Document:

EX-4.40 GLOBAL PUBLISHING AGREEMENT

 

Exhibit 4.40

Global Publishing Agreement

     Chapter 1 General Provisions

Article 1 (Purpose of Agreement)

This Agreement shall aim to define terms and conditions including rights and duties under which
whereas Gravity Co., Ltd. (hereinafter referred to as Gravity) and Sonnori Co., Ltd. (hereinafter
referred to as Sonnori) shall pursue this business, Sonnori shall grant rights to global publishing
of its developed games to Gravity, and both parties shall share corresponding earnings.

Article 2 (Games as the Target of Agreement)

	 	1.	 	Target games of this Agreement shall be Sonnori-developed online game platform
“Stylia” and all contents running inside and outside Stylia (hereinafter referred to as
the game).
	 
	 	2.	 	The specific contents and composition of the game provided to Gravity by Sonnori
shall be the same as those of the game owned by Sonnori at the signing of this Agreement
(refer to the attached list), and both parties shall discuss and reflect requirements
necessary for the success of the game in the future.
	 
	 	3.	 	The name of the game may be determined and changed through mutual agreement according
to necessary circumstances.

Article 3 (Definition of Terminologies)

	 	1.	 	Service herein refers to all forms of provision of the game such as its sale,
transmission, and distribution.
	 
	 	2.	 	Pay-based service herein refers to the service wherein fees are charged to users for
the price of using the game.
	 
	 	3.	 	Re-license herein refers to granting rights to a third party to enable him to provide
the service again, based on Gravity’s global publishing rights herein.
	 
	 	4.	 	A developer refers to a third party (an individual person, a company or an
organization) that provides contents and services to the game; provided that in case
Gravity or Sonnori develops a game directly, it will become its developer.
	 
	 	5.	 	Additional title refers to all creations (contents and services) that are crafted to
befit the character of the game and supplied.

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	 	6.	 	Platform sales refer to all sales except sales of additional titles of the game
sales.
	 
	 	7.	 	Publishing price refers to the price that Gravity pays Sonnori in return for all its
rights to the game obtained from Sonnori under this Agreement.
	 
	 	8.	 	Users refer to all users that have applied to Gravity or its re-licensed third
parties to subscribe to the services of the game, have registered user accounts, and use
the services of the game through establishments providing Internet and multimedia cultural
contents-related equipment, broadband providers, and others.
	 
	 	9.	 	Gross sales refer to total amounts of earnings that Gravity generates and collects
from users or its re-licensed third parties by either directly or indirectly operating the
services, or by supplying or re-licensing the services to third parties, at home or
abroad.
	 
	 	10.	 	Net sales refer to the amount that remains after deducting all prescribed costs
specified under Section 16 of Article 3 from gross sales under Section 16 of Article 3;
provided that net sales are regarded as generated only when any amount remains after
deducting various costs from gross sales.
	 
	 	11.	 	Commercialization (or partial pay-based services) refers to the point of time when
Gravity or its designated third party sale-rights holder (re-license holder) starts to
provide pay-based services to users of the game.
	 
	 	12.	 	Overseas contract deposit refers to the price that Gravity collects from an overseas
third-party in return for signing an agreement to license him regarding the game.
	 
	 	13.	 	Running royalty refers to the price that Gravity pays to Sonnori of the net sales
generated by the game in accordance with Article 14 herein, excluding the contract
deposit.
	 
	 	14.	 	Overseas sales refer to sales that are generated outside the Republic of Korea and
are the sum of overseas contract deposit and overseas running royalty.
	 
	 	15.	 	Sharing of overseas sales refers to sharing of net sales earned through overseas
commercialization of the game.
	 
	 	16.	 	Various costs refer to each of the following costs required in providing the services
of the game to online users.

	 	1)	 	V. A. T
	 
	 	2)	 	Costs paid to the settlement service agency (including fees)
	 
	 	3)	 	Fees paid to Internet café general agencies and agents
	 
	 	4)	 	Costs for any compensation, rewarding and refunds in connection with sales
generated by users, Internet café general agencies and/or agents in accordance with
related laws and regulations, plus costs required for refunding
	 
	 	5)	 	Costs for the exchange of money when currency exchange is required
	 
	 	6)	 	Costs defined through both parties’ written agreement

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	 	7)	 	Withheld taxes on the price of overseas exports

	 	17.	 	Marketing refers to domestic and overseas advertising, publicity and events to boost
the sale and service of the game, as well as its brand awareness and users.
	 
