Document:

exv10w2

 

Exhibit 10.2

Cardica, Inc.

2005 Equity Incentive Plan

Adopted by the Board of Directors: October 13, 2005

Approved by the Stockholders: December 27, 2005

As Amended by the Board of Directors: September 29, 2006

Approved by the Stockholders: November 8, 2006

Termination Date: October 12, 2015

1. General.

     (a) Eligible Stock Award Recipients. The persons eligible to receive Stock Awards are
Employees, Directors and Consultants.

     (b) Available Stock Awards. The Plan provides for the grant of the following Stock Awards:
(i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) Stock Purchase Awards, (iv)
Stock Bonus Awards, (v) Stock Appreciation Rights, (vi) Stock Unit Awards, and (vii) Other Stock
Awards.

     (c) Purpose. The Company, by means of the Plan, seeks to secure and retain the services of
the group of persons eligible to receive Stock Awards as set forth in Section 1(a), to provide
incentives for such persons to exert maximum efforts for the success of the Company and any
Affiliate and to provide a means by which such eligible recipients may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of Stock Awards.

2. Definitions.

     As used in the Plan, the following definitions shall apply to the capitalized terms indicated
below:

     (a) “Affiliate” means (i) any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, provided each corporation in the unbroken chain (other than
the Company) owns, at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other corporations in such
chain, and (ii) any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other corporations in such
chain. The Board shall have the authority to determine (i) the time or times at which the
ownership tests are applied, and (ii) whether “Affiliate” includes entities other than corporations
within the foregoing definition.

     (b) “Board” means the Board of Directors of the Company.

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     (c) “Capitalization Adjustment” has the meaning ascribed to that term in Section 10(a).

     (d) “Cause” means, with respect to a Participant, the occurrence of any of the following: (i)
such Participant’s commission of any felony or any crime involving fraud, dishonesty or moral
turpitude under the laws of the United States or any state thereof; (ii) such Participant’s
attempted commission of, or participation in, a fraud or act of dishonesty against the Company;
(iii) such Participant’s intentional, material violation of any material contract or agreement
between the Participant and the Company or any statutory duty owed to the Company; (iv) such
Participant’s unauthorized use or disclosure of the Company’s confidential information or trade
secrets; or (v) such Participant’s gross misconduct. The determination that a termination is for
Cause shall be made by the Company in its sole discretion. Any determination by the Company that
the Continuous Service of a Participant was terminated with or without Cause for the purposes of
outstanding Stock Awards held by such Participant shall have no effect upon any determination of
the rights or obligations of the Company or such Participant for any other purpose.

     (e) “Change in Control” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:

          (i) any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the
Company representing more than fifty percent (50%) of the combined voting power of the Company’s
then outstanding securities other than by virtue of a merger, consolidation or similar transaction.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of
the acquisition of securities of the Company by an investor, any affiliate thereof or any other
Exchange Act Person from the Company in a transaction or series of related transactions the primary
purpose of which is to obtain financing for the Company through the issuance of equity securities
or (B) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”)
exceeds the designated percentage threshold of the outstanding voting securities as a result of a
repurchase or other acquisition of voting securities by the Company reducing the number of shares
outstanding, provided that if a Change in Control would occur (but for the operation of this
sentence) as a result of the acquisition of voting securities by the Company, and after such share
acquisition, the Subject Person becomes the Owner of any additional voting securities that,
assuming the repurchase or other acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the designated percentage threshold,
then a Change in Control shall be deemed to occur;

          (ii) there is consummated a merger, consolidation or similar transaction involving (directly
or indirectly) the Company and, immediately after the consummation of such merger, consolidation or
similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly
or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%)
of the combined outstanding voting power of the surviving Entity in such merger, consolidation or
similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power
of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each
case in substantially the same proportions as their

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Ownership of the outstanding voting securities of the Company immediately prior to such
transaction;

          (iii) the stockholders of the Company approve or the Board approves a plan of complete
dissolution or liquidation of the Company, or a complete dissolution or liquidation of the Company
shall otherwise occur;

          (iv) there is consummated a sale, lease, exclusive license or other disposition of all or
substantially all of the consolidated assets of the Company and its Subsidiaries, other than a
sale, lease, license or other disposition of all or substantially all of the consolidated assets of
the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting
power of the voting securities of which are Owned by stockholders of the Company in substantially
the same proportions as their Ownership of the outstanding voting securities of the Company
immediately prior to such sale, lease, license or other disposition; or

          (v) individuals who, on the date this Plan is adopted by the Board, are members of the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of
the Board; provided, however, that if the appointment or election (or nomination for election) of
any new Board member was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan, be considered as a
member of the Incumbent Board.

     The term Change in Control shall not include a sale of assets, merger or other transaction
effected exclusively for the purpose of changing the domicile of the Company.

     Notwithstanding the foregoing or any other provision of this Plan, the definition of Change in
Control (or any analogous term) in an individual written agreement between the Company or any
Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards
subject to such agreement; provided, however, that if no definition of Change in Control or any
analogous term is set forth in such an individual written agreement, the foregoing definition shall
apply.

     (f) “Code” means the Internal Revenue Code of 1986, as amended.

     (g) “Committee” means a committee of one (1) or more members of the Board to whom authority
has been delegated by the Board in accordance with Section 3(c).

     (h) “Common Stock” means the common stock of the Company.

     (i) “Company” means Cardica, Inc., a Delaware corporation.

     (j) “Consultant” means any person, including an advisor, who is (i) engaged by the Company or
an Affiliate to render consulting or advisory services and is compensated for such services, or
(ii) serving as a member of the Board of Directors of an Affiliate and is compensated for such
services. However, service solely as a Director, or payment of a fee for such service, shall not
cause a Director to be considered a “Consultant” for purposes of the Plan.

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     (k) “Continuous Service” means that the Participant’s service with the Company or an
Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated. A
change in the capacity in which the Participant renders service to the Company or an Affiliate as
an Employee, Consultant or Director or a change in the entity for which the Participant renders
such service, provided that there is no interruption or termination of the Participant’s service
with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service; provided,
however, if the corporation for which a Participant is rendering service ceases to qualify as an
Affiliate, as determined by the Board in its sole discretion, such Participant’s Continuous Service
shall be considered to have terminated on the date such corporation ceases to qualify as an
Affiliate. For example, a change in status from an employee of the Company to a consultant of an
Affiliate or to a Director shall not constitute an interruption of Continuous Service. To the
extent permitted by law, the Board or the chief executive officer of the Company, in that party’s
sole discretion, may determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by that party, including sick leave, military leave or any
other personal leave. Notwithstanding the foregoing, a leave of absence shall be treated as
Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided
in the Company’s leave of absence policy or in the written terms of the Participant’s leave of
absence.

     (l) “Corporate Transaction” means the occurrence, in a single transaction or in a series of
related transactions, of any one or more of the following events:

          (i) a sale or other disposition of all or substantially all, as determined by the Board in its
sole discretion, of the consolidated assets of the Company and its Subsidiaries;

          (ii) a sale or other disposition of at least ninety percent (90%) of the outstanding
securities of the Company;

          (iii) the consummation of a merger, consolidation or similar transaction following which the
Company is not the surviving corporation; or

          (iv) the consummation of a merger, consolidation or similar transaction following which the
Company is the surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of
the merger, consolidation or similar transaction into other property, whether in the form of
securities, cash or otherwise.

     (m) “Covered Employee” means the chief executive officer and the four (4) other highest
compensated officers of the Company for whom total compensation is required to be reported to
stockholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.

     (n) “Director” means a member of the Board.

     (o) “Disability” means the permanent and total disability of a person within the meaning of
Section 22(e)(3) of the Code.

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     (p) “Employee” means any person employed by the Company or an Affiliate. However, service
solely as a Director, or payment of a fee for such services, shall not cause a Director to be
considered an “Employee” for purposes of the Plan.

     (q) “Entity” means a corporation, partnership or other entity.

     (r) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (s) “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include
(i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or
any Subsidiary of the Company or any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter
temporarily holding securities pursuant to an offering of such securities, (iv) an Entity Owned,
directly or indirectly, by the stockholders of the Company in substantially the same proportions as
their Ownership of stock of the Company; or (v) any natural person, Entity or “group” (within the
meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the effective date of the Plan
as set forth in Section 13, is the Owner, directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the combined voting power of the Company’s then
outstanding securities.

     (t) “Fair Market Value” means, as of any date, the value of the Common Stock determined as
follows:

          (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq
Global Market (formerly the Nasdaq National Market) or the Nasdaq Capital Market (formerly the
Nasdaq SmallCap Market), the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of trading in the Common
Stock) on the date in question, as reported in The Wall Street Journal or such other source as the
Board deems reliable. Unless otherwise provided by the Board, if there is no closing sales price
(or closing bid if no sales were reported) for the Common Stock on the date in question, then the
Fair Market Value shall be the closing sales price (or closing bid if no sales were reported) on
the last preceding date for which such quotation exists.

          (ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be
determined by the Board in good faith.

     (u) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

     (v) “IPO Date” means the date of the underwriting agreement between the Company and the
underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the
Common Stock is priced for the initial public offering.

     (w) “Non-Employee Director” means a Director who either (i) is not a current employee or
officer of the Company or an Affiliate, does not receive compensation, either

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directly or indirectly, from the Company or an Affiliate for services rendered as a consultant
or in any capacity other than as a Director (except for an amount as to which disclosure would not
be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
(“Regulation S-K”)), does not possess an interest in any other transaction for which disclosure
would be required under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or
(ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3.

     (x) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock
Option.

     (y) “Officer” means a person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder.

     (z) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares
of Common Stock granted pursuant to the Plan.

     (aa) “Option Agreement” means a written agreement between the Company and an Optionholder
evidencing the terms and conditions of an Option grant. Each Option Agreement shall be subject to
the terms and conditions of the Plan.

     (bb) “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Option.

     (cc) “Other Stock Award” means an award based in whole or in part by reference to the Common
Stock which is granted pursuant to the terms and conditions of Section 7(f).

     (dd) “Other Stock Award Agreement” means a written agreement between the Company and a holder
of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant. Each
Other Stock Award Agreement shall be subject to the terms and conditions of the Plan.

     (ee) “Outside Director” means a Director who either (i) is not a current employee of the
Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated
under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated
corporation” who receives compensation for prior services (other than benefits under a
tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or
an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliated
corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is
otherwise considered an “outside director” for purposes of Section 162(m) of the Code.

     (ff) “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to
have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or
Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power, which includes the power to vote or to direct the voting,
with respect to such securities.

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     (gg) “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if
applicable, such other person who holds an outstanding Stock Award.

     (hh) “Performance Criteria” means the one or more criteria that the Board shall select for
purposes of establishing the Performance Goals for a Performance Period. The Performance Criteria
that shall be used to establish such Performance Goals may be based on any one of, or combination
of, the following: (i) earnings per share; (ii) earnings before interest, taxes and depreciation;
(iii) earnings before interest, taxes, depreciation and amortization (EBITDA); (iv) net earnings;
(v) return on equity; (vi) return on assets, investment, or capital employed; (vii) operating
margin; (viii) gross margin; (ix) operating income; (x) net income (before or after taxes); (xi)
net operating income; (xii) net operating income after tax; (xiii) pre- and after-tax income; (xiv)
pre-tax profit; (xv) operating cash flow; (xvi) sales or revenue targets; (xvii) increases in
revenue or product revenue; (xviii) expenses and cost reduction goals; (xix) improvement in or
attainment of expense levels; (xx) improvement in or attainment of working capital levels; (xxi)
economic value added; (xxii) market share; (xxiii) cash flow; (xxiv) cash flow per share; (xxv)
share price performance; (xxvi) debt reduction; (xxvii) implementation or completion of projects or
processes; (xxviii) customer satisfaction; (xxix) total stockholder return; (xxx) stockholders’
equity; and (xxxi) other measures of performance selected by the Board. Partial achievement of the
specified criteria may result in the payment or vesting corresponding to the degree of achievement
as specified in the Stock Award Agreement. The Board shall, in its sole discretion, define the
manner of calculating the Performance Criteria it selects to use for such Performance Period.

     (ii) “Performance Goals” means, for a Performance Period, the one or more goals established by
the Board for the Performance Period based upon the Performance Criteria. Performance Goals may be
based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates,
or business segments, and in either absolute terms or relative to the performance of one or more
comparable companies or a relevant index. The Board is authorized to make adjustments in the
method of calculating the attainment of Performance Goals for a Performance Period as follows: (i)
to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects,
as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iii) to exclude
the effects of changes to generally accepted accounting standards required by the Financial
Accounting Standards Board; (iv) to exclude the effects of any statutory adjustments to corporate
tax rates; and (v) to exclude the effects of any “extraordinary items” as determined under
generally accepted accounting principles. The Board also retains the discretion to reduce or
eliminate the compensation or economic benefit due upon attainment of Performance Goals.

     (jj) “Performance Period” means the one or more periods of time, which may be of varying and
overlapping durations, as the Committee may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a Participant’s right to and the
payment of a Stock Award.

     (kk) “Performance Stock Award” means an award of shares of Common Stock which is granted
pursuant to the terms and conditions of Section 7(e).

     (ll) “Plan” means this Cardica, Inc. 2005 Equity Incentive Plan.

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     (mm) “Prior Plan” means the Company’s 1997 Equity Incentive Plan in effect immediately prior
to the effective date of the Plan as set forth in Section 13.

     (nn) “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule
16b-3, as in effect from time to time.

     (oo) “Securities Act” means the Securities Act of 1933, as amended.

     (pp) “Stock Appreciation Right” means a right to receive the appreciation on Common Stock that
is granted pursuant to the terms and conditions of Section 7(d).

     (qq) “Stock Appreciation Right Agreement” means a written agreement between the Company and a
holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation
Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions
of the Plan.

     (rr) “Stock Award” means any right granted under the Plan, including an Option, a Stock
Purchase Award, Stock Bonus Award, a Stock Appreciation Right, a Stock Unit Award, Performance
Stock Award, or any Other Stock Award.

     (ss) “Stock Award Agreement” means a written agreement between the Company and a Participant
evidencing the terms and conditions of a Stock Award grant. Each Stock Award Agreement shall be
subject to the terms and conditions of the Plan.

