Velatel Global Comm. (fka VELA)

[analyzethis]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 8-K


CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

December 13, 2010
Date of Report (date of Earliest Event Reported)



CHINA TEL GROUP INC.
(Exact Name of Registrant as Specified in its Charter)



NEVADA 98-0489800
(State or Other Jurisdiction of
Incorporation or Organization) (Commission File No.) (I.R.S. Employer
Identification No.)

12526 High Bluff Drive, Suite 155, San Diego, CA 92130
(Address of principal executive offices and zip code)

[phone]
(Registrant’s telephone number, including area code)

NOT APPLICABLE
(Former name or former address, if changed from last report)



Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

• Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

• Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

• Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

• Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))








Item 1.01
Item 2.01 Entry into Definitive Material Agreement
Completion of Acquisition or Disposition of Assets

On December 13, 2010, China Tel Group, Inc., a Nevada corporation and the registrant responsible for the filing of this Form 8-K (“ChinaTel”) entered into a Subscription and Shareholder Agreement (“Agreement”) with Golden Bridge Network Communications Co., Ltd. (“GBNC”), a limited liability company organized under the laws of the People’s Republic of China (“PRC”). Pursuant to the Agreement, ChinaTel and GBNC will each contribute certain resources in order to deploy and operate a 4G telecommunications network in the PRC. The material terms of the Agreement are as follows:

• GBNC shall contribute to the joint venture its right, title and interest in certain assets and entitlements GBNC holds in the PRC, which include existing wireless broadband access (“WBA”) licenses and concessions in two PRC cites, internet service provider (“ISP”) licenses in 26 PRC cities, GBNC’s rights to apply for additional WBA and ISP licenses in additional cities and regions throughout the PRC, and other contracts and relationships. ChinaTel shall contribute to the joint venture its technical expertise and the investment capital to finance the capital expenditures (“CAPEX”), operating expenses (“OPEX”), and other negative cash flow of the joint venture.

• The joint venture between GBNC and ChinaTel is represented by a series of new entities to be created, with interlocking ownership (collectively “Entities”), each referred to in the Agreement by a fictitious name, with the actual name of each entity to be agreed based on legal and marketing considerations. The Entities are “New Co,” a parent company to be created in the Cayman Islands, “HK Co,” a wholly owned subsidiary of New Co to be created in Hong Kong, and “WFOE,” a wholly owned subsidiary of HK Co to be created in the PRC in a manner so as to qualify as a “wholly owned foreign enterprise” under PRC law. GBNC shall subscribe to 51% and ChinaTel 49% of the stock of New Co.

• The Board of Directors of each of the Entities shall be comprised of five Directors, three of whom shall be appointed by ChinaTel and two by GBNC. The Bylaws of each of the Entities shall contain various provisions for the protection of majority and minority stockholders, requiring a 75% super-majority vote of shareholders on certain corporate action, and including joint signature on bank accounts (one each by a Director or Officer appointed by ChinaTel and by a Director or Officer appointed by GBNC), and custody of the corporate seal or “chop” of each of the Entities to be held in escrow by a neutral third party.

• In addition to the Entities, a management company shall be created in Hong Kong or other jurisdiction to be agreed between GBNC and ChinaTel. The management company shall be controlled by ChinaTel and shall enter into a management contract with WFOE to provide marketing, sales, additional spectrum acquisition, and other services to WFOE.

• ChinaTel, or a company controlled by ChinaTel, shall purchase and then lease to WFOE at market rates such equipment and other CAPEX assets as are required for deployment of the joint venture’s WBA networks. The lease may include an option for WFOE to purchase the equipment for a nominal sum when the total amount of lease payments received equals repayment of all amounts ChinaTel has paid, including financing costs to others, to purchase the equipment.

• The following events shall each occur within ten days after WFOE is registered to do business:

(i) ChinaTel shall issue to the management company 50 million shares of its Series A common stock, of which 5 million shares shall be issued to GBNC’s CEO, Fu Jian-Hui,

(ii) ChinaTel shall pay in $5 million as the initial registered capital of WFOE, and

(iii) GBNC shall transfer to WFOE relevant rights of the assets and entitlements held by GBNC and identified in the Agreement. As to any asset or right that is incapable of transfer of ownership, GBNC shall cooperate to contract with, lease, or otherwise convey to WFOE all or so much of the beneficial rights in such asset or right to the maximum extent authorized under PRC law.







If ChinaTel fails to deposit the initial registered capital and shares within the time required, GBNC has the right to terminate the Agreement.

• The $5 million initial registered capital of WFOE shall be used to meet part of the cash requirements for CAPEX and OPEX related to deployment and operation of WBA networks in the first two cities to be deployed, Fuzhou and Xiamen. ChinaTel shall also pay or arrange financing for up to $20 million towards other CAPEX and OPEX for deployment and operation of WBA networks in those two cities. Prior to the registration of WFOE to do business, ChinaTel shall advance funds necessary to commence immediately engineering work required for deployment of WBA networks in Fuzhou and Xiamen.

• When GBNC obtains WBA licenses for seven additional cities – Quanzhou, Zhang Zhou, Longyan, Putian, Sanming, Nanping and Ningde – ChinaTel shall pay in to increase the registered capital of WFOE from $5 million to $20 million and shall pay or arrange financing for up to $80 million towards other CAPEX and OPEX for deployment and operation of WBA networks in those seven additional cities.

• When GBNC obtains WBA licenses for cities in addition to the first nine cities specifically identified, ChinaTel shall pay or arrange financing for CAPEX and OPEX required for deployment and operation of WBA networks in those additional cities, based on budgets to be agreed and formulas similar to actual expenses for the first nine cities.

• WFOE shall be entitled to all revenue that is capable of being realized by the joint venture, including: (i) fees charged to WBA and ISP subscribers; (ii) lease, transport or co-location fees charged to third-party carrier users of any infrastructure equipment; (iii) lease or sale of hardware or devices marketed by WFOE; and (iv) value added services and applications.

• The financial goals of the joint venture include: (i) permitting ChinaTel to fully report the financial results of WFOE as part of ChinaTel’s consolidated financial statements; (ii) permitting New Co and/or HK Co to control the PRC-based assets of the joint venture, and the revenue to be generated from those assets; (iii) when PRC law allows, transforming WFOE into a foreign-invested telecommunications enterprise (“FITE”), so that ChinaTel’s interests in the Entities can be converted to a direct 49% ownership in the FITE; and (iv) eventual public listing of WFOE’s operations on a stock exchange, such as HKSE, NYSE, NASDAQ or London AIM in order to expand the base of equity capital available for deployment and expansion of the joint venture’s WBA networks, and to recapture some or all of the respective investments of GBNC and ChinaTel.

• From the proceeds of any public listing of WFOE’s operations on a stock exchange, ChinaTel shall be entitled to repayment of the shortfall between lease payments and amounts ChinaTel has paid, including financing costs to others but without interest to ChinaTel, and repayment of all other amounts ChinaTel has invested in CAPEX or OPEX.

• Except as to the proceeds generated by a public listing of WFOE’s operations on a stock exchange, Golden Bridge and ChinaTel contemplate that substantially all excess free cash flow and/or net operating income generated by the joint venture shall be re-invested in the form of deploying additional cities and/or expanding geographic coverage and capacity in previously deployed cities for a period of ten years.









• All profits in excess of amounts required to deploy additional cities, expand coverage and capacity in previously deployed cities, and other reserves for taxes, working capital, loan repayment, and other contingencies, shall be distributed in full in the form of dividends.

The source of funds for this acquisition of assets is the Isaac Organization Inc., a Canadian corporation (“Isaac”), pursuant to the Amended and Restated Stock Purchase Agreement between ChinaTel and Isaac dated May 9, 2010. It is anticipated that ZTE Corporation, a PRC company (“ZTE”), will offer ChinaTel a favorable financing proposal for CAPEX and OPEX, and facilitate ChinaTel’s application for debt financing by banks with which ZTE has relationships.

A fully executed copy of the Agreement is attached hereto and incorporated by this reference as Exhibit 99.1 to this Form 8-K.

Item 9.01 Exhibits.

99.1 Subscription and Shareholder Agreement for “New Co” between Golden Bridge Network Communications Co., Ltd. and ChinaTel Group, Inc.

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 TEL GROUP, INC.

Date: December 15, 2010 By: /s/ George Alvarez
Name: George Alvarez
Title: Chief Executive Officer












EXHIBIT 99.1


SUBSCRIPTION AND SHAREHOLDER AGREEMENT
FOR “NEW CO”
“ ??? ”
?????????


(A CAYMAN ISLANDS LIMITED LIABILITY COMPANY
TO BE FORMED, ACTUAL NAME TO BE AGREED)
(?????????????????,
??????)
____________________________________________________

BETWEEN



GOLDEN BRIDGE NETWORK COMMUNICATIONS CO., LTD.

AND





CHINA TEL GROUP, INC.









This Subscription and Shareholder Agreement (“ Agreement ”), dated for reference purposes as of December 13, 2010 is entered into between Golden Bridge Network Communications Co., Ltd. (“ GBNC ”), and China Tel Group, Inc. (“ ChinaTel ”). In this Agreement, GBNC and ChinaTel are each referred to as a “ Party ” and together as the “ Parties .” “ WFOE ” (as such term is defined herein), shall become a Party to this Agreement (and be deemed as one of the Parties for all purposes hereunder) by executing and delivering a counterpart signature page hereto. This Agreement shall be effective as to all Parties except for WFOE as of the date hereof, and effective as to WFOE as of the date of its respective execution and delivery of its signature page.

??????????(“ ?? ”)???????????(“ GBNC ”)? China Tel Group Inc. (“ ChinaTel ”)? 2010 ? 12 ? 13 ?????? ?????, GBNC ? ChinaTel ????“??”,???“??”???????(“ WFOE ”,??????)?????????????????????????????????(?????????????????)??? WFOE ???????,???????????????? WFOE ??,???????????????????

I. RECITALS ??

A. GBNC is a limited liability company organized under the laws of the People’s Republic of China (“ PRC ”), with headquarters in Xiamen, Fujian Province .

GBNC ?????????,?????????(“ PRC ”)????,???????????

