SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) APRIL 14, 2000
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CHINA BROADBAND CORP. (FORMERLY INSTITUTE FOR COUNSELING, INC.)
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(Exact Name of Registrant as Specified in Its Charter)
NEVADA
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(State or Other Jurisdiction of Incorporation)
0-28345 72-1381282
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(Commission File Number) (IRS Employer Identification No.)
624 WILDERNESS DRIVE, S.E., CALGARY, ALBERTA, CANADA T2J 1Z2
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(Address of Principal Executive Offices) (Zip Code)
(403) 225-2198
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(Registrant's Telephone Number, Including Area Code)
FORMERLY, INSTITUTE FOR COUNSELING, INC., 404 - 815 HORNBY STREET,
VANCOUVER, B.C. CANADA V6Z 2E6
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(Former name or Former Address, if Changed Since Last Report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On April 14, 2000, the Registrant acquired all of the issued and outstanding
shares in the capital of China Broadband (BVI) Corp. ("CB-BVI"), a company
incorporated under the laws of the British Virgin Islands. In consideration for
such shares, the Registrant issued to the former shareholders of CB-BVI, an
aggregate of 13,500,000 shares in the capital of the Registrant. A copy of the
Purchase Agreement setting out the terms of such acquisition that was entered
into in March 2000 among the Registrant, CB-BVI and the former shareholders of
CB-BVI is attached as an Exhibit hereto. The former shareholders of CB-BVI are
now the controlling shareholders of the Registrant, and three of those
shareholders are directors and officers of the Registrant. See Item 6.
Resignations of Registrant's Directors.
BIG SKY
The Registrant acquired CB-BVI in order to provide cable broadband services in
the People's Republic of China ("China") through CB-BVI's operational
subsidiary, Big Sky Network Canada Ltd. ("Big Sky"). Big Sky is a corporation
incorporated under the laws of the British Virgin Islands ("BVI"). CB-BVI owns
50% of Big Sky's issued and outstanding shares. SoftNet Systems, Inc.
("SoftNet"), a corporation incorporated under the laws of the State of Delaware,
owns the 50% interest in Big Sky not owned by CB-BVI.
BUSINESS PLANS
Big Sky plans to provide internet access to Chinese residential and business
customers via the hybrid optical fibre-coaxial ("HFC") cable architecture of
existing cable television ("CATV") stations in China, at a fraction of the cost
and many times the speed of the current dial-up alternative. As the purchase of
Chinese CATV stations is not permitted, Big Sky intends to form joint ventures
with Chinese CATV stations. Under these joint ventures, a CATV station will
contribute the necessary bandwidth on its HFC cable system and Big Sky will
contribute the requisite capital, management and technology. Big Sky's initial
focus will be on providing residential and business internet access. Ultimately,
as development evolves and Chinese regulations permit, Big Sky intends to
provide its residential and corporate customers with a full array of quality
services including web hosting, internet/intranet business solutions, e-mail,
on-line internet content services (such as shopping, games, medicine,
education), e-commerce, interactive video on demand (VOD), music on demand (MOD)
and IP telephony.
SHENZHEN JOINT VENTURE
Big Sky signed a joint venture contract with China Merchants Shekou Industrial
Zone, Ltd. ("China Merchants") on September 21, 1999 to establish Shenzhen China
Merchants Big Sky Network Ltd. (the "Shenzhen JV"). A copy of the joint venture
contract is attached as an Exhibit hereto. Under the terms of the Shenzhen JV
contract, China Merchants agreed to provide all the non-broadcast rights on the
cable networks of the Shekou CATV station, a cable television station controlled
by China Merchants. Big Sky is required to contribute a total of US$3,000,000 to
the Shenzhen JV as capital, of which Big Sky has already contributed a total of
US$500,000. Big Sky is also responsible for providing technical support to the
Shenzhen JV. Over the Shenzhen JV's 15-year duration, Big Sky will be entitled
to receive 60% of the joint venture profits earned between 2000 and 2004, 50% of
the profits earned between 2005 and 2009 and 40% of the profits earned between
2010 and 2014. Big Sky is entitled to appoint four of the seven directors on the
board of directors of the Shenzhen JV for the first five years of its operations
and is thereafter entitled to appoint three of the seven directors.
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LETTERS OF INTENT
Big Sky has signed letters of intent to form similar joint ventures involving
CATV stations located in the cities of Zhuhai, Chengdu, Dalian and Cixi in
China. Big Sky is currently negotiating an additional 13 such letters of intent
throughout China's wealthier southern provinces.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Not Applicable
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not Applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not Applicable
ITEM 5. OTHER EVENTS.
Pursuant to private placements that closed on or about April 14, 2000, the
Registrant issued an aggregate of 3,336,667 common shares for aggregate
subscription proceeds of US$11,397,502.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Pursuant to the terms of the Purchase Agreement under which the Registrant
acquired CB-BVI, James Charuk, Brent Shaw and Michael Kang resigned as directors
and officers of the Registrant as of April 14, 2000, and Matthew Heysel was
appointed a director and the Chairman and Chief Executive Officer of the
Registrant, Daming Yang was appointed a director and the President of the
Registrant and Tom Milne was appointed a director and the Vice-President, Chief
Financial Officer, Treasurer and Secretary of the Registrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Financial statements for CB-BVI and pro-forma financial information will be
filed within 60 days of the date of this report.
Exhibits attached pursuant to Item 601 of Regulations:
(1) Exhibit 2 - Purchase Agreement for the Acquisition of CB-BVI
(2) Exhibit 10 - Joint Venture Contract between Big Sky and China Merchants
ITEM 8. CHANGE IN FISCAL YEAR.
Not Applicable
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHINA BROADBAND CORP.
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(Registrant)
Date APRIL 27, 2000 By:/s/ MATTHEW HEYSEL
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Name: Matthew Heysel
Title:Chairman, Chief Executive Officer and Director
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(1) EXHIBIT 2
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Purchase Agreement for the Acquisition of CB-BVI.
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PURCHASE AGREEMENT
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BETWEEN:
INSTITUTE FOR COUNSELING, INC., 404 - 815 Hornby Street,
Vancouver, British Columbia, V6Z 2E6
(the "Purchaser")
OF THE FIRST PART
AND:
CHINA BROADBAND (BVI) CORP., c/o 624 Wilderness Drive S.E.,
Calgary, Alberta T2J 1Z2
("CBB")
OF THE SECOND PART
WHEREAS:
A. Big Sky Network Canada Ltd. ("Big Sky") is a company involved in
business in China;
B. Not less than one-half of the issued and outstanding shares of Big Sky
are, or will at Closing be, held by CBB;
C. The Purchaser wishes to acquire CBB's interest in Big Sky through the
acquisition of all of the issued and outstanding shares of CBB in
exchange for shares of the Purchaser; and
D. The Board of Directors of each of the Purchaser and CBB consider this
Agreement advisable for the benefit of each company and their respective
shareholders.
NOW THEREFORE in consideration of the covenants, representations and warranties
set forth herein and as such other further consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. PURCHASE AND SALE. CBB hereby agrees to transfer or to use its best
efforts to cause to be transferred all, and not less than all, of the
issued and outstanding shares of CBB ("CBB Shares") to the Purchaser and
the Purchaser hereby agrees to acquire all, and not less than all, of
the issued and outstanding CBB Shares in consideration for the issuance
to the shareholders of CBB (the "Shareholders"), pro rata in accordance
with their shareholdings in CBB, as set out in Schedule "A" attached
hereto, of an aggregate of 13,500,000 common shares (the "Treasury
Shares") in the capital of the Purchaser following the share
consolidation set forth in section 2(a) below.
