Equity Joint Venture Contract of [ o ]
Exhibit
10.14
of
[ o ]
between
China
Yellow River Television Station
and
Advertising
Networks Limited
May
2008
[Execution
Copy]
TABLE OF
CONTENTS
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Sections
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Page
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Section
1
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Definitions
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3
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Section
2
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Establishment
of the Company
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8
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Section
3
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Goals
and Scope of Business Operations
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8
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Section
4
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Total
Investment, Registered Capital and Increase of Registered
Capital
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8
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Section
5
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Transfer
of Interest
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10
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Section
6
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Responsibilities
of the Parties
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14
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Section
7
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Confidential
Information, Publicity, Intellectual Property Rights and
Access
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16
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Section
8
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Board
of Directors
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18
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Section
9
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Supervisor
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20
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Section
10
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Management
of the Company
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21
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Section
11
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Budgets
and Business Plan
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24
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Section
12
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Financial,
Accounting and Auditing System
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25
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Section
13
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Foreign
Exchange
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28
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Section
14
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Profits
Distribution
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28
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Section
15
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Staff,
Workers and Trade Union
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28
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Section
16
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Insurance
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30
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Xxxxxxx
00
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Xxxx,
Xxxxxxxxxxx and Liquidation
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30
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Section
18
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Liquidation
Procedures
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32
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Section
19
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Amendment
and Modification of the Contract
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34
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Section
20
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Liability
for Breach of Xxxxxxxx
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00
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Xxxxxxx
00
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Xxxxx
Xxxxxxx
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36
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Section
22
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Governing
Law and Dispute Resolution
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37
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Section
23
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Representations
and Warranties
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38
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Section
24
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Effectiveness
of the Contract and Miscellaneous
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40
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Appendix
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List of Contributed
Assets
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This Equity Joint Venture Contract (this "Contract") is made on this [ o ] of 2008 in Taiyuan, Shanxi Province, the People’s Republic of China (“PRC”).
BETWEEN:
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(1)
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China Yellow River Television
Station (Party A), a PRC television station with its registered
address at Xx. 000, Xxxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxx
Xxxxxxxx;
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and
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(2)
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Advertising
Networks Limited (Party B), a Hong Kong Special Xxxxxxxxxxxxxx Xxxxxx xx
xxx XXX (Xxxx Xxxx) company with its registered address at
12/F, Xxxxxxxxx Xxxxx, 00 Xxxxxxx XX, Xxxxxxx, Xxxx
Xxxx.
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(Individually, a "Party" and collectively the "Parties")
WHEREAS:
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(A)
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Party A is a PRC TV station owning Shanxi Yellow River
Minsheng Channel and Shanxi Literature Broadcast Channel,
and possessing extensive experience, technology and human resources in the development of 3D cartoons for advertising purposes and computer graphic development;
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(B)
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Party B is a Hong Kong Company
possessing abundant financing and extensive investment and project management
experience in advertising development and technical services;
and
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(C)
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The Parties mutually seek the benefits of jointly establishing a Sino-Foreign equity joint venture enterprise (“Company”) in Taiyuan, Shanxi Province
to operate development of 3D cartoons for advertising purposes and computer graphic development business:
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NOW,
THEREFORE, the Parties
hereby agree as follows:
SECTION
1 DEFINITIONS
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1.1
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Unless otherwise provided herein,
the following terms shall have the meaning set forth
below:
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Affiliate Company
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in
relation to an entity, means a company:
(1)
in which the entity holds, directly or indirectly, at least 10% of the
equity interest or voting rights;
(2)
which is a subsidiary of the entity’s parent company;
(3)
which owns or controls, directly or indirectly, any equity interest or
voting rights of the parent company of the entity; or
(4)
which is a subsidiary of the parent company of the entity described in (3)
above.
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Approval
Date
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means the date of issuance of a
document by the Examination and Approval Authority approving this Contract and the
Articles of Association, and without making any substantive amendments
thereto.
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Approvals
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means all rights, licenses,
permits, approvals, waivers, consents and authorizations which are
necessary for the Company to engage in the business activities
contemplated in this Contract, including the Business
License.
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Articles of
Association
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means the Articles of Association
of the Company executed concurrently herewith by the
Parties.
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Board
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means the board of directors of
the Company.
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Budget
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means the annual budget of the
Company duly approved or otherwise in effect in accordance with the
provisions of this Contract.
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Business
Day
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means any day other than a
Saturday, Sunday or other day on which commercial banks in the PRC
are required or
authorized by Law or executive order to be
closed.
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Business
License
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means the business license of the
Company issued by SAIC following the approval of this Contract and the
Articles of Association without altering in any material respects
the
Company’s business scope as set forth in
Section 3.2(a).
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Business
Plan
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means a rolling five-year business
plan for the operation of the Company and that will be updated on an
annual basis in accordance with Section
11.
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Confidential
Information
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means (a) any information of a
confidential nature, whether tangible or intangible, concerning the
organization, business, technology, finance, transactions, affairs,
released or unreleased software or hardware products, marketing or
promotion or business policies or practices of any products
of the Company or any Party (whether conveyed in written, oral or any
other form) and (b) any information or materials of a confidential nature
prepared by a Party, its recipients or the Company that
contains or otherwise reflects, or is derived from
information that is qualified as Confidential Information as described in
item (a) above.
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Dispute
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means any dispute, controversy or
claim arising out of, or relating to, this Contract, or the performance,
interpretation, breach, termination or validity
hereof.
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Encumbrance
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means (a) any mortgage, charge (whether
fixed or floating), pledge, lien, hypothecation, assignment, deed of
trust, title retention, security interest or other encumbrance of any kind
securing, or conferring any priority of payment in
respect of, any obligation of any Person, including any right granted by a
transaction that, in legal terms, is not the granting of security but that
has an economic or financial effect similar to creation of a security that
is legally enforceable under
applicable Law, any proxy, power of attorney, voting trust agreement,
interest, option, right of first offer, negotiation or refusal or transfer
restriction in favor of any Person and (b) any adverse claim as to title,
possession or use.
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Equity
Interest
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means equity interest in the
Company.
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Establishment
Date
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means the date the Business
License is issued by SAIC.
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Examination and Approval
Authority
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means the Ministry of Commerce of
the PRC and SAIC or their relevant local counterparts that are legally
authorized to approve this Contract and the Articles of Association
pursuant to PRC Law.
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Feasibility Study Report
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means the feasibility study report
jointly prepared and
executed by the
Parties in connection with the establishment and operation of the Company
and dated ___ ___, 2008.
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Financial
Statements
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means the PRC Financial Statements
and the GAAP Statements.
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Foreign Exchange
Regulations
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means applicable PRC foreign
exchange Law.
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General
Manager
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means the general
manager of the
Company.
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Independent
Auditor
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means the independent auditor of
the Company selected by the Board in accordance with Section
12.4.
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Intellectual
Property
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means all letters patent,
trademarks, service marks, registered designs, domain names and
utility models,
copyrights, inventions, Confidential Information, brand names, database
rights and business names and any similar rights situated in any country
and the benefit (subject to the burden) of any of the foregoing (in each
case whether registered or unregistered and including
applications for the grant of any of the foregoing and the right to apply
for any of the foregoing in any part of the
world).
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Law
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means all applicable laws, regulations,
rules and orders of any governmental authority, securities exchange or other
self-regulatory body, including any ordinance, statute or other
legislative measure and any regulation, rule, treaty, order, decree or
judgment.
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Person
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means an individual, corporation,
joint venture, enterprise, partnership, trust, unincorporated association,
limited liability company, government or any department or agency thereof,
or any other entity.
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Registered
Capital
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means the registered capital of
the Company.
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Related
Party
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means (a) any equity interest
holder of the Company, (b) any director of the
Company, (c) any Senior Manager of the Company (as defined in Section 10.1
below), (d) any relative of an equity interest holder, director or officer
of the Company, (e) any Person in which any equity interest holder or any
director of the Company has any
interest, and (f) any other Affiliate of the
Company.
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RMB
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means Renminbi, the legal tender of the
PRC.
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SAFE
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means the State Administration of
Foreign Exchange of the PRC or its local branches as appropriate to the
context.
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SAIC
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means the State Administration of
Industry and Commerce of the PRC or its local branches as appropriate to
the context.
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Subsidiary
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of a Person means any
other Person that the relevant Person
controls.
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Supervisor
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means the supervisor of the
Company appointed by
the Parties.
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Total
Investment
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means the total amount of
investment of the Company.
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Transaction
Documents
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means any documents entered into pursuant to PRC Law for the undertaking of the
transactions contemplated by the Parties to the cooperation, of which the details and scope
will be further covenanted by the Parties.
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"US Dollars," "US$" or
"$"
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means United States dollars, the
lawful currency of the USA.
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Joint Venture
Law
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means
Sino-foreign Equity
Joint Venture Law of the PRC and the implementing regulations
issued thereunder, as
amended.
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SECTION
2 ESTABLISHMENT OF THE
COMPANY
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2.1
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Establishment. The
Parties hereby agree to establish a Sino-Foreign equity joint
venture enterprise [ o
] (Company) in Taiyuan City, Shanxi
Province, PRC in accordance with the Joint Venture Law, this Contract
and the Articles of
Association.
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2.2
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Name. The name of the
Company shall be [ o ]
in Chinese, and
[
o ] in English. The
legal address of the Company shall be [ o ]
.
