UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
PACIFICNET INC.
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(Name of Issuer)
COMMON STOCK, PAR VALUE $.0001 PER SHARE
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(Title of Class of Securities)
69511V207
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(CUSIP Number)
UNIT 1702, CHINACHEM CENTURY TOWER, 178 GLOUCESTER ROAD, WANCHAI, HONG KONG
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
APRIL 27, 2003
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box .
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
(Continued on following pages)
(Page 1 of 23 Pages)
CUSIP No. 69511V207 13D Page 2 of 23 Pages
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PacificNet Communications Limited - Macao Commercial Offshore
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
Not Applicable (a)
(b)
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e)
Not Applicable
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Macao Special Administrative Region of the Peoples Republic of China
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7. SOLE VOTING POWER
NUMBER OF 800,000
SHARES -----------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY 0
EACH -----------------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 800,000
WITH -----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
0
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
800,000
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12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
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13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
12.8%
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14. TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
CUSIP No. 69511V207 13D Page 3 of 23 Pages
Item 1. Security and Issuer.
This Schedule 13D relates to the common stock, par value $0.0001 per
share (the "Common Stock") of PacificNet Inc., a Delaware corporation
(the "Company"). The principal executive offices of the Company are
located at Unit 1702, ChinaChem Century Tower, 178 Gloucester Road,
Wanchai, Hong Kong.
Item 2. Identity and Background.
(a) This Schedule 13D is being filed by PacificNet Communications Limited -
Macao Commercial Offshore ("PCL-Macao"). Attached as Exhibits 2, 3 and
4, is information concerning each executive officer and director of
PCL-Macao, the controlling person of PCL-Macao, and each executive
officer and director of the controlling person of PCL-Macao,
respectively.
(b) The principal business address for PCL-Macao and those persons
identified on Exhibit 2 is: Commercial Centre I Tak , Rua De Pequim No.
126, 6th Fl., E, Macau.
The principal business address for those persons identified on Exhibits
3 and 4 is Unit 1702, ChinaChem Century Tower, 178 Gloucester Road,
Wanchai, Hong Kong.
(c) PCL-Macao is principally engaged in the business of value-added telecom
services, including call centers, telemarketing, CRM, database and
data-mining services, wireless communications, mobile applications,
paging roaming, short messaging services, multimedia messaging
services, mobile commercial and VOIP in the Greater China region.
The Company, through its subsidiaries, is principally engaged in
providing systems integration, network communications, information
technology, customer care and CRM solutions in Asia.
(d) Since its inception in January 2003, PCL-Macao has not been, nor to its
knowledge have any of the persons or entities listed on Exhibits 2, 3
and 4 been convicted in a criminal proceeding.
(e) Since its inception in January 2003, PCL-Macao has not been, nor to its
knowledge have any of the persons or entities listed on Exhibits 2, 3
and 4 been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, Federal or State securities laws or finding any violation
with respect to such laws.
(f) PCL-Macao is a Macao corporation.
Item 3. Source and Amount of Funds or Other Consideration.
The shares of Common Stock of the Company were issued to PCL-Macao in
connection with that certain equity joint venture contract, dated
December 20, 2002 (the "Agreement"), attached to this Schedule 13D as
Exhibit 1. As consideration for the issuance of 800,000 shares of the
Company's Common Stock to PCL-Macao, PCL-Macao issued 50.1% of its
total registered share capital to PacificNet Management Limited, a
wholly-owned subsidiary of the Company. The issuance of the Shares are
subject to rescission, in the event the transactions contemplated by
the Agreement fail to receive certain regulatory approvals, or the
Company fails to receive certain approvals of its shareholders in
connection with the Agreement, or certain other conditions described in
the Agreement are not fulfilled. The foregoing description is qualified
in its entirety by reference to the full text of the Agreement attached
hereto as Exhibit 1.
CUSIP No. 69511V207 13D Page 4 of 23 Pages
Item 4. Purpose of Transaction.
PCL-Macao acquired the Shares as partial consideration for performing
under those certain telecommunications customer service contracts (the
"Service Contracts") assigned to PCL-Macao by International Elite, Ltd.
("IEL"). PCL-Macao has the right to acquire up to an additional
33,200,000 shares of Common Stock of the Company, which will be held in
an escrow account and disbursed in tranches upon the achievement by
PCL-Macao of certain net income milestones in the performance of the
Service Contracts as set forth in the Agreement. The foregoing
description is qualified in its entirety by reference to the full text
of the Agreement attached hereto as Exhibit 1.
Except as described in this Item 4 of this Schedule 13D, the reporting
person has not formulated any plans or proposals which relate to or
would result in: (a) the acquisition by any person of additional
securities of the Company, or the disposition of securities of the
Company; (b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its
subsidiaries; (c) a sale or transfer of a material amount of assets of
the Company or any of its subsidiaries; (d) any change in the present
Board of Directors or management of the Company, including any plans or
proposals to change the number or term of directors or to fill any
existing vacancies on the Board; (e) any material change in the present
capitalization or dividend policy of the Company; (f) any other
material change in the Company's business or corporate structure; (g)
any changes in the Company's charter or by-laws or other actions which
may impede the acquisition or control of the Company by any person; (h)
causing a class of securities of the Company to be delisted from a
national securities exchange or cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities
association; (i) causing a class of equity securities of the Company to
become eligible for termination of registration pursuant to Section
12(g)(4) of the Act; or (j) any action similar to those enumerated
above.
Item 5. Interest in Securities of the Issuer.
(a) PCL-Macao beneficially owns 800,000 shares of Common Stock,
representing 12.8% of the total issued and outstanding shares of Common
Stock of the Company. PCL-Macao, upon achieving certain net income
milestones, as set forth in the Agreement, has the right to acquire up
to an additional 33,200,000 shares of Common Stock representing in the
aggregate 85% of the Company.
The following persons constitute those executive officers and directors
of PCL-Macao, the controlling person of PCL-Macao, and those executive
officers and directors of the controlling person of PCL-Macao who
beneficially owns shares of Common Stock of the Company:
Tony Tong beneficially owns 390,391 shares of Common Stock,
representing 6.3% of the total issued and outstanding shares of Common
Stock of the Company, which includes 206,000 stock options that are
currently exercisable
Cho Sam Tong beneficially owns 3,103,556 shares of Common Stock,
representing 51.78% of the total issued and outstanding shares of
Common Stock of the Company, which includes shares of Common Stock
owned by Sino Mart Management Ltd., a company controlled by Cho Sam
Tong, and 600,000 shares of Common Stock issuable to Sino Mart
Management Ltd. upon the exercise of a warrant.
Shao Jian (Sean) Wang beneficially owns 29,400 shares of Common Stock,
representing 0.5% of the total issued and outstanding shares of Common
Stock of the Company.
Victor Tong beneficially owns 25,200 shares of Common Stock,
representing 0.4% of the total issued and outstanding shares of Common
Stock of the Company.
Richard Chi Ho Lo beneficially owns 19,000 shares of Common stock of
the Company representing 0.3% of the total issued and outstanding
shares of Common Stock of the Company.
