**Exhibit10.7**

 

[January 18, 2003,

Unofficial Translation of Executive Copy-ffa]

 

 

JOINT VENTURE CONTRACT

 

OF

 

TCL DIGITAL TECHNOLOGY (BEIJING) COMPANY LIMITED

 

 

----

 

TABLE OF CONTENTS

 
| **PREAMBLE**          |                                                              |
|-----------------------|-------------------------------------------------------------------|
|                  |                                                              |
| **ARTICLE  1**   | **DEFINITIONS**                                                   |   |
|                  |                                                              |   |
| **ARTICLE  2**   | **PARTIES TO THE  CONTRACT**                                      |   |
|                  |                                                              |   |
| **ARTICLE  3**   | **THE COMPANY**                                                   |   |
|                  |                                                              |   |
| **ARTICLE  4**   | **GOVERNMENT APPROVALS**                                          |   |
|                  |                                                              |   |
| **ARTICLE  5**   | **SCOPE OF OPERATIONS**                                           |   |
|                  |                                                              |   |
| **ARTICLE  6**   | **TOTAL  INVESTMENT AND REGISTERED CAPITAL**                      |   |
|                  |                                                              |   |
| **ARTICLE  7**   | **JOINT VENTURE TERM**                                            |   |
|                  |                                                              |   |
| **ARTICLE  8**   | **BOARD OF DIRECTORS**                                            |   |
|                  |                                                              |   |
| **ARTICLE  9**   | **MANAGEMENT**                                                    |   |
|                  |                                                              |   |
| **ARTICLE  10**  | **ANNUAL  OPERATING PLAN AND BUDGET**                             |   |
|                  |                                                              |   |
| **ARTICLE  11**  | **INTELLECTUAL  PROPERTY**                                        |   |
|                  |                                                              |   |
| **ARTICLE  12**  | **FINANCE AND  ACCOUNTING**                                       |   |
|                  |                                                              |   |
| **ARTICLE  13**  | **TAXATION**                                                      |   |
|                  |                                                              |   |
| **ARTICLE  14**  | **ALLOCATION  AND DISTRIBUTION OF PROFITS**                       |   |
|                  |                                                              |   |
| **ARTICLE  15**  | **LABOR AND PERSONNEL**                                           |   |
|                  |                                                              |   |
| **ARTICLE  16**  | **CONFIDENTIALITY**                                               |   |
|                  |                                                              |   |
| **ARTICLE  17**  | **ADDITIONAL  RESPONSIBILITIES OF THE PARTIES**                   |   |
|                  |                                                              |   |
| **ARTICLE  18**  | **TRANSFER OF  INTERESTS**                                        |   |
|                  |                                                              |   |
| **ARTICLE  19**  | **LIABILITIES  FOR BREACH OF CONTRACT**                           |   |
|                  |                                                              |   |
| **ARTICLE   20** | **AMENDMENT, CHANGES, TERMINATION, DISSOLUTION  AND LIQUIDATION** |   |
|                  |                                                              |   |
| **ARTICLE  21**  | **MISCELLANEOUS**                                                 |   |

 

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JOINT VENTURE CONTRACT

 

## **PREAMBLE**

 

The undersignedparties:

 

•                  LiuDongyuan, a Chinese person and his ID Number is 110105500915151 and having hislegal address at 1-1-6, West Compound, south Sanlitun, Chaoyang District,Beijing (“Party A”);

 

•                  ChengFei, a Chinese person and his ID Number is 110108630416639 and having his legaladdress at 24-331, Xueyuan Rd.42, Haidian District, Beijing (“Party B”);

 

•                  GaoJianou, a Chinese person and his ID Number is 110108670721187 and having hislegal address at 6-2-402, Xiyuan Garden No.1, Haidian District, Beijing (“PartyC”);

 

•                  WangHuansheng, a Chinese person and his ID Number is 110108660326542 and having hislegal address at Ganjiakou No.29, Haidian District, Beijing (“Party D”);

 

•                  HanJingzhe, a Chinese person and his ID Number is 110104741112253 and having hislegal address at 6-102, Maliandao Northern St., Xuanwu District, Beijing(“Party E”).

 

•                  HuizhouTCL Computer Technology Co., Ltd., a wholly foreign-owned enterprise dulyincorporated and existing under the laws of China and having its principaloffice in Huizhou, China (“TCL” or “Party F”); and

 

•                  LotusPacific, Inc., a legal person duly incorporated and existing under the laws ofUSA (“LP” or “Party G”);

 

after friendlydiscussions and based on the principle of equality and mutual benefit, theparties agree to establish a joint venture company in Haidian District,Beijing, and hereby sign this JOINT VENTURE CONTRACT of TCL Digital Technology(Beijing) Company Limited (the “Company”) on January 18, 2003, in accordance withthe Law of the People’s Republic of China on Joint Ventures Using Chinese andForeign Investment and other relevant Chinese laws and regulations.

 

# **ARTICLE  1          DEFINITIONS**

 
| 1.01 |   | All terms defined in  this Article 1 or in other provisions of this Contract in the singular shall  have the same meanings in the plural and vice versa. |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

 

1

----

 
| 1.02 |   | Unless the terms or  context of this Contract otherwise provides, the following terms shall have  the meanings set forth below: |
|------|--------|---------------------------------------------------------------------------------------------------------------------------------|

 
| (a)    |   | “Articles of  Association” shall mean the Articles of Association of the Company executed  by the Parties simultaneously with the execution of this Contract, as the  same may be supplemented or amended from time to time, and (if required) as  such supplemented or amended Articles of Association shall be approved by the  relevant authorities.                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (b)    |   | “Board” or “Board of  Directors” shall mean the Board of Directors of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (c)    |   | “Confidential  Information” means all Proprietary Information and any other information that  is identified to the recipient orally or in writing by the party providing  such information as being confidential, provided that in the case of any such  information that has been provided orally or has been identified as “Confidential  Information” orally, the party providing such information shall confirm its  confidential nature in writing to the recipient not later than sixty (60)  days following the provision thereof to such recipient.                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (d)    |   | “Contract” shall mean  this Joint Venture Contract, including all of the Appendices hereto, as the  same may be supplemented or amended from time to time, and (if required) as  such supplemented or amended Contract shall be approved by the relevant  authorities.                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (e)    |   | “Effective Date” shall  mean the date on which this Contract becomes effective, which shall be the  date on which each party hereto shall have received a true and correct copy  of the final approval by the Examination and Approval Authority of each of  this Contract and the Articles of Association.  If the Effective Date shall not have occurred within five (5)  months from the date of the signature of this Contract, or such other date as  may be agreed in writing by the parties, this Contract (other than Article  16) and the Articles of Association, and everything contained herein (except  the obligations set out in Article 16) and therein shall be null and void. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (f)    |   | “Employees” shall mean  the full-time regular employees (including full-time regular expatriate  employees) of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (g)    |   | “Equity Interest” shall  mean, with respect to a Party, the total interest in the registered capital  of the Company held by such Party.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (h)    |   | “Establishment Date”  shall mean the date on which the relevant Administration for Industry and  Commerce shall have duly issued an business license to the Company as  provided herein.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| (i)    |   | “Examination and  Approval Authority” shall mean the Ministry of Foreign Trade and Economic  Cooperation of the People’s Republic of China and any governmental  organization authorized by it or any successor.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

 

