Equity Joint Venture Contract Of Kunming Taishi Information Cartoon Co., Ltd.
Exhibit
10.20
[Translation
reference]
Of
Kunming Taishi Information Cartoon Co., Ltd.
between
Kunming
Television Station
and
Advertising
Networks Limited
May
2008
TABLE OF
CONTENTS
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Sections
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Page
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Section
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1
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Definitions
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3
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Section
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2
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Establishment of the
Company
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8
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Section
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3
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Goals and Scope of Business
Operations
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8
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Section
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4 | Total Investment, Registered Capital and Increase of Registered Capital |
9
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Section
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5
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Transfer of
Interest
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10
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Section
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6
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Responsibilities of the
Parties
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13
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Section
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7
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Confidential Information,
Publicity, Intellectual Property Rights and
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Access
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15
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||
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Section
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8
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Board of
Directors
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18
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Section
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9
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Supervisor
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20
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Section
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10
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Management of the
Company
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21
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Section
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11
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Budgets and Business
Plan
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24
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Section
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12
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Financial, Accounting and
Auditing System
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24
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Section
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13
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Foreign
Exchange
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27
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Section
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14
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Profits
Distribution
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28
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Section
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15
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Staff, Workers and Trade
Union
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28
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Section
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16
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Insurance
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30
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Xxxxxxx
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00
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Xxxx, Xxxxxxxxxxx and
Liquidation
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30
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Section
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18
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Liquidation
Procedures
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32
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Section
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19
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Amendment and Modification of the
Contract
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34
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Section
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20
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Liability for Breach of
Xxxxxxxx
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00
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Xxxxxxx
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00
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Xxxxx
Xxxxxxx
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36
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Section
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22
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Governing Law and Dispute
Resolution
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36
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Section
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23
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Representations and
Warranties
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37
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Section
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24
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Effectiveness of the Contract and
Miscellaneous
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39
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Translation
reference
This Equity Joint Venture Contract (this "Co ntract") is made on 14
May 2008 in Kunming City, the People’s Republic of China (“PRC”).
BETWEEN:
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(1)
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Kunming Television Station
(Party A), a PRC television station with its registered address at
Xx. 000, Xxxxxx Xxxx, Xxxxxxx Xxxx, Xxxxxx
Xxxxxxxx;
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and
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(2)
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Advertising Networks Limited
(Party B),
a Hong Kong Special Xxxxxxxxxxxxxx Xxxxxx xx xxx XXX (Xxxx Xxxx) company with
its address at 00 Xxxxx, Xxxxxxxxx Xxxxxx, 00 Xxxxxxx Xxxxxx, Xxxxxxx,
Xxxx Kong.
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(Individually,
a "Party" and
collectively the "Parties")
WHEREAS:
|
(A)
|
Party
A is a PRC TV station desiring to further develop the advertising business
of its subsidiary channels;
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|
(B)
|
Party
B possess extensive investment and project management experience in
advertising management consultation and technical services;
and
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|
(C)
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The
Parties mutually seek the benefits of jointly establishing a equity joint
venture enterprise (“Company”) to
provide management consultation and technical services in the
advertising sector:
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NOW, THEREFORE, the Parties
hereby agree as follows:
SECTION
1 DEFINITIONS
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1.1
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Unless
otherwise provided herein, the following terms shall have the meaning set
forth below:
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Affiliate
Entity
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in relation to an entity, means a company: | |
| (1) | in which the entity holds, directly or indirectly, at least 10% of the equity interest or voting rights; | |
| (2) | which is a subsidiary of the entity’s parent company; | |
| (3) | which owns or controls, directly or indirectly, any equity interest or voting rights of the parent company of the entity; | |
| (4) | which is a subsidiary of the parent company of the entity described in (3) above. | |
Translation
reference
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Approval
Date
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means
the date of issuance of a document by the Examination and Approval
Authority approving this Contract and the Articles of
Association.
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Approvals
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means
all rights, licenses, permits, approvals, waivers, consents and
authorizations which are necessary for the Company to engage in the
business activities contemplated in this Contract, including the Business
License.
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|
Articles
of Association
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means
the Articles of Association of the Company executed concurrently herewith
by the Parties, a copy of which is attached hereto as Appendix
1.
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Board
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means
the board of directors of the Company.
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Budget
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means
the annual budget of the Company duly approved or otherwise in effect in
accordance with the provisions of this Contract.
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Business
Day
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means
any day other than a Saturday, Sunday or other day required or authorized
by Law or executive order to be public holidays in the PRC.
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Business
License
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means
the business license of the Company issued by SAIC following the approval
of this Contract and the Articles of Association.
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Business
Plan
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means
a rolling five-year business plan for the operation of the Company and
that will be updated on an annual basis in accordance with Section
11.
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Confidential
Information
|
means
(a) any information of a confidential nature, whether tangible or
intangible, concerning the organization, business, technology, finance,
transactions, affairs, released or unreleased software or hardware
products, marketing or promotion or business policies or practices of any
products of the Company or any Party (whether conveyed in written, oral or
any other form) and (b) any information or materials of a confidential
nature prepared by a Party, its
recipients or the Company that contains or otherwise reflects, or is
derived from information that is qualified as Confidential Information as
described in item (a) above.
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Translation
reference
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Dispute
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means
any dispute, controversy or claim arising out of, or relating to, this
Contract, or the performance, interpretation, breach, termination or
validity hereof.
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Encumbrance
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means
(a) any mortgage, charge (whether fixed or floating), pledge, lien,
hypothecation, assignment, deed of trust, title retention, security
interest or other encumbrance of any kind securing, or conferring any
priority of payment in respect of, any obligation of any Person, including
any right granted by a transaction that, in legal terms, is not the
granting of security but that has an economic or financial effect similar
to creation of a security that is legally enforceable under applicable
Law, any proxy, power of attorney, voting trust agreement, interest,
option, right of first offer, negotiation or refusal or transfer
restriction in favor of any Person and (b) any adverse claim as to title,
possession or use.
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Equity
Interest
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means
equity interest in the Company.
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Establishment
Date
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means
the date the Business License is issued by SAIC.
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Examination
and Approval Authority
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means
the Ministry of Commerce of the PRC and SAIC or their relevant local
counterparts that are legally authorized to approve this Contract and the
Articles of Association pursuant to PRC Law.
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Feasibility
Study
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means
the feasibility study report jointly prepared by the Parties in connection
with the establishment and operation of the Company and dated on 14 May,
2008.
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Financial
Statements
Force
Majeure
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means
the PRC Financial Statements and the GAAP Statements.
Means
any earthquake, storm, fire, flood, war, changes to the relevant state and
administrative laws or regulations and policies, or any other significant
event of natural or human-caused disaster arising after the signing hereof
which is unforeseen, unavoidable and not possible to overcome, and is
beyond the control of any Party, and prevents the total or partial
performance of this Contract by any
Party.
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-5-
Translation
reference
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Foreign
Exchange Regulations
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means
applicable PRC foreign exchange Law.
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General
Manager
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means
the general manager of the Company.
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Independent
Auditor
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means
the independent auditor of the Company selected by the Board in accordance
with Section 12.4, which is an accountant firm that has been duly
registered and authorized to practice in the PRC.
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Intellectual
Property
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means
all letters patent, trademarks, service marks, registered designs, domain
names and utility models, copyrights, inventions, Confidential
Information, brand names, database rights and business names and any
similar rights situated in any country and the benefit (subject to the
burden) of any of the foregoing (in each case whether registered or
unregistered and including applications for the grant of any of the
foregoing and the right to apply for any of the foregoing in any part of
the world).
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PRC
Law
|
means
all effective laws, regulations, rules and orders of any governmental
authority, and other legislative, administrative or judicial documents in
the PRC.
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Registered
Capital
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means
the registered capital of the Company.
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Related
Party
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means
(a) any equity interest holder of the Company, (b) any director of the
Company, (c) any Senior Manager of the Company (as defined in Section 10.1
below), (d) any relative of an equity interest holder, director or officer
of the Company, (e) any Person in which any equity interest holder or any
director of the Company has any interest, and (f) any other Affiliate of
the Company.
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Translation
reference
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RMB
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means
Renminbi, the legal tender of the PRC.
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SAFE
|
means
the State Administration of Foreign Exchange of the PRC or its local
bureaus as appropriate to the context.
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SAIC
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means
the State Administration of Industry and Commerce of the PRC or its local
bureaus as appropriate to the context.
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Subsidiary
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of
a corporate entity, means any entity that any other entity controls,
directly or indirectly, 50% or more equity interest or voting right
therein.
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Supervisor
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means
the supervisor of the Company appointed by the Parties.
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Total
Investment
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means
the total amount of investment of the Company.
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Transaction
Documents
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means
the agreements to be entered into between the Parties and the Company
before the date of Closing (as defined below) relating to commercial
arrangements to be made between such parties, of which the details and
scope will be further covenanted by the Parties.
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"US
Dollars," "US$" or "$"
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means
United States dollars, the lawful currency of the USA.
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Joint
Venture Law
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means
Sino-foreign Equity
Joint Venture Law of the PRC and the implementing regulations
issued thereunder, as amended, as well as the relevant
regulations.
|
Translation
reference
SECTION 2 ESTABLISHMENT
OF THE COMPANY
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2.1
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Establishment. The
Parties hereby agree to establish an equity joint venture
enterprise Kunming Taishi Information Cartoon Co., Ltd. (Company) in Kunming
City, Yunnan Province, PRC in accordance with the Joint Venture Law,
this Contract and the Articles of
Association.
