EX-10.1 5 nova8kex101022803.txt JOINT-VENTURE CONTRACT Exhibit 10.1 Joint-venture Contract Of Baoding Pascali Broadcasting Cable TV Integrated Information Networking Company Limited between Baoding Pascali Multi-media Transmission Networking Co., Ltd. and Solar Touch Limited July, 1999 Baoding City, Heibei Province, China CONTENT CHAPTER 1 GENERAL PROVISIONS 4 CHAPTER 2 THE PARTIES TO THE JOINT VENTURE 4 CHAPTER 3 THE COMPANY 5 3.1 Incorporation 3.2 Joint Venture Information 3.3 Obedience of Law 3.4 Form of Organization CHAPTER 4 OBJECTIVE, SCOPE AND SCALE OF BUSINESS 6 4.1 Objective of Business 4.2 Scope of Business 4.3 Scale of Business CHAPTER 5 TOTAL AMOUNT OF INVESTMENT AND 6 REGISTERED CAPITAL 5.1 Total Investment 5.2 Registered Capital 5.3 Methods of Contribution 5.4 Schedule of Contribution 5.5 Alteration of Registered Capital CHAPTER 6 RESPONSIBILITIES OF EACH PARTY TO 8 THE JOINT VENTURE 6.1 Responsibilities of Party A 6.2 Responsibilities of Party B CHAPTER 7 BOARD OF DIRECTORS 9 7.1 Establishment 7.2 Composition, Appointment and Replacement of Directors 7.3 Approval of Resolution 7.4 Legal Representative 7.5 Meeting of the Board 7.6 Annual General Meeting 7.7 Authorized Representative 7.8 Notice of Meeting 7.9 Reminder of Meeting 7.10 Director's Fees and Expenses of Meeting CHAPTER 8 OPERATION AND MANAGEMENT 12 8.1 Reporting System of General Manager 8.2 General Manager and Departments 8.3 Dismissal CHAPTER 9 PREPARATORY ISSUES 13 9.1 Amortization 9.2 Asset Evaluation 9.3 Profit Distribution CHAPTER 10 LABOR MANAGEMENT 13 10.1 Employment Contract 10.2 Remuneration Package CHAPTER 11 TAXATION, FINANCE AND ACCOUNTING 13 11.1 Tax Payment by Company 11.2 Tax Payment by Personnel 11.3 Reserve 11.4 Accounting Year 11.5 Audit 11.6 Financial Report CHAPTER 12 TERM OF JOINT VENTURE 15 CHAPTER 13 PROPERTIES UPON EXPIRY 15 OF JOINT VENTURE CHAPTER 14 INSURANCE 15 2 CHAPTER 15 CONFIDENTIALITY 15 15.1 Definition 15.2 Scope of Confidentiality CHAPTER 16 AMENDMENT & TERMINATION 16 OF THE CONTRACT 16.1 Amendment 16.2 Termination 16.3 Compensation CHAPTER 17 LIABILITIES FOR BREACH OF THE CONTRACT 17 17.1 Breaching Events 17.2 Liabilities CHAPTER 18 FORCE MAJEURE 17 CHAPTER 19 APPLICABLE LAW 18 CHAPTER 20 SETTLEMENT OF DISPUTES 18 20.1 Arbitration 20.2 Continuance of the Contract CHAPTER 21 LANGUAGE OF THE CONTRACT 18 CHAPTER 22 EFFECTIVENESS AND MISCELLANEOUS 18 22.1 Effectiveness 22.2 Approval 22.3 Notices 22.4 Signing 3 CHAPTER 1 GENERAL PROVISIONS In accordance with the "Law of the People's Republic of China on Chinese-Foreign Equity Joint Venture" (the "Equity Joint Venture Law") and the "Company Law of the People's Republic of China" (the "Company Law") and other relevant Chinese laws (the "Chinese laws") and regulations of the People's Republic of China ("China"), Baoding Pascali Multi-media Transmission Networking Co., Ltd. and Solar Touch Limited, adopting the principle of equality and mutual benefits, through friendly consultation and discussion, have entered into an agreement ("the Contract") for the establishment of a joint venture named Baoding Pascali Broadcasting Cable TV Integrated Information Networking Co. Ltd. ("the Company") in Baoding City, Hebei Province, China. CHAPTER 2 THE PARTIES TO THE JOINT VENTURE 2.1 THE PARTIES TO THE JOINT VENTURE The parties to the joint venture and their legal representative or company representative are as follows: (1) Party A: Baoding Pascali Multi-media Transmission Networking Co., Ltd.. Registration Place: Baoding City, Hebei Province, China Legal Representative: TAN Zu-ping Nationality: China Position: Chairman Legal Address: Block D, Chuang Ye Centre, State Gaoxin District, Baoding, Heibei Province, China (2) Party B: Solar Touch Limited Registration Place: British Virgin Island Legal Representative: ZHAO Bing Nationality: China Position: Chairman Legal Address: Suite 1101-02 Asia Pacific Finance Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong 4 CHAPTER 3 THE COMPANY 3.1 INCORPORATION Party A and Party B agrees to establish the joint venture Baoding Pascali Broadcasting Cable TV and Integrated Information Networking Co., Ltd. in accordance with the Equity Joint Venture Law and other relevant company laws of the People `s Republic of China. The date of issue of the business license shall be the date of the establishment of the Company (the "Establishment Day"). 