Yue (Justin) Tang beneficially owns 7,000 shares of Common stock of the
Company, representing 0.1% of the total issued and outstanding shares
of Common Stock of the Company.
David Fisher beneficially owns 5,000 shares of Common Stock of the
Company, representing 0.1% of the total issued and outstanding shares
of Common Stock of the Company.
CUSIP No. 69511V207 13D Page 5 of 23 Pages
Yongjun (Charles) Fu beneficially owns 5,000 shares of Common Stock of
the Company, representing 0.1% of the total issued and outstanding
shares of Common Stock of the Company.
Emmy Lo beneficially owns 5,000 shares of Common Stock of the Company,
representing 0.1% of the total issued and outstanding shares of Common
Stock of the Company.
(b) PCL-Macao has sole voting and dispositive power over the shares. Each
of those persons identified in clause (a) of this Item 5 have sole
voting and dispositive power over the shares.
(c) PCL-Macao has not effected any transactions in the Common Stock of the
Company in the past 60 days. None of these persons identified in clause
(a) of this Item 5 have effected any transactions in the Common Stock
of the Company in the past 60 days.
(d) To the knowledge of PCL-Macao, and those persons identified in clause
(a) of this Item 5, no other person is known to have the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of the Shares. Except that Sino Mart Management,
Ltd., a Company controlled by Cho Sam Tong has the right to receive
dividends and proceeds from the sale of shares beneficially owned by
ChoSam Tong.
(e) Not Applicable
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
On December 20, 2003, PacificNet Management Limited and the
shareholders of IEL entered into the Agreement, attached hereto as
Exhibit 1, to form PCL-Macao, which is owned 50.1% by PacificNet
Management Limited and 49.9% by certain shareholders of IEL. Pursuant
to the terms of the Agreement, the Company will contribute to PCL-Macao
in the aggregate 34,000,000 restricted shares of its common stock to be
held by an escrow agent and released in tranches upon completion of
certain agreed upon net income milestones by PCL-Macao. The foregoing
description is qualified in its entirety by reference to the full text
of the Agreement attached hereto as Exhibit 1.
Item 7. Materials to be Filed as Exhibits.
Exhibit 1. Equity Joint Venture Contract, dated December 20, 2002
between PacificNet Management Limited and International Elite Limited.
Exhibit 2. Executive Officers and Directors of Pacific Communications
Limited - Macao Commercial Offshore
Exhibit 3. Controlling Person of Pacific Communications Limited - Macao
Commercial Offshore
Exhibit 4. Executive Officers and Directors of the Controlling Person
of Pacific Communications Limited - Macao Commercial Offshore
CUSIP No. 69511V207 13D Page 6 of 23 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Dated: May 7, 2003 PACIFICNET COMMUNICATIONS LIMITED-
MACAO COMMERCIAL OFFSHORE
By: /s/ Tony Tong
--------------------------------
Name: Tony Tong
Title: CEO
CUSIP No. 69511V207 13D Page 7 of 23 Pages
EXHIBIT 1
---------
EQUITY JOINT VENTURE CONTRACT
FOR
PACIFICNET COMMUNICATIONS LIMITED - MACAO COMMERCIAL OFFSHORE
Pacificonet Comunicacoes Limitada - Comercial Offshore de Macau
(Portuguese Name)
THIS AGREEMENT is made the 20th day of December 2002.
CHAPTER 1: GENERAL PRINCIPLES AND INTERPRETATIONS
PacificNet Management Limited, a company existing under the laws of the British
Virgin Islands and a wholly owned subsidiary of PacificNet Inc., and
Shareholders of International Elite Limited, pursuant to the Law of the Macao
Special Administrative Region (SAR) of the People's Republic of China (the
"PRC"), the Regulations for the Implementation of the Law of the Macao SAR on
Macao Offshore Company, and other relevant laws and regulations of the Macao
SAR, based on the principle of equality and mutual benefit, through friendly
consultations, have agreed to jointly invest in and establish an equity joint
venture, and therefore enter into this contract (hereinafter, this "Contract").
1. INTERPRETATION
1.1 The Recitals and Schedules form part of this Agreement and shall have the
same force and effect as if expressly set out in the body of this Agreement and
any reference to this Agreement shall include the Recitals and Schedules. 1.2 In
this Agreement except where the context otherwise requires the following words
and expressions shall have the following meanings:
"Completion" completion of the JV registration in accordance
with Clause 5 of this Agreement;
"Completion Date" 31st March 2003 (or such later date as the parties
shall agree in writing);
"Conditions" the conditions contained or referred to in Clause 5;
"Consideration" the consideration payable for the investment of PACT
Shares to the JV pursuant to Clause 3;
"Hong Kong" Hong Kong Special Administrative Region of the PRC;
HK$ Hong Kong dollars
"JV AGREEMENT" means equity joint venture agreement and the related Memorandum
of Association and Articles of Association to be entered into between Party A
and Party B in the agreed terms as set out in this Contract, including its
variation, modification and supplement necessitated by the requirements of the
Macao SAR approving authority;
"Macao" or "Macau" Macao Special Administrative Region of the PRC;
"MOP" Macao Pataca: * Note: Currency Exchange Ratio as of
December 18, 2002:
1 US Dollar (USD) = 8.28180 Macao Pataca (MOP)
1 Macao Pataca (MOP) = 0.12075 US Dollar (USD)
CUSIP No. 69511V207 13D Page 8 of 23 Pages
"NET INCOME" means, for any period, all revenues, income, earnings or cash flow
of any kind or description received during such period by the Joint Venture
minus all costs, expenses and taxes paid (whether income, corporate, sales or
otherwise to the relevant tax authorities) paid or incurred during such period
by the Joint Venture in the ordinary course of its business, together with
amounts used to replenish and fund the Reserves (if any);
"PACT" means PacificNet Inc. a company incorporated under the laws of the State
of Delaware in the United States of America whose principal office is situate at
860 Blue Gentian Road, Suite 360, Eagan, MN 55121, the United States of America,
the shares of which are listed on the NASDAQ stock exchange in the United States
of America and is the holding company of the PacificNet Management Limited.
"PACT Shares" ordinary shares of USD$0.0001 each in the capital of
PACT;
"PRC" People's Republic of China;
"RELEASE CRITERIA" means the basis and conditions by which the Escrow Agent
shall release the relevant portion of Consideration shares to the Joint Venture
on the Release Date pursuant to the schedule in Clause 4;
"RELEASE DATE" means the relevant date by which the Escrow Agent, pursuant to
the Escrow Agreement, shall release such portion of Consideration Shares to the
Joint Venture in accordance with the schedule in Clause 4 and upon the Release
Criteria being satisfied;
"Tax" and "Taxation" includes all forms of tax, levy, duty, charge, fee,
contribution, impost or withholding of any nature now or hereafter imposed,
levied, collected, withheld or assessed by a local, municipal, governmental,
state, federal or other body or authority in Macao SAR or elsewhere (including
any fine, penalty, surcharge or interest in relation thereto);
"USD$" or "US$" United States dollars;
"United States" United States of America;
"Warranties" the representations, warranties and undertakings contained or
referred to in Clause 4.8, Clause 8 and Schedule 5. 1.3 Words and phrases (not
otherwise defined in this Agreement) the definitions of which are contained or
referred to in the Companies Ordinance (Cap. 32) shall be construed as having
the meanings thereby attributed to them. 1.4 References in this Agreement to
ordinances and to statutory provisions shall be construed as references to those
ordinances or statutory provisions as respectively as modified (on or before the
date hereof) or re-enacted (whether before or after the date hereof) from time
to time and to any orders, regulations, instruments or subordinate legislation
made under the relevant ordinances or provisions thereof and shall include
references to any repealed ordinance or provisions thereof which has been so
re-enacted (with or without modifications).
