CONTRACT TO ESTABLISH SINO COOPERATIVE JT. VENTURE

Contract to Establish

the Sino-foreign Cooperative Joint Venture

Beijing Tianmu Satellite Communications Technology Co., Ltd.







By and Between



China International Travel Service Telecom Co., Ltd.





American China Investment Corporation COOPERATIVE JOINT VENTURE CONTRACT







ARTICLE 1: GENERAL PRINCIPLES



1.1 China International Travel Service (CITS) TELECOM CO., LTD., a company organized under the Laws of the People's Republic of China ("PRC") and legally authorized to conduct economic activities, with its principal office at: CITS Development Building, P.O.Box 3015, Beijing 100011, PRC (hereinafter referred to as Party A); Legal representative: Mr. Li Yuancheng, General Manager; nationality: PRC.



American China Investment Corporation ("ACIC"), a corporation organized under the Laws of Ontario, Canada, with its principal office at: 95 Wellington Street West, suite 1001, Toronto, Ontario M5J 2N7, Canada (hereinafter referred to as Party B); Legal Representative: Raymond I. Marks, Chairman; nationality: USA.



1.2 Party A and Party B (hereinafter referred to as the "Parties") agreed to jointly form a Cooperative Joint Venture Company in accordance with the Laws of the PRC on Cooperative Joint Ventures using Chinese and Foreign Investment and other applicable laws and regulations pursuant to a Cooperative Joint Venture Contract dated March 28, 1995 (the "Original JVC"). Certain matters have arisen making it appropriate to amend the Original JVC. The Parties agree to amend and restate the Original JVC with the terms and conditions of this Cooperative Joint Venture Contract (this "Contract"). The Parties agree to perform in good faith this Contract as amended and restated.





ARTICLE 2: NAME AND ADDRESS OF THE JOINT VENTURE COMPANY



2.1 The Chinese full name of the Joint Venture Company shall be " " (abbreviated as " ").



2.2 The English full name of the Joint Venture Company shall be "Beijing Tianmu Satellite Communications Technology Co., Ltd." (abbreviated as "JVCO").



The Headquarters and registered address of JVCO shall be 45 Baishiqiao Road, Haidian District, Beijing 100044, PRC.





ARTICLE 3: PURPOSE AND BUSINESS SCOPE OF JVCO





3.1 JVCO shall operate on sound and lawful business principles and on the basis of equality and mutual benefit, with the goal of providing services and products at a profit acceptable to JVCO.



3.2 JVCO shall endeavor to operate competitively (particularly as regards efficiency, quality, price and delivery schedule) and carry out its operations in accordance with sound business practices.



3.3 The business scope of JVCO shall include the following:



(1) Constructing and providing technical engineering services and support for telecommunications projects and facilities with capital injection relating to, without limitation, VSAT, wireless, CATV and other telecommunications networks;



(2) Engaging in network system design and integration, equipment and system installation and maintenance, engineering management and system operation consultation for telecommunications facilities and networks; and



(3) Producing and trading in satellite communications equipment and systems and network operation systems software.



JVCO's business scope shall be summarized for purposes of its business license as follows: "Producing and trading in satellite communications equipment and systems and network operation systems software; constructing and providing technical engineering services and support for telecommunications projects and facilities with capital injection relating to telecommunications networks."



3.4 This Contract shall be an exclusive agreement between Party A and Party B.



3.5 JVCO shall endeavor to apply suitable advanced technologies and management techniques to advance the quality of JVCO services. JVCO shall have the exclusive right to merge with Party A reflecting the joint roles as strategic partners when appropriate and permitted by applicable law.





ARTICLE 4: REGISTERED CAPITAL AND FINANCING



4.1 JVCO shall be a limited liability company. The respective liabilities of the Parties to JVCO in all circumstances shall be limited to the amount of the registered capital expressly subscribed to by it pursuant to Article 4.4 below. The Parties shall have no liability, jointly or severally, for any debts or obligations of JVCO other than the amount, if any, of a Party's







unpaid subscribed contribution to JVCO's registered capital. JVCO's debts and obligations shall all be settled exclusively from the then existing assets of JVCO.



4.2 The total investment of JVCO shall be US$26,900,000 (Twenty-six million, nine hundred thousand U.S. Dollars).



4.3 The registered capital of JVCO shall be US$12,500,000 (Twelve million, five hundred thousand U.S. Dollars), of which Party A shall subscribe thirty percent (30%) of the total registered capital, equivalent to US$3,750,000 (Three million, seven hundred and fifty thousand U.S. Dollars), and Party B shall subscribe seventy percent (70%) of the total registered capital, equivalent to US$8,750,000 (Eight million, seven hundred and fifty thousand U.S. Dollars).



4.4 The form of the contributions of both Parties to the registered capital of JVCO shall be as follows:



Party A: (a) Satellite telecommunications equipment and

infrastructure equivalent to US$3,481,600;



(b) Cash in Renminbi yuan equivalent to

US$268,400.