2

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| (j)    |   | “Independent Auditor”  shall mean the certified public accountants or auditors registered in China  that are appointed by the Board of Directors of the Company as its  independent auditor.                                                                                                                                                                                                                                                                                                                                             |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (k)    |   | “Intellectual Property”  shall mean patents, design patents, industrial designs, utility models,  trademarks, trade dress, proprietary designs, logos, company names, trade  names, copyrights and copyrightable works, trade secrets and all other  intellectual or industrial property rights.                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (l)    |   | “Joint Venture Law”  shall mean, collectively, the Law of the People’s Republic of China on Joint  Ventures Using Chinese and Foreign Investment promulgated July 1, 1979, the  Regulations for the Implementation of the Law of the People’s Republic of  China on Joint Ventures Using Chinese and Foreign Investment, promulgated  September 20, 1983, and all supplements, amendments, interpretations, orders  and notices relating thereto promulgated by the relevant authorities and in  effect as of the date hereof. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (m)    |   | “Joint Venture Term”  shall have the meaning specified in Section 7.01.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (n)    |   | “Products” shall mean  notebook computers and soft-hardware, parts and peripheries relating to  notebook computers, the products of integrations, network communications,  digital electronic products and such other products as the Company may  produce in accordance with the terms of its business license.                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (o)    |   | “Project Documents”  shall mean collectively, this Contract, the Articles of Association, and any  other agreements, contracts or other documents relating to any thereof, in  each case as the same may be supplemented and amended from time to time.                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (p)    |   | “Proprietary  Information” shall mean all Intellectual Property and other technical and  engineering, construction, economic, financial, sales, marketing and other  information developed and/or owned and provided in writing or orally by the  Parties, in connection with the negotiation of the project contemplated by  the Project Documents or the implementation of this Contract or the other  Project Documents.                                                                                                              |

 

# **ARTICLE  2          PARTIES TO THE CONTRACT**

 
| 2.01 |   | The name, place of  registration and legal address of each Party, and the name, position and  nationality of each Party’s legal representative are as follows: |
|------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (a)    |   | Name:          |   | Liu Dongyuan                                                       |
|--------|--------|----------------|--------|--------------------------------------------------------------------|
|   |   | Legal Address: |   | 1-1-6, West  Compound, south Sanlitun, Chaoyang District, Beijing. |
|   |   | ID Number:     |   | 110105500915151                                                    |
|   |   | Phone Number:  |   | 010-62126977                                                       |

 

3

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| (b)    |   | Name:                   |   | Cheng Fei                                                      |
|--------|--------|-------------------------|--------|----------------------------------------------------------------|
|   |   | Legal Address:          |   | 24-331, Xueyuan  Rd.42, Haidian District, Beijing.             |
|   |   | ID Number:              |   | 110108630416639                                                |
|   |   | Phone Number:           |   | 13301391618                                                    |
|   |   |                    |   |                                                           |
| (c)    |   | Name:                   |   | Gao Jianou                                                     |
|   |   | Legal Address:          |   |  6-2-402, Xiyuan Garden No.1, Haidian  District, Beijing. |
|   |   | ID Number:              |   | 110108670721187                                                |
|   |   | Phone Number:           |   | 13301391188                                                    |
|   |   |                    |   |                                                           |
| (d)    |   | Name:                   |   | Wang Huansheng                                                 |
|   |   | Legal Address:          |   | Ganjiakou No.29,  Haidian District, Beijing.                   |
|   |   | ID Number:              |   | 110108660324542                                                |
|   |   | Phone Number:           |   | 62115566-27                                                    |
|   |   |                    |   |                                                           |
| (e)    |   | Name:                   |   | Han Jingzhe                                                    |
|   |   | Legal Address:          |   | 6-102, Maliandao  Northern St., Xuanwu District, Beijing.      |
|   |   | ID Number:              |   | 110104741112253                                                |
|   |   | Phone Number:           |   | 62115566-30                                                    |
|   |   |                    |   |                                                           |
| (f)    |   | Name:                   |   | Huizhou TCL  Computer Technology Co., Ltd.                     |
|   |   | Place of Registration:  |   | Zhongkai  Development Zone for High-New Technologies, Huizhou  |
|   |   | Legal  Representative:  |   |                                                           |
|   |   |                    |   | Name: Li  Dongsheng                                            |
|   |   |                    |   | Position:  Director of Board                                   |
|   |   |                    |   | Nationality:  Chinese                                          |
|   |   |                    |   |                                                           |
| (g)    |   | Name:                   |   | Lotus Pacific,  Inc.                                           |
|   |   | Place of  Registration: |   | 18200 Von Karman  Ave. Suite 730 Irvine, CA 92612              |
|   |   |                    |   |                                                           |
|   |   | Legal  Representative:  |   |                                                           |
|   |   |                    |   | Name: Li  Dongsheng                                            |
|   |   |                    |   | Position:  Director of Board                                   |
|   |   |                    |   | Nationality:  Chinese                                          |

 

Parties set out in(a) to (e) of this section shall be referred to collectively as the “Chinese IndividualInvestors”.

 

2.02                                    Eachof the Parties, severally and not jointly, represents and warrants that:

 
| (a) |   | Each of the Parties,  apart from Chinese Individual Investors, is a duly organized and validly  existing legal person under the laws of its jurisdiction of establishment. |
|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

4

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| (b)    |   | It possesses full power  and authority to enter into this Contract and the Articles of Association and  to perform its obligations hereunder and thereunder.                                                                                                                                                                                                                                                                                                                |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (c)    |   | Its representative has  been fully authorized to sign this Contract and the Articles of Association  on its behalf pursuant to a power of attorney or resolution of its board of  directors.                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (d)    |   | Assuming due  authorization, execution and delivery by the other Parties hereto, on the  Effective Date, each of this Contract and the Articles of Association shall  constitute its legal, valid and binding obligation.                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (e)    |   | It is not a party to,  nor is it bound by, any material contract or agreement which would be violated  by its execution or performance of this Contract or the Articles of  Association.                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (f)    |   | There are no pending or  threatened legal proceedings, lawsuits, arbitration proceedings,  administrative proceedings or other governmental or court proceedings, or  governmental or court orders, injunctions, judgments or awards, or  arbitration awards to which it is a party or by which it or any of its assets  is or may be bound or affected of any material nature, or which would affect  its ability to perform this Contract or the Articles of Association. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (g)    |   | It is in compliance  with all material laws, rules, regulations, decrees and orders, and all  interpretations thereof, of all governmental authorities having jurisdiction  over it, or its business, finances, operations or properties.                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (h)    |   | It has no outstanding  commitments or obligations, contractual or otherwise, which would in any way  impede its ability and right to enter into and perform this Contract or the  Articles of Association.                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (i)    |   | From and after the date  of signature of this Contract, it will promptly inform the other Parties of  any developments in the status of approval of this Contract, the Articles of  Association and the other relevant Project Documents by the relevant  governmental authorities (including the Examination and Approval Authority).                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (j)    |   | From and after the date  of signature of this Contract to the Establishment Date, any communication by  it in writing with the Examination and Approval Authority regarding the terms  and conditions of this Contract, the Articles of Association or the other  relevant Project Documents shall be copied and sent simultaneously to the  other Parties.                                                                                                                 |

 

# **ARTICLE  3          THE COMPANY**

 
| 3.01   |   | The name of the Company  shall be TCL  in Chinese.                                                                         |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                            |
| 3.02   |   | The legal address of  the Company shall be 409# Zhongding Tower B, Northern Third Ring 18 A,  Haidian District, Beijing, China. |

 

5

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| 3.03   |   | The Company shall be a  limited liability company.  The  liability of each Party shall be limited to the amount of its interest in the  registered capital of the Company.   The Parties shall share the profits and risks of the Company and any  excess of the Company’s assets over its liabilities upon its liquidation in  proportion to their respective interest in the registered capital of the  Company. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 3.04   |   | The Company shall be an  independent legal person under the laws of China.  The activities of the Company shall be governed and protected  by the laws, decrees and relevant rules and regulations of China.                                                                                                                                                                                                                 |

 