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2.2
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Name. The
name of the Company shall be 昆明泰视信息动漫有限公司
in Chinese, and Kunming Taishi Information Cartoon Co., Ltd. in English.
The legal address of the Company shall be at Zhaoshang Plaza, Kunming
High-tech Industry Development Zone, PRC.
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2.3
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Limited
Liability. The Company shall be a limited liability
equity joint venture company qualified as an enterprise legal
person. The liability of each Party with respect to the Company
shall be limited to its contribution to the Company's Registered Capital
in accordance with Section 4.2 of this Contract. Neither Party
shall have any liability, beyond its contribution, to any third party
in respect of the debts or obligations of the
Company.
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SECTION 3 PURPOSE
AND SCOPE OF BUSINESS OPERATIONS
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3.1
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Purpose.
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The
purpose in establishing the Company are to:
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(a)
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strengthen
cooperation and exchange between the Parties in the PRC advertising
consultation and technical service
sector;
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(b)
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adopt
advanced technology and relevant management methods to promote the
modernization of advertising industry in the PRC;
and
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(c)
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obtain
increasing economic benefits to enable the Parties to obtain satisfactory
profits.
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3.2
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Business
Scope.
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i)
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The
business scope of the Company shall be the following: design and
development of computer graphic, design and development of 3D cartoon,
technical support and related
services.
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(b)
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The
Parties further acknowledge and agree that all the activities specified in
Section 3.2(a) shall be conducted within the scope permitted by PRC Law,
and the Company shall apply for all necessary licenses and permits
from the relevant PRC governmental authorities in order to engage in these
activities.
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Translation
reference
SECTION 4 TOTAL
INVESTMENT, REGISTERED CAPITAL
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4.1
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Total Investment and
Registered Capital.
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(a)
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The
Total Investment shall be RMB
300,000,000.
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(b)
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The
Registered Capital shall be RMB
300,000,000.
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4.2
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Contributions of each
Party.
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(a)
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Party
A shall contribute the assets (Contributed Assets, as listed in Appendix
2) to the Registered Capital of the Company. The valuation of
Contributed Assets will be RMB 150,000,000 in accordance with the
appraisal report as of 1 March 2008 which shall be 50% of the
Registered Capital of the Company.
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|
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(b)
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Party
B shall contribute US$ equivalent to RMB 150,000,000 which shall
be 50% of the Registered Capital of the
Company.
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4.3
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Investment
Term.
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(a)
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Upon
the completion of assets appraisal and receipt of approval certificate by
the Company, Party A shall pay 50% of the assets within 30 days to be
contributed, and Party B shall also pay US$ equivalent to RMB
75,000,000 within 30 days as its first
contribution.
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(b)
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The
subsequent contribution from the Parties shall be paid up within 12 months
after the date of the Business
License.
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4.4
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Investment
Certificates.
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Upon the
Parties’ contribution, the Company shall issue to each Party an investment
certificate evidencing that the equity interest of the Parties in the Company is
50%, respectively.
Translation
reference
SECTION 5 TRANSFER
OF INTEREST
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5.1
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Limitations on
Transfers.
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No Party
shall sell, give, assign, transfer or otherwise dispose of any Equity Interest
or any right, title or interest therein or thereto (each, a "Transfer") to any
third party (a "Transferee") or otherwise create or permit or suffer to be
created or exist (whether by operation of law or otherwise) any Encumbrance over
any Equity Interest held by it or any right, title or interest therein or
thereto for the benefits of any third party without the prior written
consent of the other Party, except as expressly permitted by this Section
5. Any purported Transfer or Encumbrance in violation of this Section
5 shall be null and void, and the Company and the Parties shall not register or
recognize any such Transfer or Encumbrance.
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5.2
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Lockup.
|
The
Parties acknowledge and agree that each Party is investing in the Company
because of the management, skill, resources and expertise that the other
Party will continuously bring to the Company. Accordingly, and notwithstanding
what is otherwise provided, the Parties agree that without the prior
written consent of the other Party, each Party shall not Transfer or impose
any Encumbrance over any Equity Interest.
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5.3
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Compliance.
|
Notwithstanding
any other provisions of this Contract, no Transfer may be made
unless:
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(a)
|
the
Transferee has agreed in writing to be bound by the terms and conditions
of this Contract and the Articles of Association, which may be amended and
restated to the extent that the Parties and the Transferee agree to such
amendments;
|
|
(b)
|
the
Transfer complies in all respects with the other applicable provisions of
this Contract, the Articles of Association and other relevant legal
documents designated by the Parties;
and
|
|
(c)
|
any
Transferee of a Party’s Equity Interest, pursuant to a Transfer permitted
under this Contract, shall also hold the Transferring Party’s rights with
respect to the portion of the Equity Interest so
transferred.
|
|
5.4
|
Right of First
Offer.
|
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(a)
|
Unless
otherwise provided in this Contract, if either Party (the "Transferring Party") (i)
proposes to Transfer any of its Equity Interest (a "Proposed Transfer"),
(ii) the Transferring Party receives an offer to acquire any of its Equity
Interest and proposes to accept such offer (a "Proposed Acceptance"); or
(iii) if either Party is dissolved, terminated or liquidated,
the other Party shall have a right of first offer (the "Right of First Offer")
with respect to such Transfer as provided in this Section
5.4
|
Translation
reference
|
(b)
|
In
the case of a Proposed Transfer, the Transferring Party shall send a
written notice to the other Party, which notice shall state (i) the name
of the Transferring Party, (ii) the Equity Interest percentage to be
Transferred, (iii) the price in cash that the Transferring Party is
prepared to accept for the Offered Interest and (iv) the other terms and
conditions of the proposed
Transfer.
|
In the
case of a Proposed Acceptance, the Transfer Notice shall state (i) the name of
the Transferring Party, (ii) the name and address of the proposed transferee,
(iii) the Equity Interest percentage to be Transferred, (iv) the amount and form
of the proposed consideration for the Transfer and (v) the other terms and
conditions of the proposed Transfer. In the event that the proposed
consideration for the Transfer in a Proposed Acceptance includes consideration
other than cash, the Transfer Notice shall include a calculation of the fair
market value of such consideration and an explanation in reasonable detail of
the basis for such calculation, together with documentation reasonably
evidencing such calculation and explanation. The notice sent by the
Transferring Party pursuant to this Section 5.4 (b) shall be referred to as the
"Transfer Notice", the
non-Transferring Parties shall be referred to as the "Offerees", the proposed Equity
Interest percentage to be Transferred shall be referred to as the "Offered Interest", and the
proposed consideration in cash (including the fair market value of any non-cash
consideration) shall be referred to as the "Offer Price".
|
(c)
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For
a period of 30 days after delivery of a Transfer Notice (the "Offer Period"), each
Offeree shall have the right, exercisable through the delivery of an
Acceptance Notice as provided in Section 5.4(d), to purchase up to its
Offered Interest at a purchase price equal to the Offer Price upon the
other terms and conditions set forth in the Transfer Notice, provided that
if one Party is restricted from purchasing its pro rata proportion of the
Offered Interest due to legal or regulatory reasons, then it shall have
the right to nominate a third party to purchase such Offered Interest and
provided, further, that even where the proposed consideration offered by a
third party in a Proposed Acceptance includes non-cash consideration, the
Offeree shall at all times be able to pay the purchase price in
cash. If the Transferring Party and the Offeree cannot agree
within 20 days after delivery of the Transfer Notice on the fair market
value of such non-cash consideration, then such fair market value shall be
determined in accordance with Section 22.2 of this Contract (Dispute
Resolution). In such event, the 30-day period set forth in this
Section 5.4(c) and the six-month period set forth in Section 5.4(f) shall
be tolled until the arbitration proceedings are
completed.
|
Translation
reference
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(d)
|
The
Right of First Offer of the Offeree under Section 5.4(c) shall be
exercisable by delivering written notice of exercise (an "Acceptance Notice")
within the Offer Period to the Transferring Party. An acceptance Notice
shall include a statement of the Equity Interest to be purchased by such
Offeree. An Acceptance Notice shall be irrevocable and shall constitute a
binding agreement by such Offeree to purchase the Offered Interest
determined in accordance with Section 5.4(c). The failure of an
Offeree to give an Acceptance Notice within the Offer Period shall be
deemed to be a waiver of such Offeree's Right of First Offer subject to
Sections 5.4(e) and 5.4(f).
|
|
(e)
|
In
the case of the Transfer of Offered Interest, and without limiting the
right of each Party to exercise the Right of First Offer pursuant to this
Section 5.4, at the sole discretion of the other Party, it may
Transfer the Offered Interest with the Transferring Party on a
pro rata basis and in accordance with their shareholding percentage in the
Company (“Co-Sale
Right”). If the Transferring Party , a third party (in the
case of a Proposed Transfer), or the proposed Transferee identified in the
Transfer Notice (in the case of a Proposed Acceptance) does not
accept the ’ Co-Sale Right, the Transfer of such Offered Interest
shall be void and of no force or effect for all
purposes.