2. COVENANTS OF THE PURCHASER. The Purchaser covenants and agrees with CBB
and Big Sky to do the following in the order which follows at or prior
to the Closing Date (as hereinafter defined), and prior to the
completion of the transactions contemplated in section 1, above:
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(a) to effect a share consolidation of its issued and outstanding
shares ("ICI Shares") on the basis of 0.65104 (new) ICI Shares
for 1 (old) ICI Share such that there will be 1,500,000 (new) ICI
Shares issued and outstanding in the capital of the Purchaser
immediately prior to the Closing (as hereinafter defined);
(b) to cause its directors and officers to resign from their
respective positions with the Purchaser, effective as at the
Closing Date and to appoint such new directors and officers as
CBB may direct to fill such vacancies;
(c) to change its name to "China Broadband Corp." or such other name
as may be acceptable to CBB; and
(d) to comply with all applicable securities laws and regulatory
requirements, including, if required, the preparation of proxy
materials for a shareholders' meeting and holding such meeting to
obtain applicable shareholder approvals.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to CBB that:
(a) the Purchaser is duly incorporated under the laws of the State of
Nevada and is validly subsisting and in good standing under such
laws;
(b) the Purchaser's Form 10-SB dated November 13, 1999 filed pursuant
to section 12(b) of the Securities Exchange Act of 1934 (the
"Form 10-SB") is true and correct as at the date hereof and shall
be true and correct at the date of Closing and such Form 10-SB
has been duly filed with the Securities and Exchange Commission
and, is effective and is in a "no comment" status with the SEC.
Immediately upon closing, Purchaser shall prepare and file an
Information Statement, pursuant to Rule 15c2-11, with the
National Association of Securities Dealers to obtain a listing on
the Over the Counter Bulletin Board (the "NASD OTC Bulletin
Board");
(c) all of the currently issued and outstanding ICI Shares are
validly issued and outstanding and are fully paid and
non-assessable and the Treasury Shares to be issued at Closing
will, on issuance, be validly issued and outstanding as fully
paid and non-assessable and the Treasury Shares will at Closing
be free and clear of all liens, charges and encumbrances;
(d) the Purchaser has good and sufficient authority to enter into
this Agreement on the terms and conditions set forth herein;
(e) neither the execution nor delivery of this Agreement nor the
consummation of the transactions contemplated hereby will
conflict in any material respect with, or result in any material
breach of, the terms, conditions, or provisions of or will
constitute a material default under the Articles of Incorporation
or resolutions of the Purchaser or any instrument, agreement or
contract to which it is party or by which it is bound;
(f) no consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority is
required in connection with the execution, delivery and
performance of this Agreement by the Purchaser and the
consummation of the transactions contemplated hereby;
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(g) there are no suits, actions, litigation, arbitration
proceedings or government or regulatory proceedings
outstanding, in progress, pending or to the best of the
knowledge of the Purchaser, threatened, against or relating to
the Purchaser which might materially and adversely affect the
Purchaser;
(h) the Purchaser is not subject to any judgment, order or decree
entered in any lawsuit or proceeding which might materially and
adversely affect the Purchaser;
(i) all material transactions of the Purchaser have been properly
recorded or filed in or with its books and records and the minute
book of the Purchaser contains records of all meetings and
proceedings of the shareholders and directors of the Purchaser;
(j) the unaudited financial statements of the Purchaser for the
period ending June 30, 1999 and the audited financial statements
of the Purchaser for years ended December 31, 1998, December 31,
1997 and December 31, 1996 were prepared in accordance with
United States generally accepted accounting principles applied on
the basis consistent with prior years, and present fairly and
accurately in all material respects the financial condition and
position of the Purchaser as of those dates and the results of
its operations for the year and period then ended;
(k) the Purchaser has duly filed all federal, state, local and
foreign tax report's and returns required to be filed by it and
has duly paid all taxes and other charges due or claimed to be
due from it by federal, state, local and foreign taxing
authorities. Further, there are no tax liens upon any property or
assets of Purchaser. No state of facts exists which would
constitute grounds for the assessment of any tax liability by the
state, local, or foreign tax authorities. All deficiencies and
assessments, if any, resulting from any examination of state,
local and foreign tax returns and reports of the Purchaser if
any, have been paid. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable
to any federal, state, local, or foreign tax return or report for
any period;
(l) the Purchaser is in compliance with all laws, regulations and
orders applicable to its business. The Purchaser has not received
any notification that it is in violation of any law, regulation
or order and no such violation exists. Neither the Purchaser nor
any of its employees or agents, to the best of their knowledge,
has made any payments to any persons which violate any statute or
law;
(m) other than this Agreement, there are no undisclosed material
changes in the affairs of the Purchaser since;
(n) the authorized capital of the Purchaser consists of an unlimited
number of ICI Shares with no par value, of which 2,304,000 ICI
Shares are currently issued and outstanding; and
(o) other than as provided for under this Agreement, there are no
rights, options or warrants outstanding pursuant to which any ICI
Shares may be required to be issued.
4. CBB'S REPRESENTATIONS AND WARRANTIES. CBB hereby represents and warrants
to the Purchaser as follows:
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(a) CBB is, or will on the Closing Date be, duly incorporated under
the laws of the British Virgin Islands and is validly subsisting
and in good standing under such laws;
(b) CBB has, or will on the Closing Date have, good and sufficient
authority to enter into this Agreement on the terms and
conditions set forth herein;
(c) neither the execution nor delivery of this Agreement nor the
consummation of the transactions contemplated hereby will
conflict in any material respect with, or result in any material
breach of, the terms, conditions, or provisions of or will
constitute a material default under the constating documents of
CBB or any instrument, agreement or contract to which it is party
or which it is a party or by which it is bound;
(d) no consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority is
required in connection with the execution, delivery and
performance of this Agreement by CBB and the consummation of the
transactions contemplated hereby;
(e) there are no suits, actions, litigation, arbitration proceedings
or government or regulatory proceedings outstanding, in progress,
pending or to the best of the knowledge of CBB, threatened,
against or relating CBB which might materially and adversely
affect CBB;
(f) CBB is not subject to any judgment, order or decree entered in
any lawsuit or proceeding which might materially and adversely
affect CBB;
(g) all material transactions of CBB have been properly recorded or
filed in or with its books and records and the minute book of CBB
contains records of all meetings and proceedings of the
shareholders and directors of CBB;
(h) the authorized capital of CBB consists of, or will at the Closing
Date consist of, 20,000,000 CBB Shares, of which 15,000,000 CBB
Shares are currently or will at the Closing Date be issued and
outstanding as fully paid and non-assessable;
(i) at the Closing Date, upon transfer thereof by the shareholders of
CBB, the Purchaser will be the legal and beneficial owner of all
of the issued and outstanding shares of CBB and no other person
(other than the Purchaser under this Agreement) will have any
right, present or future, to acquire any shares or other
securities of CBB, and such shares shall be free and clear of all
liens, charges and encumbrances;
(j) CBB is in compliance with all laws, regulations and orders
applicable to its business. CBB has not received any notification
that it is in violation of any law, regulation or order and no
such violation exists. Neither CBB nor any of its employees or
agents, to the best of their knowledge, has made any payments to
any persons which violate any statute or law; and
(k) other than this Agreement, there are no undisclosed material
facts in the affairs of CBB.
