Pursuant to the Contract Law of the PRC as well as relevant provisions of other laws andregulations, for the purpose of clarifying their respective rights and obligations, the Parties,through cooperative negotiation, hereby enter into this Agreement as follows:**ARTICLE ONE SCOPE AND PURPOSE OF THE LEASE**1. Due to the demand of business operations, Netcom Group and CNC China agree to lease to eachother the Properties owned by their respective branches, subsidiaries, affiliates and enterprisesor controlled units (hereinafter collectively referred to as “Subsidiary Companies”). Netcom Groupand CNC China confirm that such subsidiary companies, enterprises and units have agreed to entrustNetcom Group or CNC China to exercise the leasing rights of the Properties defined hereunder.Netcom Group agrees to lease to CNC China the Properties owned by Netcom Group hereunder(hereinafter referred to as “Properties of Netcom Group”); and CNC China is willing to lease theProperties of Netcom Group and pay the consideration accordingly as provided hereunder. CNC Chinaagrees to lease to Netcom Group the Properties owned by CNC China hereunder (hereinafter referredto as “Properties of CNC China”); and Netcom Group is willing to lease the Properties of CNC Chinaand pay the consideration accordingly as provided hereunder.2. The scope of the Properties of Netcom Group and the Properties of CNC China as referred to inthe foregoing article shall be defined in the Appendix of this Agreement. Netcom Group and CNCChina may make adjustment once a year to the scope of the Properties of Netcom Group and theProperties of CNC China as defined in the Appendix in accordance with the actual circumstances.3. Both Parties agree that the Properties of Netcom Group or the Properties of CNC China theyhave leased shall only be used by them within the permitted scope to legally engage in businessoperational activities, and neither Party may lease the other Party’s Properties to a third partywithout the other Party’s written consent, and this sub-leasing party shall still be liable for theliabilities and obligations hereunder.**ARTICLE TWO TERMS OF LEASING**1. The agreed lease term of the Properties hereunder is the same as that of this Agreement,subject to item 2 of this Article.2. The Lessor may immediately terminate the agreed lease of the Properties hereunder if theTenant commits any of the following:1) The Tenant, at its own discretion, sublease or sublend the Properties of the Lessor to otherparty without the prior consent of the Lessor (except when the Properties are subleased or sub-lentto the subsidiaries or affiliated companies of the Tenant);2) The Tenant violates the purpose of usage as agreed by both Parties for the leasing, or usesthe leased Properties to conduct any illegal activities and do harm to the public interests.3. If, in accordance with Article Ten, the Tenant does not exercise the right of renewal but isunable to return the Properties to the Lessor upon the expiration of this Agreement due to itsbusiness operations, the Lessor shall extend the term to a period as deemed appropriate and isentitled to claiming rental from the Tenant for an amount negotiated and agreed by both Parties.**ARTICLE THREE RENTAL AND METHOD OF PAYMENT**1. Netcom Group and CNC China agree that the actual rental for the Properties leased to eachother shall be determined by both Parties in the Appendix to this Agreement based on the marketprice or the depreciation and maintenance cost and with reference to the rental standard set by thelocal price authorities while taking into consideration the actual needs of the Parties (notexceeding the market price).
 

 
2. Netcom Group and CNC China agree that both Parties may sign separate execution documents withregard to the leasing issues of certain Properties of Netcom Group or certain Properties of CNCChina with the purpose of specifying the applicable terms and conditions relating to such leasedProperties, provided that the execution documents shall comply with the principles, compendium andterms and conditions set forth hereunder.3. The foregoing rental shall be reviewed once a year where Netcom Group and CNC China shallnegotiate to determine whether the rental needs to be adjusted as well as the actual amount of therental after such adjustment.4. The rental shall be settled once each quarter and the settlement date is the last day of eachquarter. When the last day of the quarter happens to be Saturday, Sunday or public holiday, thesettlement date shall be postponed to the first working day immediately after the holiday.5. All tax burdens incurred by the leasing of the Properties of Netcom Group or the Propertiesof CNC China, and management fees and other charges levied by the state and local governmentsagainst the Properties of Netcom Group and the Properties of CNC China shall be borne by theLessor, unless otherwise specified hereunder.**ARTICLE FOUR THE REPAIR AND MAINTENANCE OF THE PROPERTIES DURING THE LEASE TERM**The repair and maintenance of the Properties during the lease term is the Lessor’s obligation, andall costs incurred for this purpose shall be borne by the Lessor. When performing necessaryrenovation to the leased Properties, unless otherwise specified by this Agreement, the Tenant shallconsult the Lessor for any renovation involving the alterations to the main structure of the leasedProperties and shall not proceed with the renovation until a written agreement is entered into.However, unless with valid reasons, the Lessor shall not refuse or delay the alterations to themain structure of the Properties requested by the Tenant. Regarding alterations, additions that donot involve the main structure of the Properties, the Tenant may perform such alterations andadditions on its own and at its own expense without notice to and consent from the Lessor. Anyadditions or value added to the Properties as a result of renovation, alterations or additions madeby the Tenant or the Lessor during the lease term shall belong to the Lessor.**ARTICLE FIVE CHANGE OF THE LESSOR**1. If the Lessor transfers the title of the leased Properties to a third party, this Agreementshall remain in force and effective to the new owner of the title of the Properties.2. When the Lessor sells the ownership of the leased Properties, the Lessor shall notify theTenant three months before the sale. The Tenant shall have the preferential right under the sameconditions.**ARTICLE SIX THE REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES**1. Both Netcom Group and CNC China hereby represent and warrant to the other Party that bothParties are established, registered and existing companies or organizations in accordance with thelaws of the PRC and have full powers and authorizations (including the legal, the company’sinternal and other powers and authorizations):1) The powers and authorizations to own, lease, rent and operate its assets;2) The powers and authorizations to sign and implement this Agreement.2. The Lessor hereby represents and warrants to the Tenant as follows:
 

