Exhibit 10.1
Joint-venture Contract
Of
Baoding Pascali Broadcasting Cable TV
Integrated Information Networking
Company Limited
between
Baoding Pascali Multi-media Transmission Networking Co., Ltd.
and
Solar Touch Limited
July, 1999
Baoding City, Heibei Province, China
CONTENT
CHAPTER 1 GENERAL PROVISIONS 4
CHAPTER 2 THE PARTIES TO THE JOINT VENTURE 4
CHAPTER 3 THE COMPANY 5
3.1 Incorporation
3.2 Joint Venture Information
3.3 Obedience of Law
3.4 Form of Organization
CHAPTER 4 OBJECTIVE, SCOPE AND SCALE OF BUSINESS 6
4.1 Objective of Business
4.2 Scope of Business
4.3 Scale of Business
CHAPTER 5 TOTAL AMOUNT OF INVESTMENT AND 6
REGISTERED CAPITAL
5.1 Total Investment
5.2 Registered Capital
5.3 Methods of Contribution
5.4 Schedule of Contribution
5.5 Alteration of Registered Capital
CHAPTER 6 RESPONSIBILITIES OF EACH PARTY TO 8
THE JOINT VENTURE
6.1 Responsibilities of Party A
6.2 Responsibilities of Party B
CHAPTER 7 BOARD OF DIRECTORS 9
7.1 Establishment
7.2 Composition, Appointment and Replacement
of Directors
7.3 Approval of Resolution
7.4 Legal Representative
7.5 Meeting of the Board
7.6 Annual General Meeting
7.7 Authorized Representative
7.8 Notice of Meeting
7.9 Reminder of Meeting
7.10 Director's Fees and Expenses of Meeting
CHAPTER 8 OPERATION AND MANAGEMENT 12
8.1 Reporting System of General Manager
8.2 General Manager and Departments
8.3 Dismissal
CHAPTER 9 PREPARATORY ISSUES 13
9.1 Amortization
9.2 Asset Evaluation
9.3 Profit Distribution
CHAPTER 10 LABOR MANAGEMENT 13
10.1 Employment Contract
10.2 Remuneration Package
CHAPTER 11 TAXATION, FINANCE AND ACCOUNTING 13
11.1 Tax Payment by Company
11.2 Tax Payment by Personnel
11.3 Reserve
11.4 Accounting Year
11.5 Audit
11.6 Financial Report
CHAPTER 12 TERM OF JOINT VENTURE 15
CHAPTER 13 PROPERTIES UPON EXPIRY 15
OF JOINT VENTURE
CHAPTER 14 INSURANCE 15
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CHAPTER 15 CONFIDENTIALITY 15
15.1 Definition
15.2 Scope of Confidentiality
CHAPTER 16 AMENDMENT & TERMINATION 16
OF THE CONTRACT
16.1 Amendment
16.2 Termination
16.3 Compensation
CHAPTER 17 LIABILITIES FOR BREACH OF THE CONTRACT 17
17.1 Breaching Events
17.2 Liabilities
CHAPTER 18 FORCE MAJEURE 17
CHAPTER 19 APPLICABLE LAW 18
CHAPTER 20 SETTLEMENT OF DISPUTES 18
20.1 Arbitration
20.2 Continuance of the Contract
CHAPTER 21 LANGUAGE OF THE CONTRACT 18
CHAPTER 22 EFFECTIVENESS AND MISCELLANEOUS 18
22.1 Effectiveness
22.2 Approval
22.3 Notices
22.4 Signing
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CHAPTER 1 GENERAL PROVISIONS
In accordance with the "Law of the People's Republic of China on Chinese-Foreign
Equity Joint Venture" (the "Equity Joint Venture Law") and the "Company Law of
the People's Republic of China" (the "Company Law") and other relevant Chinese
laws (the "Chinese laws") and regulations of the People's Republic of China
("China"), Baoding Pascali Multi-media Transmission Networking Co., Ltd. and
Solar Touch Limited, adopting the principle of equality and mutual benefits,
through friendly consultation and discussion, have entered into an agreement
("the Contract") for the establishment of a joint venture named Baoding Pascali
Broadcasting Cable TV Integrated Information Networking Co. Ltd. ("the Company")
in Baoding City, Hebei Province, China.