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2.3
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Limited
Liability. The Company shall be
a limited liability equity joint venture company qualified
as an enterprise legal person. The liability of each Party with
respect to the Company shall be limited to its contribution to the
Company's Registered
Capital in accordance with Section 4.2 of this
Contract. Neither Party shall have any liability to any third
party in respect of the debts or obligations of the
Company.
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SECTION
3 GOALS AND SCOPE OF BUSINESS
OPERATIONS
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3.1
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Goals.
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The goals in establishing the Company are
to:
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(a)
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strengthen cooperation and exchange
between the Parties in the PRC’s advertising cartoon and graphic development technical service sector;
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(b)
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adopt advanced technology and
relevant management methods to promote
the
modernization of
advertising development technology industry in the PRC;
and
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(c)
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obtain increasing economic
benefits to enable the Parties to obtain satisfactory
profits.
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3.2
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Business
Scope.
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(a)
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The business scope of the Company
shall be the following: design and development of computer
graphic, design and development of 3D cartoons, management consultation and technical support.
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(b)
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The Parties further acknowledge
and agree that all the activities specified in Section 3.2(a) shall be
conducted within the
scope permitted by PRC Law, and the Company shall apply for all necessary
licenses and permits from the relevant PRC
governmental authorities in order to engage in these
activities.
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SECTION
4 TOTAL INVESTMENT, REGISTERED CAPITAL
AND INCREASE OF REGISTERED
CAPITAL
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4.1
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Total
Investment and Registered Capital.
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(a)
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The Total Investment shall be
RMB270,000,000.
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(b)
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The Registered Capital shall
be RMB 90,000,000.
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(c)
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The difference between the Total
Investment and the Registered Capital can be raised by the Company through
provision of shareholder loans by Party B or a third party to the
Company.
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4.2
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Contributions
of each Party.
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(a)
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Party A shall contribute the
assets (Contributed
Assets, as listed in Appendix) to the Registered Capital of the Company. The
valuation of
Contributed Assets will be RMB 45,000,00 in accordance with the appraisal
report as of ___ ______ 2008, which shall be 50% of the
Registered Capital of the
Company.
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(b)
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Party B shall contribute US$ equivalent to RMB 45,000,000which shall be 50% of the
Registered Capital of the
Company.
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(c)
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Upon the completion of
the appraisal of the assets mentioned above
and the Company receives the approval certificate, Party A shall pay 40% of the
Contributed
Assets within 30 days, while Party B shall make the initial
contribution which shall be 40% of its contribution (Party B’s Initial Contribution) in the form of cash in US$ equivalent to RMB 18,000,000 (in accordance with the median foreign exchange rate that is set by the People’s Bank of China on the Payment</fon t> Date)within 30 days.
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(d)
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Parties shall be responsible for
its rest contribution
to the Company within 2 years from the Establishment Date, which shall be in the form of
assets or
US$ cash equivalent to RMB 27,000,000.
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4.3
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Investment
Certificates.
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Upon the Parties’ contribution, the Company shall issue to each
Party an investment certificate evidencing that the equity interest of the
Parties in the Company is 50%, respectively.
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4.4
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Increase
of Registered Capital.
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If the Registered Capital is increased
pursuant to the terms and conditions of this Contract and applicable laws and
regulations, each Party shall have the right (but not the obligation) to
subscribe for such portion of the increased Registered Capital such that subsequent to the subscription
such Party will maintain the percentage Equity Interest at that it held
immediately prior to the relevant increase of the Registered Capital.
SECTION
5 TRANSFER
OF INTEREST
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5.1
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Limitations
on Transfers.
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No Party shall sell, give, assign, transfer or
otherwise dispose of any Equity Interest or any right, title or interest
therein or thereto (each, a "Transfer") to any third party (a
"Transferee") or otherwise create or permit or suffer to be created or
exist (whether by operation of law or otherwise) any
Encumbrance over any Equity Interest held by it or any right, title or
interest therein or thereto for the benefits of any third party without
the prior written consent of the other Party, except as expressly
permitted by this Section 5. Any
purported Transfer or Encumbrance in violation of this Section 5 shall be
null and void, and the Company and the Parties shall not register or
recognize any such Transfer or
Encumbrance.
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5.2
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Lockup.
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The Parties acknowledge and agree
that each Party is investing in the Company because of the
management, skill, resources and expertise that the other Party will continuously bring to the Company. Accordingly,
and notwithstanding what is otherwise provided, the Parties agree that without the prior written consent of the other
Party, each Party shall not Transfer or impose any Encumbrance over
any Equity
Interest.
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5.3
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Compliance.
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Notwithstanding any other provisions of
this Contract, no Transfer may be made unless:
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(a)
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the Transferee has
agreed in writing to
be bound by the terms and conditions of this Contract and the Articles of
Association, which may be amended and restated to the extent that the
Parties and the Transferee agree to such
amendments;
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(b)
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the Transfer complies in all
respects with the
other applicable provisions of this Contract, the Articles of Association
and other relevant legal documents designated by the Parties;
and
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(c)
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any Transferee of a
Party’s Equity Interest, pursuant to a
Transfer permitted under this Contract, shall also hold the Transferring
Party’s rights with respect to the
portion of the Equity Interest so
transferred.
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5.4
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Right
of First Offer.
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(a)
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Unless otherwise provided in this
Contract, if either Party (the
"Transferring
Party") (i) proposes
to Transfer any of
its Equity Interest (a "Proposed
Transfer"), (ii) the
Transferring Party receives an offer to acquire any of its Equity Interest
and proposes to accept such offer (a "Proposed
Acceptance"); or
(iii) if either Party is dissolved, terminated or
liquidated, the other
Party shall have a right of first offer (the "Right of First
Offer") with respect
to such Transfer as provided in this Section 5.4, except for the equity transfer
of Party B to its Affiliates in accordance with Section
5.4(f).
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(b)
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In the case of a Proposed Transfer, the
Transferring Party shall send a written notice to the other Party, which
notice shall state (i) the name of the Transferring Party, (ii) the Equity
Interest percentage to be Transferred, (iii) the price in cash that the
Transferring Party is prepared to
accept for the Offered Interest and (iv) the other terms and conditions of
the proposed Transfer.
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In the case of a Proposed Acceptance,
the Transfer Notice shall state (i) the name of the Transferring Party, (ii) the
name and address of the
proposed transferee, (iii) the Equity Interest percentage to be Transferred,
(iv) the amount and form of the proposed consideration for the Transfer and (v)
the other terms and conditions of the proposed Transfer. In the event
that the proposed consideration for the Transfer
in a Proposed Acceptance includes consideration other than cash, the Transfer
Notice shall include a calculation of the fair market value of such
consideration and an explanation in reasonable detail of the basis
for such calculation, together with
documentation reasonably evidencing such calculation and
explanation. The notice sent by the Transferring Party pursuant to
this Section 5.4 (b) shall be referred to as the "Transfer
Notice", the
non-Transferring Parties shall be referred to as the "Offerees", the proposed Equity Interest
percentage to be Transferred shall be referred to as the "Offered
Interest", and the proposed
consideration in cash (including the fair market value of any non-cash
consideration) shall be
referred to as the "Offer
Price".
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(c)
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For a period of 30 days after
delivery of a Transfer Notice (the "Offer
Period"), each
Offeree shall have the right, exercisable through the delivery of an
Acceptance Notice as provided in Section 5.4(d), to purchase up to its Offered Interest at a
purchase price equal to the Offer Price upon the other terms and
conditions set forth in the Transfer Notice, provided that if one Party is restricted from purchasing its
pro rata proportion of the Offered Interest due to legal or regulatory reasons, then
it shall have the right to nominate a third party to purchase such Offered
Interest and provided, further, that even where the proposed consideration
offered by a third party in a Proposed Acceptance includes non-cash
consideration, the Offeree shall at all
times be able to pay the purchase price in cash. If the Transferring Party and the
Offeree cannot agree within 20 days after delivery of the Transfer Notice
on the fair market value of such non-cash consideration, then
such fair market
value shall be determined in accordance with Section 22.2 of this Contract
(Dispute Resolution). In such event, the 30-day period set
forth in this Section 5.4(c) and the six-month period set forth in Section
5.4(f) shall be tolled until the arbitration proceedings are
completed.
|
Equity
Joint Venture Contract
- 11
-
[Execution
Copy]
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(d)
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The Right of First Offer of the
Offeree under Section 5.4(c) shall be exercisable by delivering written
notice of exercise (an "Acceptance
Notice") within the
Offer Period to the Transferring Party. An acceptance Notice shall include a
statement of the Equity Interest to be purchased by such Offeree. An
Acceptance Notice shall be irrevocable and shall constitute a binding
agreement by such Offeree to purchase the Offered Interest determined in
accordance with Section 5.4(c). The
failure of an Offeree to give an Acceptance Notice within the Offer Period
shall be deemed to be a waiver of such Offeree's Right of First Offer
subject to Sections 5.4(e) and
5.4(f).
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(e)
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In the case of the Transfer of Offered
Interest,
and without limiting the right of each Party to exercise the Right of First
Offer pursuant to this Section 5.4, at the sole discretion of the other Party, it may Transfer the Offered Interest
with the Transferring Party on a pro rata basis and in
accordance with their
shareholding percentage in the Company (“Co-Sale
Right”). If the Transferring Party , a third party (in the case of a
Proposed Transfer), or the proposed Transferee identified in the Transfer
Notice (in the case of a Proposed Acceptance) does not accept the ’ Co-Sale Right, the Transfer of
such Offered Interest shall be void and of no force or effect for all
purposes.
