EXHIBIT 10.17
Private and Confidential Execution Copy
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SHARE SUBSCRIPTION AGREEMENT
relating to Common Shares in
T2CN HOLDING LIMITED
(a company incorporated in the British Virgin Islands with limited liability)
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Private and Confidential
INDEX
1. INTERPRETATION..................................................4
2. SUBSCRIPTION....................................................7
3. JCE WARRANT.....................................................8
4. CONDITIONS PRECEDENT AND COVENANTS..............................9
5. COMPLETION.....................................................11
6. COMPANY WARRANTIES.............................................12
7. INVESTOR WARRANTIES............................................12
8. NOTICES........................................................12
9. CONFIDENTIALITY................................................13
10. COSTS AND EXPENSES.............................................14
11. MISCELLANEOUS..................................................14
12. DISPUTE RESOLUTION.............................................17
SCHEDULE 1
Particulars of the Companyas at the date of this Agreement
SCHEDULE 2
Details of Shareholding of the Company before and after Completion
SCHEDULE 3
Copy of the T2 Entertainment License Agreement
SCHEDULE 4
Copy of the Software Purchase Agreement
SCHEDULE 5A
Company Warranties
SCHEDULE 5B
Disclosure Schedule (on Company Warranties)
SCHEDULE 6
Investor Warranties
SCHEDULE 7
Address of the Parties
EXHIBIT I
Form of Articles of Association of the New JV
EXHIBIT 2
Warrant to Purchase Common Shares
T2CN Holding Limited
(a company incorporated in the British Virgin Islands with limited liability)
Share Subscription Agreement
THIS SHARE SUBSCRIPTION AGREEMENT (the "Agreement") is made on the 1st day of
September, 2005 (hereinafter the "Execution Date").
BY AND AMONG:
1. T2CN Holding Limited, a limited liability company organized and existing
under the laws of the British Virgin Islands with its registered address
at the offices of S-HR&M Financial Services Limited of Kingston Chambers,
P.O. Box 173, Road Town, Tortola, British Virgin Island (the "Company");
and
2. JC Entertainment Corp., a corporation organized and existing under the
laws of the Republic of Korea with its registered address at 4th Floor,
Rosedale Building, #724 Suseo-Dong, Kangnam-Ku, Seoul 135-885, Korea
("JCE").
The Company and JCE may hereinafter be collectively referred to as the "Parties"
and respectively referred to as a "Party".
WHEREAS:
(A) The Company is a company incorporated in the British Virgin Islands with
an authorised share capital of US$0.01, divided into 50,000,000 Common
Shares of par value US$0.01 each. Further particulars of the Company as at
the date of this Agreement are set out in Schedule 1. As at the date of
the Agreement, 25,078,535 Common Shares are issued and outstanding,
exclusive of the Common Shares to be issued and allocated to JCE
hereunder.
(B) The Company and JCE intend to jointly establish, no later than November 30,
2005 a wholly foreign owned subsidiary in Shanghai, PRC with the registered
capital in the amount of USD1,500,000 (the "New JV"). The Company and JCE
will hold 65% and 35% equity interest respectively in the New JV. The
intended business scope of the New JV is to engage in consulting and
technical services in connection with casual internet games. It is
contemplated that the New JV shall be entitled to operate the internet game
known as "Free Style", defined as "Localized Game" herein, in the PRC
through Shanghai T2 Entertainment Co., Ltd. , a limited liability company
incorporated under the laws of the PRC with its registered address at 5th
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Floor 88 Qinjiang Road, Xuhui District, Shanghai, PRC (200233), "T2
Entertainment"), an affiliated company which holds the qualifications
required under PRC laws to directly operate internet games in the PRC.
(C) Prior to the establishment of the New JV and as an interim arrangement, T2
Entertainment is licensed to directly operate the Localized Game by
entering into and performing a license agreement with JCE dated August 4,
2005 (the "T2 Entertainment License Agreement").
(D) Concurrent to the execution of the T2 Entertainment License Agreement, the
Parties also entered into a Purchase Agreement regarding certain casual
internet games, whereby T2CN Holding purchased such games from JCE (the
"Software Purchase Agreement").
(E) Upon the establishment of the New JV, JCE shall, if permitted under PRC
laws, enter into a license agreement with the New JV, whereby JCE shall
grant to the New JV the exclusive right and license to operate in the PRC
the Updated Version (as defined below) of the Localized Game on terms
agreed upon by the Parties. Concurrently, the New JV shall enter into a
certain cooperation agreement or sublicense agreement, as the case may be,
with T2 Entertainment, setting forth their joint participation or
sublicensing to T2 Entertainment to operate in the PRC the Updated Version
of the Localized Game, relying on their respective advantages and
qualifications (the "Cooperation Agreement"), and whereby a substantial
portion of the economic benefits generated from the aforesaid operation
shall be transferred to the New JV (together with the establishment of the
New JV, the "Proposed Transactions"). Under the Cooperation Agreement, (i)
the New JV will provide the relevant hardware platform and the technical
support and operation maintenance services in relation to the operations
of the Updated Version of the Localized Game, (ii) the New JV will provide
to T2 Entertainment the contents of the Updated Version of the Localized
Game, and (iii) T2 Entertainment will operate and release to the public in
the PRC the Updated Version of the Localized Game through its online fee
collection platform.
(F) For the purpose of the Proposed Transactions, JCE will provide various
technical and consulting services to the Company and to T2 Entertainment
regarding the Localized Game's operation during the term beginning from
the Execution Date to December 31, 2007 (the "JCE Services").
(G) By this Agreement, the Company agrees to issue and allot an aggregate of
2,000,000 Common Shares (the "Subscription Shares") to JCE in
consideration of JCE's commitment to procure the completion of the
Proposed Transactions, and provision of the JCE Services, and JCE agrees
to subscribe for the Subscription Shares, in accordance with the terms and
conditions of this Agreement.
(H) Details of the shareholding structure of the Company (i) as at the date
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hereof and (ii) immediately after Completion (as hereinafter defined) are
set out in Schedule 2.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 In this Agreement and the Schedules hereto, unless the context requires or
provides otherwise:
"Agreement" means this Share Subscription Agreement;
"Business Day" means a day (other than a Saturday or
Sunday) on which licensed banks are open for
general banking business in the PRC and New
York, USA;
"CIETAC" shall mean the China International
Economic and Trade Arbitration Commission;
"Clause" means a clause in this Agreement;
"Common Shares" means the Common Shares of a par value of
US$0.01 each in the share capital of the
Company;
"Company" means T2CN Holding Limited;
"Company Warranties" means the representations and
warranties made by the Company pursuant to this
Agreement as set out in Schedule 5A in respect
of and insofar as they relate to the Company and
the term "Company Warranty" shall be construed
accordingly;
"Completion" subject to the fulfilment of the Conditions
Precedent, means the completion of the
Subscription and, where the context requires,
the performance by the Parties of the
obligations contained in Clause 5;
"Completion Date" means September 30, 2005 or such other
date as the Parties hereto may agree, being the
date on which Completion is to take place
pursuant to Clause 5;
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"Concurrent Users" means the end users of the Localized Game
who initiate their use of the Localized Game
concurrently within the PRC;
"Number of Concurrent means the maximum number of
Concurrent Users" Users, not the average number
of Concurrent Users in any consecutive term.
"Conditions Precedent" means the conditions precedent to
Completion as set out in Clause 4.1 and Clause
4.2;
"Cooperation Agreement" has the meaning set forth in the recitals;
"Exhibit" means an exhibit attached to this Agreement;
"Investor Warranties" means the representations and
warranties made by JCE pursuant to this
Agreement as set out in Schedule 6 and the term
"Investor Warranty" shall be construed
accordingly;
"JCE" has the meaning set forth in the recitals;
"JCE Services" has the meaning set forth in the recitals;
"JCE Warrant" has the meaning set forth in Clause 3.1;
"Localized Game" means the internet game localized from the
game named "Free Style" (including any and
all versions thereof), of which the
exclusive rights to manufacture, market,
promote, use, distribute, publish and sell
have been licensed to T2 Entertainment
under the T2 Entertainment License
Agreement;
"Memorandum and means the memorandum and articles of
Articles of Association" association of the Company effective as of
the date of this Agreement;
"New JV" has the meaning set forth in the recitals;
"New JV's AOA" means the Articles of Association of
the New JV to be agreed upon by the Company and
JCE, the form of which is attached hereto as
Exhibit 1;
"Party" has the meaning set forth in the recitals;
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"PRC" means the People's Republic of China (for
the purpose of this Agreement, excluding
Hong Kong Special Administrative Region,
Macau Special Administrative Region and
Taiwan);
"Proposed Transactions" has the meaning set forth in the recitals;
"Subscription Shares" means the aggregate of the Subscription
Shares;
"Schedule" means a schedule attached to this
Agreement;
"Shareholder" means any holder of a share in the share
capital of the Company;
"Software Purchase has the meaning set forth in the recitals,
Agreement" a true copy of which has been attached hereto
as Schedule 4;
"Subscription" means the subscription by JCE for the
Subscription Shares in accordance with the
terms and conditions of this Agreement;
"T2 Entertainment" has the meaning set forth in the recitals;
"T2 Entertainment means the Software License Agreement to be
License Agreement" entered into between JCE and T2
Entertainment dated August 4, 2005, a true copy
of which has been attached hereto as Schedule 3;
"Updated Version" means a new version of the Localized
Game that contains patches, upgrades,
enhancements and/or new functions not
contained in the prior version of the
Localized Game; for the avoidance of
doubt, Upgraded Version shall not apply to
sequels of the Game (including but not
limited to "Free Style II" or "Free Style
III") which will be developed and/or
released after the date of this Agreement
and the content of which is substantially
different from the Game;
"USA" means the United States of America;
"United States Dollars" means the lawful currency of the USA; and
and "US$"
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"Warrant Shares" has the meaning set forth in Clause 3.1
hereof.
1.2 In this Agreement, unless otherwise specified:
(i) references to Clauses, sub-clauses, paragraphs, sub-paragraphs,
Schedules and Exhibits are to Clauses, sub-clauses, paragraphs,
sub-paragraphs in, and Schedules and Exhibits to this Agreement;
(ii) a reference to any statute or statutory provision shall be construed
as a reference to the same as it may have been, or may from time to
time be, amended, modified or re-enacted;
(iii) references to a "company" shall be construed so as to include any
company, corporation or other corporate body, wherever and however
incorporated or established;
(iv) references to a "person" shall be construed so as to include any
individual, firm, company, government, state or agency of a state or
any joint venture, association or partnership (whether or not having
separate legal personality);
(v) words imparting the singular shall include the plural and vice
versa, and words imparting one gender shall include all genders;
(vi) references to writing shall include any communication made by
letter, facsimile transmission, electronic mail and any other mode
of reproducing words in a legible and non-transitory form;
(vii) references to times of day are to Beijing time;
(viii)headings to Clauses, Schedules and Exhibits are for convenience of
reference only and shall not affect the interpretation of this
Agreement; and
(ix) the Schedules and Exhibits shall form part of this Agreement and
shall have the same force and effect as if expressly set out in the
body of this Agreement, and any reference to this Agreement shall
include the Schedules and Exhibits.
2. SUBSCRIPTION
2.1 On the terms and subject to the conditions set out in this Agreement, and
subject to the satisfaction or waiver of the Conditions Precedent in
Clause 4.1 and Clause 4.2, at Completion JCE shall subscribe for, and the
Company shall allot and issue to JCE, 2,000,000 Subscription Shares, in
consideration of JCE's commitment to procure the completion of the
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Proposed Transactions and provision of JCE Services which are valued at
US$4,000,000 at a subscription price of US$2.00 per share, pursuant hereto
and in accordance with the provisions of the Memorandum and Articles of
Association of the Company.
2.2 JCE hereby irrevocably agrees that as consideration for the Subscription
Shares, (i) it shall ensure that the Proposed Transactions will be
conducted, i.e. it shall procure that the New JV is duly established and
that the New JV shall enter into and fully perform its obligations
contained in the Cooperation Agreement with T2 Entertainment, under which
(a) the New JV will provide the relevant hardware platform and the
technical support and operation maintenance services in relation to the
operations of the Updated Version of the Localized Game, (b) the New JV
will provide the contents of the Updated Version of the Localized Game to
T2 Entertainment, and (c) T2 Entertainment will operate and release to the
public in the PRC the Updated Version of the Localized Game through its
online fee collection platform; and (ii) for the purpose of the Proposed
Transactions, it provides the JCE Services as per request from the
Company.
3. JCE WARRANT
3.1 The Company shall at Completion issue JCE a warrant ("JCE Warrant"),
convertible to 3,000,000 Common Shares in the Company of par value of
US$0.01 each ("Warrant Shares"). The JCE Warrant shall be exercised by JCE
at the share subscription price equal to the par value of each Common
Share. Unless otherwise agreed between the Parties, JCE may choose to pay
the consideration for the Common Shares under the JCE Warrant by way of
providing various consulting and technical services to the Company and/or
its affiliates for the purpose of benefiting the Company and JCE's joint
operation of the Localized Game in the PRC, in which case the Company's
board of directors shall adopt relevant resolutions acknowledging and
accepting such payment as due and equitable consideration for the relevant
Common Shares to be acquired by JCE under the JCE Warrant.
3.2 The exercise of the JCE Warrant shall be subject to the following
conditions:
(a) JCE may not exercise its right under the JCE Warrant to subscribe
for 1/3 of the Warrant Shares unless and until the Number of
Concurrent Users of the Localized Game in the PRC has reached
100,000 by the end of August 4, 2007;
(b) JCE may not exercise its right under the JCE Warrant to subscribe
for an additional 1/3 of the Warrant Shares unless and until the
Number of Concurrent Users of the Localized Game in the PRC has
reached 200,000 by the end of August 4, 2007;
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(c) JCE may not exercise its right under the JCE warrant to subscribe
for the remaining 1/3 of the Warrant Shares unless and until the
Number of Concurrent Users of the Localized Game in the PRC has
reached 300,000 by the end of August 4, 2007;
(d) The JCE Warrant shall be null and void for the Common Shares not
exercised thereunder immediately upon the stoppage of T2
Entertainment operating the Localized Game due to material breach by
JCE of the T2 Entertainment License Agreement or an event of force
majeure except as otherwise agreed upon the Parties.
3.3 In order for the JCE Warrant to be issued to JCE, the Company shall make
available for subscription by JCE an aggregate of 3,000,000 Common Shares,
as set out in Schedule 2 hereto. Such subscription shall be subject to
Clause 3 of this Agreement and on the terms and conditions of the JCE
Warrant, which shall be substantially in the form of Exhibit 2 hereto.
4. CONDITIONS PRECEDENT AND COVENANTS
4.1 Obligations of the Company for Completion In addition to Clause 2 above,
Completion of this Agreement by JCE shall be conditional upon the
fulfilment or waiver, on or before Completion, of each of the following
conditions:
(a) Representations and Warranties
The representations and warranties made by the Company shall be
true, complete and accurate on and as of Completion with the same
effect as though such representations and warranties had been made
on and as of the date of such Completion.
(b) Legal Compliance
The Company shall have performed and complied with all obligations
and requirements under any applicable laws, regulations, rules,
orders, or decrees, in particular those in relation to company and
securities regulatory regime and in connection with Completion in
the British Virgin Islands and the PRC.
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(c) Transaction Documents
The Company shall have duly executed and delivered to JCE this
Agreement and the New JV's AOA, and both the T2 Entertainment
License Agreement and the Software Purchase Agreement shall remain
in full effect.
(d) Necessary Approvals
The Company shall have obtained all approvals, consents and
qualifications, if necessary, to complete the subscription and
issuance of the Subscription Shares, and the Company shall have
approved the issuance and allotment of the Subscription Shares to
JCE pursuant to the terms of this Agreement and the provisions of
the Memorandum and Articles of Association.
4.2 Obligations of JCE for Completion In addition to Clause 2 above,
Completion of this Agreement by the Company shall be conditional upon the
fulfilment or waiver, on or before Completion, of each of the following
conditions:
(a) Representations and Warranties
The representations and warranties made by JCE shall be true,
complete and accurate on and as of Completion with the same effect
as though such representations and warranties had been made on and
as of the date of such Completion.
(b) Legal Compliance
JCE shall have performed and complied with all obligations and
requirements under any applicable laws, regulations, rules, orders,
or decrees, in particular those in relation to company and
securities regulatory regime and in connection with Completion in
the British Virgin Islands and the Republic of Korea.
(c) Transaction Documents
JCE shall have duly executed and delivered to the Company this
Agreement and the New JV's AOA, and both the T2 Entertainment
License Agreement and the Software Purchase Agreement shall remain
in full effect.
(d) Necessary Approvals
JCE shall have obtained all approvals, consents and qualifications,
if necessary, to complete the subscription of the Subscription
Shares.
4.3 Each Party hereto shall use all reasonable endeavours to fulfil or procure
the fulfilment of the Conditions Precedent relating to it, on or before
the Completion Date.
4.4 If any of the Conditions Precedent relating to either Party hereto are not
fulfilled, or waived in writing by the other Party hereto, on or before
the Completion Date, then unless the other Party hereto agrees otherwise
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in writing, and subject to Clause 11.1 hereof, this Agreement shall become
null and void and cease to have further effect whereupon no Party hereto
shall have any obligation or liability to, or any claim or demand against,
any other Party hereto under this Agreement.
5. COMPLETION
5.1 Subject to the fulfilment of the Conditions Precedent, or the waiver
thereof by the relevant Party, Completion shall, unless the Parties agree
otherwise, take place on the Completion Date in Shanghai, PRC.
5.2 All of the following matters shall be or have been transacted at the time
of Completion:
(a) the Company shall:
(i) issue and allot as fully paid up the Subscription Shares to
JCE, each of which being free from all charges, liens,
encumbrances, equities or other third party rights, claims or
interests, and shall procure that JCE be registered as holders
of the Subscription Shares in the register of members of the
Company,
(ii) deliver to JCE the share certificates issued in the name of JCE
for the Subscription Shares issued and allotted to JCE,
(iii) have satisfied all the conditions listed in Clause 4.1 hereof
(unless waived in whole or in part);
(iv) deliver to JCE a copy of the Memorandum and Articles of
Association of the Company, which shall remain the same as that
provided by the Company to JCE as at the date of this
Agreement.
(b) JCE shall:
(i) have satisfied all the conditions listed in Clause 4.2 hereof
(unless waived in whole or in part),
(ii) have commenced to perform its commitments to procure the
completion of the Proposed Transactions as consideration for
the Subscription Shares.
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6. COMPANY WARRANTIES
6.1 The Company hereby represents and warrants to JCE that each of the Company
Warranties (as set out in Schedule 5A) is true, complete and accurate in
all material respects as at the date of this Agreement, and that (unless
expressly provided to the contrary in the Company Warranties) if there is
any interval of time between the execution of this Agreement and
Completion, the Company Warranties will continue to be true, complete and
accurate in all material respects, subsequent to the date of this
Agreement up to and including the time of Completion, as if repeated on
each such day with reference to the facts then existing and at the
Completion Date, save and except as disclosed in the Disclosure Schedule
(Schedule 5B).
6.2 Each of the Company Warranties shall be construed as a separate and
independent Company Warranty and, except where expressly provided to the
contrary, shall not be limited or restricted by reference to or inference
from the terms of any other Company Warranty or any other terms of this
Agreement.
6.3 JCE shall not be entitled to make any claim under or in respect of the
Company Warranties, or otherwise under this Agreement, to the extent of
any matters relating to the Company Warranties which are disclosed in the
Disclosure Schedule (Schedule 5B).
7. INVESTOR WARRANTIES
7.1 JCE hereby represents and warrants to the Company that each of the
Investor Warranties (as set out in Schedule 6) is true, complete and
accurate in all material respects as at the date of this Agreement, and
that (unless expressly provided to the contrary in Investor Warranties) if
there is any interval of time between the execution of this Agreement and
Completion, Investor Warranties will continue to be true, complete and
accurate in all material respects subsequent to the date of this Agreement
up to and including the time of Completion, as if repeated on each such
day with reference to the facts then existing and at the Completion Date.
7.2 Each of the Investor Warranties shall be construed as a separate and
independent Investor Warranty and, except where expressly provided to the
contrary, shall not be limited or restricted by reference to or inference
from the terms of any other Investor Warranty or any other terms of this
Agreement.
8. NOTICES
8.1 Any notice or other communication given or made under this Agreement shall
be in writing.
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8.2 Any such notice or other communication shall be addressed as provided in
this Clause 8 and, if so addressed, shall be deemed to have been duly
given or made as follows:
(a) if sent by personal delivery, upon delivery at the address of the
relevant Party;
(b) if sent by registered post, five (5) Business Days after the date of
posting; and
(c) if sent by facsimile, upon despatch to the facsimile number of the
recipient, with the production of a transmission report by the
machine from which the facsimile was sent which indicates that the
facsimile was sent in its entirety to the facsimile number of the
recipient.
8.3 The relevant address of each Party for the purposes of this Agreement,
subject to Clause 8.4, is set out in Schedule 7.
8.4 A Party may notify the other Party to this Agreement of a change in its
name, address or facsimile number in accordance with this Clause PROVIDED
THAT such notification shall only be effective on:
(i) if Sub-clause (ii) does not apply, the date specified in the
notification as the date on which the change is to take place; or
(ii) if no date is specified or the date specified is less than seven (7)
Business Days after (and excluding) the date on which the notice is
given, the date falling seven (7) Business Days after notice of any
such change has been given.
9. CONFIDENTIALITY
9.1 Subject to Clause 9.2, each Party shall treat as strictly confidential all
information received or obtained as a result of entering into or
performing this Agreement which relates to:
(i) the provisions of this Agreement;
(ii) the negotiations relating to this Agreement;
(iii) the subject matter of this Agreement; and
(iv) the other Party.