B. GBNC has the following assets, relationships and other rights which are the subject of this Agreement:

GBNC ?????????????,???????????????????:

a. Licenses, concessions and authorizations from appropriate PRC government agencies to use radio frequency spectrum in the 3.5GHz bandwidth to provide wireless broadband access (“ WBA ”) services in specified cities in the Fujian Province. GBNC’s existing 3.5GHz WBA licenses are attached to this Agreement as Exhibit 1.

??????????????????? 3.5GHz ?????????????????,??????????????????( “ WBA ” )??? GBNC ??? 3.5GHz ????????????? 1 ??????

b. Licenses, concessions and authorizations from appropriate PRC government agencies to use radio frequency spectrum in the 5.8 GHz bandwidth to provide WBA services in specified cities in the Fujian and Shandong Provinces. GBNC’s existing 5.8 GHz WBA licenses are attached to this Agreement as Exhibit 2.

??????????????????? 5.8GHz ?????????????????,???????????????? WBA ??? GBNC ??? 5.8 ???? WBA ???????????? 2 ??????


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c. The right to submit applications to obtain from appropriate PRC government agencies licenses, concessions and authorizations to provide WBA services in the 3.4-3.6GHz and 5.8GHz bandwidths in additional cities and regions nationwide throughout the PRC. A list of the additional cities where GBNC is entitled to submit applications for WBA licenses is attached to this Agreement as Exhibit 3.

??????,?????????????????????????????,?? 3.4-3.6GHz ? 5.8GHz ???,???????????????? WBA ??? GBNC ?????????????????????? 3 ??????

d. Licenses, concessions and authorizations from appropriate PRC authorities to act as an internet service provider (“ ISP ”) in 26 cities plus Fujian province. GBNC’s existing ISP licenses are attached to this Agreement as Exhibit 4.

????????????????? 26 ?????????????????? (“ ISP ”) ??????????? GBNC ??? ISP ?????? 4 ??????

e. The right to submit applications to obtain from appropriate PRC government agencies licenses, concessions and authorizations to act as an ISP in additional cities and regions nationwide throughout the PRC. A list of the additional cities where GBNC is entitled to submit applications for ISP licenses is attached to this Agreement as Exhibit 5.

??????,?????????????????????????????,???????????????? ISP ??? GBNC ??????? ISP ??????????? 5 ??????

f. In cities where WFOE develops 3.5GHz and 5.8GHz wireless broadband business, WFOE shall have the priority right to use GBNC’s ISP licenses . GBNC shall have the right to use, or authorize a third party to use its ISP licenses, provided that such use of GBNC’s ISP licenses will not compete with WFOE’s WBA business.

? WFOE ? 3.5GHz ? 5.8GHz ????????????, WFOE ???? GBNC ? ISP ????????? GBNC ????????????? ISP ??,?? GBNC ? ISP ???????? WFOE ? WBA ??????

g. Relationships with local, regional and central PRC government agencies, including site acquisition rights to locate radio antennae and other infrastructure equipment .

????????????????????,?????????????????????????????

h. Contracts and relationships with landlords for site acquisition and use of real property to install network infrastructure equipment.

???????????????????????,????????????



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i. The right to use GBNC’s company name, trademarks, and logos.

?? GBNC ???????????????

j. Employees and vendor relationships for technical , marketing, advertising and sales support developed in connection with GBNC’s existing WBA operations.

GBNC ?????????????????????????????????????????

k. Relationships with cable and video television operators and government agencies to form contracts or joint ventures for distribution of television contents on the GNBC Network.

??????????????????,??????????????????????,????? GNBC ??????????????

C. ChinaTel is a corporation organized under the laws of the United States (“ US ”) (specifically, Nevada law), with headquarters in San Diego, California. The Series A common stock of ChinaTel is publicly traded on the US Over-the-Counter Bulletin Board Stock Exchange under the symbol “OTCBB:CHTL.” (“ ChinaTel ??”) .

ChinaTel ???????????????,???????????????? ChinaTel ???? A ???????????????????????,???“ OTCBB : CHTL ”(“ ChinaTel ??”)?

D. ChinaTel is in the business of designing, building, deploying and operating high speed wireless broadband telecommunications networks in key markets throughout the world. ChinaTel has expertise, relationships with vendors, and access to capital advantageous to deployment, expansion and operation of the GBNC Network.

ChinaTel ??????????????????????????????????????? ChinaTel ???????????????????????,??????????? GBNC ???

E. The Parties enter into this Agreement to define their respective rights and obligations. Upon mutual execution, this Agreement shall supersede entirely any prior agreement between the Parties.

????????????????????????????,??????????????????

II. DEFINITIONS ??

Wherever used in this Agreement, the following terms shall have the following meanings, even if the same term appears in “ bold ” in other sections of this Agreement immediately following a reference to such term defined in this section. Any term which appears in other sections of this Agreement in “ bold ,” but which is not otherwise defined in this section, shall have the meaning ascribed by the words or clause immediately preceding such reference to the term in “ bold .”



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??????????????????????,????????????????? “ ?? ” ??????????????????????????????? “ ??? ” ??,?????????,???????????????????????

“ChinaTel”
As to company and any or all of its subsidiaries, affiliates, finance company associates, and/or management company affiliates that support ChinaTel operations.

ChinaTel
?? ChinaTel ????????????????????????,? / ??? ChinaTel ??????????
“Effective Date”
The date this Agreement has been signed by all Parties (other than WFOE), or if signatures of different Parties occur on different days, the date of the signature of the last such Party to sign.

“ ???? ” ???????????????( WFOE ??),????????????????????,?????????????

“Entities”
Generic reference to New Co, HK Co or WFOE, collectively, or to one or more of them.

“ ?? ” ??????????? WFOE ???,????????????

“GBNC Network”

All tangible and intangible resources owned or managed by GBNC and intended for delivery of 3.5GHz and 5.8GHz WBA services, including ISP, as described in Recital B above, together with all additions, substitutions and upgrades of such things which exist or accrue now or in the future.

“ GBNC ??”
??????? B ???? GBNC ???????? 3.5GHz ? 5.8GHz ?????????????????,?? ISP ??,??????????????????????????????

“HK Co”

A fictitious name for a limited liability company to be created, registered, and organized under the laws of Hong Kong and in accordance with the terms of this Agreement. HK Co shall be a wholly owned subsidiary of New Co. The actual name of HK Co shall be mutually agreed among the Parties based on marketing and legal considerations.

“????”
?????????????,????????,??????????????????????????????????????????,???????????????,??????????




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“New Co”

A fictitious name for a limited liability company to be created, registered, and organized under the laws of the Cayman Islands and in accordance with the terms of this Agreement. GBNC and ChinaTel shall subscribe to the stock of New Co as further descried in this Agreement. The actual name of New Co shall be mutually agreed among the Parties based on marketing and legal considerations.

“???” ?????????????,????????,?????????????????? GBNC ? ChinaTel ?????????????????????????????????????????????,??????????

“Shareholders”
GBNC and ChinaTel collectively, in their capacity as shareholders of New Co, as the context requires.

“??” ?? GBNC ? ChinaTel ??????????,?????????

“WFOE”

A fictitious name for a limited liability company to be created, registered, and organized under the laws of the PRC and in accordance with the terms of this Agreement. WFOE shall be a wholly owned subsidiary of HK Co, and shall be organized so as to qualify as a “wholly foreign owned enterprise” under PRC law. The actual name of WFOE shall be mutually agreed among the Parties based on marketing and legal considerations.

“ WFOE ” ?????????????,????????,?????????????????????? WFOE ????????????,??????????????“??????” ??? WFOE ????????????????????,??????????

III. AGREEMENT ??

1. Overview of Transaction ????

1.1 The main business model to be achieved under this Agreement is the deployment, expansion and operation of WBA networks, delivery of internet service and content, digital media, and other telecommunications value added services across the GBNC Network, all in order to attract revenue generating consumer, enterprise and government based subscribers. The business model includes but is not limited to the revenue sources described in Section 6.

???????????????,???????????????????,??? GBNC ???????????????????????????,????????,?????????????????????????? 6 ?????????

1.2 In consideration for their respective interests in the business model, GBNC shall contribute all of its right, title and interest in the GBNC Network, and ChinaTel shall contribute its expertise and shall, subject to the terms and conditions hereof and the exercise of its reasonable business judgment, finance the CAPEX, OPEX and other negative cash flow of the business.

???????????????, GBNC ?????? GBNC ?????????????, ChinaTel ??????,?????????????,?????????,???????????????????????????


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1.3 The Parties shall use their reasonable commercial efforts to create, organize, capitalize and register to do business with the Entities, which shall enter into contractual relationships with each other and/or with one or both Parties in a manner that equitably reflects the respective equity interests and other rights and obligations of the Parties in the business model, and which structure is designed to comply with the laws of the jurisdiction(s) to which each of the Parties is subject based on their respective nationalities and operations.

?????????????????????????????,????????? / ?????????????????,??????????????????????????????,?????????????????????????????

1.4 This Agreement becomes binding and fully enforceable on both Parties as of the Effective Date, notwithstanding that the Entities will not yet have been formed and other contractual arrangements between the Parties and/or between either Party and one or more of the Entities are expected to occur in the future in accordance with the terms hereof .

??????????????????????,?????????,?????? / ?????????????????????????????????????????

2. Transaction Structure – Phases and Goals ???? – ?????

2.1 The Parties shall use their reasonable commercial efforts to achieve their respective financial goals in executing the business model in two phases.

?????????????,?????????????, ?????????

2.1.1 In Phase 1, the Entities will be created, organized, capitalized and registered to conduct business in accordance with the laws of the jurisdiction in which each is created. The financial goals intended to be achieved during this Phase include: (i) permitting ChinaTel to fully report the financial results of all PRC-based operations of WFOE as part of ChinaTel’s consolidated financial statements, (ii) permitting New Co and/or HK Co to control, directly or indirectly, the PRC-based assets comprising the GBNC Network, and the revenue to be generated from those assets.

?????,?????????????????????????????????????,???????????:( i )?? ChinaTel ? WFOE ????????????????? ChinaTel ?????????,??( ii )?????? / ????????????????????????? GBNC ??????????????????