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(f)
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Unless (i) the Offerees elect in
the aggregate to purchase all of the Offered Interest pursuant to Sections
5.4(c) and 5.4 (d),
or (ii) the other
Party elects to exercise its Co-Sale
Right pursuant to Section 5.4(e), the Transferring Party may Transfer all
of the Offered Interest to a third party (in the case of a Proposed
Transfer) or the proposed Transferee identified in the Transfer Notice (in the case
of a Proposed Acceptance) on the terms and conditions set forth in the
Transfer Notice; provided, however, that (i) such sale is bona fide, (ii)
the price for the sale to the Transferee is a price not less than the
Offer Price and the sale is otherwise on
terms and conditions no less favorable to the Transferring Party than
those set forth in the Transfer Notice, (iii) the Transfer is made within
six months after the giving of the Transfer Notice and (iv) the Transferee
agrees not to compete with the
Business conducted by the Company or any subsidiary of the Company or by
any Party (or such Party's Affiliate). If such a Transfer does
not occur within such six-month period for any reason, the restrictions
provided for herein shall again become effective, and
no Transfer of Equity Interest may be made by the Transferring Party
thereafter without again making an offer to the other Party in accordance
with this Section 5.4, as
appropriate.
|
Equity
Joint Venture Contract
- 12
-
[Execution
Copy]
|
5.5
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Further
Assurances.
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(a)
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If any Party proposes to Transfer its Equity
Interest in compliance with the provisions of this Section 5, the other
Party shall promptly cause the directors on the Board appointed by it to
vote in favor of a resolution approving such Transfer. If any
director does not vote in favor of such
resolution, the Party that appointed such director shall promptly remove
and replace such director and cause the newly appointed director to vote
in favor of the resolution approving such
Transfer.
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(b)
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The Party transferring
its Equity Interest
and the transferee shall enter into an equity interest transfer contract
with respect to the Transfer of the relevant Equity
Interest. The Parties shall, within 14 days thereafter amend
this Contract and the Articles of Association to reflect the respective Equity
Interests held by the Parties and the Transferee subsequent to the
completion of such equity interest transfer contract. The
Parties shall cause the Company to apply to the relevant governmental
authorities for approval of the Transfer and the amendments to
this Contract and the Articles of Association within 21 days of the
execution of the equity transfer contract. The Parties shall,
and shall cause the Company to, promptly execute all such further
documents and perform all such further acts as the
transferring Party may reasonably require constituting the Transferee as the legal and
beneficial owner of the interest Transferred free from any and all
Encumbrances.
|
Equity
Joint Venture Contract
- 13
-
[Execution
Copy]
SECTION
6 RESPONSIBILITIES OF THE
PARTIES
|
6.1
|
Responsibilities
of
Party
A
|
In addition to its responsibilities set
forth elsewhere in this Contract, the Party A shall perform the following
duties:
|
(a)
|
to submit this Contract, the
Articles of Association, the Feasibility Study and all other relevant
documents to the Examination and Approval Authority for their
examination and approval and to obtain all the Approvals from the relevant
governmental authorities in connection with the establishment of the
Company and the performance of the obligations of all the Parties
hereunder and to assist the Company in
obtaining from the appropriate PRC governmental authority the Business
License, registering the Company with the appropriate PRC tax authorities
and to assist the Company in obtaining and maintaining in force all
licenses, permits, consents, authorizations,
approvals and agreements that are necessary for the Company to conduct its
goals, business operations and business objectives in accordance with the
terms of this Contract;
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(b)
|
fulfill its obligations, and
ensure that its Affiliates fulfill their obligations,
as set forth in the Transaction Documents to which it is, and/or they are,
a party or parties;
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(c)
|
assist the Company in developing
its business based upon its established contacts and relationships with
commercial enterprises, and coordinate and liaise
with government agencies for the maintenance of permits, licenses and
other qualifications;
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(d)
|
appoint in a timely manner members
of the Board as specified in Section
8.1(b);
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(e)
|
cause its representatives on the
Board to implement
the Budget and the approved Business Plan, to act in the Company's best
interests and to perform and take all actions in accordance with this
Contract, the Articles of Association, the Feasibility Study, the
Transaction Documents and the intent of the
Parties;
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(f)
|
assist the Company in obtaining and
maintaining in force throughout the Joint Venture Term (as defined in
section 17.1(a) below) (and any extension thereof) all
Approvals and agreements that are necessary for the Company to achieve
its goals and
business objectives and conduct the business of the Company in accordance
with the terms of this Contract, the Articles of Association and the
Transaction Documents including the necessary Approvals from the
Examination and Approval
Authority;
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(g)
|
assist the Company in applying for and
obtaining any preferential treatment in tax, customs, foreign exchange
or other areas that are available or may become available under any
preferential policy in accordance with Law;
and
|
|
(h)
|
assist the Company in other matters as requested by
the Board.
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|
|
|
6.2
|
Responsibilities
of Party
B.
|
In addition to its responsibilities set
forth elsewhere in this Contract, Party B shall perform the following
duties:
|
(a)
|
use its best efforts to help obtaining Approvals from the relevant governmental authorities
in connection with the establishment of the Company and the performance of
the obligations of all the Parties hereunder, obtaining from the
appropriate PRC governmental authority of the Business License,
registering of the Company with the appropriate PRC
tax authorities and obtaining and maintaining in force of licenses,
permits, consents, authorizations, approvals and agreements that are
necessary for the Company to conduct its goals, business operations and
business objectives in accordance with the
terms of this Contract;
|
|
(b)
|
make its contribution in the form and manner
and at the times required by this Contract and the Articles of
Association;
|
|
(c)
|
fulfill its obligations, and
ensure that its Affiliates fulfill their obligations, set forth in the
Transaction Documents to which it is, and/or they are, a party or
parties;
|
|
(d)
|
appoint in a timely manner members
of the Board as specified in Section
8.1(b).
|
|
(e)
|
nominate in a timely manner
candidates to serve as the General Manager Company's and financial manager;
|
|
(f)
|
cause its representatives on the
Board to implement the Budget and the approved Business Plan, to act in
the Company's best interests and to perform and take all actions in
accordance with this Contract, the Articles of Association, the
Feasibility Study, the Transaction Documents and the intent of the
Parties;
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|
(g)
|
use reasonable efforts to assist
the Company with respect to content sourcing, business development,
financial management, strategic development, corporate governance and
fundraising;
and
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(h)
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assist the Company in other matters as
requested by the Board.
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SECTION
7 CONFIDENTIAL INFORMATION,
PUBLICITY, INTELLECTUAL PROPERTY RIGHTS AND
ACCESS
|
7.1
|
Confidentiality.
|
|
(a)
|
A Party that receives any
Confidential Information during the Joint Venture
Term and five years
from its expiry
("Receiving
Party")
shall:
|
|
(i)
|
keep the Confidential Information
confidential;
|
|
(ii)
|
not disclose the Confidential
Information to any Person other than with the prior written consent
of the Company or the
Party that disclosed such Confidential Information, as the case may be, or
in accordance with Sections 7.1(b) and 7.1(d);
and
|
|
(iii)
|
not use the Confidential
Information for any purpose other than the performance of its obligations
under this Contract
or in accordance with Section
7.1(d).
|
|
(b)
|
The Receiving Party may disclose
the Confidential Information to its directors, Senior Managers (as defend
in Section 10.1 below), employees, agents, consultants, advisors,
licensees, contractors, partners (“Representatives”) Subsidiaries, Affiliates and the
respective Representatives of its Affiliates (collectively, the
"Recipients") to the extent that it is
necessary for the purposes of this
Contract.
|
|
(c)
|
Each Party shall use its best
efforts to ensure
that each Recipient is made aware of, and complies with, all of the
Receiving Party's confidentiality obligation herein as if such
Recipient were a party to this Contract. Each Party shall use
its best efforts to ensure that the Company shall comply with all of the Receiving
Party's confidentiality obligation herein as if the Company were a party
to this Contract.
|
|
(d)
|
The provisions of this
Section 7.1 shall not
apply to:
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|
(i)
|
Confidential Information that is
or becomes generally available to the public other than as a result of
disclosure by, or at the direction of, a Party, any of its Recipients or
the Company in violation of this
Contract;
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(ii)
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disclosure to the extent required
under applicable Law or the rules of any stock exchange
(including, without
limitation, disclosure to relevant regulatory bodies); provided that such
disclosure shall be limited merely to the extent required by applicable
Law or the rules of any stock exchange, and, to the extent practicable,
the Party or the Company, as the case may be, that is the
proprietor of the Confidential Information subject to such disclosure
shall be given an opportunity to review and comment on the contents of the
disclosure before it is
made;
|
|
(iii)
|
disclosure to the extent required
by applicable Law or
judicial or regulatory process or in connection with judicial or
arbitration process regarding any legal action, suit or proceeding arising
out of, or relating to, this Contract; provided that such disclosure shall
be limited merely to the extent required by applicable Law or
judicial or regulatory
process;
|
|
(iv)
|
use of Confidential Information
concerning the Company by the Receiving Party after the termination of
this Contract in accordance with the provisions hereof where the Receiving
Party is legally
permitted to continue to operate, whether directly or indirectly, and
whether or not in cooperation with any other Person or any other Party,
the business of the Company;
and
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|
(v)
|
disclosure by any Party to any
Person that is a potential purchaser of any or all of the equity
interest of the Company held by such Party or is a potential purchaser or
subscriber of the shares or interests of such Party, if the recipient has
agreed in writing to obligations of confidentiality substantially similar
to those contained in this Section
7.1.