 
1) The Lessor is the only lawful owner of the leased Properties and has the exclusive right tolease the said Properties to the Tenant for considerations in accordance with the provisions ofthis Agreement;2) The leased Properties, when delivered to the Tenant for use, are in good conditions withstructures complete and adequate for the Tenant to use them for the purposes set forth in thisAgreement;3) The Lessor undertakes that the Tenant has the right to terminate this Agreement at any timeif the foregoing warranty contains any untrue statement. Meanwhile, the Lessor agrees to undertakethe indemnify obligation for any economic loss and damages incurred to the Tenant by such untruth.3. The Tenant hereby represents and warrants to the Lessor as follows:1) The Tenant shall pay the relevant rental to the Lessor in accordance with Article Three ofthis Agreement. If the Tenant fail to pay the said rental, the Tenant shall, for each 1 day(calendar day, and the same applies below) late, pay a late charge penalty of 0.05% of theoutstanding balance to the Lessor.2) During the lease term, the Tenant shall abide by the relevant laws and regulations of the PRCand it shall be the Tenant’s sole responsibility to bear the consequences of security, fire andenvironment protection issues.4. Netcom Group warrants to providing CNC China’s auditors with the accounting records of NetcomGroup and its connected persons for any connected transactions.5. Any terms of this Agreement and its appendixes are not in violation of the regulatorydocuments of each Netcom Group and the law and regulations of the PRC.6. It is agreed that both Parties will take further actions to ensure the realization of theprinciples and provisions in this Agreement. It is further agreed that both Parties will ensurethat, CNC China, being a subsidiary of a company to be listed or listed, China Netcom Group (HongKong) Limited, shall comply with the Listing Rules of the Hong Kong Stock Exchange for connectedtransactions.**ARTICLE SEVEN FORCE MAJEURE**1 In the event of Force Majeure that causes both Parties or either Party to fail completely orpartially in performing the obligations under this Agreement, that said Party is not liable forbreach of agreement. However, in the event of such an incident, the affected Party shall inform theother Party by written notice within fifteen (15) days after the said incident and provide relevantproof and evidence to the other Party. At the same time, the affected Party shall use its bestendeavors to minimize the damage caused by the Force Majeure event. The affected Party or bothParties shall resume its obligations under this Agreement within a reasonable time once the ForceMajeure event has ended.2 Force Majeure in this Agreement means all objective situations that are unforeseeable,unavoidable and that cannot be overcome.**ARTICLE EIGHT BREACH OF CONTRACT**1. The failure of a Party to perform the obligations set forth by this Agreement shall be deemedin violation of the contract. The delinquent Party shall correct this noncompliance within five (5)days upon receiving from the other Party detailed notice of such violation. If after five (5) days,such violation of Agreement has not been corrected, the delinquent Party should compensate theother Party for all direct and foreseeable losses caused by such breach of contract.2. If the Tenant’s use of the leased Properties is prolonged due to the errors or mistakes ofthe Lessor, the agreed lease term of the Properties hereunder shall be extended accordingly.
 

 
**ARTICLE NINE CONFIDENTIALITY**Unless with written approval by the other Party, neither Party can announce nor supply or reveal toany third party any information regarding this Agreement or the business information of the otherParty, with the exception of requests by the legal or governmental departments or any otherrelevant securities regulatory authorities or for the purpose of the Listing Company seekinglisting or retaining listing.**ARTICLE TEN GOVERNING LAWS AND DISPUTES RESOLUTION**1. The execution, power, interpretation, implementation and disputes resolution of thisAgreement are subject to the protection and jurisdiction of the law of the PRC.2. Both Parties shall seek to settle matters of dispute arising from the implementation of thisagreement or in connection with this agreement by cooperative negotiation. If the matters ofdisputes cannot be settled by negotiation, either Party has the right to resort to litigation atthe people’s court which has the jurisdiction over the matter.**ARTICLE ELEVEN EFFECTIVENESS OF AGREEMENT AND OTHERS**1. This Agreement shall come into effect once signed by the legal representatives or authorizedrepresentatives of both Parties and affixed with their official seals. This Agreement shall beeffective from January 1, 2008 to December 31, 2010. If CNC China wishes to renew this Agreementand notifies Netcom Group with 3 month’s notice, this Agreement shall be renewed automatically foranother 3 years on the same terms. There is no limit on the number of renewal.2. The supplementary agreements, side agreements, and documents drawn according to theprinciples of this Agreement are parts of this Agreement. Both Parties agree that any changes,revisions or amendments to this Agreement shall come into effect by written agreements entered intoby both Parties and shall become indivisible parts of this Agreement.3. The Agreement is made in Chinese. It is made into two (2) duplicate originals. Each Partyholds one (1) copy, and each copy shall have the same legal binding effect.IN WITNESS WHEREOF the Legal representatives or the authorized representatives of both Partieshereto have executed the Agreement as of the date and venue first written above.Signature page:     **CHINA NETWORK COMMUNICATIONS GROUP CORPORATION (SEAL)**