	 	18.	 	Close beta test refers to closed or open pilot service procedures before
commercialization with a view to bug and lag correction, stress test, game balance test,
gathering of user feedbacks and more aimed at improving the quality of the game.
	 
	 	19.	 	Open beta test refers to open pilot services before commercialization (or partial
pay-based services), also to all procedures that are conducted to ensure a successful
commercialization (or partial pay-based services) of the game, such as marketing
strategies and charging methods, in addition to intensive close beta test. This also means
100% completion of localization (language, map, items, and events) in the case of overseas
operation.

     Chapter 2 Provision of Rights to Global Publishing

Article 4 (Details of Rights)

	 	1.	 	Through its rights to the game obtained from Sonnori, Gravity may provide the game in
the form of a PC platform-based package or online services, and to that end, it may
reproduce, sell, transmit, and distribute the game.
	 
	 	2.	 	If necessary, Gravity may, through its agreement with Sonnori, allow a third party to
provide the game in the form of a PC platform-based package or online services, and to
that end, it may conclude an agreement with a third party to re-license him to reproduce,
sell, transmit, and distribute the game.
	 
	 	3.	 	Gravity’s rights to the game shall include rights under Sections 1 and 2 of Article 4
herein, PC platform-based packages, derivatives from primary and secondary authored
products (publishing materials, stationeries, clothing, miscellaneous goods, bags,
accessories, sewn stuffs, shoes, caps, etc.), mobile platforms, and animations, as well as
business rights to secondary online authored products and character merchandizing
(including re-licensing rights).

Article 5 (Territory for and Scope of Rights)

     Gravity shall have the rights specified under Article 4 to the Republic of Korea, all other
nations around the world, and organizations acknowledged as nations.

Article 6 (Enforcement)

This Agreement shall take effect on its conclusion date, and shall be enforced for five years

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from the starting of the pay-based services of the game in Korea, and for five years from the
starting of the initial open beta service in one country in overseas operations. Likewise, this
Agreement shall automatically extend for another year after it ends unless both parties express
their views otherwise; provided that in the case of automatic extension of this Agreement, the
price under Articles 12 and 13 shall not be separately paid.

     Chapter 3 Roles and Duties

Article 7 (Role and Duty of Gravity)

	 	1.	 	Gravity shall structure and manage servers and lines required for providing the
services of the game.
	 
	 	2.	 	Gravity shall conduct publicity and marketing, and hold events to promote the
services of the game.
	 
	 	3.	 	Gravity may conclude new agreements to license third parties to offer the services of
the game and reproduce the game to that end, in accordance with Articles 4 and 5.
	 
	 	4.	 	Gravity may request the renewal and amendment of the game.
	 
	 	5.	 	Gravity may select developers who will provide additional titles to the game, manage
agreements with them, and conclude and manage agreements to enable Sonnori and developers
to smoothly perform work relating to the game.
	 
	 	6.	 	If necessary, Gravity may commission part or all of work specified in above Sections
to third parties.

Article 8 (Role and Duty of Sonnori)

	 	1.	 	As a copyright holder of the game, Sonnori shall confirm the intellectual property
rights of the game, and in case disputes arise due to reasons attributable to Sonnori in
this regard, Sonnori shall resolve them using its own efforts and costs.
	 
	 	2.	 	Sonnori shall conduct the development of overall server programs and client programs
of the game, the systems and stories of the game, and others.
	 
	 	3.	 	Sonnori shall maintain and renew the game.
	 
	 	4.	 	Sonnori shall positively cooperate with Gravity to enable it to conduct work required
for publicity, marketing, advertising and events to provide the services of the game.
	 
	 	5.	 	Except force majeure reasons such as natural disasters, national emergency state,
commotions, and wars, Sonnori shall ensure a stable provision of the game during the
period of this Agreement; provided that in case the service stoppage is inevitable due to
regular checks and technical reasons, Sonnori may stop the services for a certain

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	 	 	 	period through its agreement with Gravity.
	 