CHAPTER 2 THE PARTIES TO THE JOINT VENTURE
2.1 THE PARTIES TO THE JOINT VENTURE
The parties to the joint venture and their legal representative or
company representative are as follows:
(1) Party A: Baoding Pascali Multi-media Transmission
Networking Co., Ltd..
Registration Place: Baoding City, Hebei Province, China
Legal Representative: TAN Zu-ping
Nationality: China
Position: Chairman
Legal Address: Block D, Chuang Ye Centre, State Gaoxin
District, Baoding, Heibei Province, China
(2) Party B: Solar Touch Limited
Registration Place: British Virgin Island
Legal Representative: ZHAO Bing
Nationality: China
Position: Chairman
Legal Address: Suite 1101-02 Asia Pacific Finance Tower,
Citibank Plaza, 3 Garden Road, Central,
Hong Kong
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CHAPTER 3 THE COMPANY
3.1 INCORPORATION
Party A and Party B agrees to establish the joint venture Baoding
Pascali Broadcasting Cable TV and Integrated Information Networking
Co., Ltd. in accordance with the Equity Joint Venture Law and other
relevant company laws of the People `s Republic of China. The date of
issue of the business license shall be the date of the establishment of
the Company (the "Establishment Day").
3.2 JOINT VENTURE INFORMATION
The legal name and address of the joint venture are:
Name in Chinese:
Name in English: Baoding Pascali Broadcasting Cable TV Integrated
Information Networking Co. Ltd.
Legal Address: High and New Technology Development Zone, Baoding
City, Hebei Province, China
3.3 OBEDIENCE OF LAWS
All activities of the Company in China shall follow the published laws
and regulations of China (generally called "Chinese laws"). All rights
and interests of the Company are protected by the Chinese laws.
3.4 FORM OF ORGANIZATION
The Company is a limited liability company. When one party has
completely contributed its own amount of the Company's registered
capital stipulated in the Contract, the party shall not be demanded to
further provide any fund by funding, loans, guarantees or other kinds
of financing to the Company or for the Company. The Company shall be
responsible for its own liabilities or other obligations with its own
assets. Both parties do not take any responsibility for any individual
or entity for the reason of the Company's own liabilities or
obligations. The profit and interest of the Company are distributed in
proportion to the respective capital contribution from the parties
("contributing proportion"). The parties take the loss risk of the
Company with the limitation of the respective capital contribution of
each party.
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CHAPTER 4 OBJECTIVE, SCOPE AND SCALE OF BUSINESS
4.1 OBJECTIVE OF BUSINESS
The objective of the Company is to implement advanced scientific
management skills with the advantage of advanced multi-media
transmission network as well as assure the shareholders of a reasonable
return from the social and economic benefit through first class
services.
4.2 SCOPE OF BUSINESS
The Business scope of the Company includes: development and
construction of broadband interactive multimedia information network,
telecom network products, audio transmission, image transmission, data
transmission; and development of repair techniques of cable TV
equipment and electric appliances. Foreign party is not allowed to
touch on broadcasting which shall be operated solely by the Chinese
party.
4.3 SCALE OF BUSINESS
The scale is the construction of an interactive optical fiber cable
network eventually linked to the distribution system of the
subscribers. Backbone ring-network's length is about 700 km whilst
village cables linked from county to village (or with over 500
subscribers) are about 3000 km.
CHAPTER 5 TOTAL AMOUNT OF INVESTMENT
AND REGISTERED CAPITAL
5.1 TOTAL AMOUNT OF INVESTMENT
The total amount of investment of the joint venture is One Hundred
Twenty Two Million Forty Hundred and Twenty Five Thousand in Renminbi
(RMB122,425,000; equals to USD14,800,000).
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5.2 REGISTERED CAPITAL
The registered capital is Seventy Million in Renminbi (RMB70,000,000;
equals to USD8,460,000). In the registered capital:
(1) The contribution of Party A is Thirty Five Million and Seven
Hundred Thousand in Renminbi (RMB35,700,000; equals to
USD4,310,000), being 51% of the registered capital.
(2) The contribution of Party B is Thirty Four Million and Three
Hundred Thousand in Renminbi (RMB34,300,000; equals to
USD4,145,000), being 49% of the registered capital.