     (tt) “Stock Bonus Award” means an award of shares of Common Stock which is granted pursuant to
the terms and conditions of 
Section 7(b).

     (uu) “Stock Bonus Award Agreement” means a written agreement between the Company and a holder
of a Stock Bonus Award evidencing the terms and conditions of a Stock Bonus Award grant. Each
Stock Bonus Award Agreement shall be subject to the terms and conditions of the Plan.

     (vv) “Stock Purchase Award” means an award of shares of Common Stock which is granted pursuant
to the terms and conditions of Section 7(a).

     (ww) “Stock Purchase Award Agreement” means a written agreement between the Company and a
holder of a Stock Purchase Award evidencing the terms and conditions of a Stock Purchase Award
grant. Each Stock Purchase Award Agreement shall be subject to the terms and conditions of the
Plan.

     (xx) “Stock Unit Award” means a right to receive shares of Common Stock which is granted
pursuant to the terms and conditions of Section 7(c).

     (yy) “Stock Unit Award Agreement” means a written agreement between the Company and a holder
of a Stock Unit Award evidencing the terms and conditions of a Stock Unit Award grant. Each Stock
Unit Award Agreement shall be subject to the terms and conditions of the Plan.

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     (zz) “Subsidiary” means, with respect to the Company, (i) any corporation of which more than
fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether, at the time, stock
of any other class or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company,
and (ii) any partnership in which the Company has a direct or indirect interest (whether in the
form of voting or participation in profits or capital contribution) of more than fifty percent
(50%).

     (aaa) “Ten Percent Stockholder” means a person who Owns (or is deemed to Own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Affiliate.

3. Administration.

     (a) Administration by Board. The Board shall administer the Plan unless and until the Board
delegates administration of the Plan to a Committee, as provided in Section 3(c).

     (b) Powers of Board. The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:

          (i) To construe and interpret the Plan and Stock Awards granted under it, and to establish,
amend and revoke rules and regulations for its administration. The Board, in the exercise of this
power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

          (ii) To determine from time to time (1) which of the persons eligible under the Plan shall be
granted Stock Awards; (2) when and how each Stock Award shall be granted; (3) what type or
combination of types of Stock Award shall be granted; (4) the provisions of each Stock Award
granted (which need not be identical), including the time or times when a person shall be permitted
to receive cash or Common Stock pursuant to a Stock Award; and (5) the number of shares of Common
Stock with respect to which a Stock Award shall be granted to each such person.

          (iii) To accelerate the time at which a Stock Award may first be exercised or the time during
which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the
provisions in the Stock Award stating the time at which it may first be exercised or the time
during which it will vest.

          (iv) To amend the Plan or a Stock Award as provided in Section 11.

          (v) To terminate or suspend the Plan as provided in Section 12.

          (vi) Generally, to exercise such powers and to perform such acts as the Board deems necessary
or expedient to promote the best interests of the Company which are not in conflict with the
provisions of the Plan.

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          (vii) To adopt such procedures and sub-plans as are necessary or appropriate to permit
participation in the Plan by Employees who are foreign nationals or employed outside the United
States.

     (c) Delegation to Committee.

          (i) General. The Board may delegate some or all of the administration of the Plan to a
Committee or Committees. If administration is delegated to a Committee, the Committee shall have,
in connection with the administration of the Plan, the powers theretofore possessed by the Board
that have been delegated to the Committee, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or subcommittee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time
by the Board. The Board may retain the authority to concurrently administer the Plan with the
Committee and may, at any time, revest in the Board some or all of the powers previously delegated.

          (ii) Section 162(m) and Rule 16b-3 Compliance. In the sole discretion of the Board, the
Committee may consist solely of two (2) or more Outside Directors, in accordance with Section
162(m) of the Code, and/or solely of two or more Non-Employee Directors, in accordance with Rule
16b-3. In addition, the Board or the Committee, in its sole discretion, may (1) delegate to a
committee of one or more members of the Board who need not be Outside Directors the authority to
grant Stock Awards to eligible persons who are either (a) not then Covered Employees and are not
expected to be Covered Employees at the time of recognition of income resulting from such Stock
Award, or (b) not persons with respect to whom the Company wishes to comply with Section 162(m) of
the Code, and/or (2) delegate to a committee of one or more members of the Board who need not be
Non-Employee Directors the authority to grant Stock Awards to eligible persons who are not then
subject to Section 16 of the Exchange Act.

     (d) Delegation to an Officer. The Board may delegate to one or more Officers of the Company
the authority to do one or both of the following (i) designate Officers and Employees of the
Company or any of its Subsidiaries to be recipients of Stock Awards and the terms thereof, and (ii)
determine the number of shares of Common Stock to be subject to such Stock Awards granted to such
Officers and Employees; provided, however, that the Board resolutions regarding such delegation
shall specify the total number of shares of Common Stock that may be subject to the Stock Awards
granted by such Officer and that such Officer may not grant a Stock Award to himself or herself.
Notwithstanding anything to the contrary in this Section 3(d), the Board may not delegate to an
Officer authority to determine the Fair Market Value of the Common Stock pursuant to Section
2(t)(ii) above.

     (e) Effect of Board’s Decision. All determinations, interpretations and constructions made by
the Board in good faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.

     (f) Cancellation and Re-Grant of Stock Awards. Neither the Board nor any Committee shall have
the authority to: (i) reprice any outstanding Stock Awards under the Plan, or (ii) cancel and
re-grant any outstanding Stock Awards under the Plan, unless the stockholders

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of the Company have approved such an action within a twelve (12) month period preceding or
following such an event.

4. Shares Subject to the Plan.

     (a) Share Reserve. Subject to the provisions of Section 10(a) relating to Capitalization
Adjustments, the number of shares of Common Stock that may be issued pursuant to Stock Awards shall
not exceed, in the aggregate, 658,377 shares of Common Stock. Such share reserve consists of the
number of shares remaining available for future issuance under the Prior Plan as of immediately
prior to the termination of the Prior Plan, plus an additional 650,000 shares of Common Stock. In
addition, the share reserve shall be increased from time to time by the number of shares of Common
Stock that (i) are issuable pursuant to stock awards outstanding under the Company’s Prior Plan as
of the effective date of the Plan (as set forth in Section 13), and (ii) but for the termination of
the Prior Plan as of the effective date of the Plan, would otherwise have reverted to the share
reserve of the Prior Plan.

     (b) Reversion of Shares to the Share Reserve. If any Stock Award shall for any reason expire
or otherwise terminate, in whole or in part, without having been exercised in full, if any shares
of Common Stock issued to a Participant pursuant to a Stock Award are forfeited to or repurchased
by the Company, including, but not limited to, any repurchase or forfeiture caused by the failure
to meet a contingency or condition required for the vesting of such shares, or if any shares of
Common Stock are cancelled in accordance with the cancellation and regrant provisions of Section
3(f), then the shares of Common Stock not issued under such Stock Award, or forfeited to or
repurchased by the Company, shall revert to and again become available for issuance under the Plan.
If any shares subject to a Stock Award are not delivered to a Participant because such shares are
withheld for the payment of taxes or the Stock Award is exercised through a reduction of shares
subject to the Stock Award (i.e., “net exercised”), the number of shares that are not delivered to
the Participant shall remain available for issuance under the Plan. If the exercise price of any
Stock Award is satisfied by tendering shares of Common Stock held by the Participant (either by
actual delivery or attestation), then the number of shares so tendered shall remain available for
issuance under the Plan. Notwithstanding anything to the contrary in this Section 4(b), subject to
the provisions of Section 10(a) relating to Capitalization Adjustments the aggregate maximum number
of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options
shall be 658,377 shares of Common Stock plus the amount of any increase in the number of shares
that may be available for issuance pursuant to Stock Awards pursuant to Section 4(a).

     (c) Source of Shares. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the Company on the open
market.

5. Eligibility.

     (a) Eligibility for Specific Stock Awards. Incentive Stock Options may be granted only to
Employees. Stock Awards other than Incentive Stock Options may be granted to Employees, Directors
and Consultants.

11.

 

     (b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be granted an Incentive
Stock Option unless the exercise price of such Option is at least one hundred ten percent (110%) of
the Fair Market Value of the Common Stock on the date of grant and the Option is not exercisable
after the expiration of five (5) years from the date of grant.

     (c) Section 162(m) Limitation on Annual Grants. Subject to the provisions of Section 10(a)
relating to Capitalization Adjustments, at such time as the Company may be subject to the
applicable provisions of Section 162(m) of the Code, no Employee shall be eligible to be granted
Stock Awards whose value is determined by reference to an increase over an exercise or strike price
of at least one hundred percent (100%) of the Fair Market Value of the Common Stock on the date the
Stock Award is granted covering more than two hundred thousand (200,000) shares of Common Stock
during any calendar year.

     (d) Consultants. A Consultant shall not be eligible for the grant of a Stock Award if, at the
time of grant, a Form S-8 Registration Statement under the Securities Act (“Form S-8”) is not
available to register either the offer or the sale of the Company’s securities to such Consultant
because of the nature of the services that the Consultant is providing to the Company, because the
Consultant is not a natural person, or because of any other rule governing the use of Form S-8.

6. Option Provisions.

     Each Option shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. All Options shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate
certificate or certificates shall be issued for shares of Common Stock purchased on exercise of
each type of Option. The provisions of separate Options need not be identical; provided, however,
that each Option Agreement shall include (through incorporation of provisions hereof by reference
in the Option or otherwise) the substance of each of the following provisions:

     (a) Term. The Board shall determine the term of an Option; provided, however, that subject
to the provisions of Section 5(b) regarding Ten Percent Stockholders, no Incentive Stock Option
shall be exercisable after the expiration of ten (10) years from the date of grant.

     (b) Exercise Price of an Incentive Stock Option. Subject to the provisions of Section 5(b)
regarding Ten Percent Stockholders, the exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an Incentive Stock Option
may be granted with an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option in a manner
consistent with the provisions of Section 424(a) of the Code.

     (c) Exercise Price of a Nonstatutory Stock Option. The exercise price of each Nonstatutory
Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted.

12.

 

Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with an exercise
price lower than that set forth in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner consistent with the provisions of Section
424(a) of the Code.

     (d) Consideration. The purchase price of Common Stock acquired pursuant to the exercise of an
Option shall be paid, to the extent permitted by applicable law and as determined by the Board in
its sole discretion, by any combination of the methods of payment set forth below. The Board shall
have the authority to grant Options that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant Options that require the
consent of the Company to utilize a particular method of payment. The methods of payment permitted
by this Section 6(d) are:

          (i) by cash or check;

          (ii) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds; provided, however, that such program is not in violation of
the prohibition on the extension of credit to the Company’s executive officers and Directors under
Section 402 of the Sarbanes-Oxley Act of 2002, in the opinion of counsel acceptable to the Company;

          (iii) by delivery to the Company (either by actual delivery or attestation) of shares of
Common Stock;

          (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issued upon exercise by the largest whole number of shares with a Fair
Market Value that does not exceed the aggregate exercise price; provided, however, the Company
shall accept a cash or other payment from the Participant to the extent of any remaining balance of
the aggregate exercise price not satisfied by such reduction in the number of whole shares to be
issued; provided, however, shares of Common Stock will no longer be outstanding under an Option and
will not be exercisable thereafter to the extent that (i) shares are used to pay the exercise price
pursuant to the “net exercise,” (ii) shares are delivered to the Participant as a result of such
exercise, and (iii) shares are withheld to satisfy tax withholding obligations; or

          (v) according to a deferred payment or similar arrangement with the Optionholder; provided,
however, that interest shall compound at least annually and shall be charged at the minimum rate of
interest necessary to avoid (i) the imputation of interest income to the Company and compensation
income to the Optionholder under any applicable provisions of the Code, and (ii) the classification
of the Option as a liability for financial accounting purposes.

     (e) Transferability of Options. The Board may, in its sole discretion, impose such
limitations on the transferability of Options as the Board shall determine. In the absence of such

13.

 

a determination by the Board to the contrary, the following restrictions on the
transferability of Options shall apply:

          (i) Restrictions on Transfer. An Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder.

          (ii) Domestic Relations Orders. Notwithstanding the foregoing, an Option may be transferred
pursuant to a domestic relations order.

          (iii) Beneficiary Designation. Notwithstanding the foregoing, the Optionholder may, by
delivering written notice to the Company, in a form provided by or otherwise satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall
thereafter be the beneficiary of an Option with the right to exercise the Option and receive the
Common Stock or other consideration resulting from an Option exercise.

     (f) Vesting Generally. The total number of shares of Common Stock subject to an Option may
vest and therefore become exercisable in periodic installments that may or may not be equal. The
Option may be subject to such other terms and conditions on the time or times when it may or may
not be exercised (which may be based on performance or other criteria) as the Board may deem
appropriate. The vesting provisions of individual Options may vary. The provisions of this
Section 6(f) are subject to any Option provisions governing the minimum number of shares of Common
Stock as to which an Option may be exercised.

     (g) Termination of Continuous Service. In the event that an Optionholder’s Continuous Service
terminates (other than for Cause or upon the Optionholder’s death or Disability), the Optionholder
may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such
Option as of the date of termination of Continuous Service) but only within such period of time
ending on the earlier of (i) the date three (3) months following the termination of the
Optionholder’s Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination of Continuous Service, the Optionholder does not exercise his or her Option
within the time specified herein or in the Option Agreement (as applicable), the Option shall
terminate.

     (h) Extension of Termination Date. An Optionholder’s Option Agreement may provide that if the
exercise of the Option following the termination of the Optionholder’s Continuous Service (other
than upon the Optionholder’s death or Disability) would be prohibited at any time solely because
the issuance of shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the expiration of a period of
three (3) months after the termination of the Optionholder’s Continuous Service during which the
exercise of the Option would not be in violation of such registration requirements, or (ii) the
expiration of the term of the Option as set forth in the Option Agreement.

     (i) Disability of Optionholder. In the event that an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his

14.

 

or her Option (to the extent that the Optionholder was entitled to exercise such Option as of
the date of termination of Continuous Service), but only within such period of time ending on the
earlier of (i) the date twelve (12) months following such termination of Continuous Service (or
such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, after termination of Continuous
Service, the Optionholder does not exercise his or her Option within the time specified herein or
in the Option Agreement (as applicable), the Option shall terminate.