9.2 Each Party may disclose information which would otherwise be confidential
if and to the extent:
(i) required by the law of any relevant jurisdiction;
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(ii) required by existing contractual obligations and with the prior
written consent of the other Party hereto (which consent shall not
be unreasonably withheld or delayed);
(iii) required by any securities exchange or regulatory or governmental
body to which such Party or the Company is subject or submits,
wherever situated;
(iv) disclosed to the professional advisers, auditors and bankers of each
Party for the purpose of this Agreement;
(v) a Party is a fund, then (a) to its fund manager and its professional
advisers, auditors and bankers, for the purpose of this Agreement,
and (b) if it is required for fund and inter-fund reporting (as
applicable), for such reporting only;
(vi) the information has come into the public domain through no fault of
that Party; or
(vii) the other Party has given prior written approval to the disclosure,
PROVIDED THAT, unless prohibited by any relevant law, governmental or
regulatory bodies or any securities exchange, any order or decree, any
such information disclosed pursuant to Sub-clause (i) or (iii) above shall
be disclosed only after consultation with and notice to the other Party to
which the information relates.
10. COSTS AND EXPENSES
10.1 Each Party to this Agreement shall bear its own legal and professional
fees, costs and expenses incurred in relation to the negotiations,
preparations, execution and performance of this Agreement, and all other
transactions incidental to and/or contemplated by this Agreement that
incurred thereby.
10.2 Any duty or tax arising on the issue and allotment of any of the
Subscription Shares to JCE shall be borne by each Party respectively.
11. MISCELLANEOUS
11.1 Surviving Provisions
Without prejudice to and subject always to Clause 4.4, after Completion,
any provision of this Agreement which is capable of being performed after
but which has not been performed at or before Completion, including
without limitation, Clause 4, Clause 9 and the Company Warranties and
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Investor Warranties in Clauses 6 and 7 shall remain in full force and
effect notwithstanding Completion.
11.2 Successors and Assigns
(i) This Agreement is personal to the Parties hereto and save as
expressly provided herein, neither Party may assign, mortgage,
charge or sub-license any of its rights herein, or sub-contract or
otherwise delegate any of its obligations herein, except with the
prior written consent of the other Party hereto.
(ii) Subject to sub-clause (i) above, this Agreement shall be binding on
and inure for the benefit of the successors, permitted assigns and
personal representatives (as the case may be) of each of the Parties
hereto.
11.3 Cumulative Rights
Unless otherwise provided in this Agreement, any remedy conferred on
either Party hereto for breach of this Agreement shall be in addition and
without prejudice to all other rights and remedies available to it.
11.4 Entire Agreement and Variation
This Agreement shall supersede all and any previous agreements,
understandings or arrangements (if any) between the Parties hereto in
relation to the subject matter hereof, and all or any such previous
agreements, understandings or arrangements (if any) shall cease and
determine with effect from the date hereof. This Agreement constitutes the
entire agreement between the Parties hereto or any of them in relation to
the subject matter hereof (no Party having relied on any representation,
warranty or undertaking made by the other Party which is not a term of
this Agreement) and no variation to this Agreement shall be effective
unless made in writing and signed by each of the Parties hereto.
11.5 Further Assurance
Each of the Parties hereto undertakes with the other Party that it shall
do, or shall procure to be done, all such acts and things, and shall
execute, or shall procure to be executed, all such documents, as may be
necessary or appropriate to implement the provisions of this Agreement or
otherwise to give full legal force and effect thereof. In particular, the
Parties agree to cooperate with each other to establish the New JV no
later than November 30, 2005.
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11.6 Severability
The Parties hereto intend that the provisions of this Agreement shall be
enforced to the maximum extent permissible under the laws applied in each
jurisdiction in which enforcement of any provisions of this Agreement is
sought. If any particular provision or part of this Agreement shall be
held to be invalid or unenforceable, this Agreement shall be deemed to be
amended by the deletion of such provision or part held to be invalid or
unenforceable or, to the extent permissible by the applicable laws of the
relevant jurisdiction in which such enforcement is sought, such provision
or part shall be deemed to be varied in such a way as to achieve the
purpose closest to the original provision or part, in a manner which is
valid and enforceable, provided that for the avoidance of doubt, such
amendments shall apply only with respect to the operation of this
Agreement in the particular jurisdiction in which the decision as to
invalidity or unenforceability is made.
11.7 Non-waiver
No delay or omission on the part of either Party hereto in exercising any
right, power or privilege shall operate to impair such right, power or
privilege or be construed as a waiver by such Party of the same, and no
single or partial exercise or non-exercise or delay in exercising any
right, power or privilege by either Party hereto shall in any
circumstances preclude any other or further exercise by such Party of such
right, power or privilege, or the exercise of any other right, power or
privilege by such Party.
11.8 Counterparts
This Agreement may be executed in counterparts and by different Parties
hereto on separate copies or counterparts, and which taken together shall
constitute one and the same agreement. The facsimile transmissions of any
executed original document (including without limitation, any page of an
original document on which an original signature appears) and/or
retransmission of any such facsimile transmission shall be deemed to be
the same as the delivery of an executed original. At the request of either
Party hereto, the other Party hereto shall confirm facsimile transmissions
by executing duplicate original documents and delivering the same to the
requesting Party.
11.9 Time of the Essence
Time shall be of the essence in this Agreement and this Clause shall apply
to any extension of time in relation to this Agreement as may be agreed
from time to time by the Parties hereto.
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12. DISPUTE RESOLUTION
12.1 Resolution by Consultation
Any dispute, controversy or claim arising out of or relating to this
Agreement, or the interpretation, breach, termination or validity hereof,
shall be resolved through consultation. Such consultation shall begin
immediately after one Party hereto has delivered to the other Party hereto
a written request for such consultation. If within thirty (30) days
following the date on which such notice is given the dispute cannot be
resolved, the dispute shall be submitted to arbitration according to
Clause 12.2 below upon the request of either Party with notice to the
other.
12.2 Arbitration Venue and Arbitrators
The arbitration shall be conducted in Shanghai under the auspices of the
China International Economic and Trade Arbitration Commission ("CIETAC")
in Shanghai according to its then arbitration rules. The arbitration
tribunal shall consist of three (3) arbitrators experienced in applicable
corporate, commercial and maritime law and matters, among which each Party
shall be entitled to appoint one, and the remaining one shall be appointed
by the first two arbitrators so selected.
12.3 Effect of Award
The award of the arbitration tribunal shall be final and binding upon both
Parties, and the prevailing party may apply to a court of competent
jurisdiction for enforcement of such award.
12.4 Applicable Law
The arbitrators shall decide any dispute submitted by the Parties to the
arbitration strictly in accordance with the substantive law of Singapore
and shall not apply any other substantive law.
12.5 Information Disclosure
Each Party hereto shall co-operate with the other(s) in making full
disclosure of and providing complete access to all information and
documents requested by the other(s) in connection with such arbitration
proceedings, subject only to any confidentiality obligations binding on
such Party.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
17
[Execution Page]
IN WITNESS of which the Parties hereto have executed this Agreement on the date
first mentioned above.
Company:
For and on behalf of T2CN Holding Limited
SIGNED by __________________
Name: JUN-TSE TENG
Position: Chief Executive Officer
JCE:
For and on behalf of JC Entertainment Corp.
SIGNED by __________________
Name: IL-SUNG BAIK
Position: Vice President
SCHEDULE 1
Particulars of the Company
as at the date of this Agreement
1. Name: T2CN Holding Limited
2. Date of Incorporation: May 7, 2004
3. Country of incorporation British Virgin Islands,
and status of company: International Business Company
4. IBC number: 595721
5. Registered office: The Registered Office of the
Company shall be at the offices of S-HR&M
Financial Services Limited of Kingston Chambers,
P.O. Box 173, Road Town, Tortola, British Virgin
Islands or at such other place as the Directors
may from time to time decide.
6. Authorised share capital: US$500,000 comprising of 50,000,000 shares with a
par value of US$0.01 each.
7. Issued share: 25,078,535 shares issued
8. Shareholders: See Schedule 2
9. Directors: Bo Feng
Ji Wang
Jun-Tse Teng
Tao Feng
10. Secretary: Jeff Yu
11. Financial year end: 31st December
Schedule 2 to the Share Subscription Agreement
SCHEDULE 2
Details of Shareholding of the Company
before and after Completion
Shareholding of the Company Before Completion
- --------------------------------------------------------------------------
Number of Respective
Common Number of
Shares Shares
Outstanding Name of Shareholder Owned
- --------------------------------------------------------------------------
Chengwei (China) Investment Company 4,037,500
- --------------------------------------------------------------------------
Ji Wang 2,486,250
- --------------------------------------------------------------------------
Yanqing Li 1,211,250
- --------------------------------------------------------------------------
Bin Zheng 283,333
- --------------------------------------------------------------------------
Fei Zhang 340,000
- --------------------------------------------------------------------------
Teng Jun-Tse 141,666
- --------------------------------------------------------------------------
Bryan M. Dear 700,002
- --------------------------------------------------------------------------
Michelle Cote-Dear 200,000
- --------------------------------------------------------------------------
Tandoor Holdings Ltd. 200,000
- --------------------------------------------------------------------------
Jacqueline J. McClure 300,000
- --------------------------------------------------------------------------
Keith Lim Inc 100,000
- --------------------------------------------------------------------------
D. Bruce Horton 850,000
- --------------------------------------------------------------------------
T. Robert Horton 150,000
- --------------------------------------------------------------------------
Bradley N. Scharfe 850,000
- --------------------------------------------------------------------------
Jason Scharfe 49,999
- --------------------------------------------------------------------------
Guy Peckham 500,000
- --------------------------------------------------------------------------
Beltring Limited 300,000
- --------------------------------------------------------------------------
The Calneva Financial Group, Ltd. 100,000
- --------------------------------------------------------------------------
Hampton Associates Limited 500,000
- --------------------------------------------------------------------------
Jetco Holdings Ltd. 300,000
- --------------------------------------------------------------------------
Newmargin T2CN Investment Ltd. 3,035,715
- --------------------------------------------------------------------------
Kingland Overseas Development Inc. 5,464,285
- --------------------------------------------------------------------------
Wally Marcolin 10,000
- --------------------------------------------------------------------------
Brad Shackman 10,000
- --------------------------------------------------------------------------
Richard Jeffrey 10,000
- --------------------------------------------------------------------------
Winton Capital Holdings Ltd. 250,000
- --------------------------------------------------------------------------
David L. Dreyer 10,000
- --------------------------------------------------------------------------
Brendan G. Murray 10,000
- --------------------------------------------------------------------------
Evan S. Ho 10,000
- --------------------------------------------------------------------------
Graham Watson 15,000
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Dean Roosdahl 15,000
- --------------------------------------------------------------------------
Edward Mitchuk 1,000
- --------------------------------------------------------------------------
Rocky J. Paolo 25,000
- --------------------------------------------------------------------------
Alexander Wong 10,000
- --------------------------------------------------------------------------
Lorinda Hoyem 10,000
- --------------------------------------------------------------------------
619476 B.C. Ltd. 15,000
- --------------------------------------------------------------------------
Richard Douglas Stewart 100,000
- --------------------------------------------------------------------------
622416 Alberta Ltd. 28,000
- --------------------------------------------------------------------------
George C. Robertson 65,000
- --------------------------------------------------------------------------
Robert C. Barton 100,000
- --------------------------------------------------------------------------
Steve Thackray 10,000
- --------------------------------------------------------------------------
Donald R. MacSorley 26,667
- --------------------------------------------------------------------------
James S. Barton 100,000
- --------------------------------------------------------------------------
Ronnie Steiner Travel Tours Inc. 10,000
- --------------------------------------------------------------------------
The MacLachlan Investments Corporation 133,333
- --------------------------------------------------------------------------
Ron Jones Ltd. 50,000
- --------------------------------------------------------------------------
John Michael Keegan 15,000
- --------------------------------------------------------------------------
Bruno Benedet Jr. 40,000
- --------------------------------------------------------------------------
Daryl Turner 40,000
- --------------------------------------------------------------------------
Elliott J. Lipsey 33,333
- --------------------------------------------------------------------------
Eric K. Stewart 6,666
- --------------------------------------------------------------------------
Verona Capital International 66,667
- --------------------------------------------------------------------------
Matrix Partners, Inc. 133,333
- --------------------------------------------------------------------------
Hugh Cooper 66,667
- --------------------------------------------------------------------------
Leonard Clough 28,533
- --------------------------------------------------------------------------
Kyung W. Lee, Trustee 20,000
- --------------------------------------------------------------------------
Eastside Pinnacle, LLC 26,667
- --------------------------------------------------------------------------
Micheal R. Muzos 6,000
- --------------------------------------------------------------------------
Martin S. Rood 20,000
- --------------------------------------------------------------------------
Mon Szeto 6,000
- --------------------------------------------------------------------------
Kathleen Wright 6,667
- --------------------------------------------------------------------------
Kathleen Wright Roth IRA 6,667
- --------------------------------------------------------------------------
KC Global Holdings Inc. 53,333
- --------------------------------------------------------------------------
Robert J. Charleton 50,000
- --------------------------------------------------------------------------
Dr. Brandt Miles Inc. 10,000
- --------------------------------------------------------------------------
R.J. Labonte & Co. Ltd. 12,000
- --------------------------------------------------------------------------
United Triump Inc. 53,334
- --------------------------------------------------------------------------
Dean Williams 26,667
- --------------------------------------------------------------------------
Rick Griffiths 13,333
- --------------------------------------------------------------------------
James Paleologos 80,000
- --------------------------------------------------------------------------
Valeurs Mobilieres Dejardins Inc. In Trust For 200,000
Roxy and Bear Investment
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Jeffrey Shear 366,667
- --------------------------------------------------------------------------
Michael Shear 166,667
- --------------------------------------------------------------------------
Shear Holdings Limited 133,334
- --------------------------------------------------------------------------
Bixbie Financial Corp. 267,000
- --------------------------------------------------------------------------
Total 25,078,535
- --------------------------------------------------------------------------
Shareholding of the Company After Completion
- --------------------------------------------------------------------------
Number of Name of Shareholder Respective
Common Number of
Shares Shares
Outstanding Owned
- --------------------------------------------------------------------------
- JC Entertainment Corp. 2,000,000
- --------------------------------------------------------------------------
Chengwei (China) Investment Company 4,037,500
- --------------------------------------------------------------------------
Ji Wang 2,486,250
- --------------------------------------------------------------------------
Yanqing Li 1,211,250
- --------------------------------------------------------------------------
Bin Zheng 283,333
- --------------------------------------------------------------------------
Fei Zhang 340,000
- --------------------------------------------------------------------------
Teng Jun-Tse 141,666
- --------------------------------------------------------------------------
Bryan M. Dear 700,002
- --------------------------------------------------------------------------
Michelle Cote-Dear 200,000
- --------------------------------------------------------------------------
Tandoor Holdings Ltd. 200,000
- --------------------------------------------------------------------------
Jacqueline J. McClure 300,000
- --------------------------------------------------------------------------
Keith Lim Inc 100,000
- --------------------------------------------------------------------------
D. Bruce Horton 850,000
- --------------------------------------------------------------------------
T. Robert Horton 150,000
- --------------------------------------------------------------------------
Bradley N. Scharfe 850,000
- --------------------------------------------------------------------------
Jason Scharfe 49,999
- --------------------------------------------------------------------------
Guy Peckham 500,000
- --------------------------------------------------------------------------
Beltring Limited 300,000
- --------------------------------------------------------------------------
The Calneva Financial Group, Ltd. 100,000
- --------------------------------------------------------------------------
Hampton Associates Limited 500,000
- --------------------------------------------------------------------------
Jetco Holdings Ltd. 300,000
- --------------------------------------------------------------------------
Newmargin T2CN Investment Ltd. 3,035,715
- --------------------------------------------------------------------------
Kingland Overseas Development Inc. 5,464,285
- --------------------------------------------------------------------------
Wally Marcolin 10,000
- --------------------------------------------------------------------------
Brad Shackman 10,000
- --------------------------------------------------------------------------
Richard Jeffrey 10,000
- --------------------------------------------------------------------------
Winton Capital Holdings Ltd. 250,000
- --------------------------------------------------------------------------
David L. Dreyer 10,000
- --------------------------------------------------------------------------
Brendan G. Murray 10,000
- --------------------------------------------------------------------------
Evan S. Ho 10,000
- --------------------------------------------------------------------------
Graham Watson 15,000
- --------------------------------------------------------------------------
Dean Roosdahl 15,000
- --------------------------------------------------------------------------
Edward Mitchuk 1,000
- --------------------------------------------------------------------------
Rocky J. Paolo 25,000
- --------------------------------------------------------------------------
Alexander Wong 10,000
- --------------------------------------------------------------------------
Lorinda Hoyem 10,000
- --------------------------------------------------------------------------
619476 B.C. Ltd. 15,000
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Richard Douglas Stewart 100,000
- --------------------------------------------------------------------------
622416 Alberta Ltd. 28,000
- --------------------------------------------------------------------------
George C. Robertson 65,000
- --------------------------------------------------------------------------
Robert C. Barton 100,000
- --------------------------------------------------------------------------
Steve Thackray 10,000
- --------------------------------------------------------------------------
Donald R. MacSorley 26,667
- --------------------------------------------------------------------------
James S. Barton 100,000
- --------------------------------------------------------------------------
Ronnie Steiner Travel Tours Inc. 10,000
- --------------------------------------------------------------------------
The MacLachlan Investments Corporation 133,333
- --------------------------------------------------------------------------
Ron Jones Ltd. 50,000
- --------------------------------------------------------------------------
John Michael Keegan 15,000
- --------------------------------------------------------------------------
Bruno Benedet Jr. 40,000
- --------------------------------------------------------------------------
Daryl Turner 40,000
- --------------------------------------------------------------------------
Elliott J. Lipsey 33,333
- --------------------------------------------------------------------------
Eric K. Stewart 6,666
- --------------------------------------------------------------------------
Verona Capital International 66,667
- --------------------------------------------------------------------------
Matrix Partners, Inc. 133,333
- --------------------------------------------------------------------------
Hugh Cooper 66,667
- --------------------------------------------------------------------------
Leonard Clough 28,533
- --------------------------------------------------------------------------
Kyung W. Lee, Trustee 20,000
- --------------------------------------------------------------------------
Eastside Pinnacle, LLC 26,667
- --------------------------------------------------------------------------
Micheal R. Muzos 6,000
- --------------------------------------------------------------------------
Martin S. Rood 20,000
- --------------------------------------------------------------------------
Mon Szeto 6,000
- --------------------------------------------------------------------------
Kathleen Wright 6,667
- --------------------------------------------------------------------------
Kathleen Wright Roth IRA 6,667
- --------------------------------------------------------------------------
KC Global Holdings Inc. 53,333
- --------------------------------------------------------------------------
Robert J. Charleton 50,000
- --------------------------------------------------------------------------
Dr. Brandt Miles Inc. 10,000
- --------------------------------------------------------------------------
R.J. Labonte & Co. Ltd. 12,000
- --------------------------------------------------------------------------
United Triump Inc. 53,334
- --------------------------------------------------------------------------
Dean Williams 26,667
- --------------------------------------------------------------------------
Rick Griffiths 13,333
- --------------------------------------------------------------------------
James Paleologos 80,000
- --------------------------------------------------------------------------
Valeurs Mobilieres Dejardins Inc. In Trust For 200,000
Roxy and Bear Investment
- --------------------------------------------------------------------------
Jeffrey Shear 366,667
- --------------------------------------------------------------------------
Michael Shear 166,667
- --------------------------------------------------------------------------
Shear Holdings Limited 133,334
- --------------------------------------------------------------------------
Bixbie Financial Corp. 267,000
- --------------------------------------------------------------------------
Sub-Total 27,078,535
- --------------------------------------------------------------------------
Respective
Number of Number of
Warrants Common
Outstanding Name of Holder of the Warrant Shares
Convertible
- --------------------------------------------------------------------------
JC Entertainment Corp. 3,000,000
Sub-Total 3,000,000
- ---------------------------------------------------------------------------
SCHEDULE 3
EXCLUSIVE SOFTWARE LICENSE AGREEMENT
THIS EXCLUSIVE SOFTWARE LICENSE AGREEMENT (the "Agreement") is entered into as
of August 4, 2005 (the "Effective Date") by SHANGHAI T2 ENTERTAINMENT CO., LTD.,
a limited liability company organized under the laws of the People's Republic of
China ("T2 Entertainment") and JC ENTERTAINMENT CORPORATION, a corporation
organized under the laws of the Republic of Korea ("JCE").
JCE and T2 Entertainment shall be referred to individually as a "Party" and
collectively as the "Parties".
RECITALS
WHEREAS, T2 Entertainment desires the exclusive right in the Territory (as
defined below) during the Term (as defined below) (a) to market, promote,
display, use, distribute, publish and sell the Localized Game, "Free Style" (as
defined below) and (b) to provide certain T2 Service (as defined below) to
Subscribers (as defined below).
WHEREAS, JCE desires to grant the abovementioned exclusive rights to T2
Entertainment.
THEREFORE, in consideration of the premises, agreements, covenants,
representations and warranties contained herein, and other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged, T2
Entertainment and JCE hereby agree as follows:
1. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the following terms shall have the following
meanings:
1.1 "Billing Database" shall mean a database containing billing
information of each Subscriber to the Localized Game under this Agreement.
1.2 "Billing Server" shall mean a computer server to capture and store
billing information in a Billing Database for the operation of the Localized
Game under this Agreement.
