EXHIBIT 4.16
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EQUITY JOINT VENTURE CONTRACT
BETWEEN
SKY COMMUNICATIONS GROUP COMPANY LIMITED
AND
ASIA SATELLITE TELECOMMUNICATIONS COMPANY LIMITED
FOR THE ESTABLISHMENT OF
BEIJING ASIA SKY TELECOMMUNICATIONS TECHNOLOGY COMPANY
LIMITED
DATED March 29th, 2004
BEIJING, CHINA
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TABLE OF CONTENTS
CLAUSE
PAGE
CHAPTER 1 - GENERAL
PROVISION..................................................1
CHAPTER 2 - PARTIES TO THIS
JOINT VENTURE CONTRACT.............................1
CHAPTER 3 - PURPOSE AND
BUSINESS SCOPE OF THE JOINT VENTURE COMPANY............1
CHAPTER 4 - TOTAL AMOUNT OF
INVESTMENT AND REGISTERED CAPITAL..................2
CHAPTER 5 - OBLIGATIONS OF
THE PARTIES TO THE JOINT VENTURE COMPANY.............
CHAPTER 6 - THE BOARD OF
DIRECTORS.............................................6
CHAPTER 7 - GENERALMANAGER
AND SENIOR MANAGEMENT PERSONNEL.....................9
CHAPTER 8 - TAXES, FINANCE
AND AUDIT..........................................10
CHAPTER 9 - TERM OF THE JOINT
VENTURE COMPANY.................................11
CHAPTER 10 - INTELLECTUAL
PROPERTY AND CONFIDENTIALITY........................12
CHAPTER 11 - LABOR
MANAGEMENT.................................................13
CHAPTER 12 - TRANSFER OF
EQUITY INTEREST......................................14
CHAPTER 13 -
INSURANCE........................................................17
CHAPTER 14 - TERMINATION AND
LIQUIDATION......................................17
CHAPTER 15 - FORCE
MAJEURE....................................................21
CHAPTER 16 - SETTLEMENT OF
DISPUTES...........................................22
CHAPTER 17 - GOVERNING
LAW....................................................23
CHAPTER 18 - LANGUAGES AND
COUNTERPARTS.......................................23
CHAPTER 19 - LIABILITY FOR
BREACH OF CONTRACT.................................24
CHAPTER 20 - REPRESENTATIONS
AND WARRANTIES...................................25
CHAPTER 21 - NOTICE AND
MISCELLANEOUS.........................................27
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CHAPTER 1 - GENERAL PROVISION
In accordance with the Law of
the People's Republic of China on Chinese-Foreign
Equity Joint Ventures and its
Implementing Regulations (as amended) as well as
other applicable laws and
regulations, SKY COMMUNICATIONS GROUP COMPANY LIMITED
and ASIA SATELLITE
TELECOMMUNICATIONS COMPANY LIMITED, adhering to the
principles of equality and
mutual benefit and through friendly consultation,
agree unanimously to enter
into this Joint Venture Contract (the "JOINT VENTURE
CONTRACT") for the
establishment of BEIJING ASIA SKY TELECOMMUNICATIONS
TECHNOLOGY COMPANY LIMITED
(the "JOINT VENTURE COMPANY") in the People's
Republic of China ("CHINA" or
the "PRC").
This Joint Venture Contract
is executed by the Parties (as defined below) on the
29th day of March, 2004 in
Beijing.
CHAPTER 2 - PARTIES TO THIS JOINT VENTURE CONTRACT
ARTICLE 1
The Parties to this Joint
Venture Contract are as follows:
(a) SKY
COMMUNICATIONS GROUP COMPANY LIMITED ("PARTY A"), a
company
incorporated in the PRC with its legal address at Room 209
Lujiazui
Software Park, No. 98, Nong 91, Eshan Road, Pudong District,
Shanghai,
the PRC, postal code: 200127; telephone No.: (8621) 5090
9026;
facsimile No.: (8621) 5873 0937.