     (j) Death of Optionholder. In the event that (i) an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s death, or (ii) the Optionholder dies within the period
(if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous
Service for a reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s
estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a
person designated as the beneficiary of the Option upon the Optionholder’s death, but only within
the period ending on the earlier of (i) the date eighteen (18) months following the date of death
(or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the
term of such Option as set forth in the Option Agreement. If, after the Optionholder’s death, the
Option is not exercised within the time specified herein or in the Option Agreement (as
applicable), the Option shall terminate. If the Optionholder designates a third party beneficiary
of the Option in accordance with Section 6(e)(iii), then upon the death of the Optionholder such
designated beneficiary shall have the sole right to exercise the Option and receive the Common
Stock or other consideration resulting from the Option exercise.

     (k) Termination for Cause. In the event that an Optionholder’s Continuous Service is
terminated for Cause, the Option shall terminate immediately and cease to remain outstanding.

7. Provisions of Stock Awards other than Options.

     (a) Stock Purchase Awards. Each Stock Purchase Award Agreement shall be in such form and
shall contain such terms and conditions as the Board shall deem appropriate. At the Board’s
election, shares of Common Stock may be (i) held in book entry form subject to the Company’s
instructions until any restrictions relating to the Stock Purchase Award lapse; or (ii) evidenced
by a certificate, which certificate shall be held in such form and manner as determined by the
Board. The terms and conditions of Stock Purchase Award Agreements may change from time to time,
and the terms and conditions of separate Stock Purchase Award Agreements need not be identical;
provided, however, that each Stock Purchase Award Agreement shall include (through incorporation of
the provisions hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:

          (i) Purchase Price. At the time of the grant of a Stock Purchase Award, the Board will
determine the price to be paid by the Participant for each share subject to the Stock Purchase
Award. To the extent required by applicable law, the price to be paid by the Participant for each
share of the Stock Purchase Award will not be less than the par value of a share of Common Stock.

15.

 

          (ii) Consideration. At the time of the grant of a Stock Purchase Award, the Board will
determine the consideration permissible for the payment of the purchase price of the Stock Purchase
Award. The purchase price of Common Stock acquired pursuant to the Stock Purchase Award shall be
paid either: (i) in cash or by check at the time of purchase, (ii) at the discretion of the Board,
according to a deferred payment or other similar arrangement with the Participant, (iii) by past or
future services rendered to the Company or an Affiliate, or (iv) in any other form of legal
consideration that may be acceptable to the Board in its sole discretion and permissible under
applicable law.

          (iii) Vesting. Shares of Common Stock acquired under a Stock Purchase Award may be subject to
a share repurchase right or option in favor of the Company in accordance with a vesting schedule to
be determined by the Board.

          (iv) Termination of Participant’s Continuous Service. In the event that a Participant’s
Continuous Service terminates, the Company shall have the right, but not the obligation, to
repurchase or otherwise reacquire, any or all of the shares of Common Stock held by the Participant
that have not vested as of the date of termination under the terms of the Stock Purchase Award
Agreement. At the Board’s election, the price paid for all shares of Common Stock so repurchased
or reacquired by the Company may be at the lesser of: (i) the Fair Market Value on the relevant
date, or (ii) the Participant’s original cost for such shares. The Company shall not be required
to exercise its repurchase or reacquisition option until at least six (6) months (or such longer or
shorter period of time necessary to avoid classification of the Option as a liability for financial
accounting purposes) have elapsed following the Participant’s purchase of the shares of stock
acquired pursuant to the Stock Purchase Award unless otherwise determined by the Board or provided
in the Stock Purchase Award Agreement.

          (v) Transferability. Rights to purchase or receive shares of Common Stock granted under a
Stock Purchase Award shall be transferable by the Participant only upon such terms and conditions
as are set forth in the Stock Purchase Award Agreement, as the Board shall determine in its sole
discretion, and so long as Common Stock awarded under the Stock Purchase Award remains subject to
the terms of the Stock Purchase Award Agreement.

     (b) Stock Bonus Awards. Each Stock Bonus Award Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate. At the Board’s election,
shares of Common Stock may be (i) held in book entry form subject to the Company’s instructions
until any restrictions relating to the Stock Bonus Award lapse; or (ii) evidenced by a certificate,
which certificate shall be held in such form and manner as determined by the Board. The terms and
conditions of Stock Bonus Award Agreements may change from time to time, and the terms and
conditions of separate Stock Bonus Award Agreements need not be identical, provided, however, that
each Stock Bonus Award Agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the following provisions:

          (i) Consideration. A Stock Bonus Award may be awarded in consideration for (i) past or future
services rendered to the Company or an Affiliate, or (ii) any other form of legal consideration
that may be acceptable to the Board in its sole discretion and permissible under applicable law.

16.

 

          (ii) Vesting. Shares of Common Stock awarded under the Stock Bonus Award Agreement may be
subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the
Board.

          (iii) Termination of Participant’s Continuous Service. In the event a Participant’s
Continuous Service terminates, the Company may receive via a forfeiture condition, any or all of
the shares of Common Stock held by the Participant which have not vested as of the date of
termination of Continuous Service under the terms of the Stock Bonus Award Agreement.

          (iv) Transferability. Rights to acquire shares of Common Stock under the Stock Bonus Award
Agreement shall be transferable by the Participant only upon such terms and conditions as are set
forth in the Stock Bonus Award Agreement, as the Board shall determine in its sole discretion, so
long as Common Stock awarded under the Stock Bonus Award Agreement remains subject to the terms of
the Stock Bonus Award Agreement.

     (c) Stock Unit Awards. Each Stock Unit Award Agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of
Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate
Stock Unit Award Agreements need not be identical, provided, however, that each Stock Unit Award
Agreement shall include (through incorporation of the provisions hereof by reference in the
agreement or otherwise) the substance of each of the following provisions:

          (i) Consideration. At the time of grant of a Stock Unit Award, the Board will determine the
consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock
subject to the Stock Unit Award. The consideration to be paid (if any) by the Participant for each
share of Common Stock subject to a Stock Unit Award may be paid in any form of legal consideration
that may be acceptable to the Board in its sole discretion and permissible under applicable law.

          (ii) Vesting. At the time of the grant of a Stock Unit Award, the Board may impose such
restrictions or conditions to the vesting of the Stock Unit Award as it, in its sole discretion,
deems appropriate.

          (iii) Payment. A Stock Unit Award may be settled by the delivery of shares of Common Stock,
their cash equivalent, any combination thereof or in any other form of consideration, as determined
by the Board and contained in the Stock Unit Award Agreement.

          (iv) Additional Restrictions. At the time of the grant of a Stock Unit Award, the Board, as
it deems appropriate, may impose such restrictions or conditions that delay the delivery of the
shares of Common Stock (or their cash equivalent) subject to a Stock Unit Award after the vesting
of such Stock Unit Award.

          (v) Dividend Equivalents. Dividend equivalents may be credited in respect of shares of Common
Stock covered by a Stock Unit Award, as determined by the Board and contained in the Stock Unit
Award Agreement. At the sole discretion of the Board, such dividend equivalents may be converted
into additional shares of Common Stock covered by the

17.

 

Stock Unit Award in such manner as determined by the Board. Any additional shares covered by
the Stock Unit Award credited by reason of such dividend equivalents will be subject to all the
terms and conditions of the underlying Stock Unit Award Agreement to which they relate.

          (vi) Termination of Participant’s Continuous Service. Except as otherwise provided in the
applicable Stock Unit Award Agreement, such portion of the Stock Unit Award that has not vested
will be forfeited upon the Participant’s termination of Continuous Service.

     (d) Stock Appreciation Rights. Each Stock Appreciation Right Agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate. The terms and
conditions of Stock Appreciation Right Agreements may change from time to time, and the terms and
conditions of separate Stock Appreciation Right Agreements need not be identical; provided,
however, that each Stock Appreciation Right Agreement shall include (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:

          (i) Strike Price and Calculation of Appreciation. Each Stock Appreciation Right will be
denominated in shares of Common Stock equivalents. The appreciation distribution payable on the
exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of
(i) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right)
of a number of shares of Common Stock equal to the number of share of Common Stock equivalents in
which the Participant is vested under such Stock Appreciation Right, and with respect to which the
Participant is exercising the Stock Appreciation Right on such date, over (ii) an amount (the
strike price) that will be determined by the Board at the time of grant of the Stock Appreciation
Right.

          (ii) Vesting. At the time of the grant of a Stock Appreciation Right, the Board may impose
such restrictions or conditions to the vesting of such Stock Appreciation Right as it, in its sole
discretion, deems appropriate.

          (iii) Exercise. To exercise any outstanding Stock Appreciation Right, the Participant must
provide written notice of exercise to the Company in compliance with the provisions of the Stock
Appreciation Right Agreement evidencing such Stock Appreciation Right.

          (iv) Payment. The appreciation distribution in respect to a Stock Appreciation Right may be
paid in Common Stock, in cash, in any combination of the two or in any other form of consideration,
as determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such
Stock Appreciation Right.

          (v) Termination of Continuous Service. In the event that a Participant’s Continuous Service
terminates, the Participant may exercise his or her Stock Appreciation Right (to the extent that
the Participant was entitled to exercise such Stock Appreciation Right as of the date of
termination) but only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Participant’s Continuous Service (or such longer or shorter
period specified in the Stock Appreciation Right Agreement), or (ii) the expiration of the term of
the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If,

18.

 

after termination, the Participant does not exercise his or her Stock Appreciation Right
within the time specified herein or in the Stock Appreciation Right Agreement (as applicable), the
Stock Appreciation Right shall terminate.

     (e) Performance Stock Awards. A Performance Stock Award is any Stock Award that may be
granted, may vest, or may be exercised based upon service conditions, upon the attainment during a
Performance Period of certain Performance Goals, or both. The length of any Performance Period,
the Performance Goals to be achieved during the Performance Period, and the measure of whether and
to what degree such Performance Goals have been attained shall be conclusively determined by the
Board in its sole discretion. The maximum benefit to be received by any individual in any calendar
year attributable to Performance Stock Awards shall not exceed the value of two hundred thousand
(200,000) shares of Common Stock.

     (f) Other Stock Awards. Other forms of Stock Awards valued in whole or in part by reference
to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards
provided for under Section 6 and the preceding provisions of this Section 7. Subject to the
provisions of the Plan, the Board shall have sole and complete authority to determine the persons
to whom and the time or times at which such Other Stock Awards will be granted, the number of
shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock
Awards and all other terms and conditions of such Other Stock Awards.

8. Covenants of the Company.

     (a) Availability of Shares. During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of Common Stock required to satisfy such Stock Awards.

     (b) Securities Law Compliance. The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be required to grant
Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards;
provided, however, that this undertaking shall not require the Company to register under the
Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority that counsel for the Company deems necessary for the
lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and
until such authority is obtained.

9. Miscellaneous.

     (a) Use of Proceeds. Proceeds from the sale of shares of Common Stock pursuant to Stock
Awards shall constitute general funds of the Company.

     (b) Stockholder Rights. No Participant shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award
unless and until such Participant has satisfied all requirements for exercise of the Stock Award
pursuant to its terms.

19.

 

     (c) No Employment or Other Service Rights. Nothing in the Plan, any Stock Award Agreement or
other instrument executed thereunder or any Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in the capacity in
effect at the time the Stock Award was granted or shall affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or without notice and with or without
cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with
the Company or an Affiliate, or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of the state in which
the Company or the Affiliate is incorporated, as the case may be.

     (d) Incentive Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionholder during any calendar year (under all
plans of the Company and any Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof that exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of
the applicable Option Agreement(s).

     (e) Investment Assurances. The Company may require a Participant, as a condition of
exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances
satisfactory to the Company as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative reasonably satisfactory to the Company
who is knowledgeable and experienced in financial and business matters and that he or she is
capable of evaluating, alone or together with the purchaser representative, the merits and risks of
exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating
that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own
account and not with any present intention of selling or otherwise distributing the Common Stock.
The foregoing requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or acquisition of Common Stock
under the Stock Award has been registered under a then currently effective registration statement
under the Securities Act, or (ii) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may, upon advice of counsel to the Company, place legends
on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order
to comply with applicable securities laws, including, but not limited to, legends restricting the
transfer of the Common Stock.

     (f) Withholding Obligations. To the extent provided by the terms of a Stock Award Agreement,
the Company may, in its sole discretion, satisfy any federal, state or local tax withholding
obligation relating to a Stock Award by any of the following means (in addition to the Company’s
right to withhold from any compensation paid to the Participant by the Company) or by a combination
of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of
Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in
connection with the Stock Award; provided, however, that no shares of Common Stock are withheld
with a value exceeding the minimum amount of tax required to be withheld by law (or such lower
amount as may be necessary to avoid classification of the

20.

 

Stock Award as a liability for financial accounting purposes); or (iii) by such other method
as may be set forth in the Stock Award Agreement.

     (g) Electronic Delivery. Any reference herein to a “written” agreement or document shall
include any agreement or document delivered electronically or posted on the Company’s intranet.

10. Adjustments upon Changes in Common Stock; Corporate Transactions.

     (a) Capitalization Adjustments. If any change is made in, or other events occur with respect
to, the Common Stock subject to the Plan or subject to any Stock Award after the effective date of
the Plan set forth in Section 13 without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend
in property other than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the receipt of
consideration by the Company (each a “Capitalization Adjustment”)), the Board shall appropriately
adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section
4(a), (ii) the class(es) and number of securities subject to each outstanding stock award under the
Prior Plan that are added from time to time to the share reserve under the Plan pursuant to Section
4(a), (iii) the class(es) and maximum number of securities that may be issued pursuant to the
exercise of Incentive Stock Options pursuant to Section 4(b), (iv) the class(es) and maximum number
of securities that may be awarded to any person pursuant to Sections 5(c) and 7(e), and (v) the
class(es) and number of securities and price per share of stock subject to outstanding Stock
Awards. The Board shall make such adjustments, and its determination shall be final, binding and
conclusive. (Notwithstanding the foregoing, the conversion of any convertible securities of the
Company shall not be treated as a transaction “without receipt of consideration” by the Company.)