5.3 METHODS OF CONTRIBUTION
(1) The parties shall make the contribution to the Company in the
following methods:
(a) Party A: Network and related equipment worth Twenty
One Million and Seven Hundred Thousand in Renminbi
(RMB21,700,000; equals to USD2,622,600); intangible
asset (franchise, goodwill) worth Fourteen Million in
Renminbi (RMB14,000,000; equals to USD1,692000);
(b) Party B: In cash of Four Million and One Hundred and
Fourteen Thousand in US Dollars (USD4,140,000; equals
to RMB500,350)
(2) The difference between the total investment and the registered
capital will be loaned by the shareholders (RMB30,000,000 in
proportion to the investment of Party A and B) and bank or
other financial institutes (RMB22,420,000);
5.4 SCHEDULE OF CONTRIBUTION
(1) RMB70m will be paid by two instalments by both parties in
proportion to their contributions one month after the
establishment of the joint venture.
5.5 ALTERATION OF REGISTERED CAPITAL
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The registered capital of the Company can be altered or transferred by
either party only after ALL of the following conditions are met:
(1) Each has consented to the alteration or transfer in writing;
(2) The Board has unanimously passed the alteration or transfer;
and
(3) The approving authorities has approved the alteration or
transfer in writing.
Either party has the priority in purchasing the capital contributed by
the other party.
CHAPTER 6 RESPONSIBILITIES OF EACH PARTY TO
THE JOINT VENTURE
6.1 RESPONSIBILITIES OF PARTY A
Beside the obligations under the Contract, Party A still has the
following responsibilities:
(1) Responsible for the establishment of the joint venture,
getting all the official approvals related to the
establishment of the joint venture from the concerned
authorities in China, and transact all registrations related
to the establishment of the joint venture. Party A also
obtains all licenses, permits, approvals and cooperation of
the concerned authorities in China, all of those are necessary
for operating the joint venture;
(2) Assist Party B in registering foreign exchange of RMB;
(3) Make contribution in full on schedule in terms of unsecured
capital without any liabilities or contingent liabilities;
(4) Ensure the Company of the right of operation, development and
profit gain, as well as obtaining government approvals.
(5) Assist with the implementation of the favorable terms and the
approval of documents by the approving authorities in
accordance with the favorable terms of Hebei Province and
Baoding State High and New Technology Industry Development
Zone of the State.
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(6) Party A should not engage in businesses that are similar and
competitive to that of the Company.
6.2 RESPONSIBILITIES OF PARTY B
Beside the obligations under the Contract, Party B still has the
following responsibilities:
(1) Make the contribution in full in cash on schedule in
accordance with clause 5.2 to 5.4;
(2) Provide on schedule all credentials and relevant documents for
the establishment of the Company;
(3) Conduct seriously joint venture documents like the Contract,
Articles of association, assets evaluation,
CHAPTER 7 BOARD OF DIRECTORS
7.1 ESTABLISHMENT
The Board is established on the date of the Establishment Day.
7.2 COMPOSITION, APPOINTMENT AND REPLACEMENT OF DIRECTORS
(1) The Board comprises 7 directors. Party A appoints 4 directors
and Party B appoints 3 directors. Party A appoints the
Chairman of the Board whilst Party B appoints the
Vice-Chairman.
(2) The term of the member of the Board is four (4) years. The
directors appointed by the respective party can be appointed
for the next term.
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7.3 APPROVAL OF RESOLUTION
The Board is the highest authority of the Company. The Board executes
the authority of making policy and leading the Company through passing
the resolutions. Following resolutions must be passed unanimously by
the Board:-
1. Amendment of Article of Association;
2. Winding-up of the Company;
3. Allocation of registered capital;
4. Transfer of the shares of the Company by one or more parties;
5. Transfer of the shares of the Company as security by one or
more parties;
6. Mergers or divestitures;
7. Transfer of assets to the Creditor as security
7.4 LEGAL REPRESENTATIVE
The Chairman of the Board is the legal representative of the Company.
Should the Chairman be unable to exercise his responsibilities, the
Vice-Chairman shall act on the Chairman's behalf. Should the
Vice-Chairman also be unable to exercise his responsibilities, one
director shall be elected by the Board to take the duties.