5. REPRESENTATIONS AND WARRANTIES OF CBB AS TO BIG SKY. CBB hereby
represents and warrants to the Purchaser as follows:
(a) Big Sky is duly incorporated under the laws of the British Virgin
Islands and is validly subsisting and in good standing under such
laws;
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(b) Big Sky has good and sufficient authority to enter into this
Agreement on the terms and conditions set forth herein;
(c) neither the execution nor delivery of this Agreement nor the
consummation of the transactions contemplated hereby will
conflict in any material respect with, or result in any material
breach of, the terms, conditions, or provisions of or will
constitute a material default under the constating documents of
Big Sky or any instrument, agreement or contract to which it is
party or which it is a party or by which it is bound;
(d) no consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority is
required in connection with the execution, delivery and
performance of this Agreement by Big Sky and the consummation of
the transactions contemplated hereby;
(e) there are no suits, actions, litigation, arbitration proceedings
or government or regulatory proceedings outstanding, in progress,
pending or to the best of the knowledge of Big Sky, threatened,
against or relating to Big Sky which might materially and
adversely affect Big Sky;
(f) Big Sky is not subject to any judgment, order or decree entered
in any lawsuit or proceeding which might materially and adversely
affect Big Sky;
(g) all material transactions of Big Sky have been properly recorded
or filed in or with its books and records and the minute book of
Big Sky contains records of all meetings and proceedings of the
shareholders and directors of the Big Sky;
(h) the authorized capital of Big Sky consists of 100,000 shares, of
which 100,000 shares are, or will at the Closing Date be, issued
and outstanding as fully paid and non-assessable;
(i) CBB is, or at the Closing Date will be, the legal and beneficial
owner of 50,000 shares of Big Sky, such shares shall be free and
clear of all liens, charges and encumbrances and no other person
(other than the Purchaser under this Agreement) will have any
right, present or future, to acquire any shares or other
securities of Big Sky excepting SoftNet Systems, Inc. which has
the right to acquire 50,000 shares of Big Sky, in the event of
which exercise CBB will hold 50% of the issued and outstanding
shares of Big Sky;
(j) Big Sky has duly filed all federal, state, local and foreign tax
reports and returns required to be filed by it and has duly paid
all taxes and other charges due or claimed to be due from it by
federal, state, local and foreign taxing authorities. Further,
there are no tax liens upon any property or assets of Big Sky. No
state of facts exists which would constitute grounds for the
assessment of any tax liability by the state, local, or foreign
tax authorities. All deficiencies and assessments, if any,
resulting from any examination of state, local and foreign tax
returns and reports of Big Sky if any, have been paid. There are
no outstanding agreements or waivers extending the statutory
period of limitation applicable to any federal, state, local, or
foreign tax return or report for any period;
(k) Big Sky is in compliance with all laws, regulations and orders
applicable to its business. Big Sky has not received any
notification that it is in violation of any law, regulation or
order and no such violation exists. Neither Big Sky nor any of
its employees or agents, to the best of their knowledge, has made
any payments to any persons which violate any statute or law; and
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(l) other than this Agreement, there are no undisclosed material
facts in the affairs of Big Sky.
6. FURTHER REPRESENTATIONS AND WARRANTIES OF CBB: CBB hereby represents and
warrants on behalf of each of the Shareholders that:
(a) each of the Shareholders is financially responsible, able to meet
his obligations hereunder, and acknowledges this investment may
be long term and is by its nature speculative; further, each of
the Shareholders acknowledges he is financially capable of
bearing the risk of this investment.
(b) each of the Shareholders has had substantial experience in
business or investments in one or more of the following:
(i) knowledge of and investment experience with securities,
such as Treasury Shares and bonds;
(ii) ownership of interests in new ventures and/or start-up
companies;
(iii) experience in business and financial dealings and
parlance, and each of the Shareholders can protect his own
interests in an investment of this nature and does not
have a "Purchaser Representative," as that term is defined
in Regulation D of the Securities Act of 1933, as amended,
(the "Securities Act") and does not need such a
Representative.
(c) each of the Shareholders is capable of bearing the high degree of
economic risks and burdens of this investment, including, but not
limited to, the possibility of complete loss of all his
investment capital and the lack of a liquid public market, such
that he may not be able to readily liquidate the investment
whenever desired or at the then current asking price of the ICI
Shares.
(d) each of the Shareholders has had access to the information set
forth in section 4 hereof and was able to request copies of such
information, ask questions of and receive answers from the
Purchaser regarding such information and any other information he
desired concerning the terms and conditions of this transaction
and all such questions have been answered to his full
satisfaction. Each of the Shareholders understands that the
Treasury Shares have not been registered under the Securities Act
and the applicable state securities laws in reliance on the
exemption provided by Section 4(2) of the Securities Act and
Regulation D relating to transactions not involving a public
offering. Each of the Shareholders further understands that he is
purchasing the Treasury Shares without being furnished any
offering literature, prospectus or private offering memorandum,
other than that supplied under or identified hereunder.
(e) at no time was any of the Shareholders presented with or
solicited by any leaflet, public promotional meeting, circular,
newspaper or magazine article, radio or television advertisement,
or any other form of general advertising otherwise than in
connection and concurrently with this distribution of Treasury
Shares.
(f) the Treasury Shares which each of the Shareholders hereby
subscribes is being acquired solely for his own account, for
investment, and is not being purchased with a view to or for the
resale or distribution thereof and each of the Shareholders has
no present plans to
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enter into any contract, undertaking, agreement or arrangement
for such resale or distribution.
(g) each of the Shareholders is aware of the following:
(i) the Purchaser's financial and operating history;
(ii) the existence of substantial restrictions on the
transferability of Treasury Shares;
(iii) the Treasury Shares will not be, and each of the
Shareholders will have no rights to require, that the
Purchaser register the Treasury Shares under the
Securities Act or any state securities laws; and
(iv) each of the Shareholders may not be able to avail himself
of the provisions of Rule 144 adopted by the Securities
and Exchange Commission under the Securities Act or any
applicable state securities acts with respect to the
release of the Treasury Shares, and, accordingly, it may
not be possible for any of the Shareholders to liquidate
part or all of his investment in the Purchaser or to
liquidate at the then current asking price of the Treasury
Shares, if any.
(h) it has at no time been represented, guaranteed, or warranted to
each of the Shareholders by an officer or director of the
Purchaser, or the agents or employees thereof , or any other
person, expressly or impliedly, any of the following:
(i) an exact or approximate length of time that each of the
Shareholders will or will not remain as owner of the
Treasury Shares;
(ii) a percentage of profit and/or amount or type of
consideration, profit, loss, credits or deductions to be
realized, if any, as a result of each of the Shareholder's
ownership of the Treasury Shares; or
(iii) past performance on the part of any director or officer of
the Purchaser, or the agents or employees thereof, that
will in any way indicate the predictable results accruing
from ownership of the Treasury Shares.
(i) the Purchaser is under no duty to register the Treasury Shares or
comply with any exemption from registration under the Securities
Act or any state securities law, including supplying to the
appropriate agency or to each of the Shareholders any information
required in connection with transfers under appropriate rules and
regulations.