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|
7.2
|
No
Announcements. No Party shall make
any announcement about the Company, this Contract or any other Party in
relation to the Company, this cooperation or the business of the Company
without the prior written consent of the other
Party. Notwithstanding the above, Party B may announce or disclose, at its
sole discretion, some or all of the aforesaid information to its
affiliated party(s) (including but not limited to the investors
of funds affiliated with Party B, auditors and banks of Party B and/or its affiliated party(s)).
Any of the Parties may at any time make announcements that are required by
applicable Law, regulatory bodies or stock exchange or stock association
rules, so long as the Party so required to make the announcement, promptly upon
learning of such requirement, notifies in writing the other Party of such
requirement and discusses with the other Party in good faith the exact
wording of any such announcement and takes precautionary measures to
prevent disclosure of confidential information
to the maximum extent
permitted.
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7.3
|
Intellectual
Property Rights. Any Intellectual
Property rights, produced, created or developed by the Company or by any
other Person on behalf of or for the benefit of the Company
(including any
employee of the Company in the execution of his responsibilities or
primarily using the resources of the Company) shall be the sole property
of the Company.
|
|
7.4
|
Access. The Company shall
grant to each Party and its agents, full access, upon reasonable prior notice and during normal
business hours, to the premises and books and records of the Company, and
shall instruct Senior Managers (as defined in Section 10.1 below) and
employees of the Company to give promptly all information as a Party may
reasonably request. For the
avoidance of doubt, the information provided by the Company shall be
deemed Confidential Information and the receiving Party shall comply with
the provisions of Section
7.1.
|
SECTION
8 BOARD OF DIRECTORS
|
8.1
|
The
Board.
|
|
(a)
|
The Board shall be established on the Establishment
Date and shall hold its first meeting within 30 days
thereafter. At the first meeting, the Board shall adopt the
Initial Business Plan and appoint the General Manager and financial
manager who are designated by Party B.
|
|
(b)
|
The Board shall initially consist of
five directors, two of whom shall be appointed by
Party A (“Party
A’s
Directors"), and
three of whom shall be appointed by
Party B ("Party
B’s Directors"). The term of office
of the directors shall be three years, renewable upon reappointment by
the appointing Party. The Parties agree to cause the Company
to file for the record with the Examination and Approval Authority any
change of director appointed by any Party, if required by Law. If a
director is removed, becomes incapacitated, dies,
resigns, or otherwise ceases to be a director, the Party that appointed
the director shall appoint a new director to serve for the remainder of
the former director’s term of
office.
|
|
(c)
|
The Board shall have one chairman
("Chairman") with a term of three
years. The Chairman shall be appointed by Party A with Party B’s prior written
consent. If the
Chairman is unable to attend any meeting of the Board, the Chairman may assign any other director to preside over the
meeting.
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(d)
|
The Board shall be the highest
authority of the Company and shall direct the overall supervision and
control of the business of the Company. The Board shall decide
all matters of major importance to the Company. The resolutions
of the Board shall be adopted in accordance with this
Contract, the Articles of Association and applicable PRC
Law.
|
|
(e)
|
The Chairman shall be the legal
representative of the Company for the purpose of service of process and
within the scope expressly authorized by the Board. The
Chairman shall have
the powers and responsibilities set forth in the Articles of
Association.
|
|
(f)
|
The Company shall pay all reasonable expenses
incurred by the directors in attending a Board meeting, including
traveling expenses and
accommodation.
|
|
(g)
|
The Company shall indemnify each
director against all claims and liabilities incurred by reason of his
being a director of the Company; provided that the director's acts or
omissions giving rise to such claim or liability did not constitute
intentional misconduct or a violation of criminal
Law. In addition, the Company reserves the right to pursue any
claims against directors who cause the Company to incur unauthorized
claims or liabilities.
|
|
8.2
|
Meetings.
|
|
(a)
|
Regular meetings of the Board
shall be convened at
least once every calendar quarter. Meetings shall be convened
and presided over as provided in the Articles of
Association. Not less than 10 days’ notice shall be given to all
directors, provided, however, that less than 10 days’ notice may be given if approved by all
directors. Special meetings of the Board shall be convened by
the Chairman at any time on the motion of at least two
directors or the
Foreign Director. The minutes of all
Board Meetings shall be kept on file by the
Company.
|
|
(b)
|
Three directors present in person or by proxy
throughout the entire meeting shall constitute a quorum for all meetings
of the Board. Each director has one vote. The Chairman has no casting
vote.
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8.3
|
Voting.
|
|
(a)
|
Decisions with respect to those
matters that are
required by Law at the time the relevant resolution is adopted to be
approved by unanimous approval of the Board shall require the unanimous
approval of the Board. As at the date of this
Contract, the
following matters require the unanimous approval of the
Board:
|
|
(i)
|
increases or decreases in the
Registered Capital or any transfer of any Party's interest in the
Company;
|
|
|
|
(ii)
|
merger, division or change in the
form of organization of the
Company;
|
|
|
|
(iii)
|
suspension of the business
operation of the Company, dissolution of the Company or the
extension of the Joint Venture Term (as defined in Section
17.1);
|
|
(iv)
|
mortgage of assets of the Company;
and
|
|
(v)
|
amendment of the Articles of
Association.
|
|
(b)
|
Decisions with respect to all
other matters that require approval of the Board shall be
adopted if they receive the affirmative votes of a simple majority of the
directors.
|
SECTION
9 SUPERVISOR
|
9.1
|
Supervisor
|
|
(a)
|
The Company shall not have a board of
supervisors, but a supervisor shall be jointly appointed by the
Parties.
|
|
(b)
|
The term of the Supervisor shall
be 3 years, renewable upon reappointment by the
Parties.
|
|
(c)
|
If the position of the Supervisor
becomes vacant for any reason, the Parties shall jointly appoint a
successor to serve out the remainder of the term. Where either Party finds that the
Supervisor has violated PRC laws and regulations, or any provision of
this Contract or the
Articles of Associations, practiced favoritism or fraud, breached the
Company’s by-laws and rules, or is unable
to perform all of his duties, or at the Parties’ sole discretion, the Parties may
at any time jointly remove the Supervisor and appoint another Supervisor
as his successor. Appointments and removals shall be filed with the
Examination and Approval Authority and registered with the SAIC to the extent required by
law.
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(d)
|
The Supervisor shall not
concurrently hold the position of director or Senior Managers in the
Company.
|
|
9.2
|
Authorities
of Supervisor
|
|
(a)
|
monitor the financial affairs of
the Company;
|
|
(b)
|
supervise the actions of
the directors and
Senior Managers (as defined in Section 10.1 below), and bring forward
proposals for the
removal of any director or Senior Manager that violates any law,
administrative regulation, the Contract or any resolution of the
Broad;
|
|
(c)
|
demand any director or Senior Manager to
rectify acts that has injured the interests of the Company;
and
|
|
(d)
|
bring forward any other proposals
to the Parties.
|
|
9.3
|
Liability
of the Supervisor
|
|
(a)
|
The independent and personal
actions of Supervisor are not binding on the
Company.
|
|
(b)
|
The Supervisor is immune from
personal liability for the actions in carrying out his/her duties as a
supervisor, unless the actions violate the Contract, Articles of
Association, PRC laws and the law governing the
supervisor.
|
SECTION
10 MANAGEMENT OF THE COMPANY
|
10.1
|
Senior
Managers.
|
The management organization of the
Company shall consist of the following senior managers ("Senior
Managers"): one
General Manager, one financial manager (Financial
Manager) and other officers
that the Board may designate from time to time as being necessary for
the operation of the Company. Without the prior permission
of the Board, no Senior Manager shall be simultaneously employed by or seconded
to any company other than the Company.
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(a)
|
The general manager shall be designated by Party B and
appointed by the
Board. The initial general manager shall be [ o ] .
|
The general manager shall have the
following powers:
|
(i)
|
implementing the business plan
approved by the Board;
|
|
(ii)
|
formulating the rules and regulations of the
Company;
|
|
(iii)
|
implementing the resolutions of the board of
directors;
|
|
(iv)
|
executing, and if necessary,
authorizing other Senior Mangers to execute business contracts that do
not exceed RMB￥ [ o ] (contracts that exceed
RMB￥ [ o ] shall be signed jointly by the
Chairman or his/her agent and the
authorized representative that is approved by unanimous approval of the
Board );
|
|
(v)
|
reporting the Company’s operation to the
Board on a regular basis, including submitting a quarterly
written business report;
|
|
(vi)
|
drafting the annual budget plan and submit
to the Board for approval;
|
|
(vii)
|
hiring or dismissing other
employees and draft the employment terms and welfare plans of the
Senior Managers and all the employees, and submit to the Board for
approval,
and
|
|
(viii)
|
implementing all other matters
authorized by the Board within the scope of their authorized
power.
|
|
(b)
|
The Financial Manager shall be appointed by Party
B.
|
|
(c)
|
The Board shall have the right to
dismiss any other
Senior Manager for
any reason at any time. If the General Manager or any of the
other Senior Managers resigns, or is dismissed, or dies or
becomes incapacitated, his successor shall be nominated and appointed in
the same manner as stated in Section 10.1
above.
|
|
(d)
|
The Senior Managers shall have no
liability to the Company (and the Company shall indemnify them
for any liabilities
to third parties) for any acts performed in their official capacity except
for such acts which constitute willful misconduct, fraud, gross
negligence or violations of
Law.