2.1.2 In Phase 2, the Parties shall cooperate for the PRC-based operations reported by WFOE to be listed on an offshore (non-PRC) based stock exchange, such as HKSE, NYSE, NASDAQ or London AIM. The financial goals intended to be achieved during this phase include: (i) expanding the base of equity capital available for deployment and expansion of the GBNC Network, and (ii) permitting the Parties to recapture some or all of their respective investments.

?????,???????,???? WFOE ?????????????????????,??????,???????,??????? AIM ???????????????:( i )?? GBNC ??????????,???( ii )????????????????



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2.2 Upon mutual execution of this Agreement, the Parties shall proceed diligently and cooperatively with all steps necessary or desirable to create, organize, capitalize and register each of the Entities. GBNC shall take the lead in creating New Co, HK Co and WFOE on behalf of both Parties.

???????,????????????????????????????????? GBNC ???????????,????? WFOE ?????????

2.3 After completion of the steps constituting Phase 1, the Parties shall discuss and use their reasonable commercial efforts to agree on the appropriate timing to proceed with the steps contemplated to occur during Phase 2 .

???????????,????????????????,????????????????????

2.4 As soon as relevant PRC law and policy allows and can be implemented in practice, the Parties shall use their reasonable endeavor to transform the WFOE into a foreign-invested telecommunications enterprise (“FITE”) and complete all approval procedures, so that ChinaTel’s interests in the Entities can be converted to a direct 49% ownership in the FITE .

????????????????????????,????????? WFOE ?????????????( ”FITE” )??????????,? ChinaTel ????????????? FITE ? 49% ???????

A. Corporate Structure and Governance of Entities ???????

3. New Co Structure ??????

3.1 There shall be one class of shares of the stock of New Co. In exchange for their respective capital contributions described in Section 1.2, GBNC or relevant stakeholder of GBNC shall subscribe to 51%, and ChinaTel shall subscribe to 49% of the stock of New Co. Either Shareholder shall have the right to hold its interest in the stock of New Co through one or more subsidiaries. The capital each Shareholder provides in exchange for their respective equity interests in New Co shall not be attributed a specific monetary value vis-a-vis the other Shareholder.

???????????????? 1.2 ??????????, GBNC ????????????? 51 %???, ChinaTel ????? 49 %???????????????????????????????????????????????????????????????????

3.2 The Board of Directors of New Co shall be comprised of five Directors. ChinaTel shall have the right to appoint three Directors and GBNC two Directors . The Bylaws of New Co shall provide for an Executive Committee of Officers to include the Chairman/Chief Executive Officer, a Chief Operating Officer , a Chief Finance officer (all to be appointed by ChinaTel) , and an Executive Director/General Manager (to be appointed by GBNC) . The Board may appoint such other Officers as it shall deem necessary from time to time (who shall be jointly appointed). Any Director may also serve as an Officer. The Bylaws shall also provide for joint control of all bank accounts of New Co by requiring two signatures, one signature each by a Director or Executive Officer appointed by GBNC and by ChinaTel (either or both of whom may designate any other Director or Executive Officer of New Co to act on his or her behalf in any specific instance). The corporate seal or “chop” of New Co shall be held by an attorney or other neutral party who conducts business in the same city as the principal place of business of New Co. Such neutral party shall certify resolutions or other documents requiring use of the seal or chop of New Co only upon written instructions containing two signatures, one each by a Director or Executive Officer appointed by GBNC and by ChinaTel (either or both of whom may designate any other Director or Executive Officer of New Co to act on his or her behalf in any specific instance). No Director or Executive Officer appointed by either Party shall unreasonably withhold signature on any banking activity or corporate resolution.


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??????????????? ChinaTel ????????, GBNC ????????????????????????????,?????????????????????????????(?? ChinaTel ??)?????????(? GBNC ??)????????,?????????(?????)????????????????????????????????????????????,? GBNC ? ChinaTel ????????????????????????????????????????????????????????????????????????????????????????????????????????? ChinaTel ? GBNC ???????????????(??????????????????????????????)??????????,??????????????????????????????????????????????????????????????????

3.3 The Bylaws of New Co shall include standard provisions for protection of minority and majority holders of New Co’s stock, including right of first refusal and mutual co-sale rights and a resolution for breaking deadlocks in buy-sell decisions, and shall provide that the following events require consent of at least 75% of all Shareholders: (i) a sale of all or substantially all the assets, (ii) a public listing of the stock, (iii) a voluntary petition for bankruptcy or equivalent liquidation or reorganization of the company, (iv) any action to amend the Articles of Association or other means that increases the number or class of shares of the stock of New Co, and (v) any action to amend the Bylaws in a manner that changes the number or procedure for appointment of Directors, signature control of bank accounts or control of the corporate seal or “chop” from the manner described in Section 3.2.

???????????????????????????????,???????????????????????????, ?????????????? 75% ?????:( i )??????????,( ii )?????????,( iii )?????????????????,( iv )???????????????????,??( v )?????????? 3.2 ????????????,???????????????

3.4 Each direct and indirect equity interest holder of the stock of New Co shall have complied with the registration requirements under applicable foreign exchange rule or regulation under PRC law, in relation to the transactions contemplated under this Agreement.

???????????,???????????????????????????????????????????????

4. HK Co Structure ??????

4.1 There shall be one class of stock of HK Co. New Co shall be the 100% shareholder of HK Co, such that the equity interests of GBNC and ChinaTel respectively in HK Co shall be co-extensive with their respective equity interests in New Co.

?????????????????????? 100 %???,?? GBNC ? ChinaTel ???????????????????????????






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4.2 The Board of Directors of HK Co shall be comprised of five Directors, who shall be the same as or appointed in the same manner and subject to the same voting rights as the Directors of New Co. The Bylaws of HK Co shall provide for the same titles and mechanism for appointment of its Executive Committee and other Officers as the Bylaws of New Co. The Bylaws of HK Co shall also provide for the same mechanism for joint control of all bank accounts and control of its corporate seal or “chop” as the Bylaws of New Co, and for the same super-majority protections described in Section 3.3 .

????????????????,????????????????????????????????????????????????????????????????????????????????????????????????????????????????????,?????? 3.3 ?????????????????

5. WFOE Structure WFOE ???

5.1 There shall be one class of stock of WFOE. HK Co shall be the 100% shareholder of WFOE, such that the equity interests of GBNC and ChinaTel respectively in WFOE shall be co-extensive with their respective equity interests in New Co and HK Co.

WFOE ??????????????? WFOE100 %???,?? GBNC ? ChinaTel ? WFOE ???????????????????????????

5.2 The Board of Directors of WFOE shall be comprised of five Directors, who shall be the same as or appointed in the same manner and subject to the same voting rights as the Directors of HK Co. The Bylaws of WFOE shall provide for the same titles and mechanism for appointment of its Executive Committee and other Officers as the Bylaws of HK Co. The Bylaws of WFOE shall also provide for the same mechanism for joint control of all bank accounts and control of its corporate seal or “chop” as the Bylaws of HK Co, and for the same super-majority protections described in Section 4.2 .

WFOE ????????????,???????????????????????? WFOE ?????????????????????????????????????????????? WFOE ???????????????????????????????????????????,?????? 4.2 ?????????????????

5.3 At the time ChinaTel deposits the initial registered capital as described in Section 6.4, GBNC shall transfer relevant rights of the assets and other rights comprising the GBNC Network to WFOE to the maximum extent authorized under PRC law. As to any asset or right that is incapable of transfer of ownership, GBNC shall cooperate to contract with, lease, or otherwise convey to WFOE all or so much of the beneficial rights in such asset or right to the maximum extent authorized under PRC law.

? ChinaTel ? WFOE ??? 6.4 ?????????????? , GBNC ????????????????????? GBNC ???????????? WFOE ???????????????, GBNC ?????????????????????????????????????????????????????? WFOE ?




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B. Business Model ????

6. Initial Deployment Expenses ??????

6.1 ChinaTel, or a company controlled by ChinaTel, shall purchase and then lease to WFOE at market rates such equipment and other assets reflecting capital expenses (“CAPEX”) as the Board of WFOE agrees, in the exercise of its reasonable business judgment, is required for deployment of the GBNC Network . The lease(s) for equipment between ChinaTel and WFOE may contain an option for WFOE to purchase any or all equipment for a nominal sum when the total amount of lease payments received equals repayment of all amounts ChinaTel has paid, including financing costs to others, to purchase the equipment. ChinaTel shall be entitled to repayment of any shortfall between lease payments and amounts ChinaTel has paid, including financing costs to others but without interest to ChinaTel, upon capitalization of the operations of the GBNC Network from public listing as described in Section 2.1.2, or at such other time as the free cash flow and/or net operating income generated from operation of the GBNC Network exceeds the amount required to deploy additional cities and/or expand geographic coverage and capacity in previously deployed cities.

ChinaTel ?????????????? WFOE ?????????,??? WFOE ????????????????? GBNC ???????(“ CAPEX” )??,??????????????????????? ChinaTel ? WFOE ?????????? WFOE ???,? WFOE ????????? ChinaTel ???????????(?????????????)???,???????????????????? ChinaTel ????????????????????,???????????????? ChinaTel ???, ChinaTel ???? WFOE ?? 2.1.2 ????? GBNC ??????????????,?? WFOE ???????? GBNC ???????????????????/??????????????????????????????

6.2 ChinaTel shall also invest in WFOE from time to time such amounts as the Board of WFOE agrees, in the exercise of its reasonable business judgment, are required for operating expenses (“OPEX”) associated with deployment and operation of the GBNC Network that are in excess of the operating capital and/or free cash flow of WFOE. ChinaTel shall be entitled to repayment of all amounts it invests in WFOE for OPEX, without interest, upon capitalization of the operations from the GBNC Network from public listing as described in Section 2.1.2, or at such other time as the free cash flow and/or net operating income generated from operation of the GBNC Network exceeds the amount required to deploy additional cities and/or expand geographic coverage and capacity in previously deployed cities.

ChinaTel ?? WFOE ????,????? WFOE ????? / ??????? GBNC ????????? OPEX ,????? WFOE ???????????????? ChinaTel ? WFOE ? OPEX ???????, ChinaTel ???? WFOE ?? 2.1.2 ????? GBNC ?????????????,?? WFOE ???????? GBNC ???????????????????/??????????????????????????????

