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Sample Business Contracts

Joint Venture Agreement - Techfaith Holdings Ltd. and NEC Corp.

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            CONTRACT FOR THE ESTABLISHMENT OF FOREIGN CAPITAL COMPANY

                                    ARTICLE 1
                               GENERAL PRINCIPLE

In accordance with the stipulations of "The Law of the People's Republic of
China on Foreign-Capital Enterprises", "The Regulations for the Implementation
of the law of the People's Republic of China on Foreign-Capital Enterprises and
other related laws and rules (hereinafter collectively referred to as the
"Foreign-Capital Enterprises Law"), and on the basis of equality and mutual
benefit, Techfaith Holdings Limited and NEC Corporation agree to establish a
wholly foreign owned enterprise with joint investments pursuant to the terms and
conditions contained in this Contract.

                                    ARTICLE 2
                             PARTIES OF THE COMPANY

2.1   The names and legal addresses of the parties to this Contract are as
      follows:

         TECHFAITH HOLDINGS LIMITED (hereinafter referred to as "Party A"), a
         company duly organized and validly existing under the laws of British
         Virgin Islands and hold the effective business license (license number:
         551631)

         Registered address:   Rm. 1909, 19/F, Hutchison House, 10 Harcourt Rd.,
                               Central, Hong Kong

         Legal Representative: Dong Defu

         Title:                Chairman

         Nationality:          The People's Republic of China

         NEC CORPORATION (hereinafter referred to as "party B"), a company duly
         organized and validly existing under the laws of Japan.

         Registered address:   7-1, Shiba 5-chome, Minato-ku, Tokyo 108-8001,
                               Japan

         Legal Representative: Kanasugi Akinobu

         Title:                President

         Nationality:          Japan

      Party A and Party B are hereinafter referred to as "Party" respectively
      and "Parties" collectively.

2.2   Each of Parties hereby represents and warrants to the other Party that:

      (a)   It is a validly existing enterprise legal person of its country, in
            good standing under the laws of its country, and has full power and
            right to conduct its business within the scope of its articles of
            association or similar corporate constituent

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            documents;

      (b)   It has the authority to enter into and perform this Contract;

      (c)   It has taken all requisite actions to authorize the execution of
            this Contract, this Contract will constitute a valid and binding
            contract, and the other party shall have the right to require it to
            perform it in accordance with its terms; and

      (d)   The execution and performance of this Contract will not violate any
            commitment or obligation that it has made or assumed contractually
            or otherwise, or any law or regulation.

                                    ARTICLE 3
                             FOUNDING OF THE COMPANY

3.1   In accordance with the Foreign-Capital Enterprises Law and other related
      laws, both Party A and Party B agree to establish a wholly foreign owned
      enterprise with limited liability (hereinafter referred to as the
      "Company") in Beijing, the People's Republic of China (hereinafter
      referred to as the "PRC").

3.2   The Chinese name of the Company: [CHINESE CHARECTERS]
      The English name of the Company: To be agreed upon by Parties based on
                                       Chinese name.
      The Registered Address of the Company: 4/F M8 West No.1 Jiu Xian Qiao Dong
                                         Road, Chao Yang District. Beijing,
                                         China. 100016.

      If there is any problem in connection with registration of the name of the
      Company in Chinese and/or English, Parties shall discuss and adopt another
      name that can be registered, and shall cause the directors of the Company
      appointed by them to vote for the adoption of such name.

3.3   The Company is a legal person in the PRC and is subject to the
      jurisdiction and protection of the laws, decrees, ordinances and pertinent
      rules and regulations of the PRC. All its activities shall be governed by
      the laws, decrees, ordinances and other related regulations and rules of
      the PRC.

3.4   The Company shall take the form as a Limited Liability Company. The
      liability of each Party with respect to the Company shall be limited to
      the amount of its respective capital contributions to the registered
      capital of the Company set forth in Article 6.2 (hereinafter referred to
      as the "Registered Capital").

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3.5   Neither Party shall have any liability (i) in excess of an amount of its
      contribution to the registered capital of the Company or (ii) of any sort
      whatsoever for the debts or obligations of the Company to any third party
      creditors of the Company. Thus creditors of the Company (including
      taxation and other authorities) shall look only to the assets of the
      Company for payment. Subject to the limitations described above and other
      terms and conditions contained herein, the profits and losses of the
      Company shall be shared by Party A and Party B in proportion to their
      respective capital contributions to the Registered Capital of the Company.

3.6   All legal and administrative details in connection with the establishment
      of the Company shall be carried out by Party A in consultation with Party
      B.