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10.2
|
Financial
Manager
|
The Financial Manager shall be responsible for and manage the financial and accounting
work of the Company and shall examine and sign the financial plans, credit
plans, accounting reports, and major expenditures of the Company. The
Financial Manager shall keep true and accurate records and
accounts and prepare
quarterly financial reports for the Board and other periodic financial
statements as required by the Board or applicable PRC Law. Such
reports and statements shall be prepared in Chinese and English. Both
language versions shall have equal validity. The expense associated
with any required translation shall be borne by the Company. The Financial Manager shall be the officer authorized to use
the Company's financial seal.
|
10.3
|
Quarterly
Operational Reviews and Monthly Updates.
|
Every three months, the Company shall convene an
operational meeting with representatives of Party B to review the business and operations
of the Company. During each calendar month in which such an
operational review meeting does not take place, the Company shall convene
a monthly update meeting
with representatives of Party B, which update meeting shall be shorter
in duration, and less formal, than an operational meeting, and which may take
place by way of a conference call or other similar means. The purpose
of the monthly update
meeting is for the General Manager (and any other relevant Senior Manager) to
update Party B of any material events relating to the
Company.
|
10.4
|
Ethical
Business Practices.
|
|
(a)
|
Each of the Parties agrees that
the Company shall be managed in accordance with the highest
international business ethical standards and that no director of the
Board, Senior Managers, other employees of the Company will be permitted
to engage in any act which violates applicable Law relating to corruption,
bribery, fraudulent
behavior or any other criminal
activity.
|
|
(b)
|
The Company and its Senior
Managers, directors, employees and agents shall engage only in legitimate
business and ethical practices in commercial operations and in relation to
government authorities. Neither the Company nor any of its
Senior Managers, directors, employees or agents shall pay, offer, promise
or authorize the payment, directly or indirectly, of any funds or anything
of value to any official or employee of (or any
person acting in an official capacity for or on behalf of) any
government (including any department or agency), or state-owned or
administered company or entity, public international organization,
political party (or candidate or member of such party) for the purpose of influencing
any act or decision
of such official or of the government to obtain or retain business, or
direct business to any Person (any such act, a "Prohibited
Payment"). A Prohibited
Payment does not include the payment of reasonable and bona fide
expenditures, such as
travel and lodging expenses, which are directly related to the promotion,
demonstration or explanation of products or services, or the execution
or
performance of a contract with a government authority or agency thereof;
provided that such payments are permissible under
Law.
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(c)
|
Each
of the Parties hereby represents to the other Parties that, in connection
with the performance of its obligations under this Contract and the Articles of Association,
including those responsibilities detailed at Section 6
of this
Contract, such Party,
and its owners, directors, employees and agents, have not, and will not,
pay, offer, promise or authorize, directly or indirectly, any Prohibited
Payment.
|
|
(d)
|
The Parties represent and warrant
that they shall take such steps as may be appropriate to ensure
that the Company complies with the provisions of this Section, which steps
shall include the adoption and implementation of policies and procedures
to ensure compliance with anti-bribery and anti-corruption
Laws.
|
SECTION
11 BUDGETS AND BUSINESS PLAN
|
11.1
|
Initial
Business Plan.
|
Each Party shall cause the director(s)
appointed by it to vote at the first meeting of the Board to adopt a resolution
approving the Initial Business Plan. If any director does not vote in
favor of such resolution,
the Party that appointed such director shall promptly remove and replace such
director and cause the newly appointed director to vote in favor of such
resolution.
|
11.2
|
Preparation
of the Budget and Updating of Business Plan.
|
During the Joint Venture
Term, the financial manager shall be responsible for preparing and
updating the Business Plan on an annual basis (if deemed necessary by the Board)
and for preparing an annual budget and the operational strategy and plan for the
Company for each Financial Year. Not less than two months
prior to the commencement of each Financial Year during the Joint Venture Term,
or such other time as agreed by the Parties, the financial manager shall submit an annual budget to the
Board for its approval in accordance with Section 8.3.
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11.3
|
Failure
to Agree.
|
If the Board is unable to agree on the
annual budget submitted by the financial manager prior to the commencement of a
particular Financial Year ("Relevant Financial
Year"), the Company shall
be operated in the Relevant Financial Year in accordance with the Budget
for the Financial Year immediately preceding the Relevant Financial Year with an
increase of 10% in all budgeted amounts.
SECTION
12 FINANCIAL, ACCOUNTING AND AUDITING
SYSTEM
|
12.1
|
Financial
and Accounting System.
|
The financial and accounting system of the Company
shall be formulated and adopted by the Board based on the recommendations of the
Financial Manager and shall be in accordance with the
provisions of relevant officially published PRC Law, the particular
circumstances of the
Company and, to the extent permitted by applicable Law, those methods and
principles that are consistent with international accounting standards and the
operating and financial procedures and requirements of the Parties
("Financial and
Accounting System"). The Financial and
Accounting System, and changes thereto, shall be filed with the relevant PRC
government departments for record.
|
12.2
|
Financial
Year.
|
The financial year of the Company
("Financial
Year") shall begin on
January 1 and end on December 31 of each year; provided, however, that the
first Financial Year of the Company shall commence on the Establishment Date and
end on December 31 of that calendar year and the final Financial Year of the
Company shall end on the date of dissolution of the Company.
|
12.3
|
Financial
Matters and Reporting.
|
|
(a)
|
All accounting vouchers, receipts,
statements and account books of the Company shall be maintained at the
Company's legal address and shall be written in Chinese with English
language notes appended
thereto.
|
|
(b)
|
The Company shall use the RMB as
its accounting unit. Cash, bank deposits and funds in other
currencies, as well as outstanding claims and debts, gains, expenses and
so forth in other currencies, shall be recorded in the actual currency in
which they are acquired, incurred, received or
disbursed, and converted into RMB for accounting
purposes.
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(c)
|
The Company shall open RMB and
foreign currency accounts with duly licensed financial
institutions. The Company may also open foreign currency
accounts outside of
the PRC in accordance with the Foreign Exchange
Regulations.
|
|
(d)
|
The Company shall adopt the
internationally used accrual basis and debit and credit accounting system
in the keeping of accounts and to the extent permitted by applicable Law,
those methods and
principles that are consistent with international accounting
standards.
|
|
(e)
|
The Company shall prepare
financial statements in accordance with the Financial and Accounting
System approved by the Board ("PRC Financial
Statements"). The PRC
Financial Statements
shall be prepared in Chinese and English (both language versions having
the same legal validity), shall be true and complete and shall fairly
represent the financial position of the Company as of the date of each
such statement and the results of operations for the fiscal
period covered thereby.
|
|
(f)
|
The Company shall also prepare
financial statements in a form acceptable under the US general accepted accounting
principles
("GAAP Statements"). GAAP Statements shall be prepared in
English and shall be
derived from and reconciled with the PRC Financial
Statements.
|
|
(g)
|
The Company shall submit quarterly
and annual Financial Statements to the Board within 20 Business Days after
the last day of each calendar quarter or calendar year. An
annual audit of the
books and statements of the Company shall be made by the Independent
Auditor, and reports of the audit shall be delivered to the Board and the
Parties within three (3) months after the last day of each calendar
year.
|
|
(h)
|
The Company shall submit the annual PRC Financial
Statements and the annual audit report of the Company to the finance and
taxation authorities and to other governmental
departments.
|
|
(i)
|
The Company shall also prepare and
submit monthly management accounts for the Company to each Party within 7 days after
the end of each calendar month, such monthly accounts to be prepared in
English and in a form acceptable under the international accounting
standards.
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(j)
|
The Company shall make allocations
from its after-tax profits to the Three Funds in such amount
decided by the Board in accordance with applicable
Law.
|
|
12.4
|
Independent
Auditor.
|
The Board shall select an Independent
Auditor to audit the Financial Statements of the Company and perform such other
accounting and financial duties as required by PRC Law and the
Board. The Independent Auditor selected by the Board shall be a
Sino-foreign joint venture accounting firm registered in the PRC that is capable
of performing accounting work meeting both PRC domestic accounting
standards and international accounting standards
and the procedures and requirements of the Parties. The initial auditor shall be PwC. If the Board determines that the
Independent Auditor is unable to meet such standards, it may replace such
Independent Auditor or
retain another auditor, at the Company's expense, to supplement or adjust the
work of the Independent Auditor or to perform specific accounting or auditing
tasks.
|
12.5
|
Audits
by the Parties.
|
Each Party shall have the right at any
time to retain independent accountants to audit the books and
records of the Company at its own expense (unless the results of any such audit
are significantly different from that conducted by the Independent Auditor and
are accepted by the Board, in which case the expense shall be borne by the Company). The
Company shall extend full cooperation to any such accountants and shall allow
them full access to the books and records of the Company.
|
12.6
|
Taxes.
|
|
(a)
|
The Company shall pay taxes in
accordance with the relevant officially published PRC
Law.
|
|
(b)
|
The Parties shall apply to obtain
the benefits for the Company, the Parties and all of their personnel of
all of the applicable tax exemptions, reductions, privileges and
preferences that are now or in the future become obtainable under the
Law of the PRC and
under any applicable treaties or international agreements to which the PRC
may now be or may hereafter become a
party.
|
|
(c)
|
The depreciation period for the
fixed assets of the Company shall be decided by the Board and reported to
the tax authorities
in accordance with the relevant provisions of PRC Law. If
accelerated depreciation is desired, the Company shall apply to the
relevant tax authorities for approval of accelerated depreciation for the
assets in question.
|
Equity
Joint Venture Contract
- 27
-
[Execution
Copy]
SECTION
13 FOREIGN EXCHANGE
|
13.1
|
Foreign
Exchange Matters.
|
All foreign exchange matters of the
Company shall be handled in accordance with the provisions of the Foreign
Exchange Regulations and the relevant officially published PRC
Law.
|
13.2
|
Foreign
Exchange Accounts.
|
The foreign exchange funds of the Company shall be
transferable into the PRC and deposited in the foreign exchange account or
accounts established by the Company with approved financial institutions within
or outside of the PRC in accordance with the Foreign Exchange
Regulations. All foreign exchange
payments of the Company shall be paid out of the above-mentioned foreign
exchange accounts in accordance with the Foreign Exchange Regulations after the
payment of any PRC taxes that may be applicable. Any fees or costs
(other than taxes) relating to the remittance
abroad of such payments shall be borne by the Company.