7.5 MEETING OF THE BOARD
(1) The Board shall convene at least one meeting every year at the
registered office or a designated venue. The Chairman shall
chair the meeting of the Board. Should three or more directors
submit the written proposal to the Chairman or the
Vice-Chairman of the Board asking for discussing the described
matters, the Chairman or the Vice-Chairman who received the
proposal shall convene a temporary meeting of the Board to
discuss such matters.
(2) Written notice of meeting stating place, time and agenda
should be dispatched to the Board members at least twenty (20)
days before the date of meeting.
(3) Minutes of meeting should be filed.
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7.6 ANNUAL GENERAL MEETING
(1) For officially convening, the quorum for Annual Board meeting
or Temporary meeting shall be at least five (5) members
present in person or by authorized representative. Each
director has one vote.
7.7 AUTHORIZED REPRESENTATIVE
Should any director be unable to attend the meeting of the Board to
exercise his right or perform his duty, the director can authorize a
representative in writing to attend, vote and perform his duty.
7.8 NOTICE OF MEETING
Should the Board fails to pass any major resolutions regarding legal
proceedings, regulations or significant terms of this Contract owing to
the fact that neither are the directors of one or more parties able to
attend the meeting nor do they authorize a representative, then other
parties shall send reminder of meeting to the absent directors and the
parties who authorize the absent directors to ensure that they attend
the meeting on schedule.
7.9 REMINDER OF MEETING
The reminder stated in 7.8 should be sent out by courier at least
thirty (30) days before the date of meeting stating clearly that the
director should reply in writing within twenty (20) days from the date
of receipt of the reminder whether he/she is able to attend the
meeting. If the director fails to reply, then he/she is considered as
abandoning. The directors authorized by both parties can convene a
Special Board meeting. Even if there is insufficient quorum,
resolutions can still be passed through a unanimous consent of the
Special Board meeting.
7.10 DIRECTOR'S FEES AND EXPENSES OF MEETING
Directors not engaged in the management of the Company should not
receive any Director's fees from the Company except with prior consent
of the Board. The decision as to the remuneration for non-executive
directors will be made by the Board. The Company shall be responsible
for all expenditure of transportation, staying, living and local
transportation of the directors who attend the meeting of the Board.
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CHAPTER 8 OPERATION AND MANAGEMENT
8.1 REPORTING SYSTEM OF GENERAL MANAGER
The Company shall establish a joint managerial institution which shall
be responsible for its daily operation and management. A General
Manager proposed by Party A shall be in charge of the joint managerial
institution.
There will be also two (2) Assistant General Manager proposed by Party
A and B respectively. Both general manager and assistant general
managers are appointed by the Board on a 3-year renewable term.
8.2 GENERAL MANAGER AND DEPARTMENTS
The major responsibilities of general manager are as follows:
(1) Besides carrying out the decisions of the Board, the general
manager also organizes and be in charge of the Company's daily
operation and management. Documents of major issues have to be
signed jointly by the general manager and assistant general
managers. Other issues will also be signed jointly in
accordance with the decision passed by 5/7 of the Board
members.
(2) Department heads will be recruited to assist both general
manager and assistant general managers in management.
(3) Besides the department heads, there will also be Chief
Engineer, Chief Accountant and Auditor. Chief Engineer and
Auditor will be proposed by Party A whilst Chief Accountant
will be proposed by Party B. The appointment and dismissal of
these posts will be decided by the Board.
8.3 DISMISSAL
The Board can dismiss the general manager or assistant general managers
should they be charged of serious frauds or misconducts.
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CHAPTER 9 PREPARATORY ISSUES
9.1 AMORTIZATION
The scope and amount of the preparatory expenses incurred by the
Company can be amortized by 5 years before the expiration of the joint
venture.
9.2 ASSET EVALUATION
Both parties agree to fix the date of asset evaluation on June 30,
1999.
9.3 PROFIT DISTRIBUTION
Both parties work out their own profit distribution upon the
contribution of capital to the Company.
CHAPTER 10 LABOR MANAGEMENT
10.1 EMPLOYMENT CONTRACT
The Company shall have its own right of employment, dismissal,
determining remuneration package, insurance, welfare benefits and
gratuities in China in accordance with the Chinese laws. For
recruitment purpose, the Board shall enact recruitment rules while the
Company and its labor union shall draft up employment contract which
should finally be filed with the labor authority.
