letter of intent, agreement and contract

letter of intent for the establishment of a joint venture enterprise producing XX brand mobile phone

XX Factory in Guangdong, China and XX company in Germany on the principle of friendship, equality and mutual benefit, and acmicable negotiations on and from May 10 to 15, July 5 to 7, 2003 respectively about the matter of establishing a Joint Venture Enterprise producing XX Brand Mobile Phones in Guangdong, China. Further, XX Factory in Guangdong, China sent some representives to Germany to discuss the details of the matter from August 6 to 12, 2003. While from October 15 to 20, 2003, 4 people of the German part, intited by the Factory in Guangdong, had an on-the-spot investigation of the Factory. Through friendly negotiations, the two parties have agreed to incorporate a Joint Venture making use of the Factory's workshops and facilities now available to produce XX Brand Mobile Phones under the following Intention.

1. Entire Pragramme & Installment Investment

(1) Chinese Part (XX Factory in Gunagdong Province) shall invest its yard of 60 mu, 5 workshops, 1 office building and other facilities for producing and living as its total stock which will be divided into two installments for investment.

(2) The first installment: 3 workshops, 1 office building, 30 mu of yard and some other auxiliary facilities avaliable will be invested to establish XX Brand Mobile Phone Factory.

(3) The second installment: Within 10 months after the date when the joint venture of the XX Brand Mobile Phone Enterprise obtain the examination and approval by the Chinese goverment, the two parties shall sign a Letter of Intent for the second phase of installment if they consider it necessary. Meanwhile, they should provide a feasibility reprot, a project proposal, a project contract and regulations within another two months in order to apply for the approval. Failure to do so, the secondinstallment will be considered as voluntarily abandoned. The Chinese part can use and arrange the rest 2 workshops and 30 mu of yard as their please.

2. Term of Opertion & Calculation Currency

(1) Term of Operation

a. The term of operation of the enterprise shall be in ten(10) years commencing from March 1, 2004 to Feburary 28, 2014. Should any of the Parties wish to extend the term of operation, the two parties should discuss together before they sign and application submitted to the examination and approval authority for approval of such extension.

b. After the expiration of operation, the remaining value of the fixed assets of the enterprise will belong to the Chinese Part.

(2) Calculation Currency

No matter what investment molds the parties will adopt, the calculation currency of investment should be in US dollars.

3. Scale of the Enterprise

The area of the Enterprise is 30 mu with XXX staff members and the annual output of XXX pieces of XX Brand Mobile Phone.

4. Proportion & Form of Investment Contributed by the Parties

The total investment of the Joint Venture Enterprise will be .... US dollars. The Germany Part will contribute 49% of the total investment in the sum of ... US dollars including 3 complete sets of machine for producing the Mobile Phones, auxiliary Facilities, office equipments and revolving fund used for reforming the factory facilities available and production as well. While the Chinese Part will contribute 51% of the total investment in the sum of ... US dollars including 3 workshops (covering the area of 4125 M2), 30 mu of yard, 3 vechicles for production and work, power distribution and facilities as well.

5. Obliations of the parties

Chinese Part

(1) Applying for the Joint Venture, going through the produces for examination and approval of the Government, registration in teh Administration of Industry and Commerce, and effect insurance for the Joint Venture Enterprise within 3 months.

(2) Programming entirely of the Enterprise area, equipping well the auxiliary facilities, effecting insurance for property of the Enterprise.

(3) Promoting 30% of the Enterprise's products fo ten(10) years within China.

German Part

(1) Delivering 3 complete sets of machine for producing the Mobile Phones, auxiliary facilities, and some office equipments.

(2) Sending 2 technicians to China to train the Chinese workers, directing the production and installation of equipments.

(3) Promoting 70% of the Enterprise's products of ten(10) years outside China.

(4) Providing revolving fund for production and for reforming the factory's facilities.

6. Profit Distribution and Loss Sharing

The Parties shall distribute profits and share losses in proportion to their respective percentage of investment, i.e. Chinese Part will obtain profits and share losses of 51%, while German Part will obtain profits and share losses of 49%.

7. Remarks

(1) Other matters concerning to the joint venture could be supplemented at the time of signing an agreement of establishing the Enterprise.

(2) This Letter of Intent is made out for 6 copies in bothe Chinese and German languages. Each party holds 3 copies.

(3) This Letter of Intent shall come into effect from the date of signing it.