1.5 The headings are for convenience only and shall not affect the construction
of this Agreement.
1.6 All representations, undertakings, warranties, indemnities, covenants,
agreements and obligations given or entered into by more than one person are
given or entered into jointly and severally.
1.7 Any document referred to herein as being "in the agreed terms" shall be in a
form already agreed between the Legal Counsels acting for the parties hereto.
1.8 Except where the context otherwise requires words denoting the singular
include the plural and vice versa; words denoting any one gender include all
genders; words denoting persons include incorporations and firms and vice versa.
1.9 Reference to clauses, sub-clauses, paragraphs and schedules are (unless the
context requires otherwise) to clauses, sub-clauses, paragraphs and schedules of
this Agreement.
CUSIP No. 69511V207 13D Page 9 of 23 Pages
1.10 The expressions "Party A", "Party B", PACT, and the Joint Venture shall
unless the context requires otherwise include their successors, personal
representatives and permitted assigns.
1.11 The schedules and appendices form part of this Agreement.
CHAPTER 2: PARTIES TO THE JOINT VENTURE
2.1 The Parties to this Contract are as follows:
(1) PacificNet Management Limited, a company existing under the laws of the
British Virgin Islands whose principal place of business is at Unit 1702,
ChinaChem Century Tower, 178 Gloucester Road, Wanchai, Hong Kong (hereafter
referred as "Party A").
PacificNet Management Limited is a wholly owned subsidiary of PacificNet Inc.
("PACT"), a company incorporated under the laws of the State of Delaware in the
United States of America whose principal office is situate at 860 Blue Gentian
Road, Suite 360, Eagan, MN 55121-1575, the United States of America, the shares
of which are listed on the NASDAQ stock exchange in the United States of America
under the trading symbol of "PACT".
Party A's Representative:
Name: Tony Tong
Position: Chairman and CEO of PacificNet Inc.
Citizenship: USA
(2) Shareholders of International Elite Limited: Mr. LI Kin Shing, Ms. KWOK King
Wa, Mr. Li Wang, Mr. Li Yin, and Mr. Li Yi Sheng (hereinafter jointly referred
as "Party B"). International Elite Limited is a company existing under the laws
of the Cayman Islands whose principal place of business is at Room 3813-3815,
Hong Kong Plaza, 188 Connaught Road West, Hong Kong (the "IEL");
Party B's Representative:
Name: Li Kin Shing
Position: Chairman of International Elite Limited
Citizenship: Hong Kong, SAR of China
Party B members:
Party B1: Mr. LI Kin Shing (permanent resident of Hong Kong SAR);
Party B2: Ms. KWOK King Wa (permanent resident of Hong Kong SAR);
Party B3: Li Wang (permanent resident of Hong Kong SAR);
Party B4: Li Yin (permanent resident of Hong Kong SAR);
Party B5: Li Yi Sheng (permanent resident of Hong Kong SAR);
2.2 Pursuant to the Law of the Macao SAR, Party A and Party B agree to establish
in Macao SAR an equity joint venture company, namely "PacificNet Communications
Limited - Macao Commercial Offshore" and the Portuguese Name as "Pacificonet
Comunicacoes Limitada - Comercial Offshore de Macau" (hereinafter, "Joint
Venture")
2.3 Each Party represents and warrants to the other that: (i) it is a
duly organized and validly existing corporation with independent legal person
status in its home country and has the full power and right to conduct its
business in accordance with its business license, articles of association or
similar corporate organizational documents; (ii) it possesses full power and
authority necessary to enter into this Contract and to perform its obligations
hereunder; (iii) the above designated representative of it or its authorized
representative has been fully authorized to execute this Contract and to bind
such respective Party thereby; and (iv) upon the effective date of this
Contract, the provisions of this Contract will constitute its legal, valid and
binding obligations. Each Party shall defend, hold harmless and indemnify the
other against any and all direct and foreseeable losses, damages, expenses or
liability arising from its breach of any of the foregoing representations and
warranties.
CUSIP No. 69511V207 13D Page 10 of 23 Pages
2.4 Each of Party A and Party B shall have the right to change its
Board of Directors representatives, provided that it promptly notifies the other
Party hereto in writing of such change and the name, position and nationality of
its new Board of Directors representatives.
CHAPTER 3: THE JOINT VENTURE'S NAME, ADDRESS AND SCOPE OF BUSINESS
3.1 The name of the Joint Venture shall be "PacificNet Communications Limited -
Macao Commercial Offshore" and the Portuguese Name as " Pacificonet Comunicacoes
Limitada - Comercial Offshore de Macau".
3.2 The Joint Venture shall be registered with the Administration for Commerce
of Macao SAR. The Joint Venture may change its legal address in light of its
operational needs.
3.3 The Joint Venture shall have the legal status in the Macao SAR. All
activities of the Joint Venture shall be in compliance with Macao SAR laws and
regulations.
3.4 The organizational form of the Joint Venture shall be a limited liability
company. The liability of each Party shall be limited to its contribution to the
registered capital of the Joint Venture. In other words, except as otherwise
provided herein, once a Party has completed in full its contribution to the
Joint Venture as required by the provisions of this Contract, it shall not be
required to provide any further funds to the Joint Venture by way of capital
contribution, loan, advance, guarantee or otherwise. Creditors of the Joint
Venture shall have recourse only to the assets of the Joint Venture and shall
not seek repayment of any nature from any of the Parties. The Joint Venture
shall indemnify and hold the Parties harmless against any and all losses,
damages, or liabilities suffered by the Parties in respect of any third party
claims arising out of the operation of the Joint Venture. Subject to the above,
the profits, risks and losses, and remaining assets after liquidation of the
Joint Venture shall be dealt with in strict accordance with the provisions of
this Contract.
3.5 The purpose of the Joint Venture shall be: based on the Parties' desire to
enhance economic cooperation and technical exchange, and by adopting advanced
and appropriate technologies and scientific methods of operation and management,
to provide high-level technical and logistics services, develop new products
within its scope of business, gain a competitive edge in the international
market in terms of quality, price and so on, improve economic efficiency, and
earn a profit and return satisfactory to each Party.