	 	6.	 	Sonnori shall endeavor to provide design sources requested by Gravity (design
artworks, and design manuals for illustrations) within the required period.
	 
	 	7.	 	Sonnori shall craft and maintain the homepage of the game.
	 
	 	8.	 	Sonnori may conduct advertising and publicity after obtaining Gravity’s proofreading
thereof.
	 
	 	9.	 	Sonnori shall respond to users’ questions relating to the services of the game and
operate this system.
	 
	 	10.	 	In providing developers’ additional titles to the game, Sonnori shall fulfill the
agreements between Gravity and developers and undertake to craft and operate the game.
	 
	 	11.	 	Sonnori shall cooperate with Gravity or related third parties to allow them to
smoothly perform the operational work under Section 6 of Article 7.

     Chapter 4 Services

Article 9 (Pay-based Service Regulations)

	 	1.	 	In providing the services of the game, both parties shall separately discuss and
determine the time and method of offering pay-based services of the game.
	 
	 	2.	 	Gravity shall determine the settlement means and method for the pay-based services of
the game, and also shall oversee the settlement procedure.
	 
	 	3.	 	If both parties see a need to change the service fees of the game, they shall discuss
and determine whether to do so and the amount of service fees at least 15 days prior to
applying such changed fees.

Article 10 (Service Schedule)

	 	1.	 	Both parties shall begin the open beta service of the game in December 2005.
	 
	 	2.	 	The open beta service period shall be discussed and determined by both parties not to
exceed six months.
	 
	 	3.	 	The pay-based services of the game shall begin in the Republic Korea in June 2006.
	 
	 	4.	 	The above service schedule may be changed through both parties’ written agreement.

Article 11 (Mutual Provision of Information)

	 	1.	 	To ensure successful services and marketing of the game, Gravity may request that
Sonnori provide related data relating to the game, and Sonnori shall immediately comply
with such a request.

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	 	2.	 	Sonnori may have access to Gravity’s service details of the game
	 
	 	3.	 	Both parties shall immediately notify each other of a change in their address and
contacts.

     Chapter 5 Payment for the Price of Global Publishing Rights and Earnings Sharing

Article 12 (Payment for the Price of Global Publishing)

In return for obtaining of sale rights to Sonnori’s game, Gravity shall pay Sonnori 3 billion
(3,000,000,000) won.

Article 13 (Payment Method of Global Publishing Price)

Gravity shall make gradual payment to Sonnori on the basis of each of the following Section. The
payment shall be paid in Korean won within 15 days of the base date specified in each Section.

	 	1.	 	Within 15 days of the conclusion of this Agreement, Gravity shall pay Sonnori 500
million (500,000,000) won, in addition to the already paid 1.5 billion (1,500,000,000)
won.
	 
	 	2.	 	Gravity shall pay Sonnori 500 million (500,000,000) won within 15 days of the open
beta service of additional titles, “Love Forty” and “TV Heroes,” which Sonnori provides to
the game.
	 
	 	3.	 	Gravity shall pay Sonnori 500 million (500,000,000) won within 15 days of the
commencement of commercialized services of all game products specified under Section 2 of
Article 13.
	 
	 	4.	 	Gravity shall inherit Sonnori’s rights and duties specified in agreements in
Attachment 5 which were concluded prior to this Agreement between Sonnori and developers
(referring to third parties who concluded agreements with Sonnori to develop the game
under this Section), shall pay Sonnori the already settled contract deposit between
Sonnori and developers within 15 days of its confirmation thereof, and then shall pay
Sonnori the remaining contract deposit and remaining price in accordance with the
agreed-upon schedule in the agreements made between Sonnori and developers. However, to
fulfill this Section, Sonnori shall provide Gravity with the original copies of agreements
already signed and details of the bank account specifying the payment of the price in
accordance with such agreements. Likewise, Sonnori shall provide Gravity with written
agreements of the developers that rights and duties specified in agreements in Attachment
5 shall be inherited by Gravity in accordance with this Agreement.