(b) ASIA
SATELLITE TELECOMMUNICATIONS COMPANY LIMITED ("PARTY B"),
a
company incorporated under the laws of the Hong Kong
Special
Administrative Region of the PRC ("HONG KONG") with its
registered
office situated at Floor 23, East Exchange Tower, 38 Leighton
Road,
Causeway Bay, Hong Kong, the PRC; telephone No.: (852) 2500
0888;
facsimile No.: (852) 2805 7038.
In this Joint Venture Contract, Party A and Party B are each
referred
to as a "PARTY" and collectively as the "PARTIES."
CHAPTER 3
- PURPOSE AND BUSINESS SCOPE OF THE JOINT VENTURE
COMPANY
ARTICLE 2
The purpose of the Joint
Venture Company shall be as follows: in accordance with
the principle of enhancing
economic co-operation and technical exchange, and by
adopting international
advanced and applicable technology and scientific
management methods, to
provide Chinese domestic users with quality satellite
communications technical
services and related value-added services.
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ARTICLE 3
The business scope of the
Joint Venture Company shall be the research,
development of network
telecommunication technology; manufacture of network
telecommunication equipment,
sale of self-produced products; provision of
telecommunication technology
service, technical consultancy and transfer of
self-developed
technology.
ARTICLE 4
The name of the Joint Venture
Company is [CHINES CHARACTERS OMITTED] in Chinese
and BEIJING ASIA SKY
TELECOMMUNICATIONS TECHNOLOGY COMPANY LIMITED in
English.
The registered address of the
Joint Venture Company is at No.22 Wanyuan Street,
Beijing Economic
Technological Development Area, Beijing, The PRC.
ARTICLE 5
All the activities of the
Joint Venture Company shall comply with the laws,
decrees and applicable rules
and regulations of the PRC.
ARTICLE 6
The corporate form of the
Joint Venture Company is a limited liability company.
Each Party shall be liable
for the losses of Joint Venture Company only up to
the amount of its respective
subscribed capital contribution to the registered
capital. The profits of the
Joint Venture Company shall be shared by the Parties
in proportion to their
respective contributions to the registered capital of
the
Joint Venture
Company.
CHAPTER 4 - TOTAL AMOUNT OF INVESTMENT AND REGISTERED
CAPITAL
ARTICLE 7
The total amount of
investment of the Joint Venture Company is [
].
ARTICLE 8
The registered capital of the
Joint Venture Company is [
],
of which:
(a) Party A
shall contribute the VSAT equipment set forth in Appendix
1
hereof ("PARTY A'S CONTRIBUTED Assets") equivalent to [
]
as its contribution in kind, representing 51% of the
registered
capital; and
(b) Party B
shall contribute foreign exchange cash in an amount
equivalent
to [
], representing 49% of the registered capital.
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ARTICLE 9
The Parties shall make their
respective contributions in accordance with Article
11 hereof. If additional
funds are required for working capital or any other
purpose, the Joint Venture
Company may borrow from banks or other institutions
with the consent of the Board
(as defined below).
ARTICLE 10
This Joint Venture Contract
shall become effective from the date on which the
approval is obtained from the
relevant government authority that has the right
to approve this Joint Venture
Contract and the articles of association of the
Joint Venture Company (the
"ARTICLES") pursuant to the applicable laws and
regulations of the PRC (the
"EXAMINATION AND APPROVAL AUTHORITY").
ARTICLE 11
(a) Subject to
Article 11(c) and (d), Party A shall make 30% of its
contribution to the registered capital of the Joint Venture
Company
within 30 days after the date on which the Joint Venture Company
has
obtained its business license. Party A shall contribute the balance
of
70% in one lump sum payment within 90 days after the date on which
the
Joint Venture Company has obtained its business license.