# **ARTICLE  4          GOVERNMENT APPROVALS**

 
| 4.01   |   | The Chinese Individual  Investors shall be responsible for submitting this Contract (together with  all Appendices hereto) and the Articles of Association to the relevant  approval authorities (including the Examination and Approval Authority)  promptly after the execution of this Contract. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                |
| 4.02   |   | Any modifications to  any part of this Contract, any Appendix hereto or the Articles of Association  shall be agreed upon in writing by the Parties prior to resubmission to the  relevant approval authorities (including the Examination and Approval  Authority) for final approval.             |
|   |   |                                                                                                                                                                                                                                                                                                |
| 4.03   |   | Promptly, and in no  event later than thirty (30) days after the Effective Date, the Company shall  apply to the Beijing Municipal Administration for Industry and Commerce to  make all necessary commercial registration, and to obtain a business license.                                       |

 

# **ARTICLE  5          SCOPE OF OPERATIONS**

 
| 5.01 |   | The scope of  business of the Company shall be to develop, produce and engage in the  business of computers, parts and peripherals related, network communications,  digital electronic products; integrations; sale of products produced;  technical consulting, technical services and training, technical tests and  transfer. |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

# **ARTICLE  6          TOTAL INVESTMENT AND REGISTEREDCAPITAL**

 
| 6.01   |   | The total  investment and the registered capital of the Company is RMB eighty seven  million Yuan (RMB 87,000,000) respectively. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                             |
| 6.02   |   | The Parties’  contribution in the registered capital set out as below:                                                      |

 
| Party A shall contribute  RMB 25,950,300 Yuan and hold a 29.8279% Equity Interest in the Company, |
|---------------------------------------------------------------------------------------------------|
| Party B shall  contribute RMB 8,832,900 Yuan and hold a 10.1528% Equity Interest in the  Company, |

 

6

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| Party C shall  contribute RMB 2,730,000 Yuan and hold a 3.1379% Equity Interest in the  Company, |
|--------------------------------------------------------------------------------------------------|
| Party D shall  contribute RMB 1,456,800 Yuan and hold a 1.6745% Equity Interest in the  Company, |
| Party E shall  contribute RMB 180,00 Yuan and hold a 0.2069% Equity Interest in the Company,     |
| Party F shall  contribute RMB 4,350,000 Yuan and hold a 5% Equity Interest in the Company,  and  |
| Party G shall  contribute RMB 43,500,000 Yuan and hold 50% Equity Interest in the Company.       |

 
| 6.03 |   | The Equity  Interests of the Parties shall be paid in three installments in six months  upon the business license is issued. |
|------|--------|------------------------------------------------------------------------------------------------------------------------------|

 
| The first  installment shall be 15% of their respective contribution and shall be paid  in cash in one (1) month after the Company obtains its business license, as  set below: |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| Party A: RMB 3,892,500  Yuan |
|------------------------------|
| Party B: RMB  1,324,900 Yuan |
| Party C: RMB  409,500 Yuan   |
| Party D: RMB  218,500Yuan    |
| Party E: RMB  27,000 Yuan    |
| Party F: RMB  652,500 Yuan   |
| Party G: RMB  6,525,000Yuan  |

 
| The second  installment shall be 50% of the contribution in cash in three (3) months  after the Company obtains its business license, as set out below: |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                    |
| Party A: RMB  12,975,200 Yuan                                                                                                                           |
| Party B: RMB  4,416,500 Yuan                                                                                                                            |
| Party C: RMB  1,365,000 Yuan                                                                                                                            |
| Party D: RMB  728,400 Yuan                                                                                                                              |
| Party E: RMB  90,000 Yuan                                                                                                                               |
| Party F: RMB  2,175,000 Yuan                                                                                                                            |
| Party G: RMB  21,750,000 Yuan                                                                                                                           |
|                                                                                                                                                    |
| The third  installment shall be 35% of the contribution in six (6) months after the  Company obtains its business license, as set out below:            |
|                                                                                                                                                    |
| Party A: RMB  9,082,600 Yuan                                                                                                                            |
| Party B: RMB  3,091,500 Yuan                                                                                                                            |
| Party C: RMB  955,500 Yuan                                                                                                                              |
| Party D: RMB  509,900 Yuan                                                                                                                              |
| Party E: RMB  63,000 Yuan                                                                                                                               |
| Party F: RMB  1,522,500 Yuan                                                                                                                            |
| Party G: RMB  15,225,000 Yuan                                                                                                                           |
|                                                                                                                                                    |
| The Parties may  determine an earlier contribution schedule.                                                                                            |

 

7

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| 6.04   |   | The Company  shall promptly after the Establishment Date issue one or more investment  certificates to each of the Parties reflecting its respective Equity Interest  in the Company.  Each such certificate  issued after the Establishment Date shall be signed by the Chairman of the  Company.                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |
| 6.05   |   | Except as  otherwise expressly permitted by applicable law, the registered capital of  the Company shall not be reduced in any manner during the Joint Venture  Term.  No Party shall sell, assign,  mortgage, pledge, transfer or otherwise dispose of its Equity Interest in the  Company or its investment certificate therefor, unless in accordance with the  provisions of this Contract and the Articles of Association or with the prior  written consent of the other Parties. In case that one of the Parties transfers  its part of or entire Equity Interest in the Company, other Parties have  priority to purchase the same. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |   |
| 6.06   |   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | The Parties  agree that it may be necessary to increase the registered capital of the  Company during the Joint Venture Term.   Any such increase in the registered capital of the Company shall be  completed only upon the approval of the Board pursuant to Article 8.11(b) and  Article 8.12 and shall be submitted for approval to the Examination and  Approval Authority to the extent required by applicable law.  Unless otherwise agreed by the Parties,  any additional capital contributions by the Parties in respect of such  capital increase (i) shall be made in the form of cash, and the amount in  United States Dollars of any contributions in RMB shall be calculated at the  exchange rate for buying United States Dollars with RMB announced and in  effect by the People’s Bank of China on the business day preceding the date  on which such contribution (or part thereof) is due and (ii) shall be made by  the Parties in the same proportions as their respective then-existing  interests in the registered capital of the Company. |
|   |   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | Upon receipt of  approval (if required) of such capital increase, (i) the Parties shall take  whatever action may be required to evidence such increase, (ii) such increase  shall be verified by an independent accounting firm registered in China,  (iii) the Company shall register the increase in registered capital with the  relevant department of the State Administration for Industry and Commerce,  and (iv) the Company shall issue investment certificates to the Parties, as  described in Article 6.03, reflecting such increase. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 6.07   |   | In addition to  its registered capital, the Company may borrow any necessary funds from  domestic or international banks or other financial institutions on terms and  conditions acceptable to it.                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |  |  |  |

 

# **ARTICLE  7          JOINT VENTURE TERM**

 
| 7.01 |   | The duration of  the Company shall continue for a period of twenty (20) years from the  Establishment Date (the “Joint Venture Term”), unless earlier terminated  pursuant to the provisions of this Contract. |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

8

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| 7.02 |   | Prior to the  expiration thereof, the Parties may agree to extend the Joint Venture Term or  any extension thereof.  Negotiations  for the extension of the Joint Venture Term or any extension thereof shall  begin not later than one year prior to the expiration of such term or  extension and any contract for any extension shall, if required, be submitted  to the Examination and Approval Authority for approval at least 180 days  prior to the expiration of such term or extension. |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