1.3 "Clearances" shall mean all necessary clearances, licenses, approvals,
permissions and consents from third parties in respect of the distribution
included as part of the Localized Game or which are otherwise required to enable
JCE to perform its obligations under this Agreement and grant the rights granted
to the T2 Entertainment in this Agreement including, without limitation,
clearing all music synchronization and music performance rights, rights for all
musical, literary or dramatic works, mechanical transfer and all performances.
- 1 -
1.4 "Client Software" shall mean the software component of the Game and/or
the Localized Game (as the case may be) sold, provided and/or distributed to
Subscribers and, thereafter, loaded into such Subscribers' personal computers.
1.5 "Closed Beta Test" shall mean game tests conducted internally by T2 or
externally with a limited number of users, in either case with restricted access
and user registration, for the purpose of identifying and fixing bugs and/or
stabilizing the game system in the Territory. Closed Beta Test shall commence no
later than the date of September 30, 2005 or any other date mutually agreed upon
by the Parties .
1.6 "Closed Beta Version" shall mean a version of the Game in which (a)
the localization and translation are substantially complete; (b) the
functionality and performance is complete (i.e., the coding of all functions and
features (including, without limitation, all artwork, graphics, animation,
images, photographs, video and other audio-visual material, sound, music and
text and all essential and non-essential data and device files) is completed and
material programming errors or "bugs" have been eliminated; (c) such version
operates hardware having the specifications specified by JCE from time to time
and required for the full use of the Game; and (d) such version is ready to be
launched for Closed Beta Test.
1.7 "Commercial Launch Date" shall mean the date on which the Localized
Game is launched commercially by T2 Entertainment to the public. Without
limiting the foregoing and for the avoidance of doubt, Commercial Launch Date
shall not be the date that Localized Game is introduced to the press, it shall
be the initial date of T2 Service after the Open Beta Version is launched to and
tested by the public. Commercial Launch Date shall be no later than the date of
November 30, 2005 or any other date mutually agreed upon by the Parties.
1.8 "Commission For Payment Execution" shall mean all and any payments
offered by T2 Entertainment to the distributors who run the sales market.
1.9 "Confidential Information" shall mean knowledge from, material, data,
systems and other information concerning the operation, business, financial
affairs, products, customers and Intellectual Property Rights or other aspects
of the other Party that either Party may, during the performance of its services
under this Agreement, have access to and acquire and that may not be accessible
or known to the general public solely for the purpose of this Agreement.
1.10 "day" or "days" shall mean calendar day or days unless otherwise
specified in this Agreement.
1.11 "Dollars", "Cents" and the sign "$" each shall mean the lawful money
of the United States.
1.12 "Free Promotional Items" shall mean any and all pre-paid cards, CDs,
peripheral commodities and any other free items that T2 Entertainment
distributes to promote the Localized Game.
2
1.13 "Game" shall mean any and all versions of the Internet game known as
"Free Style," which can be played by a Subscriber with other Subscribers by
installing the Client Software onto such Subscriber's computer and then
accessing the Server Software via the Internet. Without limiting the foregoing
and for the avoidance of doubt, this Agreement shall also apply to the Upgrade
Versions (defined below) of the Game that will be developed and/or released
after the date of this Agreement, but shall not apply to any Sequels of the
Game.
1.14 "Gross Revenues" shall mean all revenues, less the Commission For
Payment Execution, actually received by T2 Entertainment arising from or
relating to the marketing, promotion, use, distribution, publishing or sales of
the Localized Game by T2 Entertainment, including, without limitation, revenues
relating to the: licensing of the Client Software; sale of pre-paid cards, sale
of CDs containing the Client Software; sale of subscriptions; marketing or
promotion of the Localized Game; and/or the provision of services in connection
with the Localized Game.
1.15 "Intellectual Property Rights" shall mean, on a worldwide basis,
whether known as of the date of this Agreement or hereafter known, and whether
tangible or intangible, (a) any and all rights associated with works of
authorship including, without limitation, copyrights, moral rights and
mask-works, (b) any and all rights associated with trademarks, service marks,
trade names and similar rights, (c) any and all trade secret rights, (d) any and
all patents, designs, algorithms and other industrial property rights, (e) any
and all other intellectual and industrial property rights of every kind and
nature and however designated, whether arising by operation of law, contract,
license or otherwise, (f) any and all registrations, applications, renewals,
extensions, continuations, divisions or reissues thereof now or hereafter
existing, made, or in force (including any rights in any of the foregoing), and
(g) any and all causes of action arising from or related to any of the
foregoing.
1.16 "Laws" shall mean any and all applicable laws, rules, regulations,
ordinances, voluntary industry standards, association laws, codes or other
obligations pertaining to any of either Party's activities in connection with
this Agreement, including but not limited to, those applicable to the Localized
Game and trade registration requirements, advertising approval requirements,
trademark protection and clearance requirements, or technical or sourcing
specifications pertaining to any aspect of Localized Game.
1.17 "Localized Game" shall mean a "fully-localized" version of the Game,
the language of which shall have been translated from Korean to Mandarin Chinese
(using simplified characters).
1.18 "Minimum Guarantee" shall mean the performance guarantee provided by
T2 Entertainment to JCE, that is, the Royalties paid to JCE by T2 Entertainment
hereunder shall be in the amount of no less than Two Million Dollars
($2,000,000) during the first fifteen (15) months from the Commercial Launch
Date.
1.19 "New JV" shall have the meaning in Section 11.3 hereof.
1.20 "Open Beta Test" shall mean game tests conducted externally with
3
users on a generally accessible basis, for the purpose of identifying and fixing
bugs and/or stabilizing the game system in the Territory.
1.21 "Open Beta Version" shall mean a version of the Localized Game in
which (a) the localization and translation are complete; (b) the functionality
and performance is complete (i.e., the coding of all functions and features
(including, without limitation, all artwork, graphics, animation, images,
photographs, video and other audio-visual material, sound, music and text and
all essential and non-essential data and device files) and material programming
errors or "bugs" have been eliminated; (c) such version operates hardware having
the specifications specified by JCE from time to time and required for the full
use of the Localized Game; and (d) such version is ready to be launched for Open
Beta Test. The Open Beta Version shall be launched no later than the date of
October 15, 2005 or any other date mutually agreed upon by the Parties.
1.22 "Promotional Materials" shall mean any and all marketing, advertising
and/or other promotional materials relating to the Localized Game.
1.23 "Royalties" shall have the meaning in Section 6.1 hereof; and
"Royalty" shall be interpreted accordingly.
1.24 "Royalty Tax" shall mean the withholding tax, including any and all
income and business taxes, and any other taxes applicable to payment of the
Royalty to JCE for which T2 Entertainment has a withholding obligation under
relevant PRC tax laws and regulations.
1.25 "Sequels" shall mean any game (including but not limited to "Free
Style II" or "Free Style III"), which will be developed and/or released after
the date of this Agreement, and the content therein is substantially different
from the Game.
1.26 "Server Software" shall mean the system software and proprietary
database (including the content and records located in such database) components
of the Game and/or Localized Game (as the case may be) located on servers
connected to the Internet.
1.27 "Subscribers" shall mean the end users of the Game who initiate their
use thereof within the Territory from T2 Entertainment, and "Subscriber" shall
be interpreted accordingly.
1.28 "Subsequent Agreements" shall have the meaning set forth in Section
11.3 hereof.
1.29 "Territory" shall mean the geographical territory of the People's
Republic of China ("PRC"), excluding the Hong Kong Special Administrative
Region, the Macao Special Administrative Region, and Taiwan.
1.30 "T2 Service" shall mean the server administration and management for
the Localized Game, technical support assistance to Subscribers and billing for
the subscription provided by T2 Entertainment.
4
1.31 "Upgraded Version" shall mean a new version of the Localized Game
that contains patches, upgrades, enhancements and/or new functionality not
contained in the prior version of the Localized Game. For the avoidance of
doubt, Upgraded Version does not include any Sequels of the Game.
2. TERM.
2.1 Term. The term of this Agreement shall commence as of the Effective
Date and shall continue through and until the date that is two (2) years after
the Commercial Launch Date, unless terminated earlier in accordance with Section
11 hereof (the "Termination").
2.2 Renewal. Both Parties agree to engage in a series of discussions and
negotiations for renewal of the Agreement at least three (3) months before the
expiry of the Term. In consideration of Subscribers' interest in the Territory,
if both Parties are unable to sign the renewal contract before or on the expiry
date of the Term, this Agreement will continue to be effective and binding for
an additional 30-day period after expiry of the Term. Notwithstanding the
foregoing, should JCE offer to any third party other than T2 Entertainment in
the Territory a license to the Localized Game for use in the Territory during
the 30 days immediately following the expiration of this Agreement T2
Entertainment shall have a right of first refusal to obtain an exclusive license
to the Localized Game for use in the Territory pursuant to terms and conditions
identical to those offered by JCE to such third party in the Territory. If T2
Entertainment fails to indicate in writing that it has elected to exercise such
right of first refusal within fifteen (15) days of receiving notice from JCE of
any such offer to any third party in the Territory during such one (1) month
period, T2 Entertainment shall be deemed to have declined to exercise such right
of first refusal. This right of first refusal shall not apply to any offers to
New JV or any affiliated company of JCE to license the Localized Game for use in
the Territory after the Term.
3. GRANT OF RIGHTS.
3.1 Grant. In accordance with and subject to the terms and conditions of
this Agreement, JCE hereby grants to T2 Entertainment, and T2 Entertainment
hereby accepts and agrees to exercise the exclusive, non-sub-licensable,
non-transferable right and license to manufacture, market, promote, use,
distribute, publish and sell the Localized Game to Subscribers in the Territory
during the Term. T2 Entertainment agrees that it will not distribute or sell the
Localized Game to any party or under circumstances where T2 Entertainment knows
that such activity ultimately will result in the use of the Localized Game
outside of the Territory.
3.2 No Third Party Rights. Except as otherwise expressly set forth in this
Agreement, T2 Entertainment shall directly exercise the rights and licenses
granted to it hereunder and shall not allow or permit any third party to
exercise such rights on T2 Entertainment's behalf without JCE's prior written
approval. With respect to any third party that is approved by JCE to exercise
5
any such rights on behalf of T2 Entertainment, T2 Entertainment shall be liable
for any and all acts or omissions of any such third party arising out of or
relating to this Agreement. Notwithstanding the foregoing provision, any
outsourcing by T2 Entertainment of certain minor parts of T2 Service to any
third party for the purpose of marketing, promotion, distribution, publishment
and sale of the Localized Game shall not be deemed as any violation of this
Section 3.2.
3.3 No Right to Reproduce, Modify or Reverse Engineer. T2 Entertainment
agrees that it shall not, and shall not permit or assist any other party to
copy, modify or adapt all or any part of the Localized Game, except as may be
expressly and clearly permitted by this Agreement or by JCE's written approval.
T2 Entertainment agrees that it shall not, and shall not permit or assist any
other party to disassemble, decompile, reverse assemble, reverse engineer or
otherwise attempt to recreate the source code or extract any trade secrets from
the Localized Game without JCE's prior written approval.
3.4 License Rights Only. This Agreement only grants to T2 Entertainment a
license to transfer units of the Localized Game to Subscribers and does not
transfer any interest in, right or title of the Localized Game to T2
Entertainment. Notwithstanding any "purchase" or "sale" or similar language
contained herein, T2 Entertainment acknowledges that the Localized Game is
licensed as indicated in this Section.
3.5 Use of Trademark and Characters. For the purposes of service, use,
promotion, distribution and marketing of the Localized Game under this
Agreement, JCE hereby grants to T2 Entertainment an exclusive right to use in
the Territory the name, title and characters of the Localized Game and the
Promotion Materials in all versions as devised by JCE.
3.6 Derivative Merchandise. JCE hereby grants to T2 Entertainment as
Master Licensor, and T2 Entertainment hereby accepts and agrees to exercise the
exclusive right and license to manufacture, market, promote, use, distribute,
publish and sell various types of products which are based upon and derived from
the Localized Game to consumers in the Territory during the Term. Both Parties
agree that details of such exclusive right and license with respect to
Derivative Merchandise shall be stipulated in a separate agreement to be entered
into by both Parties.
3.7 PPL Rights. JCE agrees that T2 Entertainment may make announcements
and commercials in the Localized Game in the manner, time, frequency and
duration as JCE may agree in advance in writing. The content of each such
commercial and announcement must not be defamatory, libelous, slanderous or
obscene, must not contain any material which violates or infringes any
Intellectual Property Rights of any person or entity and must not be
inconsistent with the general character or quality of the Localized Game.
3.8 Reserved Rights. Any and all rights not specifically and expressly
granted by JCE to T2 Entertainment are hereby reserved by JCE.
6
4. Delivery of Game.
4.1 JCE shall deliver the Localized Game to T2 Entertainment as set forth
in this Agreement. For the purpose of Closed Beta Test, JCE shall make such
delivery within fourteen (14) days as of the Effective Date. The Localized Game
will be delivered in CD-ROM form, by FTP, or by such other electronic means as
JCE and T2 Entertainment may agree from time to time.
4.2 T2 Entertainment shall, within seven (7) days following its receipt of
the Localized Game, send JCE a written notice indicating, and serving as proof
of its receipt of such items.
4.3 If available and determined by T2 Entertainment and JCE to be suitable
for use in the Territory, JCE shall deliver Upgraded Versions to T2
Entertainment. The upgrades and enhancements contained in each Upgraded Version
shall be consistent with the product plans of JCE and shall be developed in
consultation with T2 Entertainment, provided that: (a) JCE shall make all final
decisions on the upgrades and enhancements that are included in each Upgraded
Version along with the production thereof, giving due consideration to T2
Entertainment's suggestions; and (b) T2 Entertainment shall be responsible for
translating the language contained in the Upgraded Version into Mandarin Chinese
(using simplified characters).
5. MARKETING EFFORTS.
5.1. Marketing Commitment. T2 Entertainment shall use its best efforts to
advertise, market and distribute the Localized Game throughout the Territory
and, in doing so, shall ensure that its marketing, promotion and advertising
activities (collectively "Marketing Activities") are in accordance with high
quality and good taste and will be comparable to the high quality Marketing
Activities in the Territory for competitive products. T2 Entertainment agrees to
spend One Million Dollars ($1,000,000) on Marketing Activities during the one
(1) full year period following and commencing on the Effective Date. In case
this Agreement is terminated prior to the end of the Term according to Section
11.3 of this Agreement and such One Million Dollars have not been fully spent by
the time of termination, disposal of the remainder shall be subject to the
Subsequent Agreements as described in Section 11.3.
5.2. Game Materials and Promotional Materials. Prior to using any Game Materials
or Promotional Materials, T2 Entertainment shall submit such Game Materials or
Promotional Materials to JCE for mutual checking and reference. However, any and
all Game Materials and Promotional Materials that JCE provides to T2
Entertainment shall be deemed as having been already approved by JCE unless T2
Entertainment has been otherwise notified by JCE prior to JCE's provision of
such materials. In addition to the foregoing, JCE shall make available to T2
Entertainment the game texts, artworks, technical manual and other information
of the current available version of the Game as Promotional Materials to help
achieve wide distribution of the Localized Game in the Territory upon execution
of the Agreement.
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5.3. Free Promotional Items. Without limiting any provisions of Section 5, T2
Entertainment shall not distribute any particular Free Promotional Item unless
and until it obtains JCE's prior written approval.
6. COMPENSATION AND PAYMENTS.
6.1 Running Royalties. As payment for the rights granted by JCE hereunder,
T2 Entertainment shall pay JCE a royalty (the "Royalties", Royalty Tax included)
in the amount equal to 15% of the amount of Gross Revenues received by T2
Entertainment, provided that T2 Entertainment is operating the Localized Games.
The calculation of Royalties shall commence on Commercial Launch Date.
6.2 Royalty Payment. T2 Entertainment shall provide JCE a report of
monthly Gross Revenue within seven (7) days after the end of each month. If JCE
has no express objection to the report, JCE shall send an invoice of the
Royalties for the given month within two (2) weeks after receiving the report
from T2 Entertainment. All payments of Royalties shall be paid within seven (7)
days after receiving the invoice from JCE.
6.3 Payment of Minimum Guarantee. The disbursement of the Minimum
Guarantee shall be divided into two payments. The due dates for the payment of
the Minimum Guarantee are shown below:
- -------------------------------------------------------------------------------
Due Date of Payment Amount of Payment
- -------------------------------------------------------------------------------
Three (3) months after the Commercial One Million Dollars ($1,000,000)
Date Launch
- -------------------------------------------------------------------------------
Fifteen (15) months after the One Million Dollars ($1,000,000)
Commercial Date Launch
- -------------------------------------------------------------------------------
6.4 Late Payment. If any payment due hereunder is not received by JCE by
its respective due date, T2 Entertainment agrees to pay a late charge equal to
the interest on the amount of the late payment. Such interest shall be tolled
from when the payment is due to the date of actual payment. The interest rate
for a late payment shall be the LIBOR on the date when payment falls due plus
twenty (20) basic points.
6.5 Payment Forms. All payments due to JCE hereunder shall be made by wire
transfer only. All payments shall be made in U.S. Dollars with the appropriate
deduction of Royalty Taxes on the Royalties, and such taxes shall paid by T2
Entertainment on JCE's behalf. Additionally, T2 Entertainment shall immediately
furnish JCE with the official receipt of all Royalty Tax payments provided by
the appropriate tax authority after receiving such receipt.
8
6.6 Taxes under PRC Laws. T2 Entertainment shall be responsible for the
payment of any and all other taxes arising out of or related to the transactions
contemplated by this Agreement except for the Royalty Tax and other withholding
taxes that shall be borne by JCE according to PRC laws and that shall be paid by
T2 Entertainment on JCE's behalf. T2 Entertainment shall timely pay the Royalty
Taxes on behalf of JCE and endeavor to select the appropriate tax category with
the lowest tax rate. Additionally, T2 Entertainment shall immediately furnish
JCE with the official receipt of any such payment provided by the appropriate
tax authority after receiving such receipt.
6.7 Commission For Payment Execution. T2 Entertainment shall notify JCE of
commercial arrangements with respect to distribution of the Localized Game,
including but not limited to the distribution margin (which shall not be higher
than thirty percent), before executing any definitive contracts with any other
distributors of the Localized Game. T2 Entertainment may proceed with the
aforesaid contract execution if there is no express objection in writing from
JCE within three (3) working days after T2 Entertainment notifies JCE of the
foregoing. All the documents related to such distributors shall be sent to JCE
within a reasonable time period upon JCE's written request.
6.8 Periodic Information Delivery. In order to substantiate any Royalty
payment due to JCE, T2 Entertainment shall provide JCE with the appropriate
details and enough information about the following: for a given payment period
for the Localized Game (a) the amount of Royalties payable to JCE for the
payment period for the Localized Game; (b) the peak concurrent users, the number
of new Subscribers, and the total number of Subscribers of the Localized Game;
(c) the amount of Gross Revenues for the Localized Game; (d) the amount of
Commission For Payment Execution, and (e) any other items that T2 Entertainment
and JCE may mutually agree upon.
6.9 Audits. T2 Entertainment shall maintain complete and accurate books
and records related to Gross Revenues in sufficient detail to reflect its
operations under this Agreement.
6.9.1 T2 Entertainment shall keep all of its detailed record,
contractual and accounting documents and company documents in relation to its
business and activities under this Agreement at its principal office for one (1)
year after the end of the Term.
6.9.2 Subject to the provision of at least ten (10) days written
notice and, not more frequently than twice in any consecutive twelve (12) month
period, JCE is entitled to inspect the books and records of T2 Entertainment for
the purpose of verifying the Royalty payments under the Agreement from the
Commercial Launch Date until the date of auditing. The auditing shall be held
during T2 Entertainment's working hours, and shall not disturb or annoy T2
Entertainment's operation in any way. T2 Entertainment shall provide assistance
and cooperation reasonably required by JCE for such auditing. All expenses
arising from such auditing shall be borne by JCE.
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7. SERVICES.
7.1 Closed Beta Version. JCE shall provide T2 Entertainment with all
necessary technical assistance, and shall assist T2 Entertainment in the
improvement and perfection of translating from Korean to Mandarin Chinese (using
simplified characters), which is necessary for T2 Entertainment to launch its
Closed Beta Version of the Game in the Territory before the initial date of
Closed Beta Test.
7.2 Open Beta Version. JCE shall continue after the launching of the
Closed Beta Version in the Territory to provide T2 Entertainment with the
technical assistance necessary for T2 Entertainment to launch its Open Beta Test
of the Localized Game in the Territory before the initial date of the Open Beta
Test.
7.3 T2 Service. JCE shall, after the Open Beta Test in the Territory,
continue to provide T2 Entertainment with the technical assistance necessary for
T2 Entertainment to provide and maintain the T2 Service in the Territory, during
the Term of this Agreement.
7.4 Technical Support. JCE shall provide T2 Entertainment with sufficient
technical support via telephone and email during JCE's normal business hours
(Seoul local time) in connection with the installation, maintenance, testing,
upgrading and operation of the Localized Game and the servers on which it is set
up. JCE shall send its certified engineers to the site designated by T2
Entertainment for the foregoing technical support in the Territory upon the T2
Entertainment's request during the Term. In case of emergency, JCE shall provide
T2 Entertainment with seven (7) days a week, twenty-four (24) hours a day
technical support via the telephone and email.
7.5 Other Support.
7.5.1 Local Support. After signing the Agreement, JCE shall dispatch the
local support team to the site designated by T2 Entertainment. The local support
team of JCE shall (a) arrange the schedule for the localization of the Game; (b)
design the consulting service to the service team of T2 Entertainment, which is
the technical supporting service that enables T2 Entertainment to provide the
Subscribers with the T2 Service; (c) prepare training documents related to the
localization of the Game in the Territory; (d) be responsible for the other
processes including, but not limited to, the establishment of the communication
processes and the contact points; and (e) provide other local support as
reasonably requested by T2 Entertainment from time to time for the purpose of
performing this Agreement.