|
|
(f)
|
Unless
(i) the Offerees elect in the aggregate to purchase all of the Offered
Interest pursuant to Sections 5.4(c) and 5.4 (d), or (ii) the other
Party elects to exercise its Co-Sale Right pursuant to Section 5.4(e), the
Transferring Party may Transfer all of the Offered Interest to a third
party (in the case of a Proposed Transfer) or the proposed Transferee
identified in the Transfer Notice (in the case of a Proposed Acceptance)
on the terms and conditions set forth in the Transfer Notice; provided,
however, that (i) such sale is bona fide, (ii) the price for the sale to
the Transferee is a price not less than the Offer Price and the sale is
otherwise on terms and conditions no less favorable to the Transferring
Party than those set forth in the Transfer Notice, (iii) the Transfer is
made within six months after the giving of the Transfer Notice and (iv)
the Transferee agrees not to compete with the Business conducted by the
Company or any subsidiary of the Company or by any Party (or such Party's
Affiliate). If such a Transfer does not occur within such
six-month period for any reason, the restrictions provided for herein
shall again become effective, and no Transfer of Equity Interest may be
made by the Transferring Party thereafter without again making an offer to
the other Party in accordance with this Section 5.4, as
appropriate.
|
Equity
Joint Venture Contract
-12-
Translation
reference
|
5.5
|
Further
Assurances.
|
|
(a)
|
If
the Parties agree to propose to Transfer its Equity Interest in
compliance with the provisions of this Section 5, the other Party shall
promptly cause the directors on the Board appointed by it to vote in favor
of a resolution approving such Transfer. If any director does
not vote in favor of such resolution, the Party that appointed such
director shall promptly remove and replace such director and cause the
newly appointed director to vote in favor of the resolution approving such
Transfer.
|
|
(b)
|
The
Party transferring its Equity Interest and the transferee shall enter into
an equity interest transfer contract with respect to the Transfer of the
relevant Equity Interest. The Parties shall, within 14 working
days thereafter amend this Contract and the Articles of Association to
reflect the respective Equity Interests held by the Parties and the
Transferee subsequent to the completion of such equity interest transfer
contract. The Parties shall cause the Company to apply to the
relevant governmental authorities for approval of the Transfer and
the amendments to this Contract and the Articles of Association within 21
working days of the execution of the equity transfer
contract. The Parties shall, and shall cause the Company to,
promptly execute all such further documents and perform all such further
acts as the transferring Party may reasonably require constituting the
Transferee as the legal and beneficial owner of the interest Transferred
free from any and all Encumbrances.
|
SECTION 6 RESPONSIBILITIES
OF THE PARTIES
|
6.1
|
Responsibilities
of Party
A
|
In
addition to its responsibilities set forth elsewhere in this Contract, the Party
A shall perform the following duties:
|
(a)
|
to
submit this Contract, the Articles of Association, the Feasibility Study
and all other relevant documents to the Examination and Approval Authority
for their examination and approval and to obtain all the Approvals from
the relevant governmental authorities in connection with the establishment
of the Company and the performance of the obligations of Party A hereunder
and to assist the Company in obtaining from the appropriate PRC
governmental authority the Business License, registering the Company with
the appropriate PRC tax authorities and to assist the Company in obtaining
and maintaining in force all licenses, permits, consents, authorizations,
approvals and agreements that are necessary for the Company to conduct its
goals, business operations and business objectives in accordance with the
terms of this Contract;
|
Equity
Joint Venture Contract
-13-
Translation
reference
|
(b)
|
fulfill
its obligations, and ensure that its Affiliates fulfill their obligations,
as set forth in the Transaction Documents to which it is, and/or they are,
a party or parties;
|
|
(c)
|
assist
the Company in developing its business based upon its established contacts
and relationships with commercial enterprises, and coordinate and liaise
with government agencies for the maintenance of permits, licenses and
other qualifications;
|
|
(d)
|
appoint
in a timely manner members of the Board as specified in Section
8.1(b);
|
|
(e)
|
cause
its representatives on the Board to implement the approved Budget and
Business Plan, to act in the Company's best interests and to perform and
take all actions in accordance with this Contract, the Articles of
Association, the Feasibility Study, the Transaction Documents and the
intent of the Parties;
|
|
(f)
|
assist
the Company in obtaining and maintaining in force throughout the Joint
Venture Term (as defined in section 17.1(a) below) (and any extension
thereof) all Approvals and agreements that are necessary for the Company
to achieve its goals and business objectives and conduct the business of
the Company in accordance with the terms of this Contract, the Articles of
Association and the Transaction Documents including the necessary
Approvals from the Examination and Approval
Authority;
|
|
(g)
|
assist
the Company in applying for and obtaining any preferential treatment in
tax, customs, foreign exchange or other areas that are available or may
become available under any preferential policy in accordance with Law;
and
|
|
(h)
|
assist
the Company in other matters as requested by the
Board.
|
|
6.2
|
Responsibilities
of Party
B.
|
In
addition to its responsibilities set forth elsewhere in this Contract, Party
B shall perform the following duties:
|
(a)
|
use
its best efforts to help obtaining Approvals from the relevant
governmental authorities in connection with the establishment of the
Company and the performance of the obligations of Party B hereunder,
obtaining from the appropriate PRC governmental authority of the Business
License, registering of the Company with the appropriate PRC tax
authorities and obtaining and maintaining in force of licenses, permits,
consents, authorizations, approvals and agreements that are necessary for
the Company to conduct its goals, business operations and business
objectives in accordance with the terms of this
Contract;
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Joint Venture Contract
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(b)
|
make
its contribution in the form and manner and at the times required by this
Contract and the Articles of
Association;
|
|
(c)
|
fulfill
its obligations, and ensure that its Affiliates fulfill their obligations,
set forth in the Transaction Documents to which it is, and/or they are, a
party or parties;
|
|
(d)
|
appoint
in a timely manner members of the Board as specified in Section
8.1(b).
|
|
(e)
|
nominate
in a timely manner candidates to serve as the General
Manager Company's and financial
manager;
|
|
(f)
|
cause
its representatives on the Board to implement the approved Budget and
Business Plan, to act in the Company's best interests and to perform and
take all actions in accordance with this Contract, the Articles of
Association, the Feasibility Study, the Transaction Documents and the
intent of the Parties;
|
|
(g)
|
use
reasonable efforts to assist the Company with respect to content sourcing,
business development, financial management, strategic development,
corporate governance and fundraising;
and
|
|
(h)
|
assist
the Company in other matters as requested by the
Board.
|
SECTION 7 CONFIDENTIAL
INFORMATION,
PUBLICITY,
INTELLECTUAL PROPERTY RIGHTS AND ACCESS
|
7.1
|
Confidentiality.
|
|
(a)
|
A
Party that receives any Confidential Information during the Joint Venture
Term and five years from its expiry ("Receiving Party")
shall:
|
|
|
(i)
|
keep
the Confidential Information
confidential;
|
|
(ii)
|
not
disclose the Confidential Information to any Person other than with the
prior written consent of the Company or the Party that disclosed such
Confidential Information, as the case may be, or in accordance with
Sections 7.1(b) and 7.1(d); and
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(iii)
|
not
use the Confidential Information for any purpose other than the
performance of its obligations under this Contract or in accordance with
Section 7.1(d).
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(b)
|
The
Receiving Party may disclose the Confidential Information to its
directors, Senior Managers (as defend in Section 10.1 below), employees,
agents, consultants, advisors, licensees, contractors, partners (“Representatives”) Subsidiaries,
Affiliates and the respective Representatives of its Affiliates
(collectively, the "Recipients") to the
extent that it is necessary for the purposes of this
Contract.
|
|
(c)
|
Each
Party shall use its best efforts to ensure that each Recipient is made
aware of, and complies with, all of the Receiving Party's confidentiality
obligation herein as if such Recipient were a party to this
Contract. Each Party shall use its best efforts to ensure that
the Company shall comply with all of the Receiving Party's confidentiality
obligation herein as if the Company were a party to this
Contract.
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|
(d)
|
The
provisions of this Section 7.1 shall not apply
to:
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|
|
(i)
|
Confidential
Information that is or becomes generally available to the public other
than as a result of disclosure by, or at the direction of, a Party, any of
its Recipients or the Company in violation of this
Contract;
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|
|
(ii)
|
disclosure
to the extent required under applicable Law or the rules of any stock
exchange (including, without limitation, disclosure to relevant regulatory
bodies); provided that such disclosure shall be limited merely to the
extent required by applicable Law or the rules of any stock exchange, and,
to the extent practicable, the Party or the Company, as the case may be,
that is the proprietor of the Confidential Information subject to such
disclosure shall be given an opportunity to review and comment on the
contents of the disclosure before it is
made;
|
|
|
(iii)
|
disclosure
to the extent required by applicable Law or judicial or regulatory process
or in connection with judicial or arbitration process regarding any legal
action, suit or proceeding arising out of, or relating to, this Contract;
provided that such disclosure shall be limited merely to the extent
required by applicable Law or judicial or regulatory
process;
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(iv)
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use
of Confidential Information concerning the Company by the Receiving Party
after the termination of this Contract in accordance with the provisions
hereof where the Receiving Party is legally permitted to continue to
operate, whether directly or indirectly, and whether or not in cooperation
with any other Person or any other Party, the business of the Company;
and
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(v)
|
disclosure
by any Party to any Person that is a potential purchaser of any or all of
the equity interest of the Company held by such Party or is a potential
purchaser or subscriber of the shares or interests of such Party, if the
recipient has agreed in writing to obligations of confidentiality
substantially similar to those contained in this Section
7.1.