The foregoing representations and warranties shall be true and accurate as of
the date hereof and as of the date of any acceptance of this offer by the
Purchaser and shall survive the date of such acceptance by the Purchaser.
7. CONDUCT OF BUSINESS PENDING CLOSING Prior to the Closing Date, except as
otherwise consented to or approved by the Purchaser in writing, CBB
convenants and warrants that:
(a) CBB and Big Sky shall each carry on their business diligently and
substantially in the same manner as previously conducted, and CBB
and Big Sky shall not engage in any transaction or activity,
enter into any agreement or make any commitment except in the
ordinary course of business and consistent with past practice;
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(b) no change or amendment shall be made to the constating documents
of CBB and Big Sky;
(c) neither CBB or Big Sky shall issue or sell, or issue options,
warrants to purchase, conversion privileges or other rights to
subscribe to or enter into any arrangement or contract with
respect to any of its shares, other than as contemplated or
disclosed herein;
(d) neither CBB or Big Sky shall declare, pay or set aside for
payment any dividend or other distribution in respect of its
shares nor shall Big Sky redeem, purchase or otherwise acquire
any of its Shares; and
(e) each of CBB and Big Sky shall use their best efforts to preserve
their corporate existence and business organizations intact.
8. CONDITIONS FOR THE BENEFIT OF THE PURCHASER. The obligations of the
Purchaser to complete the transaction as contemplated herein shall be
subject to the following conditions:
(a) this Agreement shall have been duly executed by CBB;
(b) all the representations and warranties of CBB set forth in
sections 4 and 5 and of the Shareholders in section 6 shall be
true and correct as of the Closing Date; and
(c) the covenants of CBB set forth in section 8 shall have been
completed in full to the Purchaser's satisfaction as at the
Closing Date.
9. CONDITIONS FOR THE BENEFIT OF CBB. The obligations of CBB to complete
the transactions as contemplated herein shall be subject to the
following conditions:
(a) this Agreement shall have been duly executed by the Purchaser;
(b) all the representations and warranties of the Purchaser set forth
in section 3 shall be true and correct as at the Closing Date;
(c) all of the covenants of the Purchaser set forth in section 2
shall have been completed in full to CBB's satisfaction as at the
Closing Date;
(d) there shall have been no material adverse change in the financial
condition or assets of the Purchaser; and
(e) completion of due diligence by CBB with results satisfactory to
CBB.
10. CLOSING. Completion of the transactions contemplated herein (the
"Closing") shall take place as soon as practicable after the approval of
the shareholders of the Purchaser at the law firm of Koffman Kalef in
Vancouver, British Columbia (the "Closing Date"), or such other date,
time and place acceptable to the parties hereto. Closing shall in any
event occur on or before March 31, 2000, failing which this Agreement
shall terminate and be of no further force or effect, unless otherwise
mutually agreed to by the parties hereto.
11. DELIVERY BY THE PURCHASER. At the Closing, the Purchaser shall deliver
to CBB the following:
(a) a certified true copy of a resolution of the board of directors
of the Purchaser evidencing its approval to this Agreement and
all transactions contemplated hereunder;
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(b) a certified true copy of a resolution of all of the shareholders
of the Purchaser evidencing their approval to this Agreement and
all transactions contemplated hereunder;
(c) share certificate or certificates representing the Treasury
Shares; and
(d) such other documents, certificates and legal opinions that are,
in the opinion of legal counsel of the Purchaser, reasonably
required to complete the transactions and due diligence
contemplated hereunder.
12. DELIVERY BY CBB. At the Closing, CBB shall deliver to the Purchaser the
following:
(a) a certified true copy of a resolution of the board of directors
of CBB evidencing its approval of this Agreement and all
transactions contemplated hereunder;
(b) share certificate or certificates representing all of the CBB
Shares duly cancelled;
(c) a new share certificate representing all, and not less than all,
of the issued and outstanding CBB Shares registered in the name
of the Purchaser, together with confirmation of registration of
the Purchaser as the holder of all of the outstanding CBB Shares;
and
(d) such other documents, certificates and legal opinions that are,
in the opinion of legal counsel to the Purchaser, reasonably
required to complete the transactions and due diligence
contemplated hereunder.
13. BINDING AGREEMENT. Upon acceptance of the terms of this Agreement by the
parties hereto, this Agreement shall be deemed to constitute and shall
be a legally valid and binding agreement.
14. FURTHER ASSURANCES. The parties hereto agree to execute and deliver or
cause to be executed and delivered all such further documents and
instruments and do all such acts and things as either party may
reasonably request to give full effect to the terms and conditions,
intent and meaning of this Agreement.
15. ENTIRE AGREEMENT. This agreement constitutes the entire agreement
between the parties hereto and in respect of the matters referred to
herein and there are no representations, warranties, covenants,
agreements, express or implied, collateral hereto other than as
expressly set forth or referred to herein.
16. TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
17. APPLICABLE LAW AND ATTORNMENT. This agreement shall be governed and
interpreted in accordance with the laws of the Province of British
Columbia and the parties hereto irrevocably attorn to the non-exclusive
jurisdiction of the courts of the Province of British Columbia.
18. ENUREMENT. This agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
19. COUNTERPARTS. This agreement may be executed in any number of
counterparts with the same effect as if all the parties hereto had
signed the same agreement and all counterparts will be construed
together and constitute one and the same instrument.
14
<PAGE>
20. NOTICE. Any notice, request, demand or other communication to be given
under this Agreement will be in writing and shall be delivered by hand
or by telecopy to the party at the following respective addresses:
To CBB:
China Broadband (BVI) Corp.
c/o 624 Wilderness Drive S.E.
Calgary, Alberta
T2J 1Z2
Attention: President
Facsimile Number: 1-403-225-2198
To the Purchaser:
Institute for Counseling, Inc.
404 - 815 Hornby Street
Vancouver, British Columbia
V6Z 2E6
Attention: President
Facsimile Number: 1-604-899-5495
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.
INSTITUTE FOR COUNSELING, INC.
Per: _____________________________
Authorized Signatory
CHINA BROADBAND (BVI) CORP.
Per: _____________________________
Authorized Signatory
CHINA BROADBAND (BVI) CORP. as attorney for and
on behalf of each of the Shareholders set forth
in Schedule A hereto
Per: _____________________________
Authorized Signatory
15
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE "A"
CHINA BROADBAND (BVI) CORP. INSTITUTE FOR COUNSELLING
----------------------------------- ----------------------------------
NAME OF SHAREHOLDER NO. SHARES PERCENTAGE NO. SHARES PERCENTAGE
-------------------
<S> <C> <C> <C> <C>
Matthew Heysel 2,137,500 14.25 1,923,750 12.83
Daming Yang 2,137,500 14.25 1,923,750 12.83
Wei Yang 2,137,500 14.25 1,923,750 12.83
Kai Yang 2,137,500 14.25 1,923,750 12.83
Qifeng Xue 900,000 6.00 810,000 5.40
Donghe Xue 900,000 6.00 810,000 5.40
Lu Wang 900,000 6.00 810,000 5.40
Wallace Nesbitt 625,000 4.17 562,500 3.75
Western Capital 625,000 4.17 562,500 3.75
Pamela Hallisey 50,000 0.33 45,000 0.30
R. Scott Hutcheson 50,000 0.33 45,000 0.30
David Beatty 400,000 2.67 360,000 2.40
Fevzi Ogelman 1,000,000 6.67 900,000 6.00
Malcolm Albery 100,000 0.67 90,000 0.60
850015 Alberta Ltd. 200,000 1.33 180,000 1.20
728871 Alberta Ltd. 100,000 0.67 90,000 0.60
588063 Alberta Ltd. 100,000 0.67 90,000 0.60
Lombard Odier & Cie 500,000 3.33 450,000 3.00
----------------- -------------- ------------------ -------------
TOTAL 15,000,000 100.00 13,500,000 100.00
* to be renamed China Broadband Corp.
