Sino-foreign Joint Venture

CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


SINO-FOREIGN JOINT VENTURE


GUANGDONG UTSTARCOM TELECOMMUNICATION CO. LTD.


CONTRACT


ARTICLE 1 GENERAL


In accordance with the "Law of the People's Republic of China Sino-Foreign Equity Joint Venture enterprise" and other relevant laws and regulations, Chinese Guangdong Nanfang telecommunication Group Co. and UTStarcom Inc., adhering to the principle of equality and mutual benefit, agree to jointly invest to set up a joint venture enterprise. The contract hereunder worked out.


ARTICLE 2 PARTIES OF THE JOINT VENTURE


Chinese Guangdong Nanfang telecommunication Group Co. (hereafter referred to as Party A), registered with Guangzhou City of Guangdong province in China, and its legal address is at Guangzhou City.


Legal representative: Name: Li Yisheng


Position: Chairman of the board


Nationality: China


UTStarcom Inc. (hereafter referred to as Party B), registered in U.S.A., and its legal address is at Alameda, California, U.S.A.,


Legal representative: Name: Lu Hongliang


Position: CEO


Nationality: U.S.A.


ARTICLE 3 ESTABLISHMENT OF JOINT VENTURE COMPANY


3.1 In accordance with the "Law of the People's Republic China on Sino-Foreign Equity Joint Ventures Enterprise" and other relevant laws and regulations, both parties of the Joint venture agree to set up a equity joint venture company in business of manufacturing and operating telecommunication equipment.


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3.2 The name of joint venture company is Guangdong UTStarcom telecom Co. Ltd. The name in English is: GUANGDONG UT STARCOM TELECOM CO. LTD. The legal address of the joint venture company is No. 4, JiangBei YunShan DongLu, Huizhou City, Guangdong province, P.R.C.


3.3 All activities of the joint venture company shall be governed by the laws, decrees and pertinent rules and regulations of the People's Republic of China.


3.4 The organization form of the joint venture company is a limited liability company. The profit, risks and losses of the joint venture company shall be shared by the parties in proportion to their contributions of the registered capital.


ARTICLE 4 THE PURPOSE OF THE JOINT VENTURE COMPANY


The joint venture company will operate on the basis of fair, legality, equality, mutual benefit, and enhance the economic cooperation and technical exchanges, to raise economic results and ensure satisfactory economic benefits for each party by improving the product quality, decreasing the cost, quickly delivery, and improving after-sale service, and gaining competitive position in the world market and national market through advanced, appropriate and scientific management.


ARTICLE 5 THE PRODUCTS AND BUSINESS SCOPE


The joint venture company manufacture and operate telecom subscriber access network set product, provide maintenance service after the sale of the products; research and develop new products. The production scale may be: output value for the year 1996 is [*]; output value for the year 1997 is [*]. The production scale may be increased with needs of the market.


5.1 Starting period: joint manufacture and sale of optical terminal products [*] by using [*] technology; digital loop carrier system [*]; high-rate digital subscriber lines HDSL; Access network systems [*] and [*]; products used for the connection of intelligent network and other products relevant to subscriber access network.


5.2 Joint develop manufacture period: manufacture and sale of access network systems incorporating digital loop system [*] and other subscriber access products.


5.3 The products manufactured and operated by the joint venture company shall be exclusive in [*] market and both parties shall not solely or with other third party to establish a company to manufactured and sale the same products the joint venture company manufactured.


ARTICLE 6 TOTAL AMOUNT OF INVESTMENT AND THE REGISTERED CAPITAL


6.1 The total amount of investment of the joint venture company is [*]. The registered capital is US$2.4 million. Party A shall invest [*], accounting for 51% of the total amount of investment, and Party B shall invest [*], accounting for 49% of the total amount of investment.


[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


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Party A will pay [*], accounting for 51% of the registered capital; and Party B will pay [*], accounting for 49% of the registered capital.


6.2 Party A shall contribute the ReiMinBi equivalent to be determined in accordance with the quoted rate of exchange published by the people's bank of China on the month of payment. Party B shall contribute US dollar in cash.


6.3 The registered capital shall be paid in two installments. The first installment shall be remitted amount of [*] within [*] after the date of issuance of the joint venture company's business license. The second installment will be [*], it shall be remitted within [*] after the date of issuance of the business license.


6.4 The net profit at the end of the year shall be determined in accordance with the quoted rate of exchange for RMB and USD published by the people's bank of China.


6.5 In case any party to the joint venture intends to assign all or part of his investment subscribed to a third party, consent shall be obtained from the other party to the joint venture, and approval from the examination and approval authority is required. When one party to the joint venture assigns all or part of his investment, the other party has preemptive right.


ARTICLE 7 RESPONSIBILITY OF EACH PARTY TO THE JOINT VENTURE


7.1 Responsibilities of Party A:


- Handling applications for approval, registration, huskiness
license; Organizing the design and decoration of the
engineering facilities of the joint venture company; and
handling processing import and export Customs declaration and
transportation within Chinese territory;


- Assisting the joint venture in recruiting Chinese management
personnel, technical personnel, workers and other personnel
needed;


- Assisting the joint venture in developing domestic products
market;


- Assisting foreign workers and staff in applying for the entry
visa;


- Responsible for handling other mat ...