3.2 JOINT VENTURE INFORMATION The legal name and address of the joint venture are: Name in Chinese: Name in English: Baoding Pascali Broadcasting Cable TV Integrated Information Networking Co. Ltd. Legal Address: High and New Technology Development Zone, Baoding City, Hebei Province, China 3.3 OBEDIENCE OF LAWS All activities of the Company in China shall follow the published laws and regulations of China (generally called "Chinese laws"). All rights and interests of the Company are protected by the Chinese laws. 3.4 FORM OF ORGANIZATION The Company is a limited liability company. When one party has completely contributed its own amount of the Company's registered capital stipulated in the Contract, the party shall not be demanded to further provide any fund by funding, loans, guarantees or other kinds of financing to the Company or for the Company. The Company shall be responsible for its own liabilities or other obligations with its own assets. Both parties do not take any responsibility for any individual or entity for the reason of the Company's own liabilities or obligations. The profit and interest of the Company are distributed in proportion to the respective capital contribution from the parties ("contributing proportion"). The parties take the loss risk of the Company with the limitation of the respective capital contribution of each party. 5 CHAPTER 4 OBJECTIVE, SCOPE AND SCALE OF BUSINESS 4.1 OBJECTIVE OF BUSINESS The objective of the Company is to implement advanced scientific management skills with the advantage of advanced multi-media transmission network as well as assure the shareholders of a reasonable return from the social and economic benefit through first class services. 4.2 SCOPE OF BUSINESS The Business scope of the Company includes: development and construction of broadband interactive multimedia information network, telecom network products, audio transmission, image transmission, data transmission; and development of repair techniques of cable TV equipment and electric appliances. Foreign party is not allowed to touch on broadcasting which shall be operated solely by the Chinese party. 4.3 SCALE OF BUSINESS The scale is the construction of an interactive optical fiber cable network eventually linked to the distribution system of the subscribers. Backbone ring-network's length is about 700 km whilst village cables linked from county to village (or with over 500 subscribers) are about 3000 km. CHAPTER 5 TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL 5.1 TOTAL AMOUNT OF INVESTMENT The total amount of investment of the joint venture is One Hundred Twenty Two Million Forty Hundred and Twenty Five Thousand in Renminbi (RMB122,425,000; equals to USD14,800,000). 6 5.2 REGISTERED CAPITAL The registered capital is Seventy Million in Renminbi (RMB70,000,000; equals to USD8,460,000). In the registered capital: (1) The contribution of Party A is Thirty Five Million and Seven Hundred Thousand in Renminbi (RMB35,700,000; equals to USD4,310,000), being 51% of the registered capital. (2) The contribution of Party B is Thirty Four Million and Three Hundred Thousand in Renminbi (RMB34,300,000; equals to USD4,145,000), being 49% of the registered capital. 5.3 METHODS OF CONTRIBUTION (1) The parties shall make the contribution to the Company in the following methods: (a) Party A: Network and related equipment worth Twenty One Million and Seven Hundred Thousand in Renminbi (RMB21,700,000; equals to USD2,622,600); intangible asset (franchise, goodwill) worth Fourteen Million in Renminbi (RMB14,000,000; equals to USD1,692000); (b) Party B: In cash of Four Million and One Hundred and Fourteen Thousand in US Dollars (USD4,140,000; equals to RMB500,350) (2) The difference between the total investment and the registered capital will be loaned by the shareholders (RMB30,000,000 in proportion to the investment of Party A and B) and bank or other financial institutes (RMB22,420,000); 5.4 SCHEDULE OF CONTRIBUTION (1) RMB70m will be paid by two instalments by both parties in proportion to their contributions one month after the establishment of the joint venture. 