3.7   Party A shall advance all necessary fees and expenses for the
      establishment of the Company set forth in Article 3.6, and shall be
      reimbursed for the amount so advanced from funds of the Company, provided,
      however, that Party A shall inform Party B and the Company in writing in a
      timely manner of the amount so advanced together with appropriate
      evidence.

3.8   The establishment of the Company shall be subject to examination and
      approval by Beijing Municipal Committee of Foreign Trade and Economic
      Cooperation (hereinafter referred to as the "Approval Authority"), and
      registration by Beijing Municipal Administration for Industry and Commerce
      (hereinafter referred to as the "Registration Authority"). The date of
      issuance of the business license for the Company from the Registration
      Authority shall be regarded as the date of establishment of the Company
      thereinafter referred to as the "Establishment Date").

3.9   Immediately after the Establishment Date, Party A shall send a copy of
      such business license to Party B with an English translation.

                                    ARTICLE 4
                            OBJECTIVES OF THE COMPANY

Parties acknowledge that the purpose of establishment of the Company is to cause
the Company to engage in the business on the principles of the maximizing
profit, and to cause the Company to serve as a modernized enterprise with the
capacity to develop certain technologies regarding mobile terminal products
primarily for party B. Parties contemplates that the Company will be engaged in
development of technologies for 2.5G mobile terminal products to be marketed in
the PRC, and those for 3G mobile terminal products to be marketed worldwide.

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                                   ARTICLE 5
                         BUSINESS SCOPE OF THE COMPANY

5.1   The business scope of the Company shall be:

      (a)   to engage in developing technology and performing design works in
            connection with the mobile terminal communication equipment; and

      (b)   to be engaged in other activities adopted by the board of directors
            of the Company (hereinafter referred to as the "Board of Directors")
            pursuant to Article 8.4.

5.2   Unless otherwise specifically agreed upon by Parties in accordance with
      this Contract and approved by the Approval Authority, the Company shall
      not perform any business other than those listed in Article 5.1.

                                    ARTICLE 6
                    REGISTERED CAPITAL AND TOTAL INVESTMENT

6.1   The total investment amount of the Company is fifty million Renminbi
      (RMB50,000,000).

6.2   The Registered Capital of the Company shall be fifty million Renminbi
      (RMB50,000,000).

      Each Party shall subscribe for and make contribution in cash to the
      Registered Capital of the Company as follows:

         PARTY A: thirty five million Renminbi (RMB35,000,000), accounting for
         seventy percent (70%) of the Registered Capital of the Company.

         PARTY B: fifteen million Renminbi (RMB15,000,000), accounting for
         thirty percent (30%) of the Registered Capital of the Company.

      Party A shall make cash contributions in Renminbi and Party B shall make
      cash contributions in US dollars. The exchange rate for conversion between
      Renminbi and US Dollars for determining Party B's cash contributions shall
      be RMB8.2780 per US Dollar.

6.3   Each Party shall contribute its entire amount of contribution to the
      Registered Capital within thirty (30) days after the Establishment date,
      provided, however, that each Party shall have no obligation to make its
      contributions to the Registered Capital if, prior to the completion of
      such contributions, (a) the other Party has committed a

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      material breach relating to the establishment of the Company hereunder, or
      (b) any of the force majeure set forth in Article 21 has occurred and
      remains.

6.4   If either Party fails to make its contributions to the Registered Capital
      as required in Articles 6.2 and 6.3, it shall be subject to the liability
      provided in Article 14.1.

6.5   Within fourteen (14) days after each payment of the contributions pursuant
      to Article 6.2, the Company shall, at its cost, cause an accountant
      registered in the PRC to verify such payment and issue an investment
      verification report, and shall submit such report to the Approval
      Authority. In addition, without delay upon such payment, the Company shall
      send Parties an original of investment certificate and a copy of such
      report. The investment certificate, in which total investment paid by then
      by each Party shall be indicated, shall be signed by the chairman of the
      Board of Directors. If an investment certificate is defaced, lost, stolen
      or destroyed, the Company shall, upon request, reissue such investment
      certificate specifying the reasons.

6.6   During the term of corporate existence of the Company, the Company may
      increase its Registered Capital in the event (a) the Board of Directors
      approves such increase pursuant to Article 8.4, and (b) the relevant
      approval is obtained from the Approval Authority in accordance with the
      Foreign-Capital Enterprises Law.

6.7.1 During the term of the corporate existence of the Company, neither Party
      may transfer or otherwise dispose of all or any portion of its interest in
      the Registered Capital to any third party without the prior written
      consent of the other Party and the approval by the Approval Authority.