SECTION
14 PROFITS DISTRIBUTION
|
14.1
|
Profits
Distribution Policy.
|
The profits distribution policy of the
Company shall be determined by the Board and based on the IFRS
Statements. The distribution ratio is 50% to each Party
respectively.
SECTION
15 STAFF, WORKERS AND TRADE
UNION
|
15.1
|
Employment
Policies of the Company.
|
|
(a)
|
Such matters as the employment,
transfer, dismissal, resignation, wages, welfare benefits, labor
insurance, labor protection and labor discipline of the
staff and workers of the Company shall be handled according to applicable
PRC Law.
|
|
(b)
|
The Company shall sign individual
labor contracts with each of its staff and workers. The form of
the individual labor contract shall be filed with the Labor Bureau
for the record if required by applicable
Law.
|
Equity
Joint Venture Contract
- 28
-
[Execution
Copy]
|
(c)
|
The Company shall have the right
directly to recruit, hire and dismiss staff and workers. In all
cases, the Company shall employ only those staff and workers who are
sufficiently
qualified for employment, as determined through examinations, and staff
and workers may be hired provisionally for a probationary
period.
|
|
(d)
|
The salaries and welfare and other
benefits of all personnel of the Company shall be determined by the
Board in accordance
with the principles set forth herein. All personnel shall
receives salaries and welfare and other benefits from the Company
commensurate with their expertise and experience and in accordance with
the assumptions set forth in the Business
Plan.
|
|
(e)
|
The Company shall have the right
to impose the sanctions of warnings, demerits and salary reductions on the
staff and workers who violate the rules and regulations and labor
discipline of the Company in accordance with the applicable Law of
the
PRC. When the circumstances are serious, they may be
dismissed. The dismissal of staff and workers shall be reported
to the local labor department for the
record.
|
|
(f)
|
Such matters as the welfare
benefits, bonuses, labor protection and labor insurance of the staff and workers shall be
determined by the General Manager based on the recommendations of
the Financial Manager according to the specific
circumstances of the Company and with reference to relevant officially
published PRC Law, and shall be stipulated in the individual labor
contracts and various rules of the
Company.
|
|
(g)
|
In order to promote the economic
strength of the Company and reward productivity and effective management,
the Company may, consistent with the profitability of the Company,
from time to time
increase the wages of staff and workers and provide bonuses to any staff
and workers commensurate with their efforts, expertise and
experience. Increases in wages and bonuses shall be determined
by the Board upon the joint recommendation of the General Manager and the Financial Manager.
|
|
15.2
|
Trade
Union.
|
|
(a)
|
For so long as required by PRC
Law, the staff and workers of the Company shall have the right to
establish a trade union organization and conduct trade union activities in
accordance with applicable PRC
Law.
|
Equity
Joint Venture Contract
- 29
-
[Execution
Copy]
|
(b)
|
The trade union of the Company
shall represent the interests of the staff and workers. Its
tasks shall be to safeguard the rights and interests of the staff and
workers in accordance with PRC Law, to assist the Company in its
planning and rational
utilization of its bonus and welfare funds, to organize staff and workers
in political, professional, scientific and technical studies, to organize
cultural and sports activities, and to educate the staff and workers to
observe labor discipline and work hard to fulfill
the economic tasks of the
Company.
|
|
(c)
|
For so long as required by
applicable PRC Law, the Company shall pay each month an amount equal to
two percent of the total amount of the actual wages received by the PRC
staff and workers of
the Company for such month into the Company's trade union fund for such
trade union's use in accordance with the relevant procedures of the PRC
for the management of trade union
funds.
|
SECTION
16 INSURANCE
|
16.1
|
Insurance.
|
The Parties shall ensure that the
Company shall keep insured
at all times and maintain insurance policies in a sufficient amount and with
such coverage as are generally maintained by companies of the same standing and
in the same industry in the PRC. Such policies shall be sufficient to
cover liabilities that the Company may
reasonably be considered at risk in the course of their respective
business. The insurance shall be in the name of the Company, as
applicable, and any other Person having an insurable interest in the property of
the Company, as the case may
be.
XXXXXXX
00 XXXX, XXXXXXXXXXX AND
LIQUIDATION
|
17.1
|
Joint
Venture Term.
|
|
(a)
|
The term of operations of the
Company ("Joint Venture
Term") shall be
thirty years commencing on the Establishment
Date.
|
|
(b)
|
Prior to expiration of the Joint
Venture Term, or any
extension thereof, the Parties may agree to extend such term, subject to
approval by the Examination and Approval Authority and the relevant
requirements of Law. Negotiations for such extension shall
begin not later than one year prior to the expiration of the Joint
Venture Term (or extension thereof) of the Company and, subject to the
successful conclusion of such negotiations, an application for extension
shall be filed with the Examination and Approval authority not later than
six months prior to the expiration of the
Joint Venture Term.
|
Equity
Joint Venture Contract
- 30
-
[Execution
Copy]
|
17.2
|
Termination.
|
|
(a)
|
The Company shall be dissolved and
this Contract terminated in accordance with the procedures set forth in
the Articles of Association, the Joint Venture Law and other relevant PRC
Laws if any of the
conditions or events set forth below shall occur and be
continuing:
|
|
(i)
|
upon the motion of any Party, if
the Parties agree to dissolve the
Company;
|
|
(ii)
|
upon the motion of any Party, if
the Company sustains losses significantly in excess of those estimated in the Budget in two
consecutive years as a result of an Event of Force Majeure, making it
impossible for the Company to
operate;
|
|
(iii)
|
upon the motion of any Party, if
any Party is unable to perform any of its material obligations under this
Contract for six
consecutive months or more as the result of an Event of Force
Majeure;
|
|
(iv)
|
upon the motion of the
non-breaching Party, if any PRC Party fails to perform any of its material
obligations under this Contract or any of the Transaction Documents and
such failure is not
cured by the
breaching party within one month of the delivery of a written notice stating
specifically the manner in which the breaching Party has failed to perform
and if, in the reasonable opinion of the non-breaching Party, such
non-performance defeats the economic
objectives of this Contract and of the establishment of the Company or creates a material risk
of loss to the non-breaching Party or the Company, or materially and adversely affects
the value of the non-breaching Party's interest in the Company;
|
|
(v)
|
upon the motion of any affected
Party, if any government authority having authority over the Company
requires any provision of this Contract or any of the Transaction
Documents to be revised in such a way as to cause significant
adverse consequences
to the Company or any Party;
|
Equity
Joint Venture Contract
- 31
-
[Execution
Copy]
|
(vi)
|
upon the motion of any Party, if
either of the conditions set forth below fail to be fulfilled within 90
days after the execution date of this
Contractor at any
time thereafter;
|
|
(1)
|
all of the Transaction
Documents have been
signed by the parties thereto and have become effective in accordance with
the provisions thereof;
|
|
(2)
|
the Company has received and
obtained all Approvals which are required for the Company to perform the
business activities contemplated by this
Contract;
|
|
(vii)
|
upon the motion of any of the
non-bankrupt Parties, if a Party becomes bankrupt, is the subject
of proceedings for liquidation or dissolution, ceases to carry on business
or becomes unable to pay its debts as they become
due.
|
|
(viii)
|
upon the business license not being issued within 100 days after the execution date
of this Contract
|
|
(b)
|
Upon the motion of a Party to
dissolve the Company pursuant to Section 17.2(a), the Parties shall cause
their representatives on the Board to unanimously adopt a resolution to dissolve the
Company. The Board shall apply to the Examination and Approval
Authority for approval of such
dissolution.
|
|
(c)
|
After the Board resolves to
dissolve the Company, the Company and the Parties shall take all
reasonable steps to accomplish such dissolution in
accordance with relevant, officially published and publicly available
Laws.
|
SECTION
18 LIQUIDATION
PROCEDURES
|
18.1
|
Liquidation
of the Company.
|
|
(a)
|
Upon the adoption by the Board of
a motion to dissolve the Company, the Board shall immediately take steps to dissolve the
Company and liquidate its assets in accordance with the then applicable
PRC Law and the provisions of this Contract and the Articles of
Association.