5.5 ALTERATION OF REGISTERED CAPITAL 7 The registered capital of the Company can be altered or transferred by either party only after ALL of the following conditions are met: (1) Each has consented to the alteration or transfer in writing; (2) The Board has unanimously passed the alteration or transfer; and (3) The approving authorities has approved the alteration or transfer in writing. Either party has the priority in purchasing the capital contributed by the other party. CHAPTER 6 RESPONSIBILITIES OF EACH PARTY TO THE JOINT VENTURE 6.1 RESPONSIBILITIES OF PARTY A Beside the obligations under the Contract, Party A still has the following responsibilities: (1) Responsible for the establishment of the joint venture, getting all the official approvals related to the establishment of the joint venture from the concerned authorities in China, and transact all registrations related to the establishment of the joint venture. Party A also obtains all licenses, permits, approvals and cooperation of the concerned authorities in China, all of those are necessary for operating the joint venture; (2) Assist Party B in registering foreign exchange of RMB; (3) Make contribution in full on schedule in terms of unsecured capital without any liabilities or contingent liabilities; (4) Ensure the Company of the right of operation, development and profit gain, as well as obtaining government approvals. (5) Assist with the implementation of the favorable terms and the approval of documents by the approving authorities in accordance with the favorable terms of Hebei Province and Baoding State High and New Technology Industry Development Zone of the State. 8 (6) Party A should not engage in businesses that are similar and competitive to that of the Company. 6.2 RESPONSIBILITIES OF PARTY B Beside the obligations under the Contract, Party B still has the following responsibilities: (1) Make the contribution in full in cash on schedule in accordance with clause 5.2 to 5.4; (2) Provide on schedule all credentials and relevant documents for the establishment of the Company; (3) Conduct seriously joint venture documents like the Contract, Articles of association, assets evaluation, CHAPTER 7 BOARD OF DIRECTORS 7.1 ESTABLISHMENT The Board is established on the date of the Establishment Day. 7.2 COMPOSITION, APPOINTMENT AND REPLACEMENT OF DIRECTORS (1) The Board comprises 7 directors. Party A appoints 4 directors and Party B appoints 3 directors. Party A appoints the Chairman of the Board whilst Party B appoints the Vice-Chairman. (2) The term of the member of the Board is four (4) years. The directors appointed by the respective party can be appointed for the next term. 9 7.3 APPROVAL OF RESOLUTION The Board is the highest authority of the Company. The Board executes the authority of making policy and leading the Company through passing the resolutions. Following resolutions must be passed unanimously by the Board:- 1. Amendment of Article of Association; 2. Winding-up of the Company; 3. Allocation of registered capital; 4. Transfer of the shares of the Company by one or more parties; 5. Transfer of the shares of the Company as security by one or more parties; 6. Mergers or divestitures; 7. Transfer of assets to the Creditor as security 7.4 LEGAL REPRESENTATIVE The Chairman of the Board is the legal representative of the Company. Should the Chairman be unable to exercise his responsibilities, the Vice-Chairman shall act on the Chairman's behalf. Should the Vice-Chairman also be unable to exercise his responsibilities, one director shall be elected by the Board to take the duties. 7.5 MEETING OF THE BOARD (1) The Board shall convene at least one meeting every year at the registered office or a designated venue. The Chairman shall chair the meeting of the Board. Should three or more directors submit the written proposal to the Chairman or the Vice-Chairman of the Board asking for discussing the described matters, the Chairman or the Vice-Chairman who received the proposal shall convene a temporary meeting of the Board to discuss such matters. (2) Written notice of meeting stating place, time and agenda should be dispatched to the Board members at least twenty (20) days before the date of meeting. (3) Minutes of meeting should be filed. 10 7.6 ANNUAL GENERAL MEETING (1) For officially convening, the quorum for Annual Board meeting or Temporary meeting shall be at least five (5) members present in person or by authorized representative. Each director has one vote. 7.7 AUTHORIZED REPRESENTATIVE Should any director be unable to attend the meeting of the Board to exercise his right or perform his duty, the director can authorize a representative in writing to attend, vote and perform his duty. 7.8 NOTICE OF MEETING Should the Board fails to pass any major resolutions regarding legal proceedings, regulations or significant terms of this Contract owing to the fact that neither are the directors of one or more parties able to attend the meeting nor do they authorize a representative, then other parties shall send reminder of meeting to the absent directors and the parties who authorize the absent directors to ensure that they attend the meeting on schedule. 