</TABLE>
16
(2) EXHIBIT 10
- --------------------------------------------------------------------------------
Joint Venture Contract between Big Sky and China Merchants
17
<PAGE>
COOPERATIVE JOINT VENTURE CONTRACT FOR
SHENZHEN CHINA MERCHANTS BIG SKY NETWORK LTD.
CHAPTER 1
GENERAL PROVISIONS
ARTICLE 1
In accordance with the " Law of the People's Republic of China on Chinese
Foreign Cooperative Joint Ventures" and other relevant Chinese laws and
regulations of Shenzhen, China Merchants Shekou Industrial zone Ltd. and Big Sky
Network Canada Ltd., adopting the principle of equality and mutual benefits,
spirit of friendship and cooperation, have entered into an agreement for the
establishment of a cooperative joint venture at Shekou, Shenzhen, Guangdong
Province, the People's Republic of China. The Contract hereunder is concluded.
Article 2-
The following terms as used in this Contract shall have the meanings set forth
below:
1. "Approval Authority" shall mean the Shenzhen Municipal Government.
2. "Articles of Association" shall mean the "Articles of Association for
Shenzhen China Merchants Big Sky Cable Network Ltd.
3. "Board of Directors" shall mean the board of directors of the Company.
4. "Business License" means the business license of the Company issued by
the State Administration for Industry and Commerce.
5. "Company" shall mean Shenzhen China Merchants Big Sky Network Ltd.
6. "Contract" means this Cooperative Joint Venture Contract For Shenzhen
China Merchants Big Sky Network Ltd.
7. "Effective Date" shall mean the date on which the approval document of
this Contract is issued by the Approval Authority.
8. "Party" shall mean each of Party A (China Merchants Shekou Industrial
Zone Ltd.) and Party B (Big Sky Network Canada Ltd.) which
are sometimes collectively referred to as the "Parties".
9. "RMB" shall mean the currency of the People's Republic of China.
10. "Foreign Currency" means the currencies of foreign countries (including
paper money) and foreign payment notes (including notes and bank
deposit, etc.).
11. "Senior Officers" shall mean the General Manager, the Deputy General
Manager, the Chief Engineer and the Chief Accountant.
18
<PAGE>
CHAPTER 2
PARTIES TO THE COOPERATIVE JOINT VENTURE
ARTICLE 3
The Parties to this Contract are:
Party A:
China Merchants Shekou Industrial Zone, Ltd. ("hereinafter referred as Party A).
Registration Place: Beijing, The People's Republic of China
Address: Time Plaza, 1 Prince Road, Shekou, Nanshan District, Shenzhen, the
People's Republic of China
Legal Representative: Zhang Dachun
Position: Chairman
Nationality: China
Telephone: 86-755-6818928
Fax: 86-755-6691325
Party B: Big Sky Network Canada Ltd. (hereinafter referred as Party B).
Registration Place: British Virgin Islands
Address: 624 Wilderness Dr. SE, Calgary, Alberta, Canada
Legal representative: Matthew Heysel
Position: Chairman
Nationality: Canada
Telephone: 1-403-650-0389
Fax: 1-403-225-2198
CHAPTER 3
ESTABLISHMENT OF THE COOPERATIVE
(A) JOINT VENTURE COMPANY
19
<PAGE>
ARTICLE 4
The name of the cooperative joint venture company by both Parties
is:(hereinafter the Company). The name of the Company in English is: Shenzhen
China Merchants Big Sky Network Ltd.
Registration Place: Shenzhen, Guangdong Province, the People's Republic of
China.
Address: Times Plaza, 1 Prince Road, Shekou, Nanshan District, Shenzhen,
Guangdong, the People's Republic of China.
ARTICLE 5
The Company is a cooperative joint venture that is registered in Shenzhen,
approved by the approval authorities of the Government of Shenzhen. As a legal
entity, the Company shall follow the laws and regulations of the People's
Republic of China. All activities of the Company shall be governed and protected
by the laws and pertinent rules and regulations of the People's Republic of
China.
ARTICLE 6
The Company is a limited liability company. The condition and terms provided by
both Parties of the Company belongs to the assets of the Company. The Company
shall be responsible for its own liability with its own all assets. Both Parties
of the Company have agreed in the Contract on the following: the terms and
conditions of the cooperation and investment, profit distribution, risk and loss
taken, manner of the business management and operation, and asset distribution
on termination of the Contract.
CHAPTER 4
OBJECTIVE AND SCOPE OF BUSINESS
ARTICLE 7
The objective of the Company is to develop business related to data
transmission, and to develop a world-class software and hardware platform to
provide Internet-related business via the cable TV network in the Shekou area.
This will be accomplished by economic cooperation and technical exchanges as
well as through adopting advanced technology, scientific management skills, so
as to achieve favorable economic results and ensure a satisfactory rate of
return for the Parties.
ARTICLE 8
The business scope of the Company shall include: value-added business on the
Shekou cable TV network, the development of the digital information
20
<PAGE>
transmission platform, the development of digital network technology, and
related software, technical consulting and training services.
(B) CHAPTER 5
TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL
ARTICLE 9
1. The total amount of investment of the Company shall be US$3,000,000.
The registered capital shall be US$3,000,000 (including cash and
equipment).
2. In consent of the Parties and a unanimous agreement by the Board of
Directors, the total investment may be increased for the Company's new
business development. The Party B shall be assisting fund raising for
the new business development. It needs to be approved by the Approval
authority of the government.
ARTICLE 10
The terms and conditions provided by both Parties are as follows:
By Party A:
The exclusive operation right of current cable television frequency resources (a
bandwidth of 5-56MHz upstream and a bandwidth of 600-860MHz downstream) over the
entire duration of the Company in Shekou Industrial Zone. By Party B:
Financial funds including cash and equipment required by the project to a
maximum of US$3,000,000.
ARTICLE 11
1. The contribution stipulated in the Contract shall be made in accordance
with the following manner:
(1) Party A shall obtain all regulatory approvals that the Company
may require in order to conduct its business within fifteen (15)
days after the issue date of the Business License and Party B
shall be satisfied of these approvals by way of a legal opinion
from Chinese counsel selected by Party B. If all relevant
approvals are not obtained by Party A within fifteen (15) days
after the issue of the Business License due to the government
policy and delay, Party A shall not be considered to be in breach
of the Contract. Should approvals not be obtained by Party A both
Parties shall mutually agree on an appropriate time extension to
obtain the relevant approvals.
(2) The initial capital contribution of US$500,000 shall be made by
21
<PAGE>
Party B within fifteen (15) days after the issue date of the
Business License and approval of relevant approval authorities.
(3) All the remaining registered capital US$2,500,000 (including cash
and equipment) shall be made based on the Company's operation
plan and investment plan within six (6) months after the
approvals of relevant approval authorities and the issue date of
the Business License.