     (b) Dissolution or Liquidation. In the event of a dissolution or liquidation of the Company,
all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares
of Common Stock not subject to the Company’s right of repurchase) shall terminate immediately prior
to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the
Company’s repurchase option may be repurchased by the Company notwithstanding the fact that the
holder of such Stock Award is providing Continuous Service, provided, however, that the Board may,
in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or
no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously
expired or terminated) before the dissolution or liquidation is completed but contingent on its
completion.

     (c) Corporate Transaction. The following provisions shall apply to Stock Awards in the event
of a Corporate Transaction unless otherwise provided in a written agreement between the Company or
any Affiliate and the holder of the Stock Award:

          (i) Stock Awards May Be Assumed. In the event of a Corporate Transaction, any surviving
corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company)
may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar
stock awards for Stock Awards outstanding under the

21.

 

Plan (including but not limited to, awards to acquire the same consideration paid to the
stockholders of the Company pursuant to the Corporate Transaction), and any reacquisition or
repurchase rights held by the Company in respect of Common Stock issued pursuant to Stock Awards
may be assigned by the Company to the successor of the Company (or the successor’s parent company,
if any), in connection with such Corporate Transaction. A surviving corporation or acquiring
corporation may choose to assume or continue only a portion of a Stock Award or substitute a
similar stock award for only a portion of a Stock Award. The terms of any assumption, continuation
or substitution shall be set by the Board in accordance with the provisions of Section 3(b).

          (ii) Stock Awards Held by Current Participants. In the event of a Corporate Transaction in
which the surviving corporation or acquiring corporation (or its parent company) does not assume or
continue such outstanding Stock Awards or substitute similar stock awards for such outstanding
Stock Awards, then with respect to Stock Awards that have not been assumed, continued or
substituted and that are held by Participants whose Continuous Service has not terminated prior to
the effective time of the Corporate Transaction (referred to as the “Current Participants”), the
vesting of such Stock Awards (and, if applicable, the time at which such Stock Awards may be
exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in
full to a date prior to the effective time of such Corporate Transaction as the Board shall
determine (or, if the Board shall not determine such a date, to the date that is five (5) days
prior to the effective time of the Corporate Transaction), and such Stock Awards shall terminate if
not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and
any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall
lapse (contingent upon the effectiveness of the Corporate Transaction). No vested Stock Unit Award
shall terminate pursuant to this Section 10(c)(ii) without being settled by delivery of shares of
Common Stock, their cash equivalent, any combination thereof, or in any other form of
consideration, as determined by the Board, prior to the effective time of the Corporate
Transaction.

          (iii) Stock Awards Held by Former Participants. In the event of a Corporate Transaction in
which the surviving corporation or acquiring corporation (or its parent company) does not assume or
continue such outstanding Stock Awards or substitute similar stock awards for such outstanding
Stock Awards, then with respect to Stock Awards that have not been assumed, continued or
substituted and that are held by persons other than Current Participants, the vesting of such Stock
Awards (and, if applicable, the time at which such Stock Award may be exercised) shall not be
accelerated and such Stock Awards (other than a Stock Award consisting of vested and outstanding
shares of Common Stock not subject to the Company’s right of repurchase) shall terminate if not
exercised (if applicable) prior to the effective time of the Corporate Transaction; provided,
however, that any reacquisition or repurchase rights held by the Company with respect to such Stock
Awards shall not terminate and may continue to be exercised notwithstanding the Corporate
Transaction. No vested Stock Unit Award shall terminate pursuant to this Section 10(c)(iii)
without being settled by delivery of shares of Common Stock, their cash equivalent, any combination
thereof, or in any other form of consideration, as determined by the Board, prior to the effective
time of the Corporate Transaction.

22.

 

          (iv) Payment for Stock Awards in Lieu of Exercise. Notwithstanding the foregoing, in the
event a Stock Award will terminate if not exercised prior to the effective time of a Corporate
Transaction, the Board may provide, in its sole discretion, that the holder of such Stock Award may
not exercise such Stock Award but will receive a payment, in such form as may be determined by the
Board, equal in value to the excess, if any, of (i) the value of the property the holder of the
Stock Award would have received upon the exercise of the Stock Award, over (ii) any exercise price
payable by such holder in connection with such exercise.

     (d) Change in Control. A Stock Award may be subject to additional acceleration of vesting and
exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement
for such Stock Award or as may be provided in any other written agreement between the Company or
any Affiliate and the Participant. A Stock Award may vest as to all or any portion of the shares
subject to the Stock Award (i) immediately upon the occurrence of a Change in Control, whether or
not such Stock Award is assumed, continued, or substituted by a surviving or acquiring entity in
the Change in Control, or (ii) in the event a Participant’s Continuous Service is terminated,
actually or constructively, within a designated period following the occurrence of a Change in
Control. In the absence of such provisions, no such acceleration shall occur.

11. Amendment of the Plan and Stock Awards.

     (a) Amendment of Plan. Subject to the limitations, if any, of applicable law, the Board at
any time, and from time to time, may amend the Plan. However, except as provided in Section 10(a)
relating to Capitalization Adjustments, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary to satisfy applicable
law.

     (b) Stockholder Approval. The Board, in its sole discretion, may submit any other amendment
to the Plan for stockholder approval, including, but not limited to, amendments to the Plan
intended to satisfy the requirements of Section 162(m) of the Code and the regulations thereunder
regarding the exclusion of performance-based compensation from the limit on corporate deductibility
of compensation paid to Covered Employees.

     (c) Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide eligible Employees with the
maximum benefits provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.

     (d) No Impairment of Rights. Rights under any Stock Award granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent
of the affected Participant, and (ii) such Participant consents in writing.

     (e) Amendment of Stock Awards. The Board, at any time and from time to time, may amend the
terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms
more favorable than previously provided in the Stock Award

23.

 

Agreement, subject to any specified limits in the Plan that are not subject to Board
discretion; provided, however, that the rights under any Stock Award shall not be impaired by any
such amendment unless (i) the Company requests the consent of the affected Participant, and (ii)
such Participant consents in writing.

12. Termination or Suspension of the Plan.

     (a) Plan Term. The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on the day before the tenth (10th) anniversary of the earlier
of (i) the date the Plan is adopted by the Board, or (ii) the date the Plan is approved by the
stockholders of the Company. No Stock Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.

     (b) No Impairment of Rights. Suspension or termination of the Plan shall not impair rights
and obligations under any Stock Award granted while the Plan is in effect except with the written
consent of the affected Participant.

13. Effective Date of Plan.

     The Plan shall become effective on the IPO Date, but no Stock Award shall be exercised (or, in
the case of a Stock Purchase Award, Stock Bonus Award, Stock Unit Award, or Other Stock Award shall
be granted) unless and until the Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is adopted by the
Board.

14. Choice of Law.

     The law of the State of Delaware shall govern all questions concerning the construction,
validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.

24.exv10w8

 

Exhibit 10.8

TECHNICAL SERVICES AGREEMENT

By and Among

CHINACAST TECHNOLOGY (SHANGHAI) LIMITED

THE CCL SHAREHOLDERS

and

CHINACAST CO., LTD.

Dated as of November 15, 2000

 

 

     This TECHNICAL SERVICES AGREEMENT (“Agreement”) is entered into as of November 15, 2000, by
and among ChinaCast Technology (Shanghai) Limited, a wholly foreign-owned limited liability
enterprise organized and existing under the laws of the People’s Republic of China (“PRC”) (“CCT
Shanghai”); CHINACAST CO. LTD., a limited liability company organized and existing under the laws
of the PRC (“CCL”); and BEIJING COL NETWORK TECHNOLOGY CO., LTD, a limited liability company
organized and existing under the laws of the People’s Republic of China (“PRC”), (“Beijing Col”);
SHENZHEN ZHONGXUN TENG INVESTMENT DEVELOPMENT CO., LTD., a limited liability company organized and
existing under the laws of the PRC (“Shenzhen Zhongxun”); TIBET TIANTAI INVESTMENT MANAGEMENT CO.,
LTD., a limited liability company organized and existing under the laws of the PRC (“Tibet
Tiantai”) (Beijing Col, Shenzhen Zhongxun and Tibet Tiantai are referred to collectively as the
“CCL Shareholders”). CCL and CCT Shanghai are each individually referred to herein as a “Party” and
both are collectively referred to herein as the “Parties”.

RECITALS

     WHEREAS, CCL wishes to secure the assistance of CCT Shanghai to assist CCL in the
implementation of CCL’s Turbo 163, DDN Enhancement and Cablenet businesses in the PRC;

     AND WHEREAS, CCT Shanghai wishes to assist CCL to implement CCL’s Turbo 163, DDN Enhancement
and Cablenet businesses in the PRC

     NOW THEREFORE, in consideration of the foregoing and the mutual promises, covenants and
agreements contained in this Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are acknowledged expressly, the Parties hereby agree as follows:

ARTICLE I.     PROVISION OF SERVICES AND ANCILLARY EQUIPMENT

     Section 1.1     Services. CCT Shanghai will, during the term of this Agreement and to the
extent of CCL’s need, provide and CCL will take and pay for the Services set forth in Appendix A,
with respect to CCL’s Turbo 163 business, DDN Enhancement business and Cablenet business all as
contemplated in the Business Plan dated as of August, 2000. CCT Shanghai will provide the Services
solely in the capacity of an independent contractor and consultant to CCL. The General Manager of
CCL will retain all authority and responsibility to conduct the affairs of and to manage CCL. CCT
Shanghai may, at its option, assign any of its rights hereunder and/or delegate the performance of
the Services described in this Section 1.1 to a subcontractor or affiliate of CCT Shanghai,
provided that any such assignment, delegation, or subcontract will not relieve CCT Shanghai of its
obligations hereunder. CCL shall not assign this Agreement without the prior written approval of
CCT Shanghai.

 

 

     Section 1.2     Equipment. In connection with provision of the Services hereunder, CCT
Shanghai will supply to CCL for its use ancillary Equipment as set forth in Appendix A hereto
together with associated software and technical documentation. Such use of ancillary Equipment by
CCL will be without additional charge.

     Section 1.3     Obligation to Return Equipment. Upon the occurrence of any of the
following events in the determination of CCT Shanghai, CCL will promptly take all action to deliver
and return the Equipment and the related software and documentation in the possession of CCL to CCT
Shanghai, except to the extent CCT Shanghai has waived its right to the return of such Equipment as
contemplated in Section 2.3 hereof : (i) termination of this Agreement, or (ii) material breach by
CCL of this Agreement or the Pledge Agreement among certain shareholders of CCL and CCT Shanghai of
even date herewith (the “Pledge Agreement”). In the event CCL fails to promptly and fully return
the Equipment in good operating condition and the related software and documentation to CCT
Shanghai it its sole determination, such event shall be an equipment return default (“Equipment
Return Default”), and CCT Shanghai shall be entitled to immediately avail itself of any and all
legal actions and proceedings to recover the Equipment and/or to foreclose upon the Pledged
Collateral pursuant to the Pledge Agreement.

     Section 1.4     Rights to Use Equipment and Software. CCT Shanghai hereby grants to CCL
the non-exclusive, non-transferable right to use all Equipment and software provided by CCT
Shanghai under this Agreement solely in the conduct of CCL’s Turbo 163, DDN Enhancement and
Cablenet businesses.

     Section 1.5     Warranty. CCT Shanghai warrants that the Services will be provided in a
good and workmanlike manner, exercising that degree of skill, diligence, prudence and foresight
which would reasonably be expected from a fully skilled, experienced and competent contractor
and/or operator engaged in the same type of undertaking under the same or similar conditions in the
same or a similar location. CCL’s sole and exclusive remedy for breach of this warranty will be the
provision of replacement Services by CCT Shanghai. CCT Shanghai makes no other warranty, express or
implied, relating to the Services, ancillary Equipment, software, know how or other things
delivered under this Agreement.

ARTICLE II.     COMPENSATION

     Section 2.1     Compensation. As compensation for the performance of the Services,
including the provision of ancillary Equipment, CCL will pay to CCT Shanghai on the tenth business
day of each calendar month, in Renminbi and in immediately available funds in an account designated
by CCT Shanghai, service fees in an amount equal the difference between the total cash revenue CCL
has received in the preceding month and CCL’s cash paid out or allocated to pay for operating
expenses (including without limitation cost reimbursements and taxes as contemplated in Section 2.2
and 2,4), as set forth in Appendix B, for that preceding month in amounts not exceeding the
applicable monthly operating expenses budget in the current CCL business plan approved by the Board
of Directors of CCL (“Service Fee”). Any operating expense not set forth in Appendix B must be
approved by the Board of Directors prior to payment if such

3

 

operating expense is (i) not incurred in the ordinary course of business, (ii) a non-recurring
cost, or (iii) an expense that CCT Shanghai deems inappropriate to be paid as an operating expense.

     Section 2.2     Cost Reimbursement. CCL will, within 30 days of receipt of CCT Shanghai’s
invoice with reasonable supporting documentation, reimburse CCT Shanghai for all costs and fees
incurred in connection with the exportation, importation, shipping and delivery of the Equipment,
including, but not limited to, freight, customs duties, taxes, warehousing, and insurance costs.

     Section 2.3     CCT Shanghai Right to Decline Return of Equipment. CCT Shanghai may, from
time to time, subject only to applicable PRC law and to the terms of the Pledge Agreement, elect to
decline the return of any item of equipment (the “Transferred Equipment”) to CCL and cause
Relinquishment (as defined in the Pledge Agreement). Upon receipt of notice of Relinquishment (as
specified below), the CCL Shareholders shall assign, transfer and deliver to CCT Shanghai, or its
designated Affiliate (as defined in the Pledge Agreement) or third party, free from any interest of
the CCL Shareholders all of their respective right, title and interest in and to the corresponding
amount of Ownership Rights (as defined in the Pledge Agreement) to be transferred as set forth in
the notice of Relinquishment. The CCL Shareholders shall promptly take all actions to execute any
documents or instruments necessary to initiate and complete all proceedings and procedures required
to transfer their respective Ownership Rights. Such Relinquishment, once effected, shall terminate
CCL’s obligation under Section 1.3 above to return such Transferred Equipment to CCT Shanghai.