# **ARTICLE  8          BOARD OF DIRECTORS**

 
| 8.1    |   | The Board of  Directors shall be the highest authority of the Company, which shall be  formally established on the Establishment Date, and the first meeting of the  Board shall be convened in Beijing as soon as practicable after the  Establishment Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
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| 8.2    |   | The Board of  Directors shall consist of seven (7) members.  Party A shall appoint one (1) director, Party B shall appoint  one (1), Party C shall appoint one (1) director, TCL shall appoint one (1)  director, and LP shall appoint three (3) directors.  In the event of any change in the ratio of ownership of the  Parties of the registered capital of the Company (including as a result of an  increase in registered capital), the total number of directors and the number  of directors appointed by each Party shall be changed as necessary to reflect  such change.                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 8.3    |   | LP shall  nominate one of the directors appointed by itself as the Chairman of the  Board.  Notwithstanding the provisions  of Article 8.05, the renewal of the term of office of the Chairman and the  removal or replacement of the Chairman shall be subject to the approval of the  Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 8.4    |   | The Chairman of  the Board shall be the legal representative of the Company.  The Chairman shall have the authority (1)  to lead the work of the Board, and to convene and preside over Board  meetings, (2) to execute material contracts and other material documents of  the Company in accordance with the prior approval of the Board, and if  required, upon approval from the relevant authorities, (3) to check on the  implementation of Board resolutions, to handle matters within the scope of  his authority and to report on important matters at the next meeting of the  Board, and (4) to exercise other powers conferred by duly adopted resolutions  of the Board.  If the Chairman is  unable to perform his duties, any other director authorized by the Chairman shall  represent the Company in his stead until the Chairman shall return to his  duties or a replacement shall have been appointed as provided herein. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 8.5    |   | The term of  office for directors shall be four (4) years, and their terms may be renewed  if re-appointed by the party which appointed them.  Each Party shall have the right, with or without cause, to  remove or replace any of the directors it appoints prior to the expiration of  any four (4) year term.  If a seat on  the Board is vacated for any reason, the party which originally appointed the  director whose seat is vacated shall within thirty (30) days appoint a  successor to serve out the term of such director.                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 8.6    |   | Regular meetings  of the Board shall be convened and held not less than once every year.  Subject to the relevant provisions of  Article 8.09, the Chairman shall set the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

 

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|   |   | agenda for Board  meetings.  Upon the written request of  two or more of the directors, the Chairman shall convene a special meeting of  the Board.  In addition, if the  Chairman believes it is necessary, he may convene a special meeting of the  Board.  Each meeting of the Board  shall be convened by and presided over by the Chairman of the Board or, if  the Chairman is unable to convene or preside over such meeting, any other  director authorized by the Chairman shall convene and preside over such  meeting in his stead.  If over  two-thirds of the directors consent in writing, the Board may act without  convening a formal meeting, and if no formal meeting is held, resolutions may  be passed by written resolution signed by the required number of directors  consenting to the passage of such resolutions without a Board meeting.  Facsimile signatures of directors shall be  binding for this purpose.                                                    |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 8.7    |   | The presence in  person or by proxy of over four-seventh of the directors then serving shall  constitute a quorum for any meeting of the Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
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| 8.8    |   | If any member of  the Board is unable to attend a Board meeting for any reason, he or she may  appoint a proxy in writing to be present and to vote at the meeting.  A director may appoint any person  (including any other director) with legal capacity as his or her proxy and  one proxy may represent one or more directors.  Each written proxy shall set out the name of the individual  appointed to represent the relevant director (and may also provide for  alternate proxies to represent such director if the originally appointed  proxy is unable or does not attend the relevant meeting).  In addition, each written proxy shall  describe the scope and duration of the proxy; provided, however, that unless  otherwise provided in the written proxy, a proxy shall have the same rights  and powers as the director appointing such proxy, and the rights and powers  of such proxy shall expire at the adjournment of the meeting for which such  proxy was originally appointed. |
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| 8.9    |   | In order to  convene a meeting of the Board, the Chairman shall send written notice,  including by mail, facsimile or e-mail, to each director’s address provided  at least three (3) days prior to any meeting; provided, however, that no  notice needs to be sent to convene the first meeting of the Board.  Such notice shall include a detailed  agenda of matters to be discussed at the meeting and all reports, documents  and other materials relevant or necessary for adequate and informed  consideration of each matter on such agenda.   No action may be taken with respect to any matter not identified on  the agenda of matters to be discussed at a meeting of the Board, unless  discussion of the matter shall have been unanimously approved by the Board at  such meeting.  Notice of any meeting  of the Board may be waived by unanimous consent of all directors.                                                                                                         |
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| 8.10   |   | If any member of  the Board is unable to attend a Board meeting for any reason, he or she may  appoint a proxy in writing to be present and to vote at the meeting.  Neither presentation nor proxy shall be  seen as abstention.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
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| 8.11   |   | In the event of  an emergency, the Chairman shall by the most rapid means of communication  available, including but not be limited to, facsimile e-mail or call  conferece notify each director of the nature of the emergency or unforeseen  circumstances that require the Board to act, the reason for urgency, the  proposed action to be taken, the time within which the action must be taken,  and the convening                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

 

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|   |   | of a Board  meeting to consider such action.  If  due to the urgency of the situation it is not possible to convene a meeting  of the Board or to pass a resolution by signature of the required number of  directors as provided in Article 8.06, within the time available for the  Company to act, the written approval of the Chairman will suffice for  management of the Company to act, and a Board meeting shall be convened or an  appropriate resolution shall be signed as provided in Article 8.06 as soon as  reasonably possible thereafter to ratify such action. |
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|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 8.12   |   | The following  matters in respect of the Company may only be acted upon pursuant to a  resolution duly passed by the Board as provided herein and in the Articles of  Association:                                                                                                                                                                                                                                                                                                                                                                                                    |

 
| (a)    |   | any revision of the  Articles of Association;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (b)    |   | any increase in the  registered capital of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (c)    |   | any merger,  acquisition, consolidation or reorganization of the Company or any transfer  of all or substantially all of the assets of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (d)    |   | the cessation of  business and operations as a whole or the termination, dissolution or  liquidation of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (e)    |   | any single transaction  or series of related transactions creating indebtedness for borrowed  money  in an amount equal to or  exceeding RMB three million(or the equivalent thereof in any other currency),  or the mortgaging or pledging of, or the creation of any other security  interest in, any assets of the Company having a book value equal to or  exceeding RMB three million(or the equivalent thereof in any other currency),  for the purpose of securing such indebtedness; in each case unless in  connection with the implementation of an approved operating plan or budget; |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (f)    |   | any guarantee by the  Company of indebtedness of any entity other than the Company, or the  mortgaging or pledging of, or the creation of any other security interest in,  any assets of the Company for the purpose of securing indebtedness of any  entity other than the Company, unless contemplated in an approved operating  plan or budget;                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (g)    |   | except as otherwise  provided in these Articles or the Contract or as otherwise required by  applicable law, the assignment of duties to any director or alteration of  such duties;                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (h)    |   | any change in the  location of the legal address or of the principal place of business of the  Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (i)    |   | allocations to or  withdrawals from the general reserve fund, the business development fund and  the bonus and welfare fund for workers and staff;                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (j)    |   | except as otherwise  provided herein, the payment of profits or other distributions to the  Parties;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