(4) Party A shall provide the Company with the applicable operation
right of the broadband two-way data transmission network (Shekou
Cable Television frequencies: bandwidth 5-56MHz upstream and
bandwidth 600-860MHz downstream) stipulated in ARTICLE 10 of this
Contract within fifteen (15) days from the issue date of the
Business License.
2. During the cooperation, both Parties are not allowed to withdraw any
registered funds or the terms and conditions of cooperation that have
been mutually agreed on.
ARTICLE 12
1. In case any Party to the Company intends to assign all or part of his
interest subscribed to a Third Party, consent shall be obtained from
the other Party (the Non-Transferring Party) to the Company, and
approval from the examination and approval authority is required. The
application for the said transfer shall be submitted to State
Administration for Industry and Commerce for the change of registration
within one (1) month after the approval from relevant approval
authority.
2. When one Party (the Transferring Party) to the Company assigns all or
part of his interest, the Non-Transferring Party has preemptive right.
The Transferring Party's Interest shall be sold to such
Non-Transferring Party on the same terms and conditions as the Third
Party Offer. Otherwise, the exercise of this transfer shall be
considered invalid.
3. Both Parties hereby irrevocably consent to the assignment by the
Transferring Party of all or any part of its rights, obligations and
interests in the Contract, the Articles and the Company to a
wholly-owned subsidiary. The above-mentioned preemptive right shall not
apply to such assignment. Upon completion of such assignment, the
Transferring Party shall be released from its corresponding obligations
under the Contract and these Articles and such obligations shall be
borne by such wholly-owned subsidiary. The Transferring Party shall
formally notify the other Party in writing concerning the assignment
and hand over the copy of the transferring agreement so as to guarantee
no harm to the other Party's interest and the normal business operation
of the Company.
22
<PAGE>
CHAPTER 6
PRESPONSIBILITIES OF EACH PARTY TO THE COOPERATION JOINT VENTURE
ARTICLE 13
Both Parties shall be respectively responsible for the following matters:
By Party A:
1. Promoting and supporting the Company to promote popularization of
information society in Shekou area.
2. Assisting the preparation team of both Parties to handle applications
for approval, registration, business license and other matters
concerning the establishment of the Company from relevant approval
authorities in China.
3. Processing for applying the right to the use of a site as an office
space of the Company.
4. Assisting the Company in purchasing or leasing necessary equipment,
materials, articles for office use, means of transportation and
communication facilities, etc.
5. Assisting the Company in contacting and settling the fundamental
facilities for business operation such as water, electricity,
transportation, etc.
6. Assisting the Company in recruiting Chinese management and technical
personnel, workers and other personnel needed.
7. Assisting expatriate personnel in applying for Temporary Residential
Card, entrance visa and work permit and their traveling matters.
8. Providing the terms and conditions in accordance with the stipulations
in ARTICLE 10.
9. Providing convenience for Party B in controlling the implementation of
investment.
10. Providing Party B with a certificate of integrity of Party A's property
right of the said network stipulated in ARTICLE 10 to guarantee the
implementation of the Contract and its appendices within fifteen (15)
days after signing this Contract.
11. Responsible for handling other matters entrusted by the Company.
By Party B:
1. Promoting and supporting the Company to promote popularization of
information society in Shekou area.
2. Assisting the preparation team of both Parties to handle applications
for approval, registration, business license and other matters
concerning the establishment of the Company from relevant approval
authorities in China.
23
<PAGE>
3. Providing cash, machinery and equipment in accordance with the
stipulations in ARTICLE 10, and responsible for shipping capital goods
such as machinery and equipment etc. contributed to a Chinese port.
4. Handling the matters entrusted by the Company, such as selecting and
purchasing machinery and equipment outside China, etc.
5. Training the technical personnel and workers of the Company (details in
ARTICLES OF ASSOCIATION).
6. Assisting the Company in promoting its business with the best marketing
efforts.
7. Party B shall provide Party A with the Letter of Comfort from an
investment bank within fifteen (15) days after signing this Contract to
show commitment to the Contract and its appendices. \
8. Providing the Company with the latest information concerning
international new technology for the project.
9. Assisting the Company with other matters entrusted by the Company.
CHAPTER 7
GUARANTEE OF BOTH PARTIES
ARTICLE 14
Party A guarantees that:
1. Party A is an entity legally established under the laws of the People's
Republic of China and has all corporate capacity, authority and power
to enter into and perform this Contract and the Articles.
2. Party A owns the Shekou cable television network.
3. Party A owns exclusive operation right of the cable TV frequency
resources in Shekou, i.e. broadband two-way data transmission with a
bandwidth of 5-65MHz upstream and a bandwidth of 600-860MHz downstream.
4. Party A has the authority and power to transfer the said operation
rights of the said cable television frequency resources to the Company
in accordance with the conditions and deadlines stipulated in the
Contract.
Party B guarantees:
1. Party B is an entity legally established under the laws of British
Virgin Islands and has all corporate capacity, authority and power to
enter into and perform this Contract and the Articles.
2. The funds and equipment required by the project in accordance with the
amount of investment fund, means of contribution, duration and actual
engineering requirement stipulated in ARTICLE
24
<PAGE>
11 of the Contract. Party B shall assure the Company of providing an
operation fund before profit distribution during Phase I of the
project.
3. The investment funds and equipment provided by Party B shall be free of
encumbrances.
4. Internationally sophisticated technology and equipment used by the
Company.
CHAPTER 8
(C) EQUIPMENT & SERVICE
ARTICLE 15
1. All related equipment can be purchased in both domestic market and
foreign market. The Company shall give priority to People's Republic of
China suppliers whenever items from such suppliers are competitive with
like imported items with respect to price, delivery time, technical
specifications, quality of product, international credit and reputation
and other material terms as decided by the Board of Directors. Each
Party shall assign relevant personnel to join the decision making to
purchase the equipment in the foreign market. The Company shall submit
the certificate provided by the PRC's commodity inspection authority
for certification of the equipment purchased in foreign market, in
compliance with " Law of Import and Export Commodity Inspection of the
People's Republic of China."
2. During the cooperation, the Company shall give priority in awarding
contracts and technical service contracts to service providers of the
People's Republic of China whenever services from such providers are
competitive with respect to price, completion time and service quality
as decided by the Board of Directors.
CHAPTER 9
PROFIT DISTRIBUTION
ARTICLE 16
After the Company pays the tax and contributes statutory funds as required by
applicable PRC law, the profits shall be distributed as follows:
<TABLE>
<CAPTION>
Party A Party B
------- -------
<S> <C> <C>
Phase I (2000*-2004): 40% 60%
Phase II (2005-2009): 50% 50%
Phase III (2010-2014): 60% 40%
*Or the Effective Date which ever occurs earlier.
</TABLE>
25
<PAGE>
ARTICLE 17
The Company shall endeavour to restrict all operating and general and
administrative costs to a maximum of 50% of revenue at all time.
(D) CHAPTER 10
BOARD OF DIRECTORS
ARTICLE 18
The date of the establishment of the Board of Directors of the Company shall be
the Effective Date.
ARTICLE 19
The Board of Directors will be comprised of seven (7) Directors. Of these, the
distribution of Directors shall be as follows:
<TABLE>
<CAPTION>
Party A Party B
------- -------
<S> <C> <C>
Phase I (2000*-2004): 3 4
Phase II (2005-2009): 4 3
Phase III (2010-2014): 4 3
*Or the Effective Date which ever occurs earlier.