     CCT Shanghai will make such election by providing to CCL a written notice of Relinquishment
together with a calculation of the average of the replacement cost of the Transferred Equipment and
the original cost of such Transferred Equipment (such average being the “Cost of Transferred
Equipment”) together with a calculation of the number of shares in CCL which are of equal value to
such the Cost of Transferred Equipment, such calculation to be made by dividing the net asset value
of CCL (as determined by CCL’s accountants based on CCL’s books of the close of the most recent
calendar quarter increased by the Cost of Transferred Equipment), by the total number of Ownership
Certificates as of the close of the most recent calendar quarter. In the event CCL disputes in good
faith any of the foregoing calculations, CCT Shanghai may retain an internationally-recognized
independent accounting firm selected by CCT Shanghai to make such calculations and the Parties will
be bound by the calculations of such accounting firm. CCL will pay for the services of the
accounting firm if such firms binding calculations. are no more favorable to CCL than
CCT Shanghai’s calculations, which CCL challenged, otherwise, CCT Shanghai will pay for the
services of the accounting firm.

     Section 2.4     Taxes. CCL will pay all import duties, value-added taxes and business
taxes arising from the provision of Services and ancillary Equipment set forth in Appendix A.

4

 

ARTICLE III.     TERM

     This Agreement will be effective upon its execution by the Parties and will continue for a
term of twenty years, provided that CCT Shanghai may terminate this Agreement without cause by
giving CCL notice of termination no less than one year prior to the effective date of termination.

ARTICLE IV.     LIMITATIONS OF LIABILITY

     Section 4.1     Limitation of Liability. Notwithstanding anything to the contrary
contained in this Agreement, neither CCT Shanghai nor its shareholders, nor any of its or their
respective directors, officers, agents, or employees, nor any person or entity controlling any of
the forgoing will be liable to CCL for any claim arising under or in connection with this
Agreement except claims for injury or death caused to persons or damage to tangible personal
property to the extent caused by CCT Shanghai and except for claims based on CCT Shanghai’s gross
negligence or willful misconduct in the performance of its obligations hereunder. No act or
omission which may be the result of an error of judgment or mistake made in good faith will be
considered gross negligence or willful misconduct. Notwithstanding anything to the contrary
contained in this Agreement, CCL will have no right to recover indirect, special, incidental,
consequential, or punitive damages or damages for loss of profits that may result from any action
or inaction of CCT Shanghai in connection with this Agreement.

     Section 4.2     Force Majeure. Failure of either Party to perform any obligations
hereunder will be excused (except that any obligation to pay money will not be excused) to the
extent such failure is attributable to events which are beyond the control of the defaulting Party
including, without limitation, earthquakes, typhoons, flood, fire, war, or the action or inaction
of any governmental authority (events of “Force Majeure”). A Party claiming the event of Force
Majeure will notify the other Party within fifteen (15) days, explaining the nature of such event
of Force Majeure, the anticipated duration and actions required by the affected Party to correct
the deficiencies resulting from such event. Upon an event of Force Majeure, the Parties will
immediately consult with each other to find an equitable solution and will use commercially
reasonable efforts to mitigate the consequences caused by such event.

ARTICLE V.     ADMINISTRATION

     Section 5.1     Representative. Each Party will, by notice to the other Party, appoint one
individual who will represent the appointing Party in all matters relating to this Agreement.
Either Party may change its representative at any time by notice to the other Party.

     Section 5.2     Right to Inspect. CCL will have the right, at its reasonable request and
expense, to inspect any Service or ancillary Equipment provided under this Agreement and to inspect
any records kept by CCT Shanghai as required by this Agreement.

5

 

     Section 5.3     Employees. All personnel used by CCT Shanghai in the performance of this
Agreement will be employed or otherwise retained by CCT Shanghai and will not be deemed employees
of CCL. CCT Shanghai will be responsible for supervising such individuals, for paying all salaries
and benefits and for meeting all government liabilities with respect to such individuals.

     Section 5.4.     Exchange of Information and Confidentiality. The Parties will exchange
information as may be reasonably necessary to implement this Agreement. Each Party will maintain in
confidence and will use solely for the purposes of this Agreement all information disclosed by the
other Party in a writing marked “Confidential” or “Proprietary” provided that:

     a.     The receiving Party may disclose such information in compliance with any requirement of any
governmental authority, provided that the receiving Party uses best reasonable efforts to afford
the disclosing Party notice and an opportunity to object to such disclosure;

     b.     The receiving Party may disclose such information to its agents or employees who have a
need to know such information and who have agreed in writing to protect such information from
further disclosure on terms substantially similar to the terms of this Section 5.4; and

     c.     The receiving Party may disclose such information if such information has entered the
public domain (other than through the unauthorized disclosure of the receiving Party).

ARTICLE VI.     MISCELLANEOUS

     Section 6.1     Authority. Each of the Parties hereby represents and warrants to the other
Party that each has the power to execute and perform this Agreement; and that this Agreement upon
execution will constitute the valid, lawful, binding and enforceable obligations of each Party.

     Section 6.2     Compliance with Law. The Parties will comply with all laws in the
performance of this Agreement and their respective business activities. Without limiting the
foregoing, CCT Shanghai and CCL agree not to pay or promise to pay or give or promise to give
anything of value, either directly or indirectly, to an official of the Chinese or any other
government for the purpose of influencing an act or decision of any such government or its
officials in connection with the performance of this Agreement and their respective business
activities.

     Section 6.3     Relationship of Parties. The Parties will perform their obligations under
this Agreement as independent contractors. Nothing in this Agreement will render the Parties hereto
liable as partners, associates, or joint venturers or to create a partnership, joint venture or
association.

     Section 6.4     Governing Law; Dispute Resolution. This Agreement will be governed by, and
construed in accordance with, the laws of the PRC. The Parties will use

6

 

their best efforts to resolve all disputes arising in connection with this Agreement promptly
through friendly negotiations. In the event that no settlement is reached within thirty days
following notice by one Party to the other of the occurrence of a dispute, the dispute will, at the
request of either Party, be referred to and finally resolved by arbitration in Beijing at the China
International Economic and Trade Arbitration Commission (“CIETAC”) in accordance with its Rules
then in effect (which Rules are deemed to be incorporated by reference into this section). Such
arbitration will be conducted in the English and Chinese languages by a panel of three arbitrators.
Each of CCL and CCT Shanghai will appoint one arbitrator. The third arbitrators will be mutually
agreed upon by CCL and CCT Shanghai. In the event CCL and CCT Shanghai fail to agree within 20
days, the third arbitrator will be appointed by CIETAC pursuant to its Rules within 30 days from
the date of receipt of notice to make such appointment. If selected pursuant to the immediately
preceding sentence, the third arbitrator must be chosen from among the CIETAC panel of arbitrators
from one of the following countries: Australia, Canada, Germany, Hong Kong Japan, Singapore,
Sweden, Switzerland and the United States. The arbitrators will decide in their award the
allocation of costs, including the arbitrators’ fees and all other costs to which the dispute may
give rise. The award of the arbitrators will be final and without appeal. Any competent court may
enforce such award.

     Section 6.5     Language. This Agreement is written and executed in both the English and
Chinese languages, each of which will be of equal force and effect.

     Section 6.6     Amendments. This Agreement and its provisions may be amended, interpreted,
waived, discharged or terminated only by a writing signed by each of the Parties hereto.

     Section 6.7     Notices. All notices and other communications required or permitted
hereunder shall be in the English language, in writing and shall be (i) mailed by registered or
certified mail, postage prepaid; (ii) sent by facsimile or electronic mail with electronic
confirmation of receipt; or (iii) delivered by hand or by an internationally-recognized overnight
courier with written confirmation of receipt, addressed (a) if to a party hereto, at such Party’s
address set forth below, or at such other address as such Party shall have furnished to the other
Parties in writing:

	 	 	 
	If to ChinaCast Technology (Shanghai) Limited:
	Address:
	          	25/F Qiang Sheng Plaza
	 
	 	No. 145 Pu Jian Lu
	 
	 	Pu Dong
	 
	 	Shanghai 200127, China
	Attn:
	 	Mr. Luk Chung Po
	Tel:
	 	(86 21) 6864 4666
	Fax:
	 	(86 21) 5873 4554
	E-mail:
	 	terencel@direct163.com

7

 

	 	 	 
	If to CCL:
	Address:
	          	Unit B, 15/F., China Merchants Tower
	 
	 	No. 2 Dong Huan Nan Lu,
	 
	 	Chaoyang District
	 
	 	Beijing 100022, PRC
	Attn:
	 	Lu Ruifeng
	Tel:
	 	(86 10) 6566 7788
	Fax:
	 	(86 10) 6566 9374
	E-mail:
	 	rf.lu@direct 16 3 . com
	 
	 
	If to Beijing Col:
	Address:
	 	No. 48 (B), Baishiqiao Road
	 
	 	Beijing, PRC
	Attn:
	 	Du Wei
	Tel:

	Fax:

	E-mail:

	 
	If to Shenzhen Zhongxun:
	Address:
	 	Rm#1506, Haiyan Building
	 
	 	Jiabin Road, Luohu District,
	 
	 	Shenzhen, PRC
	Attn:
	 	Lu Ruifeng
	Tel:

	Fax:

	E-mail:
	 	rf.lu@direct163.com
	 
	If to Tibet Tiantai Investment:
	Address:
	 	No. 36, Sela Road
	 
	 	Lhasa, PRC
	Attn:
	 	Shi Yuqing Tel:
	Fax:

	E-mail:

Each such notice or other communication shall for all purposes of this Agreement be treated as
effective or having been given (x) in the case of personal delivery or delivery by facsimile or by
electronic mail, on the date of such delivery, (y) in the case of an internationally-recognized
overnight courier, on the fifth business day after the date when sent and (z) in the case of
mailing, on the tenth business day following that on which the piece of mail containing such
communication has been deposited in a regularly maintained receptacle for the deposit of mail,
addressed and mailed as aforesaid.

     Section 6.8     Further Assurances. CCT Shanghai and CCL each agree to execute and deliver
such additional documents and to take such additional actions as may be

8

 

necessary or appropriate to effect the provisions of this Agreement and all transactions
contemplated hereby.

     Section 6.9     Severability. If any provision of this Agreement or the application
thereof to any Party or circumstance will be held invalid or unenforceable to any extent, the
remainder of this Agreement and the application of such provision to other Parties or circumstances
will not be affected thereby and will be enforced to the greatest extent permitted by law.

     Section 6.10     No Third Party Beneficiary. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than the Parties hereto and their respective
permitted successors and assigns any rights, benefits, or obligations hereunder.

     Section 6.11     Remedies Cumulative. Subject to the limitations set forth in Article IV
hereof, the rights and remedies available under this Agreement or otherwise available will be
cumulative of all other rights and remedies and may be exercised successively.

     Section 6.12     CCL Shareholders. Beijing COL Network Technology Co., Ltd., Shenzhen
Zhongxun Teng Investment Development Co., Ltd. and Tibet Tiantai Investment Management Co., Ltd.
jointly and severally agree to the terms and conditions of this Agreement and shall take any and
all action to ensure the due and prompt performance of this Agreement by CCL and each of the CCL
Shareholders.

     Section 6.13     Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together will constitute
one and the same instrument.

     IN WITNESS WHEREOF, the parties, intending to be legally bound, have caused this Agreement to
be signed on the date first above written.

	     	 	 	 	 	 
	 	BEIJING COL NETWORK TECHNOLOGY CO., LTD.

 
	 	By:  	/s/ Lu Ruifeng
 	 
	 	 	Name:  	Lu Ruifeng 	 
	 	 	Title:  	Authorized Signatory 	 
	 

	     	 	 	 	 	 
	 	SHENZHEN ZHONGXUN TEND INVESTMENT DEVELOPMENT CO., LTD
 
	 	By:  	/s/ Lu Ruifeng
 	 
	 	 	Name:  	Lu Ruifeng 	 
	 	 	Title:  	Authorized Signatory 	 

9

 

	     	 	 	 	 	 
	 	TIBET TIANTAI INVESTMENT MANAGEMENT CO., LTD

 	 
	 	By:  	/s/ Lu Ruifeng
 
	 	 	Name:  	Lu Ruifeng 	 
	 	 	Title:  	Authorized Signatory 	 
	 

	     	 	 	 	 	 
	 	CHIINACAST TECHNOLOGY (SHANGHAI) LIMITED

 
	 	By:  	/s/ Terence Luk
 	 
	 	 	Name:  	Terence Luk 	 
	 	 	Title:  	Chairman of the Board 	 
	 

	     	 	 	 	 	 
	 	CHINACAST CO., LTD.

 
	 	By:  	/s/ Lu Ruifeng
 	 
	 	 	Name:  	Lu Ruifeng 	 
	 	 	Title:  	Authorized Signatory 	 
	 

10

 

APPENDIX A

Statement of Work

For Technical Goods and Services To

ChinaCast Co. Ltd. from

ChinaCast Technology (Shanghai) Limited

1 Introduction

This Statement of Work (“SOW”) describes certain technical services and other advice,
consulting, and services, and the provision of ancillary Equipment, Software and Know-How
(individually and collectively “Services”) that ChinaCast Technology (Shanghai) Limited (“CCT
Shanghai”) will provide to ChinaCast Co. Ltd. (“CCL”) in conjunction with CCL’s 3 primary areas of
business, being;

	 	1.	 	Turbo 163 via DirecPC
	 
	 	2.	 	Digital Data Network (DDN Enhancement)
	 
	 	3.	 	Cablenet

These businesses are described in greater detail below.

1.1 DirecPC Services

CCT Shanghai will provide Services as specified in this SOW to support CCL’s provision to its
customers (CCL’s customers are referred to as “Customers”) of high speed broadband services via
satellite (“Turbo 163 via DirecPC”).

CCT Shanghai and CCL expect that the Services to support the provision of Turbo 163 via DirecPC
service will include advice, related technical and other consulting and services in connection with
(i) the supply, operation and maintenance of a DirecPC Network Operations Center (“NOC”); (ii) the
supply, installation and maintenance of service access kits for Customers (“DAKS”); and (iii) the
payment of the space segment bandwidth fee and of sales, marketing, fulfillment, billing and
Customer care services. CCL will be responsible for the operation and maintenance of the NOC and
will own and sell DAKS.