7.9 REMINDER OF MEETING The reminder stated in 7.8 should be sent out by courier at least thirty (30) days before the date of meeting stating clearly that the director should reply in writing within twenty (20) days from the date of receipt of the reminder whether he/she is able to attend the meeting. If the director fails to reply, then he/she is considered as abandoning. The directors authorized by both parties can convene a Special Board meeting. Even if there is insufficient quorum, resolutions can still be passed through a unanimous consent of the Special Board meeting. 7.10 DIRECTOR'S FEES AND EXPENSES OF MEETING Directors not engaged in the management of the Company should not receive any Director's fees from the Company except with prior consent of the Board. The decision as to the remuneration for non-executive directors will be made by the Board. The Company shall be responsible for all expenditure of transportation, staying, living and local transportation of the directors who attend the meeting of the Board. 11 CHAPTER 8 OPERATION AND MANAGEMENT 8.1 REPORTING SYSTEM OF GENERAL MANAGER The Company shall establish a joint managerial institution which shall be responsible for its daily operation and management. A General Manager proposed by Party A shall be in charge of the joint managerial institution. There will be also two (2) Assistant General Manager proposed by Party A and B respectively. Both general manager and assistant general managers are appointed by the Board on a 3-year renewable term. 8.2 GENERAL MANAGER AND DEPARTMENTS The major responsibilities of general manager are as follows: (1) Besides carrying out the decisions of the Board, the general manager also organizes and be in charge of the Company's daily operation and management. Documents of major issues have to be signed jointly by the general manager and assistant general managers. Other issues will also be signed jointly in accordance with the decision passed by 5/7 of the Board members. (2) Department heads will be recruited to assist both general manager and assistant general managers in management. (3) Besides the department heads, there will also be Chief Engineer, Chief Accountant and Auditor. Chief Engineer and Auditor will be proposed by Party A whilst Chief Accountant will be proposed by Party B. The appointment and dismissal of these posts will be decided by the Board. 8.3 DISMISSAL The Board can dismiss the general manager or assistant general managers should they be charged of serious frauds or misconducts. 12 CHAPTER 9 PREPARATORY ISSUES 9.1 AMORTIZATION The scope and amount of the preparatory expenses incurred by the Company can be amortized by 5 years before the expiration of the joint venture. 9.2 ASSET EVALUATION Both parties agree to fix the date of asset evaluation on June 30, 1999. 9.3 PROFIT DISTRIBUTION Both parties work out their own profit distribution upon the contribution of capital to the Company. CHAPTER 10 LABOR MANAGEMENT 10.1 EMPLOYMENT CONTRACT The Company shall have its own right of employment, dismissal, determining remuneration package, insurance, welfare benefits and gratuities in China in accordance with the Chinese laws. For recruitment purpose, the Board shall enact recruitment rules while the Company and its labor union shall draft up employment contract which should finally be filed with the labor authority. 10.2 REMUNERATION PACKAGE The Board shall decide the wages and remuneration of the management proposed by both parties in accordance with the Chinese laws. CHAPTER 11 TAXATION, FINANCE AND ACCOUNTING 11.1 TAX PAYMENT BY THE COMPANY 13 The Company shall pay taxes and enjoy preferential treatment in accordance with the stipulations of the Chinese laws. 11.2 TAX PAYMENT BY PERSONNEL All personnel shall pay individual income taxes in accordance with the Chinese laws. 11.3 RESERVE The Company is entitled annually to reserve fund, enterprise development fund and staff welfare fund. The entitlement will be determined by the Board according to the Company's financial status. 