Purchase and License Agreement - Nortel Networks Ltd. and China Broadband Corp.


China Broadband Corporation                                      NORTEL
                                                                    NETWORKS
PURCHASE AND LiCENSE AGREEMENT                                        



This Purchase and License Agreement ("Purchase and License Agreement") is
between Nortel Networks Limited ("Nortel Networks") and China Broadband
Corporation for itself and on behalf of Big Sky Networks Canada Ltd. ("Big Sky")
and Sichuan Huayu Big Sky Networks Ltd. ("SHBS") ("collectively, Customer")
effective as of the last date signed. Additional terms related to Customer's
purchase or license of Products or Services may be added by written agreements
("Supplements") referencing the Purchase and License Agreement, collectively
referred to as the "Agreement".

1. DEFINITIONS
a) "Furnish-only" means Products that Customer installs.
b) "Hardware" means a Nortel Networks machine or components.
c) "Products" are any Hardware, Software or Third Party Vendor Items provided
under this Agreement.
d) "Services" includes associated engineering, maintenance and installation; and
consulting, network management, software services and other telecommunication
support services as quoted and set forth in a Supplement.
e) "Software" is owned or licensed by Nortel Networks, its parent or one of its
subsidiaries or affiliates, and is copyrighted and licensed, not sold. Software
consists of machine-readable instructions, its components, data, audio-visual
content (such as images, text, recordings or pictures) and related licensed
materials including all whole or partial copies.
f) "Third Party Vendor Item" includes "Third Party Hardware" and "Third Party
Software" and meets any non-Nortel Networks hardware and/or software supplied to
Customer under this Agreement.

2. ORDERS
Customer may acquire Products or Services by issuing a written purchase order
signed by an authorized representative or, if Customer is enrolled in Nortel
Networks' Order Online Progtam, by submitting electronic orders (collectively,
"Orders"). All Orders shall reference this Agreement and specify the quantity,
price, Nortel Networks quotation number, shipping and billing instructions,
requested delivery dates, requested commencement date for Services and any other
special instructions. All Orders will be governed by and cannot alter the terms
and conditions of this Agreement. Nortel Networks' written or electronic
communication accepting the Order, shipment of Products or commencement of
Services will be Nortel Networks' acceptance of Customer's Order.

3. ORDER ONLINE PROGRAM
Nortel Networks has established an Order Online Program to facilitate electronic
transactions. By enrolling in the Order Online Program, Customer agrees to
comply with the Order Online Program Terms. Customer agrees that all electronic
Orders issued are equivalent to a written Order, are governed by the terms and
conditions of this Agreement and that in the event of any conflict between this
Agreement and the information contained in Customer's Order Online website, this
Agreement governs. Customer is responsible for the use and protection of all
Order Online passcodes provided by Nortel Networks and agrees that all Orders
submitted using such passcodes are valid and binding Orders authorized by
Customer. Nortel Networks shall have no liability to Customer due to Customer's
failure to access Customer's Order Online website or errors or failures relating
to its operation.

4. LICENSED USE OF SOFTWARE
Nortel Networks grants Customer a nonexclusive license to use Software to the
extent of the activation or authorized usage level. To the extent Software is
furnishcd for use with designated Hardware, Customer is granted a nonexclusive
license to use Software only on such Hardware. Software contains trade secrets
and Customer agrees to treat Software as confidential information. Customer will
ensure that anyone who uses the Software does so only in compliance with the
terms of this Agreement. Customer shall not a) use, copy, modify, transfer or
distribute the Software except as expressly authorized; b) reverse assemble,
reverse compile, reverse engineer or otherwise translate the Software; c) create
derivative works or modifications unless expressly authorized; or d) sublicense,
rent or lease the Software. Licensors of intellectual property to Nortel
Networks are beneficiaries of this provision. Upon termination of the license
for any reason, Customer will promptly return the Software to Nortel Networks or
certify its destruction. Nortel Networks may audit by remote polling or other
reasonable means to determine Customer's Software activation or usage levels.
With respect to Third Party Software, Customer agrees to abide by the terms
provided by Nortel Networks with respect to any such software. Customer further
agrees that the terms contained in any Nortel Networks or third party "shrink
wrap" or "click" licenses shall govern the use of such software.