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7.2
|
No
Announcements. No Party shall make any announcement
about the Company, this Contract or any other Party in relation to the
Company, this cooperation or the business of the Company without the prior
written consent of the other Party. Notwithstanding the above,
the Parties may announce or disclose, at its sole discretion, some or
all of the aforesaid information to its affiliated party(s) (including but
not limited to the investors with the Parties, auditors and banks of Party
B and/or its affiliated party(s)). Any of the Parties may at any time
make announcements that are required by applicable Law, regulatory bodies
or stock exchange or stock association rules, so long as the Party so
required to make the announcement, promptly upon learning of such
requirement, notifies in writing the other Party of such requirement and
discusses with the other Party in good faith the exact wording of any such
announcement and takes precautionary measures to prevent disclosure of
confidential information to the maximum extent
permitted.
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|
7.3
|
Intellectual Property
Rights. Any Intellectual Property rights, produced,
created or developed by the Company or by any other Person on behalf of or
for the benefit of the Company (including any employee of the Company in
the execution of his responsibilities or primarily using the resources of
the Company) shall be the sole property of the
Company.
|
|
7.4
|
Access. The
Company shall grant to each Party and its agents, full access, upon
reasonable prior notice and during normal business hours, to the premises
and books and records of the Company, and shall instruct Senior Managers
(as defined in Section 10.1 below) and employees of the Company to give
promptly all information as a Party may reasonably request. For
the avoidance of doubt, the information provided by the Company shall be
deemed Confidential Information and the receiving Party shall comply with
the provisions of Section 7.1.
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SECTION 8 BOARD
OF DIRECTORS
|
8.1
|
The
Board.
|
|
|
(a)
|
The
Board shall be established on the Establishment Date and shall hold its
first meeting within 30 days thereafter. At the first meeting,
the Board shall appoint the General Manager and financial
manager who are designated by Party
B.
|
|
|
(b)
|
The
Board shall initially consist of five directors, two of whom
shall be appointed by Party A (“Party A’s Directors"), and three
of whom shall be appointed by Party B ("Party B’s Directors"). The term
of office of the directors shall be three years, renewable upon
reappointment by the appointing Party. The Parties agree to
cause the Company to file for the record with the Examination and Approval
Authority any change of director appointed by any Party, if required by
Law. If a director is removed, becomes incapacitated, dies, resigns, or
otherwise ceases to be a director, the Party that appointed the director
shall appoint a new director to serve for the remainder of the former
director’s term of office.
|
|
|
(c)
|
The
Board shall have one chairman ("Chairman") with a term
of three years. The Chairman shall be appointed by Party A. If the
Chairman is unable to attend any meeting of the Board, the Chairman may
assign any other director to preside over the
meeting.
|
|
|
(d)
|
The
Board shall be the highest authority of the Company and shall direct the
overall supervision and control of the business of the
Company. The Board shall decide all matters of major importance
to the Company. The resolutions of the Board shall be adopted
in accordance with this Contract, the Articles of Association and
applicable PRC Law.
|
|
|
(e)
|
The
Chairman shall be the legal representative of the Company for the purpose
of service of process and within the scope expressly authorized by the
Board. The Chairman shall have the powers and responsibilities
set forth in the Articles of
Association.
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|
|
(f)
|
The
Company shall pay all reasonable expenses incurred by the directors in
attending a Board meeting, including traveling expenses and
accommodation.
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(g)
|
The
Company shall indemnify each director against all claims and liabilities
incurred by reason of his performance as being a director of the
Company; provided that the director's acts or omissions giving rise to
such claim or liability did not constitute intentional misconduct or a
violation of criminal Law. In addition, the Company reserves
the right to pursue any claims against directors who cause the Company to
incur unauthorized claims or
liabilities.
|
|
8.2
|
Meetings.
|
|
|
(a)
|
Regular
meetings of the Board shall be convened at least once every calendar
quarter. Meetings shall be convened and presided over as
provided in the Articles of Association. Not less than 10 days’
notice shall be given to all directors, provided, however, that less than
10 days’ notice may be given if approved by all
directors. Special meetings of the Board shall be convened by
the Chairman at any time on the motion of at least two directors or the
Foreign Director. The minutes of all Board Meetings shall be
kept on file by the Company.
|
|
|
(b)
|
Three directors present
in person or by proxy throughout the entire meeting shall constitute a
quorum for all meetings of the Board. Each director has one
vote.
|
|
8.3
|
Voting.
|
|
|
(a)
|
Decisions
with respect to those matters that are required by Law at the time the
relevant resolution is adopted to be approved by unanimous approval of the
Board shall require the unanimous approval of the Board. The
following matters may be adopted upon the unanimous approval of the
Board:
|
|
(i)
|
increases
or decreases in the Registered Capital or any transfer of any Party's
interest in the Company;
|
|
(ii)
|
merger,
division or change in the form of organization of the
Company;
|
|
(iii)
|
suspension
of the business operation of the Company, dissolution of the Company or
the extension of the Joint Venture Term (as defined in Section
17.1);
|
|
(iv)
|
mortgage
of assets of the Company; and
|
|
(v)
|
amendment
of the Articles of
Association.
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(b)
|
Decisions
with respect to all other matters that require approval of the Board shall
be adopted if they receive the affirmative votes of a simple majority of
the directors.
|
SECTION 9 SUPERVISOR
|
9.1
|
Supervisor
|
|
|
(a)
|
The
Company shall not have a board of supervisors, but a supervisor shall
be jointly appointed by the
Parties.
|
|
|
(b)
|
The
term of the Supervisor shall be 3 years, renewable upon reappointment by
the Parties.
|
|
|
(c)
|
If
the position of the Supervisor becomes vacant for any reason, the Parties
shall jointly appoint a successor to serve out the remainder of the term.
Where either Party finds that the Supervisor has violated PRC laws and
regulations, or any provision of this Contract or the Articles of
Associations, practiced favoritism or fraud, breached the Company’s
by-laws and rules, or is unable to perform all of his duties, or at the
Parties’ sole discretion, the Parties may at any time jointly remove the
Supervisor and appoint another Supervisor as his successor.
Appointments and removals shall be filed with the Examination and Approval
Authority and registered with the SAIC to the extent required by
law.
|
|
|
(d)
|
The
Supervisor shall not concurrently hold the position of director or Senior
Managers in the Company.
|
|
9.2
|
Authorities of
Supervisor
|
|
|
(a)
|
monitor
the financial affairs of the
Company;
|
|
|
(b)
|
supervise
the actions of the directors and Senior Managers (as defined in Section
10.1 below), and bring forward proposals for the removal of any director
or Senior Manager that violates any law, administrative regulation, the
Contract or any resolution of the
Broad;
|
|
|
(c)
|
demand
any director or Senior Manager to rectify acts that has injured the
interests of the Company; and
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|
|
(d)
|
bring
forward any other proposals to the
Parties.
|
|
9.3
|
Liability of the
Supervisor
|
|
|
(a)
|
The
independent and personal actions of Supervisor are not binding on the
Company.
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Joint Venture Contract
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(b)
|
The
Supervisor is immune from personal liability for the actions in carrying
out his/her duties as a supervisor, unless the actions violate the
Contract, Articles of Association, PRC laws and the law governing the
supervisor.
|
SECTION 10 MANAGEMENT
OF THE COMPANY
|
10.1
|
Senior
Managers.
|
The
management organization of the Company shall consist of the following senior
managers ("Senior
Managers"): one
General Manager, one financial manager (Financial Manager) and other
officers that the Board may designate from time to time as being necessary for
the operation of the Company. Without the prior permission of the
Board, no Senior Manager shall be simultaneously employed by or seconded to any
company other than the Company.
|
|
(a)
|
The
general manager shall be designated by Party B and appointed by the
Board. The initial general manager shall be Xxxx
Xxxx.
|
The
general manager shall have the following powers:
|
|
(i)
|
implementing
the business plan approved by the
Board;
|
|
(ii)
|
formulating
the rules and regulations of the
Company;
|
|
(iii)
|
implementing
the resolutions of the board of
directors;
|
|
(iv)
|
executing,
and if necessary, authorizing other Senior Mangers to execute
business contracts that do not exceed RMB￥ 100,000
(contracts that exceed RMB￥100,000
shall be signed jointly by the Chairman or his/her agent and the
authorized representative that is approved by unanimous approval of the
Board );
|
|
(v)
|
reporting
the Company’s operation to the Board on a regular basis,
including submitting a quarterly written business
report;
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Joint Venture Contract
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(vi)
|
drafting
the annual budget plan and submit to the Board for
approval;
|
|
(vii)
|
hiring
or dismissing other employees and draft the employment terms and welfare
plans of the Senior Managers and all the employees, and submit to the
Board for approval, and
|
|
(viii)
|
implementing
all other matters authorized by the Board within the scope of their
authorized power.
|
|
|
(b)
|
The
Financial Manager shall be appointed by Party
B.
|
|
|
(c)
|
The
Board shall have the right to dismiss any other Senior Manager for any
reason at any time. If the General Manager or any of the other
Senior Managers resigns, or is dismissed, or dies or becomes
incapacitated, his successor shall be nominated and appointed in the same
manner as stated in Section 10.1
above.
|
|
|
(d)
|
The
Senior Managers shall have no liability to the Company (and the Company
shall indemnify them for any liabilities to third parties) for any acts
performed in their official capacity except for such acts which constitute
willful misconduct, fraud, gross negligence or violations of
Law.
|
|
10.2
|
Financial
Manager
|
The
Financial Manager shall be responsible for and manage the financial and
accounting work of the Company and shall examine and sign the financial plans,
credit plans, accounting reports, and major expenditures of the
Company. The Financial Manager shall keep true and accurate records
and accounts and prepare quarterly financial reports for the Board and other
periodic financial statements as required by the Board or applicable PRC
Law. Such reports and statements shall be prepared in Chinese and
English. Both language versions shall have equal
validity. The expense associated with any required translation shall
be borne by the Company.
|
10.3
|
Quarterly
Operational Reviews and
Monthly Updates.
|
Every
three months, the Company shall convene an operational meeting with
representatives of the Parties to review the business and operations of the
Company. During each calendar month in which such an operational
review meeting does not take place, the Company shall convene a monthly update
meeting with representatives of the Parties, which update meeting shall be
shorter in duration, and less formal, than an operational meeting, and which may
take place by way of a conference call or other similar means. The
purpose of the monthly update meeting is for the General Manager (and any other
relevant Senior Manager) to update the Parties of any material events relating
to the Company.