3.6 The scope of business of the Joint Venture shall be:
o provision of telecom and related communications services in the Greater
China Region and Asia, including but not limited to Hong Kong, Macao,
Taiwan, China, Singapore;
o provision of value added telecom services including Call Center,
telemarketing, wireless communications, mobile applications, paging,
roaming, short messaging services (SMS), multi-media messaging services
(MMS), Voice Over IP (VoIP) in the abovementioned regions;
o provision of outsourcing services including customer support, loyalty
program, customer care services, telemarketing, data-entry, data
processing, secretarial, call answering services in the abovementioned
regions;
o provision of e-commerce and mobile commerce (m-commerce) in the
abovementioned regions;
o reseller, distributor, value added reseller (VAR), and service agents for
telecom services in the abovementioned regions;
o database marketing, data mining related services;
o research and development of software applications, hardware systems, and
solutions related to telecom and CRM services,
o provision of all relevant technical consultancy and services,
(collectively, "Joint Venture Businesses").
CHAPTER 4: TOTAL INITIAL REGISTERED CAPITAL, TOTAL INVESTMENT, FORM AND
SCHEDULES OF INVESTMENT
4.1 The total Registered Share Capital of the Joint Venture is MOP 100,000.
* Note: Currency Exchange Ratio as of December 18, 2002:
1 US Dollar (USD) = 8.28180 Macao Pataca (MOP)
1 Macao Pataca (MOP) = 0.12075 US Dollar (USD)
CUSIP No. 69511V207 13D Page 11 of 23 Pages
4.2 The contributions by Party A and Party B to the registered capital of the
Joint Venture are as follows:
Party A shall contribute MOP 50,100, representing 50.1% of the Joint Venture
registered capital, in a single payment in the form of cash, within 10 days of
the registration of the JV.
Party B shall contribute MOP 49,900, representing 49.9% of the Joint Venture's
registered capital, in a single payment in the form of cash, within 10 days of
the registration of the JV.
The total Registered Share Capital will be MOP 100,000 divided into 100,000
shares of MOP1.00 each. Party A: 50,100 shares allotted to PacificNet Management
Limited
Party B:
Party B1: 22,500 shares allotted to Li Kin Shing
Party B2: 22,500 shares allotted to Kwok King Wa
Party B3: 1,700 shares allotted to Li Wang
Party B4: 1,700 shares allotted to Li Yin
Party B5: 1,500 shares allotted to Li Yi Sheng
All the issued shares will be allotted in cash.
4.3 Party A and Party B shall make their capital contributions in full to Joint
Venture within ten (10) working days after the Joint Venture receives its
business license.
4.4 INVESTMENT SCHEDULE: JV INVESTMENT SCHEDULE
4.4.1 JOINT VENTURE INVESTMENT BY PARTY B: CUSTOMER SERVICE CONTRACTS:
Subject to the terms of this Agreement, PARTY B agrees to transfer a number of
Customer Service Contracts to the JV. The contracts will be valued at not less
than USD$20,400,000. PARTY B agrees to provide an independent business appraisal
valuation of the business operation, profit model, discounted cash flow
projection performed by an independent auditor or valuation appraiser showing
that the Valuation of the contracts to be transferred to the JV is not less than
USD$20,400,000;
(** See Exhibit 1: Valuation Report on various contracts offered to PacificNet
Communications Limited - Macao Commercial Offshore, and prepared by HLB Hodgson
Impey Cheng )
4.4.2 Joint Venture Investment by Party A: 170,000,000 (* equivalent to
34,000,000 shares after the 5-for-1 reverse stock split dated Jan 6, 2003) PACT
shares
4.4.2.1 To match PARTY B's investment of Customer Contracts valuing at
USD$20,400,000, PACT agrees to invest into the JV the amount of 170,000,000 (*
equivalent to 34,000,000 shares after the 5-for-1 reverse stock split dated Jan
6, 2003) restricted shares of PACT (** WHICH IS EQUIVALENT TO APPROX.
USD$20,480,000 BASED ON A VALUATION OF USD$0.12 PER PACT SHARE, THE CLOSING
SHARE PRICE ON DECEMBER 19, 2002, THE DAY BEFORE THE SIGNING OF THIS CONTRACT)
according to the following issuance schedule.
4.4.2.1.1 Within 30 days of the completion of the registration of the Joint
Venture in the Macao SAR, PACT shall deliver to the JV the sum of 4,000,000 (*
equivalent to 800,000 shares after the 5-for-1 reverse stock split dated Jan 6,
2003) PACT Shares (the "REFUNDABLE DEPOSIT"), being a refundable deposit and
part payment of the investment consideration for the JV;
4.4.2.1.2 In the event that:
JV fails to receive the regulatory approvals by the SEC, NASDAQ, or fails to
receive the approval of the Shareholders of PACT; or
the conditions set out in Clause [5.1] shall not have been fulfilled by the date
referred to in Clause 4.4 or such other date as the parties hereto may agree in
writing;
the JV shall refund to the PACT the Refundable Deposit within thirty (30) days
following the date on which PACT rescinds this Agreement.
4.4.2.2 In case of any stock split or reverse stock split by PACT, the number of
PACT shares to be issued will be adjusted according to the stock split ratio.
CUSIP No. 69511V207 13D Page 12 of 23 Pages
4.4.3 ESCROW ARRANGEMENT FOR INVESTMENT SHARES ANDS ADJUSTMENT
4.4.3.1 Party B warrants, represents and undertakes that:
(i) the total Net Income of JV for the period from 1st January 2003 to 31st
December 2003 ("First Fiscal Year") will not be less than USD$3,000,000.
(ii) Party B hereby agrees and acknowledges that the total investment by PACT is
based on Party B's warranty in respect of the Net Income of PARTY B as described
above. In this regard PARTY B hereby agrees to let the JV appoint the Escrow
Agent upon the terms of the Escrow Agreement in the agreed terms to hold all the
Investment shares to be issued in accordance with this Agreement on Completion
and the JV undertakes with PACT that it shall not either sell, transfer, charge,
encumber, grant options over or otherwise dispose of, or of any legal or
beneficial interest in any of the Investment shares until such part of the
Investment shares are released to by the Escrow Agent to the JV in accordance
with the following schedule:
RELEASE DATE ACCUMULATED RELEASE CRITERIA BASED ON
NUMBER OF SHARES TO BE ACCUMULATED NET INCOME
RELEASED
------------------------------------------------------- --------------------------- ---------------------------------
0. Within 30 days of the completion of the 4,000,000 Refundable Deposit:
registration of the Joint Venture in the Macao SAR, PACT Shares (* equivalent Within 30 days of the
PACT shall deliver to the JV the sum of 4,000,000 to 800,000 shares after completion of the registration
(* equivalent to 800,000 shares after the 5-for-1 the 5-for-1 reverse stock of the Joint Venture in the
reverse stock split dated Jan 6, 2003) (the split dated Jan 6, 2003) Macao SAR.
"Refundable Deposit"), being a refundable deposit
and part payment of the investment consideration
for the JV;
------------------------------------------------------- --------------------------- ---------------------------------
1. After Q1 of 2003, within 30 days of the Auditors 27,000,000 JV has achieved:
certification that the auditor's review relating to PACT Shares (* equivalent Net Income for the 3 months
JV and its business is acceptable and can be to 5,400,000 shares after ending on March 31 (Q1) of 2003
consolidated into PACT's audited accounts, balance the 5-for-1 reverse stock of not less than USD$550,000
sheet and financial statements, in accordance with split dated Jan 6, 2003)
the US GAAP.