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Article 14 (Earnings Sharing at Home and Abroad)

	 	1.	 	Both parties shall share earnings falling under Subsection 1) of earnings generated
through the services of the game in the Republic of Korea at the ratio of 40% for Gravity,
30% for Sonnori, and 30% for the developer. However, such earnings shall be shared after
deducting the business owner’s V. A. T., fees for charging service fees, and other
third-party fees from them, and receivables shall be shouldered by Gravity. Earnings
falling under Subsection 2) shall be shared at the ratio of 45% for Gravity, 10% for
Sonnori, and 45% for the developer; provided that earnings sharing under Subsection 2)
shall apply only to the existing concluded agreements, and earnings sharing after the
conclusion of this Agreement shall follow Subsection 3). However, earnings sharing under
Subsection 4) shall be conducted through subsequent mutual agreement.

	 	1)	 	Of the game sales, sales generated by platforms involving developers’
codes.
	 
	 	2)	 	In case Sonnori and developers had already concluded earnings sharing
agreements prior to this Agreement regarding the developers’ additional titles
provided to the related game and related earnings have been generated of the game
sales
	 
	 	3)	 	In case Gravity and developers have concluded agreements regarding
the developers’ additional titles provided to the related game, Gravity shall pay
Sonnori 10% of net sales of the game sales. Likewise, sharing ratios for remaining
earnings shall be determined through mutual agreement between Gravity and
developers, and Gravity shall not be obliged to notify Sonnori of corresponding
agreement details.
	 
	 	4)	 	In case sales by services other than services under above three
Subsections are generated of the game sales

	 	2.	 	Earnings on sales generated by services provided by Gravity to the game shall be
shared at the ratio of 90% for Gravity and 10% for Sonnori (this applies to both domestic
and overseas services).
	 
	 	3.	 	Earnings on sales generated by services provided by Sonnori to the game shall be
shared at the ratio of 45% for Gravity and 55% for Sonnori (this applies to both domestic
and overseas services).
	 
	 	4.	 	Of sale rights details specified under Section 3 of Article 4, earnings on service
items except mobile games and additional game services shall not be shared for two years
after the conclusion of this Agreement, but shall instead belong to Gravity. Likewise, two
years later, such earnings after deducting costs from them shall be shared at the

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	 	 	 	ratio of 80% for Gravity and 20% for Sonnori. Mobile game and additional game service items
shall be determined later through mutual written agreement; provided that Sonnori’s own
developments shall have no relations with its earnings sharing with Gravity and Gravity’s
rights (this applies to both domestic and overseas services).
	 
	 	5.	 	Of earnings on overseas sales of the game, earnings falling under Subsections 1) and
2) shall be shared at the ratio of 60% for Gravity and 40% for Sonnori. Earnings under
Subsection 3) shall be shared at the ratio of 60% for Gravity, 20% for Sonnori, and 20%
for the developer. Earnings under Subsection 4) shall be shared at the ratio of 60% for
Gravity, 10% for Sonnori, and 30% for the developer.

	 	1)	 	In the case of contracted initial sales in connection with the game
	 
	 	2)	 	In the case of sales of the game itself
	 
	 	3)	 	In the case of sales of the game platforms
	 
	 	4)	 	In the case of sales of the developer’s game

Article 15 (Earnings Settlement Procedures)

	 	1.	 	Gravity shall pay Sonnori in cash a due share of earnings on sales generated by the
services in the Republic of Korea every month.
	 
	 	2.	 	Gravity shall send monthly settlement details by the 15th of the next
month to Sonnori and developers to enable them to confirm them.
	 
	 	3.	 	Sonnori and developers shall offer opposition — if any — to such settlement details
to Gravity within 10 days of the receipt thereof. If there is no opposition from Sonnori
and developers, this shall be regarded as Sonnori and developers agreeing to such
settlement details.
	 
	 	4.	 	Gravity shall in principle settle the monthly payment to Sonnori and developers by
the 12th of the month after the following month.
	 
	 	5.	 	Overseas sales shall follow Gravity’s accounting principle, and related shared
earnings shall in principle be paid by the 12th of the month after the
following month, on the basis of sales occurrence dates.

Article 16 (Settlement Method)

     Gravity shall receive tax invoices from Sonnori and developers in accordance with settlement
criteria under Article 15, and automatically transfer the requested amounts from its bank account
to bank accounts designated by Sonnori and developers, respectively, within 30 days of the receipt
thereof (provided that such designated bank accounts of Sonnori and

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developers shall be separately determined by Gravity, and Sonnori and developers shall comply with
this decision).