1.2 DDN Enhancement Services

CCT Shanghai will provide Services as specified in this SOW to support CCL’s provision to
China Telecom of high speed broadband services and facilities to enhance the availability and
geographic coverage of China Telecom’s Digital Data Network (“DDN”)

Page 1

 

CCT Shanghai and CCL expect that the Services will include advice, related technical and other
consulting and services in connection with the installation, operations and maintenance of a main
NOC in Beijing and approximately 30 interconnection facilities locations throughout the PRC. CCT
Shanghai would also provide high speed back up channels and VSAT terminals at Customer sites
requiring high speed service.

1.3 Cablenet Services

The Cablenet business can be described as 3 different services;

	 	1.	 	TV Distribution — CCL provides facilities for the delivery of up to 100 channels
of TV content to cable Multi-System Operators (“MSOs”) throughout China.
	 
	 	2.	 	One Way — CCL provides facilities for the delivery of high speed internet data
through one-way cable plant in China. The return channel is via the China Telecom “163”
service. This business is essentially the “Turbo 163 via DirecPC” service delivered via
cable.
	 
	 	3.	 	Two Way — CCL provides facilities for high speed and interactive TV services via
2-way cable plant in China.

The various service offerings of the Cablenet business will allow MSOs to leverage their respective
infrastructures to deliver high-bandwidth interactive data services. Cablenet will provide to MSOs
a turnkey solution, which includes a technology platform and a brand as well as ongoing marketing,
customer service, billing and product development support. The MSOs bear the cost of maintaining
their cable systems, distributing required subscriber equipment, installing the broadband services
in subscribers’ homes.

1.3.1 Cablenet TV Distribution

The objective of the TV Distribution service is to centralize the distribution of content so
as to provide an aggregate of 100 video channels to be offered to MSO’s throughout China. The
service delivery is based on satellite so as to provide efficiency in the transmission of content.
The initial service will start with approximately 8 channels but will expand over time as the
number of video channels increase.

While SARFT will be active in the aggregation of content it is envisioned that CCL, with the
support and assistance of CCT Shanghai, will expand its services to include content aggregation and
generation. As these additional services are to be developed in the future they are not described
in this SOW.

In support of the TV Distribution service, CCL, with the technical support and assistance of CCT
Shanghai, will do the following:

	 	•	 	Establish a central TV uplink facility
	 
	 	•	 	Obtain satellite space segment sufficient to support the transmission of the TV
content throughout China. CCT Shanghai will support and assist CCL by defining
requirements and negotiating relevant contracts and agreements. CCL will execute
contracts and agreements and will be responsible for payment and other obligations
thereunder.
	 
	 	•	 	Market the TV delivery facilitis to various cable MSO’s throughout the PRC
	 
	 	•	 	Supply, install, commission and operate receiving equipment at enlisted MSO headend
facilities

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1.3.2 Cablenet Two-Way Data

The Two-Way Data service is a broadband service which provides for both high speed data
delivery as well as interactive TV to cable subscribers. The Two-Way Data service requires
advanced cable infrastructure like Two-way hybrid fiber-coaxial. Currently only 5% of cable
systems in China are Two-Way capable but this percentage is forecast to grow rapidly as the
existing cable plant is upgraded to two-way capability. To support the Two-Way services Cablenet
will introduce a “platform” consisting of head-end equipment which will enable to provision of
advanced services.

With the TV programming/ Internet content synchronization function installed, subscribers would be
able to experience an unprecedented multimedia experience. Subscribers will be able to view linear
content and simultaneously tap the resources of the Internet to drill down more detailed
information to interact at any number of levels including e-commerce.

CCT Shanghai will provide technical support and assistance to CCL in the following activities
relating to the Cablenet business:

	 	•	 	Marketing support for various MSOs as “resellers” or “distributors” of the Cablenet
service
	 
	 	•	 	Working with SARFT and other PRC governmental organizations to establish the
necessary regulatory approvals for content and technology supporting the Cablenet
service business
	 
	 	•	 	Establishment of the network infrastructure to support the provision of the various
Cablenet services
	 
	 	•	 	Installation, commissioning and technical support, advice, services and consulting
in connection with the operation and management of the network facilities used to
provide the Cablenet services at various MSOs.

1.3.3 Cablenet One-Way Data

As noted above the One Way Data service entails the provision of DirecPC services to
subscribers via a one way cable infrastructure. With the exception of the distribution and
fulfillment of subscriber equipment all aspects of the operation of this service are substantially
the same as described in the “Turbo 163 via DirecPC” service. In the Cablenet business the MSOs
will be responsible for the distribution and fulfillment services associated with the subscriber
equipment. Consequently the remainder of this document focuses only on the TV Distribution service
and Two Way Data service of Cablenet. It is envisaged that in 5 years, the One-Way service will be
phased out slowly as the cable plant of various MSO’s are upgraded to support two-way digital
operations.

1.4 Service Overview

CCT Shanghai will provide technical advice, consultation and services in connection with
DirecPC, DDN and Cablenet Services and CCL will accept and pay for the following technical advice,
consultation and services to support CCL in:

	 	1.	 	Complete NOC operation support, consisting of 24-hour per day, 365-days per year
technical support services, network supervision and control, and trouble reporting,
isolation and resolution.

Page 3

 

	 	2.	 	Installation services for Customer premise equipment (“CPE”) including Head-end
Equipment, DAKs and/or VSATs, including planning and scheduling and assistance in
securing permits and approvals when required.
	 
	 	3.	 	Procurement support, including traffic analysis and planning, of Internet bandwidth
sufficient to support the network and its growth to maintain the network performance
	 
	 	4.	 	Space segment bandwidth and support, including the planning of satellite transponder
capacity reuired to support CCL network and its growth, and technical support and
assistance in procurement of such satellite transponder capacity.
	 
	 	5.	 	CPE maintenance, including 8:00 a.m. to 6:00 p.m., Monday through Friday service
coverage, trouble reporting, remote service dispatch, problem isolation and resolution,
and supplementary maintenance and repair or replacement services when required.
	 
	 	6.	 	Monthly reports and other information listing data on installation schedules and
service outages.
	 
	 	7.	 	Program Management, including network planning and implementation of Service.
	 
	 	8.	 	Provision and maintenance of terrestrial communications between Customer premises and
service nodes as required. In the case of the DirecPC service, CCL will be responsible
for the provision and maintenance of terrestrial communications between the China Telecom
163 internet backbone and the NOC.
	 
	 	9.	 	Sales and Marketing Support — This includes sales collateral material, white papers,
marketing seminar support, PR/promotions support, etc.
	 
	 	10.	 	Customer Care/Billing Platform Support.
	 
	 	11.	 	Administrative Support — Accounting/finance and legal support.
	 
	 	12.	 	Research & Development/Engineering Support — Product and service development and
engineering support.

2 Ancillary Equipment Provided

To the extent of CCL’s requirements, and incident to its provision to CCL of technical advice,
consultation and services, CCT Shanghai will provide CCL ancillary Equipment including, but not
limited to the following types:

	 	•	 	Hughes Network Systems DirecPC NOC hardware and software
	 
	 	•	 	Hughes Network Systems ISBN/PES hardware and software
	 
	 	•	 	Hughes Network Systems TRES hardware and software
	 
	 	•	 	Hughes Network Systems Bandwidth On Demand software
	 
	 	•	 	Intel Digital Architecture (IDA), a two-way cable network infrastructure consisting of
various hardware and software systems
	 
	 	•	 	Video Uplink Facility including video retransmission equipment
	 
	 	•	 	Radio Frequency Transmission (RFT) facility at the Beijing NOC sufficient to support
the traffic for this site

Page 4

 

	 	•	 	Customer Care Platform to support the recording and tracking of customer contact
information including billing
	 
	 	•	 	Head-end Video down-link
	 
	 	•	 	Two-Way Cable Head-end equipment
	 
	 	•	 	Test equipment
	 
	 	•	 	Spare parts
	 
	 	•	 	Office supplies
	 
	 	•	 	Tools

2.1 Use of Proprietary Domain Names

CCT Shanghai or its affiliate will provide CCL the non-exclusive use of the following
proprietary domain names.

www.turbo163.net

www.turbo163.com

www.direct163.com

CCT Shanghai will formulate the domain name strategy for the various CCL business and provide
the necessary domain names for CCL’s non-exclusive use.

3 Network Operations

3.1 Space Segment

CCT Shanghai will provide advisory support services to assist CCL to comply with PRC
regulatory requirements and to use satellite transponder capacity in an effective manner. CCT
Shanghai will provide technical support to CCL for the purpose of generating accurate forecasts for
transponder capacity requirements. While CCL will enter into contractual arrangement with satellite
transponder provider, CCT Shanghai or its parent company would pay for the satellite transponder
capacity sufficient to meet service demand.

3.2 Program Team

In order to ensure the smooth, timely provision of technical advice, consultation and services
and that work proceeds at the planned rate, CCT Shanghai will put into place a program team
consisting of experienced professionals in the various areas of expertise required. This team will
be headed by a Program Manager to coordinate all CCT Shanghai resources required for the successful
conduct of the support services and work, and to ensure that required coordination takes place
between CCT Shanghai and CCL personnel.

     Tasks to be performed by the program team shall be in the areas including:

	 	•	 	Schedules
	 
	 	•	 	Pricing
	 
	 	•	 	Agreement negotiations
	 
	 	•	 	Status reporting
	 
	 	•	 	Staffing

Page 5

 

	 	•	 	Subcontractor interface
	 
	 	•	 	Specification compliance
	 
	 	•	 	Space segment technical support
	 
	 	•	 	Selection of technical staff
	 
	 	•	 	Regulatory agency support
	 
	 	•	 	Test plans
	 
	 	•	 	System reliability
	 
	 	•	 	Network analysis
	 
	 	•	 	System configuration
	 
	 	•	 	NOC site survey
	 
	 	•	 	NOC installation specification
	 
	 	•	 	Acceptance test procedures
	 
	 	•	 	Remote installation specification
	 
	 	•	 	Onsite installation and test of the NOC earth station and baseband equipment
	 
	 	•	 	Documentation preparation

3.2.1 Progress Reports and Program Status Review

At least once a month, appropriate CCT Shanghai and CCL personnel will meet to discuss issues
affecting the provision of the services including such key issues as the schedule of network
deployment, network configurations, the manufacture and installation of products, development and
implementation of new and improved technologies and procedures. As part of such meetings and at
any other mutually agreeable times senior account management personnel will meet to discuss;

	 	(i)	 	Forecasts for the following quarter for the number of Subscribers so that CCT
Shanghai can anticipate demand for manufacture and installation and provision of the
services;
	 
	 	(ii)	 	any additional services that may be requested or required, and
	 
	 	(iii)	 	any changes to CCL deployment plan for the services, including, among other
things, procurement of additional Internet bandwidth, leasing of transponders and
service in extended geographical areas.

For such period of time as CCT Shanghai and CCL mutually agree, operational personnel from both CCT
Shanghai and CCL will meet in person or by conference call at least once every two weeks to
discuss operational, day-to-day issues that may arise in connection with the provision of the
services.

3.3 System Analysis And Support

CCT Shanghai will provide system analyses of the network to estimate overall system capacity,
traffic capabilities, satellite resource requirements, and the specific network configuration
required to support CCL’s identified traffic. Furthermore, CCT Shanghai will make available, for
the term of this Agreement, systems analysis services to assist CCL in determining future optional
expansion requirements.

CCT Shanghai will also assist CCL in planning for such things as antenna sizes and/or RF power
sizes for CPE sites based upon the specific space segment selected and CCL specified requirements,
such as availability and video capability. CCT Shanghai will provide necessary satellite link
budgets.

Page 6

 

3.3.1 System Analysis Reports

CCT Shanghai will periodically provide the results of system analyses of capacity, traffic
capabilities, satellite resource requirements, and network configuration.

CCT Shanghai will make the results of CPE antenna size and/or SSPA size analyses available within
thirty (30) days after the specification of the space segment and the appropriate CPE sites.

3.3.2 Regulatory Agency Support

CCT Shanghai will provide technical support and consultation in support of CCL’s applications
for any relevant licenses from local regulatory authorities. CCT Shanghai technical support
includes implementation planning, interface investigation and specification, and detailed satellite
link engineering. As part of this activity, CCT Shanghai will prepare the technical documentation
required to support the required filings for the network operating license.

3.4 Network Operation

CCT Shanghai will provide resources to support the operation of the CCL NOCs 24 hours per day,
365 days per year. CCT Shanghai will provide qualified engineers and operations center personnel
as required to adequately monitor the system as mutually agreed by CCT Shanghai and CCL. CCT
Shanghai will make available personnel at the NOC to provide technical advice, consultation and
network control services, consisting of monitoring, configuration management, and troubleshooting,
including field dispatch. NOC personnel will also provide technical assistance for onsite
management and maintenance of the NOC facilities themselves. CCT Shanghai will provide technical
advice, consultation and support for all aspects of NOC operation including the following:

	 	•	 	Staffing
	 
	 	•	 	Preventive Maintenance
	 
	 	•	 	Reports
	 
	 	•	 	Record Keeping
	 
	 	•	 	Trouble-shooting
	 
	 	•	 	Traffic analysis
	 
	 	•	 	System expansion

3.5 Business Planning

Once per quarter representatives from CCT Shanghai and CCL shall meet to conduct business
planning for the following quarter. In the fourth quarter of every year a full business budget for
the following year will be developed.

Page 7

 

3.6 Redundancy and Backup

Ancillary Equipment will include redundancy of critical NOC and NOC RF components on a 1:1
basis. All other traffic carrying NOC components are redundant on a 1:N basis. This redundancy
will assure availability in spite of occasional failures of such components.

3.7 Internet Backhaul Connection

CCL will provide necessary data circuits between China Telecom Internet exchange and the NOC
facility. CCL will be responsible for the cost and performance of these circuits. Unless
otherwise agreed by CCT Shanghai and CCL, all Customer connectivity to the Internet will be
effected through these circuits connected to the China Telecom Internet exchange. CCL will be
responsible for the monitoring and maintenance of these Internet backhaul connections.

