Aerostrong Business Agreement
On November 11, 2011, the Company entered into a Business Agreement (“Aerostrong Business Agreement”) with Aerostrong Company Limited (“Aerostrong”). The Company will partially meet its contractual obligations with Aerostrong through Beijing Yunji, which is a technical service company engaged mainly in the business of telecommunication service related technology development, consulting, design, deployment management and operation management. Aerostrong is a subsidiary of China Aerospace Science and Technology Group (“China Aerospace”). Aerostrong holds a PRC-issued license for value added telecommunication services by which Aerostrong is authorized to provide these services throughout China and internet services in 18 major cities in China. Aerostrong has been commissioned by Beijing Zhengzhou Software Technology Co., Ltd., a subsidiary of the China Aerospace, to deploy an internal wireless broadband network (“Commercial Network”) and application platform for China Aerospace. The Commercial Network will cover the companies, research institutions and other entities owned by or affiliated with China Aerospace. The preliminary estimated total investment in the Commercial Network is approximately $32.15 million, and the estimated investment for Phase 1 of the Commercial Network is approximately $8.4 million. Aerostrong and Beijing Yunji will enter into agreements for the implementation of projects and for Beijing Yunji to act as the exclusive contractor for Aerostrong to provide deployment management, operation management and other services for the projects. Beijing Yunji and/or the Company will pay for all capital expenditures, operating expenditures and other negative cash flow in connection with the projects and will arrange financing for the projects. The revenue generated by the telecommunication business will be used in priority to reimburse Beijing Yunji and/or the Company for any amounts paid for by either of them and to repay any financing arranged by Beijing Yunji and/or the Company. Aerostrong and Beijing Yunji will share the profit generated from the telecommunication business in a manner to be agreed to in the services agreement.
Aerostrong Strategic Agreement
On April 19, 2012, Beijing Yunji entered into a strategic business agreement with Aerostrong (“Aerostrong Strategic Agreement”), which is the exclusive services agreement contemplated under the Aerostrong Business Agreement. The term of the Aerostrong Strategic Agreement is from April 19, 2012 until all projects agreed upon between the parties are completed and Beijing Yunji receives the last payment from Aerostrong. The parties will cooperate on application of jointly approved wireless broadband projects for which the rights and obligations of each party will be set forth in a separate project agreement. The agreed upon initial cooperation projects are: (i) the Digital Lijiang management platform project in Guangxi Autonomous Region; (ii) the Shen Hua wireless broadband special network project for railway; and (iii) the overload wireless broadband surveillance projects in Shanxi Province. Aerostrong is responsible for the development and follow-up of governmental markets and industrial markets. The Company is responsible to provide each component usually associated with the design, deployment and operation of a wireless broadband telecommunications network in China.
CASC has more than 120,000 employees distributed among eight R&D and production complexes and approximately 20 other subsidiaries and affiliated enterprises. Its asset value exceeds $20 billion, its annual revenue $10 billion and its annual profit $1 billion. For further information about CASC, please visit www.spacechina.com.
~ There have been no operations during 2013 associated with the Aerostrong Agreements. Neither party has sought to terminate the Aerostrong Agreements. Accordingly, it remains possible that there will be operations in the future. Since the Company made no investment associated with the Agreements, the Company has not been required to make a determination whether to impair any investment.