Article 17 (Basic Settlement Data)

	 	1.	 	Either party shall not improperly amend or delete/add his respective service details.
	 
	 	2.	 	Gravity shall tally results of the services of Sonnori’s game by period, and provide
them to allow Sonnori to access them.

     Chapter 6 General Matters

Article 18 (Confidentiality)

	 	1.	 	Either party shall not use data provided by the other party and any business
information of the other party additionally acquired for purposes outside this Agreement,
nor leak the same to third parties by means other than laws.
	 
	 	2.	 	Obligations specified under Section 1 above shall be enforced for three years after
this Agreement ends, and in case one party has violated this and caused damage to the
other party, the defaulting party shall be held liable for such damages to the
non-defaulting party.

Article 19 (Ban on Transfer)

Either party shall not transfer his rights and duties herein to third parties without the written
agreement of the other party.

Article 20 (Cancellation and Termination of Agreement)

Under the following circumstances, the non-defaulting party may terminate this Agreement.

	 	1.	 	In case either party has failed to fulfill his duties herein or has violated this
Agreement, and has received a written notice from the other party to correct this, but has
failed to do so within 7 days of the receipt thereof,
	 
	 	2.	 	In case either party has faced bankruptcy or excessive debts, thereby leaving part or
all of his properties to belong to third parties,
	 
	 	3.	 	In case either party has faced consequential management circumstances such as
commencement of reorganization, application for composition, mergers, and enforced
execution proceedings, and thus the fulfillment of this Agreement is deemed to be
difficult,
	 
	 	4.	 	In case either party has delegated or transferred part or all of this Agreement to
third parties without the agreement of the other party, and has used the same for
security,

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	 	 	 	and

     5. In case either party has delayed the fulfillment of his duties herein, thereby making it
impossible to achieve the purpose of this Agreement.

Article 21 (Effects of Agreement Termination)

	 	1.	 	In case this Agreement has been cancelled due to consequential reasons attributable
to Gravity before the commencement of the beta service in the Republic of Korea, Gravity
shall not recollect the price already paid for its global publishing of the game.
Likewise, in case such a cancellation has occurred due to reasons attributable to Sonnori
before the commencement of the beta service in the Republic of Korea, Sonnori shall
compensate Gravity in cash for double the total amount paid through the accounting. The
subsequent payment shall be determined by Gravity.
	 
	 	2.	 	In case the services have stopped due to reasons attributable to Sonnori after the
commencement of the beta services in the Republic of Korea, or this Agreement has been
cancelled due to similar consequential reasons attributable to Sonnori, Sonnori shall
compensate Gravity in cash for double the total amount paid by Gravity (the payment method
shall be determined by Gravity), and shall transfer the entire source program to Gravity
free of charge.

Article 22 (Liability for Damages)

The defaulting party shall compensate the non-defaulting party for damages sustained by the latter,
and the effectivity of the termination of this Agreement specified under Article 21 shall not
supersede or exempt such liability for damages.

Article 23 (Observance of Laws)

Both parties shall observe the laws of related regions and countries where the services are
offered. In case civil and criminal disputes have arisen because of violations of such laws, the
party accountable for such disputes shall in principle resolve them. However, in case the
non-defaulting party has to inevitably resolve such disputes, the defaulting party must shoulder
the corresponding costs, which should naturally include compensation for efforts made by the
non-defaulting party.

Article 24 (Amendment)

This Agreement may, if necessary, be amended or complemented in part or in its entirety through
mutually signed agreement.

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Article 25 (Others)

Matters not specified herein shall follow general business customs and the laws of the Republic of
Korea, and matters requiring separate agreement shall be determined through mutual agreement with
the related agreement attached thereto.

Article 26 (Competent Court)

With respect to the resolution of disputes arising from this Agreement, a competent court shall be
the first-trial court which has jurisdiction over the location of Gravity’s headquarters.

Article 27 (Execution)

Both parties shall execute two original copies of this Agreement, and each party shall keep one
copy thereof.

November ___, 2005

	 	 	 
	Ryu Il-young

	 	Lee Won-sul
	Chairman and CEO

	 	Chairman and CEO
	Gravity Co., Ltd.