6.3 Prior to completion of registration of WFOE, ChinaTel shall advance funds necessary to immediately commence engineering work required for deployment of WBA networks in the cities of Fuzhou and Xiamen .

? WFOE ???????, ChinaTel ??????????????? WBA ???????????????





10



6.4 The Parties shall use their best efforts to complete the registration of the Entities within the shortest possible time. Within ten days after completion of registration of WFOE, ChinaTel shall deposit 50 million shares of ChinaTel Series A stock into a management company which ChinaTel shall control, and $5 million as the initial registered capital of WFOE, such registered capital to be used to meet part of the cash requirements for CAPEX and OPEX related to deployment and operation of WBA networks in the cities of Fuzhou and Xiamen. If ChinaTel fails to deposit the initial registered capital and shares within this time period, GBNC shall have the right to terminate this Agreement.

????????????????????????? WFOE ?????? 10 ??, ChinaTel ?? 5000 ?? ChinaTel ? A ??????? ChinaTel ???????,??? 500 ??????? WFOE ???????,?????????????? WBA ?????????? CAPEX ? OPEX ????????????????????????????, GBNC ??????????

6.5 Upon the completion of registration of WFOE and as required by the progress of the deployment work of GBNC Network, ChinaTel guarantees to spend or secure financing for up to $20M towards equipment, services, debt service and other CAPEX and OPEX in excess of the operating capital, borrowing capacity and/or free cash flow of WFOE necessary to deploy and operate WBA networks in Fuzhuo and Xiamen.

???? WFOE ??????????? / ?????????,?????????????? WBA ???????????????????? CAPEC ? OPEX , ChinaTel ??? WFOE ????????????????,??????? 2000 ???????

6.6 After GBNC obtains WBA licenses for Quanzhou, Zhang Zhou, Longyan, Putian, Sanming, Nanping and Ningde, as required by the progress of the deployment work of the GBNC Network and within a reasonable time, ChinaTel shall increase the WFOE’s registered capital from $5m to $20m, to be used to meet part of the cash requirements for CAPEX and OPEX related to deployment and operation of WBA networks in the additional 7 cities. In addition, ChinaTel guarantees to spend or secure financing for up to $80M towards equipment, services, debt service and other CAPEX and OPEX in excess of the operating capital, borrowing capacity and/or free cash flow of WFOE necessary to deploy and operate WBA networks in those seven cities.

? GBNC ???????????????????????? WBA ???,???????????????????, ChinaTel ?? WFOE ?????? 500 ?????? 2000 ?????,?????? 7 ????? WBA ?????????? CAPEX ? OPEX ???????????? WFOE ??????????? / ?????????,??? 7 ???????? WBA ???????????????????? CAPEC ? OPEX , ChinaTel ???????????? 8000 ???????






11



6.7 Subject to GBNC’s ability to secure WBA licenses for cities in addition to the nine cities described in Sections 6.5 and 6.6, ChinaTel guarantees to spend or secure financing for the amounts required towards equipment, services, debt service and other CAPEX and OPEX in excess of the operating capital, borrowing capacity and/or free cash flow of WFOE necessary to deploy and operate WBA networks for such additional cities, based on deployment budgets to be mutually agreed and formula similar to actual expenses for the nine cities described in Sections 6.5 and 6.6 .

? GBNC ????? 6.5 ? 6.6 ???? 9 ??????????? WBA ??????,???? WFOE ??????????? / ?????????,???????????? WBA ???????????????????? CAPEX ? OPEX , ChinaTel ?????????,??????????????????? 6.5 ? 6.6 ??? 9 ??????????????????

6.8 A management company shall be created in HK or other territory to be agreed by the Parties, and a management service agreement shall be signed between the management company and WFOE, according to which the management company will provide marketing, sales, additional spectrum acquisition and other service to WFOE, subject to consideration of 50 million shares of ChinaTel stock, of which five million shares shall be issued to Fu Jian-Hui .

????????????????????????????????? WFOE ????????,??????????? WFOE ???????,????????????,????? ChinaTel ? 5000 ????,??? 500 ????????????

7. Revenue from GBNC Network GBNC ???????

WFOE shall be entitled to all revenue that is capable of being realized by the GBNC Network, as it now exists or as it may be improved, expanded or increased, including but not limited to (i) all fees charged to or paid by consumer, enterprise or government subscribers within the geographic coverage of the GBNC Network, (ii) all lease, transport or co-location fees charged to or paid by third-party carrier users of any infrastructure equipment, (iii) all amounts charged to or paid for lease or sale of hardware or devices marketed by WFOE, and (iv) all value added services and applications .

???????????????????????????? GBNC ???????????,??????:( i )? GBNC ????????????????????????????????????????????????;( ii )??????????????????????????????????;( iii )?????????? WFOE ???????????????;?( iv )??????????

8. Re-Investment of Profit ?????

The Parties contemplate that substantially all excess free cash flow and/or net operating income generated from operation of the GBNC Network shall be re-invested in the form of deploying additional cities and/or expanding geographic coverage and capacity in previously deployed cities for a period of 10 years from the Effective Date, subject to considerations not yet foreseen related to the public listing contemplated during Phase 2 and described in Section 2.1.2 .





12



???????? 10 ??,????????? GBNC ?????????????? / ???????????,????????? / ???????????????????,??????? 2.1.2 ???????????????????????????

9. Distribution of Profi t ????

In the event the free cash flow and/or net operating income generated from operation of the GBNC Network exceeds the amount required to deploy additional cities and/or expand geographic coverage and capacity in previously deployed cities, and after repayment of amounts advanced by ChinaTel as described in Section 6, any surplus profit, after tax or provision therefore and after the making of such provision as may be requisite to meet working capital requirements, pay outstanding loan obligations, provide for reserves for contingent future liabilities, shall (to the extent allowed by applicable law) be distributed to the Shareholders in full by way of dividends.

?? GBNC ????????????? / ???????????????? / ?????????????????????????,?????? 6 ??? ChinaTel ???????,?????,??????????,??????????,??????????,???? ( ???????????? ) ???????????

C. Other Terms ????

10. Representations and Warranties ?????

10.1 Each Party acknowledges that the other Party has been induced to enter into this Agreement on the basis of and in reliance upon the following representations, the accuracy of which each Party warrants to the other Party. The rights and remedies of a Party for breach of any warranty by the other Party shall not be affected by any due diligence investigation made by or on behalf of the Party relying on a representation, except pursuant to written waiver or release. Where any representation is qualified by the expression "so far as the Party making the representation is aware" or words having similar effect, such representation shall be deemed to include a statement that such awareness means both actual knowledge of the Party and also such knowledge which the Party would have had if it had made reasonable inquiry of all relevant persons.

?????????????????????????,???????????????????????????????????????????,????????????????????,??????????????????“????????”???????????????,?????????????,??“??”??????????????,???????????????????????????
Each Party represents and warrants : ????????:

10.2 Such Party is a corporation or limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of the country and state described as applicable to such Party in the Recitals, and has all requisite power to own, lease and operate its properties and to carry on its business as currently conducted and as proposed to be conducted in this Agreement. No order has been made or petition presented (or pending) or resolution passed for the winding up of Such Party. Such Party is not insolvent or unable to pay its debts as they fall due .



13



?????????????????????????,??????????????,??????????????????????,?????????????????????????????????????(???????)?????????????????????

10.3 Such party has all requisite capacity, power and authority, and has taken all necessary corporate or other actions to enter into this Agreement.

???????????,?????,???????????????????????????

10.4 Such party has done or will promptly do all such further acts, including necessary filings with appropriate governmental authorizes, required in order to give full force and effect to this Agreement.

???????????????,????????????,??????????

10.5 The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated by this Agreement will not result in any violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either: (a) a default under any provision, instrument, judgment, order, writ, decree, contract or agreement or (b) an event which results in the creation of any lien, charge or encumbrance upon any assets of such Party (except as expressly stated in this Agreement) or the suspension, revocation, forfeiture, or non-renewal of any material permit or license applicable to such Party, provided that, GBNC acknowledges that ChinaTel has disclosed a contractual relationship with CECT-Chinacomm, which may limit ChinaTel’s right in up to 29 cities to provide certain competing services, all as further described in the contract between ChinaTel and CECT-Chinacomm.

????????,??????????,???????????????????????????????????:( a )????????????????????????????;( b )???????????(?????????)????????????,???????????????????????????????? GBNC ?? ChinaTel ???????????????,?? ChinaTel ??????????,?????? ChinaTel ? 29 ??????????????????

10.6 No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of such Party.

???????????????????????????????????????????????????????

Each of GBNC and the WFOE, on a joint and several basis, represents and warrants :

GBNC ? WFOE ???????:

10.7 All information in Recitals A through C is correct.

?? A ? C ????????????



14



10.8 All information in Schedule 1 attached to this Agreement is complete and correct.

????? 1 ???????????????

ChinaTel represents and warrants : ChinaTel ?????:

10.9 All information in Recitals D through E is correct.

?? D ? E ????????????

11. Indemnification ??

Each Party agrees to defend, indemnify and hold harmless the other Party and its successors, permitted assigns, employees, officers, agents, managers, shareholders and affiliates, from and against any and all losses, deficiencies, liabilities, damages, assessments, judgments, costs and expenses, including reasonable attorneys’ fees (both those incurred in connection with the defense or prosecution of an indemnity claim and those incurred in connection with the enforcement of this provision) resulting from or arising out of (i) any failure of the indemnifying Party to perform or fulfill any undertaking, covenant or agreement applicable to such Party in this Agreement, and (ii) any material breach of a representation and warranty contained in Section 10 and Schedule 1 of this Agreement and applicable to the indemnifying Party.

????,???????( i )??????????????????????????;?( ii )???????????? 10 ???? 1 ????????????,??????????????????????????????????????????,??????????????????????????????????????,????????(?????????????????????,???????????????????)?

12. Successors and Assigns; Assignment ???????;??

This Agreement shall be binding upon and inure to the benefit of and shall be enforceable by the Parties hereto and any of their respective successors, permitted assigns and affiliates who agree in writing to be bound by the terms of this Agreement. Neither Party may assign its rights, in whole or in part, under this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld, provided, no refusal of consent shall be considered unreasonable if the requested assignment would relieve the assigning Party of any of its duties under this Agreement. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the Parties to this Agreement, or their respective successors and assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

???????????????????????????????????????????????????????????,????????????????????,?????????????????????????????????????,??????????????????????????,???????????????????????????????????????????????????????????????????????????