Party B: US$8,750,000 in cash.

4.5 The contributions of both Parties to the registered capital of JVCO shall be made in installments in accordance with the following schedule:



(1) Within fifteen (15) days of the approval by the original authority of this Contract and the extension of JVCO's tentative business license which was issued on May 19, 1995 by the State Administration for Industry and Commerce (the "SAIC"), Party A shall fully make its subscribed capital contribution as above-mentioned to JVCO, and Party B shall contribute US$2,500,000 in cash to JVCO (less the amount of any preparatory expenses advanced or paid by Party B or on its behalf pursuant to Article 4.6 of this Contract); and



(2) Subject to the issuance of JVCO's formal business license by the SAIC, Party B shall contribute an additional US$3,400,000 in cash to JVCO not later than June 30, 1996; and Party B shall contribute the remaining US$2,850,000 in cash to JVCO not later than December 31, 1996.



4.6 Prior to the date of this Contract, Party B will have advanced to Party A the amount of US$300,000 to be used by Party A as preparatory expenses in connection with JVCO. If the condition to the payment of registered capital of JVCO pursuant to Article 4.5 (1) is not







fulfilled within forty-five (45) days of the date of this Contract, Party A will reimburse Party B the amount of the preparatory expenses advanced to Party A.



4.7 The magnitude, schedule and method for financing the total investment of JVCO in addition to the registered capital contributions shall be decided and approved by the Board of JVCO based on the actual capital required by the growth and expansion of JVCO. Party B shall be responsible for arranging such financing, which shall not result in any change in either Party's percentage interest in the total registered capital of JVCO as set forth in Article 4.3 of this Contract. Party A shall have no obligation to arrange any part of such financing.



4.8 After the contributions to the registered capital of JVCO are made by the Parties, an independent international accountant registered in China shall verify such investment. JVCO shall issue an investment certificate, signed by the Chairman and the Vice Chairman of the Board, which states the following: name of JVCO; date, month and year of the establishment of JVCO; names of the Parties and their investment contributed; date, month and year of the contribution of the investment and date, month and year of the investment certificate issued. The total amount of the registered capital as confirmed by the Parties shall not be reduced during the term of this Contract.



4.9 The balancing of foreign currency requirements will be the responsibility of JVCO.





ARTICLE 5: BOARD OF DIRECTORS AND ORGANIZATIONAL



5.1 The Board of Directors shall be the highest authority of JVCO and decide all major issues. The Board shall be composed of eleven (11) Directors, four (4) of which shall be from Party A and seven (7) from Party B. Party A shall appoint a Chairman, and Party B shall appoint two (2) Vice Chairmen. The Directors shall hold the office for a period of four (4) years. Directors shall be appointed, renewed and/or replaced by Party A and Party B, respectively.



5.2 Actions by the Board of Directors require the affirmative vote of a majority of the Directors, which majority shall include at least two Directors from Party A and two Directors of Party B. Directors who are unable to attend Board meetings (either in person or by teleconference) may send their duly executed written proxies to the Chairman. When dealing with issues of concern to the Parties' individual rights and interests, the Board of Directors shall operate on the basis of equality and mutual benefit through consultation.



5.3 The Board of Directors shall meet quarterly. Meetings shall be called and presided over by the Chairman of the Board; in his absence, a Vice Chairman shall preside. The







Chairman shall give twenty (20) days' written notice of every meeting to all Directors and the General Manager. When necessary, special meetings may be called at the request of Directors from either Party. The meetings shall generally be held in China. Nine (9) Directors, present in person or by proxy, shall constitute a quorum. Action taken by unanimous written and signed resolution of the Board shall have the effect of approval at a Board Meeting. Minutes of the meetings shall be kept both in English and Chinese languages.



5.4 At the first meeting of the Board of Directors (which will be scheduled as soon as practicable after JVCO has received its formal business license), members will consider establishing a number of oversight committees to assist with the management and operation of JVCO. Such committees may include an executive committee, compensation committee and an audit committee.



5.5 Notwithstanding the requirements of Section 5.2, certain matters require either unanimous or dual majority voting by the Board:



(1) Issues requiring unanimous decision of the Directors are:

- Amendment of the Articles of Association of JVCO;

- Extension, termination and dissolution of JVCO and

the liquidation and wind-up thereof,

- Increase, transfer or assignment of the registered

capital of JVCO; and

- Any merger of JVCO with another economic organization.



(2) Issues requiring a decision by a majority of Directors from Party A and a majority of the Directors from Party B are:

- Strategic direction and borrowing plans of JVCO;

- Business plans of JVCO;

- Annual budget and accounting statements of JVCO;

- Plans for allocating reserve funds, enterprise

expansion funds, and plans for distributing annual ...