	 	Sonnori Co., Ltd.
	620-2 Sinsa-dong, Gangnam-gu, Seoul

	 	2nd floor, Gwansun Building,
	 

	 	1303-3, Seocho-dong, Seocho-gu, Seoul

# Attachment 1: Development Plans

# Attachment 2: Development Schedule

# Attachment 3: Development Manpower Schedule / Job Description

# Attachment 4 : Service Development List at the conclusion of this Agreement

# Attachment 5 : Copies of agreements between Sonnori and developers that Gravity has

inherited

# Attachments: Certificate of business registration/Transcript of Corporate Register/List of
Shareholders/Financial Statements

11exv4w1

 

EXHIBIT 4.1

This is only an English translation of the agreement in Chinese.

This English translation shall not have any binding effect.

No responsibility can be accepted for reliance upon it.

DIRECTOR’S SERVICE AGREEMENT

CHINA SOUTHERN AIRLINES CO., LTD.

After friendly negotiations in the spirit of equality and mutual benefit, China
Southern Airlines Co., Ltd. (hereinafter referred to as “Party A” or the “Company”) and (“Party
B”), who is currently domiciled at , entered into this Service Agreement on at Party A’s domicile
in Guangzhou Municipality, Guangdong Province, under which they agree
as follows:

ARTICLE 1 EMPLOYMENT

1.1 This Agreement is intended to define and govern the relationship between Party A as
employer and Party B as employee.

1.2 Subject to the terms and conditions hereof, Party A agrees to employ Party B as director of
its board of directors.

1.3 Subject to the terms and conditions hereof, Party B agrees to accept Party A’s employment
and serve as Party A’s director.

ARTICLE 2 TERM OF EMPLOYMENT

2.1 Party
B’s term of employment as Party A’s director is three (3) years, beginning on ___ and
ending ___.

2.2 Prior to the expiration of Party B’s term of office as Party A’s director, Party A shall
not remove Party B from his office without any cause except as provided in Article 6 hereof.

ARTICLE 3 PARTY B’S RESPONSIBILITIES

3.1 Party B represents and warrants that he shall perform his duties in accordance with the
Company Law of the People’s Republic of China and other applicable laws and administrative
regulations, as well as Party A’s articles of association, this Agreement and resolutions of Party
A’s shareholders meeting.

3.2 During his term of office, Party B shall

(1) as director of the Company, perform such duties and exercise such powers Party A’s
shareholders meeting and board of directors shall assign or grant him from time to time;

(2) comply with the lawful orders and instructions which the Company’s shareholders’ resolution
or board of directors shall give or make from time to time, serve the Company in good faith and
with due care, and use his best efforts to promote the business of the Company; and

(3) attend to the business and interests of Party A with due diligence, and deal with matters
relating to the Company’s business and interest during business hours and at any other time at the
reasonable request of the Company, except when Party B is not able to attend due to illness or
other unexpected event.

Under such circumstances, he should give prompt notice on the Company, and provide evidence of
such illness or event at the request of the Company.

3.3 During his term of office as director of the Company, Party B shall undertake not to

(1) Embezzle Party A’s funds or lend such funds to others;

(2) Deposit Party A’s funds in an account under his name or under the name of any other
individual;

(3) Use Party A’s assets as collateral for the debts of the Company’s shareholders or other
individuals;

(4) Operate for himself or for others in the same line of business as Party A’s, or engage in
activities detrimental to the interests of Party A;

(5) Seek personal interest by using his position in the Company; or

(6) Accept bribery or other unlawful incomes which come his way because of his position in the
Company, or convert Party A’s property to himself.

3.4 Party B shall

(1) Act in good faith and in the overall interest of Party A;

(2) Act with an appropriate purpose;

(3) Account to Party A for the use or misuse of Party A’s assets;

(4) Avoid any actual or potential conflict of interest or state of divided loyalty;

(5) Disclose unreservedly and fairly Party B’s interest in his agreement with Party A; and

 

 

(6) Act with the skill, care and diligence reasonably expected of a person having the same
experience and knowledge and holding the position as Party A’s director.

3.5 In performing his duties as director of the Company, Party B shall be held liable for any
loss or injury of Party A that results from Party B’s violation of the laws, administrative
regulations, as well as Party A’s articles of association.