7.5.2 On-site Service. Before launching the Closed Beta Test, Open
Beta Test, and the commencement of T2 Service, JCE shall dispatch its certified
engineers, and marketing team to the Territory. The JCE certified engineers
shall install the Localized Game, and train the engineers of T2 Entertainment.
The JCE marketing team shall have the meetings with the marketing team of T2
Entertainment, and support T2 Entertainment to conduct high quality marketing
activities in the Territory. JCE shall provide the service team of JCE which
supports the service team of T2 Entertainment with on-line support.
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7.5.3 Expenses. All the cost and expenses in relation to Section
7.5.1, and Section 7.5.2 shall be borne respectively by JCE and T2 Entertainment
based on each Party's workload.
7.5.4 Additional Support. After the initial on-site services, JCE
shall provide T2 Entertainment with additional reasonable support via telephone
and email during the JCE's normal business hours (Seoul local time) in
connection with the installation, maintenance, testing, upgrading and operation
of the Localized Game and the servers on which it is sets up. JCE shall appoint
its certified engineers to the Territory during the Term. In emergency cases,
JCE shall provide T2 Entertainment with seven (7) days a week, twenty four (24)
hours technical support via the telephone and email. The expenses and costs
related to cases of emergency shall be discussed by project executives of both
Parties after the on-site Service. All further support shall be discussed by
both Parties.
7.5.5 Response Time. JCE shall timely respond to each request made
by T2 Entertainment for assistance, and shall resolve highlighted problems
subject to the timeframe agreed by the Parties. If JCE fails to meet the above
requirements, T2 Entertainment shall have the right to deduct or offset the
amount of losses or expenses so incurred by T2 Entertainment from the payment of
Royalty payable to JCE.
7.5.6 Hacking. JCE and T2 Entertainment shall use their best efforts
to protect the servers of the Localized Game from hacking. In the event T2
Entertainment discovers any hacking activities, T2 Entertainment shall submit to
JCE a written report, via e-mail or by facsimile, describing the nature of such
activities in sufficient detail to permit JCE to provide preventive measures.
Upon receipt of any such written report, JCE agrees to use its best efforts to
respond to the reported hacking activities on an urgent basis and to solve the
hacking problems.
7.6 Billing Server and Gaming Server System.
7.6.1 Billing Server. T2 Entertainment shall be responsible for
authenticating and billing the Subscribers. In connection with such
responsibilities, T2 Entertainment shall set up and maintain the Billing Server
to capture and store billing information in the Billing Database and to bill
each Subscriber for all charges arising from such Subscriber's use of the
Localized Game. T2 Entertainment will provide JCE with a remote access tool that
enables JCE to access to the Billing Server at any time as desired by JCE. JCE
agrees that it shall not modify or duplicate any of the billing information in
the Billing Database in any way.
7.6.2 Gaming Server. T2 Entertainment will provide JCE with a remote
access tool that enables JCE to access the Gaming Server at any time as desired
by JCE. JCE agrees that it shall not modify or duplicate any of the information
in the database of Gaming Server in any way.
7.6.3 Permits and Certificates. During T2 Entertainment's
application for any and all permits and certificates from the applicable
authorities of the People's Republic of China that are necessary to exercise the
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rights and licenses granted to T2 Entertainment under this Agreement, both
Parties agree to utilize their accessible resources and explore further
cooperation
7.7 Notification of Claimed or Suspected Defects. T2 Entertainment shall
promptly notify JCE in writing of any claimed or suspected defect in the
Localized Game no later than ten (10) days after T2 Entertainment becomes aware
of the same.
7.8 Compliance with Law. T2 Entertainment shall comply with all Laws that
are necessary to exercise the rights and licenses granted to T2 Entertainment
under this Agreement, including, but not limited to, all applicable labor laws
and regulations and all applicable governmental and industry codes of conduct
and social accountability.
7.9 Clearances. JCE shall be responsible for the clearance of material
contained in the Localized Game and Promotional Materials for the purpose of
distribution of the Localized Game in the Territory.
8. OWNERSHIP AND PROTECTION OF PROPRIETARY RIGHTS.
8.1 JCE retains all Intellectual Property Rights in and to the Game, the
Localized Game (including, without limitation, the Closed Beta Version and the
Open Beta Version), all Promotional Materials, and all Game Materials. JCE, and
its permitted successor and assignee, shall exclusively own all Intellectual
Property Rights, in perpetuity and in all languages, embodied in or pertaining
to the Localized Game (including, without limitation, the Closed Beta Version
and the Open Beta Version) and any and all Promotional Materials and Game
Materials created by JCE, and T2 Entertainment hereby makes a full, irrevocable
assignment, in perpetuity, to JCE of all such Intellectual Property Rights.
8.2 JCE shall provide T2 Entertainment with appropriate copyright and
trademark notices in JCE's names, and T2 Entertainment shall place, in such
manner and form as JCE may instruct in writing in advance, such copyright and
trademark notices on all Promotional Materials and Game Materials. In no event
shall T2 Entertainment alter, remove, obscure, erase or deface or otherwise hide
from view, any such notices or any other copyright, trademark or other
proprietary rights notice of JCE contained or incorporated in any Promotional
Material and any Game Material.
8.3 T2 Entertainment shall own Intellectual Property Rights in and to the
Subscribers' database in the Territory as of the Commercial Launch Date. Upon
expiration or early termination of this Agreement, T2 Entertainment shall
transfer the Subscribers' database and all Intellectual Property Rights therein
to JEC, to the extent as permitted by PRC laws and prior agreements between the
Subscribers and T2 Entertainment.
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9. CONFIDENTIAL INFORMATION.
9.1 Non-Disclosure. Any Confidential Information acquired by the receiving
party shall not be used, published or divulged by the receiving party to any
other person or entity in any manner whatsoever without the prior express
written approval of the disclosing party, which approval the disclosing party
may withhold at its sole discretion. The receiving party shall, and shall cause
its employees, agents and every other person and entity it employs in connection
with its services under this Agreement to, protect and safeguard the
Confidential Information by using the same degree of care, but no less than a
reasonable degree of care, to prevent the unauthorized use or disclosure of the
Confidential Information as the receiving party uses to protect its own
confidential or proprietary information of a like nature.
9.2 Publicity. Each party agrees that the execution of this Agreement
shall be released to the public by means of press conference on a date to be
mutually agreed upon by both Parties.
10. REPRESENTATIONS, WARRANTIES, LIMITATIONS AND INDEMNIFICATION.
10.1 Representations and Warranties of T2 Entertainment. T2 Entertainment
represents and warrants that (a) it has the right, power and authority to enter
into this Agreement and to fully perform its obligations under this Agreement;
(b) the execution of this Agreement by it does not violate any agreement
existing between it and any other person or entity, and throughout the Term it
shall not make any agreement with any person or entity that is inconsistent with
any of the provisions of this Agreement; and (c) it is, and at all times during
the Term shall be, the holder of all consents necessary for it to perform its
obligations hereunder.
10.2 Representations and Warranties of JCE. JCE represents and warrants
that: (a) it has the right, power and authority to enter into this Agreement;
(b) the execution of this Agreement by it does not violate any agreement
existing between it and any other person or entity; (c) it shall be responsible
during the Term for obtaining and maintaining at its cost all necessary
Clearances; (d) the Localized Game and Promotional Materials and any materials
related to the Game provided to T2 Entertainment under this Agreement will not
infringe Intellectual Property Rights, copyright, trade marks, moral rights,
performing rights, right of privacy or any other proprietary right or interest
of any third party and will not be defamatory or constitute contempt of court or
constitute a misuse of confidential information, and (e) it has and will
maintain sufficient personnel, equipment and technology to perform its
obligations under this Agreement.
10.3 Indemnification. Either Party shall, at its sole expense, indemnify,
defend and hold harmless the other Party and its directors, officers, employees,
agents, successors and assigns, from and against any and all claims, demands,
suits, actions, proceedings, judgments, damages, costs, losses, expenses
13
(including attorneys' fees and expenses) and other liabilities (including
settlements) arising from, in connection with or related in any way to, directly
or indirectly, (a) any breach or alleged breach of any of the representations or
warranties made by the breaching party under this Agreement; or (b) the gross
negligence and/or willful misconduct of the breaching party.
10.4 Limitation of Liability. In no event shall JCE be liable under or in
connection with this Agreement for any loss or profit or any other commercial
damage, including without limitation incidental, consequential, special,
exemplary, punitive or other direct or indirect damages of any nature, for any
reason, including without limitation the breach of this Agreement, any
expiration or termination of this Agreement, claims alleging that the Game or
any part or aspect thereof infringes upon or violates any Intellectual Property
Right of any party or claims arising from the malfunction of or defects in the
game, whether such liability is asserted on the basis of contract, tort or
otherwise.
11. TERMINATION.
11.1JCE may, without prejudice to any other rights or remedies available
to JCE, have the right, in its sole discretion, to immediately terminate this
Agreement upon written notice to T2 Entertainment in the event of the occurrence
of any of the following events: (a)T2 Entertainment discontinues its internet
game marketing and service business; or (b) T2 Entertainment breaches any of its
material obligations under this Agreement and fails to cure such material breach
within sixty (60) days of receipt of written notice from JCE specifying the
nature of such material breach.
11.2T2 Entertainment may, without prejudice to any other rights or
remedies available to T2 Entertainment, have the right, in its sole discretion,
to immediately terminate this Agreement upon written notice to JCE in the event
of the occurrence of any of the following events: (a) JCE ceases to provide
technical support required for distribution of the Localized Game in the
Territory; (b) JCE fails to deliver the Localized Game according to the
timeframe agreed by the Parties; or (c) JCE breaches any of its other material
obligations under this Agreement and fails to cure such material breach within
sixty (60) days of receipt of written notice from T2 Entertainment specifying
the nature of such material breach.
11.3 This Agreement automatically terminates once all of the following
conditions have been fulfilled: (a) JCE and T2CN HOLDING LIMITED (a corporation
organized under the laws of the British Virgin Islands, "T2CN Holding") have
jointly established a wholly foreign owned enterprise in PRC ("NEW JV"), in
which JCE holds a 35% equity interest and T2CN Holding holds a 65% equity
interest; (b) JCE has entered into a license agreement with NEW JV, whereby JCE
grants to NEW JV the exclusive right and license to market, promote, use,
distribute, publish and sell the Updated Version of the Localized Game to
Subscribers in the Territory on the terms agreed upon by T2CN Holding and JCE;
(c) NEW JV has entered into a sublicense agreement or otherwise agreement as
agreed by JCE with T2 Entertainment, whereby NEW JV sublicenses the above
exclusive rights or grant the operation right to T2 Entertainment or another
14
entity agreed by both Parties, whereby T2 Entertainment or such other entity, as
the sub-licensee or the owner of the relevant operation right of the Localized
Game, shall have all the rights and be facilitated with all assistance and
support from JCE to maintain the business of running the Localized Game for the
interests and benefits of Subscribers in the Territory on terms not less
favorable than those contained in this Agreement applicable to T2 Entertainment,
as the licensee of the Localized Game (such license agreement and sublicense or
otherwise agreement are collectively referred to as "Subsequent Agreements");
provided that royalties paid to JCE under the Subsequent Agreements shall be at
the same rate as Royalties defined herein. If granting license by JCE to NEW JV,
and/or granting sublicense or other operating rights by NEW JV to T2
Entertainment or another party agreed by both Parties are, under current or
future PRC laws and regulations, illegal or unenforceable, JCE shall have the
right, at its option but subject to an at least thirty (30) working days' prior
notice, to resume the effectiveness of this Agreement, or to request both
Parties to seek alternative arrangements to achieve the commercial purpose of
the Parties in entering into the Subsequent Agreements to the extent permitted
by then effective PRC laws and regulations. In the former case, this Agreement
shall be as it originally binding on the Parties. In the latter case, both
Parties agree to endeavor to enter into such alternative arrangements within
thirty (30) working days following the receipt of JCE's notice by T2CN Holding.
11.4 Effect Of Termination. Upon the expiration or earlier termination of
this Agreement: (a) all rights and licenses granted to T2 Entertainment under or
pursuant to this Agreement shall revert to JCE and T2 Entertainment shall
immediately terminate providing the Subscribers with access to the Server
Software and any other components of the Localized Game; (b) each Party shall
return the Confidential Information of the other Party; and (c) T2 Entertainment
shall promptly transfer all of its right, title and interest in and to
Subscribers' database and all Intellectual Property Rights therein to JEC, to
the extent as permitted by PRC laws and prior agreements between the Subscribers
and T2 Entertainment.
12 GENERAL PROVISIONS.
12.1 Entire Agreement. This Agreement constitutes the complete, final and
exclusive understanding and agreement between the Parties with respect to the
transactions contemplated herein, and supersedes any and all prior or
contemporaneous oral or written representation, understanding, agreement,
correspondence or communication between the Parties concerning the subject
matter hereof. Neither of the parties is relying upon any warranties,
representations, assurances or inducements not expressly set forth herein.
12.2 Amendments. All amendments or modifications to this Agreement shall
be binding upon the Parties despite any lack of consideration so long as the
same shall be in writing and executed by each of the Parties hereto.
12.3 Governing Law. The Parties expressly agree that this Agreement shall
be governed and construed by the laws of the People's Republic of China.
15
12.4 Dispute Resolution. Any disputes arising hereunder and in connection
herewith shall be settled through consultations between the Parties, and if the
Parties cannot reach an agreement regarding such disputes within thirty (30)
days of their occurrence, such disputes shall be submitted to China
International Economic and Trade Arbitration Commission Shanghai Branch for
arbitration in Shanghai in accordance with its then effective arbitration rules,
and the arbitration award shall be final and binding on both Parties.
12.5 Headings. Captions and headings contained in this Agreement have been
included for ease of reference and convenience and shall not be considered in
interpreting or construing this Agreement.
12.6 Force Majeure. The obligations of the Parties under this Agreement
shall be suspended to the extent a party is hindered or prevented from complying
therewith because of labor disturbances, including strikes or lockouts, war,
fires, storms, flood, epidemic, accidents, governmental regulations, failure of
telecommunications vendors or suppliers, or any other cause whatsoever beyond a
Party's reasonable control. For so long as such circumstances prevail, the Party
whose performance is delayed or hindered shall continue to use all commercially
reasonable efforts to recommence performance without delay.
12.7 Notice. Any notices relating to this Agreement shall be in writing
and either personally delivered or sent by certified mail, postage prepaid,
return receipt requested, or by facsimile transmission or overnight courier
service, addressed to the Party at the address set forth below, or at such
different address as a party has advised to the other party in writing and shall
be deemed given and received when actually received:
If to JCE:
Attention: JC ENTERTAINMENT CORPORATION
Name: IL-Sung Baik
Address: 4thf, Rosedale Bldg., #724 Suseo-Dong, Kangnam-Ku, Seoul 135-885, Korea
Tel: 82.2.2040.1114
E-mail: isbaik@joycity.co.kr
If to T2 Entertainment:
Attention: SHANGHAI T2 Entertainment CO., LTD.
Name: JUN-TSE TENG
Address: 5 Floor, 88 Qin Jiang Road, Shanghai, PRC
Tel: 86-21-54278388
E-mail: joe@t2cn.com
12.8 Counterparts. This Agreement may be executed by manual or facsimile
signatures and in counterparts, each of which shall be deemed an original and
all of which together shall constitute one and the same instrument.
16
12.9 Language. This Agreement shall be executed in both Chinese and
English. The English and the Chinese version of this Agreement shall have equal
legal effect. In case of any inconsistency between the English and the Chinese
version, the English version shall prevail.
[reminder of this page is intentionally left blank]
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IN WITNESS WHEREOF, the duly authorized representatives of each of the Parties
hereto have executed this Agreement as of the date first written above.
JC ENTERTAINMENT CORPORATION SHANGHAI T2 Entertainment CO., LTD.
By: /s/ Il-Sung Baik By: /s/ Jun-Tse Teng
---------------------- ----------------------
Name: Il-Sung Baik Name: Jun-Tse Teng
------------------------------- ----------------------
Title: Chief Executive Officer Title: Chief Executive Officer
------------------------------- ----------------------
SCHEDULE 4
Purchase Agreement
This agreement ("Agreement") is entered into as of August 4, 2005 ("Effective
Date") by JC ENTERTAINMENT CORPORATION, a corporation duly organized and
existing under the laws of the Republic of Korea (hereinafter referred to as
"Seller") and T2CN HOLDING LIMITED, a corporation (hereinafter referred to as
"Buyer") incorporated and registered in British Virgin Islands.
Whereas, Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller the Products (as defined below).
In consideration of the mutual covenants, representations herein and other good
and valuable consideration, Seller and Buyer hereby agree as follows,
Article 1. The Sale
Upon the terms and subject to the conditions of this Agreement, Seller shall
sell to Buyer, and Buyer shall purchase from Seller the Products. As used in
this Agreement, the term "Products" means ten kinds of casual games, the name
and specification of which are listed as Attachment A and herein incorporated by
reference.
Article 2. Purchase Price
The purchase price for the Products (the "Purchase Price") shall be One Million
and Five Hundred and Twenty Five Thousand United States Dollars
(US$1,525,000.00). Subject to the terms and conditions of this Agreement, the
Purchase Price shall be paid as follows:
1. Within three (3) days upon the execution of this Agreement, an initial
payment as earnest money in the amount of One Million United States Dollars
(US$1,000,000.00) shall be paid by wire transfer to the bank account designated
by Seller.
1
2. The rest payment in the amount of Five Hundred Twenty-five Thousand United
States Dollars ($525,000.00) shall be paid by wire transfer to the bank account
designated by Seller by November 15, 2005.
Article 3. Delivery of Product
1. Seller shall deliver all of the Products within thirty (30) days upon the
execution of this Agreement in CD-ROM form, by FTP, or by such other ways as
Seller and the Buyer may agree from time to time. Upon the receipt of the
Product, Buyer shall immediately send Seller, by courier or by fax later
confirmed by courier, a written notice confirming its receipt of the Products.
2. Seller shall bear the costs and expenses arising for the delivery of the
Products.
Article 4. Product Specification
The Products shall be subject to the specifications set out in Attachment A.
Article 5. Objection Period
Buyer shall install, test and operate the Products and raise objection against
the Products for, if any, defects, bugs and other flaws, within fourteen (14)
days upon the receipt of the Products ("Objection Period"). Failure to raise an
objection in the Objection Period shall be deemed as the acceptance of the
quality of the Products, waiving the right of claiming later for the quality of
the Products.
Article 6. Ownership of Intellectual Property Right
Buyer shall obtain and maintain all Intellectual Property Rights in and to the
Products including in and to its promotional materials, materials, prints and
derivative merchandise (if any) upon the delivery of the Products.
2
Article 7. Support
Seller shall provide the Buyer necessary technical support via the telephone and
email in connection with the installment, maintenance, test and operation of the
Products in Objection Period. Seller may provide, with no liability, technical
support after the expiry of Objection Period, in the operation of the Products.
Article 8. Translation
Buyer shall, if necessary, be responsible to translate language including but
not limited to words, expressions, logos (identified in Korean) contained in the
products into English or Mandarin Chinese. Seller may, with no liability,
provide necessary assistance in such translation.
Article 9. Representations and Warranties
1. Seller represents and warrants that:
(1) It has the right, power and authority to enter into this Agreement and
to fully perform its obligations under this Agreement;
(2) The execution and delivery of this Agreement, and the consummation of
the transactions contemplated do not violate any agreement existing between it
and any other person or entity, and it shall not make any agreement with any
person or entity that is inconsistent with any of the provisions of this
Agreement;
(3) It is, and at all times shall be, the holder of all consents necessary
for it to perform its obligations hereunder;
(4) The Products, to the best of the Seller's knowledge as of the date, will
not infringe the intellectual property rights of any third party.
2. Buyer represents and warrants that:
(1) It has the right, power and authority to enter into this Agreement and
to fully perform its obligations under this Agreement;
(2) The execution and delivery of this Agreement, and the consummation of
3
the transactions contemplated do not violate any agreement existing between it
and any other person or entity, and it shall not make any agreement with any
person or entity that is inconsistent with any of the provisions of this
Agreement;
(3) It is, and at all times shall be, the holder of all consents necessary
for it to perform its obligations hereunder.
Article 10. Term and Termination
1. This Agreement will commence on the Effective Date and keep continuous until
the complete payoff of the Purchase Price, unless terminated earlier pursuant to
paragraph 2 below.
2. Either party has the right to terminate this Agreement by seven (7) days
prior written notice upon the occurrence of any of the following events:
1) The Seller delays up to thirty (30) days in the delivery of the
Products.
2) The Buyer delays up to thirty (30) days in each payment of the
Purchase Price.
3) Either party becomes insolvent or bankrupt, or is in the process of
liquidation.
Article 11. Seller's Remedy
1. If the Seller has fulfilled all of its obligations under this Agreement and
the Buyer materially breaches any of its obligations hereunder, then Seller
shall, as its sole remedy therefore, be entitled to receive the unpaid Purchase
Price of the Purchase Price as liquidated damages in lieu of, and as full
compensation for all other rights or claims of the Seller against the Buyer by
reason of such default. In that case, Buyer shall return the Product and all
intellectual property rights contained therein to Seller.
2. Buyer will indemnify, defend and hold harmless Seller and its affiliates,
directors, officers, employees, agents, representatives, successors and assigns
from any and all liabilities, losses, expenses (including, without limitation,
reasonable attorneys' fees), costs and damages of any kind arising out of or
relating to any liability otherwise associated with the Products incurred prior
4
to the Effective Date of this Agreement; provided that in no event shall Buyer
be liable under or in connection with this Agreement for any loss or profit or
any other commercial damage, including without limitation incidental,
consequential, special, exemplary, punitive or other direct or indirect damages
of any nature under this the preceding sentence.