15



13. Notices ??

All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the Party to be notified; (ii) when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) one (1) business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery, with written verification of receipt. All communications shall be sent to the respective Parties at their address as set forth on the signature page, or to such e-mail address, facsimile number or address as subsequently modified by written notice given in accordance with this Section. If notice is given to ChinaTel, notice shall also be given to the counsel for ChinaTel to be delivered in the same manner as to ChinaTel at the address, facsimile number or e-mail address immediately below:

????????????? / ?????????????,???????????????????????????:( i )????????? ; ( ii )????????????????????????,??????;????????????,???????????? ; ( iii )????????????????????????( 5 )?;?( iv )???????????????????????????????????,??????????????????????????????,???????????????????????????????????????? ChinaTel ,?????????????? ChinaTel ????????????????????:

Kenneth L. Waggoner
Vice President and General Counsel
China Tel Group, Inc.
12526 High Bluff Drive, Suite 155
San Diego, California 92130
Facsimile: 1 [phone]
E-Mail: [e-mail]

14. Governing Law ???

This Agreement and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of Hong Kong, without regard to conflict of law principles that would result in the application of any law other than the laws of the Hong Kong, as the same apply to agreements executed solely by residents of Hong Kong and wholly to be performed within Hong Kong.

????????????????????????????,?????????????????????,???????????????????????




16



15. Dispute Resolution ????

Either Party may, at any time, deliver to the other Party a dispute notice setting forth a brief description of the issues to be resolved through the dispute resolution mechanism set forth in this Section. Such dispute notice shall specify the provision or provisions of this Agreement and the facts or circumstances that are the subject matter of dispute. Immediately following the receipt of a dispute notice, the Parties shall cause representatives of their respective senior management to meet and seek to resolve the disputed cordially through informal negotiations. If the Parties’ representatives are unable to resolve the dispute within 20 business days of the receipt of the dispute notice (or such extended time period as the Parties may agree), then the dispute shall be submitted to the Hong Kong International Arbitration Center (“HKIAC”) for binding arbitration conducted in English by a single arbitrator. The dispute(s) shall be resolved pursuant to the United Nations Commission on International Trade Law Arbitration Rules. The award of the arbitrator shall be final and binding on the Parties and may be enforced in any court of competent jurisdiction.

??????????????????????,?????????????????????????????????????????????????????????????????????,????????????????????????????????????????????????? 20 ?????(????????????)????,????????????????( “HKIAC“ ),????????,??????????????????????????????????????????,????????,??????????????

The Dispute resolution proceedings contemplated by this Section shall be confidential and private, as permitted by applicable law. To that end, the Parties shall not disclose the existence, content or results of any proceedings conducted in accordance with this Section and materials prepared or submitted in connection with such proceedings shall not be admissible in any other legal proceeding; provided, however, that this confidentiality provision shall not prevent a petition to vacate or enforce an arbitration award and shall not bar disclosure required by applicable law. The Parties agree that any decision or award resulting from proceedings in accordance with this Section shall have no preclusive effect in any other matter involving third parties.

?????????,????????????????????????,??????????????????????????????????,????????????????????????????,??????????????????????,??????????????????????????????????????????????????????????????

16. Attorneys’ Fees ???

If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of any of this Agreement, the prevailing Party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such Party may be entitled.

??????????(????)??????????????????????,??????????????????????????????????




17



17. Severability ????

The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

?????????????????????????????????????

18. Disclosure of Information ????

The Parties agree that, if either party intends to disclose any information concerning this Agreement and/or the transaction contemplated under this Agreement, except for the disclosure requested by a court or mandatory requirement by relevant authority, it shall communicate the contents of the disclosure to the other Party and obtain the written consent of the other Party.

????,????????????? / ???????????????,????????????????,??????????????????????????????????????

19. Delays or Omissions ?????

No delay or omission to exercise any right, power or remedy accruing to any Party under this Agreement, upon any breach or default of any other Party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting Party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of either Party of any breach or default under this Agreement, or any waiver on the part of either Party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to either Party, shall be cumulative and not alternative.

?????????????????????????????????????????????????????????????????????,??????????????????????????????????,??????;???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????

20. Entire Agreement ????

This Agreement constitutes the full and entire understanding and agreement between the Parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the Parties is expressly canceled.

??????????????????????????,???????????????????????????????




18



21. Counterparts ??

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original copy of this Agreement and all of which, when taken together, shall be deemed to constitute one and the same Agreement.

???????????,???????????????,???????????????????

22. Titles and Subtitles ??????

The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

???????????????????,???????????



THE SIGNATURES OF THE PARTIES APPEAR ON THE FOLLOWING PAGE









19






GOLDEN BRIDGE NETWORK COMMUNICATIONS CO., LTD.


CHINA TEL GROUP, INC.




By /s/ Fu Jian-Hui
Fu Jian-Hui, its Chief Executive Officer



By /s/ George Alvarez
George Alvarez, its Chief Executive Officer

11/F Xinhong Building, No. 31 Xinglong Road
Huli District, Xiamen, China 361006
Facsimile: + (86) 592 513799
E- Mail: [e-mail]
12656 High Bluff Drive, Suite 155
San Diego, California 92130 USA
Facsimile: + [phone]
E-Mail: [e-mail]









WFOE (this information will be inserted and a substitute signature page created after WFOE is formed)


By _________________________________
X, its Chief Executive Officer
Address
City, State, Country
Facsimile:
Email:

By /s/ Colin Tay
Colin Tay, its President

3F-2, 102 Kuang Fu South Road
Taipei 106, Taiwan
Facsimile + (886) 2 2778-1534
E-Mail: [e-mail]





20



SCHEDULE 1 TO SHARE SUBSCRIPTION AGREEMENT

BETWEEN GOLDEN BRIDGE NEWORK COMMUNICATONS CO., LTD.
AND CHINA TEL GROUP, INC.

REPRESENTATIONS AND WARRANTIES OF GBNC

?????????

?? 1

GBNC ??????


1. Due Establishment, Agreements and Corporate Power ??????? ?????

1.1 The entire equity interest of GBNC is free from all liens, charges, equities, and other Encumbrances or interests in favour of any other person.

GBNC?????????????????????????????,????????????

1.2 The copies of the business licence and the articles of association of GBNC provided to ChinaTel are true and complete and have embodied in them or annexed to them a copy of every such supplement agreement or document (if any) as is required by PRC laws and regulations.

GBNC???ChinaTel???????????????,????????????????????????????????(??)?

2. Financials ??

2.1 The accounts of GBNC for the years 2008-2009 provided to ChinaTel (“ Accounts ”) have been prepared in accordance with the requirements of all relevant PRC law and regulations and generally acceptable accounting practice and policies applied in the PRC and on a consistent basis and give a true and fair view of the state of affairs of GBNC for the period ended December 31, 2009, and make proper provision for all actual liabilities, bad or doubtful debts, the Taxation in the PRC and proper provision for or contain full particulars in notes of (in accordance with good accounting practice) all contingent unqualified deferred or disputed liabilities and all capital commitments and all assets or stock which are wholly or in part lost, obsolete or depreciated in value and all contractual or statutory payment required to be made by GBNC to any director, consultant or employee of GBNC and have consistently applied the bases and policies of accounting in the audited balance sheet and profit and loss accounts for the two years ended December 31, 2009 and except where specified are not affected by any extraordinary exceptional or non-recurring item.

GBNC???ChinaTel?2008-2009???(“ ?? ”)??????????????????????????????????????????????????,???????????GBNC??2009?12?31????????,?????????????????????????,??????????????????????????????????(?????????),???????????????????????????????????????,????????????????GBNC???????????????????????????????????2009?12?31???????????????????????????????????,???????,???????????????????????




21



2.2 The Accounts truly and fairly reflect the financial position of GBNC as at December 31, 2009 and truly and fairly disclose all assets and liabilities of GBNC as at December 31, 2009.

????????????2009?12?31?GBNC?????,????????2009?12?31?GBNC??????????

2.3 The provision for Taxation in the Accounts is sufficient to cover all Taxation assessed or liable to be assessed on GBNC or for which GBNC is then or may then be or become accountable in respect of profits, income earnings, receipts, transfers, events and transactions up to December 31, 2000.

????????????GBNC???????????????,?GBNC?2009?12?31?????????????????????????????????????

2.4 GBNC has duly complied and will continue to duly comply with its obligations to account to the relevant Taxing Authorities for all amounts for which it is or may become accountable in respect of Taxation.

??????????????,??????????????????????????

2.5 All returns, computation and payments in connection with Taxation that should have been made by GBNC have been made in a timely manner and on a proper basis and will until Completion continue to be so made.

GBNC????????????????????????????????????????

2.6 GBNC has exercised its reasonable endeavours to preserve and secure all tax benefits and refunds.

GBNC?????????,????????????????

2.7 All particulars furnished to PRC Taxation Authority and other Taxation Authorities, in connection with the application for any consent or clearance on behalf of GBNC or affecting GBNC fully and accurately disclosed all facts and circumstances material for the decision of those authorities, and consent or clearance is valid and effective; and any transaction, for which consent or clearance has previously been obtained, has been carried into effect (if at all) only in accordance with the terms of the relative application and consent or clearance.

GBNC??????????????????????????????????,????GBNC???????????????????????????????????????????????????????????????????????

2.8 GBNC has not taken or omitted to take any action which has had, or might have, the result of altering, prejudicing or in any way adversely affecting any arrangement or agreement which it has previously negotiated with any Taxation Authorities in the PRC or any other jurisdiction.

GBNC???????????????????????????????????????????????????????????????????



22



2.9 GBNC is not, nor expects to become, a passive foreign investment company as described in Section 1297 of the United States Internal Revenue Code of 1986, as amended.

GBNC??????????1986???????1297????????????? . ?

2.10 No shareholder GBNC, solely by virtue of its status as shareholder of GBNC, has personal liability under PRC law for the debts and claims of GBNC. There has been no communication from any tax authority relating to or affecting the tax classification of GBNC.