------------------------------------------------------- --------------------------- ---------------------------------
2. After Q2 of 2003, within 30 days of the Auditors 68,000,000 JV has achieved:
certification that the auditor's review relating to PACT Shares (* equivalent Net Income for the 6 months
JV and its business is acceptable and can be to 13,600,000 shares ending on June 30 (Q1+Q2) of
consolidated into PACT's audited accounts, balance after the 5-for-1 reverse 2003 of not less than
sheet and financial statements, in accordance with stock split dated Jan 6, USD$1,200,000
the US GAAP. 2003)
------------------------------------------------------- --------------------------- ---------------------------------
3. After Q3 of 2003, within 30 days of the Auditors 113,000,000 JV has achieved:
certification that the auditor's review relating to PACT Shares (* equivalent Net Income for the 9 months
JV and its business is acceptable and can be to 22,600,000 shares ending on September 30
consolidated into PACT's audited accounts, balance after the 5-for-1 reverse (Q1+Q2+Q3) of 2003 of not less
sheet and financial statements, in accordance with stock split dated Jan 6, than USD$2,000,000
the US GAAP. 2003)
------------------------------------------------------- --------------------------- ---------------------------------
4. After Q4 of 2003, within 30 days of the Auditors 170,000,000 JV has achieved:
certification that the auditor's review relating to PACT Shares (* equivalent Net Income for the 12 months
JV and its business is acceptable and can be to 34,000,000 shares ending on December 31
consolidated into PACT's audited accounts, balance after the 5-for-1 reverse (Q1+Q2+Q3+Q4) of 2003 of not
sheet and financial statements, in accordance with stock split dated Jan 6, less than USD$3,000,000
the US GAAP. 2003)
------------------------------------------------------- --------------------------- ---------------------------------
TOTAL PACT SHARES TO BE RELEASED IN 2003 170,000,000 JV has achieved:
PACT Shares (* equivalent Minimum Net Income for 2003 of
to 34,000,000 shares not less than USD$3,000,000
after the 5-for-1 reverse
stock split dated Jan 6,
2003)
------------------------------------------------------- --------------------------- ---------------------------------
CUSIP No. 69511V207 13D Page 13 of 23 Pages
The JV agrees and undertakes not to dismiss nor withdraw its instructions to the
Escrow Agent pursuant to the Escrow Agreement unless the Escrow Agent has
voluntarily resigned or ceased to act as escrow agent in accordance with the
Escrow Agreement, in which case the JV agrees and undertakes to appoint an
escrow agent (as is agreeable to PACT) in its place to act as escrow agent on
the same terms and conditions of the Escrow Agreement.
The JV agrees that on the relevant release date (as referred to in the above
schedule) JV will collect the relevant portion of the Investment shares from the
Escrow Agent (if the Release Criteria has been met).
4.4.3.2 In the event that the JV produces only a portion of the quarterly Net
Income Release Criteria, the Escrow Agent shall release PACT shares with a
deduction in proportion to the shortfall of the Net Income.
4.4.3.3 NET INCOME GUARANTEE BY PARTY B AND CASH COMPENSATION BY PARTY B IN CASE
OF SHORTFALL OF NET INCOME BELOW USD$3,000,000:
In the event that the Net Income at the end of 2003 as warranted by PARTY B is
not fulfilled (i.e. USD$3,000,000 Net Income), then PARTY B shall pay to PACT an
amount in the form of cash in USD representing the shortfall in Net Income, and
the Escrow Agent shall release the remaining shares.
CHAPTER 5: CONDITIONS
5.1 This Agreement is conditional upon:
5.1.1 an independent business appraisal valuation of the business operation,
profit model, discounted cash flow projection of the Joint Venture and the
Subsidiaries having been performed to the reasonable satisfaction of Party A by
an independent auditor or valuation appraiser showing that such the Valuation of
the Joint Venture and the Subsidiaries as at the time of completion of such
valuation is not less than USD$20,400,000;
5.1.2 Party A being satisfied with the results of a legal and financial due
diligence review to be conducted by Party A on the Joint Venture covering such
matters as are relevant to the transactions contemplated under this Agreement
and as Party A may reasonably request);
5.1.3 if required, permission from the relevant stock exchange, government and
securities authority and regulator in the United States having been obtained in
respect of the issue and transferability of any PACT Shares which may fall to be
issued herein;
5.1.4 if required, a resolution at a meeting of the Directors of PACT approving
this Agreement, creating and giving authority for the issue of the JV Investment
Shares, the implementation of the transactions contemplated hereunder and all
other matters incidental hereto in accordance with the provisions of PACT's
articles of association bye-laws and such rules, regulations and laws in force
from time to time in the United States and which apply to PACT;
5.1.5 if required, the shareholders of PACT at a meeting of members approving
this Agreement, creating and giving authority for the issue of the JV Investment
Shares, the implementation of the transactions contemplated hereunder and all
other matters incidental hereto in accordance with the provisions of PACT's
articles of association, bye-laws and such rules, regulations and laws in force
from time to time in the United States and which apply to PACT;
5.1.6 all other matters as may be required or may be deemed necessary by Party A
in order to complete all of the transactions contemplated herein this Agreement.
5.2 Party A, Party B, and the JV shall use their respective best endeavors to
ensure that the conditions set out in Clause 5.1 shall be fulfilled by the date
set out in Clause 5.4.
5.3 If the conditions set out in Clause 5.1 shall not have been fulfilled, or as
the case may be, waived by Party A, on or before March 31, 2003 or such later
date as the parties may agree, this Agreement shall lapse and be of no further
effect whereupon a sum equal to the Deposit shall be refunded to Party A in
accordance with Clause [4.4.2] and no party to this Agreement shall have any
claim against or liability to the other party save in respect of any antecedent
breaches of this Agreement, including any breaches of this Clause 5.
CUSIP No. 69511V207 13D Page 14 of 23 Pages
5.4 From the date of this Agreement until Completion, except for the
transactions described herein or otherwise with the prior written consent of
Party A:
(a) Party B warrants and undertakes that they will:
(i) keep records in which true and correct entries will be made of all material
transactions by and with the Joint Venture and the Subsidiaries;
(ii) duly observe all material requirements of governmental authorities unless
contested in good faith by appropriate proceedings with the consent of Party A;
(iii) promptly pay and discharge, or cause to be paid and discharged, when due
and payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Joint Venture and
the Subsidiaries unless contested in good faith by appropriate proceedings with
the consent of Party A;
(iv) at all times comply with the provisions of all contracts, agreements and
leases to which the Joint Venture and the Subsidiaries is a party, unless
contested in good faith by appropriate proceedings with the consent of Party A;
5.5 Party B warrants, represents and undertakes that there shall have been no
Material Adverse Change in the customer contracts or the business, prospects,
financial condition or results of operations of the Customer Service Contracts.