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| (k)    |   | the establishment of  any subsidiary of the Company and the appointment of directors thereof;                                                                                                              |
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|   |   |                                                                                                                                                                                                       |
| (l)    |   | the approval of the  Company’s operating plan and budget for each fiscal year or any revision  thereof which would result in a material increase in planned or budgeted  expenditures by the Company; |
|   |   |                                                                                                                                                                                                       |
| (m)    |   | the appointment,  remuneration, removal or dismissal of the General Manager;                                                                                                                               |
|   |   |                                                                                                                                                                                                       |
| (n)    |   | the assignment and/or  adoption of any logo, trademark, service mark or technology for the Company  or its Products or services;                                                                           |
|   |   |                                                                                                                                                                                                       |
| (o)    |   | the establishment and  abolition of branch offices;                                                                                                                                                        |
|   |   |                                                                                                                                                                                                       |
| (p)    |   | the formulation of  basic management system;                                                                                                                                                               |
|   |   |                                                                                                                                                                                                       |
| (q)    |   | the approval of annual  accounting statements;                                                                                                                                                             |
|   |   |                                                                                                                                                                                                       |
| (r)    |   | the purchase of any  building or the acquisition of any land use rights, unless in connection with  the implementation of an approved operating plan or budget;                                            |
|   |   |                                                                                                                                                                                                       |
| (s)    |   | the assignment or  licensing of any intangible assets owned by the Company, including but not  limited to patent rights, know-how or trademarks; and                                                       |
|   |   |                                                                                                                                                                                                       |
| (t)    |   | any other matter  expressly required by this Contract, the Articles of Association or by law to  be decided or approved by a resolution of the Board.                                                      |

 
| 8.13   |   | Resolutions with  respect to the matters enumerated in paragraphs (a) through (d) of Article  8.12 shall require the unanimous approval of the directors present in person  or by proxy at a duly constituted meeting of the Board.  Resolutions with respect to the other  matters enumerated in Article 8.12 may only be passed by a vote of simple  priority of the directors present in person or by proxy at a duly constituted  meeting of the Board. |
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| 8.14   |   | Directors who  don’t hold any position in the management institution in the Company shall  not obtain salaries from the Company.                                                                                                                                                                                                                                                                                                                            |
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| 8.15   |   | The Company  shall pay all reasonable necessary expenses relating to Board meetings,  including reasonable necessary travel, meal, lodging and other expenses  incurred by Board members (and their proxies) in traveling to and from and  attending Board meetings.                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 8.16   |   | List of address  and phone numbers of the members of Board of Directors (omit).                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 8.17   |   | Additional  procedures relating to Board meetings shall be set out in detail in the  Articles of Association.                                                                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

 

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# **ARTICLE  9          MANAGEMENT**

 
| 9.01   |   | Subject to the terms  hereof and of the Articles of Association, the Board of Directors shall  establish a management structure to carry out the day-to-day management of  the Company.  The areas of  responsibility of the General Manager and Deputy General Manager not otherwise  specified herein shall be specified by the Board.  The Company shall implement a management system which shall  include the following officers:                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |   | The day-to-day operation and management of the  Company shall be under the direction of the General Manager of the Company.  The General Manager and the Deputy General Manager shall be appointed and may  be dismissed by the Board.  Their  terms of office shall be four (4) years, and they may serve consecutive  terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 9.02   |   | The duties of the General Manager shall consist of  carrying out the decisions of the Board, organizing and directing the  day-to-day operations and management of the Company in accordance with such  decisions.  The powers and  responsibilities of the General Manager shall be listed in the Articles of  Association, and shall include final decision-making power with respect to  daily operational and management matters.   The General Manager shall consult with the Deputy General Manager  before making final decisions on important day-to-day business matters.  If for any reason the General Manager is  unable to carry out his duties, the Deputy General Manager shall act in his  stead until the General Manager shall return to his duties or a replacement  shall have been appointed as provided herein. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 9.03   |   | Any employee of the Company who misuses his or her  position, engages in graft, is seriously derelict in his or her duties, or  fails consistently to complete in a timely fashion assigned tasks shall be  dismissed, and a replacement shall be selected (a) in the case of the General  Manager and the Deputy General Manager, by the Board pursuant to Section  9.01(b); and (b) in all other cases, by or under the authority of the General  Manager.  Unless otherwise approved by  the Board, no employee of the Company shall concurrently hold any position in  any other company, enterprise or economic organization.                                                                                                                                                                                                              |

 

# **ARTICLE  10       ANNUAL OPERATING PLAN AND BUDGET**

 
| 10.01 |   | The General Manager shall be responsible for the  preparation of an annual operating plan and budget.  The operating plan and budget (including a projected balance  sheet, profit and loss statement and cash flow report) for each one (1) year  period shall be submitted to the Board for examination and approval by no  later than October 31 of the preceding calendar year, and shall include  comprehensive detailed information regarding the following matters, unless  otherwise determined by the Board: |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (a) |   | anticipated requirements for the repair and  maintenance of the capital assets of the Company; |
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| (b)    |   | the estimated income and expenditures of the Company  covered by the annual operating plan and budget; |
|--------|--------|--------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                   |
| (c)    |   | plans, if any, for the raising and application of  funds;                                              |
|   |   |                                                                                                   |
| (d)    |   | plans for labor management, including employee  education and training; and                            |
|   |   |                                                                                                   |
| (e)    |   | any other matter in respect of which the Board or  any director may have requested a report.           |

 
| 10.02  |   | The Board shall convene a meeting for the  examination and approval of the annual operating plan and budget and shall  complete such examination and approval by no later than [December 1 of the  preceding year].  In implementing the  annual operating plan and budget as approved by the Board, the General  Manager and the Deputy General Manager shall be subject to the relevant  provisions of Article 9. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 10.03  |   | The General Manager shall be responsible for the  preparation in each year of a long-term operating plan and budget for the  next succeeding five (5) fiscal years.   Each such operating plan and budget shall be submitted to the Board  for examination and approval in October of the fiscal year preceding the  first fiscal year to which such plan relates.                                                  |

 

# **ARTICLE  11       INTELLECTUAL PROPERTY**

 
| 11.01 |   | No rights are granted to any party or the Company in  respect of any Intellectual Property as a result of this Contract unless  specifically so provided herein. |
|-------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

# **ARTICLE  12       FINANCE AND ACCOUNTING**

 
| 12.01  |   | The Company shall  establish its financial and accounting system pursuant to the relevant laws,  regulations and provisions promulgated by the central and local financial  authorities.  The Company shall submit  its financial and accounting system to the relevant local finance and tax  authorities for the record.                                                                                                                                                                                                    |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 12.02  |   | The Company’s fiscal  year shall end on December 31 of each Gregorian calendar year.  The Company’s initial fiscal year shall  begin on the date of its formation and end on December 31 of the same  year.  The Company’s last fiscal year  shall begin on January 1 and end on the date of dissolution of the Company in  accordance with the provisions of relevant law.                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 12.03  |   | The Company shall  maintain complete and accurate books, statements of accounts and financial  and related records, in accordance with the Company’s financial and  accounting system.  Such financial materials  shall be kept both in the Chinese and English language.  RMB shall be the standard bookkeeping  currency for the financial records of the Company.  When the currency of any cash deposit, cash receipt,  expenditure, or claim or expense relating to any debt of the Company differs  from |

 

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|   |   | the standard  bookkeeping currency of the Company, accounts shall also be kept in the  currency actually paid or received. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                       |
| 12.04  |   | The following financial  principles shall be used as guidelines in the on-going operation of the  Company:                 |

 
| (a)    |   | return on sales and return on assets should be  sufficient to meet the growth needs of the Company;                                                                                                                                                             |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                            |
| (b)    |   | the pricing for materials or products bought or sold  by the Company shall be established based on the competitive situation in the  marketplace and the cost levels of the Company;                                                                            |
|   |   |                                                                                                                                                                                                                                                            |
| (c)    |   | unless otherwise determined by the Board, 100% of  after-tax net profits available for distribution to the Parties will be paid  as dividends;                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                            |
| (d)    |   | all financial reporting and controls shall satisfy  the relevant stipulations of the Ministry of Finance of China regarding  accounting and financial management of foreign investment enterprises; and                                                         |
|   |   |                                                                                                                                                                                                                                                            |
| (e)    |   | all financial reporting and controls of the Company  shall in addition satisfy the requirements of the GAAP, provided that such  requirements do not contradict the relevant stipulations of the Ministry of  Finance of China referred to in Article 12.04(d). |

 
| 12.05  |   | The Company shall  prepare and provide quarterly and annual accounting statements to each Party  and to the relevant tax departments of the Beijing Municipal People’s  Government.  A balance sheet and an  income and expense statement shall be provided to each Party not later than  twelve (12) days after the end of each month.  Quarterly financial statements shall be provided to each Party  not later than fifteen (15) days after the end of each quarter, and annual  audited financial statements shall be provided to each Party not later than ninety  (90) days after the end of each fiscal year.   The annual financial statements shall have been audited by the  Independent Auditor at the Company’s expense and shall be accompanied by an  audit report prepared by such Independent Auditor. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 12.06  |   | In addition to the  monthly, quarterly and annual reports described in Section 12.05, the Company  shall prepare and provide to LP such other financial reports in the form of  10-Q and 10-K and containing such information as reasonably requested by LP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 12.07  |   | Each of the Parties  hereto shall also have the right to appoint an auditor to audit the accounts  of the Company at its own expense, provided that such auditor undertakes to  keep confidential all documents used in connection with such audit and,  provided further, that such Party shall provide a copy of any report  resulting from such audit to the Board.   The Company shall make available its accounting books and records to  such auditor on reasonable terms during regular business hours.                                                                                                                                                                                                                                                                                                                              |