????GBNC????????GBNC??????????????????GBNC???????????????GBNC???????????????GBNC????????

2.11 GBNC has not entered into or been a party to any schemes or arrangements designed partly or wholly for the purpose of it or any other person avoiding Taxation.

GBNC ????? ?????????????????????????????????????

2.12 All assets of GBNC of a wasting or depreciable nature are stated in the Accounts after deduction of depreciation, and such depreciation being in amounts sufficient to write down such assets over their respective expected useful economic lives, and unless stated to the contrary in the Accounts, depreciation is calculated on a straight line basis and a consistent depreciation policy has been adopted over all assets and there has been no change in the basis and policy of depreciation.

??????GBNC?????????????????????????,?????????????????????????;???????????,????????????????????????,?????????????

2.13 A consistent accounting policy has been adopted by GBNC for the two years ended December 31, 2009 and there has been no material change thereof.

GBNC???2009?12?31?????????????????,?????????

2.14 GBNC does not hold any security (including any guarantee or indemnity) which is not valid or enforceable against the grantor thereof in accordance with its terms.

GBNC ?????? (???? ?? ? ???? ) ???????,???????????????????

2.15 In relation to all financing arrangements to which GBNC is a party:

???GBNC???????????????:

(a) there has been no contravention of or non-compliance with any provision of any such document;

??????????????????;



23



(b) no steps for the enforcement of any Encumbrances have been taken or threatened;

?????????????????????????;

(c) there has not been any alteration in the terms and conditions of any of the said arrangements or facilities all of which are in full force and effect and GBNC is unaware of any circumstances whereby the terms and condition of any facilities might be prejudiced or which might give rise to any alteration in the terms or conditions of any of the facilities;

???????????,????????????,??GBNC????????????????????????;

(d) nothing has been done or omitted to be done whereby the continuance of the said arrangements and facilities in full force and effect might be affected or prejudiced, in particular, as a result of other matters or transactions contemplated in this Agreement; and

??????????????????????????????,??????????????????????;?

(e) none of the arrangements is dependent on the guarantee of or on any security provided by a third party.

????????????????????????

2.16 The total amount borrowed by GBNC: GBNC???:

(a) from its bankers does not exceed its overdraft facilities; and

????????????????;?

(b) from whatsoever source does not exceed any limitation on borrowing contained in its articles of association or any other deed or document binding on it.

??????????????????????????????????;

2.17 All dividends or distributions declared, made or paid by GBNC have been declared, made or paid in accordance with its articles of association and PRC law and regulations.

GBNC??????????????,???????????????????????

2.18 No part of the amounts included in the Accounts, or subsequently recorded in the books of GBNC, as owing by any debtors is overdue by more than two (2) months or the credit period as agreed by GBNC, or has been released on terms that any debtor pays less than the full book value of his debt other than discount or allowance in accordance with normal trade practice or has been written off or has proved to any extent to be irrecoverable or is now regarded by GBNC as irrecoverable in whole or in part.

GBNC????????2?????GBNC?????????????,GBNC??????????????????????????,????????????????????????????


24



2.19 GBNC does not have any outstanding commitment for capital expenditure or any agreement or arrangement which is either (i) not on an arm's length basis or (ii) exceeds US$ 50,000 in the aggregate. There is no outstanding mortgage or charge on the whole or any part of the undertaking, property or assets of GBNC.

GBNC??????????????,???(i)??????,(ii)????50,000?????????GBNC????????????????????

2.20 Since the date of the Accounts there has been (i) no material adverse change in GBNC's financial position or prospects, (ii) the business has operated in the ordinary course and (iii) so far as GBNC is aware, no material liabilities (actual, contingent or disputed) have arisen other than those disclosed in the Accounts and/or those arising in the ordinary course of business of GBNC since the date of the Accounts up to the Effective Date.

????????? , (i)GBNC?????????????????????;(ii)??????, (iii) ??????????????,?GBNC??,??????????????????????? , ?????????????(????????????)?

3. Assets ??

3.1 GBNC is the legal owner of and has good and marketable title to all the assets used in its business, save for those subject to hire-purchase or leasing or rental agreements (if any) as disclosed in the Accounts.

????????????????????(??) , GBNC?????????????????

3.2 GBNC has not created, or granted, or agreed to create or grant, any security interest or other Encumbrance in respect of any of its fixed assets for the business of GBNC otherwise than in the ordinary course of its business.

?????????????,GBNC??????????????????????????????????

3.3 Save as disclosed in the Accounts, the assets of GBNC are solely the property of GBNC and are not subject to any Encumbrance or any agreement to give or create any Encumbrance including any bill of sale, hire or hire purchase agreement, conditional sale, credit sale or similar agreement.

??????????,GBNC??????????????????????????????,????????????????????,?????????????????????????????

3.4 Save for disposals in the ordinary course of its business, the assets of GBNC have been in its possession or under its control.

???????????? , GBNC?????????????????

3.5 The machinery equipment, vehicles and other devices used in connection with the business of GBNC:

GBNC???????????????????:

(a) are properly registered with or approved by the relevant PRC authorities if the import, use or ownership of the same by GBNC requires such registration or approval under PRC law and regulations;

????????????????????????????,?GBNC??????????????????????;


25



(b) are in a good and safe state of repair and condition and satisfactory working order and have been regularly and properly maintained;

??????????????? , ?????????????;

(c) are not to any extent surplus to requirements;

????????;

(d) are in the possession and control of GBNC and are the absolute property of GBNC, save for those items as disclosed in the Accounts ;

??GBNC????? , ????GBNC?? , ???????????;

(e) are not expected to require replacements or additions; and

???????;?

(f) are all capable, and (subject to normal wear and tear) will remain capable, throughout the respective periods of time during which they are each written down to a nil value in the accounts of GBNC (in accordance with the recognised accountancy principles in the PRC), fit for the purpose for which they were designed or purchased.

???GBNC?????????????(???????????????????)??????????????????(??????)?

3.6 Maintenance contracts are in full force and effect in respect of all assets of GBNC in connection with its business which it is normal or prudent to have maintained by persons carrying on similar business, and in respect of all assets which GBNC is obliged to maintain or repair under any leasing or similar agreement; and all those assets have been regularly maintained to a good technical standard, and in accordance with safety regulations usually observed in relation to assets of that description, and in accordance with the terms and conditions of any applicable leasing or similar agreement.

GBNC??????????????????? , ??????????????,??GBNC?????????????????????????????????????????????????????????,????????????

4. Business ??

4.1 The business of GBNC is in compliance with and is lawful under PRC law and regulations and all approvals, consents, permits, licences and/or any similar authority necessary for the operation of the business of GBNC and for the business of GBNC to comply with PRC law and regulations have been duly obtained and are in force and valid.

GBNC???????,????????? , ?????????????????????????????????????/????????,???????????????/??????????????



26



4.2 GBNC lawfully and validly holds valid approval, licences or consent issued by the PRC competent authority(ies), including but not limited to the Ministry of Information Industry, for the construction and operation of 3.5GHz wireless broadband operation, and there has not arisen any circumstances that may result in the temporary or permanent cancellation or termination of such licences.

GBNC????????????????????????? , ???????????????????????????3.5GHz???????????????,????????????????????????

4.3 GBNC has carried on its business in the ordinary and usual course and without having entered into any material transaction, assumed any material liability or made any material payment not provided for in the Accounts which is not in the ordinary course of its business or suffered any material adverse interruption or alteration in the nature, scope or manner of its business .

GBNC?????????? , ??????????????????????????????????????????,?????????????????????????????????

4.4 GBNC has paid its creditors within the time agreed with such creditors and there are not debts outstanding by GBNC which have been due for more than six months .

GBNC????????????????????,?GBNC??????????6??????

4.5 GBNC has not entered into, or agreed to enter into, any capital commitments .

GBNC???????????????

4.6 No unusual trade discounts or other special terms have been incorporated into any contract entered by GBNC inconsistent with the previous practice of GBNC .

GBNC???????? , ???????????????????????????

4.7 There has been no material deterioration in the financial position or prospects or turnover of GBNC.

GBNC??????????????????????

4.8 GBNC’s compliance with the terms of this Agreement will not:

GBNC???????????:

(a) cause GBNC to lose the benefit of any right or privilege it presently enjoys or cause any person who normally does business with GBNC not to continue to do so on the same basis as previously does;

??GBNC?????????????? , ???GBNC??????????????




27



(b) relieve any person of any obligation to GBNC (whether contractual or otherwise) or enable any person to determine any such obligation or any right or benefit enjoyed by GBNC or to exercise any right whether under an agreement with or otherwise in respect of it;

?????GBNC???(???????????)???,???????????????GBNC????????,?????????????????????

(c) result in any present or future indebtedness of GBNC becoming due or capable of being declared due and payable prior to its stated maturity ;

??GBNC??????????????????,???????????????

(d) give rise to or cause to become exercisable any right of pre-emption;

?????????????????;

(e) adversely affect GBNC’s relationships with its clients, customers, suppliers or employees;

????GBNC???????????????;

(f) result in any revocation or suspension of any licences permit or consent held by or granted to GBNC; or

??GBNC???????????????????????;?

(g) result in the termination of any contract to which GBNC is a party.

??GBNC????????????????

5. Litigation ??

5.1 Neither GBNC nor any person for whose acts and/or defaults it may be vicariously liable, is at present engaged whether as claimant, defendant or otherwise in any legal action, proceeding or arbitration which is either in progress or is threatened or is pending or is being prosecuted for any criminal offence and no governmental or official investigation or inquiry concerning GBNC is in progress or pending.

????GBNC???????/??????GBNC?????????????????????????????????????????????????????,??????????????????GBNC????????????????????

5.2 There are no circumstances likely to lead to any such claim or legal action, proceeding or arbitration (other than as aforesaid) prosecution, investigation or enquiry.

????????GBNC??????????????(???????)?????????????

5.3 No claims, lawsuits, legal or other proceedings are pending or threatened against GBNC or its business before any court, arbitration tribunal, administrative body .

????????????????????????????GBNC???????????????????