3.6 Party B shall not engage in any activity that competes with the business of the Company in
any country or region during the term of his office or within 12 months thereafter. However, this
provision only applies to the products or services Party B is responsible for or related to during
the said term of office.

3.7 During the term of his office and within 12 months thereafter, Party B shall not cause any
customers or suppliers of the Company to become customers or suppliers of any other third party,
nor shall he induce them to terminate their business with the Company.

3.8 During the term of his office and within 12 months thereafter, Party B shall not induce any
employee of the Company to leave the Company or hire other employees from the Company.

3.9 At no time after the termination of his term of office shall Party B use for whatever
purpose the name of the Company (both English and Chinese) or any other name similar thereto
together with his own name or any other name to indicate that he is or was affiliated with the
business of the Company. Nor shall he claim any such affiliation in any other way.

3.10 Party B has the right to:

(1) Request Party A to provide the necessary working conditions and terms; and

(2) Seek compensation from Party A in the occurrence of economic loss or punishment
consequent to a decision made in good faith by Party B.

ARTICLE 4 COMPENSATIONS AND EXPENSES

4.1 During Party B’s term of office, Party A shall pay an annual amount in RMB determined by
the Company’s policy as compensation for Party B’s service, which he renders according to the terms
of the Agreement as director of the Company.

4.2 Payment and amount of the director’s compensation may be altered by resolution of the
Company’s shareholders meeting.

4.3 Party A shall withhold Party B’s individual income tax from his income.

4.4 Party A and Party B shall, in accordance with relevant provisions of Chinese law, pay to
relevant authorities or insurance companies their respective share of insurance premium for medical
care, pension, unemployment, and for insurance against work-related accidents.

4.5 Party A shall be responsible for the reasonable expenses (such as traveling expenses) which
Party B incurs in rendering services to Party A as director or for the purpose of Party A’s
business. If such expenses have already been paid by Party B, Party A shall reimburse Party B in
accordance with Party A’s relevant rules of financial management, provided, however, that Party B
shall provide valid receipts or invoices. Party A may also advance Party B such payments for Party
B to cover these necessary expenses. After using such advance money, Party B shall provide valid
receipts or invoices for the said expenses for final settlement at a time requested by Party A.

4.6 Party B shall be entitled to annual paid leaves, which shall not include statutory
holidays. The number of days of the annual paid leave shall be decided by the board of directors.
Party B shall take leave at a time convenient to the board of directors after all urgent corporate
matters have been taken into consideration, provided, however, that

(A) Party B shall be entitled to paid leaves on a pro-rata basis according to the days of his
actual employment by the Company in the year if his employment is terminated for reasons other than
that under Article 6.2 hereunder;

(B) If in any given year Party B does not take full advantage of the paid leaves, he has no
claim on the Company, except when the Company holds in its own judgment that this is caused by the
burdensome or urgent nature of his duty. Under such circumstances he can use the paid leave he is
entitled to in the following year.

4.7 If Party B is unable to perform his duty under this Agreement due to illness, injury or
accidents, he is still entitled to full compensation for one month or any shorter period during
which he remains incapable of performing his duty, provided, however, that he provides evidence or
reasons of his incapability satisfactory to the board of directors. If he remains incapable of
performing his duty for more than six consecutive months, his compensation as director shall be
withheld.

4.8 Party B may be removed from office by resolution of a shareholders meeting if he materially
breaches any provision hereunder, if he seriously injures the interests of the Company, if he is
bankrupt or insolvent, or if he has committed a crime. After his removal from office, Party B shall
not be entitled to any bonus or other payments except his salary for that month on a pro-rata
basis. Nor shall he be entitled to any damages for such removal.

4.9 If
Party B’s employment is terminated for reasons other than that
under Article 6.2,

(A) Party B shall be entitled to

(1) his prorated last monthly salary according to his actual days of employment in the month,
in accordance with Article 2.1 hereunder;

(2) his share of bonus for the last year of his employment under the Agreement, as decided by
the board of directors in accordance with Article 2.1 hereunder; and

(3) paid leaves for the last year of his employment under the Agreement, in accordance with
Article 4.6 hereunder. Party B shall ask

 

 

for such leave before the termination of his employment; and

(B) Party B shall not claim any damages against the Company for termination of his employment
hereunder.