 

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| 12.08  |   | The Company shall be  entitled to open foreign exchange and RMB accounts.  The procedures for issuing and signing checks and initiating  wire transfers shall be stated in the financial regulations of the Company.  LP shall have the right to remit outside  China all payments (after deduction of all taxes according to relevant  Chinese law) made to it by the Company, including amounts paid to it upon  dissolution of the Company, in accordance with the relevant laws and regulations  of China regarding foreign exchange control.   Unless otherwise specified in this Contract, the Articles of  Association or in other contracts duly entered into by the Company, all  expenses, loan repayments, labor compensation and other charges of the  Company paid to Chinese enterprises or nationals shall be paid in RMB. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 12.09  |   | All the Company’s  foreign exchange income shall be deposited in its foreign exchange  account(s), and all payments by the Company in foreign exchange shall be made  from its foreign exchange account(s).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

 

# **ARTICLE  13       TAXATION**

 
| 13.01  |   | (a)    |   | The Company shall pay taxes in accordance with  relevant published and publicly available laws and regulations of China.                                                                                                                                                                                                                                                                                   |
|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | (b)    |   | The workers and staff members of the Company shall  pay individual income tax in accordance with the Individual Income Tax Law of  China.  The Company shall not be  responsible for the payment of any such taxes, except to the extent that it  may be responsible under applicable law for reporting and for the payment of  withholding taxes with respect to compensation paid to its employees. |

 
| 13.02 |   | Subject to approval by the relevant authorities (if  required), the Parties shall take and cause the Company to take all  reasonable actions necessary for the Company to obtain all preferential tax  and customs duties treatment available in the same area and industry,  including reductions and exemptions available to technologically advanced  joint ventures. |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

# **ARTICLE  14       ALLOCATION AND DISTRIBUTION OF PROFITS**

 
| 14.01 |   | In accordance with the  Joint Venture Law, the Company shall set aside an amount of money from after  tax profits for its general reserve fund, its business development fund, and  its bonus and welfare fund for workers and staff.  The actual amounts to be allocated to the general reserve fund,  the business development fund and the bonus and welfare fund for workers and  staff in each year shall be determined by the Board on the basis of the  Company’s actual business and financial condition. |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| 14.02 |   | After allocations have  been made to the general reserve fund, the business development fund and the  bonus and welfare fund for workers and staff, the remaining after-tax net  profits of the Company shall be distributed among the Parties in proportion  to their respective shares in the registered capital of the Company.  Unless otherwise determined by the Board,  the remaining after-tax net profit of the Company shall be distributed every  year, and the amounts to be distributed shall be |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

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|   |   | fixed in RMB.  If the Company carries over losses from  any previous year, the profit of the current year shall first be used to  cover such losses, and no distribution shall be made until prior deficits are  made up.  Any profit retained by the Company  and carried over from the previous years may be distributed together with the  distributive profit of the current year. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

# **ARTICLE  15       LABOR AND PERSONNEL**

 
| 15.01  |   | (a)    |   | Pursuant to the labor  laws and regulations of China and of the Beijing Municipal Government, which  shall include the Labor Law of the People’s Republic of China, the  Regulations of the People’s Republic of China on Labor Management, and other  relevant published and publicly available laws and regulations, the Company  shall create and amend from time to time as necessary its internal rules and  regulations or “Employees Handbook” setting out rules applicable to the  recruitment, employment, dismissal and resignation of Employees and their  wages, salaries, welfare benefits, labor insurance, labor discipline and  other relevant matters. |
|--------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | (b)    |   | The Company shall enter  into individual employment contracts with each Employee incorporating the  rules referred to in Section 15.01(a).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

# **ARTICLE  16       CONFIDENTIALITY**

 
| 16.01  |   | (a)    |   | Each Party shall maintain  the confidentiality of, and not disclose to any third person other than, nor  use for any purpose except in strict compliance with the terms and conditions  of this Contract, any Confidential Information at any time during the Joint  Venture Term and thereafter, unless (1) such Confidential Information  properly comes into the public domain prior to its disclosure through no  fault of either Party or the Company, (2) the disclosure or use thereof is  required by a mandatory provision of applicable law or a final non-appealable  order of a competent court or (3) the disclosure or use thereof is authorized  in advance in writing by the party that originally provided such Confidential  Information.  Each Party shall take all  measures reasonably available to it (including without limitation,  administrative and legal action)(i) to cause its directors, management  personnel and other employees, and departments in charge (if any), to comply  in all respects with the confidentiality obligations set forth herein, and  (ii) to prevent unauthorized disclosure, use or reproduction in any form or  language of any Confidential Information. |
|--------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | (b)    |   | Each Party shall cause  the Company to, and the Company shall, maintain the confidentiality of, and  not disclose to any third person, nor use for any purpose except in strict  compliance with the terms and conditions of this Contract, any Confidential  Information, unless (1) such Confidential Information properly comes into the  public domain prior to its disclosure through no fault of any party or the  Company, (2) the disclosure or use thereof is required by a mandatory  provision of applicable law or a final non-appealable order of a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

17

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|   |   |   |   | competent court, or (3)  the disclosure or use thereof is authorized in advance in writing by the  party that originally provided such Confidential Information.  The Company shall disclose Confidential  Information only to those of its employees whose duties require such  disclosure.  In addition, the Company  shall take all measures reasonably available to it (including without  limitation, administrative and legal action) (i) to cause its directors,  management personnel and other employees, and department in charge (if any),  to comply in all respects with the confidentiality obligations set out  herein, (ii) to prevent unauthorized disclosure, use or reproduction in any  form or language of any Confidential Information. |
|--------|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| 16.02 |   | The confidentiality obligations stated herein shall  survive for a period of ten (10) years after the termination of this Contract  and the latest to occur of the termination, dissolution or liquidation of the  Company. |
|-------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

# **ARTICLE  17       ADDITIONAL RESPONSIBILITIES OF THEPARTIES**

 
| 17.01 |   | In addition to (but  without duplication of) its other responsibilities under this Contract and  the Articles of Association, Chinese Individual Investors shall be  responsible for the following matters: |
|-------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (a)    |   | to assist in  commencing, establishing and maintaining relationships with the relevant  government departments, agencies and other relevant business departments for  the establishment of the Company and for its operations on a continuing  basis; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                  |
| (b)    |   | to assist in obtaining  and maintaining an adequate supply of any elements and/or spare parts on a  continuing basis for the Company to carry on its intended activities;                                                                             |
|   |   |                                                                                                                                                                                                                                                  |
| (c)    |   | to assist in obtaining  for the Company favorable national and local tax treatment, and                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                  |
| (d)    |   | to perform its other  obligations hereunder.                                                                                                                                                                                                          |

 
| 17.02 |   | In addition to (but without duplication of) its  other responsibilities under this Contract, LP shall be responsible for the  following matters: |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (a)    |   | to assist the Company,  when appropriate, to recruit qualified and trained expatriate management and  senior technical personnel, and; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                   |
| (b)    |   | to perform its other  obligations hereunder.                                                                                           |