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Joint Venture Contract
-22-
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10.4
|
Ethical Business
Practices.
|
|
|
(a)
|
Each
of the Parties agrees that the Company shall be managed in accordance with
the highest international business ethical standards and that no director
of the Board, Senior Managers, other employees of the Company will be
permitted to engage in any act which violates applicable Law relating to
corruption, bribery, fraudulent behavior or any other criminal
activity.
|
|
|
(b)
|
The
Company and its Senior Managers, directors, employees and agents shall
engage only in legitimate business and ethical practices in commercial
operations and in relation to government authorities. Neither
the Company nor any of its Senior Managers, directors, employees or agents
shall pay, offer, promise or authorize the payment, directly or
indirectly, of any funds or anything of value to any official
or employee of (or any person acting in an official capacity for or on
behalf of) any government (including any department or agency), or
state-owned or administered company or entity, public international
organization, political party (or candidate or member of such party) for
the purpose of influencing any act or decision of such official or of the
government to obtain or retain business, or direct business to any Person
(any such act, a "Prohibited
Payment"). A Prohibited Payment does not include the
payment of reasonable and bona fide expenditures, such as travel and
lodging expenses, which are directly related to the promotion,
demonstration or explanation of products or services, or the execution
or performance
of a contract with a government authority or agency thereof; provided that
such payments are permissible under
Law.
|
|
|
(c)
|
Each of the Parties
hereby represents to the other Parties that, in connection with the
performance of its obligations under this Contract and the Articles
of Association, including those responsibilities detailed at Section 6 of
this Contract, such Party, and its owners, directors, employees and
agents, have not, and will not, pay, offer, promise or authorize, directly
or indirectly, any Prohibited
Payment.
|
|
|
(d)
|
The
Parties represent and warrant that they shall take such steps as may be
appropriate to ensure that the Company complies with the provisions of
this Section, which steps shall include the adoption and implementation of
policies and procedures to ensure compliance with anti-bribery and
anti-corruption Laws.
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Joint Venture Contract
-23-
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SECTION 11 BUDGETS
AND BUSINESS PLAN
|
11.1
|
Business
Plan.
|
The
Business Plan shall be prepared on a regular basis and submitted to the Board
for voting.
|
11.2
|
Preparation of the
Budget and Updating of Business
Plan.
|
|
|
(a)
|
During
the Joint Venture Term, the financial manager shall be responsible for
preparing an annual budget and the operational strategy and plan for the
Company for each Financial Year. Not less than two months prior
to the commencement of each Financial Year during the Joint Venture Term,
or such other time as agreed by the Parties, the financial manager shall
submit an annual budget to the Board for its approval in accordance with
Section 8.3.
|
|
|
(b)
|
The
General Manager shall be responsible for preparing and updating the
Business Plan on a yearly basis.
|
|
11.3
|
Failure to
Agree.
|
If the
Board is unable to agree on the annual budget submitted by the financial manager
prior to the commencement of a particular Financial Year ("Relevant Financial Year"),
the Company shall be operated in the Relevant Financial Year in accordance with
the Budget for the Financial Year immediately preceding the Relevant Financial
Year with an increase of 10% in all budgeted amounts.
SECTION
12 FINANCIAL, ACCOUNTING
AND AUDITING SYSTEM
|
12.1
|
Financial and Accounting
System.
|
The
financial and accounting system of the Company shall be formulated and adopted
by the Board and shall be in accordance with the provisions of relevant
officially published PRC Law, the particular circumstances of the Company and,
to the extent permitted by applicable Law, those methods and principles that are
consistent with international accounting standards and the operating and
financial procedures and requirements of the Parties ("Financial and Accounting
System"). The Financial and Accounting System, and changes
thereto, shall be filed with the relevant PRC government departments for
record.
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Joint Venture Contract
-24-
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reference
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12.2
|
Financial
Year.
|
The
financial year of the Company ("Financial Year") shall begin
on January 1 and end on December 31 of each year; provided, however, that the
first Financial Year of the Company shall commence on the Establishment Date and
end on December 31 of that calendar year and the final Financial Year of the
Company shall end on the date of dissolution of the Company.
|
12.3
|
Financial Matters and
Reporting.
|
|
|
(a)
|
All
accounting vouchers, receipts, statements and account books of the Company
shall be maintained at the Company's legal address and shall be written in
Chinese with English language notes appended
thereto.
|
|
|
(b)
|
The
Company shall use the RMB as its accounting unit. Cash, bank
deposits and funds in other currencies, as well as outstanding claims and
debts, gains, expenses and so forth in other currencies, shall be recorded
in the actual currency in which they are acquired, incurred, received or
disbursed, and converted into RMB for accounting
purposes.
|
|
|
(c)
|
The
Company shall open RMB and foreign currency accounts with duly licensed
financial institutions. The Company may also open foreign
currency accounts outside of the PRC in accordance with the Foreign
Exchange Regulations.
|
|
|
(d)
|
The
Company shall adopt the internationally used accrual basis and debit and
credit accounting system in the keeping of accounts and in those methods
and principles that are permitted by applicable PRC
Law.
|
|
|
(e)
|
The
Company shall prepare financial statements in accordance with the
Financial and Accounting System approved by the Board ("PRC Financial
Statements"). The PRC Financial Statements shall be prepared in
Chinese and English (both language versions having the same legal validity
and, if any controversy between two language versions, subject to the
Chinese version), shall be true and complete and shall fairly represent
the financial position of the Company as of the date of each such
statement and the results of operations for the fiscal period covered
thereby.
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Joint Venture Contract
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reference
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|
(f)
|
The
Company shall make its best endeavor to assist Party B in preparing
financial statements in a form acceptable under the US general accepted
accounting principles ("GAAP Statements"). GAAP Statements
shall be prepared in English and shall be derived from and reconciled with
the PRC Financial Statements.
|
|
|
(g)
|
The
Company shall submit quarterly and annual Financial Statements to the
Board within 20 Business Days after the last day of each calendar quarter
or calendar year. An annual audit of the books and statements
of the Company shall be made by the Independent Auditor, and reports of
the audit shall be delivered to the Board and the Parties within three (3)
months after the last day of each calendar
year.
|
|
|
(h)
|
The
Company shall submit the annual PRC Financial Statements and the annual
audit report of the Company to the finance and taxation authorities and to
other governmental departments.
|
|
|
(i)
|
The
Company shall also prepare and submit monthly management accounts for the
Company to each Party within 7 days after the end of each calendar month,
such monthly accounts to be prepared by the financial manager in Chinese
and English and in a form acceptable under the international accounting
standards.
|
|
|
(j)
|
The
Company shall make allocations from its after-tax profits to the Three
Funds in such amount decided by the Board in accordance with applicable
Law.
|
|
12.4
|
Independent
Auditor.
|
The Board
shall select an Independent Auditor to audit the Financial Statements of the
Company and perform such other accounting and financial duties as required by
PRC Law and the Board. The Independent Auditor selected by the Board
shall be a Sino-foreign joint venture accounting firm registered in the PRC
that is capable of performing accounting work meeting both PRC domestic
accounting standards and international accounting standards and the procedures
and requirements of the Parties. The initial auditor shall be selected from
among the top four international accounting firms, or other accounting firm
nominated by Party A and approved by Party B. If
the Board determines that the Independent Auditor is unable to meet such
standards, it may replace such Independent Auditor or retain another auditor, at
the Company's expense, to supplement or adjust the work of the Independent
Auditor or to perform specific accounting or auditing tasks.