5.6 Party A shall be entitled to rescind this Agreement by notice in writing to
Party B and the Joint Venture if prior to Completion it appears that any of the
Warranties is not or was not true and accurate in all respects or if any act or
event occurs which, had it occurred on or before the date of this Agreement,
would have constituted a breach of any of the Warranties or if there is any
material non-fulfillment of any of the Warranties which (being capable of
remedy) is not remedied prior to Completion.
CHAPTER 6: COMPLETION
6.1 Subject to the terms of this Agreement, Completion shall take place pursuant
to this clause at the offices of Party A's Legal Counsel on the Completion Date.
6.2 Upon Completion of the JV, Party B shall deliver to the JV:
6.2.1 executed the transfer and assignment of the Customer Service Contracts
from Party B to the JV;
6.2.2 certified true copies of the minutes of meetings of the Party B's board of
directors and shareholders approving the transfer and assignment of the Customer
Service Contracts to the JV;
6.2.3 certified true copies of the minutes of Party B's board of directors and
shareholders approving this Agreement and all matters herein contemplated and
the transfer and assignment of its Customer Sales Contracts to the JV;
6.2.4 written confirmation that none of Party B are aware of any matter or thing
which is in breach of or inconsistent with any of the representations,
warranties and undertakings herein contained;
6.2.5 such other papers and documents as Party A reasonably require;
6.2.6 approve and authorize the execution of such documents and/or deeds as
Party A may reasonably request in order to facilitate the transactions
contemplated herein or necessary to complete the transactions herein;
CHAPTER 7: TRANSFER, INCREASE OR DECREASE OF THE REGISTERED CAPITAL
Right of first refusal:
7.1 No shareholder in the JV shall transfer all or part of its shares to a third
party without the other shareholder's consent. Any such transfer shall be
subject to the following procedures:
CUSIP No. 69511V207 13D Page 15 of 23 Pages
(A) In the event that one shareholder intends to sell or transfer its
contribution to the registered capital of the Joint Venture to a third party, it
shall first notify the other shareholders and offer to sell on the same terms
and conditions as are offered to the third party, which terms and conditions
shall be set forth in writing, and the other shareholders shall have the right
to acquire and purchase such contribution to the registered capital on such
terms and conditions in proportion to their share ownership percentage.
(B) In the event that the other shareholders shall have failed to accept such
offer within fifteen (15) days after its receipt of the written offer, the
offering shareholder shall be free to transfer the contribution to the said
third party on the terms and conditions originally offered.
(C) If no such transfer is made within ninety (90) days after expiry of the
foregoing fifteen (15) day period, then the procedures set forth in this Clause
must be complied with again before any transfer to a third party (including the
above-said third party to which the offer was previously made) may be made.
Any transfer or assignment made by one shareholder in violation of the above
procedures shall be deemed null and void.
Any transfer by a shareholder of all or part of its contribution to the
registered capital of the Joint Venture to a third party consistent with the
foregoing procedures shall further require the unanimous approval of the Board
of Directors and the approval of the examination and approval authorities of the
Joint Venture. Such transfer shall only become effective on the date when the
examination and approval authorities grant the approval thereof.
Notwithstanding the procedures set forth above, if one shareholder wishes to
transfer its shares of the Joint Venture to its affiliate, the other
shareholders shall promptly give consent to such proposed transfer and waive the
right of first refusal. "Affiliate" shall mean any company which, through
ownership of voting stock or otherwise, is controlled by, under common control
with, or in control of, a Party; "control" shall mean ownership, directly or
indirectly, of more than fifty percent (50%) of the securities having the right
to vote for the election of directors in the case of a corporation, and more
than fifty percent (50%) of the beneficial interests in the capital in the case
of a business entity other than a corporation.
For any transfer that is consistent with the foregoing provisions, all
shareholders shall immediately and jointly cause the Board of Directors and the
directors appointed by them respectively to approve such transfer and sign any
and all documents and take any and all actions that are necessary to effect such
transfer.
7.2 Any increase or decrease of the registered capital, or change of the share
ownership percentage, shall be approved by the Board of Directors.
CHAPTER 8: RESPONSIBILITIES OF THE PARTIES
8.1 Both Parties shall use their best endeavors to support and assist the Joint
Venture in achieving its business objectives.
8.2 PARTY A SHALL ASSUME THE FOLLOWING RESPONSIBILITIES AND OBLIGATIONS FOR THE
JOINT VENTURE:
(1) continually introducing advanced e-business and CRM software technologies to
the Joint Venture, solving technical quality problems, providing technical
consulting, in an effort to make the Joint Venture's technologies being advanced
in the international market;
(2) providing technical training and guidance to the managerial and technical
personnel of the Joint Venture;
(3) assisting the Joint Venture in its marketing and public relations endeavors
in the North America, and in developing the trans-Pacific market and promoting
the business development of the Joint Venture;
(4) handling other matters reasonably delegated to it by the Joint Venture.
CUSIP No. 69511V207 13D Page 16 of 23 Pages
The Parties agree that the specific terms and conditions, on which Party A shall
provide to the Joint Venture technologies, technical consultancy, research and
development services and technical training under Items (1), (2) and (3) above,
including without limitation the methods for provision of technologies, the
ownership of the technologies and the fees for use of technologies and services
and training, shall be based on the principle of fairness and reasonableness.
8.3 Party B shall assume the following responsibilities and obligations for the
Joint Venture:
(1) handling applications to the relevant government authorities for the
approval and registration of the Joint Venture, and securing the business
license and permits, as required for the establishment of the Joint Venture and
for the future expansion of the JV in the following regions: including but not
limited to Hong Kong, Macao, Taiwan, China, Singapore;
(2) providing assistance to the Joint Venture in purchasing or leasing office
space, equipment, articles for office use, vehicles, communications apparatus
and so on in China;
(3) assisting the Joint Venture in its marketing and public relations endeavors
in the Greater China Region, and in developing the Chinese market and promoting
the business development of the Joint Venture;
(4) handling other matters reasonably delegated to it by the Joint Venture.
CHAPTER 9: BOARD OF DIRECTORS, OPERATION AND MANAGEMENT
9.1 The Board of Directors shall be the highest authority of the Joint Venture
and shall determine all major issues of the Joint Venture.
9.2 The Board of Directors shall be deemed as established on the date when the
Joint Venture is duly registered, and shall hold its first meeting within thirty
(30) days thereafter.
9.3 The Board of Directors shall be composed of five (5) directors, of which
three (3) shall be appointed by Party A and two (2) by Party B. The Directors
shall each serve a term of one (1) year and may serve additional term or terms
if reappointed by the Party who appointed him. If a Party is to replace a
director before the expiry of his term of office, it shall notify the other
Party and the Joint Venture in writing fifteen days in advance, failing which
the replacement shall not become effective.
9.4 A Board meeting shall require a quorum of at least three (3) directors. A
director who is not able to attend at a Board meeting shall give a proxy in
writing to another person, who shall attend and vote on his behalf. A director
who has been notified of a Board meeting but failed to attend the meeting in
person or by proxy shall be deemed to have attended the Board meeting and
consented to all the resolutions adopted by the Board meeting; all resolutions
adopted by a Board meeting accordingly shall be deemed valid and effective. A
Board meeting may be held by telephone or video-conferencing.