6.7.2 Notwithstanding Article 6.7.1, if at any time either Party desires to
      transfer all or any portion of its interest in the Registered Capital
      (hereinafter referred to as the "Proposing Transferor"), such interest
      shall be first offered to the other Party (hereinafter referred to as the
      "First Refusal Party ") by way of a written notification (hereinafter
      referred to as the "Transfer Notice"). The Transfer Notice shall be sent
      to the First Refusal Party pursuant to Article 26.4, enclosing a copy of
      the offer that the Proposing Transferor (i) intends to submit to a third
      party or (ii) has received in good faith from a third party and wishes to
      accept, and stating (a) its wish to make such transfer, (b) the interest
      it wishes to transfer, (c) the price (including the terms and conditions
      thereof) of such interest and (d) the identity of such third party.

6.7.3 Upon receipt of me Transfer Notice, the First Refusal Party shall have the
      right of first refusal to purchase all or portion of such interest at the
      Transfer Price. This right of first refusal shall be exercised within
      twenty (20) days from receipt of the Transfer Notice.

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      For the purpose of this Article 6.7.3, the "Transfer Price" shall be equal
      to the amount of one hundred twenty percent (120%) of the net assets of
      the Company times the ratio of the Proposing Transferor's interest in the
      Registered Capital to be transferred. In such event, the value of the net
      assets of the Company shall be the book value of the net assets of the
      Company as of the end of the month immediately preceding the issuance of
      the relevant Transfer Notice, which shall be audited by an independent
      public certified accountant selected by both Parties.

6.7.4 If the above-referred right of first refusal is not exercised within the
      twenty (20) day period or if there is a remainder after exercise of the
      right of first refusal, the Proposing Transferor shall have the right,
      exercisable after the expiry of the twenty (20) day period or the receipt
      of the offer to purchase part of the interest from the First Refusal Party
      as the case may be, to transfer the interest or the unsold portion of the
      interest to the third party identified in the Transfer Notice at the price
      and on terms and conditions not more favorable to such third party than
      those contained in the Transfer Notice.

6.7.5 In case of a transfer of all or any portion of the interest owned by the
      Proposing Transferor to a third party identified in the Transfer Notice
      pursuant to Article 6.7.2, the Proposing Transferor shall cause such third
      party to submit to the First Refusal Party a written commitment signed by
      an authorized representative of such third party to assume any and all
      obligations of the Proposing Transferor under this Contract and the
      Articles of Association.

6.7.6 Any purported transfer of all or any portion of the interest in the
      Registered Capital by either Party which is not in accordance with the
      provisions of Article 6.7 shall be null and void and of no effect
      whatsoever. In case that an agreement on the transfer of the interest
      owned by either Party shall be reached in compliance with this Contract,
      Parties agree to cause all the directors of the Company appointed by them
      respectively to vote for such transfer. The Company shall apply for
      approval of such transfer to the Approval Authority in accordance with the
      Foreign-Capital Enterprises Law and shall use its best efforts to secure
      such approval. Party A shall assist the Company in applying for and
      securing such approval.

6.7.7 Upon any transfer by either Party of all or any portion of its interest in
      the Registered Capital pursuant to Article 6.7, the Proposing Transferor
      shall turn in to the Company for cancellation its investment certificate
      issued by the Company, and the Company shall issue in its place a new
      investment certificate or certificates, as appropriate.

6.7.8 In the event that any transfer by either Party of all of its interest in
      the Registered Capital is effected in accordance with Article 6.7, the
      Proposing Transferor shall immediately cause all the directors of the
      Board of Directors appointed by it and the General Manager and Deputy
      Managers of the Company directly and indirectly nominated by it, if any,to
      resign from their posts in the Company.

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6.7.9 Notwithstanding the foregoing, Party B hereby explicitly and irrevocably
      waives its right of first refusal as stipulated in Article 6.7.2 and 6.7.3
      above in case of the assignment of all of Party A's interest in the
      Registered Capital of the Company to Party A's parent company if:

      (1)   Such parent company is established within two (2) years after the
            Establishment Date for the purpose of initial public offering of the
            stock of such parent company;

      (2)   Such parent company has one hundred percent (100%) ownership of
            voting stock issued by Party A;

      (3)   Such parent company, in advance, submits to Party B a written
            commitment signed by an authorized representative of such parent
            company to assume any and all obligations of Party A under this
            Contract and the Articles of Association; and

      (4)   Mr. Dong Defu, a citizen of the PRC with the ID number of
            220224197107242611 and having his residential address at 3.4 309C
            area, Wang Jing Xin Cheng, Chao Yang District, Beijing 10120, the
            PRC, in advance, submits to Party B a written commitment, in a form
            and substance, similar to the contract signed by him for the
            establishment of the Company.