(b) Subject to
Article 11(c) and (d), Party B shall make 30% of its
contribution to the registered capital of the Joint Venture
Company
within 30 days after the date on which the Joint Venture Company
has
obtained its business license. Party B shall contribute the balance
of
70% in one lump sum payment within 90 days after the date on which
the
Joint Venture Company has obtained its business license.
(c) The
Parties shall be obligated to make their contributions to
the
registered capital of the Joint Venture Company only after all of
the
following conditions have been satisfied or waived in writing by
the
Parties:
(i) following
execution by the Parties, this Joint Venture
Contract and the Articles having been approved by the
Examination and Approval Authority without substantive
amendments thereto;
(ii)
the Joint Venture Company having been issued its
business
license without substantial amendments to the business
scope
of the Joint Venture Company set forth in Article 3
hereof;
(iii)
the Joint Venture
Company having received all necessary
rights, licenses, permits, approvals, waivers and
authorizations to engage in the business activities
contemplated in Article 3 hereof;
(iv) the Joint
Venture Company having entered into the Consulting
and Billing Services Contract and the Intellectual
Property
Rights License Contract (collectively, the "PARTY A
SUBSIDIARY
Contracts") with a subsidiary of Party A ("PARTY A
SUBSIDIARY") in form and substance satisfactory to the
Parties;
(v) Party A
Subsidiary having received all necessary rights,
licenses, permits, approvals, waivers and authorizations
to
engage in the operation of a VSAT communications
business;
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(vi)
Party A having entered into a facilities purchase
contract
("FACILITIES PURCHASE CONTRACT") with Party A Subsidiary
with
respect to the purchase by Party A Subsidiary of Party
A's
VSAT hub and related facilities in form and substance
satisfactory to the Parties;
(vii)
Party B having entered into a Transponder Lease Agreement
with
Party A Subsidiary with respect to the lease of
transponder
capacity by Party B to Party A Subsidiary in form and
substance
satisfactory to the Parties;
(viii) Party A
having entered into a transfer contract with Party A
Subsidiary in form and substance satisfactory to the
Parties
in accordance with which Party A shall transfer all
satellite
hub service contracts entered into with its Affiliates
(as
defined below) to Party A Subsidiary at no consideration.
The
transfer contract shall also provide that Party A
Subsidiary
may transfer such satellite hub service contracts to the
foreign-invested telecommunications enterprise that will
be
established by Party A and Party B in accordance with
the
applicable PRC laws and regulations and approved to engage
in
the operation of VSAT communications business;
(ix)
Party A having terminated or having caused its Affiliates
to
terminate the employment contracts with the employees to
be
seconded to the Joint Venture Company and having released
in
writing the non-competition and confidentiality obligations
of
such employees under such employment contracts or any
other
documents, except as otherwise agreed by the parties.
(x) Party B
having received a legal opinion from Party A's PRC
counsel to Party A in form and substance satisfactory to
Party
B;
and
(xi)
all of the respective representations and warranties made
by
Party A in Articles 51(a) and (b) being true and correct
in
every respect.
(d) After the
Parties have made their contributions to the Joint
Venture
Company, a Chinese registered accountant satisfactory to the
Parties
shall verify the capital contribution made by each Party and issue
a
capital contribution verification report. Thereupon the Joint
Venture
Company shall issue investment certificates to the Parties, in
which
the following items shall be included:
(i) the name
of the Joint Venture Company;
(ii)
the date of the establishment of the Joint Venture
Company;
(iii) the
names of the Parties and their capital contributions;
(iv)
the date on which the contributions were made; and
(v) the date
on which the investment certificate is issued.
The investment certificates
shall be signed by the Chairman (as defined below)
and the Vice-Chairman (as
defined below).
ARTICLE 12
If a Party fails to make its
contribution to the registered capital of the Joint
Venture Company in accordance
with Articles 8 and 11, such Party (the
"CONTRIBUTION DEFAULTING
PARTY") shall pay to the other Party default interest
on the unpaid contribution
accruing at the rate of 0.02% per day from the tenth
day after the due date set
forth in Article 11 until the date on which the
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contribution is paid in full.