11.4 ACCOUNTING YEAR The Company shall adopt the calendar year as its accounting year, from January 1st to December 31st of the calendar year as one accounting year. All account evidences, invoices and accounts shall be recorded in Chinese. 11.5 AUDIT (1) The Company shall appoint an accounting firm that is registered in China to conduct annual audit to the Company's accounts and statements. Upon completion of audit, the domestic registered accounting firm shall submit the fiscal reports to the Board, general manager and assistant general managers. (2) Party B has the right at any time appoint international accounting firm to audit the Company's accounts and records, or other documents related to the Company's accounts. The related fees shall be borne by Party B. 11.6 FINANCIAL REPORTS The Company shall (starting from the first complete calendar quarter since the Establishment Day) prepare and submit the un-audited annual financial statements and fiscal reports (balance sheet, profit and loss account, and profit distribution proposal) to the Board for review. 14 CHAPTER 12 TERM OF THE JOINT VENTURE (1) The operation term of the joint venture is twenty (20) years starting from the Establishment Day. (2) Should both parties intend to extend the operation term of the Company, an application shall be submitted at least six (6) months before the expiration. CHAPTER 13 PROPERTIES UPON EXPIRY OF JOINT VENTURE The properties left through disposal upon the expiration or termination of the joint venture should be shared between Party A and B in proportion to their respective contributions. CHAPTER 14 INSURANCE The Company shall arrange and maintain the full and sufficient insurance for the Company's assets and liabilities. Various kinds of insurance coverage shall be furnished by insurance institutions within the territory of China. The general manager shall decide the extension, value, kind, and duration of the insurance policies in accordance with the Chinese laws. The selection of the insurance company shall be discussed and passed by the Board. CHAPTER 15 CONFIDENTIALITY 15.1 DEFINITION Confidentiality here applies to all technologies and information (software, proprietary technologies, trade secrets, original design), which are considered as the properties of the Company 15.2 SCOPE OF CONFIDENTIALITY To all information related to the Company, the Contract and any relevant documents which are disclosed between two parties or between one party and the Company, if one party that discloses the information has expressed clearly in writing while disclosing that the disclosed 15 information is confidential, or indicates while orally disclosing that the information is confidential and then confirm in writing immediately, such information shall be viewed as "confidential information". The party that receives the confidential information shall take the responsibility, and let its director(s), supervisor(s), employees or agent(s) to take the responsibility by signing non-disclosure agreement. Without the written and definite consent from the party (the Board) that provides the information, the party that receives the information shall not disclose to the third party (including the staff of its own party who do not need to know the information) but not limited to the loan provider, financial advisor and legal consultant of its own party for whatever purposes including personal ones). The described obligation of confidentiality is not applicable to the information that is required to disclose in accordance with the Chinese laws, regulations and any documents with legal effect or court order. CHAPTER 16 AMENDMENT & TERMINATION OF THE CONTRACT 16.1 AMENDMENT After signing the Contract, only after the amendment contract or the supplement contract has been duly signed by both parties can any amendment or supplement to the Contract be effective. 16.2 TERMINATION The Contract can be terminated by the Board with the approval of authorities in charge of examination and approval if the Company faces force majeure, continuous losses or financial problems. 16.3 COMPENSATION Should either party fail to fully conduct the Contract, Article of Association or seriously breach the Contract which results in the mal-operation of the Company, then the other party can claim losses and appeal to the approving authorities for termination of the Contract. Should both parties reconcile to continue the joint venture, the breaching party should bear all losses caused to the Company. 