10.2 REMUNERATION PACKAGE
The Board shall decide the wages and remuneration of the management
proposed by both parties in accordance with the Chinese laws.
CHAPTER 11 TAXATION, FINANCE AND ACCOUNTING
11.1 TAX PAYMENT BY THE COMPANY
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The Company shall pay taxes and enjoy preferential treatment in
accordance with the stipulations of the Chinese laws.
11.2 TAX PAYMENT BY PERSONNEL
All personnel shall pay individual income taxes in accordance with the
Chinese laws.
11.3 RESERVE
The Company is entitled annually to reserve fund, enterprise
development fund and staff welfare fund. The entitlement will be
determined by the Board according to the Company's financial status.
11.4 ACCOUNTING YEAR
The Company shall adopt the calendar year as its accounting year, from
January 1st to December 31st of the calendar year as one accounting
year. All account evidences, invoices and accounts shall be recorded in
Chinese.
11.5 AUDIT
(1) The Company shall appoint an accounting firm that is
registered in China to conduct annual audit to the Company's
accounts and statements. Upon completion of audit, the
domestic registered accounting firm shall submit the fiscal
reports to the Board, general manager and assistant general
managers.
(2) Party B has the right at any time appoint international
accounting firm to audit the Company's accounts and records,
or other documents related to the Company's accounts. The
related fees shall be borne by Party B.
11.6 FINANCIAL REPORTS
The Company shall (starting from the first complete calendar quarter
since the Establishment Day) prepare and submit the un-audited annual
financial statements and fiscal reports (balance sheet, profit and loss
account, and profit distribution proposal) to the Board for review.
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CHAPTER 12 TERM OF THE JOINT VENTURE
(1) The operation term of the joint venture is twenty (20) years
starting from the Establishment Day.
(2) Should both parties intend to extend the operation term of the
Company, an application shall be submitted at least six (6)
months before the expiration.
CHAPTER 13 PROPERTIES UPON EXPIRY OF JOINT VENTURE
The properties left through disposal upon the expiration or termination of the
joint venture should be shared between Party A and B in proportion to their
respective contributions.
CHAPTER 14 INSURANCE
The Company shall arrange and maintain the full and sufficient insurance for the
Company's assets and liabilities. Various kinds of insurance coverage shall be
furnished by insurance institutions within the territory of China. The general
manager shall decide the extension, value, kind, and duration of the insurance
policies in accordance with the Chinese laws. The selection of the insurance
company shall be discussed and passed by the Board.
CHAPTER 15 CONFIDENTIALITY
15.1 DEFINITION
Confidentiality here applies to all technologies and information
(software, proprietary technologies, trade secrets, original design),
which are considered as the properties of the Company
15.2 SCOPE OF CONFIDENTIALITY
To all information related to the Company, the Contract and any
relevant documents which are disclosed between two parties or between
one party and the Company, if one party that discloses the information
has expressed clearly in writing while disclosing that the disclosed
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information is confidential, or indicates while orally disclosing that
the information is confidential and then confirm in writing
immediately, such information shall be viewed as "confidential
information". The party that receives the confidential information
shall take the responsibility, and let its director(s), supervisor(s),
employees or agent(s) to take the responsibility by signing
non-disclosure agreement. Without the written and definite consent from
the party (the Board) that provides the information, the party that
receives the information shall not disclose to the third party
(including the staff of its own party who do not need to know the
information) but not limited to the loan provider, financial advisor
and legal consultant of its own party for whatever purposes including
personal ones). The described obligation of confidentiality is not
applicable to the information that is required to disclose in
accordance with the Chinese laws, regulations and any documents with
legal effect or court order.
CHAPTER 16 AMENDMENT & TERMINATION
OF THE CONTRACT
16.1 AMENDMENT
After signing the Contract, only after the amendment contract or the
supplement contract has been duly signed by both parties can any
amendment or supplement to the Contract be effective.
16.2 TERMINATION
The Contract can be terminated by the Board with the approval of
authorities in charge of examination and approval if the Company faces
force majeure, continuous losses or financial problems.