28



6. Statutory and legal requirements ????

6.1 GBNC has conducted its business in all respects in accordance with all applicable laws and regulations of the PRC and there is no order, decree or judgment of any court or any governmental agency of the PRC outstanding against GBNC or which may have a material adverse effect upon the assets or business of GBNC.

GBNC????????????????????? , ???????GBNC????GBNC???????????????????????????????

6.2 All necessary licences, consents, registrations, permits and authorities (public and private) have been obtained by GBNC to enable GBNC to carry on its business effectively in the PRC and in the manner in which such business is now carried on and all such licences, consents, permits and authorities are valid and subsisting and GBNC knows of no reason why any of them should be suspended, cancelled or revoked or should not be renewed or reissued upon or prior to their expiry.

GBNC??????????????????????????????(???????)?. ????????????????????????????,?GBNC???????????????????????????????????????,??????????????

6.3 GBNC has not committed and is not liable for any criminal, illegal, unlawful or unauthorised act or breach of covenant, contract or statutory duty.

GBNC????????????????????????????????????

6.4 No key employee or senior management of GBNC has:

GBNC??????????????:

(a) been convicted of a criminal offence; or

?????????;?

(b) been disqualified from being a company director .

?????????????

6.5 GBNC is not or, to GBNC’s knowledge, no key employee, senior management, administrators, members or employees of GBNC is an OFAC Sanctioned Person (as defined below). To GBNC’s knowledge, their key employee, senior management, administrators, members or employees are in compliance with, and have not previously violated, the USA Patriot Act of 2001, and all other applicable United States and PRC anti-money laundering laws and regulations. To the knowledge of GBNC, none of (i) the execution, delivery and performance of this Agreement, or (ii) the consummation of any transaction contemplated hereby or thereby, or the fulfilment of the terms hereof or thereof, will result in a violation by the Shareholders or key employee, of any of the OFAC Sanctions or of any anti-money laundering laws of the United States, the PRC or any jurisdiction.

?GBNC??, ??GBNC???????????????????????????????????????“?????”(?????)??GBNC??,?????????????????????????????????2001?????????????????????????????????????GBNC??,(i)????????????,?(ii)????????????????????????????????????????????????????



29


For the purposes of this Section 6.5: ???6.5 ?????:

(a) “ OFAC Sanctions ” means any sanctions program administered by the Office of Foreign Assets Control of the United States Department of the Treasury (“ OFAC ”) under authority delegated to the Secretary of the Treasury (the “ Secretary ”) by the President of the United States or provided to the Secretary by statute, and any order or license issued by, or under authority delegated by, the President or provided to the Secretary by statute in connection with a sanctions program thus administered by OFAC. For ease of reference, and not by way of limitation, OFAC Sanctions programs are described on OFAC’s website at www.treas.gov/ofac . “

“?????????”????????????????(“ OFAC ”)???????????????(??)???????????,??????????????????????,?OFAC???????????????,????????????????????? www.treas.gov/ofac ?????(???????)?

(b) “ OFAC Sanctioned Person ” means any government, country, corporation or other entity, group or individual with whom or which the OFAC Sanctions prohibit a United States Person from engaging in transactions, and includes without limitation any individual or corporation or other entity that appears on the current OFAC list of Specially Designated Nationals and Blocked Persons (the “ SDN List ”). For ease of reference, and not by way of limitation, OFAC Sanctioned Persons other than government and countries can be found on the SDN List on OFAC’s website at www.treas.gov/offices/enforcement/ofac/sdn.

“? OFAC ????”??? OFAC ???????????????????????????????,????????? OFAC ???????????????(???? SDN ??)????????????????????,?????????“? OFAC ????”??? OFAC ??? www.treas.gov/offices/enforcement/ofac/sdn. SDN ?????(???????)?

(c) “ United States Person ” means any United States citizen, permanent resident alien, entity organized under the laws of the United States (including foreign branches), or any person (individual or entity) in the United States, and, with respect to the Cuban Assets Control Regulations, also includes any corporation or other entity that is owned or controlled by one of the foregoing, without regard to where it is organized or doing business.

“???”????????????????????????????(????????)??????????(?????)???,????????????,???????????????????????,?????????????

6.6 GBNC has not or, to GBNC’s knowledge, no key employee, senior management, administrators, members or employees of GBNC has made, directly or indirectly , any payment or promise to pay, or gift or promise to give or authorized such a promise or gift, of any money or anything of value, directly or indirectly, to:

GBNC??,??GBNC????,?????????????????????????????????????????????????????????,??????????????????:

(a) any foreign official (as such term is defined in the FCPA) for the purpose of influencing any official act or decision of such official or inducing him or her to use his or her influence to affect any act or decision of a governmental authority, or

??????(?FCPA?????),????????????????,??????????????????????????????,?



30



(b) any foreign political party or official thereof or candidate for foreign political office for the purpose of influencing any official act or decision of such party, official or candidate or inducing such party, official or candidate to use his, her or its influence to affect any act or decision of a foreign governmental authority.

??????????,???????????,????????????????????????,???????????????????????????????????????????

In the case of both (a) and (b) above in order to assist GBNC to obtain or retain business for, or direct business to GBNC, as applicable, subject to applicable exceptions and affirmative defences. GBNC has not or none of GBNC’s key employee, senior management, administrators, members or employees has made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of funds or received or retained any funds in violation of any law, rule or regulation subject to applicable exceptions and affirmative defences.

???(a)?(b)????,???GBNC???????,???????GBNC,????????????????? GBNC??,?GBNC???????????????????????????????????????????????????,????????????????????,?????????????????

6.7 No person, not being a director of GBNC, has any actual or ostensible authority, whether under a power of attorney, agency agreement or otherwise, to commit GBNC to any obligation other than an obligation of a nature which it is usual for it to incur in the ordinary course of its business .

?GBNC??????????????????????????????????,??GBNC??????????????????????????

7. Records ??

7.1 All accounting records, vouchers, invoices, ledgers, contracts and memoranda and all other accounting documents of GBNC and records of all transactions thereof are in the possession of GBNC and have been accurately and properly written up, kept and maintained in accordance with generally accepted accounting practice in the PRC and together shows a true and fair view of the affairs and financial position of GBNC.

GBNC?????????????????????????????? , ?????????,??GBNC????????????????????????????????????????????????????????GBNC??????

7.2 Without prejudice to the generality of Section 7.1, the minute book of directors’ meetings and the minute book of shareholders’ meetings respectively of GBNC contain full and accurate records of all resolutions passed by the directors and the shareholders of GBNC and no resolutions have been passed by either the directors or shareholders of GBNC which are not recorded in the relevant minute books.

?????7.1??????????,GBNC???????????????????????????????????????????????????????????


31



7.3 All documents requiring to be filed with any relevant authorities in the PRC by GBNC have been properly made up, presented, filed and approved.

??????GBNC?????????????????????,GBNC??????????????????????

8. Intellectual Property ????

8.1 GBNC is the sole legal and beneficial owner of (or applicant for) the Intellectual Property Rights used or held for use in its business (“ GBNC’s Intellectual Property Rights ”), free from all Encumbrances.

GBNC???????????????????????(“ GBNC???? ”)????????????(????) , ?GBNC?????????????

8.2 The GBNC’s Intellectual Property Rights are valid, subsisting and enforceable and nothing has been done or not been done as a result of which any of them has ceased or might cease to be valid, subsisting or enforceable. In particular:

GBNC???????????????????,???????????????????????????GBNC??????????????????????,???:

(a) all application and renewal fees and other steps required for the maintenance or protection of such rights have been paid on time or taken;

???????GBNC????????????????????????????????;

(b) all know-how (including trade secrets and confidential information) owned or used by GBNC has been kept confidential and has not been disclosed to third parties (other than parties who have signed written confidentiality undertakings in respect of such information;

??GBNC??????????(???????????)??????? , ??????????????????????????;

(c) no mark, trade name or domain name identical or similar to any such rights has been registered or is being used by any person in the same or a similar business to that of GBNC, in any country in which GBNC has registered or is using that mark, trade name or domain name; and

???GBNC??????????????????,????????????????GBNC????????????????????????????; ?

(d) there are and have been no claims, challenges, disputes or proceedings, pending or threatened, in relation to the ownership, validity or use of such rights.

?????GBNC???????????????????????????????????????

8.3 There has been no infringement by any third party of any GBNC’s Intellectual Property Rights and no such infringement is current or anticipated.

?????????GBNC???????,?????????????????


32



8.4 A change of Control of GBNC will not result in the termination of or have any material effect on any GBNC’s Intellectual Property Rights.

GBNC??????????GBNC???????????????????????

8.5 The activities of GBNC (and of any licensee of GBNC’s Intellectual Property Rights granted by GBNC) have not infringed, do not infringe and are not likely to infringe the Intellectual Property Rights of any third party.

GBNC(??GBNC?????????)??????????????????
9. GBNC’s Contracts GBNC???

9.1 All documents to which GBNC is a party and other documents owned by or which ought to be in the possession of GBNC have been properly stamped (if required) and are in GBNC's possession.

??GBNC????????????GBNC??????????????????(????)??GBNC???

9.2 Save as disclosed in the Accounts (where such items would be disclosed in the Accounts according to PRC law and regulations and the generally accepted accounting practices in the PRC), GBNC is not a party to any agreement, transaction, obligation, commitment, understanding, arrangement or liability which:

?????????????????????????? , GBNC????????????????????????????????????:

(a) is known or is likely to result in a loss to GBNC on completion of performance;

???????????GBNC???;

(b) cannot readily be fulfilled or performed by GBNC on time without undue or unusual expenditure of money and effort;

??GBNC??????????????????????;

(c) involves or is likely to involve obligations, restrictions, expenditure or receipts of an unusual, onerous or exceptional nature;

?????????????????????,???????????????;

(d) is a lease or a contract for hire or rent, hire purchase or purchase by way of credit sale or periodical payment;

??????????????????????????;

(e) is a contract with any trade union or body or organisation representing GBNC's employees;

???GBNC??????????????????;

(f) requires an aggregate consideration payable by GBNC in excess of $50,000;

??GBNC??????$50,000??;


33



(g) requires GBNC to pay any commission, finders’ fee, royalty or the like;

??GBNC????????????????????;

(h) in any way restricts GBNC’s freedom to carry on the whole or any part of its business in any part of the world in such manner as it thinks fit; or

???GBNC?????????????????????????????;

(i) is in any way otherwise than in the ordinary and proper course of GBNC’s business.