3.8 Information Monitoring

CCT Shanghai will provide, on a monthly basis, such ongoing and updated information regarding
the performance of the network service as the parties will agree.

3.9 Service Level Quality Control and Measurement

CCT Shanghai will monitor the quality of Services on a continuing basis and will report to CCL
reasonable measure of the quality of Services and Equipment. CCT Shanghai will also establish and
implement reasonable programs for the continuous improvement of Service quality and performance.

3.10 Security

CCT Shanghai will work to ensure that CCL’ Subscribers’ privacy and security are protected
over the services by using a Conditional Access System and Digital Encryption Standard (DES 128K)
security algorithm.

3.11 Turbo163 Dial-up Connectivity

CCL will provide at its cost all dial-up connectivity necessary for the “Turbo163 via DirecPC”
and for the Cablenet One-Way service.

4 Fulfillment Services

CCT Shanghai is responsible for the shipment, installation and commissioning of Head-end
equipment ordered by MSOs.

The nature of the Cablenet business is such that CCL’s Customers will be the cable MSO’s in China.
The MSO’s will be responsible for the distribution, installation and maintenance of

Page 8

 

end-user equipment to individual subscribers. CCT Shanghai will be responsible for the
distribution of the end-user equipment to the MSO’s.

4.1 Permits and Approvals

CCT Shanghai will provide CCL with assistance and support in order to obtain and maintain the
relevant government approvals required for CCL. CCT Shanghai will also assist and support CCL to
obtain landlord approvals and will determine if construction permits or zoning variances are
required and, if so, assist and support CCL in obtaining such permits at the time the site survey
is performed. After all permits and approvals have been obtained, CCL will authorize CCT Shanghai
to schedule and perform site preparation and installation of the equipment.

4.2 Planning and Scheduling

CCT Shanghai will installation Equipment according to a schedule to be provided and maintained
by CCT Shanghai, with the cooperation of CCL.

CCT Shanghai will endeavor to complete installation within sixty (60) days of notification of need
to install a site. CCT Shanghai and CCL agree, however, that additional time may be required if
CCT Shanghai encounters delays in obtaining any necessary permits or variances, or if nonstandard
installations (as defined herein) are required.

4.3 Site Preparation

The site survey report, if required, will identify technically suitable locations for
installing the indoor and outdoor CPE (including Head-End equipment) and cables.

For sites identified as requiring preparation by CCT Shanghai, CCT Shanghai will perform the
following tasks:

	 	1)	 	Provide necessary independent contractor for structural or electrical
work, as required, at additional cost.
	 
	 	2)	 	Construct a standard antenna mounting point of the standard type
	 
	 	3)	 	Provide suitable access for the connecting cable from the exterior of
the building to the interior and through any concrete, masonry, or fire barrier
walls between the indoor and outdoor units.

4.4 Maintenance Services

	 	A.	 	CCT Shanghai will provide maintenance services to CCL to ensure the
availability of the service NOC 24 hours per day, 365 days per year by single
nationwide number telephone access for resolution of problems with the Turbo 163
via DirecPC, DDN and Cablenet services. The NOC will provide a single point of
contact for the origination, administration, and tracking of Customer trouble
reports, CCT Shanghai personnel contact names, telephone numbers, and other
trouble reporting and escalation procedures. CCT

Page 9

 

	 	 	 	Shanghai will provide a NOC technical support document detailing these procedures
will be provided to CCL after execution of this Technical Services Agreement.

	 	B.	 	Corrective Maintenance — CCT Shanghai will provide corrective
maintenance for the various ancillary equipment provided by the CCT Shanghai in
support of the CCL businesses. CCT Shanghai will restore ancillary equipment to
good working condition by performing the following corrective maintenance as
required:

	 	1)	 	Diagnostic testing to determine the existence and cause of the malfunction
	 
	 	2)	 	Removal and replacement of any malfunctioning Field Replaceable Unit
(FRU)
	 
	 	3)	 	Reorientation (re-pointing) of the antenna subsystem
	 
	 	4)	 	Repair or replacement of interconnecting cables
	 
	 	5)	 	Reloading initializing instructions and re-commissioning
	 
	 	6)	 	Verification of proper operation and completion of service report
	 
	 	7)	 	Notification to the NOC and the Customer host that Equipment has been
restored to operational status

	 	C.	 	Service Coverage and Response Times
	 
	 	 	 	Service coverage hours, including related travel, will be selected on a site-by-site
basis from the coverage available for that site. The available coverage plans are:

	 	1)	 	Normal Service Coverage (8:00 a.m. to 6:00 p.m., local time, Monday through
Friday, holidays excepted)
	 
	 	2)	 	Continuous Service Coverage (24 hours per day, 365 days per year).

	 	 	 	At certain sites only Normal Service Coverage is available.
	 
	 	 	 	CCT Shanghai will use reasonable efforts to ensure that within sixty (60) minutes of a
request for maintenance, the NOC personnel will determine the problem and isolate the
fault. CCT Shanghai and CCL acknowledge, however, that such maintenance response time
represents a target and failure to meet such maintenance response time target shall in no
event be construed as a breach of this Technical Services Agreement. Upon determining the
problem and isolating the fault, the NOC personnel will authorize field Service dispatch,
and the Customer Service Representative (CSR) will be onsite at Customer’s premises,
according to the maintenance response time table given below, from the time of
authorization by the NOC.

Page 10

 

Maintenance Response Time Table (Targets)

	 	 	 	 	 
	Distance from Service Office	 	Response Time	 
	0 - 50 miles
	 	12 hours
	51 - 100 miles
	 	24 hours
	101 - 150 miles
	 	24 hours
	151 - 200 miles
	 	24 hours
	Over 200 miles
	 	48 hours

	 	D.	 	Spare Parts Support
	 
	 	 	 	Spares will be provided as part of this Agreement. An inventory of spare parts
(typically 5% of installed hardware) will be pre-positioned at CCT Shanghai-designated
local maintenance facilities for support of all CPE supported by that office.
	 
	 	 	 	Spares for the CPE antenna subsystem, including reflectors, mounts, anti-icing
equipment, modems, and if applicable, certain video equipment will be centrally stocked
at a designated location in China.
	 
	 	 	 	Malfunctioning Equipment will be replaced on a one-for-one exchange basis by a
functionally equivalent spare part.
	 
	 	E.	 	Remote maintenance does not include any of the following services;

	 	1)	 	Maintenance, repair, or replacement of parts damaged or lost through
catastrophe, accident, lightning, theft, misuse, fault, or negligence of CCL, or
causes external to the Equipment, such as, but not limited to, failure of, or
faulty, electrical power or air conditioning, operator error, failure, or
malfunction of data communication Equipment not provided to CCL by CCT Shanghai,
or from any cause other than intended and ordinary use
	 
	 	2)	 	Changes, modifications, or alterations in or to the Equipment other
than approved upgrades and configuration changes
	 
	 	3)	 	De-installation, relocation, or removal of the Equipment or any
accessories, attachments, or other devices

4.5 Remote Reports and Other Information

CCT Shanghai will provide CCL with the following standard reports on a monthly basis:

	 	A.	 	Chronological list of trouble reports summarizing determined problem(s) and
resolution(s) at remote site(s) with timed duration of remote site outage. Service
availability for the preceding month will also be provided,
	 
	 	B.	 	A summary report showing all open (with days to completion) and completed work
orders for new and existing CPE locations during the preceding month.

5 Sales and Marketing

CCT Shanghai shall provide technical advice, consultation and services in connection with the
management of sales and marketing for the following businesses:

Page 11

 

	 	1.	 	Turbo 163 via DirecPC
	 
	 	2.	 	DDN
	 
	 	3.	 	Cablenet

5.1 Management

CCT Shanghai will support and assist CCL in the sales and marketing of the DDN service to
potential end users. This will include providing sales collateral material, white papers,
marketing seminar support, PR/promotions support, etc. It is envisioned that the following
personnel will initially be required for the sales and marketing of the various services:

	 	A.	 	Vice President, Marketing
	 
	 	B.	 	Manager, Public Relations (minimum 4 PR events/year)
	 
	 	C.	 	Market Research Specialists (4)
	 
	 	D.	 	Channel Support Specialists (10)
	 
	 	E.	 	Regional Sales Managers (5)
	 
	 	F.	 	Sales Executives (25)
	 
	 	G.	 	Manager, Sales Administration
	 
	 	H.	 	Sales Administration Support (10)

The organization of the direct sales force is represented by the following diagram;

The VP of Sale/Marketing will be responsible for oversight of all sales/marketing activities.

The Manager of Marketing will be responsible for the following key areas;

	 	•	 	Product Marketing
	 
	 	•	 	Direct Marketing
	 
	 	•	 	Web Based Marketing

The Regional Sales Managers are responsible for the oversight of the direct sales staff.

5.2 Turbo 163 via DirecPC and DDN Sales

CCT Shanghai will make available personnel and assist CCL to maintain a sales force to handle
direct sales targeting the following (but not limited to) market segments;

	 	•	 	Internal Trade
	 
	 	•	 	Coals and Mines
	 
	 	•	 	Agencies and entities under the Economic and Trade Commissions
	 
	 	•	 	Telecom and Communication Industries
	 
	 	•	 	Multi-National Corporations
	 
	 	•	 	Education

Page 12

 

5.2.1 Channel Management For Turbo 163 via DirecPC

CCT Shanghai will provide technical assistance in connection with the set up of various sales
channels for the Turbo163 via DirecPC service. These sales channels will be “Value Added
Resellers” (VAR) who will be responsible for certain targeted market segments. The VARs may
include the following;

	 	•	 	IBM — targeting the banking and finance sectors
	 
	 	•	 	IBM — targeting the intelligent building sector
	 
	 	•	 	Infobank — targeting the banking and finance sectors
	 
	 	•	 	Blueexpress — bundled Turbo163 and PC services
	 
	 	•	 	China Telecom — sales to consumers for Turbo163 service
	 
	 	•	 	Existing 163 service resellers

CCT Shanghai is responsible for enlisting and maintaining the VARs. Support activities include
product and market training, support of product demonstrations, provision of collateral materials
and other informational materials. CCT Shanghai sales staff will also accompany VARs on visits to
key accounts as well as host customer visits to the NOC facility.

5.3 Cablenet Sales

There are approximately 1300 cable operators (MSOs) in China. The main focus of the sales and
marketing activities of the Cablenet business group is to sign-up as many of these 1300 cable
operators as possible as “subscribers” to the various services supported by the Cablenet business.
In fact, the MSOs will essentially act as “distributors” of these services and resell the content
or access to their own customers.

The sales effort to reach these MSOs will be though direct access utilizing sales staff employed by
CCT Shanghai. Distribution channels will not be utilized in support of this effort.

CCT Shanghai will assist CCL in the sales and marketing of the Cablenet services to potential MSOs.
This will include providing sales collateral material, white papers, marketing seminar support,
PR/promotions support, etc. It is envisioned that the following personnel will initially be
required to support the sales and marketing of the Cablenet service:

	 	I.	 	Vice President, Marketing
	 
	 	J.	 	Manager, Public Relations (minimum 4 PR events/year)
	 
	 	K.	 	Market Research Specialists (2)
	 
	 	L.	 	Sales Executives (5)
	 
	 	M.	 	Manager, Sales Administration

The VP of Sale/Marketing will be responsible for oversight of all sales/marketing activities.

5.4 Publicity Campaign

CCT Shanghai will be responsible for implementing a China-wide publicity campaign to highlight
the service availability. Various forms of PR events are necessary to influence the major ISP/ICPs
in China and well as Internet users.

Page 13

 

PR events mainly include: promotion, press/products releases, expositions, technical seminars,
speeches and consultations, annual reports, charity and donations, sponsoring, community
persuasions, signal publicity, company’s periodicals, news creation etc.

5.5 Market Analysis and Service Tariff Structure

In support of the marketing efforts for the various CCL businesses CCT Shanghai will conduct
the relevant market analysis. These activities will include the following;

	 	•	 	Competitive analysis
	 
	 	•	 	Identification of target market segments
	 
	 	•	 	Identification and development of “value added” services
	 
	 	•	 	Service tariff modeling and analysis

5.6 Collateral Materials

CCT Shanghai will generate the collateral material required to support the sales and marketing
efforts. These materials will include the following;

	 	•	 	Product brochures
	 
	 	•	 	Application white papers
	 
	 	•	 	Packaging materials
	 
	 	•	 	Advertisements
	 
	 	•	 	Web based materials
	 
	 	•	 	Customer gifts
	 
	 	•	 	Customer deliverable marketing CD-ROM
	 
	 	•	 	User handbook and operating procedures

5.7 Advertising Campaigns

The CCT Shanghai will be responsible for conducting a variety of advertising campaigns
designed to raise awareness about CCL’s services and to attract and retain subscribers to CCL’s
services. It is anticipated that CCT Shanghai will utilize different types of media as follows:
Plane media:50%, Television: 20%, Billboards: 25%, Web: 5%. CCT Shanghai will be responsible for
advertising content generation as well as placement.

6 Administration

CCT Shanghai will provide consulation and advice to CCL in connection with human resource
management, bookkeeping, accounting, financial planning, legal and corporate strategic planning
services.

6.1 Accounting

Page 14

 

CCT Shanghai will provide advisory services relating to the administration of all accounting
operations of CCL in support of the service. This includes administration of accounts receivable,
accounts payable, payroll and other accounting related services.

CCT Shanghai Services will also cover CCL’s:

	(i)	 	quarterly management accounts for the various businesses within 45 days after the end of each
fiscal quarter;
	 
	(ii)	 	monthly management accounts for the various businesses within 30days after the end of each
month; and
	 
	(iii)	 	an annual budget for the various businesses within 30 days prior to the end of each fiscal
year.

6.2 Human Resources

CCT Shanghai will assist and provide advice to the human resources operation to support CCL’s
operation. CCT Shanghai will provide a headcount report to CCL at the end of each month and will
assist and provide advice for the recruitment to support the Turbo 163 via DirecPC business.

6.3 Legal and Corporate planning

CCT Shanghai will assist and provide advice to support CCL in working out a proper legal
structure for the Turbo 163 via DirecPC service. CCT Shanghai is also responsible for the
adminstration support and corporate planning of the Turbo 163 via DirecPC business.