Article 12. Buyer's Remedy
1. If the Buyer has fulfilled all of its obligations under this Agreement and
the Seller materially breaches any of its obligations hereunder, then Buyer
shall, as its sole remedy therefore, be entitled to receive the unpaid Purchase
Price as liquidated damages in lieu of, and as full compensation for, all other
rights or claims of the Buyer against the Seller by reason of such default.
2. Seller will indemnify, defend and hold harmless Buyer and its affiliates,
directors, officers, employees, agents, representatives, successors and assigns
from any and all liabilities, losses, expenses (including, without limitation,
reasonable attorneys' fees), costs and damages of any kind arising out of or
relating to any liability otherwise associated with the Products incurred prior
to the Effective Date of this Agreement; provided that in no event shall Seller
be liable under or in connection with this Agreement for any loss or profit or
any other commercial damage, including without limitation incidental,
consequential, special, exemplary, punitive or other direct or indirect damages
of any nature under this the preceding sentence.
Article 13. Severability
If any article hereof shall be deemed invalid, void or unenforceable for any
reason by a court of competent jurisdiction or legal authority, the remaining
parts hereof shall still hold their full effectiveness.
Article 14. Notice
Any notice or communication that is required to be sent out or that may be sent
out pursuant to this Agreement shall be made in written and shall be delivered
personally, faxed, or sent by registered mail to the addresses as set forth
below. Any such notice or communication shall be deemed given when so delivered
personally, faxed, or if mailed, on the earlier of the date of receipt or ten
(10) days after the date of such mailing.
5
Buyer:
Attention: T2CN HOLDING LIMITED
Name: JUN-TSE TENG
Address: 5 Floor, 88 Qin Jiang Road, Shanghai, PRC
Tel: 86-21-54278388
E-mail: joe@t2cn.com
Seller:
Attention: JC ENTERTAINMENT CORPORATION
Name: IL-Sung Baik
Address: 4thf, Rosedale Bldg., #724 Suseo-Dong, Kangnam-Ku, Seoul 135-885,
Korea
Tel: 82.2.2040.1114
E-mail: isbaik@joycity.co.kr
Article 15. Costs and Tax
The costs, expenses, and taxes levied on in the negotiation, preparation,
execution and delivery of this Agreement shall be borne respectively by Buyer
and Seller.
Article 16. Entire Agreement and Modification
This Agreement shall constitute the entire agreement between Seller and Buyer.
Any change, amendment or modification of this Agreement shall be agreed and made
by Seller and Buyer in written.
Article 17. Governing Law and Jurisdiction
This Agreement shall be governed by and be construed in accordance with the
substantive law of Singapore.
Any disputes arising hereunder and in connection herewith shall be settled
through consultations between the Parties, and if the Parties cannot reach an
agreement regarding such disputes within thirty (30) days of their occurrence,
such disputes shall be submitted to International Chamber of Commerce for
6
arbitration in Singapore in accordance with its then effective arbitration
rules, and the arbitration award shall be final and binding on both Parties.
Article 18. Effectiveness
This Agreement shall become effective upon the signature hereof and be binding
upon Seller and Buyer.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement through their
legally authorized representative as of the date first above written.
[reminder of this page is intentionally left blank]
7
IN WITNESS WHEREOF, the duly authorized representatives of each of the Parties
hereto have executed this Agreement as of the date first written above.
JC ENTERTAINMENT CORPORATION T2CN HOLDING LIMITED
By: By:
Name: __________________________ Name: _____________________________
Title: _________________________ Title: ____________________________
Attachment A
List of Casual Games
Name English Chinese
No.
- -------------------------------------------------
1. Chess
- -------------------------------------------------
2. Dujiju
- -------------------------------------------------
3. Lianliankan
- -------------------------------------------------
4. Gobang
- -------------------------------------------------
5. Weiqi
- -------------------------------------------------
6. Junqi
- -------------------------------------------------
7. Shanghai
- -------------------------------------------------
8. Poker
- -------------------------------------------------
9. Hoola
- -------------------------------------------------
10. High-low
- -------------------------------------------------
SCHEDULE 5A
Company Warranties
1. INCORPORATION AND STANDING
The Company:
(i) is duly incorporated in its place of incorporation and is validly
existing under the laws of its place of incorporation;
(ii) has the requisite corporate power and authority to own and operate its
properties and assets and to carry on its business as presently
conducted and as proposed to be conducted.
2. CONSENTS AND AUTHORISATION
The Company has taken or will take all necessary steps and actions and has
obtained or will obtain all necessary consents and approvals required for
its execution, delivery and performance of its obligations under this
Agreement, including all necessary corporate actions on the part of the
Company, its directors and shareholders necessary for the allotment of the
Subscription Shares and the issuance and delivery of share certificates
thereof.
3. BINDING AND ENFORCEABILITY
This Agreement, upon the Company's execution and delivery of the same,
shall be a legal, valid, binding agreement on the Company and enforceable
against it in accordance with its terms in full, except that as to
enforceability which is subject only to any applicable bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors
rights generally, any general principles of equity and public policy
relating to enforceability, and to any applicable laws affecting the
ability of the Company to bind itself in respect of the matters provided
therein.
4. NO CONTRAVENTION
The execution, delivery and performance of the Company's obligations
under this Agreement shall not contravene:-
(i) any of its constitutional documents;
(ii) violate, conflict nor result in any breach of any of its obligations
to any person (including without limitation, under any contract,
security document, undertaking, agreement, instrument or otherwise)
nor any order or decree directly relating to it; nor
1
(iii) violate nor result in any breach of any laws or regulations
applicable to it.
5. GOVERNMENT CONSENTS
No consents, approvals, authorisation of, designation, declaration, filing
or otherwise, with any state, federal or any governmental authority of any
jurisdiction, on the part of the Company is required or necessary for the
valid execution, delivery and performance of its obligations under this
Agreement, and the consummation of the transactions contemplated in this
Agreement.
6. SHARE CAPITAL
The authorised and issued share capital of the Company immediately after
Completion are as set out in Schedule 2 and all information in Schedule 1
are true, complete and accurate in all material respects.
7. SUBSCRIPTION SHARES
The Subscription Shares, when issued in accordance with the provisions of
this Agreement, the Memorandum and Articles of Association and the
provisions of all the applicable laws, will become validly issued Common
Shares in the share capital of the Company, save and except that the
Subscription Shares may be subject to restrictions of transfer under any
applicable securities or other applicable law, the Memorandum and Articles
of Association, or the terms of this Agreement.
8. MEMORANDUM AND ARTICLES OF ASSOCIATION
The copies of the Memorandum and Articles of Association, or equivalent
constitutional documents of the Company, effective as of the date of this
Agreement and which have been supplied to JCE or its legal or professional
advisers or officers or agents are true, complete and accurate in all
respects.
9. OTHER MATTERS RELATING TO THE COMPANY
As at the date of this Agreement, the Company:
1. has not traded;
2. does not have any liabilities or obligations other than in respect of
its paid up share capital and those liabilities or obligations imposed
upon any company solely by virtue of its incorporation.
SCHEDULE 5B
Disclosure Schedule
(on Company Warranties)
1. General Disclosures
1.1 There shall be deemed to be disclosed to JCE, and it is hereby
incorporated by reference as having been disclosed, all or any information
and matter contained in or referred to in:
(a) this Agreement (and all Schedules and Exhibits thereto, if any) and
all or any documents and matters referred to therein;
(b) all matters set out in the attachments to this Disclosure Schedule
(Schedule 5B) (if any);
(c) all information contained in or referred to in any documents provided,
or copies of which have been provided (including but not limited to
any diligence documents delivered and/or supplied) to JCE, its legal
or other professional advisers, and/or its agents on or before the
date of this Agreement and/or the Completion Date;
(d) the Memorandum and Articles of Association (or equivalent
constitutional documents) of the Company;
(e) all matters, facts and circumstances known to JCE (by reason of
information supplied by and/or on behalf of the Company);
(f) all information which would be disclosed by a search or inspection of
the files and/or records available to the public or for public
inspection on the Company;
(g) all information of public record and/or in the public domain in all
applicable jurisdiction on or before the date of this Agreement and as
at the Completion Date.
2. General Note
2.1 Unless the context requires otherwise, words and expressions defined or
used in this Agreement have the same meanings in this Schedule. The
headings and numbering are used merely for convenience and shall not
affect the interpretation of this Schedule.
2.2 The Company Warranties are made and given subject to the disclosures in
this Disclosure Schedule.
1
2.3 Each item disclosed (or deemed to be disclosed) herein shall be deemed to
be a disclosure in respect of all the Company Warranties notwithstanding
that an item disclosed may be disclosed by reference to a particular
paragraph or paragraphs, or clauses of the Company Warranties.
2.4 The disclosure of any matter or document hereby shall not imply any
representation, warranty or undertaking as to that matter or document or
as to any statement or reference contained in that matter or document that
is not expressly included in this Agreement, nor shall such disclosure be
taken as extending the scope of the Company Warranties or of any
undertaking contained in this Agreement.
2
SCHEDULE 6
Investor Warranties
JCE hereby warrants that:
(i) Power and Authority
it has full power and authority to execute, deliver and perform
its obligations under this Agreement;
(ii) Consents and Authorisation
it has obtained all necessary consents and approvals required for its
execution, delivery and performance of its obligations under this
Agreement, including all necessary corporate actions;
(iii) Binding and Enforceability
this Agreement, upon its execution and delivery of the same, shall be
a legal, valid, binding agreement on JCE and enforceable against it
in accordance with its terms in full, except that as to
enforceability which is subject only to any applicable bankruptcy,
insolvency or other similar laws affecting the enforcement of
creditors rights generally, any general principles of equity, and
public policy relating to enforceability;
(iv) No Contravention
its execution, delivery and performance of its obligations
under this Agreement shall not contravene :
(a) any of its constitutional documents;
(b) any of its obligations to any person under any contract, security
document, undertaking, agreement, instrument or otherwise; or
(c) any laws or regulations applicable to it.
(v) Government Consents
No consents, approvals, authorisation of, designation, declaration,
filing or otherwise, with any state, federal or any governmental
authority of any jurisdiction, on the part of JCE is required or
necessary for the valid execution, delivery and the performance of
its obligations under this Agreement, and the consummation of the
transactions contemplated in this Agreement.
SCHEDULE 7
Address of the Parties
1. T2CN Holding Limited
Address: 5th Floor, 88 Qin Jiang Road, Shanghai, PRC
Attention: JUN-TSE TENG
2. JC Entertainment Corp.
Address: 4th Floor, Rosedale Bldg., #724 Suseo-Dong, Kangnam-Ku,
Seoul 135-885, Korea
Attention: IL-Sung Baik
EXHIBIT 1
Form of Articles of Association of the New JV
Execution Copy
Articles of Association
of
J-Town Information Technology (Shanghai) Co., Ltd.
Dated September 1, 2005
ARTICLES OF ASSOCIATION
This Articles of Association is executed and delivered as of September 1,
2005 (the "Execution Date") by and between
T2CN HOLDING LIMITED, a company incorporated under the laws of British
Virgin Islands, with its registered address at offices of S-HR&M Financial
Services Limited of Kingston Chambers, P.O. Box 173, Road Town, Tortola,
British Virgin Islands ("Party A"); and
JC ENTERTAINMENT CORPORATION, a company incorporated under the laws of the
Republic of Korea, with its registered address at 4th Floor, Rosedale
Building, #724 Suseo-Dong, Kangnam-Ku, Seoul 135-885, Korea ("Party B").
Capitalized terms used herein but not otherwise defined herein are defined
in Section 1.2.
Article 1. General Principles
1.1 Introduction.
The total investment amount of J-Town Information Technology (Shanghai)
Co., Ltd. (the "WFOE") is United States Dollar two million one hundred and
forty thousand (USD2,140,000) and its registered capital is United States
Dollar one million five hundred thousand (USD1,500,000). Its business term
is 30 years (commencing from the Business License Date of the WFOE). Party
A holds 65% of the registered capital and corresponding equity interests in
the WFOE, and Party B holds 35% of the registered capital and corresponding
equity interests in the WFOE.
In accordance with the Laws of China, the Parties reach the following
agreement after friendly negotiations.
1.2 Certain Definitions.
For the purposes of the Articles of Association the following terms shall
have the meanings set forth below:
(1) "Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common
control with, such Person; for purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of the Person, whether
through the ownership of voting securities, by contract or otherwise.
For clarification and notwithstanding the foregoing definition, the
WFOE shall not be deemed to be an Affiliate of a Party or any of such
Party's Affiliates.
(2) "Articles of Association" means these WFOE's Articles of Association,
as the same may be amended, modified, restated or replaced from time
to time in accordance with the terms thereof and the Laws of China.
1
(3) "Bankruptcy Event" means, with respect to the WFOE, the filing by the
WFOE of a petition in bankruptcy according to the applicable Law of
China or the decision of a Chinese court with competent jurisdiction
that the WFOE shall initiate its bankruptcy procedure upon the
application of the creditor(s) of the WFOE.
(4) "Board of Directors" means the board of directors of the WFOE.
(5) "Business Day" means a day, other than a Saturday, Sunday or national
holiday in China, the Republic of Korea or other relevant countries,
on which commercial banks in Shanghai, China are open for the conduct
of commercial banking business.
(6) "Business License" means the business license issued by the
Registration Administration Organ for the WFOE, which authorizes the
WFOE to conduct business (as originally issued and as the same may be
amended, modified, restated, replaced or reissued from time to time in
accordance with the Laws of China) in accordance with the Articles of
Association.
(7) "Business License Date" means the date on which the Registration
Administration Organ issues the Business License to the WFOE
(8) "Business Plan" means the detailed business plan of the WFOE including
an operating budget, capital plan (including investment and financing
plans), and service plan, together with a strategic plan for a fixed
period of not less than five (5) years, as approved by the Board of
Directors, as the same may be modified, amended, replaced or restated
from time to time in accordance with the terms of the Articles of
Association.
(9) "Chief Financial Officer" has the meaning in Section 8.1(a).
(10) "China" or "PRC" means the People's Republic of China.
(11) "Confidential Information" means and includes, but shall not be
limited to, information relating to operations, Technology, business
and marketing plans, strategies, customer information, pricing
policies, and other information concerning the service, promotions,
development, financing, expansion plans, business policies and
practices, and other forms of information that a reasonable business
person would treat as proprietary or confidential. Confidential
Information shall not include (i) information which becomes generally
available to the public other than as a result of disclosure by the
WFOE or a Party, (ii) information that a Party or the WFOE is required
by applicable law or the rules of any national stock exchange or
automated quotation system on which the Party's (or any Affiliate's)
securities are traded or admitted for quotation to disclose, or (iii)
information to the extent required to be disclosed in order to obtain
the approval of a customer or Governmental Entity for the
establishment of the WFOE; provided that, in the case of any
disclosure pursuant to (ii) or (iii) above, the disclosing Party shall
first advise the Board of Directors of the WFOE and the non-disclosing
Party of such requirement and, if requested, the disclosing Party
shall fully cooperate in obtaining a protective order or other
2
assurances that the confidentiality of the Confidential Information
will be maintained by the receiving Person.
(12) "Day", unless otherwise noted, shall mean a calendar day.
(13) "Deputy General Managers" have the meaning in Section 8.1(a).
(14) "Director" or "Directors" means a director or directors of the Board
of Directors, as applicable.
(15) "Examination and Approval Authority" means Shanghai Foreign Investment
Working Commission or its authorized agency.
(16) "Execution Date" has the meaning in the preamble.
(17) "Financial Manager" has the meaning in Section 8.1(f).
(18) "Fiscal Year" means the fiscal year of the WFOE as determined pursuant
to Section 10.2.
(19) "Force Majeure Event" means any act or event which is not reasonably
foreseeable and avoidable and which is beyond the reasonable control
of the affected Party, including, without limitation, earthquake,
typhoon, flood, or other acts of nature, fire, war, riots, terrorist
acts, act of any governmental entity (domestic or foreign), changes in
law (domestic or foreign), or any other act or event which is
generally accepted as "force majeure" in international commercial
practice.
(20) "General Manager" has the meaning in Section 8.1(a).
(21) "Governmental Entity" means any court or government or governmental
agency, commission, entity, instrumentality or political subdivision
of China or any city, municipality or other political subdivision of
China.
(22) "WFOE" means J-Town Information Technology (Shanghai) Co., Ltd.
(23) "Term" means the term of the WFOE as set forth in Section 13.1.
(24) "WFOE Law" means the Law of the People's Republic of China on Foreign
Capital Enterprises and the Rules of Implementation of the Law of the
People's Republic of China on Foreign Capital Enterprises (as the same
currently exist and as the same may be amended, modified, replaced or
restated from time to time in accordance with the Laws of China).
(25) "Labor Contracts" means the contracts (as originally executed and as
the same may be amended, modified, repealed or replaced from time to
time in accordance with the terms thereof and the Laws of China)
executed between the WFOE and each employee.
3
(26) "Laws" means applicable laws, orders, regulations and requirements
officially promulgated by Governmental Entities.
(27) "Liquidation Committee" means the liquidation committee set up by the
Board of Directors according to the Laws of China.
(28) "Offered Interest" has the meaning in Section 6.2(c).
(29) "Offered Party" has the meaning in Section 6.2(c).
(30) "Offered Terms and Conditions" has the meaning in Section 6.2(c).
(31) "Offering Party" has the meaning in Section 6.2(c).
(32) "Officers" means the Officers of the WFOE appointed as contemplated in
Section 8.1(a).
(33) "Party" or "Parties" means a party or the parties to the Articles of
Association.
(34) "Party A" has the meaning in the preamble.
(35) "Party A Representatives" has the meaning in Section 7.1(a).
(36) "Party B" has the meaning in the preamble.
(37) "Party B Representatives" has the meaning in Section 7.1(a).
(38) "Person" means (without limitation) any individual, corporation,
limited liability company, entity, firm, trust, partnership, joint
venture, association, company, unincorporated organization or a
governmental entity (domestic or foreign).
(39) "PRC Accounting Principles" has the meaning in Section 10.6.
(40) "Registration Administration Organ" means the Shanghai Administration
of Industry and Commerce, Pudong Branch.
(41) "Renminbi" and "RMB" means Renminbi Yuan, the legal currency of China.
(42) "Solicitation and Negotiation Period" has the meaning in Section
6.2(f).
(43) "Special Damages" means punitive, consequential, incidental, special,
exemplary, treble, indirect and any other damages except only direct
damages.
(44) "Technology" means and includes all technical information and
experience, including but not limited to, data, data bases, documents,
designs, plans, software, methods, processes, systems, drawings,
procedures, specifications, guidelines, trade secrets, expertise,
know-how, research and development and other confidential and
proprietary information employed in the design, control, operation
and/or provision of services of the WFOE.
4
(45) "Transfer" has the meaning in Section 6.2(a).
(46) "Transfer Notice" has the meaning in Section 6.2(c).
(47) "Two Funds" has the meaning in Section 11.3.
(48) "United States" means the United States of America.
(49) "United States Dollars" and "US$" mean legal currency of the United
States.
(50) "US Accounting Principles" has the meaning in Section 10.6. (51) "Vice
Chairperson" has the meaning in Section 7.1(d).
Article 2. Parties to the Joint Venture
2.1 Parties. The Parties to the joint venture are:
-------
Party A: T2CN HOLDING LIMITED, a company incorporated under the laws
of British Virgin Islands. Party A's registered address is
offices of S-HR&M Financial Services Limited of Kingston
Chambers, P.O. Box 173, Road Town, Tortola, British Virgin
Islands.
Party A's Authorized Representative is:
Name: Tao Feng
Title: Chairman of board of directors
Address: Villa 3, Radisson Plaza, Xing Guo
Hotel, Shanghai, PRC
Nationality: PRC
Party B: JC ENTERTAINMENT CORPORATION, a corporation incorporated
under the laws of the Republic of Korea. Party B's principal
business address is 4th Floor, Rosedale Building, #724
Suseo-Dong, Kangnam-Ku, Seoul 135-885, Korea.
Party B's Authorized Representative is:
Name: Yang Shin Kim
Title: Chairman
Address: 4th Floor, Rosedale Building, #724
Suseo-Dong, Kangnam-Ku, Seoul
135-885, Korea
Nationality: KOREA
Article 3. Name and Registered Address of the WFOE
3.1 Name. Subject to the approval of the relevant approval authority and
Registration Administration Organ, the name of the WFOE shall be (in
Chinese):
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The English name of the WFOE shall be:
J-Town Information Technology (Shanghai) Co., Ltd.
The WFOE's registered address shall be at Room 692-13, Building 2, 351 Guo
Shou Jing Road, Zhangjiang Hi-Tech Park, Pudong, Shanghai, PRC.
3.2 Chinese Legal Person. The WFOE is a Chinese legal person, all of
its activities shall comply with the Laws of China and shall be
protected under the Laws of China.
3.3 Limited Liability Company. The WFOE is organized as a limited
liability company under the Laws of China. Accordingly, the WFOE
shall be liable to its creditors on the basis of all of its assets.
Article 4. Purpose of the Joint Venture and Scope of Business
4.1 Purpose. The purpose of the WFOE is to facilitate information exchange
between China and overseas units, share resources, propel for the
enhancement of computer hardware and software market in China based on the
successful experience and broad information channel of both Parties in the
fields of computer software and hardware development, design and
manufacturing.
4.2 Scope of Business. The scope of the business of the WFOE shall be design
and production of software, sale of self-produced products, system
integration, and providing relevant technical consultancy and technical
services and business consultancy.
Article 5. Total Investment and Registered Capital
5.1 Total Investment. The total investment of the WFOE is Two Million
One Hundred and Forty Thousand (US$2,140,000).
5.2 Registered Capital. The registered capital of the WFOE is One
Million Five Hundred United States Dollars (US$1,500,000).