For the avoidance of any doubt, a Party who does
not make its contribution due
to the non-fulfillment of the conditions set forth
in Article 11 shall not be
regarded as a Contribution Defaulting Party under
this Article 12 and Article
13.
ARTICLE 13
If the Contribution
Defaulting Party fails to make its contribution to the
registered capital of the
Joint Venture Company within 60 days after the due
date, the other Party may
apply to the original Examination and Approval
Authority for approval to
terminate the Joint Venture Company and cancel this
Joint Venture
Contract.
ARTICLE 14
The difference between the
total amount of investment and the registered capital
stipulated herein shall be
made up by the Parties jointly by fund raising.
CHAPTER 5 OBLIGATIONS OF THE PARTIES TO THE JOINT VENTURE
COMPANY
ARTICLE 15
The obligations of each Party
are as follows:
(a) The
obligations of Party A include:
(i) submitting
this Joint Venture Contract, the Articles and other
relevant documents of the Joint Venture Company to the
Examination and Approval Authority in accordance with
the
requirements of the applicable PRC laws and regulations
and
using its best endeavors to obtain the prompt approval of
the
application;
(ii)
promptly making its contribution to the registered capital
as
stipulated in Articles 8 and 11 hereof;
(iii)
handling the registration matters of the Joint Venture
Company, obtaining the business license from the relevant
PRC
government department, providing assistance in respect of
the
opening of the bank accounts of the Joint Venture Company
and
other matters related to the establishment of the Joint
Venture Company;
(iv)
recommending a suitable person who will serve as the
first
deputy general manager (the "DEPUTY GENERAL MANAGER") of
the
Joint Venture Company upon the approval of the Board;
(v) causing
Party A Subsidiary (1) to enter into the Party A
Subsidiary Contracts with the Joint Venture Company on
the
date of establishment of the Joint Venture Company; (2)
to
accept the services and the license of intellectual
property
rights provided by the Joint Venture Company in
accordance
with the Party A Subsidiary Contracts; and (3) to pay
promptly
all payments due under the Party A Subsidiary Contracts to
the
Joint Venture Company;
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(vi)
causing Party A Subsidiary to enter into a three-party
customer contract with the Joint Venture Company and
each
customer of Party A Subsidiary's VSAT communications
business,
pursuant to which Party A Subsidiary shall provide such
customers with services for which a company is required
to
have a VSAT communication business operating permit in
order
to provide and the Joint Venture Company shall provide
other
services relating to the VSAT communications business
for
which such permit is not required;
(vii)
assisting the Joint Venture Company in developing the
domestic
market;
(viii) advising
the Joint Venture Company on the laws and policies of
PRC and coordinating the relationship between the Joint
Venture Company and relevant PRC government agencies;
(ix)
providing the Joint Venture Company with administrative
and
logistic support and assistance;
(x) handling
other matters reasonably entrusted to it by the
Board; and
(xi)
fulfilling other obligations set forth in this Joint
Venture
Contract.
(b) The
obligations of Party B include:
(i) promptly
making its contribution to the registered capital as
stipulated in Articles 8 and 11 hereof; (ii) assisting Party
A
in handing the registration matters of the Joint Venture
Company;
(iii)
recommending suitable persons who will serve as the
first
general manager of the Joint Venture Company (the
"GENERAL
MANAGER") and the first financial controller of the
Joint
Venture Company (the "FC") upon the approval of the
Board;
(iv)
assisting the Joint Venture Company in obtaining
advanced
marketing and promotion experience of the international
market;
(v) assisting
the Joint Venture Company in its ordinary operation;
(vi)
providing managerial and technical support and personnel
training to the Joint Venture Company;
(xii)
handling other matters reasonably entrusted to it by the
Board; and
(xiii)
fulfilling other obligations set forth in this Joint
Venture
Contract.