|
Equity
Joint Venture Contract
- 32
-
[Execution
Copy]
|
(b)
|
If the termination of the Company
results from its merger, consolidation or other business combination
with another Person, the Assets and liabilities of the Company shall be
transferred, assumed and valued as provided in the contractual
arrangements with respect to such merger, consolidation or other business
combination and applicable PRC
Laws.
|
|
18.2
|
Liquidation
Committee.
|
|
(a)
|
Upon the early termination of the
Company, the Board shall formulate liquidation procedures and principles,
publish an announcement of the liquidation in accordance with relevant
regulations, provide written notice of the liquidation to
creditors of the Company and establish a liquidation committee
("Liquidation
Committee"). The Liquidation
Committee shall be composed of five members. Party A shall have the right to appoint
two members and Party B shall have the right to appoint
three members of the Liquidation
Committee. Within ten Business Days after the Board adopts a
motion to dissolve the Company, each Party shall deliver a notice to the
other Parties stating the names of the members that it has appointed to the Liquidation
Committee pursuant to its right set forth in this Section 18.2(a) and
shall attach to such notice documentation evidencing that each such member
has consented to serve on the Liquidation Committee. If any
Party ("Non-Appointing
Party") fails to deliver such notice
within such ten Business Day period, then such Party shall forfeit its
right to appoint any members to serve on the Liquidation Committee and
each Party that has delivered such a notice shall have a proportional
right to appoint the
remaining members to the Liquidation Committee such that the total number
of members shall equal five. Each member shall
have one vote. A quorum for convening a meeting of the
Liquidation Committee shall be five members. If such quorum
is not present within
one hour after the time appointed for the commencement of the meeting, the
meeting shall be adjourned to such place and time (which is at least ten
days later or such earlier date as shall be agreed by all of the members
of the Liquidation Committee) as the members who
did attend shall decide. If a quorum is not present within one
hour after the time appointed for such adjourned meeting, any number of
members of the Liquidation Committee shall constitute a
quorum. All decisions of the Liquidation Committee shall be
adopted by simple majority vote. The Company shall deliver to each
member of the Liquidation Committee written notice of each meeting of the
Liquidation Committee at least ten Business Days prior to the date of such
meeting or such shorter period as agreed by
all of the members of the Liquidation
Committee.
|
Equity
Joint Venture Contract
- 33
-
[Execution
Copy]
|
(b)
|
The tasks of the Liquidation
Committee shall be to conduct a thorough survey of the property, claims
and debts of the Company, draw up a balance sheet and inventory of
assets, propose a
basis for the valuation of the Company and formulate a liquidation plan,
all of which shall be implemented after it has been submitted to and
adopted by the Board and shall also be submitted to the Examination and
Approval Authority for the
record.
|
|
(c)
|
During the period of liquidation,
the Liquidation Committee shall represent the Company in any legal
proceeding.
|
|
(d)
|
The liquidation expenses and the
remuneration to the members of the
Liquidation
Committee shall
be paid with priority
from the existing
assets of the Company. The remaining proceeds shall be paid
in the following order: (i) wages and labor insurance fees of the staff
and workers, (ii) state taxes, and (iii) other liabilities, and (iv) to the Parties in
accordance with the principle in 18.2
(e).
|
|
(e)
|
If the Parties decide to liquidate
the Company in accordance with this Contract, after the statutory
expenses and all the unpaid debts to the third parties are paid, any
remaining proceedings shall be distributed in a pro rata basis in accordance with the
shareholding percentages of the
Parties..
|
|
(f)
|
After the liquidation of the
Company is completed, the Liquidation Committee shall promptly submit a
report thereon to a meeting of the Board for approval and submission to
the Examination and
Approval Authority for the record. The Liquidation Committee
shall then carry out the procedures for turning in the Company's business
license and canceling its registration at SAIC, and at the same time, make
a public announcement of such actions.
|
SECTION
19 AMENDMENT AND MODIFICATION OF THE
CONTRACT
|
19.1
|
Amendment.
|
Amendments to this Contract must be made
by a written agreement signed by each Party in both Chinese and English texts,
each of which shall have equal validity and legal effect, and shall be
submitted to the
Examination and Approval Authority for approval before they can become
effective.
Equity
Joint Venture Contract
- 34
-
[Execution
Copy]
|
19.2
|
Changes
in Law.
|
If, after the date this Contract is
signed, any central or local government organ of the PRC makes any change in any
provision of any PRC Law,
including amendment, supplementation or repeal of an existing Law, or
introduction of a different interpretation or method of implementation of an
existing Law (each, a "Change"), or promulgates a new Law (each, a
"New
Provision"), the following
shall apply:
|
(a)
|
If a Change or a New Provision is
more favorable to the Company or any of the Parties than the relevant Law
in effect on the date this Contract was signed (and the other Party is not
materially and adversely affected thereby), the Company and the Parties shall promptly apply to
receive the benefits of such Change or New Provision. The
Company and the Parties shall use their best efforts to cause such
application to be approved.
|
|
(b)
|
If, after the Approval Date and
because of such Change or New Provision, the economic benefits
of the Company or of any Party under this Contract are materially and
adversely affected, directly or indirectly, then this Contract shall
continue to be implemented in accordance with its original
terms. If the adverse effect on the Company's or on any
Party's economic interests cannot be resolved pursuant hereto, upon notice
by the affected Party to the other Party, the Parties shall consult
promptly and make all such amendments to this Contract as are required to
maintain the affected Party's economic
benefits hereunder provided that such amendments shall be made without
prejudicing the other party, or at least by equitably adjusting the
benefits for each Party.
|
SECTION
20 LIABILITY FOR BREACH OF
CONTRACT
|
20.1
|
Breach
of Contract.
|
Subject to the provisions of this Section
20, a Party shall be in breach of this Contract (a) if it fails to perform, or
suspends its performance of, its obligations under this Contract, and if it does
not commence correction of such failure within 30 days, and complete such correction within 60
days, of receipt of written notice thereof from any other Party or the Company,
which notice must specify the nature of the alleged breach in reasonable detail;
or (b) if any of the representations and warranties made by such Party is untrue or inaccurate in
any material respects.
|
20.2
|
Liability
for Breach of Contract.
|
Equity
Joint Venture Contract
- 35
-
[Execution
Copy]
|
(a)
|
If the Company or a Party suffers
any cost, liability or loss, including lost profits of the Company but not
including any other consequential losses of whatsoever nature, as a result of
a breach of this Contract by any Party, the Party in breach shall
indemnify and hold the Company and the non-breaching Party or Parties
harmless in respect of any such cost, liability or loss, including
interest paid or lost as a result thereof and
attorneys' fees.
|
|
(b)
|
Without limiting the generality of
the foregoing, each Party ("Indemnifying
Party") shall
indemnify, defend and hold harmless the other Party and the Company
("Indemnified
Party") from and
against all claims,
losses, liabilities, damages, deficiencies, judgments, assessments, fines,
settlements, costs or expenses (including interest, penalties and fees,
loss of profits by the Company, expenses and disbursements of attorneys,
experts, personnel and consultants incurred by any Indemnified
Party in any action or proceeding between the Indemnifying Party and any
Indemnified Party or between any Indemnified Party and any third party, or
otherwise) based upon, arising out of, relating to or otherwise in respect
of any inaccuracy in or any breach of
any representation, warranty, covenant or agreement of the Indemnifying
Party contained in this Contract or in any documents or other evidence
delivered by the Indemnifying Party pursuant to this
Contract.
|
SECTION
21 FORCE MAJEURE
|
21.1
|
Occurrence
and Consequences of an Event of Force Majeure.
|
|
(a)
|
A Party that cannot perform its
obligations under this Contract ("Hindered
Party") in full or in
part as a direct result of an event that is unforeseeable by the Hindered
Party and of which
the occurrence and consequences cannot be prevented or avoided by the
Hindered Party, such as earthquakes, typhoons, floods, fires and other
natural disasters, wars, insurrections and similar military actions, civil
unrest and strikes, slowdowns, epidemics, embargoes, expropriation,
injunctions or other restraints and actions of government (provided that
the government entity involved is not the department in charge of the
Hindered Party or its Affiliate) ("Event of Force
Majeure"), shall not
be deemed to be in
breach of this Contract if all of the following conditions are
met:
|
|
(i)
|
the Event of Force Majeure was the
direct cause of the stoppage, impediment or delay encountered by the
Hindered Party in performing its obligations under this
Contract;
|
Equity
Joint Venture Contract
- 36
-
[Execution
Copy]
|
(ii)
|
the Hindered Party used its best efforts to
perform its obligations under this Contract and to reduce the losses to
the other Party or to the Company arising from the Event of Force Majeure;
and
|
|
(iii)
|
at the time of the occurrence of
the Event of Force Majeure, the Hindered Party informed the other
Party and the Company, providing written information on such event within
ten Business Days of its occurrence, including a statement of the reasons
for the delay in implementing or partially implementing this
Contract.
|
|
(b)
|
If an Event of Force Majeure shall
occur, the Parties shall discuss and decide whether this Contract should
be amended in light of the impact of the event upon the implementation
hereof, and whether the Hindered Party should be partially or fully freed
from its obligations
hereunder.
|
SECTION
22 GOVERNING LAW AND DISPUTE
RESOLUTION
|
22.1
|
Governing
Law.
|
The formation, validity, interpretation,
execution, amendment and termination of and settlement of disputes under this
Contract shall all be governed by the officially published and publicly available Laws of the
PRC. When the officially published and publicly available Laws of the
PRC do not cover a certain matter, international legal principles and practices
shall apply.