 

18

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# **ARTICLE  18       TRANSFER OF INTERESTS**

 
| 18.01  |   | No Party may assign, sell or otherwise dispose of  all or part of its respective interest in the registered capital of the  Company to any third party unless the other Parties shall have consented in  writing to such assignment, sale or disposition. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                      |
| 18.02  |   | Any transfer, assignment or other disposition of any  interest in the registered capital of the Company under Section 18.01:                                                                                                                              |

 
| (a)    |   | shall be valid under the relevant laws of China and  any other country or area having jurisdiction;                                                                                                                      |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                     |
| (b)    |   | shall be to a transferee or assignee which has not  been convicted of a crime and is not currently under criminal indictment; and                                                                                        |
|   |   |                                                                                                                                                                                                                     |
| (c)    |   | shall be made under a transfer agreement which  provides that the transferee or assignee shall assume all the rights and  obligations of the Disposing Party under this Contract and under the Articles  of Association. |

 
| 18.03 |   | The foregoing provisions of this Article 18 (except  Section 18.02) shall not apply to any transfer or assignment by any Party of  any or all of its interest in the Company to any of its Affiliates.  Each of the Parties hereby consents to any  transfer or assignment described in the preceding sentence and agrees that it  will cause the directors of the Company appointed by it and the Company to  take all actions that may be required to cause any such transfer or  assignment to be approved by the Examination and Approval Authority.  Upon receipt of such approval, and if and  to the extent required by applicable laws or regulations, (i) the parties  shall take whatever action may be required to evidence such transfer or  assignment, (ii) such transfer or assignment shall be verified by an  independent accounting firm registered in China, (iii) the Company shall  register such transfer or assignment with the relevant department of the  State Administration for Industry and Commerce, and (iv) the Company shall  issue investment certificates to the relevant Parties, as described in  Section 6.03, reflecting such transfer or assignment and any changes in the  respective investment ratios of the Parties. |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

# **ARTICLE  19       LIABILITIES FOR BREACH OF CONTRACT**

 
| 19.01  |   | If any Party has not made contribution payment on  time in accordance with Article 5, such Party shall pay penalty to other  Parties who have completed the contribution. Penalty shall be 3% of the  related amount of the overdue contribution for the first month upon the due  date, and 9% of the related amount of the overdue contribution after 3 months  upon the due date. In addition, Parties who performed their duties have right  to terminate this Contract and claim for indemnity. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 19.02  |   | In the event that a breach of contract committed by  a Party results in the non-performance of or inability to fully perform this  Contract, the liabilities arising from the breach of contract shall be borne  by the Party in breach. In the event a breach of                                                                                                                                                                                                                                    |

 

19

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|   |   | contract is committed by more Parties, each Party  shall bear its individual share of liabilities arising from the breach of  contract. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

 

# **ARTICLE  20       AMENDMENT,CHANGES, TERMINATION, DISSOLUTION AND LIQUIDATION**

 
| 20.01  |   | Any amendment to this Contract shall be in written  signed by the Parties and shall be affective upon the approval by the  original Examination and Approval Authority. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                    |
| 20.02  |   | This Contract and the Articles of Association may be  terminated as provided herein for any of the following reasons:                                                   |

 
| (i)    |   | if any Party  transfers its interest in the registered capital of the Company in violation  of the provisions of this Contract or the Articles of Association;                                                                                                                                                                                                                                                                                          |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (ii)   |   | if any Party  materially breaches any other provisions of this Contract or violates any  other provision of the Articles of Association,  and such breach or violation is not cured within sixty (60)  days of written notice of such breach or violation to such  violating Party;                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (iii)  |   | if the  conditions or consequences of an event of Force Majeure (as defined in  Section 21.02) (A) prevail for a period of six (6) months, (B) have resulted  in a material adverse impact on the business and prospects of the Company and  (C) the parties are unable to reach agreement regarding the continued performance  of this Contract, the Articles of Association, and/or any other agreements or  contracts relating hereto or thereto; or |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (iv)   |   | for any other  reason provided in relevant laws or regulations which renders it  inappropriate or impossible for the Company to maintain its normal business  operations.                                                                                                                                                                                                                                                                               |

 
| 20.03  |   | Upon liquidation of the  Company pursuant hereto, the Board shall (i) propose liquidation procedures  and principles in accordance with relevant laws and regulations of China,  (ii) establish a liquidation committee consisting of representatives  nominated by each Party, and member from an institution of independent  accountants licensed in China appointed by all Parties, and (iii) submit a  report to the Beijing Municipal People’s Government containing such information  as is required pursuant to the relevant laws and regulations of China.  In principle, the Liquidation Committee  shall resolve all issues by consensus.   In the event that consensus cannot be reached, matters shall be  decided by majority vote. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 20.04  |   | The tasks of the  liquidation committee shall include conducting a comprehensive investigation  of the assets and debts of, and claims against the Company, formulating a  liquidation plan for approval by the Board, and implementing such liquidation  plan on behalf of the Company.  In its  implementation of such plan, the liquidation committee shall exercise its  best efforts and judgment in obtaining the best prices for the Company’s  assets including selling such assets outside of China or                                                                                                                                                                                                                                       |

 

20

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|   |   | to foreign purchasers  at prices higher than those otherwise obtainable within China.  In the liquidation of the assets of the  Company, each of the Parties shall have priority in purchasing such assets if  the price and terms offered by such Party are no less favorable than other  offers. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                    |
| 20.05  |   | The assets of the  Company shall be liquidated and the proceeds therefrom shall be applied in  the following sequence:                                                                                                                                                                                  |

 
| (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | the expenses of  liquidation and the remuneration of the members of the liquidation committee;                                                                      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                |
| (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | outstanding employee  salaries and labor insurance payments;                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                |
| (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | unpaid taxes;                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                |
| (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | obligations secured by  the assets of the Company;                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                |
| (e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | obligations not secured  by the assets of the Company; and                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                |
| (f)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | distribution of the  remaining balance, if any, to the Parties in proportion to their respective  then existing interests in the registered capital of the Company. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                |
| All amounts payable to  LP shall be calculated in RMB, paid in freely convertible foreign exchange  and remitted upon approval by the State Administration for Exchange Control  (if then required by applicable law) to the foreign bank designated by  LP.  If there is insufficient foreign  exchange to pay the share of LP, then unless LP agrees to accept RMB, the  liquidation committee and the Company shall assist LP to obtain sufficient  foreign exchange to pay such share by purchasing foreign exchange through  authorized foreign exchange bank or other financial institution with the  approval (if then required by applicable law) of the State Administration for  Exchange Control. |

 
| 20.06  |   | After the liquidation  of the Company is completed, the liquidation committee shall submit a  liquidation report to the Board and the Board, upon adoption of such  liquidation report, shall submit it to the Examination and Approval Authority  for approval.  Upon approval by the  Examination and Approval Authority, the Board shall carry out procedures for  canceling the Company’s registration at the Beijing Administration for  Industry and Commerce, and shall cause the Company to turn in its business  license for cancellation.  The  Company’s books of account and other documents and records shall be preserved  by TCL.  . |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 20.07  |   | The expiration or  termination of this Contract for any cause shall not release any Party from  any liability which at the time of expiration or termination has already  accrued or which thereafter accrues in respect of any act or omission prior  to such expiration or termination.                                                                                                                                                                                                                                                                                                                                                                                    |

 