9.5 The Board of Directors shall meet at least once every quarter. A Board
meeting may be called by any director.
9.6 Board resolutions concerning the following major issues shall require the
unanimous vote of all the directors or their proxies present at the Board
meeting:
(1) any amendment to the Articles of Association of the Joint Venture;
(2) separation, merger, dissolution or liquidation of the Joint Venture;
(3) any increase, decrease or transfer of the registered capital of the Joint
Venture;
(4) any business transaction between the Joint Venture and any of its
shareholders, directors or senior management personnel;
(5) deciding the employment, the duties and powers and the compensation of the
General Manager and the Vice General Manager;
(6) the annual business plans, labor and compensation plans, and financial
budget for revenues and expenditures, of the Joint Venture ;
CUSIP No. 69511V207 13D Page 17 of 23 Pages
(7) the annual profit distribution plans;
(8) development plans of the Joint Venture and investment plans involving more
than USD$300,000;
(9) other matters for which the unanimous vote of the Board of Directors shall
be required.
Board resolutions concerning any issues other than those major issues enumerated
in this Clause 9.6 shall require a simple majority vote of all the directors or
their proxies present at the Board meeting.
9.7 The Joint Venture shall establish an operation and management structure to
be responsible for the daily operation and management of the Joint Venture. Such
structure shall include one (1) General Manager, recommended by Party A, and one
(1) Vice General Manager, recommended by Party B. Both the General Manager and
the Vice General Manager shall be appointed by the Board of Directors, and shall
serve a term of one (1) year. The General Manager and Vice General Manager may
be removed and replaced by the Board of Directors at any time with a resolution.
Other managerial personnel shall be appointed by the General Manager.
9.8 The task of the General Manager shall be to carry out the various
resolutions of the Board of Directors and organize and direct the daily
operation and management of the Joint Venture. The Vice General Manager shall
assist the General Manager in his work, and shall serve as the acting General
Manager should the General Manager be unable to exercise his responsibilities.
The General Manger shall consult with, and obtain the consent of, the Vice
General Manager before making decisions on all major business matters of the
Joint Venture. The operation and management structure may consist of certain
departments, the managers for which shall be responsible for the work of the
relevant departments, handle matters delegated by the General Manager and the
Vice General Manager, and report to the General Manager and the Vice General
Manager.
9.9 In the event of graft or serious dereliction of duty, the General Manager
and the Vice General Manager may be removed and replaced by the Board of
Directors with a resolution at any time.
CHAPTER 10: LABOR MANAGEMENT
10.1 The General Manager shall prepare plans for the employment, dismissal,
wages, labor protection, welfare, rewards and punishments and other matters of
the employees of the Joint Venture in accordance with the Labor Law of the Macao
SAR and other relevant regulations, and shall implement such plans as approved
by the Board of Directors.
10.2 Labor contracts entered into between the Joint Venture and its employees
shall be filed with the local labor management authorities for record.
10.3 The employment, wages and compensation, social insurance, welfare, travel
and lodging expenses and other matters of senior managerial personnel
recommended by Party A and Party B shall be discussed and determined by the
Board of Directors.
CHAPTER 11: TAXES, FINANCIAL MATTERS AND AUDITING
11.1 The Joint Venture shall pay taxes and be entitled to various tax reductions
and exemptions in accordance with the relevant laws and regulations of the Macao
SAR.
11.2 The fiscal year of the Joint Venture shall commence on January 1, and end
on December 31, of each year.
11.3 Within thirty (30) days after the end of each quarter of a year, the Joint
Venture shall provide the balance sheet for such quarter to each of Parties and
each director. Each of the Parties and each director shall also have the right
to make inquiries to the Joint Venture from time to time as to the operational
and financial status, and shall be entitled to receive written replies thereto
from the Joint Venture.
11.4 A Macao registered accountant shall be engaged to audit the financial
matters of the Joint Venture and shall provide a report of such audit to the
Board of Directors and the General Manager.
If either party deems it necessary to engage an accounting institution or CPA
licensed in the USA to audit the financial matters of the Joint Venture, the
Joint Venture shall consent to such audit.
CUSIP No. 69511V207 13D Page 18 of 23 Pages
11.5 All foreign exchange matters shall be dealt with in accordance with the
Regulations of the Macao SAR and relevant regulations.
CHAPTER 12: SHARING OF PROFITS AND LOSSES
12.1 The profits of the Joint Venture remaining thereafter shall be distributed
to the Parties in proportion to the ratio of their contributions to the
registered capital of the Joint Venture.
12.2 Party A and Party B agree that, in order to support the development of the
Joint Venture, no profits of the Joint Ventures shall be distributed within two
(2) years after the establishment of the Joint Venture.
CHAPTER 13: AMENDMENT TO AND TERMINATION OF THIS CONTRACT
13.1 No amendment to this Contract, including its Appendices, shall be effective
unless a written agreement or an appendix hereto has been approved by the board
of directors of the JV.
13.2 The Joint Venture may be terminated under any of the following
circumstances, subject to the approval of the examination and approval
authorities:
(A) The Board may decide to terminate the Joint Venture at any time if:
(i) the Joint Venture is unable to continue operations due to the failure of
one of the Parties to perform its obligations under this Contract;
(ii) the Joint Venture is unable to continue operations due to potential or
actual heavy losses caused by Force Majeure;
(iii) the Joint Venture is unable to achieve its intended objectives and there
is no reasonable prospect for favorable development in this regard; or
(iv) any other circumstances as deemed appropriate by the Board.
(B) The Board may pass a resolution to terminate the Joint Venture upon the
agreement of both Parties.
13.3 Either Party shall have the right to terminate this Contract upon giving
written notice to the other Party in the event that any of the followings shall
have occurred:
(i) the other Party shall have been in material breach of its obligations
under this Contract and shall have failed to cure such breach within
sixty (60) days after its receipt of written notice of such breach from
the terminating Party;
(ii) performance by the other Party of its obligations under this Contract
shall have been prevented for a period in excess of six (6) months by
reason of an event or circumstance of Force Majeure;
(iii) the Joint Venture shall have become insolvent, or a petition or
proceedings of any kind as to its bankruptcy shall have been filed or
commenced, or any proceedings shall have been commenced for its
dissolution or winding up;
(iv) any applicable law or government authority requires any term or condition
of this Contract to be revised in such a manner so as to cause
significant adverse consequences to the operation of the Joint Venture;
or
(v) any approval, license or permit applied for by the Joint Venture, and
which is of fundamental importance to the operation of the Joint Venture,
is not granted by the relevant government authority, or having been
granted, is subsequently revoked or canceled.
13.4 The early termination of this Contract by either Party in accordance with
this foregoing provisions shall be without prejudice to the accrued rights and
liabilities of either Party on the date of such termination, and any other
rights or remedies under this Contract or under law, except any such rights
which shall have been waived in writing by the respective Parties.