Equity
Joint Venture Contract
-26-
Translation
reference
|
12.5
|
Audits by the
Parties.
|
Each
Party shall have the right at any time to retain independent accountants to
audit the books and records of the Company at its own expense (unless the
results of any such audit are significantly different from that conducted by the
Independent Auditor and are accepted by the Board, in which case the expense
shall be borne by the Company). The Company shall extend full
cooperation to any such accountants and shall allow them full access to the
books and records of the Company.
|
12.6
|
Taxes.
|
|
|
(a)
|
The
Company shall pay taxes in accordance with the relevant officially
published PRC Law.
|
|
|
(b)
|
The
Parties shall apply to obtain the benefits for the Company, the Parties
and all of their personnel of all of the applicable tax exemptions,
reductions and preferences that are now or in the future become obtainable
under the Law of the PRC and under any applicable treaties or
international agreements to which the PRC may now be or may hereafter
become a party.
|
|
|
(c)
|
The
depreciation period for the fixed assets of the Company shall be decided
by the Board and reported to the tax authorities in accordance with the
relevant provisions of PRC Law. If accelerated depreciation is
desired, the Company shall apply to the relevant tax authorities for
approval of accelerated depreciation for the assets in
question.
|
SECTION
13 FOREIGN
EXCHANGE
|
13.1
|
Foreign Exchange
Matters.
|
All
foreign exchange matters of the Company shall be handled in accordance with the
provisions of the Foreign Exchange Regulations and the relevant officially
published PRC Law.
|
13.2
|
Foreign Exchange
Accounts.
|
The
foreign exchange funds of the Company shall be transferable into the PRC and
deposited in the foreign exchange account or accounts established by the Company
with approved financial institutions within or outside of the PRC in accordance
with the Foreign Exchange Regulations. All foreign exchange payments
of the Company shall be paid out of the above-mentioned foreign exchange
accounts in accordance with the Foreign Exchange Regulations after the payment
of any PRC taxes that may be applicable. Any fees or costs (other
than taxes) relating to the remittance abroad of such payments shall be borne by
the Company.
Equity
Joint Venture Contract
-27-
Translation
reference
SECTION
14 PROFITS
DISTRIBUTION
|
14.1
|
Profits Distribution
Policy.
|
The
profits distribution policy of the Company shall be determined by the Board
According to the contribution ratio of each Party, respectively.
SECTION
15 STAFF, WORKERS AND TRADE
UNION
|
15.1
|
Employment Policies of
the Company.
|
|
|
(a)
|
Such
matters as the employment, transfer, dismissal, resignation, wages,
welfare benefits, labor insurance, labor protection and labor discipline
of the staff and workers of the Company shall be handled according to
applicable PRC Law.
|
|
|
(b)
|
The
Company shall sign individual labor contracts with each of its staff and
workers. The form of the individual labor contract shall be
filed with the Labor Bureau for the record if required by applicable
Law.
|
|
|
(c)
|
The
Company shall have the right directly to recruit, hire and dismiss staff
and workers. In all cases, the Company shall employ only those
staff and workers who are sufficiently qualified for employment, as
determined through examinations, and staff and workers may be hired
provisionally for a probationary
period.
|
|
|
(d)
|
The
salaries and welfare and other benefits of all personnel of the Company
shall be determined by the Board in accordance with the principles set
forth herein. All personnel shall receives salaries and welfare
and other benefits from the Company commensurate with their expertise and
experience and in accordance with the assumptions set forth in the
Business Plan.
|
|
|
(e)
|
The
Company shall have the right to impose the sanctions of warnings, demerits
and salary reductions on the staff and workers who violate the rules and
regulations and labor discipline of the Company in accordance with the
applicable Law of the PRC. When the circumstances are serious,
they may be dismissed. The dismissal of staff and workers shall
be reported to the local labor department for the
record.
|
Equity
Joint Venture Contract
-28-
Translation
reference
|
|
(f)
|
Such
matters as the welfare benefits, bonuses, labor protection and labor
insurance of the staff and workers shall be determined by the General
Manager based on the recommendations of the Financial Manager according to
the specific circumstances of the Company and with reference to relevant
officially published PRC Law, and shall be stipulated in the individual
labor contracts and various rules of the
Company.
|
|
|
(g)
|
In
order to promote the economic strength of the Company and reward
productivity and effective management, the Company may, consistent with
the profitability of the Company, from time to time increase the wages of
staff and workers and provide bonuses to any staff and workers
commensurate with their efforts, expertise and
experience. Increases in wages and bonuses shall be determined
by the Board upon the joint recommendation of the General Manager and
the Financial Manager.
|
|
15.2
|
Trade
Union.
|
|
|
(a)
|
For
so long as required by PRC Law, the staff and workers of the Company shall
have the right to establish a trade union organization and conduct trade
union activities in accordance with applicable PRC
Law.
|
|
|
(b)
|
The
trade union of the Company shall represent the interests of the staff and
workers. Its tasks shall be to safeguard the rights and
interests of the staff and workers in accordance with PRC Law, to assist
the Company in its planning and rational utilization of its bonus and
welfare funds, to organize staff and workers in political, professional,
scientific and technical studies, to organize cultural and sports
activities, and to educate the staff and workers to observe labor
discipline and work hard to fulfill the economic tasks of the
Company.
|
|
|
(c)
|
For
so long as required by applicable PRC Law, the Company shall pay each
month an amount equal to two percent of the total amount of the actual
wages received by the PRC staff and workers of the Company for such month
into the Company's trade union fund for such trade union's use in
accordance with the relevant procedures of the PRC for the management of
trade union funds.
|
Equity
Joint Venture Contract
-29-
Translation
reference
SECTION
16 INSURANCE
|
16.1
|
Insurance.
|
The
insurance shall be underwritten by a insurance company incorporated in the
PRC. The details relating to insurance shall be determined by the
Board.
XXXXXXX
00 XXXX, XXXXXXXXXXX AND
LIQUIDATION
|
17.1
|
Joint Venture
Term.
|
|
|
(a)
|
The
term of operations of the Company ("Joint Venture Term")
shall be twenty years commencing on the Establishment
Date.
|
|
|
(b)
|
Prior
to expiration of the Joint Venture Term, or any extension thereof, the
Parties may agree to extend such term, subject to approval by the
Examination and Approval Authority and the relevant requirements of
Law. Negotiations for such extension shall begin not later than
one year prior to the expiration of the Joint Venture Term (or extension
thereof) of the Company and, subject to the successful conclusion of such
negotiations, an application for extension shall be filed with the
Examination and Approval authority not later than six months prior to the
expiration of the Joint Venture
Term.
|
|
17.2
|
Termination.
|
|
|
(a)
|
The
Company shall be dissolved and this Contract terminated in accordance with
the procedures set forth in the Articles of Association, the Joint Venture
Law and other relevant PRC Laws if any of the conditions or events set
forth below shall occur and be
continuing:
|
|
|
(i)
|
upon
the motion of any Party, if the Parties agree to dissolve the
Company;
|
|
|
(ii)
|
upon
the motion of any Party, if the Company sustains losses significantly in
excess of those estimated in the Budget in two consecutive years as a
result of an Event of Force Majeure, making it impossible for the Company
to operate;
|
|
|
(iii)
|
upon
the motion of any Party, if any Party is unable to perform any of its
material obligations under this Contract for six consecutive months or
more as the result of an Event of Force
Majeure;
|
Equity
Joint Venture Contract
-30-
Translation
reference
|
|
(iv)
|
upon
the motion of the non-breaching Party, if any PRC Party fails to perform
any of its material obligations under this Contract or any of the
Transaction Documents and such failure is not cured by the breaching party
within one month of the delivery of a written notice stating specifically
the manner in which the breaching Party has failed to perform and if, in
the reasonable opinion of the non-breaching Party, such non-performance
defeats the economic objectives of this Contract and of the establishment
of the Company or creates a material risk of loss to the non-breaching
Party or the Company, or materially and adversely affects the value of the
non-breaching Party's interest in the
Company;
|
|
|
(v)
|
upon
the motion of any affected Party, if any government authority having
authority over the Company requires any provision of this Contract or any
of the Transaction Documents to be revised in such a way as to cause
significant adverse consequences to the Company or any
Party;
|
|
|
(vi)
|
upon
the motion of any Party, if either of the conditions set forth below fail
to be fulfilled within 120 days after the execution date of this
Contractor at any time thereafter;
|
|
(1)
|
all
of the Transaction Documents have been signed by the parties thereto and
have become effective in accordance with the provisions
thereof;
|
|
(2)
|
the
Company has received and obtained all Approvals which are required for the
Company to perform the business activities contemplated by this
Contract;
|
|
|
(vii)
|
upon
the motion of any of the non-bankrupt Parties, if a Party becomes
bankrupt, is the subject of proceedings for liquidation or dissolution,
ceases to carry on business or becomes unable to pay its debts as they
become due.
|
|
|
(viii)
|
upon
the business license not being issued within 130 days after the execution
date of this Contract
|
|
|
(b)
|
Upon
the motion of a Party to dissolve the Company pursuant to Section 17.2(a),
the Parties shall cause their representatives on the Board to unanimously
adopt a resolution to dissolve the Company. The Board shall
apply to the Examination and Approval Authority for approval of such
dissolution.
|
Equity
Joint Venture Contract
-31-
Translation
reference
|
|
(c)
|
After
the Board resolves to dissolve the Company, the Company and the Parties
shall take all reasonable steps to accomplish such dissolution in
accordance with relevant, officially published and publicly available
Laws.
|
SECTION
18 LIQUIDATION
PROCEDURES
|
18.1
|
Liquidation of the
Company.
|
|
|
(a)
|
Upon
the adoption by the Board of a motion to dissolve the Company, the Board
shall immediately take steps to dissolve the Company and liquidate its
assets in accordance with the then applicable PRC Law and the provisions
of this Contract and the Articles of
Association.
|
|
|
(b)
|
If
the termination of the Company results from its merger, consolidation or
other business combination with another Person, the Assets and liabilities
of the Company shall be transferred, assumed and valued as provided in the
contractual arrangements with respect to such merger, consolidation or
other business combination and applicable PRC
Laws.