5.3 Party A's Ownership of Registered Capital. Party A shall hold and own
sixty-five percent (65%) of the registered capital of the WFOE, which is
Nine Hundred and Seventy Five Thousand United States Dollars (US$975,000).
5.4 Party B's Ownership of the Registered Capital. Party B shall hold and own
thirty-five percent (35%) of the registered capital of the WFOE, which is
Five Hundred and Twenty Five Thousand United States Dollars (US$525,000).
5.5 Reduction in Registered Capital. During the term of the WFOE, the WFOE may
not reduce its registered capital except as may be first unanimously
approved by the Parties and the Board of Directors and then submitted for
approval of, and approved by, the Examination and Approval Authority. The
WFOE shall register any reduction in the registered capital in compliance
with applicable Laws.
6
5.6 Increases in Registered Capital. Subject to Section 5.8(b), any increase
in the registered capital of the WFOE shall first be unanimously approved
by the Parties and the Board of Directors and then submitted for approval
of, and approved by, the Examination and Approval Authority. Upon receipt
of such approval, the WFOE shall register the increase in the registered
capital with the Registration Administration Organ.
5.7 Contributions of Parties as to Increased Registered Capital. Unless
otherwise agreed in writing by the Parties and unanimously approved by the
Board of Directors, and except as otherwise contemplated in Section
5.8(b), any increase in the registered capital shall be made by the
Parties in the same proportions as their original interests in the
registered capital as reflected in Sections 5.3 and 5.4. The Parties may
agree to adjust their proportional interests in the WFOE's existing
registered capital, subject to the approval of the Examination and
Approval Authority.
5.8 Company Financing.
(a) The Parties intend the WFOE to be a financially independent
entity. It is understood and agreed that each Party shall use
its commercially reasonable efforts, in close consultation and
cooperation with the other Party, to advise and assist the
management of the WFOE in sourcing for and obtaining all the
funds from third party lenders which may be necessary or
appropriate for the implementation of the Business Plan.
However, the Parties shall have no obligation to lend to, or
otherwise provide funds to the WFOE, or to provide any
collateral pledge, guarantee or other credit support to the
WFOE.
(b) Subject to Sections 3.3 and 5.8(a) above, in the event that
the Board of Directors of the WFOE determines that such
financing is required and the WFOE is unable to obtain
financing from a third party lender for such requirements, the
Parties shall provide such financing to the WFOE as agreed in
writing by both Parties and provided that Party A shall be
responsible to provide WFOC the financing with no more than
US$4,000,000 (or the RMB equivalent amount). The financing
exceeding US$4,000,000 shall be provided by the Parties in
proportion to their interests in the registered capital of the
WFOE. The provisions of any such financing by the Parties by
way of loans shall be on the terms and subject to the
conditions of loan contracts to be entered into by the WFOE
and the Parties. Any such loan contract entered into by Party
A or Party B and the WFOE shall be subject to approval of and
registration with the relevant China foreign exchange
administration authority to the extent required by applicable
Laws.
Article 6. Transfers of Interests in Registered Capital
6.1 Transfers of Interests in Registered Capital Not Permitted Except in
Strict Compliance with the Articles of Association and the WFOE Law.
Except as otherwise permitted by this Article 6, no Party shall have any
right or power to sell, assign, transfer, or otherwise dispose of, or
encumber, hypothecate, pledge or grant any security interest on or in
respect of all or any part of its interest in the registered capital of
the WFOE, voluntarily or involuntarily, by operation of Law or otherwise,
except with the written consent of the other Party and the unanimous
approval of the Board of Directors (in each case which may be granted or
7
withheld in such other Party's unfettered discretion) and then only in
strict accordance with the terms of the Articles of Association and the
WFOE Law, and any attempt to do so shall be null and void and of no
effect.
6.2 Consent Required for a Transfer.
(a) For the purposes hereof, "Transfer" means any sale,
disposition, exchange, assignment, pledge, or other change in
legal or beneficial ownership of an interest in the registered
capital of the WFOE. For avoidance of doubt, a transfer to any
affiliate of the Parties shall be deemed to be a Transfer. A
change in beneficial ownership as a result of a change in
control of Party A or Party B shall be an exception, and shall
not be deemed to be a Transfer. The aforesaid exception shall
only be applicable to the first signatories of the Articles of
Association i.e. T2CN HOLDING LIMITED and JC ENTERTAINMENT
CORPORATION. No legal successors or transferees of either
Party A or Party B shall enjoy the benefit of such exception.
A change in beneficial ownership as a result of a change in
control of such successors or transferees shall be deemed a
Transfer.
(b) Neither Party shall make a Transfer of all or any portion of
its interest in the registered capital of the WFOE during the
three (3)-year period immediately following the Business
License Date without the prior written consent of the other
Party. Thereafter, either Party may make a Transfer of not
less than all of its interest in the registered capital of the
WFOE to the other Party or another single Person, but only
upon compliance with and pursuant to the further provisions of
this Section 6.2 and other applicable provisions of this
Article 6.
(c) If a Party (the "Offering Party") shall propose to make a
Transfer of its entire interest in the registered capital of
the WFOE (the "Offered Interest"), which it may do only after
the period specified in Section 6.2(b), it shall first give a
written notice (a "Transfer Notice") to the other Party (the
"Offered Party") to (i) set forth the proposed sale price of
the Offered Interest and all other material terms and
conditions of the proposed Transfer of the Offered Interest
(the "Offered Terms and Conditions"), and (ii) offer to
Transfer the Offered Interest to the Offered Party on the
Offered Terms and Conditions (the "Offer"). The Offered Party
shall have the preemptive rights. The terms and conditions of
the Transfer of the Offered Interest offered by the Offering
Party to any third party shall be no more favorable than the
Offered Terms and Conditions to the Offered Party. The
failure by the Offered Party to respond to a Transfer Notice
within thirty (30) days after its receipt of such Transfer
Notice shall be deemed to constitute a notification to the
Offering Party of the Offered Party's decision to give up its
preemptive rights with respect to the Transfer of the Offered
Interest described in such Transfer Notice.
(d) In the event the sale price in the Offered Terms and Conditions is
stated in consideration other than cash and cash equivalents, the
Offered Party may accept the Offer on the basis that the sales price
will be paid by it in cash or cash equivalents having a fair market
value equivalent to such consideration.
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(e) In the event the Offering Party and the Offered Party make agreement
with respect to the Transfer of the Offered Interest , the closing
of the Transfer of the Offered Interest shall be conducted in
accordance with Section 6.3 below.
6.3 Closing and Transfer.
(a) This Section 6.3(a) applies to any of the closings referred to in
Section 6.2. The closing in question shall occur on a date and at a
place within China designated by the purchasing Party not later than
sixty (60) days after the later of:
(i) the final determination of the purchase price as contemplated
in the applicable Section of the Articles of Association, or
(ii) the date all filings, notices, approvals and consents with
respect to the transaction have been made with, and obtained
from, all governmental entities (domestic and foreign)
required under applicable laws (domestic and foreign) and all
applicable waiting periods have expired or been terminated.
Each Party and the WFOE shall make all required filings and notices
with and shall use commercially reasonable efforts to obtain all
approvals and consents from all governmental entities (domestic and
foreign) required under applicable laws (domestic and foreign). At
the closing, the Parties shall deliver or cause to be delivered such
instruments of assignment and Transfer and other agreements,
documents and papers as are customary in transactions of the
character contemplated (and containing customary representations and
warranties as to title, authority and otherwise and other
agreements). In addition, the selling Party shall deliver to the
WFOE and the purchasing Party resignations, effective at the
closing, of the representatives of the selling Party on the Board of
Directors of the WFOE. It shall be a condition to the closing of the
transaction that all loans made by the selling Party to the WFOE
shall be repaid with all accrued and unpaid interest thereon.
(b) The purchasing Party may Transfer its rights to acquire the selling
Party's interest in the registered capital of the WFOE under Section
6.2, as applicable, to any other Person without the consent of the
selling Party. This Section 6.3 only applies to a purchase under
Section 6.2.
6.4 Approval of Transfer by Board of Directors and Approval and Registration
of Transfer. To the extent, but only to the extent, required by the WFOE
Law, a Transfer of an interest in the registered capital of the WFOE
pursuant to the Articles of Association shall require the approval of the
Board of Directors of the WFOE, each Party agrees to cause its
representatives on the Board of Directors of the WFOE to approve any such
Transfer that is otherwise in accordance with the applicable provisions of
this Article 6. Any Transfer stated in this Article 6 shall be submitted
to the relevant Examination and Approval Authority of China for approval
and to the Registration Administration Organ for registration of the
Transfer.
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6.5 Waiver of Preemptive Rights. Each Party hereby agrees to waive its
preemptive rights with respect to any Transfer of an interest in the
registered capital of the WFOE pursuant to Section 6.2 that is otherwise
in accordance with the applicable provisions of this Article 6.
6.6 Transfer of Interest in the Registered Capital.
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(a) A Transfer of an interest in the registered capital of the WFOE
shall become effective only upon compliance with all applicable
provisions of this Article 6.
(b) The Person acquiring an interest in the registered capital of
the WFOE, pursuant to the Articles of Association, if not
already a Party, (i) shall execute an amendment to the
Articles of Association pursuant to which the acquiring Person
shall join in and become bound as a Party to the Articles of
Association and which shall specify the change in interest in
the registered capital of the WFOE and (ii) shall thereupon
have the same membership on the Board of Directors and all the
rights and all of the obligations of the transferring Party
hereunder.
Article 7. Board of Directors
7.1 Board of Directors.
(a) The Board of Directors shall be established on the date the
WFOE is issued its Business License. The Board of Directors
shall be composed of three (3) Directors. The Directors shall
be appointed by the Parties as follows: two (2) Directors
shall be appointed by Party A (the "Party A Representatives"),
both of whom shall be employees of Party A or an Affiliate of
Party A, and hold executive positions within Party A or an
Affiliate of Party A, and one (1) Director shall be appointed
by Party B (the "Party B Representatives"), who shall be
employee of Party B or an Affiliate of Party B and hold
executive position within Party B or an Affiliate of Party B.
Each Party shall give written notice to the other Party and
the WFOE of the names of its initial representatives on the
Board of Directors as soon as practicable after the Business
License Date, but in no event later than ten (10) Business
Days after the Business License Date.
(b) As a general matter, the WFOE shall be managed by the Board of
Directors consistently with the Business Plan and in accordance with
the Articles of Association.
(c) Meetings of the Board of Directors shall be presided over by a
Chairperson who shall be appointed by Party A (from among the two
directors appointed by Party A). The Chairperson's powers shall be
the powers outlined below in this Section 7.1(c) and any other
powers expressly delegated to the Chairperson in writing by both
Parties:
(i) In the status as Chairperson, to handle internal procedures
related to meetings of the Board of Directors as provided for
in the Articles of Association;
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(ii) In the status as Chairperson, to further serve as a symbol and
an ambassador of the WFOE and to promote the public image and
the relationships needed by the WFOE; and
(iii) In the status as a Director, to exercise the same authority as
each other Director of the WFOE, such as casting one vote
equal in weight to the votes of each other Director at
meetings of the Board of Directors.
The Chairperson is the legal representative of the WFOE. At the
first meeting of the Board of Directors, the Directors shall agree
to a scope of material or significant commitments, acts and
undertakings with respect to which the Chairperson must obtain the
prior approval of the entire Board of Directors before the
Chairperson may sign any documents or take any other actions on
behalf of the WFOE to bind the WFOE.
(d) The Board of Directors shall also have a Vice Chairperson who shall
be a Director appointed by Party B. The Vice Chairperson shall, in
the absence of the Chairperson, have the same duties and authority
as the Chairperson and as otherwise as may be delegated to the Vice
Chairperson in the Articles of Association or by the Board of
Directors from time to time.
(e) Each Director shall serve for a four (4) year term and until (i)
such Director's successor is designated by the Party which appointed
the Director or (ii) such Director's earlier resignation or death,
or removal by such Party. A Director may serve consecutive terms if
reappointed by the Party that originally appointed the Director. The
term of the Directors on the initial Board of Directors shall
commence on the Business License Date. Any Director may resign at
any time upon written notice to the Party that appointed the
Director. Subject to the limitations set forth in Section 7.1(a),
each Party may, without the approval or consent of the other Party
and without any condition or restriction whatsoever, select,
designate, appoint, remove (with or without cause) and replace at
any time any one or all of its representatives on the Board of
Directors. Such selection, designation, appointment, removal or
replacement shall be effective as between the Parties upon receipt
by the other Party of written notice from the Party taking such
action.
7.2 Power of Board of Directors.
(a) The Board of Directors of the WFOE shall be the highest
authority of the WFOE. Except as reserved to the Parties in
the Articles of Association, the Board of Directors shall have
all power to manage, and to supervise and direct the Officers
and employees of, the WFOE. Subject to Section 7.2(d), the
Board of Directors shall have the right to delegate concurrent
authority to such Officers of the WFOE as the Board shall deem
appropriate. Except as may be reserved to the Parties in the
Articles of Association, any power not delegated pursuant to
Section 7.2(b) or a policy of delegation adopted by the Board
of Directors shall remain exclusively with the Board of
Directors. Approval by, or action taken by, the Board of
Directors in accordance with the Articles of Association,
subject to any approval or action by the Parties required by
the Articles of Association or applicable Laws, shall
constitute approval or action by the WFOE.
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(b) Subject to the powers set forth in Section 7.2(d), which are
hereby specifically reserved to the Board of Directors, (i)
the General Manager the Deputy General Managers and the Chief
Financial Officer of the WFOE are hereby delegated the power
to conduct the business of the WFOE in the ordinary course,
and (ii) the General Manager, the Deputy General Managers and
the Chief Financial Officer are hereby delegated the further
powers delegated to them as provided in the Articles of
Association.
(c) None of the General Manager, the Deputy General Managers and the
Chief Financial Officer nor any other Officer or employee of the
WFOE shall take any action on behalf of the WFOE, nor shall any
action be deemed to bind the WFOE, except to the extent that such
action is clearly within the scope of an express delegation of
authority that is in the Articles of Association, or approved by a
vote of the Board of Directors.
(d) Except as reserved to the Parties in the Articles of Association,
the Board of Directors, by its own action, but not by delegation to
any Officers or other employees of the WFOE, shall have the right
and power to:
(1) approve any amendment to the Articles of Association;
(2) approve the termination and liquidation of the WFOE other than
as contemplated in Article 14 or any renewal or the extension
of the Term;
(3) approve any increase in, or reduction of, the registered
capital of the WFOE or the total investment in the WFOE;
(4) approve any sale, disposition, exchange, assignment, Transfer,
pledge by a Party of its interest in the registered capital of
the WFOE;
(5) approve any merger or division of the WFOE or the acquisition
of any business or business division;
(6) approve any declaration of, or filing or commencement of, any
Bankruptcy Event, by the WFOE;
(7) approve the WFOE's initial financial and accounting system,
and approve the annual Business Plan (including approval of
initial operation capacity and changes to operation capacity)
of the WFOE, which shall be prepared and approved annually
during the fourth (4th) quarter of the WFOE's Fiscal Year
preceding the year to which such annual Business Plan relates;
and approve any amendment or modification to any annual
Business Plan;
(8) approve the annual financial statements of the WFOE, all of
which shall be prepared and approved annually during the first
(1st) quarter of the WFOE's Fiscal Year;
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(9) determine amounts available for and, subject to Article 11,
authorize any distribution to the Parties;
(10) authorize the creation of any subsidiaries or operating
divisions of the WFOE, or the establishment of any branch,
representative office or other operating location, the entry
by the WFOE into any joint venture or partnership agreement,
or any other investment in, or the acquisition of stocks or
bonds of, other Persons or any equity interest in any other
Person, provided that there shall be no limitation on the
Board of Directors' authority to delegate the making of
investments (a) as part of cash management in the ordinary
course of the business of the WFOE or (b) by Directors of
trusts established in connection with any employee benefit
plans of the WFOE;
(11) subject to Section 5.8(b), approve any obligation of the WFOE
for borrowed money (including, without limitation, capitalized
lease obligations) and approve its granting of any security
therefor; provided that there shall be no limitation on the
Board of Directors' authority to delegate its power to (i)
procure advances under lines of credit or other borrowing
arrangements previously approved by the Board of Directors
pursuant to this subsection, (ii) open letters of credit in
the ordinary course of the WFOE's business in accordance with
written policies established by the Board of Directors, or
(iii) borrow money in the ordinary course of the WFOE's
business for periods not in excess of ninety (90) days in
accordance with written policies established by the Board of
Directors;
(12) subject to the further provisions of this Section 7.2(d),
authorize any sale, lease, transfer or other disposition of
any asset of the WFOE or any group of its assets not in the
ordinary course of business having a (i) fair market value,
(ii) sale price or (iii) book value at the time of disposition
greater than the amount set forth in the delegation of
authority to General Manager by the Board of Directors;
(13) subject to Section 8.1, appoint, remove (with or without
cause) and replace the General Manager, the Deputy General
Managers and the Chief Financial Officer;
(14) approve the allocations of profits to the Two Funds (subject
to Section 11.3) and approve the allocation of the Two Funds;
(15) establish, amend or modify rules for the operation of the
Board of Directors, provided that any rules as so established,
amended or modified shall not be inconsistent with any
provision of the Articles of Association;
(16) establish the salaries of the General Manager, the Deputy
General Managers and the Chief Financial Officer, and
establish, alter or amend the powers of the General Manager,
the Deputy General Managers and the Chief
Financial Officer;
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(17) approve the selection and retention of external auditors;
(18) approve any lease of any facility by the WFOE that exceeds an
annual value of the RMB equivalent of US$50,000, approve
capital expenditures exceeding US$50,000 or the RMB equivalent
per project, approve any business contract or agreement with
the amount exceeding US$100,000 or the RMB equivalent per
project or creating a commitment on the part of the WFOE the
term of which exceeds three (3) years, unless any of the
aforesaid transactions was approved as a transaction
contemplated under the annual Business Plan;
(19) authorize the making, modification, amendment, or termination
by the WFOE, in its own interests, of any agreement with any
Party or an Affiliate of a Party that exceeds an annual value
of the RMB equivalent of US$250,000;
(20) adopt, approve or terminate any group employee benefit plan or
policy or any modifications thereto;
(21) approve the sale, assignment or license of any technology or
other intellectual property or intellectual property rights,
regardless of the form thereof, developed or owned by the
WFOE;
(22) approve any change of the location of the registered address,
principal office or any other facility of the WFOE or the
closing or partial closing of any such facility;
(23) approve any guaranties of the debts or obligations of any
other Person;
(24) approve the accounting policies of the WFOE and any major
change in such approved accounting policies or approve the
operating, personnel and financial policies and procedures for
the WFOE;
(25) approve or authorize the WFOE to enter into any agency
agreement or license agreement with any overseas game software
or customs brokerage agent other than an Affiliate of Party A
or Party B;
(26) approve the initiation and settlement of any legal claims,
disputes, suits, actions, cases or proceedings with respect to
the WFOE; and
(27) approve any other matter requiring approval of the Board of
Directors in the Articles of Association or the WFOE Law.
7.3 Notice of Meetings of Board of Directors, Location; Waiver of Notice.
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(a) Regular meetings of the Board of Directors shall be held at
such times and places within or outside China as may be fixed
by the Board of Directors, and may be held without further
notice. It is contemplated that regular meetings will be held
not less frequently than twice per Fiscal Year. Special
meetings of the Board of Directors may be called by the
14
Chairperson or, in his or her absence, the Vice Chairperson
or, in his or her absence, another Director authorized by the
Chairperson, and shall be so called at the request of a
majority of the Directors then in office or a Party. Notice
of the time and place of a special meeting of the Board of
Directors shall be effective if delivered to each Director by
hand or telecopy at least thirty (30) days prior to the time
of such special meeting or other period agreed upon by all of
the Directors. Actual receipt of notice by the Directors
shall not be required and notice under this Section shall be
deemed received if sent to a Director at the address or the
telecopy number designated for such notices by such Director.
(b) Notices of special meetings of the Board of Directors shall
identify the purpose of the special meeting or the business to
be transacted at the special meeting; provided that the
failure to specifically identify an action to be taken or
business to be transacted shall not invalidate any action
taken or any business transacted at a special meeting which is
(i) approved by the required vote and (ii) specifically
described in the minutes of such special meeting and such
minutes are approved by the Board of Directors.
(c) The meetings of the Board of Directors may be held at any
location within or outside China. Directors may hold a
regular or special meeting of the Board of Directors by means
of conference telephone, video conference or similar
communications equipment by means of which all Persons
participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person
at the meeting.
(d) Whenever notice is required to be given under this Section
7.3, a written waiver of notice, signed by the Director
entitled to receive such notice, whether before or after the
time of the meeting, shall be deemed equivalent to notice. A
Director's attendance at a meeting shall constitute a waiver
of notice of that meeting, except when the Director attends a
meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the
meeting is not properly called or convened.
7.4 Quorum for Meetings of the Board of Directors; Minutes; Written
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Actions.
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(a) No business shall be conducted at a meeting of the Board of
Directors unless a quorum is then present at the meeting. A
quorum for the transaction of business at any meeting of the
Board of Directors shall consist of all of the Directors for
the matters set forth in (1),(2),(3),(4),(5),(6),(13),(23),
and (25) of Article 7.2(d) hereof. For other matters set forth
in Article 7.2 (d), a quorum for the transaction of business
at any meeting of the Board of Directors shall consist
two-thirds of the Directors. If, at any properly convened
meeting, no quorum is constituted because less than the
required number of Directors are present then the Chairperson
(or other Person calling the meeting) shall call another
meeting with seven (7) Business Days' prior written notice.