</TABLE>
Party A shall have the right to appoint one its nominees to the Board of
Directors as the Chairman of the Board of Directors, and Party B shall have the
right to appoint one of its nominees to the Board of Directors as the
Vice-Chairman of the Board of Directors. The term of office for the Directors,
Chairman and Vice Chairman is three (3) years, and their term of office may be
renewed if continuously appointed by the relevant Party.
ARTICLE 20
The highest authority of the Company shall be the Board of Directors. It shall
decide all major issues concerning the Company. Unanimous approval shall be
required before any decisions are made concerning major issues which defined in
Article 26 of the Articles of Association. All other matters shall be passed in
accordance with the stipulations in the Contract and the Articles of
Association.
ARTICLE 21
The Chairman of the Board of Directors is the legal representative of the
Company. Should the Chairman be unable to exercise his responsibilities for some
reasons, he shall authorize the Vice-Chairman or any other Directors to
represent the Company
26
<PAGE>
temporarily. The Chairman and Vice-Chairman of the Board of Directors shall be
subject to the authority of the Board of Directors and shall not take any
actions or sign any document binding the Company except as the Board of
Directors may authorize by written resolution.
ARTICLE 22
The Board of Directors shall convene at least one meeting every year. The
meeting shall be called and presided over by the Chairman of the Board. The
Chairman may convene an interim meeting based on a proposal made by more than
one third of the total number of Directors. Minutes of the meetings shall be
placed on file.
ARTICLE 23
The Meeting of the Board of Directors may be held in any place that most
participating Directors agree on.
CHAPTER 11
BUSINESS MANAGEMENT AND
LABOR MANAGEMENT
ARTICLE 24
The Company shall establish a management office, which shall be responsible for
its day-to-day operation and management. The management office shall have a
General Manager, appointed by Party B; a Deputy General Manager, appointed by
Party A. The General Manager and Deputy General Manager shall be nominated by
the Board of Directors whose terms of office is three (3) years.
ARTICLE 25
The responsibility of the General Manager is to carry out the decisions of the
Board, and conduct the day-to-day management of the Company. The Deputy General
Manager shall assist the General Manager in his work. The General Manager may
consult with the Deputy General Manager concerning handling major issues in the
Company.
ARTICLE 26
In case of graft or serious dereliction of duty on the part of the General
Manager or the Deputy General Manager, the Board of Directors shall have the
power to dismiss them at any time.
27
<PAGE>
ARTICLE 27
Labor contract covering the recruitment, employment, dismissal and resignation,
wages, welfare, labor protection and insurance, labor discipline, rewards,
penalty and other matters concerning the staff and workers of the Company shall
be drawn up between the Company and the Trade Union of the Company as a whole or
individual employees in accordance with the "Regulations of the People's
Republic of China on Labor Management in Chinese-Foreign Cooperative Joint
Ventures and its Implementation Rules" and regulations of Shenzhen. The labor
contracts shall, after being signed, be filed with the Shenzhen Labor Bureau for
the procedures of employment.
ARTICLE 28
The appointment of senior officers who are recommended by both Parties, their
salaries, social insurance, welfare and the standard of traveling expenses etc.
shall be decided by the Board of Directors.
(E) CHAPTER 12
CONFIDENTIALITY
ARTICLE 29
No Party in this Contract shall, nor shall it permit any of its employees or the
employees of the Company to, divulge to any person any technical or commercial
secrets concerning execution of the business of the Company during the
cooperation period. The confidentiality shall remain for a period of fifteen
(15) years from signing this Contract to termination of this Contract.
(F) CHAPTER 13
TAXES, FINANCE, AUDIT, STATISTICS AND ENVIRORNMENTAL PROTECTION
28
<PAGE>
ARTICLE 30
The Company shall pay taxes in accordance with the stipulations of Chinese laws
and other relevant regulations.
ARTICLE 31
Staff members and workers of the Company shall pay individual income tax
according to the "Individual Income Tax Law of the People's Republic of China."
ARTICLE 32
Allocations for reserve funds, for expansion funds of the Company and welfare
and bonus for staff and workers shall be set aside in accordance with
stipulations in the " Law of the People's Republic of China on Chinese-Foreign
Cooperative Joint Ventures" and regulations of the Shenzhen Special Economic
Zone. The annual proportion of allocations shall be decided by the Board of
Directors in accordance with the business situation of the Company. No profits
may be distributed to the Parties unless the Company has set aside at least
RMB?2,000,000 of reserve funds.
ARTICLE 33
The financial affairs and accounting of the Company shall be handled in
accordance with the applicable accounting system and financial management
regulations of the Financial Ministry of the People's Republic of China and the
Shenzhen Special Economic Zone. The accounting system of the Company shall be
filed for the record at the Financial Bureau and Taxation in Shenzhen and
reviewed by relevant authorities with respect to finance, tax and audit.
ARTICLE 34
Financial auditing and examination of the Company shall be conducted by an
international accounting firm registered in China and reports shall be submitted
to the Board of Directors and the General Manager. Both Parties to the Company
have the right to employ their own foreign auditors registered in other country
to undertake annual financial checking and examination at their own expense.
ARTICLE 35
The monthly reports, quarterly reports and annual reports including Balance
Sheet and Profit and Loss Statement and Cash Flow Statement shall be submitted
to the relevant authorities in accordance with the regulations of the People's
Republic of China.
ARTICLE 36
The Company shall commit to bear the responsibility of protecting environment
according to "Law of the People's Republic of China on Environment Protection".
29
<PAGE>
CHAPTER 14
FOREIGN EXCHANGE
ARTICLE 37
All the foreign exchange matters shall be handled in accordance with the "
Regulations of Foreign Exchange Control of the People's Republic of China."
ARTICLE 38
The Company shall maintain a balance of foreign currency reserve. Any loan and
guarantee as investment or cooperation terms for either side of the Parties
shall be settled on their own, respectively.
ARTICLE 39
All profits, income and funds after liquidation of Party B shall be entitled in
accordance with relevant foreign exchange regulations of China to be remitted to
outside China.
ARTICLE 40
The employment income and other legitimate income of the expatriate personnel in
the Company, whether from Taiwan, Hong Kong, Macao or foreign countries, shall
be entitled to remit their employment income and other legitimate income to
outside China after they complete paying relevant tax and deduct the expenses
incurred in China.
CHAPTER 15
DURATION OF THE COMPANY
ARTICLE 41
The duration of the Company is fifteen (15) years. The establishment of the
Company shall start from the date on which the Business License of the Company
is issued. An application for the extension of the duration, proposed by one
Party and unanimously approved by the Board of Directors, shall be submitted to
the approval authorities one hundred and eighty (180) days prior to the expiry
date of the Company.
21. CHAPTER 16
(A) THE DISPOSAL OF ASSETS AFTER
THE EXPIRATION OF THE DURATION
30
<PAGE>
ARTICLE 42
Upon the expiration of the duration, liquidation of assets, credit and debt
shall be carried out according to the relevant law. A Liquidation Committee set
up by the representatives of both Parties shall be responsible for the
liquidation.
ARTICLE 43
Upon prior termination of this Contract, the Company's assets after the
liquidation shall be settled in accordance with the stipulation in the Contract
and Articles of Association.