13.5 Upon dissolution of the Joint Venture, the Board of Directors shall work
out procedures and principles for the liquidation, nominate candidates for the
liquidation committee, and supervise the liquidation.
CUSIP No. 69511V207 13D Page 19 of 23 Pages
13.6 Upon completion of liquidation pursuant to relevant Macao SAR regulations,
the liquidation committee shall submit a liquidation report to the Board of
Directors for approval, submit the same to the original examination and approval
authorities for approval, go through the formalities for canceling its
registration with the original registration authorities, and return its business
license for cancellation.
13.7 The properties of the Joint Venture remaining after its liquidation shall
be distributed in proportion to the ratio the Parties' respective contributions
to the registered capital of the Joint Venture.
13.8 After the dissolution of the Joint Venture, its account books and various
documents shall be retained by Party A.
CHAPTER 14: FORCE MAJEURE
14.1 "Force Majeure" shall mean any event, not existing as of the date of this
Contract and not reasonably foreseeable or within the control of the Parties as
of such date, which prevents, in whole or part, the performance by one of the
Parties of its obligations hereunder or makes the performance of such
obligations commercially unreasonable, including, without limitation, acts of
state or governmental action, crisis, war, and natural catastrophe.
14.2 If due to any event or circumstance of Force Majeure, either Party is
unable to fulfill any or all of its obligations under this Contract, such Party
shall not be considered to be in default under this Contract, but shall continue
to fulfill its other obligations hereunder that are not affected by the event or
circumstance of Force Majeure. The period allowed for the performance of the
obligations affected by the event or circumstance of Force Majeure shall
automatically be extended for a period equal to the period during which the
Force Majeure continues.
14.3 Either Party shall promptly inform the other Party of the event or
circumstance constituting Force Majeure and, within thirty (30) days thereof,
shall provide all relevant details and appropriate proof of the occurrence and
duration of such event.
14.4 The Party claiming Force Majeure shall use all reasonable efforts to
overcome the delay caused by the event or circumstance of Force Majeure. Subject
to the provisions of Clause 13.2 (A), the Board shall meet and decide, based on
the extent and nature of the effect such event or circumstance may be expected
to have on the performance of the Contract, whether or not the Contract should
be terminated and, if not, whether other performance under the Contract which is
not directly affected by the event or circumstance of Force Majeure should be
postponed.
CHAPTER 15: SETTLEMENT OF DISPUTES
15.1 The formation of this Contract and its Appendices and related agreements,
and the validity, interpretation, performance and settlement of disputes thereof
shall be governed by the laws of the Macao SAR and the laws of Delaware USA.
15.2 Any disputes arising out of or in connection with this Contract shall be
resolved through friendly consultations by the Parties; if no agreement can be
reached through consultations within thirty (30) days after the occurrence of
such dispute, either Party shall have the right to submit such dispute to the
International Economic and Trade Arbitration Commission Hong Kong Branch for
arbitration in Hong Kong in accordance with its procedures of arbitration. The
arbitral award shall be final and binding upon both Parties.
CHAPTER 16: CONFIDENTIALITY
16.1 Each Party may have received from the other Party prior to the conclusion
of this Contract, and may from time to time during the term of this Contract
receive from the other Party or the Joint Venture, information which is
confidential or proprietary ("Confidential Information") to the disclosing Party
or to the Joint Venture.
CHAPTER 17: EFFECTIVENESS AND MISCELLANEOUS PROVISIONS
17.1 Any appendix hereto that is signed based on the various principles set
forth in this Contract, including the Joint Venture Articles of Association and
related agreements, shall constitute an integral part of this Contract. If there
is any conflict between any appendix hereto and the provisions of this Contract,
this Contract shall prevail.
CUSIP No. 69511V207 13D Page 20 of 23 Pages
17.2 Any notice from one Party to the other shall be sent in writing or by
e-mail or facsimile. The legal residence of each Party set forth herein or
another address designated by such Party shall be the address for such Party to
receive a notice. In the event that the legal residence of a Party is changed, a
notice thereof must be sent to the Joint Venture, failing which such Party shall
be liable for any miscommunications caused thereby.
17.3 This Contract shall have seven (7) original copies in English. Copies of
this Contract shall be submitted to the examination and approval authorities
according to their requirements. If this Contract is translated into Chinese,
Portuguese, or other languages, the English language version should be
interpreted as the official contract.
17.4 This Contract is subject to final approval by the Board of Directors of
PACT.
17.5 This Contract is subject to final approval by the shareholders of PACT at a
shareholders meeting.
17.6 This Contract is signed in Hong Kong SAR, China by the authorized
representatives of the Parties on December 20, 2002.
(Signature page)
PARTY A:
PACIFICNET MANAGEMENT LIMITED. (CORPORATE CHOP)
Tony Tong, Chairman & CEO Signature: /s/ Tony Tong
PARTY B:
SHAREHOLDERS OF INTERNATIONAL ELITE LIMITED:
Party B1: Mr. LI Kin Shing: Signature: /s/ LI Kin Shing
Party B2: Ms. KWOK King Wa Signature: /s/ KWOK King Wa
Party B3: Mr. LI Wang Signature: /s/ LI Wang
Party B4: Ms. LI Yin Signature: /s/ LI Yin
Party B5: Mr. LI Yi Sheng Signature: /s/ LI Yi Sheng
CUSIP No. 69511V207 13D Page 21 of 23 Pages
EXHIBIT 2
---------
EXECUTIVE OFFICERS AND DIRECTORS
OF PACIFIC COMMUNICATIONS
LIMITED-MACAO COMMERCIAL OFFSHORE
NAME TITLE CITIZENSHIP
---- ----- -----------
Tony Tong Director and Chief Executive Officer USA
Victor Tong Director and Vice-President USA
Paul Zheng Chief Financial Officer China
Nelson Wong Vice President Hong Kong, China
Emmy Lo Director Hong Kong, China
Li Yi Sheng Director Hong Kong, China
Li Kin Shing Director Hong Kong, China
CUSIP No. 69511V207 13D Page 22 of 23 Pages
EXHIBIT 3
---------
CONTROLLING PERSON OF PACIFIC COMMUNICATIONS
LIMITED-MACAO COMMERCIAL OFFSHORE
ENTITY NAME STATE OF INCORPORATION
----------- ----------------------
PACIFICNET INC DELAWARE
CUSIP No. 69511V207 13D Page 23 of 23 Pages
EXHIBIT 4
---------
EXECUTIVE OFFICERS AND DIRECTORS OF THE
CONTROLLING PERSON OF PACIFIC COMMUNICATIONS
LIMITED MACAO COMMERCIAL OFFSHORE
NAME TITLE CITIZENSHIP
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Tony Tong Chairman, Director and Chief USA
Executive Officer
Cho Sam Tong Director and President of China Hong Kong, China
Operations
Victor Tong Director and Vice President USA
Shao Jian (Sean) Wang Chief Financial Officer China
Richard Chi Ho LO Director Hong Kong, China
Yue (Justin) Tang Director China
David Fisher Director USA
Yong Jun (Charles) Fu Director China