ARTICLE 5 CONFIDENTIALITY

5.1 Party B is aware that he has access to Party A’s commercial secrets in performing his
duties as director of the Company. These commercial secrets include, without limiting to, documents, materials, data, information,
plans, inside news, etc. Party B acknowledges that these secrets are Party A’s proprietary rights, and Party B is obligated to keep the
confidentiality of such secrets.

5.2 Party B guarantees that at any time, including after the expiration or termination of his
employment,

(1) he will not disclose to any third party any confidential materials under Article 5.1
hereunder in any manner, except information which must be disclosed to related employees of Party A
or experts hired by Party A for performance of his duty as director.

(2) he will not use such confidential information in any way for his own benefit or for the
benefit of his friends or relatives.

(3) he will take necessary actions to prevent such confidential information from being
disclosed or disseminated to any third party unauthorized by Party A; and

(4) he will return to Party A all materials relating to Party A’s business in a timely and
valid manner before expiration or early termination of his term of office, including without
limiting Party A’s documents, notes taken by himself, records, reports, handbooks, blueprints,
graphs, disks, tapes, models and samples. To avoid any ambiguity, it is hereby declared that all
such documents belong to the Company at any time.

5.3 Party B agrees that all intellectual property rights in connection with products that are
developed, created or manufactured during his term of office as director of the Company are the
proprietary rights of Party A.

ARTICLE 6 TERMINATION OF EMPLOYMENT

6.1 Under any of the following circumstances, the employment relationship between Party A and
Party B shall be terminated:

(1) Party B’s term of office as director expires;

(2) Party B dies;

(3) Facts have been unearthed which, according to statutes, disqualify Party B as director, and
the shareholders meeting has decided to terminate his employment by resolution.

(4) Party B fails to perform his duty for six (6) months due to illness or other reasons, upon
approval by the resolution of the shareholders.

6.2 Under any of the following circumstances, Party A may terminate its employment relationship
with Party B by written notice:

(1) Party B has brought injury or loss to Party A intentionally or as a consequence of wanton
misconduct in performing his duty as director;

(2) Party B breaches his duty as director or violates the provisions of this Agreement, and
refused to correct his behavior after a warning;

(3) Party B violates the law in matters unrelated to Party A during his term of office, or
damages the reputation of Party A because of his personal conduct.

6.3 Termination of employment hereunder does not eliminate Party A’s existing rights under
Articles 5 and 6. Articles 5 and 6 hereunder shall survive the termination of the employment
relationship.

ARTICLE 7 OTHERS

7.1 This Agreement is an agreement for Party B’s rendition of personal service as director.
Therefore, the rights, interests, obligations and duties of Party B hereunder shall not be assigned
or delegated to any third party, except the right to attend Party A’s board meetings, which may be
exercised by proxy upon his written authorization.

7.2 Neither Party shall add to, delete or amend this Agreement or any provisions herein without
the written consent of both Parties.

7.3 The law of the People’s Republic of China shall govern the execution, interpretation, and
performance of this Agreement as well as dispute resolution hereunder.

7.4 Disputes that arise out of the performance of this Agreement shall be resolved by the
Parties through friendly negotiations. If the Parties are unable to resolve their disputes through
negotiation, either Party may institute a legal action at a people’s court with competent
jurisdiction.

7.5 In the event that either Party breaches this Agreement, fails to perform its obligation
hereunder, or renders non-conforming performance, the other Party has the right to request
correction within a specific period of time, specific performance, removal of hindrances, damages
and other remedies. Failure of either Party to exercise its right or a part of its right hereunder
does not constitute a waiver of such right or such partial right.

7.6 Written notice under this Agreement may be delivered face-to-face, personally, or by fax or
mail service. Party B shall notify Party A of his new address within 10 days after any address
changes.

7.7 The Employee Handbook is attached hereto as a valid component part of this Agreement.

 

 

7.8 This Agreement shall become effective as of the date of its execution.

7.9 This Agreement shall have two counterparts, one for each of Party A and Party B.

Party A

China Southern Airlines Company Limited

Legal Representative:

Party B

Date :

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