EXHIBIT 10.3
Cooperation Agreement regarding China Online's Internet
Content Service Commercial Business
Shenzhen Rayes Group Co., Ltd. Is a private high-tech enterprise registered in
Shenzhen, Guangdong, China. (Party A). "China Online" was established by the
Rayes Group to meet China's development needs. China Online is a
commercially-focused, inter-provincial and inter-city online service provider
based on China Telecom's digital network and connected with the Internet.
Shenzhen Neihe Electronic System Co., Ltd. is a high-tech company registered in
Shenzhen with electronic business affairs as a focus and computer network
technology and consulting service as additional (Party B) . With mutual consent
and recognition of the favorable development prospect for China's internet
market and after a full discussion between the two parties, the cooperation
agreement agreed on is set out below.
I Parties to the Agreement
Party A: Shenzhen Rayes Group Co., Ltd.
Party B: Shenzhen Neihe Electronic Network Systems Co., Ltd.
II Basis of Cooperation
The project China Online invested by Party A has wide advantages in
respect of policy, brand and business development, mainly including:
1. On Oct.30th, 1998, the Administration Bureau of
Telecommunications of the Ministry of Information Industry issued
the "Reply on the Re-Acquisition of the Business Permit for the
Internet Business of Computer Information Network" for Shenzhen
Rayes Group Co., Ltd., approving Shenzhen Rayes Group Co., Ltd.
to be engaged in the Internet business of computer information
network in its business subsidiaries in 80 cities;
2. In 1998, it entered into a cooperation agreement on jointly
supplying information services to society with the State
Administration of Telecommunications, reaching the
interconnection between public multi-media communications network
and "China Online" in China. The users of "China Online" may
directly dial the special service number 169 for online access;
3. In 1997 and 1998, in two phases, it obtained the special service
number 95888 as approved by the former Ministry of Posts and
Telecommunications to be used in 64 cities throughout the
country;
4. In 1997, the former Ministry of Posts and Telecommunications
issued official documents to supply preferential to Shenzhen
Rayes Group Co., Ltd. in leasing dedicated digital line;
5. On April 22, 1998, it signed a letter of intent with the Bank of
China, to make the Commodities Transaction Center of "China
Online" a corresponding point to develop the overall business and
technological cooperation in the fields of "China Online"
communications service, information service and e-commerce.
6. On June 10, 1999, the State Administration of Communications of
China made further definition on the cooperation scope,
settlement, expense, roaming, etc. in the "Circular on the
Cooperation, Execution, and Relevant Issues of ISP/ICP between
Rayes Group and Others".
Party B is a high-tech company qualified as a corporation in
China owing to its advantage in respect to the introduction
of new technology, technological consultations, market
popularization, assets raising, etc.
III Content of Co-operation
Based on the Internet platform, branding and policy support enjoyed by Party A,
Party B will begin assisting Party A in Party A's provision of Internet Content
Services and electronic commercial services. This assistance will start at Party
A's offices in Shanghai and Wuhan. Party A promises Party B will enjoy
preference in investing in and increasing web sites.
IV Responsibilities of Both Parties to Cooperate
1. Responsibilities of Party A
A. Party A is responsible for the business development, planning and
coodination of the whole network of "China Online" and for better
developing the business of Internet content service commercial
business.
B. Party A agrees, Party B may to the extent allowed by PRC law and
policies be allowed to use any preferential state policies enjoyed by
Party A to promote its business development.
C. Party A agrees Party B may utilize its nationally-registered brand
names to promote and develop the internet content service commercial
business.
D. Party A shall provide nation-wide internet platform and related
technological linkage, guidance and support.
E. Party A shall liase with its associate companies throughout China to
promote Party B's business market establishment.
F. Party A shall be responsible for all procedures related to licenses,
approvals, references and applications for development of internet
content services business.
2. Responsibilities of Party B
A. Party B shall abide by all relevant national policies and regulations
to develop its business.
B. All Party B's development shall be in accordance with the PRC
government overall plan for development of internet as it applies to
Party A's "China Online" project and accept operational management by
the management team appointed by both Party A and B.
C. Party B is only authorised to use Party A's branding during the time
that Party B is assisting Party A develop its Internet Content service
commercial business. Party B is not authorised to use Party A's
branding in the development of any other business;
D. The development of all business of Party B should be under the daily
supervision and control of the network management center of Party A
and relevant technological and business data should be reported in
time;
E. Party B guarantees to calculate and apportion in a timely and regular
fashion income derived from entities associated with "China Online".
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V Partnership Expenses
Where Party B has obtained the co-operation and policy support of Party A
in the above referenced businesses, Party B agrees to pay to Party A an
amount of RMB 7 million in return for investment in and preferential rights
to the website business. The period of co-operation will be three years,
with RMB 1.4 million [sic] being paid each year. Payment will be made
within 30 days of the formal signing of this agreement.
VI
In the event that in the cooperation period the business permit of Party
A's internet connection service commercial business is altered, canceled or
terminated by the relevant department thereafter affecting the performance
of the Agreement, or in the cooperation period China allows foreign
investment participating in internet connection service commercial business
or carries out other opening measures, Party A and Party B agree to amend
or sign another agreement through friendly negotiation.
VII Cooperation Period
The time limit of validity of the Agreement is from July 1st, 1999 to July
1st, 2004, for a period of 5 years. Upon the expiration of the Agreement, the
parties may sign to extend the Agreement through negotiation.
VIII Default Responsibilities
In the event that Party B makes a breach of the Agreement, Party A has the
right to terminate the performance of this Agreement and the fees received will
not be returned.
In the event that Party A breach the Agreement, Party A should
return the fees received from Party B and compensate Party B the relevant losses
caused therefrom.
IX Other
The Agreement is made in duplicate, of which Party A and Party B separately
hold one. The Agreement comes into effect upon the date of signing and
sealing of the two parties.
Party A: Shenzhen Rayes Group Co., Ltd.
Party B: Shenzhen Neihe Electronic Network Systems Co., Ltd.
Date on July 15, 1998