16 CHAPTER 17 LIABILITIES FOR BREACH OF CONTRACT 17.1 BREACHING EVENTS (1) Should either party fail to make full contribution on schedule, that party shall be viewed as breaching Chapter 5 of the Contract. The breaching party shall pay an indemnity to the other party according to the "Supplementary Contracts Involving Capital Contribution by Shareholders of Joint Ventures". The indemnity constituting 0.03% of the total contribution by the breaching party will start from the first month since the due date of the contribution. If the contribution becomes overdue for 3 consecutive months, not only should the breaching party pay a total of 0.09%'s indemnity, the other party also reserves the right to terminate the Contract in accordance with clause 16.3 of the Contract. In this case, the breaching party has to compensate the other party for all losses. 17.2 LIABILITIES Should either party breach the Contract, the breaching party should bear all liabilities whilst both parties will be held responsible if both breach the Contract. CHAPTER 18 FORCE MAJEURE Should either party delay in or be prevented from executing its responsibilities under the Contract due to earthquake, typhoon, fire, war or other events, and their occurrence and consequences are unpreventable or unavoidable to the affected party (hereinafter collectively referred to as "event of force majeure"), the delay or failure of execution shall not be viewed as breach to the Contract. But the affected party shall notify immediately the other party of the event and within fifteen (15) days thereafter provide the detailed information of the event and the reason of its inability to execute or delay in execution, as well as the notary documents of evidence provided by the notary organization of the place where the event of force majeure occurred. Depending on the extent affected by the event of force majeure to the execution of the Contract, both parties shall decide whether or not to terminate or waive some of the terms or delay the execution of the Contract. 17 CHAPTER 19 APPLICABLE LAW The formation of the Contract, its validity, interpretation, execution and settlement of disputes shall be governed by the Chinese laws. CHAPTER 20 SETTLEMENT OF DISPUTES 20.1 ARBITRATION All disputes, controversies, and right of claims arising from or in connection with the Contract (generally called "disputes") shall be settled through friendly consultation between both parties. In case no settlement can be reached through consultation, either party can submit the dispute at any time to China International Economic and Trade Arbitration Commission (CIETAC) for arbitration. Any arbitral award made by the arbitration court is final and binding upon both parties. The defeated party shall bear the arbitration fee. 20.2 CONTINUANCE OF THE CONTRACT During the arbitration process, the Company shall proceed with the terms of the Contract except those in arbitration. CHAPTER 21 LANGUAGE OF THE CONTRACT The Contract is written in both Chinese and English. Both languages are equivalent in effect. In case of discrepancy, the original version in Chinese shall prevail. CHAPTER 22 EFFECTIVENESS AND MISCELLANEOUS 22.1 EFFECTIVENESS 18 As the supplement to the Contract, auxiliary documents like the Articles of association, Appendix I are attached. The government approval in relation to the Contract becomes the basis for the interpretation of the Contract. 22.2 APROVAL The Contract and its appendix involved will come into force upon approval granted by the Department of Foreign Trade and Economic Cooperation, China. 22.3 NOTICES All notices and other communicated documents in connection with the Contract, the articles of association and the Company between two parties, as well as all notices and other communicated documents between the Company and both parties or among the directors, shall be sent to the other party by message delivery or fax followed by mail. The registered offices of both parties are treated as the mailing addresses. 22.4 SIGNING The Contract was signed by legal representatives or their authorized representatives of both parties on July 23, 1999 in Baoding City, Hebei Province, China. Party A: Baoding Pascali Multi-media Transmission Networking Co., Ltd..(signed & sealed) Authorized Representative: TAN Zu-ping Party B: Solar Touch Limited (signed & sealed) Authorized Representative: ZHAO Bing 19