|
22.2
|
Dispute
Resolution.
|
|
(a)
|
Any Dispute shall be
resolved through
friendly consultation. Such consultation shall begin
immediately after one Party has delivered to the other Party a written
request for such consultation stating specifically the nature of the
Dispute. If within 30 days following the date on which such notice is delivered the
Dispute cannot be resolved, the Dispute shall be referred to, and finally
resolved by, arbitration upon the request of any Party with notice to the
other Party.
|
|
(b)
|
The arbitration shall be conducted
in Beijing under the auspices of China International Economic Trade
Arbitration Commission and in accordance with
its currently
effective rules. However, if such rules are in
conflict with the provisions of this Section 22, the provisions of this
Section 22 shall prevail. The arbitration proceedings shall
be conducted in English and
Chinese.
|
Equity
Joint Venture Contract
- 37
-
[Execution
Copy]
|
(c)
|
The arbitral award shall be final
and binding upon the
Parties.
|
|
(d)
|
In order to preserve its rights
and remedies, any Party shall be entitled to seek preservation of property
in accordance with
Law from any court of competent jurisdiction or from the arbitration
tribunal pending the final decision or award of the arbitration
tribunal. During the period when the Dispute is being resolved,
except for the matters being disputed, the Parties shall in all other
respects continue their implementation of this
Contract.
|
|
(e)
|
Each Party irrevocably consents to
the service of process, notices or other papers in connection with or in
any way arising from the arbitration or the enforcement of any arbitral award, by use of any
of the methods and to the addresses set forth for the giving of notices in
Section 24.5. Nothing contained herein shall affect the right
of any Party to serve such processes, notices or other papers in any other
manner permitted by applicable
Law.
|
SECTION
23 REPRESENTATIONS AND
WARRANTIES
|
23.1
|
Representations
and Warranties of the Parties.
|
Each Party represents and warrants to
the other Party, with respect to itself, on the signing date of this Contract,
as follows:
|
(a)
|
Such Party is a legal entity duly organized,
validly existing and in good standing under the laws of the PRC, in the
case of Party
A, and under the laws
of HK, in the case
of Party
B, and has the
corporate power and lawful authority to own or possess, lease and
operate its assets
and to carry on its business as now being and as previously
conducted.
|
|
(b)
|
Such Party has the full legal
right, power and authority required to enter into this Contract and to
perform fully its obligations hereunder. This Contract has been
duly authorized,
executed and delivered by each Party and, assuming the due authorization,
execution and delivery by the other Party and approval by the Examination
and Approval Authority, constitutes the valid and binding obligation of
each Party enforceable against it in accordance with
its terms.
|
Equity
Joint Venture Contract
- 38
-
[Execution
Copy]
|
(c)
|
Except for the requirements for
the obtaining of a Foreign Investment Enterprise Approval Certificate and
issuance of the Business License and as otherwise set forth in this
Contract, no filings with, notices to, or license, permits,
consents, authorizations, qualifications, orders or other approvals of any
governmental body or any other Person are necessary to be obtained by such
Party for its execution, delivery and performance of this Contract or for
the establishment of the
Company.
|
|
(d)
|
Such Party is, has been and will
continue to be in compliance with all applicable Law of its home
jurisdiction and does not know of any circumstances that would be a breach
of such Law.
|
|
(e)
|
Neither the execution of this
Contract, nor the
performance of such Party's obligations hereunder, will conflict with, or
result in a breach of, or constitute a default under, any provision of the
memorandum and articles of association, business license or by-laws of
such Party, as the case may be, or any law, rule,
regulation, authorization or approval of any government agency or body, or
of any contract or agreement to which such Party is a party or is subject
(including, in the case of Party B, contracts existing on the date
of this Contract
relating to Party
B' other investments in the
PRC).
|
|
(f)
|
As of the date of this Contract,
there is no lawsuit, arbitration or legal, administrative or other
proceeding or governmental investigation pending or, to the best knowledge
of such Party, threatened against such Party with
respect to the subject matter of this Contract or that would affect in any
way such Party's ability to enter into or perform this
Contract.
|
|
(g)
|
All documents, statements and
information of or derived from any governmental body in the possession of such
Party relating to the transactions contemplated in this Contract have been
disclosed to the other Party, and no document previously provided by such
Party to any other Party contains the untrue statement of material fact
or omits to state any material fact
necessary in order to make the statements contained therein not
misleading.
|
|
23.2
|
Representations
and Warranties about
the Contribution Assets Status
of
Party
A
|
Except for those disclosed to Party B,
Party A has full ownership
upon the Contributed Assets. No Encumbrance has been established upon the
Contributed Assets. Party A has not established any mortgage, pledge and any
other assurance.
Equity
Joint Venture Contract
- 39
-
[Execution
Copy]
SECTION
24 EFFECTIVENESS OF THE CONTRACT AND
MISCELLANEOUS
|
24.1
|
Articles
of Association. The
Articles of
Association have been concluded in accordance with the various principles
stipulated in, and in the form attached to, this Contract and are an
integral part of this
Contract.
|
|
24.2
|
Approval
of Contract and Articles of Association. This Contract and the
Articles of
Association shall be submitted to the Examination and Approval Authority
and shall come into force on the Approval
Date.
|
|
24.3
|
Survival. The agreements of the
Party contained in Section 7, 20, 22, and this Section 24.3shall continue
to survive after the
expiration or termination of this Contract and the dissolution of the
Company.
|
|
24.4
|
Language. This Contract is
written in Chinese in six
counterparts.
|
|
24.5
|
Notices. Each notice, demand
or other communication given, delivered or made under this Contract
shall be in writing
and delivered or sent to the relevant Party or Parties at the address or
fax number set out below (or such other address or fax number as the
addressee has by ten days' prior written notice specified to the other
Party).
|
If to the Party A: China Yellow River
Television Station
|
Attention:
|
Mr. Jia
Bin
|
|
Telephone
Number:
|
(86)-0351-8302574
|
|
Fax:
|
(86)-0351-4042780
|
|
Address:
|
Xx.
000, Xxxxxx Xxxxxx, Xxxxxxx Xxxx,
|
|
Xxxxxx
Xxxxxxxx;
|
|
If to Party B: 广告网络有限公司(Advertising
Networks
Limited)
|
Attention:
|
Xx. Xx
Shuangqing
|
|
Telephone
Number:
|
(00)-000-00000000
|
|
Fax:
|
(00)-000-00000000
|
|
Address:
|
Suite A-16E, Oriental Kenzo, Xx.
00,
|
Xxxxxxxxxxxxx Xxxxxx, Xxxxxxxxx
District, Beijing.
Each notice, demand or other communication to be given,
delivered or made pursuant to this Section 24.5 shall be deemed so given,
delivered or made (i) if sent by registered or certified mail within one country
on the third Business Day after such notice, demand or communication, addressed as above provided, is
delivered to a post office and a receipt therefor is issued thereby, (ii) if
sent by registered or certified mail to another country on the tenth Business
Day after such notice, demand or communication, addressed as above provided, is delivered to a post
office and a receipt therefor is issued thereby, (iii) if sent by courier or
personnel delivery, when such notice, demand or communication is delivered to
the appropriate address as above provided, and (iv) if sent by facsimile, when such notice, demand or
communication is transmitted to the appropriate facsimile number as above
provided and the relevant report for the successful transmission is
given.
Equity
Joint Venture Contract
- 40
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[Execution
Copy]
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24.6
|
Severability. In the event any one
or more of the provisions contained in this Contract should be
held under any applicable Law to be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The Parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
|
|
24.7
|
Waiver. No waiver of any
provision of this Contract shall be effective unless set forth in a
written instrument signed by the Party waiving such
provision. No failure or delay by a Party in executing any
right, power or remedy under this Contract shall operate as a waiver thereof, nor
shall any single or partial exercise of the same preclude any further
exercise thereof or the exercise of any other right, power or
remedy. Without limiting the foregoing, no waiver by a Party of
any breach by any other Party of any provision hereof shall
be deemed to be a waiver of any subsequent breach of that or any other
provision hereof.
|
|
24.8
|
Interpretation.
|
|
(a)
|
"Include," "including," "are
inclusive of" and similar expressions are not expressions of limitation
and shall be
construed as if followed by the words "without
limitation."
|
|
(b)
|
References to any government
ministry, agency, department or authority shall be construed as references
to the duly appointed successor ministry, agency, department or authority
of such ministry,
agency, department or authority where the context
permits.
|
|
(c)
|
A reference in this Contract to a
document "in the agreed form" is to a document agreed by the Parties and
initialed by them for identification
purposes as of the date of this Contract.
|
[THE REMAINDER OF
THIS PAGE IS INTENTIONALLY LEFT BLANK]
Equity
Joint Venture Contract
- 41
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[Execution
Copy]
IN WITNESS WHEREOF, the Parties have
caused their respective representatives to execute this Contract as of the date
first above written.
|
China Yellow River Television
Station
(Company
Seal)
|
|||
|
By:
|
|||
| Name: | |||
| Title: | |||
|
(Advertising Networks Limited)
|
|||
|
By:
|
|||
| Name: | |||
| Title: Chairman | |||
|
By:
|
|||
| Name: Li Shuangqing | |||
| Title: CEO | |||
Equity
Joint Venture Contract
- 42
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[Execution
Copy]
APPENDIX
LIST OF
CONTRIBUTED ASSETS
Equity
Joint Venture Contract
- 43
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