ARTICLE 16
As permitted by PRC law and
upon the approval and request of the Board, each
Party shall have the
obligation to assist the Joint Venture Company in
applying
for permission to carry out
new businesses.
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CHAPTER 6 - THE BOARD OF DIRECTORS
ARTICLE 17
(a) The board
of directors of the Joint Venture Company (the "BOARD")
shall
be established on the date on which the business license of the
Joint
Venture Company is issued. The Board shall be the highest authority
of
the Joint Venture Company and shall direct the overall
management,
supervision and control of the business of the Joint Venture
Company.
All major matters of the Joint Venture Company shall be decided by
the
Board. The Board shall adopt resolutions in accordance with this
Joint
Venture Contract, the Articles and the applicable laws and
regulations
of the PRC.
(b) To the
extent that the laws and regulations of the PRC in effect as
of
the date of the adoption of the relevant resolution require,
decisions
with respect to the following matters shall require the
unanimous
approval of the directors present and voting in person or by proxy
at a
Board meeting:
(i) any
amendment to the Articles;
(ii)
termination and dissolution of the Joint Venture
Company;
(iii)
increases or decreases in the registered capital of the
Joint
Venture Company or any transfer (other than transfers
pursuant
to Chapter 12) of either Party's interest in the Joint
Venture
Company;
(iv)
division of the Joint Venture Company or merger of the
Joint
Venture Company with other economic organizations; and
(v) other
matters requiring unanimous approval of the Board as
provided in officially promulgated and implemented laws
and
regulations of the PRC.
(c) Decisions
with respect to all other matters that require the
approval
of the Board shall be adopted if they receive the affirmative vote
of a
simple majority of the directors present and voting in person or
by
proxy, including at least one director or its proxy
appointed
respectively by each Party.
ARTICLE 18
(a) The Board
shall consist of six directors, of whom three directors
shall
be appointed by Party A and three directors shall be appointed by
Party
B. Each of the directors shall have one vote.
(b) One of the
directors nominated by Party A shall be appointed as the
chairman of the Board (the "Chairman") and shall preside over
Board
meetings. One of the directors nominated by Party B shall be
appointed
as the vice-chairman of the Board (the "VICE-CHAIRMAN"). In the
absence
of the Chairman, the Vice Chairman will chair the Board
meeting.
(c) The term
of office of the directors shall be four years, renewable
upon
reappointment by the appointing Party. Upon approval of the Board,
any
director may serve as a senior manager of the Joint Venture
Company.
(d) If there
is a vacancy on the Board due to a director retiring,
resigning, falling ill, becoming incapacitated, dying, being
removed by
its appointing Party or otherwise ceasing to be a director, the
Party
that appointed such director shall appoint a successor to serve for
the
remainder of the term of office of such director.
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ARTICLE 19
(a) Except as
otherwise set forth in Article 19(b), four directors,
present
in person or by their officially authorized proxies shall
constitute a
quorum for any Board meeting.
(b) If such a
quorum is not present within one hour after the time
appointed for the meeting or if at any time during the meeting a
quorum
is no longer present for any reason, the meeting shall adjourn to
a
second meeting, at such place and time (which is at least 15
days
later) as those directors who attended the first meeting shall
decide
or, if no such decision is reached, at the same place and time 15
days
later. If a quorum is not present within 20 minutes after the
time
appointed for the second meeting or if at any time during the
second
meeting a quorum is no longer present for any reason, the number
of
directors present shall be deemed to constitute a quorum for
the
purpose of that second meeting; PROVIDED THAT not less than 10
days'
notice of the second meeting is given to all directors. For the
purpose
of determining whether a quorum is present, directors participating
in
person or by proxy shall be deemed as directors present at the
meeting.