5. CHARGES AND PAYMENT
Amounts are due upon receipt of invoice and shall be paid by Customer within 30
days. Customer shall pay interest on any late payments at the rate of 18% per
annum (1 1/2 % per month.) Nortel Networks will inform Customer in advance
whenever additional charges apply. Additional charges shall apply for shipping,
insurance and special handling. Charges for Software may be based on extent of
use authorized as specified in a Supplement or invoice. Customer agrees to pay
the charges applicable for any activation or usage beyond the authorized level.
If any authority imposes a tax, duty, levy or fee, excluding those based on
Nortel Networks' net income, upon a Product or Service supplied by Nortel
Networks under this Agreement, Customer agrees to pay that amount as specified
in the invoice, or supply exemption documentation. Customer is responsible for
personal property taxes for each Product from the date of shipment by Nortel
Networks. Customer consents without qualification to the sale of receivables by
Nortel Networks without further notice and authorizes the disclosure of this
Agreement and Supplements as necessary to facilitate such sale.

6. WARRANTY 
a) Nortel Networks warrants that Hardware i) is free from defects
in materials and workmanship and ii) substantially conforms to Nortel Networks'
published specifications. If Hardware does not function as warranted during the
warranty period, Nortel Networks will determine to either i) make it do so, or
ii) replace it with equivalent Hardware.
b) Nortel Networks warrants that when Software is used in the specified
operating environment it will substantially conform to its published
specifications. 1f Software does not function as


Proprietary and Confidential Information                                       1
                                                                               




China Broadband Corporation                                      NORTEL
                                                                    NETWORKS
PURCHASE AND LiCENSE AGREEMENT                                        


warranted during the warranty period, Nortel Networks will provide a suitable
fix or workaround or will replace the Software; provided Software is within one
software release level of the then-current software.
c) Services will be performed in a professional and workmanlike manner. If
Services are not performed as warranted, Nortel Networks will correct the
defective Services.
d) The warranty period for Hardware and Software shall be the warranty period
identified in the Nortel Networks Warranty Matrix in effect at the time of
Customer's Order. In the event Nortel Networks determines that repair or
replacement as set forth in this Section 6 cannot be made using commercially
reasonable efforts, Nortel Networks will refund to Customer the price paid for
the Product, less applicable depreciation.
e) No warranty is provided for i) supply items normally consumed during Product
operation, ii) failures caused by non- Networks products; iii) failures caused
by a Product's inability to operate in conjunction with other Customer hardware
or software; or iv) performance failures resulting from services not performed
by Nortel Networks or Customer's failure to purchase all necessary Products
under this Agreement. Warranty will be voided by misuse, accident, damage or
modification, failure to maintain proper physical or operating environment or
improper Customer maintenance. Software is not warranted to operate
uninterrupted or error free. THESE WARRANTIES AND LIMITATIONS ARE CUSTOMER'S
EXCLUSIVE WARRANTIES AND SOLE REMEDIES AND REPLACE ALL OTHER WARRANTIES OR
CONDITIONS. EXPRESS OR IMPLIED. INCLUDING, BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OR CONDITIONS OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
d) Noetel Networks provides Third Party vendor Items on an "AS IS" BASIS WITHOUT
WARRANTIES OF ANY KIND, unless Nortel Networks specifics otherwise. However,
such Third Party Vendor Items may carry their own warranties and Nortel Networks
shall pass through to Customer any such warranties to the extent authorized.

7. WARRANTY SERVICE
Nortel Networks provides certain types of warranty repair and exchange service,
without charge. Nortel Networks will inform Customer of the types of warranty
services available to Customer consistent with Nortel Networks standard
practices and response times. Nortel Networks Technical Assistance Services
("TAS") are available for warranty repair during the warranty period at no
charge only for specified Products. When Customer is required to return Hardware
to Nortel Networks for warranty service, Customer agrees to ship it prepaid and
suitably packaged to a location Nortel Networks designates. Nortel Networks will
return the Hardware to Customer at Nortel Networks' expense. Nortel Networks is
responsible for loss of, or damage to, Customer Hardware while is is a) in
Nortel Networks' possession or b) in transit back to Customer. Any exchanged
Hardware becomes Nortel Networks' property and, subject to Section 8 Title and
Risk of Loss, its replacement becomes the Customer's property. The replacement
Hardware may not be new but will be in working order and equivalent to the item
exchanged. The warranty period for the Hardware shall be the greater of ninety
(90) days from the date of repair or replacement or the remaining Hardware
warranty period. Customer agrees to ensure that exchanged Hardware is free of
any legal obligations or restrictions that prevent its exchange and represents
that all returned items are genuine and unaltered. Where applicable, before
Nortel Networks provides warranty services. Customer agrees to a) follow the
problem determination, problem analysis, and warranty services request
procedures that Nortel Networks provides; b) secure all programs and data
contained in Hardware: and c) inform Nortel Networks of changes in the
Hardware's location. Post warranty Services may be available at Nortel Networks'
then-current prices.

