OPERATION AND MANAGEMENT RIGHT AGREEMENT
Exhibit
10.1
[Cautionary
Note: This Agreement has been translated into English from the original Chinese
language version.]
Party
A:
Sale and Marketing Publishing House
Add.:
Suite A, 14/F Guanghui International Trade Center, No.15 Jingsan Rd, Zhengzhou,
PRC
Party
B:
Shenzhen Media Investment Co., Ltd.
Add.:
5D,
Building C, Jinxiu Garden, overseas Chinese town, Nanshan District, Shenzhen,
PRC
Party
A
is a
large-scale publishing house approved by the General Administration of Press
and
Publication and Henan Provincial Government.
Party
B
is a
management company which is specialized in cultural media related business,
such
as newspapers and magazines publication, etc..
Under
the
background of China’s entry into WTO, in order to survive in the intensive
competition, stabilize the management team, strengthen employees’ sense of
responsibility, bring in employees’ collective wisdom and enthusiasm, fully
utilize the social resource and capital, expand the firm’s capital and business
scale, Party A decided to contract all of its business, operation and management
right to Party B. This issue has been recorded under the file No. [2003]2 and
approved by the Federation of Henan Light Industry, the Office of Henan Light
Industry Administration, the General Administration of Press and Publication
and
Ministry of Foreign Trade and Economic Cooperation.
Party
A
decided to contract all of its business, operation and management rights to
Party B. Based on mutual agreement between both parties, Party A and Party
B
reached an agreement of Operation and Management Right as follows:
|
A.
|
Party
A contracts all the business, operation and management rights to
Party B.
The term of this contract is ten years, from November 1, 2003 through
October. 31, 2013.
|
| B. |
Guarantee
clause. In order to prevent any loss of the state-owned assets, Party
B
agrees to pay a lump sum deposit of RMB 10,109,300 ( equal to RMB
1,010,930 per year x 10 years) to obtain the business, operation
and
management rights of Party A (according to No.007 (2003) assessment
report
of Henan Shi Xx Xxxx He accountants’ office). In addition, Party B
promises that for the continuous three years from the commencement
of the
agreement, the realized annual income of Party A (including the sum
of RMB
1,010,930 per year and the bonus dividend from Party B) would not
be lower
than the after-tax profit of Party A in the year end 2003 (the “basic
level”) (based on the FY2003 accounting statement of Party A). In the case
that the realized income of Party A is lower than the basic level,
Party A
will have a priority in collecting the shortage before Party B to
pay any
dividend to the shareholders, until restoring the realized income
of Party
A to the basic level. In the case that the realized income of Party
A is
higher than the basic level, Party A receives dividend from Party
B
according to the proportion of its shareholding. Upon the contract
expiration in ten years time, the lump-sum deposit that mention above
is
owned by Party A.
|
1
| C. |
The
operation and management rights granted to Party B by Party A
include:
|
|
1.
|
Rights
to publish, including publishing and printing affairs of all publications,
and all other related operations owned by Party
A.
|
|
2.
|
Advertising
right, including exclusive right of advertising business of all the
publications owned by Party A;
|
|
3.
|
Right
to use intangible assets, such as brand, trade xxxx, etc.(the ownership
of
the intangible assets belongs to Party
A);
|
|
4.
|
Right
of strategic decision-making and contracting with external parties
in
aspects of investment, joint venture, cooperation and
contracting.
|
|
5.
|
The
right of financial management and the operation of Party
A;
|
|
6.
|
Right
to obtain benefit: Party B bears all of the operating costs relating
to
the operation of Party A and is entitled to all revenues generated
from
the operation of Party A.
|
| D. |
Terms
of payment
|
Within
15
days after this agreement is signed, Party B remits the lump-sum payment of
RMB
10,109,300 to Party A’s account.
| E. |
The
management and personnel arrangements of the Operation and Management
Right:
|
|
1.
|
After
Party A grants to Party B with operation and management rights pursuant
to
this agreement, Party B has the obligation to pay the staffs of Party
A
with the same level of salary and welfares for three
years.
|
|
2.
|
Party
B carries on the operation and management of Party A according to
the
modern management system. Party B hires the general manager and the
chief
financial officer, who shall be in charge of the operation and management
of Party A pursuant to this agreement.
|
|
3.
|
The
responsibilities and duties of the chairman, general manager and
the chief
financial officer should be defined by the board of directors of
Party B.
|
2
| F. |
The
allocation of assets and profits
Party A has the ownership of
its assets
(including the intangible assets). Party B could use the existing
offices,
buildings, equipment and vehicles of Party A by paying compensation
to
Party A. Party A charges the usage based on the depreciation of the
assets. Both parities shall sign additional agreements regarding
the usage
of fixed assets.
|
| G. |
Insurance
clause. Party B has the obligation to continue purchasing social
insurance
for the staff of Party B according to the state regulations and laws
during the operation and management period.
|
| H. |
Upon
the expiration of this agreement, Party B has the right of first
refusal
to renew the agreement.
|
| I. |
Treatment
of Credit/Debt:
|
Party
A
shall be responsible for the social insurance and welfare that Party A should
have purchased for its staff before the commencement of the agreement but failed
to do so. Party A should solely take all financial and legal liabilities
caused/related to debts generated before the commencement of this agreement.
| J. |
Default:
|
|
1.
|
Once
the agreement is signed and comes into force, the operation and management
right granted to Party B is sole, exclusive and non-transferable.
If Party
B’s failure to fulfill the obligations under this agreement is caused
by
Party A, it will be considered as a breach of contract by Party A.
If a
suspension of publication is caused by the state’s publication policy,
Party A does not bear the liability for breaching the contract, but
should
return Party B's corresponding remaining deposits (calculated on
RMB
1,010,930 per year basis).
|
|
2.
|
During
the term of the agreement, Party B should take best effort to prevent
damages of intangible assets of Party A such as the brand and trademark
etc. If, during the term of the agreement, Party B terminates the
agreement without a reasonable cause or transfers its operation and
management rights under this agreement without Party A’s consent to a
third party, or does not meet the minimum income requirements of
Party A
for the continuous three years, Party B will be liable for breaching
of
the contract.
The
violation of the above-mentioned clauses by
either Party A or Party B should be considered as breach of contract.
Either party shall be liable for its breach and compensate all actual
losses incurred to the other party. In addition, the breaching party
shall
pay to the other party a penalty, which shall be equivalent to 50%
of the
registered capital of Party B. If Party A is the breaching party,
it shall
return to Party B corresponding deposit for the residual terms of
the
agreement (calculated as RMB 1,010,930 per year). If Party B is the
breaching party, Party A does not need to return the corresponding
deposits to Party B.
|
| K. |
Settlement
of Disputes. All disputes between the Parties arising out of or in
connection with this agreement shall be settled between the
Parties by
discussion and mutual accord. If a mutual accord cannot be reached
between
the Parties, either party may submit the dispute to Shenzhen Arbitral
Committee for arbitration.
|
3
| L. |
This
agreement will come into force as soon as it is duly signed, sealed
by
both parties and ratified by the concerned governmental authorities.
This
agreement shall be executed in five (5) copies. Each party holds
two (2)
copies, and the Office of Henan Light Industry Administration keeps
one
(1) copy for records.
|
Party
A:
Sale and Marketing Publishing House
/s/
Yingsheng Li
(Corporate
Seal)
October
23, 2003
Party
B:
Shenzhen Media Investment Co., Ltd.
/s/
Xxxxxx Xx
(Corporate
Seal)
October
23, 2003
4