In the event that there is no quorum, on two consecutive
occasions, for meetings as to which proper notice has been
provided in accordance with the terms of this Article 7, then
the Chairperson (or other Person calling the original meeting)
shall call another meeting with seven (7) Business Days'
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written notice and the members of the Board attending such
meeting shall constitute a quorum for purposes of such
meeting. The Chairperson of the WFOE, or, in the
Chairperson's absence, the Vice-Chairperson or, in his absence,
a Director authorized by the Chairperson, shall preside over
meetings of the Board of Directors.
(b) The minutes of each meeting of the Board of Directors shall be
taken by the Chairperson of the WFOE or a Person designated by
the Chairperson. A transcript of such minutes shall be
prepared by the Chairperson or such designated Person in the
Chinese and English languages and delivered to each Director,
as well as to each Party, within ten (10) Business Days after
such Board of Directors meeting. The first order of business
of the first meeting of the Board of Directors convened after
delivery of such transcript shall be its approval or
modification by the Board of Directors. The Directors shall
sign all resolutions duly adopted by the Board of Directors
pursuant to the Articles of Association within ten (10)
Business Days after the resolutions are delivered to the
Directors.
(c) Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting if all of the
Directors then in office consent thereto in writing. The written
consent(s) shall be filed with the minutes of the proceedings of the
Board of Directors.
7.5 Voting Power of Directors and Required Vote.
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(a) Each Director shall have one (1) vote on each matter submitted
to the Board of Directors. The unanimous vote of the
Directors attending the meeting of the Board of Directors
shall be needed to constitute approval by, or the
authorization of, the Board of Directors for the matters set
forth in (1),(2),(3),(4),(5),(6),(13),(23),(25) of Article
7.2(d) hereof. For other matters set forth in Article 7.2
(d), the simple majority vote of the Directors attending the
meeting of the Board of Directors shall constitute approval
by, or the authorization of, the Board of Directors.
(b) No Director shall be disqualified from acting on any matter because
either such Director or the Party that appointed such Director or an
Affiliate thereof is interested in the matter to be acted upon by
the Board of Directors.
(c) A Director may authorize another Director (but no other Person) to
act for the Director by proxy at any meeting of the Board of
Directors by a written proxy executed by the Director.
7.6 Standard of Care.
(a) Each Director shall discharge such Director's duties in good faith,
with the care an ordinarily prudent person in a like position would
exercise under similar circumstances.
(b) Each Director shall be fully protected in relying in good
faith upon the records of the WFOE and upon such information,
opinions, reports or statements presented to the WFOE by any
of its other Directors, Parties, Officers or employees, or by
16
any other Person as to matters the Director reasonably
believes are within such other Person's professional or expert
competence and also has been selected with reasonable care by
or on behalf of the WFOE, including information, opinions,
reports or statements as to the value or amount of assets,
liabilities, profits or losses of the WFOE or any other facts
pertinent to the existence and amount of assets from which
distributions to Parties might properly be paid.
7.7 First Meeting of the Board of Directors After the Business License Date.
The first meeting of the Board of Directors of the WFOE shall be held not
later than thirty (30) days after the Business License Date. The Board of
Directors shall adopt resolutions at the first meeting as follows:
(a) appointing the external auditor of the WFOE for the first Fiscal
Year of the WFOE;
(b) approving the WFOE's initial financial and accounting system;
(c) adopting for the WFOE the accounting principles and practices
contemplated in Article 10;
(d) establishment of lines of credit for the WFOE;
(e) appointing the Officers as contemplated in Section 8.1;
(f) adopting human resources policies and procedures for the WFOE;
(g) determine the scope of material or significant commitments, acts or
undertakings described in Section 7.1(c); and
(h) taking such other action as the Board of Directors deems
appropriate.
Article 8. Management Organization
8.1 Officers of the WFOE.
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(a) The Officers of the WFOE shall be (i) a General Manager, (ii) such
number of Deputy General Managers as the Board of Directors may
approve, (iii) a Chief Financial Officer, and (iv) such other
Officers as may be jointly appointed by the General Manager and the
Chief Financial Officer from time to time (each, an "Officer" and
collectively, the "Officers").
(b) Party A shall nominate the General Manager for appointment by the
Board of Directors. The Board of Directors shall appoint the General
Manager nominated by Party A (and each Party shall cause its
respective representatives on the Board of Directors to do so). No
Director shall unreasonably withhold such Director's approval of the
appointment.
(c) Party B shall nominate the Chief Financial Officer for appointment
by the Board of Directors. The Board of Directors shall appoint the
Chief Financial Officer nominated by Party B (and each Party shall
17
cause its respective representatives on the Board of Directors to do
so). No Director shall unreasonably withhold such Director's
approval of the appointment.
(d) The General Manager shall be the chief operating officer of
the WFOE and, subject to the provisions of the Articles of
Association and to the direction of the Board of Directors,
shall be responsible for the general management and control of
the affairs of the WFOE, will be responsible to organize and
conduct the day-to-day management and operations of the WFOE,
and will perform all other duties and responsibilities and,
subject to the further provisions of the Articles of
Association, enjoy all other powers delegated to him by the
Articles of Association and the power commonly incident to his
office or delegated to him by the Board of Directors, or which
are or may at any time be authorized or required by applicable
Law of China.
(e) The Deputy General Managers shall assist the General Manager in
management and, subject to the further provisions of the Articles of
Association, enjoy all other powers delegated to them by the
Articles of Association and the power commonly incident to their
offices or delegated to them by the Board of Directors, or which are
or may at any time be authorized or required by applicable Law of
China.
(f) A Financial Manager shall work under the supervision of the Chief
Financial Officer. Party B shall be entitled to recommend one
candidate for the position of Financial Manager. The Financial
Manager shall be appointed by the General Manager.
(g) The General Manager shall in the name of the WFOE, prepare reports
for submission to the Board of Directors.
(h) The General Manager and the Chief Financial Officer shall
agree on the management issues prior to their execution.
Notwithstanding the foregoing, however, for any matter
determined in good faith by the General Manager to be time
sensitive or urgent and where the General Manager and the
Chief Financial Officer are not able to agree upon the matter
in a timely fashion (but if such matter requires the approval
of the Board of Directors or the Parties, the matter has
received the required approval), including, but not limited to
items referenced in Section 8.2, the General Manager alone
shall have the power to approve/execute the matter. In that
event, the General Manager shall provide a written notice
concerning such approval/execution to the Chief Financial
Officer promptly after such approval/execution. The General
Manager and the Chief Financial Officer shall promptly advise
the Board of Directors in writing in the event the General
Manger takes any action pursuant to the preceding sentence.
(i) From time to time the Board of Directors may and, in the case
of Officers other than the General Manager and the Chief
Financial Officer, the General Manager and the Chief Financial
Officer may establish, increase, reduce or otherwise modify
responsibilities of the Officers or may create or eliminate
offices as the Board of Directors or the General Manager and
the Chief Financial Officer may consider appropriate. Any
number of offices may be held by the same Person but no
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Officer may take any action or execute any document on behalf
of the WFOE in more than one capacity. Each Officer shall
hold office until the Officer's successor is appointed or
until earlier resignation, removal or death.
(j) The General Manager and the Chief Financial Officer shall each serve
for four (4) year terms.
(k) Each Party may replace the General Manager or the Chief
Financial Officer nominated by it, at any time, subject to the
approval of the Board of Directors (provided, that each Party
shall cause its respective representatives on the Board of
Directors to approve such removal as recommended by the
nominating Party). The Board of Directors shall not, without
the approval of the nominating Party, terminate the term of
the General Manager or the Chief Financial Officer without
cause. The removal (with or without cause) of any other
department Officers must be decided by the General Manager and
the Chief Financial Officer. Any Officer may resign at any
time upon a 30-day prior written notice to the General Manager
and the human resources department. Notice of the resignation
of the General Manager, the Chief Financial Officer or the
Deputy General Managers shall be given to the Board of
Directors.
(l) In the event that the office of the General Manager is vacant
for any reason (whether as a result of removal, resignation or
otherwise), the relevant nominating Party shall be entitled to
nominate a replacement to fill such vacancy for appointment by
the Board of Directors. The Board of Directors shall appoint
the replacement General Manager so nominated by the relevant
nominating Party (and each Party shall cause its respective
Representatives on the Board of Directors to do so). No
Director shall unreasonably withhold such Director's approval
of the appointment.
(m) In the event that the office of the Chief Financial Officer is
vacant for any reason (whether as a result of removal,
resignation or otherwise), the relevant nominating Party shall
be entitled to nominate a replacement to fill such vacancy for
appointment by the Board of Directors. The Board of Directors
shall nominate the replacement so nominated by the relevant
appointing Party (and each Party shall cause its respective
Representatives on the Board of Directors to do so). No
Director shall unreasonably withhold such Director's approval
of the appointment.
(n) The decision to appoint a particular candidate as Officer shall be
based on the candidate's competence and qualifications for the
position.
8.2 Document Signatures. Subject to Section 8.1(h), all checks, deposits and
other agreements to which the WFOE is a signatory shall be jointly
approved by the General Manager and the Chief Financial Officer and shall
require the signatures of the General Manager or his/her designee, the
Chief Financial Officer or his/her designee, and a third Officer.
Notwithstanding the foregoing, but subject to Section 8.1(h), any check
must be co-signed by the General Manager and the Chief Financial Officer.
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Article 9. Labor Management
9.1 Labor Contracts. The General Manager, and the Deputy General Managers
shall prepare the outlines regarding the employment, termination, salary,
labor insurance, benefits and bonuses of the employees of the WFOE in
accordance with the labor Laws of China, shall submit them for approval by
the Board of Directors and shall determine the principles and guidelines
for the Labor Contracts to be entered into between the WFOE and each
individual employee.
9.2 Employees. Subject to Section 8.1, the WFOE shall hire employees solely on
the basis of their ability to make a positive contribution to the WFOE
owing to their skills, work attitude, productivity and willingness to
comply with the policies of the WFOE.
9.3 Trade Union. The Parties acknowledge that the staff and workers of the
WFOE shall have the right to establish a trade union in accordance with
the WFOE Law, the Labor Union Law of China and other relevant Laws of
China. Activities of the trade union shall be conducted after normal
working hours, shall not interfere with the normal operations of WFOE, and
shall conform to relevant Laws.
Article 10. Financial Matters and Foreign Exchange
10.1 Accounting and Financial Systems. Financial and accounting matters of the
WFOE shall be conducted in accordance with the Accounting System of
Enterprise and the General Financial Principles of Enterprise. The
financial and accounting systems and procedures to be adopted by the WFOE
shall be submitted to the Board of Directors for approval. Once approved
by the Board of Directors, the systems and procedures shall be filed for
the record with the appropriate finance and tax Governmental Entity.
10.2 Fiscal Year. The Fiscal Year of the WFOE shall be from January 1 of every
year until December 31 of the same year (in the year of termination, it
shall end on the date of termination), and the first Fiscal Year shall be
from the Business License Date of the WFOE until December 31 of that year.
10.3 Accrual Basis. The WFOE shall adopt the internationally recognized accrual
basis and debit and credit accounting systems for bookkeeping. All
vouchers, account books and statements prepared by the WFOE shall be
written in the Chinese language, with a translation thereof if requested
by Party B from time to time at Party B's expense.
10.4 Renminbi as Accounting Unit; Exchange Rate. The WFOE shall use RMB as the
unit for bookkeeping, as applicable. In preparing financial statements,
the WFOE shall use the medium exchange rate in the exchange market
announced by the People's Bank of China on the date specified in the
WFOE's financial policy as the conversion rate between RMB and other
currencies. Actual exchange gains or losses will be booked as gains or
losses in the year incurred. For any actual transaction of the WFOE
involving conversion between RMB and other currencies, the conversion rate
shall be the actual exchange rate in the exchange market announced by the
People's Bank of China on the date of the transaction for bookkeeping.
20
10.5 Independent Audits. Either Party shall have the right to conduct an
independent audit of the WFOE at such Party's expense.
10.6 Financial Statements. The WFOE shall prepare and deliver to each of the
Parties, separately in Chinese and English, and in accordance with Chinese
generally accepted accounting principles ("PRC Accounting Principles") for
the purpose of complying with applicable legal and accounting requirements
of China by the WFOE, and generally accepted accounting principles used in
the United States ("US Accounting Principles") for purpose of complying
with applicable legal and accounting requirements of the United States by
Party A, monthly and annual financial statements which shall include a
profit and loss statement, a balance sheet, a cash flow statement, a
budget projection for the subsequent period, and a profit distribution
recommendation (if applicable). Each monthly financial statement shall be
delivered on or before the tenth (10th) Business Day of the following
month and each annual financial statement shall be delivered no later than
the 15th day of March following the relevant Fiscal Year. Party B will use
its best efforts to cause the WFOE to assist Party A in meeting its
financial reporting requirements as a publicly traded company in the
United States, to the extent such financial reporting requirements pertain
to Party A's ownership of the WFOE. Party A shall provide training or
other assistance as necessary to appropriate staff of the WFOE in
preparing the monthly and annual financial statements in accordance with
US Accounting Principles and to meet such financial reporting
requirements.
10.7 External Annual Audits. The annual financial statements of the WFOE shall
be audited each year at the expense of the WFOE by an accountant
registered in China and thereafter be submitted to the Board of Directors
for approval. The Parties shall jointly nominate the auditors and the
auditors shall be appointed by the Board of Directors. Upon approval of
the Board of Directors, such audited financial statements shall be
delivered to each of the Parties, and shall be submitted to competent
authorities of China in accordance with the applicable Laws of China.
Upon the request by Party A, the WFOE shall provide English translations
of such audited financial statements to Party A. Either Party may appoint
an independent auditor at its own expense to carry out audits of the
accounts and all financial aspects of the WFOE and the WFOE shall provide
access to all of its records and accounts for such purpose.
10.8 Preferential Tax Treatment. The WFOE shall be entitled to any and all
applicable preferential tax treatments, reductions and exemptions
available to the WFOE, under current or future Laws, as well as favorable
tax reduction or exemption treatment given to the WFOE, by any
Governmental Entity.
10.9 Foreign Exchange. All foreign exchange matters of the WFOE shall be
handled in accordance with applicable Laws. Subject to compliance with
relevant foreign exchange Laws, foreign exchange funds in the WFOE's
foreign exchange bank accounts shall be used for the following purposes:
(a) repayment of principal and interest of foreign exchange loans
borrowed by the WFOE;
(b) payment of the purchase price of imported equipment and materials;
21
(c) payment of profits distributed to Party A or Party B which Party A
or Party B requests to be converted into foreign currency and
remitted out of China or payment of other amounts to Party A or
Party B as contemplated by the Articles of Association; and
(d) other foreign exchange payments and other purposes permitted under
applicable Law.
10.10 Account or Accounts of the WFOE. The WFOE shall maintain its funds in one
or more bank accounts in the sole name of the WFOE with banks selected by
the Board of Directors, and any withdrawals from such account or accounts
may be made only by Persons approved by the Board of Directors in
accordance with the accounting policies approved by the Board of
Directors.
10.11 Forecasting. The WFOE shall prepare and provide to both Parties monthly
forecasts of the WFOE's anticipated results of operations for the next
fiscal month, and then-current quarter. The WFOE will provide an updated
forecast for the then-current year on a quarterly basis. Party A and
Party B will be jointly responsible for training members of the WFOE's
finance and accounting staffs on preparation of these forecasts.
Article 11. Profit Distribution
11.1 Payment of Taxes. The WFOE shall pay all taxes according to the
applicable tax Laws of China.
11.2 Individual Income Tax. The employees of the WFOE shall pay all
individual income tax according to the Individual Income Tax Law of
China.
11.3 Establishment of Two Funds. The WFOE shall establish a Reserve Fund and a
Bonus and Welfare Fund (the "Two Funds"). The amount to be allocated to
such funds in each year the WFOE is profitable shall be determined by the
Board of Directors according to the business operation of the WFOE. The
amount of the Two Funds allocated shall be determined by the Board of
Directors in accordance with applicable legal requirements. The Reserve
Fund allocated annually is in any event not more than 40% of the profits
of the same fiscal year, and the Bonus and Welfare Fund allocated annually
is in any event not more than 10% of the profits of the same fiscal year.
11.4 Distribution of Profits. Subject to Sections 11.5 and 11.6, after payment
of taxes according to applicable Law and allocation to the Two Funds, the
WFOE's profits, which shall be no less than fifty percent (50%) of the
profits after payment of taxes, shall be distributed to the Parties in
proportion to their respective interests in the WFOE's registered capital
unless the Board of Directors resolves otherwise.
11.5 Board of Director Approval of Distribution Plan. Within one month from
completion of the audited financial statement for the immediately
preceding year, the General Manager, and Deputy General Managers shall
jointly prepare and submit to the Board of Directors a profit distribution
plan based on such audited financial statements. Such plan must be
approved by the Board of Directors before any profits are distributed.
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11.6 Annual Distribution. Subject to Sections 11.4 and 11.5, the WFOE shall
distribute profits once annually. There shall be no profit distribution
before recovery of losses incurred in previous Fiscal Years. Undistributed
profits of previous Fiscal Years may be distributed in the current Fiscal
Year.
11.7 Distributions in Other Currencies. Upon the request of either of the
Parties, the WFOE shall, after the deduction of relevant China taxes that
are required to be withheld by the WFOE, if any, upon such distributions
under then applicable Laws, convert the profits to be distributed to that
Party into U.S. Dollars or any other currency designated by that Party in
accordance with the then applicable exchange rates published by the
People's Bank of China and remit the actual converted amount by wire
transfer into a bank account designated by that Party in writing. Any
expenses associated with the conversion shall be borne by the WFOE.
Article 12. Confidentiality and Intellectual Property Protection
12.1 Confidentiality.
(a) Each of the Parties and the WFOE shall, and shall cause their
respective Affiliates and their respective directors,
officers, employees, agents and advisors to, (i) use the
Confidential Information of the WFOE or provided by the other
Party only for the purposes specified in the Articles of
Association, and (ii) disclose the Confidential Information
only to such of the WFOE's or such Party's (or its Affiliates)
directors, officers, employees, agents and advisors who need
to know such information for the purposes contemplated
herein. The disclosure of Confidential Information to a
Director of the WFOE solely in his or her capacity as a
Director of the WFOE, shall not, in and of itself, violate the
preceding sentence. For further clarification, nothing in the
Articles of Association shall limit or restrict the use,
practice, exploitation or disclosure by a Party or its
Affiliates of any of such Party's or Affiliate's Confidential
Information.
(b) Each Party further agrees that the Party and its Affiliates
shall not use, practice or exploit any of the Confidential
Information provided by the other Party or any of its
Affiliates or the WFOE in any manner without the prior written
consent of the Party, such Affiliate or the WFOE providing the
Confidential Information. Each Party shall further use its
reasonable best efforts to prevent any personnel of the Party
with access to the Confidential Information of the other Party
or the WFOE, for a period of one (1) year following the
termination of such personnel's employment with the Party,
from working for, providing consulting services to, or having
any interest in any company, entity or arrangement which the
Party reasonably determines to be in competition with the
Party and/or any of its Affiliates or whose services the Party
reasonably determines to be in competition with the WFOE.
(c) Each Party shall advise its Affiliates and the directors, officers,
employees and agents of the Party and its Affiliates having access
to any Confidential Information of the WFOE or the other Party (or
any of its Affiliates) of the existence and requirements of this
Section 12.1 and cause all of them to comply with the requirements
of this Section 12.1.
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(d) The confidentiality obligation in this Section 12.1 shall not
apply to information that was known to the receiving Party at
the time of disclosure by the disclosing Party, is or becomes
public knowledge through no fault of the receiving Party, is
disclosed to the receiving Party from a third Person not under
an obligation of confidence to the disclosing Party with
respect to such information and/or is independently developed
by the receiving Party without reference to the disclosed
information. The confidentiality obligations set forth in this
Article 12 shall survive the expiration or termination of the
Articles of Association for a period of five (5) years.
12.2 Intellectual Property Protection. The WFOE shall take all actions that are
necessary and appropriate, in all locations in the world where the WFOE or
any of its Affiliates conducts business or where it is otherwise prudent
to do so, to aggressively protect all intellectual property and other
rights and interests of the WFOE in and to the names and marks of J-Town
Information Technology (Shanghai) Co., Ltd. , including but not limited to
all actions that are necessary to prevent other Persons from using such
names and marks or infringing the WFOE's rights in and to the use of such
names and marks.
Article 13. Term of the WFOE
13.1 The term of the WFOE commenced on the Business License Date of the WFOE,
and shall expire on the 30th anniversary date of Business License Date
(the "Term").
13.2 If both Parties agree to, and if the Board of Directors approves, an
extension of the Term, the Parties shall submit a written application to
the original Examination and Approval Authority six (6) months prior to
the expiration of the original Term. The extension shall become valid upon
the approval of the Examination and Approval Authority and the WFOE shall
comply with the amendment registration procedures at the original
Registration Administration Organ and the Term shall thereupon be so
extended.