8. TITLE AND RISK OF LOSS
Nortel Networks transfers title to hardware to Customer upon final payment of
the total purchase price. Risk of loss for hardware shah pass from Nortel
Networks to Customer upon delivery to the carrier.

9. IMPLEMENTATION TEND INSTALLATION SERVICES
Customer agrees to provide sufficient, free and safe access to Customer's
facilities and a suitable physical environment meeting Nortel Networks'
specified requirements to permit the timely installation of Products and/or
performance of Services. Nortel Networks will perform its responsibilities in
accordance with the standard Nortel Networks statement of work where applicable.
Nortel Networks will successfully complete its standard installation and
commissioning procedures before it considers Products installed. Nortel Networks
may make alterations to any Product and Service as necessary to comply with
specifications, changed safety standards or governmental regulations, to make a
Product non-infringing with respect to any patent, copyright or other
proprietary interest, or to otherwise improve a product or Service. Customer is
responsible for i) the results obtained from the use of Products and Services;
all integration and interconnection with Customer's hardware and/or third party
hardware and/or systems; and iii) installation of Furnish-only Products.

10. CONFIDENTIAL INFORMATION
a) Confidential information ("Information") means i) Software and Third Party
Software; and ii) all business, technical, marketing and financial information
and data that is clearly marked with a restrictive legend of the disclosing
party ("Discloser').
b) The party receiving Information ("Recipient") will use the same care and
discretion to avoid disclosure, publication or dissemination of Information as
it users with its own similar information that it does not wish to disclose,
publish or disseminate. The Recipient may disclose Information only to i) its
employees and employers of its parent, subsidiary or affiliated companies who
have a need to know for purposes of carrying out this Agreement; and ii) any
other party with the Discloser's prior written consent. Before disclosure to my
of the above parties, the Recipient will have a written agreement with such
party sufficient to require that party to treat Information in accordance with
this Agreement.
c) The Recipient may disclose information to the extent required by law.
However, the Recipient must give the Discloser prompt notice and make a
reasonable effort to obtain a protective order.


Proprietary and Confidential Information                                       2




China Broadband Corporation                                      NORTEL
                                                                    NETWORKS
PURCHASE AND LiCENSE AGREEMENT                                        


d) No obligation of confidentiality applies to any Information that the
Recipient i) already possesses without obligation of confidentiality; ii)
develops independently; or iii) rightfully receives without obligations of
confidentiality from a third party. No obligation of confidentiality applies to
any Information that is, or becomes, publicly available without breach of this
Agreement.
e) The release of any advertising or other publicity relating to this Agreement
requires the prior approval of both patties.

11. PATENTS AND COPYRIGHTS
If a third party claims that Nortel Networks Hardware or Software provided to
Customer under this Agreement infringes that party's patent or copyright, Nortel
Networks will defend Customer against that claim at Nortel Networks' expense and
pay all costs and damages that a Court finally awards or are agreed in
settlement, provided that Customer a) promptly notifies Nortel Networks in
writing of the claim and b) allows Nortel Networks to control, and cooperates
with Nortel Networks in, the defense and any related settlement negotiations. If
such a claim is made or appears likely to be made, Nortel Networks agrees to
secure the right for Customer to continue to use the Hardware or Software, or to
modify it, or to replace it with one that is equivalent. If Nortel Networks
determines that none of these alternatives is reasonably available, Customer
agrees to return the Hardware or Software to Nortel Networks on Nortel Networks'
written request. Nortel Networks will then give Customer a credit equal to
Customer's net book value for the Hardware or Software provided Customer has
followed generally-accepted accounting principles. Any such claims against the
Customer or liability for infringement arising from use of the Hardware or
Software following a request for return by Nortel Networks are the sole
responsibility of Customer. This represents Nortel Networks' entire obligation
to Customer regarding any claim of infringement. Nortel Networks has no
obligation regarding any claim based on any of the following: a) anything
Customer provides which is incorporated into the Hardware or Software; b)
functionality provided by Nortel Networks at the instruction of Customer; c)
Customer's modification of Hardware or Software; d) the combination, operation,
or use of Hardware of Software with other products not porvided by Nortel
Networks as a system, or the combination, operation, or use of Hardware or
Software with any product, data, or apparatus that Nortel Networks did not
provide; or e) infringement by a Third Party Vendor item alone, as opposed to
its combination with Products Nortel
Networks provides to Customer as a system.