7 Equipment And Software

In addition to the provision of services and technical know-how CCT Shanghai will provide to
CCL all of the networking equipment required in support of the business plan for the Turbo 163 via
DirecPC, DDN and Cablenet services.

7.1 Turbo 163 via DirecPC Equipment Already Supplied

The following subsections describe equipment and software which have already been provided to
CCL.

7.1.1 Turbo 163 via DirecPC NOC Equipment And Software

The Turbo 163 via DirecPC business is supported by the following baseband hardware subsystems
at the NOC. The equipment and software listed below are fully described in the document “DirecPC
Technical Specification” published by Hughes Network Systems.

Page 15

 

	 	 	 	 	 
	Foundation NOC
	 	 	S/W	 	Software License
	 	 	SAGW	 	Satellite Gateway
	 	 	IF	 	IF System
	 	 	HM95	 	Health Monitor
	 	 	QAPC	 	Quality Assurance Monitor
	 	 	FRNTEND	 	Subscriber Management Front End
	 	 	RTR	 	System Router
	 	 	SWTCH	 	Ethernet Switch
	 	 	TCCS/COMS	 	Dial-in Communication Device
	 
	 	CNSL	 	Monitoring Console
	 
	 	CAC	 	Conditional Access Controller
	 
	 	FRWL	 	Firewall
	 
	 	HPRK	 	Racks
	 
	 	SPAR	 	NOC Spares
	Turbo Internet System
	 
	 	S/W	 	Software License
	 
	 	TIGW	 	Turbo Internet System (10 online, 2 red; 20000 subs)
	Package Delivery System
	 
	 	S/W	 	Software License
	 	 	PDSV	 	Package Delivery Server
	 	 	PDSV	 	Package Delivery Scheduler
	 	 	NFS	 	Storage Device
	 	 	PDMC	 	Package Delivery Gateway
	IP Multicast System
	 	 	S/W	 	Software License
	 	 	PDMC	 	IP Multicast Gateway
	 
	 	BCPC	 	Broadcaster
	Webcast System
	 
	 	S/W	 	Software License
	 
	 	WEBC	 	Webcast System
	NewsCast System
	 
	 	S/W	 	Software License
	 
	 	NEWS	 	NewsCast System
	Autocommissioning System
	 
	 	S/W	 	Software License
	 
	 	ACS	 	Autocommissioning System

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	Email Alert System
	 
	 	S/W	 	Software License
	 
	 	EMAIL	 	Email Alert System
	Dedicated Bandwidth System
	 
	 	S/W	 	Software License
	 
	 	DBW	 	Dedicated Bandwidth System
	Fair Access License
	 
	 	S/W	 	Software License
	 
	 	FAP	 	Fair Access License

7.1.2 NOC RFT Uplink Facility

CCT Shanghai has provided to CCL Radio Frequency Transmission (RFT) equipment consisting of a
KU-Band 6.1 meter antenna and associated amplifiers, up/down converters, LNB and spare parts. In
addition, CCT Shanghai has installed and tested this equipment on the NOC facility of CCL.

7.1.3 Turbo 163 via DirecPC CPE Equipment

The Customer Premise Equipment (CPE) provided to CCL consists of quantity 3,000 DirecPC Access
Kits (DAKs). Each DAK consists of the following elements;

	 	•	 	Antenna
	 
	 	•	 	LNB
	 
	 	•	 	PCI Card
	 
	 	•	 	DAK Client Software
	 
	 	•	 	Mounting hardware
	 
	 	•	 	Installation instructions
	 
	 	•	 	Packaging

7.1.4 System Integration

CCT Shanghai will perform integration and testing of the DirecPC and DDN systems. System
acceptance test has been conducted to verify that the delivered product meets the specification
requirements. These tests have been performed by CCT Shanghai with CCL’s assistance. The
combination of the NOC earth station, baseband equipment, and DAKs meet the performance
requirements as outlined in the CCL business plan.

7.1.5 Expansion of Network

To support the expansion of the Turbo 163 via DirecPC and DDN services CCT Shanghai will
provide to CCL additional equipment and software licenses. It is anticipated that the following
types of equipment will be provided;

	 	•	 	Additional RFT uplink facilities to support the DDN business

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	 	•	 	Additional HNS DirecPC NOC equipment (as described above)
	 
	 	•	 	Additional HNS DirecPC DAK CPE
	 
	 	•	 	HNS TRES satellite modems and earth stations in support of the DDN business
	 
	 	•	 	HNS ISBN baseband equipment and software licenses in support of the DDN business
	 
	 	•	 	HNS PES equipment in support of the DDN business

The functionality and performance of these systems are defined in the following documents;

	 	•	 	HNS DirecPC Technical Specification
	 
	 	•	 	HNS ISBN/PES Technical Specification
	 
	 	•	 	HNS TRES Technical Specification
	 
	 	•	 	HNS TRES BOD Technical Specification

7.2 Cablenet Equipment and Software

To support the Cablenet services it will be necessary to deploy a significant amount of
network infrastructure. This infrastructure will generally fall into three categories;

	 	1.	 	Network infrastructure
	 
	 	2.	 	Cable headend infrastructure
	 
	 	3.	 	Subscriber equipment

7.2.1 TV Distribution Service

The subsections below describe the equipment subsystems that are supplied in support of the TV
Distribution business.

7.2.1.1 Uplink Facility

Satellite transmission will be used to efficiently distribute the aggregated video content to
cable MSOs throughout China. In support of this video distribution CCT Shanghai will provide
technical assistance and advice to assist CCL in establishing an uplink facility consisting of the
following key elements;

	1.	 	RF Subsystem including a 6.1 meter KU band antenna and all of the attendant electronics to
provide fully redundant transmission to the satellite. Some of these components include;

	 	•	 	Antenna tracking control unit
	 
	 	•	 	High power amplifiers
	 
	 	•	 	Low noise receivers
	 
	 	•	 	Frequency up converters
	 
	 	•	 	Frequency down converters
	 
	 	•	 	RF Management and Control subsystem
	 
	 	•	 	Redundancy switching equipment
	 
	 	•	 	Spare parts

	2.	 	MPEG2/DVB Encoder Modulation Subsystem consisting of the following key elements;

	 	•	 	Variable rate modulators
	 
	 	•	 	MPEG/DVB Encoders
	 
	 	•	 	Switching equipment

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	3.	 	DTH Receive Subsystem (Video Turn Around) consisting of the following components;

	 	•	 	Antenna subsystem
	 
	 	•	 	Low noise receivers
	 
	 	•	 	Video receivers

	4.	 	Video Distribution Subsystem consisting of the following components;

	 	•	 	Audio and video monitors
	 
	 	•	 	Switching matrix
	 
	 	•	 	Studio quality recording equipment

	5.	 	Conditional Access Subsystem to provide secure control of the video signal.

7.2.1.2 Head-end TV Receiving Equipment

For each MSO subscribing to the TV distribution service CCT Shanghai will install a set of
equipment at the cable head-end which will enable to reception of the aggregated TV content that is
distributed over the satellite. The following will be the key components provided by CCT Shanghai
at the Head-end;

	 	•	 	Receive-only satellite antenna and receiver subsystem including LNA
	 
	 	•	 	TV Receiver for each video channel subscriber by the MSO. The TV receivers include
the necessary conditional access equipment to decode the signals.
	 
	 	•	 	Video distribution cabling to provide for interconnect of the downlinked TV content
into the MSO head-end.

7.2.1.3 Subscriber Equipment

Subscriber equipment will be provided by the Cable MSOs.

7.2.2 Two-Way Service

7.2.2.1 Network Infrastructure

The following schematics diagram represents what is expected to be the typical network
infrastructure at each MSO’s NOC.

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7.2.2.2 Head-end Equipment

CCT Shanghai will provide technical services and advice in connection with the deployment of
the NOC for two way services. CCT Shanghai will be responsible for installing software onto the
NOC servers and integrate the NOC servers and software with other business system servers (such as
those for Turbo163). CCT Shanghai will provide technical service in connection with specifying and
installing the networking equipment in the NOC and will assist and support CCL in managing the NOC.

CCT Shanghai will also be responsible for the training of MSO personnel for local support.

7.2.2.3 Subscriber Equipment

CCT Shanghai will be responsible for identifying OEMs that are capable of building the Client
Box.

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7.2.2.4 Technical Support

Technical issues from End Users or MSO should first be escalated to CCT Shanghai’s level 1
(technical) support group. It is expected that CCT Shanghai’s level 1 support should be able to
handle about 90% of the calls that come in. They would be expected to be able to answer calls that
involved installation questions, or known problems that are listed in the Errata, Application
notes, Hints documents, Technical advisories, or CCT Shanghai’s technical database. If that group
can not solve the problem, then the issue should get escalated to CCT Shanghai’s level 2
(Engineering) support group.

CCT Shanghai’s level 2 support will continue to work the problem with diligence and try to provide
a resolution. It is expected that this group will be able to handle 90% of the issues that get
escalated from CCT Shanghai’s level 1 support. Issues that cannot be resolved by CCT Shanghai’s
level 2 support will be escalated to the attention of the equipment vendor’s Field Application
Engineer for who shall be located in Hong Kong. Before escalation to the equipment vendor, it is
expected that CCT Shanghai Product Support will verify the nature of the problem and further try to
isolate the cause of the problem if necessary. In order to facilitate swift and effective diagnosis
and resolution or errors, CCT Shanghai shall maintain the representative configuration(s) of each
system deployed for use as fault replication and defect isolation test beds.

One representative (along with one alternate) from CCT Shanghai’s level 2 Product Support Group
should be selected to manage the interface between CCT Shanghai and the equipment vendor’s Field
Application Engineer. The purpose of this single interface will be to make sure information
flowing from the equipment vendor to CCT Shanghai gets disseminated to the proper parties within
CCT Shanghai, and to set priorities of escalation flowing from CCT Shanghai to the equipment
vendor. CCT Shanghai will provide a list of contact names to the equipment vendor. Callers to the
equipment vendor’s Field Application Engineer who are not on this list of approved contacts will be
referred back to an individual on the approved contact list.

Upon escalation to the equipment vendor’s FAE, CCT Shanghai will submit a detailed technical
description of the problem as well as the details of CCT Shanghai’s efforts to resolve it. Upon
receiving this information, the FAE will first try and reproduce the fault using CCT Shanghai’s
fault replication and defect isolation test beds. If reproducible, it will be entered on an
internal the equipment vendor defect tracking database (Tracker) and assigned a tracking number and
severity level (as defined above). The equipment vendor’s FAE shall have access to all appropriate
systems and facilities as required to pursue correction of active defects.

The status of each open issue reported by CCT Shanghai will be tracked and reported to CCT Shanghai
according to severity level as defined above.

It is expected that the equipment vendor’s FAE will be able to handle 90% of the calls that get
escalated to him/her. Issues that can not be resolved by the FAE will get escalated to the
equipment vendor’s Engineering Organization. It is expected that the equipment vendor’s
Engineering organization will be able to resolve 100% of the issues that get escalated to them from
the FAE.

It should be noted that in all cases above, resolution of a problem does not necessarily mean a
fix, but could mean a workaround or decision not to fix. The problem would then be documented as an
errata.

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7.3 Inventory

In order to provide CCL with adequate inventory to expand the service businesses CCT Shanghai
will supply a rolling 3 month inventory of equipment. The inventory will be determined by the
current business plans for the various services.

7.4 Shipment Schedule

Once every quarter CCT Shanghai will evaluate the inventory of equipment to determine what
replenishments or new stocking is required. The evaluation will use both the business plans as
well as marketing forecasts to determine the amount of inventory to be stocked. It is anticipated
that the lead time to supply CPE is typically 3 months while the lead time to supply NOC related
equipment is typically 6 months.

7.5 Customer Care Platform

CCT Shanghai will provide CCL with a customer care and billing platform services. This
includes the provision of a call center, web-based customer support, problem tracking, problem
escalation procedures and monthly billing invoices.

8 CCL Obligations

To facilitate provision of the Equipment and Services by CCT Shanghai, CCL will meet the
following obligations:

	 	A.	 	CCL hereby grants CCT Shanghai and CCT Shanghai’ authorized representatives
access, subject to CCL’s reasonable security restrictions, to Equipment and related
locations and areas of CCL’s facilities and premises, and will arrange permitted access
to areas of third-Party facilities and premises for the purpose of CCT Shanghai
performing the work required under this Agreement. CCT Shanghai will comply with CCL’s
reasonable rules and regulations for access, a copy of which will be furnished to CCT
Shanghai by CCL promptly after execution of this Agreement.
	 
	 	B.	 	CCL will provide safe access to Equipment on CCL premises and will maintain the
environment where the Equipment is located in a safe and secure condition.
	 
	 	C.	 	CCL will provide CCT Shanghai with access to electrical power, water, and other
utilities as required for efficient Service.
	 
	 	D.	 	Procure and obtain any and all Government Approvals which may be required under
any applicable law for the operation and maintenance of the business services.

CCL will reimburse CCT Shanghai for all costs incurred by CCT Shanghai as a result of CCL’s failure
to meet such obligations.

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APPENDIX B

Satellite Revenue and

Satellite Expense of

ChinaCast Co. Ltd.

Satellite Revenue

Satellite Revenue includes all the revenues derived from the Turbo163 business, DDN
Enhancement business and Cablenet business of CCL and any other satellite related business
conducted by CCL. The Satellite Revenue shall form the basis to compute the Service fee payable
from CCL to CCT Shanghai.

Satellite Expense

Satellite Expense includes all expense incurred by CCL in relation to its satellite
operation and for the generation of Satellite Revenue. Satellite and shall include the following
items:

Transponder fee

Lease line charge

Rental fee

Equipment usage fee

Equipment installation charge

Equipment maintenance and depreciation

Content fee

Cost of material

Freight & Duty

Marketing/Advertising fee

Payroll

Labor Welfare

Travel and transportation

Entertainment

Professional expenses

Insurance

Office supplies

Water & electricity

Training & meeting expense

Car rental and expense

Bank charge

Consumable

Stamp tax duty

Business tax

Profit tax

To be counted as Satellite Expense and be deducted from the Satellite Revenue to compute the
Service fee, all the operating expense items set forth above must be related to the satellite
operation of CCL.

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