Article 14. Termination and Liquidation
14.1 Prior to the expiration of the Term, a Party and/or the Parties may
terminate this Articles of Association and the WFOE as follows (but
subject to Section 14.3):
(a) By written instrument of termination executed by both of the
Parties;
(b) By written notice of termination by a Party given to the other Party
in the event that a final determination is made by a Governmental
Entity or court with competent jurisdiction over the matter that it
is unlawful for the WFOE or its business to be carried on or any
substantially material provision of this Articles of Association
shall be invalid, unlawful or unenforceable;
(c) By written notice of termination by a Party given to the other Party
in the event that all or a significant part of the assets of the
WFOE are expropriated by any Governmental Entity;
(d) By written notice of termination by a Party given to the other Party
at or after the occurrence of a Bankruptcy Event with respect to the
WFOE if the occurrence of the Bankruptcy Event with respect to the
24
WFOE would have a material adverse effect on the business, financial
condition or results of operations of the WFOE;
(e) By written notice of termination by a Party given to the other Party
in the event that a Force Majeure Event resulting in a material
adverse effect on the business, financial condition or results of
operations of the WFOE continues for a consecutive period of one
hundred and eighty (180) days;
(f) By written notice of termination by a Party given to the other Party
at or after the entry of a decree of judicial dissolution of the
WFOE under applicable Law;
(g) By written notice of termination by a Party given to the other
Party at or after the sale, abandonment or other disposition
by the WFOE of all or substantially all of its assets,
business or properties, provided that, for clarification, the
pledge, hypothecation or encumbrance of any or all of the
WFOE's assets, business or properties shall not, in itself,
constitute a sale, abandonment or other disposition for the
purpose of this Section 14.1(g);
(h) By written notice of termination by a Party given to the other
Party in the event of a continuing material breach by the
other Party of any material provision of this Articles of
Association, if all of the following applies: (1) the breach
is not cured within thirty (30) days after the receipt by the
breaching Party of written determination of the court with
competent jurisdiction or an arbitrator to the effect that the
Party has breached any such material provision or, if the
breach is not reasonably capable of being cured within such
thirty (30) days so long as the breaching Party continues to
use good faith and reasonable efforts to effectuate the cure
but in any event not longer than one-hundred eighty (180) days
of receipt of such written determination, (2) the breach is
not compensable solely by the payment of money damages, (3)
the WFOE or a Party has become subject to criminal liability
or suffered a material adverse effect on its reputation,
business, financial condition or results of operations as a
result of the breach or the terminating Party has suffered a
material adverse effect on its financial condition and results
of operations taken as a whole as a result of the breach
(provided that this clause (3) shall not apply to a breach of
Article 12 of this Articles of Association); or
(i) By written notice of termination by a Party given to the other
Party, if the WFOE suffers significant losses during any fiscal year
for a reason other than the happening of a Force Majeure Event; for
purposes of this Section, "significant losses" means aggregate
losses in a fiscal year amounting to twenty-five percent (25%) or
more of the amount of the registered capital of the WFOE.
In the event that a Party elects to terminate this Articles of Association
and the WFOE pursuant to this Section 14.1, the Parties shall cause their
respective representatives on the Board of Directors to unanimously
approve the termination of this Articles of Association and the WFOE as
promptly as practical after such election.
25
14.2 Except as provided in Section 14.1 above, and except only as may be
required under applicable Law, no other act or occurrence shall cause a
termination of this Articles of Association or the WFOE, it being the
intention of the Parties that any other act or occurrence that would
otherwise cause such a termination be waived by the Parties to the fullest
extent permitted under applicable Law.
14.3 Upon the expiration of the Term, or the earlier termination of the WFOE
due to any situation described in Section 14.1, upon the unanimous
resolution of the Board of Directors and the approval of the original
Examination and Approval Authority, the liquidation procedures shall
commence according to the Measures for the Liquidation of Foreign Invested
Enterprises and other applicable Laws of China. The Parties shall cause
their respective representatives on the Board of Directors to unanimously
approve the termination and liquidation of the WFOE as promptly as
practical after the occurrence of one of the events specified in Section
14.1 hereof but in any event not later than 30 days after any such
occurrence (unless the Parties shall otherwise agree in writing).
14.4 Prior to the sale of any assets of the WFOE, each Party shall have the
first priority right to a return of the following:
(a) all intellectual property and rights and know-how; and
(b) all installations, machinery, equipment, contract rights and other
items of a proprietary nature,
Such returned items shall be credited toward each Party's liquidation
distribution at the then fair market value of said items, or if the
liquidation distribution to which such Party would have been entitled is
insufficient to cover the value of said items, then such Party shall be
entitled to purchase them at their then fair market value.
14.5 Upon completion of liquidation of the WFOE, the Liquidation Committee
shall submit a liquidation proceedings wind-up report to the Board of
Directors for approval and submission to the Examination and Approval
Authority and carry out necessary procedures to cancel the WFOE's Business
License, tax registration, customs registration and other necessary
administrative formalities.
Article 15. Legal Compliance
15.1 The WFOE shall comply with all Laws of China and any other applicable
jurisdictions.
15.2 With the understanding that Party A is required to comply with certain
U.S. federal and state legal and regulatory requirements and requirements
of applicable stock exchanges on which shares of the Party A are listed,
the WFOE shall, and shall cause its appropriate financial and other
Officers and managers, and its external auditors and accountants to,
provide such financial, accounting, and other related information and
documents and take such actions (including executing required
certifications and other documents) as requested by Party A to enable
Party A and its Affiliates to comply with all such requirements.
26
Article 16. Imports and Exports
16.1 In the conduct of its business, the WFOE shall comply with, all applicable
import and export control laws and regulations of all applicable
jurisdictions, including obtaining all required import licenses, customs
clearances and approvals.
Article 17. Language, Effectiveness and Miscellaneous
17.1 Headings. All headings in the Articles of Association are merely
for the purpose of easy reference and have no legal meaning.
17.2 Language. The Articles of Association shall be written in Chinese and
English, and in case of any discrepancy between the two language versions,
the Chinese version shall prevail.
17.3 Effectiveness of the Articles of Association. The Articles of Association
shall become effective upon its approval by the Examination and Approval
Authority.
17.4 Amendment of the Articles of Association. Amendment of the Articles of
Association requires a written agreement signed by both Parties and
approval of the original Examination and Approval Authority before
becoming effective.
17.5 Governing Law. The Articles of Association shall be governed by
the applicable Laws of China.
17.6 Severability. Each and every section, paragraph, sentence, term and
provision of the Articles of Association shall be considered several in
that, in the event a court or arbitrator finds any section, paragraph,
sentence, term or provision to be invalid or unenforceable, the validity
and enforceability, operation, or effect of the remaining sections,
paragraphs, sentences, terms, and provisions shall not be affected, and
the Articles of Association shall be construed in all respects as if the
invalid or unenforceable matter had been omitted.
17.7 Counterparts. The Articles of Association has eight (8) counterparts. Each
executed counterpart shall be deemed to be an original. All executed
counterparts taken together shall be one and the same agreement.
[the remainder of this page is intentionally left blank]
27
The Articles of Association is executed by the authorized representatives
of both Parties in Shanghai on the Execution Date.
Party A: Party B:
T2CN HOLDING LIMITED JC ENTERTAINMENT CORPORATEION
Signature: __________________ Signature: __________________
Name: Tao Feng Name: Yang Shin Kim
Title: Chairman Title: Chairman
Nationality: PRC Nationality: Korea
EXHIBIT 2
T2CN Holding Limited
Warrant to Purchase Common Shares
THIS WARRANT ("Warrant") is issued pursuant to, and is subject to the terms
and conditions of, the Share Subscription Agreement. This Warrant certifies that
JC Entertainment Corp., a corporation organized and existing under the laws of
the Republic of Korea with its registered address at 4th Floor, Rosedale
Building, #724 Suseo-Dong, Kangnam-Ku, Seoul 135-885, Korea (the "Holder"), is
entitled to purchase from T2CN Holding Limited, a limited liability company
organized and existing under the laws of the British Virgin Islands with its
registered address at the offices of S-HR&M Financial Services Limited of
Kingston Chambers, P.O. Box 173, Road Town, Tortola, British Virgin Island (the
"Company"), 3,000,000 fully paid and non-assessable Common Shares of the Company
(the "Warrant Shares"), having the rights and benefits conferred on the Common
Shares by the Company's Articles of Association, at the subscription price at
par value of US$0.01 for each Common Share or US$20,000 in total ("Share
Purchase Price").
Upon and subject to each occurrence of the triggering event as provided in
Article 1 below, this Warrant shall be exercisable for 1,000,000 Warrant Shares,
at any time during the 30-day period from the date of issuance by the Company of
the monthly operation report of the Localized Game, evidencing such occurrence
("Valid Period"), upon surrender to the Company at its principal office (or at
such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Form of Subscription attached hereto ("Form
of Subscription") duly filled in and signed. Unless otherwise agreed between the
Parties, JCE may choose to pay the consideration for the Common Shares under
this Warrant by way of providing various consulting and technical services to
the Company and/or its affiliates for the purpose of benefiting the Company and
JCE's joint operation of the Localized Game in the PRC, in which case the
Company's board of directors shall adopt relevant resolutions acknowledging and
accepting such payment as due and equitable consideration for the relevant
Common Shares to be acquired by JCE under this Warrant. The Share Purchase Price
and the number of Warrant Shares purchasable hereunder are subject to adjustment
as provided in this Warrant.
In this Warrant, unless the context requires or provides otherwise:
"Concurrent Users" means the end users of the Localized Game who initiate
their concurrent use of the Localized Game within the PRC;
"Localized Game" means the internet game localized from the game named "Free
Style" (including any and all versions thereof), of which the exclusive rights
to manufacture, market, promote, use, distribute, publish and sell have been
licensed to T2 Entertainment under the Software License Agreement entered into
between the Holder and T2 Entertainment dated August 4, 2005;
"Number of Concurrent Users" means the maximum number of Concurrent Users at
a specific point in time, not the average number of Concurrent Users during a
consecutive term;
"PRC" means the People's Republic of China (for the purpose of this
Agreement, excluding Hong Kong Special Administrative Region, Macau Special
Administrative Region and Taiwan);
"T2 Entertainment" means Shanghai T2 Entertainment Co., Ltd., a limited
liability company incorporated under the laws of the PRC with its registered
address at 5th Floor 88 Qinjiang Road, Xuhui District, Shanghai, PRC (200233).
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares. The exercise of
this Warrant shall be subject to the following conditions: (1) the Holder may
not exercise its right under this Warrant to subscribe for 1,000,000 Common
Shares unless and until the Number of Concurrent Users of the Localized Game in
the PRC has reached 100,000 prior to and/or by the end of August 4, 2007; (2)
the Holder may not exercise its right under this Warrant to subscribe for an
additional 1,000,000 Common Shares unless and until the Number of Concurrent
Users of the Localized Game in the PRC has reached 200,000 prior to and/or by
the end of August 4, 2007; and (3) the Holder may not exercise its right under
this Warrant to subscribe for the remaining 1,000,000 Common Shares unless and
until the Number of Concurrent Users of the Localized Game in the PRC has
reached 300,000 prior to and/or by the end of August 4, 2007. Notwithstanding
the above conditions, if in respect of any Valid Period the Holder expects that
the above conditions cannot be met, and prior to the expiration of such Valid
Period, the Holder submits to the Company a request to exercise the Warrant and
reasonable evidence proving that such failure to meet the conditions is caused
solely due to the quality or technical problems of the Company's servers or
other facilities and without any default on the part of the Holder under this
Warrant or any default on the party of the Holder under the Software License
Agreement entered into between the Holder and T2 Entertainment dated August 4,
2005, the Holder shall still be entitled to subscribe for the Warrant Shares
available for such Valid Period within five (5) days after the expiration of
such Valid Period. This Warrant shall be null and void for the Common Shares not
exercised hereunder immediately upon the stoppage of T2 Entertainment operating
the Localized Game due to breach by the Holder of the Software License Agreement
in connection with the Localized Game entered into between the Holder and T2
Entertainment dated August 4, 2005. The Company agrees that the Common Shares to
be purchased under this Warrant shall be and are deemed to be issued to the
Holder hereof (or to the nominee of the Holder) as the recorded owner of such
shares as of the close of business on the date on which this Warrant shall have
been surrendered, properly endorsed, and the completed, executed Form of
Subscription shall have been delivered, and payment shall have been made for
such shares, subject to the entry of such shares in the register of members of
2
the Company, which the Company shall undertake to do immediately upon
presentation of the Form of Subscription. Certificates for the Common Shares so
purchased shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. Each share certificate so delivered shall be in
such denominations of Common Shares as may be requested by the Holder hereof and
shall be registered in the name of the Holder or in the name of the Holder's
nominee. In case of a purchase of less than all the Warrant Shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new warrant or warrants of like tenor for the balance of the
shares purchasable under the Warrant, surrendered upon such purchase to the
Holder hereof within a reasonable time.
2. Shares to be Fully Paid; Reservation of Shares. The Company covenants
and agrees that Common Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and non assessable, and free from all preemptive
rights of any nature and free of all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved for the purpose of
issuing or transferring upon exercise of the subscription rights evidenced by
this Warrant, a sufficient number of shares of authorized but unissued Common
Shares, to provide for the exercise of the rights represented by this Warrant
when and as required. The Company will take all such action as may be necessary
to assure that such Common Shares may be issued as provided herein without
violation of any applicable law or regulation.
3. Adjustment of Share Purchase Price and Number of Warrant Shares. The
Share Purchase Price and the number of Warrant Shares purchasable upon the
exercise of this Warrant shall be subject to adjustment from time to time upon
the occurrence of any of the events described in this Article 3. Upon each
adjustment of the Share Purchase Price, the Holder of this Warrant shall
thereafter be entitled to purchase, at the Share Purchase Price resulting from
such adjustment, the number of shares obtained by multiplying the Share Purchase
Price in effect immediately prior to such adjustment by the number of shares
Purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Share Purchase Price resulting from such adjustment.
3.1 Subdivision or Combination of Shares. In case the Company shall at
any time subdivide its outstanding Common Shares into a greater number of
shares, the Share Purchase Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in case the outstanding Common
Shares of the Company shall be combined into a smaller number of shares, the
Share Purchase Price in effect immediately prior to such combination shall be
proportionately increased.
3.2 Reclassification. If any reclassification of the share capital of the
Company shall be effected in such a way that holders of Common Shares shall be
entitled to receive shares, securities, or other assets or property, then, as a
3
condition of such reclassification, lawful and adequate provisions shall be made
whereby the Holder hereof shall thereafter have the right to purchase and
receive (in lieu of the Common Shares of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby)
such shares, securities or other assets or property as may be issued or payable
with respect to or in exchange for the number of outstanding shares of such
Common Shares equal to the number of shares immediately theretofore purchasable
and receivable upon the exercise of the rights represented hereby. In any
reclassification described above, appropriate provision shall be made with
respect to the rights and interests of the Holder of this Warrant to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Share Purchase Price and of the number of shares purchasable
and receivable upon the exercise of this Warrant) shall thereafter be
applicable, in relation to any shares, securities or assets thereafter
deliverable upon the exercise hereof.
3.3 Notice of Adjustment. Upon any adjustment of the Share Purchase Price
or any increase or decrease in the number of shares purchasable upon the
exercise of this Warrant, the Company shall give written notice thereof, by
first class mail postage prepaid, addressed to the registered Holder of this
Warrant at the address of the Holder as shown on the books of the Company. The
notice shall be signed by the Company's Chief Financial Officer and shall state
the Share Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
3.4 Other Notices. If at any time:
--------------
(1) the Company shall declare any cash dividend upon its Common
Shares;
(2) there shall be any capital reorganization or reclassification of
the share capital of the Company; or consolidation or merger of
the Company with, or sale of all or substantially all of its
assets to, another corporation;
(3) the Company shall conduct an initial public offering ("IPO"); or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, at any one or more of the abovementioned occurrences, the Company shall
give, by first class mail, postage prepaid, addressed to the Holder of this
Warrant at the address of the Holder as shown on the books of the Company, (a)
at least fifteen (15) days prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such dividend or for
determining right to vote in respect of any such IPO, reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, and (b) in the case of any such IPO, reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
4
winding-up, at least fifteen (15) days prior written notice of the date when the
same shall take place; provided, however, that the Holder shall make a best
efforts attempt to respond to such notice as early as possible after the receipt
thereof. Any notice given in accordance with the foregoing clause (a) shall also
specify, in the case of any such dividend, the date on which the Holder shall be
entitled thereto. Any notice given in accordance with the foregoing clause (b)
shall also specify the date on which the Holder shall be entitled to exchange
the Common Shares, for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up or conversion, as the case may be.
4. No Voting or Dividend Right. Nothing contained in this Warrant shall be
construed as conferring upon the Holder hereof the right to vote or to consent
to receive notice as a shareholder of the Company or any other matters or any
rights whatsoever as a shareholder of the Company. No dividends or interest
shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised.
5. Transfer. It is expressly acknowledged that the Warrant Shares are not
subject to any provisions in relation to any pre-emptive right of any party.
The Holder may not transfer the Warrant, without obtaining the prior written
consent of the Company, to any third parties (including JCE's subsidiaries,
affiliates or other entities controlled by the Holder). With respect to any
offer, sale or other disposition of this Warrant or any Warrant Shares, in each
case prior to registration of such Warrant or Warrant Shares, the Holder hereof,
and each subsequent holder of this Warrant, agree to give written notice to the
Company prior thereto, describing in sufficient detail the manner thereof,
together with a written opinion of the Holder's counsel, if reasonably requested
by the Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Securities Act of
1933, as amended (the "Securities Act") or any U.S. federal or state law then in
effect) of this Warrant or such Warrant Shares and indicating whether or not
under the Securities Act certificates for this Warrant or such Warrant Shares to
be sold or otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such laws.
Promptly upon receiving such written notice and reasonably satisfactory opinion,
if so requested, the Company, as promptly as practicable, shall notify the
Holder that the Holder may sell or otherwise dispose of this Warrant or the
Warrant Shares, all in accordance with the terms of the notice delivered to the
Company. Notwithstanding the foregoing, at any time that the Warrant Shares are
publicly traded, such Warrant Shares may, as to such U.S. federal laws, be
offered, sold or otherwise disposed of in accordance with Rule 144 under the
Act, provided that the Company shall have been furnished with such information
as the Company and its counsel may reasonably request to provide assurance that
the provisions of Rule 144 have been satisfied. To the extent required to comply
with the provisions of applicable law, each certificate representing this
Warrant or the Warrant Shares transferred shall bear a legend as to any
applicable restrictions on transferability which are required in order to ensure
compliance with applicable laws, unless in the aforesaid opinion of counsel for
5
the Holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
All references in the preceding paragraph to U.S. securities law are made on
an as-applicable basis.
6. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
7. Notice. Any notice, request or other document required or permitted to be
given or delivered to the Holder hereof or to the Company shall be delivered or
shall be sent by certified mail, postage prepaid, to the Holder at its address
as shown on the books of the Company, or to the Company at the address indicated
in the first paragraph of this Warrant or such other address as either may from
time to time provide to the other.
8. Descriptive Headings and Governing Law. The description headings of the
several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall in all
respects be construed and enforced in accordance with and governed by the laws
of Singapore, without giving effect to any choice of law rule that would cause
the application of the laws of any jurisdiction other than the laws of Singapore
to the rights and duties of the Parties. In the event any dispute arises between
the Parties, or any of them, which cannot amicably be resolved, such dispute
shall be submitted to the China International Economic and Trade Arbitration
Commission ("CIETAC") in Shanghai for arbitration in accordance with its then
effective arbitration rules.
9. Lost Warrants. The Company represents and warrants to the Holder hereof
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction, or mutilation of this Warrant and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity satisfactory to
the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant, the Company, at its expense, will make and deliver
a new Warrant, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant.
10.Fractional Shares. No fractional shares shall be issued upon exercise of
this Warrant. The Company shall, in lieu of issuing any fractional share, pay to
the Holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Share Purchase Price.
11. Representations and Warranties of the Holder.
11.1 Purchase for Own Account. The Holder represents that it is
acquiring the Warrant, and that the Common Shares issuable upon exercise
of the Warrant (collectively, the "Securities") will be acquired, for
investment for the Holder's own account, not as nominee or agent, and not
6
with a view to the public resale or distribution thereof, and the Holder
has no present intention of selling, granting any participation in, or
otherwise distributing the same. If not an individual, the Holder also
represents that such Holder has not been formed for the specific purpose
of acquiring the Securities.
11.2 Information and Sophistication. The Holder understands that the
purchase of the Securities involves substantial risk. The Holder (a) has
experience as an investor in securities of companies in the development
stage and acknowledges that the Holder can bear the economic risk of the
Holder's investment in the Securities and has such knowledge and
experience in financial or business matters that the Holder is capable of
evaluating the merits and risks of this investment in the Securities and
protecting its own interests in connection with this investment and/or (b)
has a preexisting personal or business relationship with the Company and
certain of its officers, directors or controlling persons of a nature and
duration that enables the Holder to be aware of the character, business
acumen and financial circumstances of such persons.
7
IN WITNESS WHEREOF, the Company and the Holder, by their respective
officers, have caused this Warrant to be duly executed, thereunto duly
authorized on , 2005.
For and on behalf of
T2CN Holding Limited
SIGNED by ___________________
Name:
Position:
COMPANY SEAL
[ ]
For and on behalf of JC Entertainment Corp.
SIGNED by ___________________
Name:
Position:
COMPANY SEAL
8
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: T2CN Holding Limited
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and
to purchase thereunder, ___________________(__________) Common Shares of
T2CN Holding Limited, a limited liability company organized and existing
under the laws of the British Virgin Islands with its registered address
at the offices of S-HR&M Financial Services Limited of Kingston Chambers,
P.O. Box 173, Road Town, Tortola, British Virgin Island (the "Company"),
in consideration of the provision by the Holder of various consulting and
technical services which are valued at _________________________Dollars
(US$____________) at a subscription price of
_________________________Dollars (US$____________) per share to the
Company and its affiliates in relation to the operation of the Localized
Game in the PRC, and requests that the certificates for such shares be
issued in the name of and delivered to the Holder,
__________________________________, whose address is
_________________.
The undersigned represents that it is acquiring such Common Shares for
investment for its own account and not with a view to, or for sale in connection
with, any distribution thereof, and in order to induce the issuance of such
Common Shares makes the representation statement attached hereto.
DATED: ____________________
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(Signature must conform in all respects to the name of the Holder, as
specified on the face of the Warrant)