12. LIMITATION OF LIABILITY
In no event shall Nortel Networks or its agents or suppliers be liable to
Customer for more than the amount of any actual direct damages up to the
greater of U.S. $100,000 (or equivalent in local currency) or the charges for
the Product or Services that are the subject of the claim, regardless of the
cause and whether arising in contract, tort (including negligence) or otherwise.
This limitation will not apply to claims for damages for bodily injury
(including death) and damage to real property and tangible personal property for
which Nortel Networks is legally liable and payments as set forth in Section l1
Patents and Copyrights. IN NO EVENT SHALL NORTEL NETWORKS OR ITS AGENTS OR
SUPPLIERS BE LIABLE FOR ANY OF THE FOLLOWING: a) DAMAGES BASED ON ANY THIRD
PARTY CLAIM EXCEPT AS EXPRESSLY PROVIDED HEREIN AND IN SECTION 11; b) LOSS OF
OR DAMAGE TO, CUSTOMER'S RECORDS, FILES OR DATA; OR c) INDIRECT, SPECIAL,
INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS OR
SAVINGS), EVEN IF NORTEL NETWORKS IS INFORMED OF THEIR POSSIBILITY.

13. GENERAL
a) Customer agrees not to assign, or otherwise transfer this Agreement or
Customer's rights under it, or delegate Customer's obligations, without Nortel
Networks' prior written consent, and any attempt to do so is void. Customer
represents and warrants that it is buying Products and/or Services for its own
internal use and not for resale. Customer agrees to comply with all applicable
laws including all applicable export and import laws and regulations. Except for
non-payment, neither Customer not Nortel Networks will bring a legal action
under this Agreement more than two years after the cause of action arose.
Neither party is responsible for failure to fulfill any obligations due to
causes beyond its control. In the event that any provision of this Agreement or
portions thereof are held to be invalid or unenforceable, the remainder of this
Agreement will remain in full force and effect.

b) The terms and conditions of this Agreement, including ally Supplement(s)
signed by Nortel Networks and Customer referencing this Agreement and attached
hereto, form the Complete and exclusive agreement between Customer and Nortel
Networks and replace any prior oral or written proposals, correspondence or
communications regarding the subject matter hereof. In the event of a conflict
between this Purchase and License Agreement and a Supplement, the terms in any
Supplement(s) prevail. Any changes to this Agreement must be made by mutual
agreement in writing. All Customer's rights and all of Nortel Networks'
obligations are valid only in the country in which the Products and Services
were supplied; the laws of the State of Ontario govern this Agreement, exclusive
of its conflict of laws provisions; and nothing in this Agreement affects any
statutory rights of consumers that cannot be waived or limited by contract. c)
The Parties have requested that this Agreement be drawn up in the English
language. Ets Parties ont demande que cette convention oit redigee en langue
anglaise.

CHINA BROADBAND CORPORATAION
By:/s/MATT HEYSEL
   ------------------------------
Name: Matt Heysel
     ----------------------------
Title: Chariman & CEO
      ---------------------------
Address: Calgary, AB.
        -------------------------
Date: 26-Sep-00
     ----------------------------

NORTEL NETWORKS LIMITED
By:/s/RICHARD DUGAL
   ------------------------------
Name: Richard Dugal
     ----------------------------
Title: Sales Director
      ---------------------------
Address: Brampton, Ontario
        -------------------------
Date: 28-Sep-00
     ----------------------------


Proprietary and Confidential Information                                       3



China Broadband Corporation                                      NORTEL
                                                                    NETWORKS
WARRANTY MATRIX

        

The following Hardware and Software items shall have the corresponding warranty
periods:

Category Includes Hardware Software -------- ------------------------------------- -------------------------- ---------------------------- A DMS 10, DMS 100, DMS 100W DMS 200, 12 months from ship date 12 months from ship date DMS 250, DMS 300, DMS 300/250, DMS 500. DMS GSP NIS product families. Optical Networks, AccessNode, and Wireless product families -------- ------------------------------------- -------------------------- ---------------------------- B CVX 1800. SS7 Gateway 12 months from ship date 90 days from ship date and Shasta Products -------- ------------------------------------- -------------------------- ---------------------------- C Internet Telephony Products 6 months from ship date 6 months from ship date -------- ------------------------------------- -------------------------- ---------------------------- D Nortel Networks-Bay Products See current Nortel See current Nortel Networks price list Networks price list -------- ------------------------------------- -------------------------- ---------------------------- E Passport Varies depending on the Varies depending on the Performance Pack selected I Performance Pack selected by Customer. See current , by Customer. See current Nortel Networks price list Nortel Networks price list for description of for description of Performanced Pack warranty Performance Pack periods. warranty periods. -------- ------------------------------------- -------------------------- ---------------------------- F All other product families not listed 90 days from ship date 90 days from ship daft above (unless specified otherwise in writing) -------- ------------------------------------- -------------------------- ----------------------------
This Warranty Matrix may be revised from time to time. Proprietary and Confidential Information 4 China Broadband Corporation NORTEL NETWORKS WARRANTY MATRIX The terms and conditions provided in this Supplement ("Supplement") are in addition to those contained in the Purchase and License Agreement dated - and will apply solely to the provision of the Products specified in this Supplement during the term. 1. TERM This Supplement will commence on date of last signature on Purchase and License Agreement and terminate after 12 months ("Term"). 2. SCOPE/ COMMITMENT / RESPONSIBILITIES OF THE PARTIES Nortel Networks will ship the equipment listed in Exhibit A to the mutually agreeable site in Hong Kong. Customer is responsible to ship the goods from Hong Kong into the People's Republic of China ("PRC") to the installation site(s). Customer shall comply fully with all relevant laws. rules and regulations in respect of the importation of the goods into the PRC. China Broadband Corporation warrants that it has the authority to bind Big Sky and SHBS and guarantees the performance by Big Sky and SHBS of all of their obligations Specified in this Agreement CHINA BROADBAND CORPORATION By:/s/MATT HEYSEL ------------------------------ Name: Matt Heysel ---------------------------- Title: Chairman & CEO --------------------------- Address: ------------------------- Date: ---------------------------- NORTEL NETWORKS LIMITED By:/s/RICHARD DUGAL ------------------------------ Name: Richard Dugal ---------------------------- Title: Sales Director, Canada --------------------------- Address: Brampton, Ontario ------------------------- Date: 28-Sep-00 ---------------------------- Proprietary and Confidential Information 5
China Broadband Corporation NORTEL NETWORKS PLA SUPPLEMENT EXHIBIT "A" MODEL DESCRIPTION QTY LIST US$ EXT ------------- ---------------------------------------------- ------- -------- ------- DE3801E02 CMTS-1000 * * * DE3804031 Receiver Card * * * ARSVS01031 CPS-2000 V1.1 * * * ARSVS01020 CPS-2000 Software Kit V1.1 * * * ARSVS01016 CPS-2000 Documentation * * * DE3810001 SNMPC 4.2 Software * * * DE3810004 On Net Server Software Arris * * * DE3313001 LCn Software Arris * * * ARCD21522 Cable Modem, Ethernet (Revised 9-14) * * * AL2012F14 BayStack 450-24T Switch * * * DS1410005-1.0 Optivity Campus NMS 702 Network Management * * * NTJT55AH Australia Power Cord * * * NTJT02FA BSN-5000 System - 10G * * * NTJT16AA Slot Cover * * * NTJT29CA Sub Svc Card + 4xSub Svc Module no encryption * * * NTJT36CA 8xFE(UTPS) * * * NTJT60BA SW - ISOS Software Release 2.0 * * * NTJT63AA SW - ISOS - Aggregation - 1000 users * * * NTJT64AA SW - ISOS - Residential Firewalls - 1000 users * * * NTJT68AA SW - ISOS - Interdomain Routing (BG P-4) * * * NTJTB0BA SW - SC5- Entry - 2000 subscribers * * * NTJT878A SW - SC5 Server for ISOS 2.0 - Domain Tier * * * NTJT50AA AC Power Shelf * * * NTJT51AA AC Power Module * * * NTJT52AA Status Cable * * * NTJT90BA Perf Pak * * * TOTAL * * - Information has been omitted and has been filed separately with the United States Securities and Exchange Commission pursuant to an application for confidential treatment under Rule 406 of the Securities Exchange Act of 1933, as amended.
PROPRIETARY AND CONFIDENTIAL INFORMATION 6