ARTICLE 20
Subject to Article 27(a), if
the Board fails to adopt a resolution regarding the
matters set forth in Articles
17(b) or 17(c) by unanimous vote or simple
majority vote (as the case
may be), a deadlock will be deemed to have occurred
(the "DEADLOCK") and the
Chairman shall not have a casting vote. If a Deadlock
occurs, the General Manager
of the Joint Venture Company shall draft and submit
to Party A and Party B a
detailed report on such matter within 30 days after the
occurrence of the Deadlock.
From the date of receipt of the above report, the
Parties shall attempt to
reach a successful resolution of the matter in another
30 days (or a longer period
agreed by the Parties). If the Parties fail to do so
within the aforesaid
period,
(a) either
Party, the Purchasing Party (as defined below), may purchase
or
designate another person to purchase the interest of the other
Party,
the Non-Purchasing Party (as defined below) pursuant to the
procedures
set forth in Article 40(b). If both Parties issue Invocation
Notices
(as defined below) pursuant to Article 40(b), the valuation
procedures
set forth in Article 40(b)(i) through (viii) shall not be
implemented
and instead the Party willing to pay the highest price per
percentage
interest of the Joint Venture Company shall have the right to
purchase
or designate another party to purchase the interest of
the
Non-Purchasing Party at such purchase price in accordance with
the
provisions of Article 40(b)(ix) and (x),
(b) the
provisions of Article 41 shall apply in the event that
neither
Party is willing to carry on the business of the Joint Venture
Company
as a going concern.
During the Deadlock period,
the Parties shall continue to perform their
obligations under this Joint
Venture Contract.
ARTICLE 21
Regular meetings of the Board
shall be convened at least twice every year, of
which at least one regular
meeting shall be convened within three months after
the completion of each
financial year. Special meetings of the Board shall be
convened by the Chairman at
any time on a motion of any two directors. The
minutes of all Board meetings
shall be kept on file by the Joint Venture Company
for reference.
ARTICLE 22
The detailed powers and
procedures of the Board, the scope of authority and
responsibilities of the
Chairman and the Vice Chairman, and the rights and
obligations of the directors
shall be as set forth in the Articles.
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CHAPTER 7 GENERAL MANAGER AND SENIOR MANAGEMENT
PERSONNEL
ARTICLE 23
(a) The
management organization of the Joint Venture Company shall
consist
of the following senior management personnel (the "SENIOR
MANAGEMENT
PERSONNEL"): one General Manager, one Deputy General Manager, one
FC
and other officers that the Board may appoint as being necessary
for
the operation of the Joint Venture Company. The Senior
Management
Personnel shall be appointed or dismissed by the Board.
(b) Party B
shall nominate the candidates for the positions of the
first
General Manager and the first FC, and Party A shall nominate
the
candidate for the position of the first Deputy General
Manager.
Subsequent General Managers, Deputy General Managers and FCs shall
be
nominated and appointed by the Board. If any candidate nominated
by
Party A or Party B for the positions of the initial Senior
Management
Personnel is not appointed by the Board, the original nominating
Party
shall have the right to nominate another candidate for the
relevant
position for appointment by the Board. The General Manager, the
Deputy
General Manager and the FC shall each serve for a term of three
years.
The Board shall have the right to remove the General Manager,
the
Deputy General Manager, the FC and other Senior Management
Personnel at
any time for any reasonable reason, but in the case of the
initial
Senior Management Personnel the replacement candidate for the
position
of such Senior Management Personnel shall be nominated by the
original
nominating Party for appointment by the Board and shall serve
the
remainder of the term of the Senior Management Personnel whom he or
she
is replacing..
ARTICLE 24
(a) The duties
of the General Manager shall be to implement the
decisions
of the Board and to organize and lead the daily operations
and
management of the Joint Venture Company in every respect within
the
scope authorized by the Board. The General Manager shall use all
his
efforts to ensure that the Joint Venture Company does not suffer
losses
in the course of its operation. The General Manager shall submit
the
relevant monthly or annual report at each Board meeting.