????????GBNC????????????

9.3 GBNC is not a party to any agreement under which GBNC or any other party is in default, being a default which is material in relation to the financial or trading position of GBNC nor (so far as GBNC is aware) are there any circumstances likely to give rise to such a default.

GBNC??????????????GBNC????????GBNC?????????,(?GBNC??????)?????????????

10. Insurance ??

10.1 GBNC has maintained insurance covers in respect of all risks and up to an extent that may reasonably be expected of a prudent businessman operating a business similar to that of GBNC.

GBNC??????????????,????????????GBNC???????????????????

10.2 All insurance policies taken out by GBNC are valid, binding, in full force and effect and not voidable. There are no circumstances which might lead to any liability under any such insurance policies being avoided by the insurers or the premiums being increased and there is no claim outstanding under any such policy nor are there any circumstances likely to give rise to a claim.

GBNC???????????????????????????????????????????????????????????,???????????????????????

11. Events since January 1, 2010 ?2010?1?1????????

11.1 Since January 1, 2010: ?2010?1?1???:

(a) there has been no material adverse change in the turnover, financial or trading position or prospects of GBNC and GBNC has entered into transactions and incurred liabilities only in the ordinary course of business;

GBNC?????????????????????????????? . ?GBNC??????????,????????????????;

(b) GBNC has not declared, paid or made or is proposing to declare, pay or make any dividend or other distribution;

GBNC????????????? , ????????????????;

(c) no event has occurred which would entitle any third party (with or without the giving of notice) to call for the repayment of indebtedness prior to its normal maturity date;

???????????(??????????)???????????;


34



(d) the business of GBNC has been carried on in the ordinary and usual course and in the same manner (including nature and scope) as in the past, no fixed asset or stock has been written up nor any debt written off, no stock has notionally depreciated, become obsolete or lost value and no material change has occurred in the level of stock and no unusual or abnormal contract has been entered into by GBNC;

GBNC????????????????(?????????)???????????????????????????????????????GBNC????????????? , ??GBNC???????????;

(e) no asset of GBNC has been acquired or disposed of, or has been agreed to be acquired or disposed of, otherwise than in the ordinary course of business and there has been no disposal or parting with possession of any of its property, assets (including know-how) or stock in trade or any payments by GBNC, and no contract involving expenditure by it on capital account has been entered into by GBNC, and no liability has been created or has otherwise arisen (other than in the ordinary course of business as previously carried on);

?????????,GBNC???????????,?????????,GBNC????????(??????)?????GBNC?????????????????,GBNC??????????????,????????????????(?????????????????);

(f) there has been no disposal of any asset (including stock) or supply of any service or business facility of any kind (including a loan of money or the letting, hiring or licensing of any property whether tangible or intangible) in circumstances where the consideration actually received or receivable for such disposal or supply was less than the consideration which could be deemed to have been received for Taxation purposes;

??????(????)????????????????(????????????????????????),??????????????????????????????

(g) no event has occurred which gives rise to a Taxation liability to GBNC or deemed (as opposed to actual) income, profits or gains or which results in GBNC becoming liable to pay or bear a tax liability directly or primarily chargeable against or attributable to another person, firm or company;

???????GBNC??????????????(??????)????????,??GBNC????????????,?????????????????;

(h) no remuneration (including bonuses) or benefit payable to any officer or employee of GBNC has been increased nor has GBNC undertaken any obligation to increase any such remuneration at any future date with or without retrospective effect; and

GBNC????????????????????(????)?????,????????????;?

(i) such of the book debts shown in the Accounts and all other book debts arising since such time which have been realised since January 1, 2010 have been realised at amounts not less than those shown in the Accounts or, in the case of subsequently arising book debts, their face amount, and no indication has been received that any debt now owing to GBNC is bad or doubtful.

??????2010?1?1????????????????????????????????? , ???????????????????



35


12. Employment ??

12.1 No strikes, lock-outs or other forms of industrial action or trade disputes against or involving GBNC are known to be ongoing, pending, threatened or contemplated.

??????????????????GBNC?????????????????????????????

12.2 There is no past, existing, threatened or pending dispute involving GBNC and any of its employees, and there is no arrangement between GBNC and any trade union or organization representing any such employees.

???????????????????????????GBNC??????? , ??????GBNC??????????????????

12.3 GBNC's employment of its employees did not and does not infringe or conflict with or result in any breach of or constitute a default under any contract to which the relevant employee is a party (including without limitation any agreement between the relevant employee and any of his / her ex-employers).

GBNC???????????????????????????????(???????????????????)?

12.4 GBNC has made up-to-date social insurance contributions in respect of all of its employees in accordance with PRC law and regulations.

GBNC????????????????????????????????

12.5 GBNC has complied with all applicable PRC labour law and regulations in respect of each of its employees and none of them will have any claim against GBNC in respect of his/her employment by GBNC.

GBNC?????????????,??????????????GBNC??????

13. Environmental ????

13.1 GBNC has at all times complied in all respects with all PRC environmental laws, regulations and official guidelines and GBNC has not received any notice, warning or communication of any kind stating, alleging, suggesting or otherwise indicating that a breach of any PRC environmental laws, regulations or official guidelines has occurred or is threatened .

GBNC????????????????????,??????????????????????????????????????????????????????????????????????

13.2 GBNC has applied for, obtained and complied fully with all permits, licences, authorisations, consents and approvals required by any PRC environmental laws, regulations or official guidelines (" Environmental Licences ") in respect of its business or assets. There are no circumstances which could lead to the withdrawal or modification of any Environmental Licence or to the shortening of the term of any of them.

GBNC????????????????????????????????????????????????(“?????”)??????????GBNC????????????????????



36



13.3 GBNC has no grounds to believe or suspect and does not believe or suspect that there are any actions, claims, proceedings, losses, expenses or other liabilities (whether actual or potential) in respect of any PRC environmental laws, regulations or official guidelines or the terms of any Environmental Licence for which GBNC or any of its directors, officers or employees is or may be held to be liable in relation to its assets or the conduct of its business.

GBNC?????????,??????????,GBNC????????????????????????????????????????????????????????????(?????????)?????????

13.4 GBNC has no grounds to believe or suspect and does not believe or suspect that expenditure (other than in respect of routine maintenance) will be required in relation to GBNC’s assets or the conduct of GBNC’s business in order to ensure future compliance with any PRC environmental laws, regulations or official guidelines and/or Environmental Licences including (but without limitation) any requirements expressed to come into effect at a future date.

GBNC?????????,??????????,GBNC???????(????????)???????????????????????/?????????,??(????)???????????????????

14. Property ???

14.1 The “Properties” referred to in this Section 14 include all the real properties owned, occupied or used by GBNC in connection with its business and are so occupied or used by right of ownership or under lease the terms of which permit such occupation or use. For the purpose of this Section 14, Properties also include light poles, telegraph poles, walls or roofs of buildings, or any other structures to which the equipment and facilities of GBNC are put on or attached to.

??14???????????GBNC????????????????????? , ??????????????????????????????????14????,?????????????????????????????GBNC??????????

14.2 GBNC has a good and marketable title to, is the legal and beneficial owner and has exclusive and unfettered possession of, the Properties owned by GBNC

GBNC????????????? , ?????????????

14.3 The Properties owned by GBNC are not subject to any restrictive covenants, stipulations, easements, rights, privileges, wayleaves, licences, grants, restrictions, or other such rights vested in third parties.

GBNC????????????????????????????????????????????????????




37



14.4 All requisite licences, certificates and authorities necessary for the existing user of the Properties have been duly obtained and are in full force, validity and effect and all covenants, restrictions, stipulations, conditions and other terms affecting the Properties have been observed, performed and complied with in all respects and there are no circumstances which would entitle or require any person to exercise restrict or terminate the continued possession or occupation of any of the Properties.

?????????????????????????????????GBNC???????????????????????????,????????????????????????????

14.5 Each of the lease contracts relating to the Properties leased by GBNC is valid and subsisting and has in no way become void or voidable; all covenants, obligations, conditions or restrictions imposed upon GBNC under the lease contracts have been duly and promptly observed and performed. All necessary approvals, consents, authorisations and permits for the renting of the Properties leased by GBNC have been obtained and are valid and subsisting.

GBNC???????????????????????GBNC?????????????????????????????GBNC????????????????????????

14.6 All rent and other charges payable under the lease contracts have been promptly paid as and when due.

GBNC ???????????? ?? ???????? .

14.7 The parties to the lease contracts to which GBNC is a party have observed and performed all the terms and conditions therein and there are no disputes or outstanding or expected claims in these contracts and there are no circumstances giving rise to such disputes or claims.

GBNC??????????????????????????? , ????????????????????????

14.8 GBNC has the legal right to occupy each of the Properties leased by GBNC upon the terms and conditions of the lease contracts. Each of the Properties leased by GBNC is being used for lawful purposes, which are permitted by the relevant lease contracts and the actual occupation has not violated any relevant land, construction or user regulations applicable to the Properties leased by GBNC.

GBNC????????????????? . ,GBNC????????????????????? GBNC?????????????????????????????????

14.9 Since commencement of the term in respect of the Properties leased by GBNC, GBNC has enjoyed uninterrupted use of the Properties leased by it and the terms of the lease contracts are fully enforceable by GBNC against the relevant landlord.

????????,GBNC??????????????,????????????????????

14.10 All the terms of the tenancy are set out in the lease contracts and the terms thereof have not been varied, modified, amended or supplemented verbally or by means of supplemental agreement(s) or correspondences between the landlord and GBNC or otherwise.

???????????????????GBNC????????????????????????????????



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14.11 The relevant landlord to the lease contracts has the full right, power and capacity to enter into such contracts with GBNC and all governmental or other approvals, consents and authorisations, registrations, filings and stampings in connection with the execution, legality, validity and enforceability of the lease contracts have been obtained and effected and the same are in full force and effect.

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14.12 There are no closure, demolition, clearance orders, enforcement notices, stop notices or other orders of any governmental or local authority or other body affecting the Properties, nor are there any circumstances likely to lead to any being made.

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