16.3 COMPENSATION
Should either party fail to fully conduct the Contract, Article of
Association or seriously breach the Contract which results in the
mal-operation of the Company, then the other party can claim losses and
appeal to the approving authorities for termination of the Contract.
Should both parties reconcile to continue the joint venture, the
breaching party should bear all losses caused to the Company.
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CHAPTER 17 LIABILITIES FOR BREACH OF CONTRACT
17.1 BREACHING EVENTS
(1) Should either party fail to make full contribution on
schedule, that party shall be viewed as breaching Chapter 5 of
the Contract. The breaching party shall pay an indemnity to
the other party according to the "Supplementary Contracts
Involving Capital Contribution by Shareholders of Joint
Ventures". The indemnity constituting 0.03% of the total
contribution by the breaching party will start from the first
month since the due date of the contribution. If the
contribution becomes overdue for 3 consecutive months, not
only should the breaching party pay a total of 0.09%'s
indemnity, the other party also reserves the right to
terminate the Contract in accordance with clause 16.3 of the
Contract. In this case, the breaching party has to compensate
the other party for all losses.
17.2 LIABILITIES
Should either party breach the Contract, the breaching party should
bear all liabilities whilst both parties will be held responsible if
both breach the Contract.
CHAPTER 18 FORCE MAJEURE
Should either party delay in or be prevented from executing its responsibilities
under the Contract due to earthquake, typhoon, fire, war or other events, and
their occurrence and consequences are unpreventable or unavoidable to the
affected party (hereinafter collectively referred to as "event of force
majeure"), the delay or failure of execution shall not be viewed as breach to
the Contract. But the affected party shall notify immediately the other party of
the event and within fifteen (15) days thereafter provide the detailed
information of the event and the reason of its inability to execute or delay in
execution, as well as the notary documents of evidence provided by the notary
organization of the place where the event of force majeure occurred. Depending
on the extent affected by the event of force majeure to the execution of the
Contract, both parties shall decide whether or not to terminate or waive some of
the terms or delay the execution of the Contract.
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CHAPTER 19 APPLICABLE LAW
The formation of the Contract, its validity, interpretation, execution and
settlement of disputes shall be governed by the Chinese laws.
CHAPTER 20 SETTLEMENT OF DISPUTES
20.1 ARBITRATION
All disputes, controversies, and right of claims arising from or in
connection with the Contract (generally called "disputes") shall be
settled through friendly consultation between both parties. In case no
settlement can be reached through consultation, either party can submit
the dispute at any time to China International Economic and Trade
Arbitration Commission (CIETAC) for arbitration. Any arbitral award
made by the arbitration court is final and binding upon both parties.
The defeated party shall bear the arbitration fee.
20.2 CONTINUANCE OF THE CONTRACT
During the arbitration process, the Company shall proceed with the
terms of the Contract except those in arbitration.
CHAPTER 21 LANGUAGE OF THE CONTRACT
The Contract is written in both Chinese and English. Both languages are
equivalent in effect. In case of discrepancy, the original version in Chinese
shall prevail.
CHAPTER 22 EFFECTIVENESS AND MISCELLANEOUS
22.1 EFFECTIVENESS
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As the supplement to the Contract, auxiliary documents like the
Articles of association, Appendix I are attached. The government
approval in relation to the Contract becomes the basis for the
interpretation of the Contract.
22.2 APROVAL
The Contract and its appendix involved will come into force upon
approval granted by the Department of Foreign Trade and Economic
Cooperation, China.
22.3 NOTICES
All notices and other communicated documents in connection with the
Contract, the articles of association and the Company between two
parties, as well as all notices and other communicated documents
between the Company and both parties or among the directors, shall be
sent to the other party by message delivery or fax followed by mail.
The registered offices of both parties are treated as the mailing
addresses.
22.4 SIGNING
The Contract was signed by legal representatives or their authorized
representatives of both parties on July 23, 1999 in Baoding City, Hebei
Province, China.
Party A: Baoding Pascali Multi-media Transmission
Networking Co., Ltd..(signed & sealed)
Authorized Representative: TAN Zu-ping
Party B: Solar Touch Limited (signed & sealed)
Authorized Representative: ZHAO Bing
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