(b) The duties
of the Deputy General Manager shall be to assist the
General
Manager in his work and he shall be responsible for the daily
operation
work of the Joint Venture Company. The duties of the FC shall be
to
organize and lead all financial and accounting affairs of the
Joint
Venture Company. The FC shall report to both the General Manager
and
the Board.
(c) The
detailed scope of authority and duties of the Senior
Management
Personnel shall be as set forth in the Articles.
ARTICLE 25
Without the written approval
of the Board, none of the Senior Management
Personnel may concurrently
serve in any operations management position at any
other economic organizations,
except in the Parties or their Affiliates or the
subsidiaries or Affiliates of
the Joint Venture Company.
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CHAPTER 8 - TAXES, FINANCE AND AUDIT
ARTICLE 26
(a) The
financial and accounting matters of the Joint Venture Company
shall
be handled in accordance with the applicable laws and regulations
of
the PRC. The Joint Venture Company shall establish an
independent
financial and accounting system in light of the special conditions
of
the Joint Venture Company and international accounting
principles,
which shall be implemented upon the approval of the
Board.
(b) The fiscal year
of the Joint Venture Company (the "FISCAL YEAR") shall
begin on January 1 and end on December 31 of each year and a
financial
report shall be prepared every year. All financial reports
and
management reports of the Joint Venture Company shall be written
in
Chinese and English. The cost of translation shall be borne by
the
Joint Venture Company. Such financial reports will be prepared by
using
the accounting records prepared in accordance with the applicable
laws
and regulations.
(c) The major
financial reports of the Joint Venture Company (the
"FINANCIAL REPORTS") shall be prepared strictly in accordance with
the
applicable laws and regulations of the PRC. The Joint Venture
Company
shall prepare a quarterly management report, which will
include
quarterly financial reports (the "QUARTERLY REPORTS"). The form
and
content of the Quarterly Reports shall comply with the requirements
of
the Board. All annual Financial Reports and Quarterly Reports shall
be
completed and submitted to the Board from time to time in
accordance
with the reporting schedule adopted by the Board. All Financial
Reports
shall be written in Chinese and English. The costs of preparing
and
translating the Financial Reports shall be borne by the Joint
Venture
Company.
(d) The Joint
Venture Company shall select an independent auditor to
audit
the Financial Reports 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 preferably be
a
Chinese-foreign joint venture firm of accountants registered in the
PRC
that is capable of performing accounting work meeting both PRC
domestic
and international accounting standards and the foreign party of
such
joint venture shall be an accounting firm of international standing
and
repute. The Financial Reports shall be audited by such
independent
auditor. If required, the Board may select a Chinese
investment
independent auditor in view of the situation provided that
such
independent auditor should be a reputable and impartial
independent
auditor recognized in the industry.
(e)
Furthermore, each Party shall have the right to retain
independent
auditors to audit the Financial Reports of the Joint Venture
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
Joint Venture Company). The Joint Venture Company and each Party
shall
extend full cooperation to any audit.
(f) The Joint
Venture Company shall use Renminbi as its accounting
unit.
The conversion of Renminbi into other currencies shall be made
in
accordance with the relevant exchange rate published by the
People's
Bank of China. The Joint Venture Company shall open Renminbi
and
foreign currency accounts with banks duly licensed to operate
Renminbi
and foreign currency business. All accounts opened by the Joint
Venture
Company shall be managed and supervised in accordance with
the
financial and accounting system of the Joint Venture Company;
PROVIDED
THAT all accounts shall have the FC as one of the
authorized
signatories.