21

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# **ARTICLE  21       MISCELLANEOUS**

 
| 21.01  |   | (a) The execution, validity, interpretation and  implementation of this Contract shall be governed by the published and  publicly available laws of China and the treaties and other international  agreements to which China is a party.   If there is no such law or treaty or international agreement governing  a particular matter relating to this Contract, reference shall be made to  international custom and practice. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |
|   |   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | If any Party’s economic benefits are adversely and  materially affected by the promulgation of any new laws or regulations of  China, or the amendment or interpretation of any existing laws or regulations  of China, the Parties shall promptly consult with one another and use their  reasonable best efforts to implement any adjustment necessary to maintain the  economic benefit each Party would have reasonably derived had such laws or  regulations not been promulgated or so amended or interpreted. |

 
| 21.02  |   | (a)    |   | “Force Majeure” shall mean any event which: (i) is  beyond the control of the affected Party; (ii) is unforeseen or, if foreseen,  is unavoidable; (iii) arises after the date of the execution of this  Contract; (iv) prevents total or partial performance by such Party of this  Contract and/or any other agreements relating hereto.  Such events shall include, but not be  limited to, floods, fires, droughts, typhoons, earthquakes or other natural  disasters, transportation disasters, strikes (other than strikes by the Company’s  work force), civil unrest or disturbance, riots and war (whether or not  declared). |
|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | (b)    |   | Should either of the Parties to this Contract be  prevented from performing any of its obligations by an event of Force  Majeure, the performance of such obligation shall be suspended for the period  during which such event of Force Majeure prevents performance.                                                                                                                                                                                                                                                                                                                                                                                     |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | (c)    |   | A Party claiming that its performance is affected by  an event of Force Majeure shall notify the other Parties by telecopy or  facsimile within the shortest possible time of the occurrence of such event,  and shall within thirty (30) days of when the event of Force Majeure arose  send by registered airmail to the other Party appropriate proof of the  occurrence and duration of such event.   Any Party claiming that its performance is affected by an event of  Force Majeure shall use all reasonable efforts to eliminate or mitigate the  effects of such event of Force Majeure.                                                    |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | (d)    |   | If any event of Force Majeure shall occur, the  parties shall immediately commence friendly negotiations in an attempt to  settle how this Contract, the Articles of Association and/or any other  agreements or contracts relating hereto or thereto shall continue to be  implemented.                                                                                                                                                                                                                                                                                                                                                                   |

 
| 21.03 |   | Except as otherwise  expressly permitted by the terms hereof or of the Articles of Association, no  Party shall assign any of its rights or obligations under this Contract  without the prior written consent of the other Party, and the obtaining of  all necessary approvals from the Examination and Approval Authority. |
|-------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

22

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| 21.04 |   | Any notice or other  written communication provided for in or relating to this Contract or the  Articles of Association shall be made in writing by facsimile or by registered  airmail letter.  Unless otherwise  specified by notice to the other Party, the notice address of each Party  shall be the address indicated below.   The date of receipt of a notice or communication hereunder shall be  deemed to be seven (7) days after its postmark in the case of a registered  airmail letter and two (2) working days after dispatch in the case of a  facsimile. |
|-------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| (a)    |   | TCL Computer  Technology C., Ltd. |
|--------|--------|-----------------------------------|
|   |   |                              |
|   |   | Address:                          |
|   |   | Tel:                              |
|   |   | Fax:                              |
|   |   |                              |
| (b)    |   | Lotus Pacific,  Inc.              |
|   |   |                              |
|   |   | Address:                          |
|   |   | Tel:                              |
|   |   | Fax:                              |
|   |   |                              |
| (c)    |   | Chinese  Individual Investors     |
|   |   |                              |
|   |   | Name:                             |
|   |   | Address:                          |
|   |   | Tel:                              |
|   |   | Fax:                              | (Omit) |

 
| 21.05  |   | (a)    |   | Subject to the Parties’  rights to terminate this Contract as provided in Article 19, in the event a  dispute arises among the Parties in connection with the interpretation or  implementation of this Contract, the Articles of Association or any other  contract, agreement or document relating to any of the foregoing or the  transactions contemplated hereby or thereby, the parties to the dispute shall  attempt to settle such dispute through friendly consultations.                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | (b)    |   | If no mutually  acceptable settlement of such dispute is reached within sixty (60) days, then  the dispute shall be submitted to China International Economic and Trade  Arbitration Commission in Beijing for exclusive, final, non-appellant and  binding settlement by arbitration in accordance with the Arbitration Rules  being in force at the time a particular dispute is submitted for arbitration,  which rules are deemed to be incorporated by reference herein.  Except for the arbitration contemplated  herein, each of the Parties hereby expressly and irrevocably waives any right  to bring any legal suit, action or proceeding arising out of or based upon  this Contract and the Articles of Association or any other contract,  agreement or document relating to any of the foregoing or the transactions  contemplated hereby or thereby in any court in any jurisdiction. |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | (c)    |   | Without limiting the  rights of the parties to terminate this Contract as provided herein,  commencement of arbitration proceedings shall not otherwise give rise                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

 

23

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|   |   |   |   | to termination of this  Contract, the Articles of Association or any other relevant contract or  agreement, which will continue to be in full force and effect pending the  decision rendered by the arbitrators. |
|--------|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 
| 21.06  |   | This Contract  (including its Appendices), together with the Articles of Association and the  other Project Documents, constitute the complete and only agreement among the  Parties and take the place of all prior agreements, contracts, understandings  and communications among the Parties, whether oral or written, relating to  the subject matter hereof.  No  amendment of this Contract shall be valid or binding on the Parties unless  made in writing and signed by an authorized representative of each Party, and  (if required by applicable law) approved by the Examination and Approval  Authority. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 21.07  |   | Failure or delay on the  part of a Party to exercise any right, power or privilege under this Contract  shall not operate as a waiver, nor shall any single or partial exercise of  any right, power or privilege preclude any future exercise thereof.                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 21.08  |   | If any term or  provision of this Contract is hereafter determined to be illegal by any court  of competent jurisdiction, the remainder of this Contract shall not be  affected thereby and shall continue in force notwithstanding such illegal  provision or provisions.                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 21.09  |   | The rights and  obligations of the Parties pursuant to this Contract shall continue to exist  throughout the Joint Venture Term, and the establishment of the Company and  the adoption of the Articles of Association shall not prejudice the rights  and obligations set out in this Contract.   In the event of any conflict between the provisions of this Contract  and of the Articles of Association, the provisions of this Contract shall  control.                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 21.10  |   | The language of this  Contract is Chinese.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 21.11  |   | The Contract is made in  twelve (12) originals.  Each Party  shall retain one  (1) original, the  Company shall retain three (3) originals and other two (2) originals shall be  retained by the Examination and Approval Authority at the central and local  levels.                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 21.12  |   | This Contract shall be  approved by the Examination and Approval Authority and shall be effective  upon the approval date, the same is any amendment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 21.13  |   | With respect to rights  and obligations of the Parties, corresponding letter mails in written shall  be sent upon the notices via telex, fax or phone call.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

 

IN WITNESS WHEREOF, theParties have caused their duly authorized representatives to execute thisContract on January 18, 2003.

 

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[PAGE OF SIGNATURES ]

 
|   | TCL Computer Technology Co., Ltd. |
|--------|-----------------------------------|
|   |                              |
|   |                              |
|   | /s/ Li Dongsheng                  |   |
|   | Name: Li Dongsheng                |
|   | Title:Chairman                    |
|   |                              |
|   |                              |
|   | Lotus Pacific, Inc.               |
|   |                              |
|   |                              |
|   | /s/ Li Dongsheng                  |   |
|   | Name: Li Dongsheng                |
|   | Title: Chairman                   |
|   |                              |
|   |                              |
|   | /s/ Liu Dongyuan                  |   |
|   |                              |
|   |                              |
|   | /s/ Cheng Fei                     |   |
|   |                              |
|   |                              |
|   | /s/ Gao Jianou                    |   |
|   |                              |
|   |                              |
|   | /s/ Wang Huansheng                |   |
|   |                              |
|   |                              |
|   | /s/ Han Jingzhe                   |   |
|        |                                   |  |  |  |  |  |

 

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