|
|
18.2
|
Liquidation
Committee.
|
|
|
(a)
|
Upon
the early termination of the Company, the Board shall formulate
liquidation procedures and principles, publish an announcement of the
liquidation in accordance with relevant regulations, provide written
notice of the liquidation to creditors of the Company and establish a
liquidation committee ("Liquidation
Committee"). The Liquidation Committee shall be composed
of five members. Party A shall have the right to appoint
two members and Party B shall have the right to appoint
three members of the Liquidation Committee. Within ten
Business Days after the Board adopts a motion to dissolve the Company,
each Party shall deliver a notice to the other Parties stating the names
of the members that it has appointed to the Liquidation Committee pursuant
to its right set forth in this Section 18.2(a) and shall attach to such
notice documentation evidencing that each such member has consented to
serve on the Liquidation Committee. If any Party ("Non-Appointing Party")
fails to deliver such notice within such ten Business Day period, then
such Party shall forfeit its right to appoint any members to serve on the
Liquidation Committee and each Party that has delivered such a notice
shall have a proportional right to appoint the remaining members to the
Liquidation Committee such that the total number of members shall equal
five. Each member shall have one vote. A quorum for
convening a meeting of the Liquidation Committee shall be five
members. If such quorum is not present within one hour after
the time appointed for the commencement of the meeting, the meeting shall
be adjourned to such place and time (which is at least ten days later or
such earlier date as shall be agreed by all of the members of the
Liquidation Committee) as the members who did attend shall
decide. If a quorum is not present within one hour after the
time appointed for such adjourned meeting, any number of members of the
Liquidation Committee shall constitute a quorum. All decisions
of the Liquidation Committee shall be adopted by simple majority
vote. The Company shall deliver to each member of the
Liquidation Committee written notice of each meeting of the Liquidation
Committee at least ten Business Days prior to the date of such meeting or
such shorter period as agreed by all of the members of the Liquidation
Committee.
|
Equity
Joint Venture Contract
-32-
Translation
reference
|
|
(b)
|
The
tasks of the Liquidation Committee shall be to conduct a thorough survey
of the property, claims and debts of the Company, draw up a balance sheet
and inventory of assets, propose a basis for the valuation of the Company
and formulate a liquidation plan, all of which shall be implemented after
it has been submitted to and adopted by the Board and shall also be
submitted to the Examination and Approval Authority for the
record.
|
|
|
(c)
|
During
the period of liquidation, the Liquidation Committee shall represent the
Company in any legal proceeding.
|
|
|
(d)
|
The
liquidation expenses and the remuneration to the members of the
Liquidation Committee shall be paid with priority from the existing assets
of the Company. The remaining proceeds shall be paid in the following
order: (i) wages and labor insurance fees of the staff and workers, (ii)
state taxes, and (iii) other liabilities, and (iv) to the Parties in
accordance with the principle in 18.2
(e).
|
|
|
(e)
|
If
the Parties decide to liquidate the Company in accordance with this
Contract, after the statutory expenses and all the unpaid debts to the
third parties are paid, any remaining proceedings shall be distributed in
a pro rata basis in accordance with the shareholding percentages of the
Parties..
|
|
|
|
|
(f)
|
After
the liquidation of the Company is completed, the Liquidation Committee
shall promptly submit a report thereon to a meeting of the Board for
approval and submission to the Examination and Approval Authority for the
record. The Liquidation Committee shall then carry out the
procedures for turning in the Company's business license and canceling its
registration at SAIC, and at the same time, make a public announcement of
such actions.
|
Equity
Joint Venture Contract
-33-
Translation
reference
SECTION
19 AMENDMENT AND
MODIFICATION OF THE CONTRACT
|
19.1
|
Amendment.
|
Amendments
to this Contract must be made by a written agreement signed by each Party in
both Chinese texts, and shall be submitted to the Examination and Approval
Authority for approval before they can become effective.
|
19.2
|
Changes in
Law.
|
If, after
the date this Contract is signed, any central or local government organ of the
PRC makes any change in any provision of any PRC Law, including amendment,
supplementation or repeal of an existing Law, or introduction of a different
interpretation or method of implementation of an existing Law (each, a "Change"), or promulgates a new
Law (each, a "New
Provision"), the following shall apply:
|
|
(a)
|
If
a Change or a New Provision is more favorable to the Company or any of the
Parties than the relevant Law in effect on the date this Contract was
signed (and the other Party is not materially and adversely affected
thereby), the Company and the Parties shall promptly apply to receive the
benefits of such Change or New Provision. The Company and the
Parties shall use their best efforts to cause such application to be
approved.
|
|
|
(b)
|
If,
after the Approval Date and because of such Change or New Provision, the
economic benefits of the Company or of any Party under this Contract are
materially and adversely affected, directly or indirectly, then this
Contract shall continue to be implemented in accordance with its original
terms. If the adverse effect on the Company's or on any Party's
economic interests cannot be resolved pursuant hereto, upon notice by the
affected Party to the other Party, the Parties shall consult promptly and
make all such amendments to this Contract as are required to maintain the
affected Party's economic benefits hereunder provided that such amendments
shall be made without prejudicing the other party, or at least by
equitably adjusting the benefits for each
Party.
|
Equity
Joint Venture Contract
-34-
Translation
reference
SECTION 20 LIABILITY
FOR BREACH OF CONTRACT
|
20.1
|
Breach of
Contract.
|
Subject
to the provisions of this Section 20, a Party shall be in breach of this
Contract (a) if it fails to perform, or suspends its performance of, its
obligations under this Contract, and if it does not commence correction of such
failure within 30 days, and complete such correction within 60 days, of receipt
of written notice thereof from any other Party or the Company, which notice must
specify the nature of the alleged breach in reasonable detail; or (b) if any of
the representations and warranties made by such Party is untrue or inaccurate in
any material respects.
|
20.2
|
Liability for Breach
of Contract.
|
|
|
(a)
|
If
the Company or a Party suffers any cost, liability or loss, including lost
profits of the Company but not including any other consequential losses of
whatsoever nature, as a result of a breach of this Contract by any Party,
the Party in breach shall indemnify and hold the Company and the
non-breaching Party or Parties harmless in respect of any such cost,
liability or loss, including interest paid or lost as a result thereof and
attorneys' fees.
|
|
|
(b)
|
Without
limiting the generality of the foregoing, each Party ("Indemnifying Party")
shall indemnify, defend and hold harmless the other Party and the Company
("Indemnified
Party") from and against all claims, losses, liabilities, damages,
deficiencies, judgments, assessments, fines, settlements, costs or
expenses (including interest, penalties and fees, loss of profits by the
Company, expenses and disbursements of attorneys, experts, personnel and
consultants incurred by any Indemnified Party in any action or proceeding
between the Indemnifying Party and any Indemnified Party or between any
Indemnified Party and any third party, or otherwise) based upon, arising
out of, relating to or otherwise in respect of any inaccuracy in or any
breach of any representation, warranty, covenant or agreement of the
Indemnifying Party contained in this Contract or in any documents or other
evidence delivered by the Indemnifying Party pursuant to this
Contract.
|
Equity
Joint Venture Contract
-35-
Translation
reference
SECTION
21 FORCE
MAJEURE
|
21.1
|
Occurrence and
Consequences of an Event of Force Majeure.
|
|
|
(a)
|
A
Party that cannot perform its obligations under this Contract ("Hindered Party") in full
or in part as a direct result of an Event of Force
Majeure, shall not be deemed to be in breach of this Contract if
all of the following conditions are
met:
|
|
|
(i)
|
the
Event of Force Majeure was the direct cause of the stoppage, impediment or
delay encountered by the Hindered Party in performing its obligations
under this Contract;
|
|
|
(ii)
|
the
Hindered Party used its best efforts to perform its obligations under this
Contract and to reduce the losses to the other Party or to the Company
arising from the Event of Force Majeure;
and
|
|
|
(iii)
|
at
the time of the occurrence of the Event of Force Majeure, the Hindered
Party informed the other Party and the Company, providing written
information on such event within ten Business Days of its occurrence,
including a statement of the reasons for the delay in implementing or
partially implementing this
Contract.
|
|
|
(b)
|
If
an Event of Force Majeure shall occur, the Parties shall discuss and
decide whether this Contract should be amended in light of the impact of
the event upon the implementation hereof, and whether the Hindered Party
should be partially or fully freed from its obligations
hereunder.
|
SECTION
22 GOVERNING LAW AND
DISPUTE RESOLUTION
|
22.1
|
Governing
Law.
|
The
formation, validity, interpretation, execution, amendment and termination of and
settlement of disputes under this Contract shall all be governed by the
officially published and publicly available Laws of the PRC. When the
officially published and publicly available Laws of the PRC do not cover a
certain matter, international legal principles and practices shall be referred
to.
|
22.2
|
Dispute
Resolution.
|
|
|
(a)
|
Any
Dispute shall be resolved through friendly consultation. Such
consultation shall begin immediately after one Party has delivered to the
other Party a written request for such consultation stating specifically
the nature of the Dispute. If within 30 days following the date
on which such notice is delivered the Dispute cannot be resolved, the
Dispute shall be referred to, and finally resolved by, arbitration upon
the request of any Party with notice to the other
Party.
|
Equity
Joint Venture Contract
-36-
Translation
reference
|
|
(b)
|
The
arbitration shall be conducted in Beijing under the auspices of China
International Economic Trade Arbitration Commission and in accordance with
its currently effective rules. However, if such rules are in
conflict with the provisions of this Section 22, the provisions of this
Section 22 shall prevail.