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ARTICLE 27
(a) No later
than three months prior to the end of each Fiscal Year,
the
General Manager shall, in conjunction with the Deputy General
Manager
and the FC, prepare and submit to the Board for approval, a capital
and
operating budget and a business plan for the next Fiscal Year
in
accordance with the requirements of the Board and within the
framework
of the business plan adopted by the Board. These budgets and
plans
shall provide for the development of activities of the Joint
Venture
Company that are in line with the business scope and major tasks of
the
Joint Venture Company specified in Articles 2 and 3. The Board
may
approve the budget and business plan submitted by the General
Manager
or require amendments to be made prior to its approval. If the
Board
fails to approve the capital and operating budget and business plan
of
the next Fiscal Year prior to the commencement of the next Fiscal
Year,
the General Manager shall, in conjunction with the Deputy
General
Manager and the FC, be responsible for preparing a provisional plan
to
ensure the ongoing operation of the Joint Venture Company based on
the
capital and operating budget and business plan of the previous
Fiscal
Year and the framework of the business plan already adopted by
the
Board taking into consideration factors such as
inflation.
(b) The profit
distribution plan of the Joint Venture Company shall be
determined at the discretion of the Board. The profit distribution
plan
and the amount of profits to be distributed to the Parties shall
be
announced within three months after approval by the Board. The
profit
share payable to Party B shall be paid in United States
dollars.
(c) If the
Joint Venture Company suffers losses in any Fiscal Year,
the
profit of the next Fiscal Year shall be used first to make up
such
losses. No profit shall be distributed unless the losses from
the
previous Fiscal Years have been made up.
ARTICLE 28
The Joint Venture Company
shall pay taxes in accordance with the applicable laws
and regulations of the PRC.
The personnel of the Joint Venture Company shall pay
individual income tax in
accordance with the laws and regulations of the PRC.
The Parties shall apply to
obtain for the benefit of the Joint Venture Company,
the Parties and all of their
personnel, all of the applicable tax exemptions,
reductions, privileges and
preferences that are now or in the future become
obtainable under the laws and
regulations of the PRC and under any applicable
treaties or international
agreements to which the PRC may now be or may
hereafter become a
party.
CHAPTER 9 - TERM OF THE JOINT VENTURE COMPANY
ARTICLE 29
The Joint Venture Company
shall be established on the date on which the Joint
Venture Company is issued its
business license. The term of the Joint Venture
Company shall be 30
years.
ARTICLE 30
Prior to the expiration of
the term of the Joint Venture Company or any
extension thereof, the
Parties may agree to extend such term, subject to
approval by the Examination
and Approval Authority and provided that such
extension is handled in
accordance with applicable laws and regulations.
Negotiations with respect to
the extension of such term shall begin not later
11
<PAGE>
than one year prior to
expiration of the original joint venture term (or
extension thereof) and,
subject to the successful conclusion of such
negotiations, the Joint
Venture Company shall submit the application to extend
the joint venture term to the
Examination and Approval Authority six months
prior to the expiration of
the term of the Joint Venture Company or any
extensions thereof. Upon
approval of the application for the extension of the
term of the Joint Venture
Company, procedures for change in registration shall
be handled in accordance with
the applicable laws and regulations of the PRC.
CHAPTER 10 - INTELLECTUAL PROPERTY AND CONFIDENTIALITY
ARTICLE 31
When the Board determines
that it is necessary, each Party shall, and shall
cause its Affiliates to,
enter into technology transfer or license, trademark
license, technical services
or management consultancy services contracts with
the Joint Venture Company in
order to provide for the transfer of technology or
the provision of license,
trademark license, technical services or management
consultancy services to the
Joint Venture Company in accordance with the terms
and conditions requested by
the Board. The Joint Venture Company shall handle
all necessary examination and
approval, registration or filing procedures with
the government authorities in
accordance with the applicable laws and
regulations of the
PRC.
ARTICLE 32
(a) All
technology, know-how, techniques, software, proprietary
databases,
trade secrets, trade practices, methods, specifications, designs
and
other proprietary information disclosed by any Party to the
Joint
Venture Company under t