CHAPTER 17
INSURANCE
ARTICLE 44
Insurance policies of the Company on various kinds of risks shall be
underwritten with the People's Republic of China. Types, the value and duration
shall be decided by the Board of Directors with the stipulations of the People's
Republic of China.
CHAPTER 18
THE ALTERATION AND
(B) DISCHARGE OF THE CONTRACT
Article 45
The amendment of the Contract and the Articles of Association, any
increase or decrease of the registered capital, pledge of assets of the Company,
merger or separation of the Company, discontinuation or dissolution,
amalgamation with other economic organization or any other major appendices
shall come into force only after it is unanimously approved by the Board of
Directors. The written agreement with signatures of both Parties can become
effective only after it is submitted to the original examination and approval
authority for its approval, and registered in State Administration for Industry
and Commerce.
ARTICLE 46
In case of the inability to fulfil the Contract or to continue operation due to
heavy loss in successive years as a result of Force Majeure, the duration of the
Company and the Contract shall be terminated before the time of expiration after
consultation with
31
<PAGE>
between each Party and shall be approved by the original examination and
approval authority.
ARTICLE 47
Should the Company be unable to continue its operations or achieve the business
purpose stipulated in the Contract due to the fact that one of the contracting
Parties fails to fulfill the obligations prescribed by the Contract and Articles
of Association, or seriously violate the stipulations of the Contract and
Articles of Association, that Party shall be deemed as having unilaterally
terminated the Contract. The other Party shall have the right to terminate the
Contract in accordance with the provisions of the Contract after approved by the
original approval authority as well as to claim damages. In case Party A and
Party B of the Company agree to continue the operation, the Party who fails to
fulfil the obligations shall be liable to the losses thus caused to the Company.
CHAPTER 19
LIABILITIES FOR BREACH OF CONTRACT
ARTICLE 48
Should either Party A or Party B fails to pay on schedule the contributions or
provide the terms and conditions in accordance with the provisions defined in
ARTICLE 10 and ARTICLE 11 of this Contract, the breaching Party shall be
responsible for the breaching event and pay to the other Party in cash an amount
equal to 0.05% per day of the value of the registered capital contribution for
each day following the date when such contribution was due but not made or the
terms and conditions were due but not provided. If the breach Party fails to
remedy such material breach within a period of ninety (90) days, in addition to
be paid in cash as a penalty an amount equal to 4.5% of the value of the capital
contribution. In addition the other Party shall have the right to terminate the
Contract and claim damages thus caused during the breaching event.
ARTICLE 49
Should all or part of the Contract and its appendices be unable to be fulfilled
owing to the fault of one Party, the breaching Party shall bear the
responsibilities thus caused. Should it be the fault of both Parties, they shall
bear their respective responsibilities. The breaching Party shall take action to
remedy such material breach within thirty (30) days after notice in writing from
the other Party. Except for the stipulation in
32
<PAGE>
ARTICLE 49 of this Contract, if the breaching Party fails to remedy the breach
in time, the breaching Party shall pay the other Party in cash as a penalty an
amount equal to 1% of the value of the capital contribution to compensate for
damages caused by the breach event. If both Parties to the Company fail to
execute or to fully execute the terms and conditions of this Contract, each of
them shall bear their respective responsibilities for default and compensation
for losses, based on the specific circumstances.
(C) CHAPTER 20
FORCE MAJEURE
ARTICLE 50
Should either of the Parties to the Contract be prevented from executing the
Contract by Force Majeure, such as earthquake, typhoon, flood, fire and war and
other unforeseen events, and their happening and consequences are unpreventable
and avoidable, the prevented Party shall notify the other Party by cable without
any delay, and within fifteen (15) days thereafter provide the detailed
information of the events and a valid document for evidence issued by the
relevant public notary organization for explaining the reason of its inability
to execute or delay the execution of all or part of the Contract. Both Parties
shall, through consultations, decide whether to terminate the Contract or to
execute the part of obligations for implementation of the Contract or whether to
delay the execution of the Contract according to the effects of the events on
the performance of the Contract.
(D) CHAPTER 21
APPLICABLE LAW
ARTICLE 51
The formation of this Contract, its validity, interpretation, execution and
settlement of the disputes shall be governed by the related laws of the People's
Republic of China. If changes are made to the current laws, regulations or
policies of the People's Republic of China applicable to this Contract to
provide more favourable conditions for the achievement of the objectives of the
Parties as set out in ARTICLE 7 AND ARTICLE 8 of this Contract, the Parties
shall negotiate in good faith to amend this Contract so that the Parties can
benefit from the more favourable conditions to the greatest extent possible.
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CHAPTER 22
(E) SETTLEMENT OF DISPUTES
ARTICLE 52
Any disputes arising from the execution of, or in connection with the Contract
shall be settled through friendly consultations between both Parties. In case no
settlement can be reached through consultations after sixty (60) days, the
disputes shall be submitted to the Foreign Economic and Trade Arbitration
Commission of the China Council for the Promotion of International Trade in
Beijing, for arbitration in accordance with its rules of procedure. The arbitral
award is final and binding upon both Parties. The defeated Party shall bear the
arbitration fee. During the arbitration, the Contract shall be executed
continuously by both Parties except for matters in disputes.
(F) CHAPTER 23
EXPENSES DURING THE ESTABLISHMENT
OF THE COMPANY
ARTICLE 53
1. Party A shall pay fees for the establishment of the Company. The
expenses shall be listed as expenses for the establishment of the
Company and shall be reimbursed on the basis of receipts approved by
both Parties.
2. If one Party breaches the Contract which results in the Company failure
to be established, the breaching Party shall pay the cost of
establishing the Company. These fees shall be shared by both Parties if
both Parties breach.
3. If the company fails to set up due to the reason other than both
Parties' breach, the fees shall be shared as follows:
Party A: 50%; Party B: 50%.
(G) CHAPTER 24
22. LANGUAGE
ARTICLE 54
The Contract shall be written in Chinese version and English version. Both
languages are equally authentic. In the event of any discrepancy between the two
aforementioned versions, the Chinese version shall prevail.
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CHAPTER 25
(A) EFFECTIVENESS OF THE CONTRACT
AND MISCELLANEOUS
ARTICLE 55
The Articles of Association drawn up in accordance with the principles of this
Contract are an integral part of this Contract. The titles of chapters in this
Contract shall serve for obviousness and have no influence upon meaning and
interpretation of the contents in the Contract.
ARTICLE 56
The Contract and its appendices shall come into force beginning from the date of
approval of the approval authority of the Government of Shenzhen. This approval
date is the Effective Date.
ARTICLE 57
Should notices in connection with any Party's rights and obligations be sent by
either Party A or Party B by telegram, telex, email or fax, etc., the written
letter notices shall be also required afterwards. Such written letter notices
shall be delivered by post services, and be considered to be received by in ten
(10) business days from the date of sending out. The legal address of Party A
and Party B listed in this Contract (or such other address as either Party may
notify the other Party in writing) shall be the posting addresses.
ARTICLE 58
The Contract is signed in Shekou, Shenzhen, Guangdong Province, the People's
Republic of China, by the authorized representatives of both Parties on
September 21, 1999. Four copies of each version of this Contract shall be
respectively provided to both Parties.
Party A: Party B:
China Merchants Shekou Big Sky Network Canada Ltd.
Industrial Zone Ltd.
Authorized Representative Legal Representative
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Zhou Qifang Matthew Heysel
General Manager Chairman
[Seal] [Seal]
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