|
|
|
(c)
|
The
arbitral award shall be final and binding upon the
Parties.
|
|
|
(d)
|
In
order to preserve its rights and remedies, any Party shall be entitled to
seek preservation of property in accordance with Law from any court of
competent jurisdiction or from the arbitration tribunal pending the final
decision or award of the arbitration tribunal. During the
period when the Dispute is being resolved, except for the matters being
disputed, the Parties shall in all other respects continue their
implementation of this Contract.
|
|
|
(e)
|
Each
Party irrevocably consents to the service of process, notices or other
papers in connection with or in any way arising from the arbitration or
the enforcement of any arbitral award, by use of any of the methods and to
the addresses set forth for the giving of notices in Section
24.5. Nothing contained herein shall affect the right of any
Party to serve such processes, notices or other papers in any other manner
permitted by applicable Law.
|
SECTION
23 REPRESENTATIONS AND
WARRANTIES
|
23.1
|
Representations and
Warranties of the Parties.
|
Each
Party represents and warrants to the other Party, with respect to itself, on the
signing date of this Contract, as follows:
|
|
(a)
|
Such
Party is a legal entity duly organized, validly existing and in good
standing under the laws of the PRC, in the case of Party A, and under the
laws of HK, in the case of Party B, and has the corresponding power
and lawful authority to own or possess, lease and operate its assets and
to carry on its business as now being and as previously
conducted.
|
|
|
(b)
|
Such
Party has the full legal right, power and authority required to enter into
this Contract and to perform fully its obligations
hereunder. This Contract has been duly authorized, executed and
delivered by each Party and, assuming the due authorization, execution and
delivery by the other Party and approval by the Examination and Approval
Authority, constitutes the valid and binding obligation of each Party
enforceable against it in accordance with its
terms.
|
Equity
Joint Venture Contract
-37-
Translation
reference
|
|
(c)
|
Except
for the requirements for the obtaining of a Foreign Investment Enterprise
Approval Certificate and issuance of the Business License and as otherwise
set forth in this Contract, no filings with, notices to, or license,
permits, consents, authorizations, qualifications, orders or other
approvals of any governmental body or any other Person are necessary to be
obtained by such Party for its execution, delivery and performance of this
Contract or for the establishment of the
Company.
|
|
|
(d)
|
Such
Party is, has been and will continue to be in compliance with all
applicable Law of its home jurisdiction and does not know of any
circumstances that would be a breach of such
Law.
|
|
|
(e)
|
Neither
the execution of this Contract, nor the performance of such Party's
obligations hereunder, will conflict with, or result in a breach of, or
constitute a default under, any provision of the memorandum and articles
of association, business license or by-laws of such Party, as the case may
be, or any law, rule, regulation, authorization or approval of any
government agency or body, or of any contract or agreement to which such
Party is a party or is subject (including, in the case of Party B,
contracts existing on the date of this Contract relating to Party
B' other investments in the
PRC).
|
|
|
(f)
|
As
of the date of this Contract, there is no lawsuit, arbitration or legal,
administrative or other proceeding or governmental investigation pending
or, to the best knowledge of such Party, threatened against such Party and
the performance of this Contract with respect to the subject matter of
this Contract or that would affect in any way such Party's ability to
enter into or perform this
Contract.
|
|
|
(g)
|
All
documents, statements and information of or derived from any governmental
body in the possession of such Party relating to the transactions
contemplated in this Contract have been disclosed to the other Party, and
no document previously provided by such Party to any other Party contains
the untrue statement of material fact or omits to state any material fact
necessary in order to make the statements contained therein not
misleading.
|
Equity
Joint Venture Contract
-38-
Translation
reference
|
23.2
|
Party A further
represents and covenants to Party B that:
|
|
|
(a)
|
The
Assets free from any encumbrance;
|
|
|
(b)
|
No
third party, court, government agency or arbitration institution have
proposed any pending litigation, third party claim, order or investigation
relating to the Assets or Business which may threaten the cooperation
between the Parties;
|
|
|
(c)
|
Party
A have lawfully obtained all the consent or permit (“Governmental
Authority” including the items as listed in Appendix 3) as required by PRC
Law from the competent authority for its duly establishment, existing and
operation, and such Governmental Authority is fully
effective.
|
|
23.3
|
Party B further represents
and covenants to Party A
that:
|
The
capital source of Party B is lawful, which will not cause any losses to Party
A.
SECTION
24 EFFECTIVENESS OF THE
CONTRACT AND MISCELLANEOUS
|
24.1
|
Articles of
Association. The Articles of Association have been
concluded in accordance with the various principles stipulated in, and in
the form attached to, this Contract and are an integral part of this
Contract.
|
|
24.2
|
Approval of Contract
and Articles of Association. This Contract and the
Articles of Association shall be submitted to the Examination and Approval
Authority and shall come into force on the Approval
Date.
|
|
24.3
|
Survival. The
agreements of the Party contained in Section 7, 20, 22, and this Section
24.3shall continue to survive after the expiration or termination of this
Contract and the dissolution of the
Company.
|
|
24.4
|
Language. This
Contract is written in Chinese in six
counterparts.
|
|
24.5
|
Notices. Each
notice, demand or other communication given, delivered or made under this
Contract shall be in writing and delivered or sent to the relevant Party
or Parties at the address or fax number set out below (or such other
address or fax number as the addressee has by ten days' prior written
notice specified to the other
Party).
|
|
If
to the Party A: Kunming Television
Station
|
|
|
Attention:
|
Mr.
Lv Yongping
|
|
Telephone
Number:
|
(86)-0351-8302574
|
|
Fax:
|
(86)-0351-4042780
|
|
Address:
|
Xx.
000, Xxxxxx Xxxx, Xxxxxxx Xxxx, Xxxxxx Xxxxxxxx;
|
|
If
to Party B: 广告网络有限公司 (Advertising
Networks
Limited)
|
|
|
Attention:
|
Xx.
Xx Shuangqing
|
|
Telephone
Number:
|
(00)-000-00000000
|
|
Fax:
|
(00)-000-00000000
|
|
Address:
|
Suite
A-16E, Oriental Kenzo, Xx. 00,
|
|
Xxxxxxxxxxxxx
Xxxxxx, Xxxxxxxxx Xxxxxxxx,
Xxxxxxx.
|
|
Equity
Joint Venture Contract
-39-
Translation
reference
Each
notice, demand or other communication to be given, delivered or made pursuant to
this Section 24.5 shall be deemed so given, delivered or made (i) if sent by
registered or certified mail within one country on the third Business Day after
such notice, demand or communication, addressed as above provided, is delivered
to a post office and a receipt therefor is issued thereby, (ii) if sent by
registered or certified mail to another country on the tenth Business Day after
such notice, demand or communication, addressed as above provided, is delivered
to a post office and a receipt therefor is issued thereby, (iii) if sent by
courier or personnel delivery, when such notice, demand or communication is
delivered to the appropriate address as above provided, and (iv) if sent by
facsimile, when such notice, demand or communication is transmitted to the
appropriate facsimile number as above provided and the relevant report for the
successful transmission is given.
|
24.6
|
Severability. In
the event any one or more of the provisions contained in this Contract
should be held under any applicable Law to be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein shall not in any way be affected
or impaired thereby. The Parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions
with valid provisions, the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable
provisions.
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24.7
|
Waiver. No
waiver of any provision of this Contract shall be effective unless set
forth in a written instrument signed by the Party waiving such
provision. No failure or delay by a Party in executing any
right, power or remedy under this Contract shall operate as a waiver
thereof, nor shall any single or partial exercise of the same preclude any
further exercise thereof or the exercise of any other right, power or
remedy. Without limiting the foregoing, no waiver by a Party of
any breach by any other Party of any provision hereof shall be deemed to
be a waiver of any subsequent breach of that or any other provision
hereof.
|
Equity
Joint Venture Contract
-40-
Translation
reference
|
24.8
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Interpretation.
|
|
|
(a)
|
"Include,"
"including," "are inclusive of" and similar expressions are not
expressions of limitation and shall be construed as if followed by the
words "without limitation."
|
|
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(b)
|
References
to any government ministry, agency, department or authority shall be
construed as references to the duly appointed successor ministry, agency,
department or authority of such ministry, agency, department or authority
where the context permits.
|
|
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(c)
|
A
reference in this Contract to a document "in the agreed form" is to a
document agreed by the Parties and initialed by them for
identification purposes as of the date of this
Contract.
|
[THE REMAINDER OF THIS PAGE IS
INTENTIONALLY LEFT BLANK]
Equity
Joint Venture Contract
-41-
Translation
reference
IN
WITNESS WHEREOF, the Parties have caused their respective representatives to
execute this Contract as of the date first above written.
| Kunming Television
Station
(Company
Seal)
|
|||
|
By:
|
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| Name: | |||
| Title: | |||
|
(Advertising
Networks Limited)
|
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|
By:
|
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| Name: | |||
| Title: | |||
Equity
Joint Venture Contract
-42-
Translation
reference
APPENDIX
1
ARTICLES OF
ASSOCIATION
Equity
Joint Venture Contract
-43-
Translation
reference
APPENDIX
2
LIST OF CONTRIBUTED
ASSETS
Equity
Joint Venture Contract
-44-