      In such event, Party B further agrees to cause the director of the Board
      of Directors they appointed to vote in favor of such transfer.

      In addition, in case Party A desires to transfer all or any portion of its
      interest in the Registered Capital to Affiliates, upon appropriate
      information to be provided by Party A and with the evidence of harmless to
      Party B's business, Party B shall negotiate with Party A in good faith for
      waiver of its right of first refusal as stipulated in Article 6.7.2 and
      6.7.3. For the purpose of this paragraph, "Affiliate" means a legal entity
      that directly or indirectly through one or more intermediaries, controls,
      is controlled by or under common control with Party A. For the purpose of
      this definition, the term "control" means the possession of more than
      fifty percent (50%) of the voting stock or other interest for the election
      of directors.

                                    ARTICLE 7
                          OBLIGATIONS OF BOTH PARTIES

In Addition to subscribing for and making contributions to the Registered
Capital pursuant hereto, Parties shall have the obligations set forth in this
Article 7.

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     (1) Party A shall be responsible for:

         -  Matters related to application to the authorities of China for
            approval, registration and acquisition of permit or license for the
            purpose of setting up the Company;

         -  Applying for the land use right for the Company, to organize the
            design and construction of factory and engineering facilities
            required for the Company, to handle customs clearance for import and
            export as well as to handle transportation within China;

         -  Assisting the Company in hiring personnel of Chinese nationality
            including managers, technicians, workers and other staff needed for
            the Company;

         -  Assisting the Company in pursuing its business scope set forth in
            Article 5, including without limitation, transferring or dispatching
            certain appropriate engineers of its subsidiaries who are currently
            engaged in the design work for Party B;

         -  Supporting the Company in obtaining availability of foreign currency
            in the PRC;

         -  Assisting the Company in obtaining loans from financial
            organizations in the PRC;

         -  Assisting the Company in obtaining all the preference treatment
            which may be available for the Company as a Foreign-Capital
            Enterprise and/or as technologically-advanced enterprise in
            accordance with the Foreign-Capital Enterprises Law;

         -  Assisting the Company in obtaining latest technical and marketing
            information related to the businesses of the Company;

         -  Assisting the Company in obtaining approval related to quality
            control such as ISO 9001;

         -  Causing its subsidiaries to grant to the Company a license for
            performing the businesses contemplated herein, including without
            limitation, Know-how concerning 2.5G mobile terminal products, in
            accordance with the license contract to be entered into between the
            Company and such subsidiaries; and

         -  Other matters entrusted by the Company and accepted by Party A.

      (2) Party B shall be responsible for:

         -  Assisting the Company in procuring the advanced and applicable
            machinery and equipment from the international market, provide
            related information in that regard by putting quality as top
            priority in the selection to ensure the quality and quantity
            standard of such equipment.

         -  Providing the technical assistance to the Company pursuant to the
            "Framework Contract" and relevant individual contracts to be
            separately entered into with the Company under which the Company
            will develop certain technologies for Party B.

         -  Other matters entrusted by the Company and accepted by Party B.

                                    ARTICLE 8
                               BOARD OF DIRECTORS

8.1   The Company shall establish the Board of Directors as of the Establishment
      Date.

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8.2   The Board of Directors shall consist of five (5) directors (hereinafter
      referred to as "Directors"), four (4) of which shall be appointed by Party
      A, and one (1) of which shall be appointed by Party B. The Board of
      Directors shall have one (1) chairman (hereinafter referred to as
      "Chairman"), which shall be appointed by Party A.

8.3   The term of Directors shall be three (3) years and Directors may be
      reappointed by the Party which appointed them. The Directors may be
      replaced during their term only by the Party which appointed them. The
      Directors may be dismissed for misconduct upon consent of all of the
      remaining Directors, and the replacement of such dismissed Director shall
      be appointed by the Party which appointed such dismissed Director. Should
      a vacancy occur in the Board of Directors for any reason, the replacement
      shall be appointed in due time for the remaining period of his/her
      predecessor by the Party which appointed such predecessor. For any
      appointment or replacement of the Directors, the Party which appoints or
      replaces shall notify the other Party in writing of the name, age,
      address, personal history and other related information of the candidates
      in advance, and shall notify the Company and the other Party in writing of
      such appointment or replacement.

8.4   The Board of Directors shall be the highest authority of the Company, and
      shall have the sole power to decide all the major matters of the Company
      including without limitation the followings:

      (1)   Amendment of the Articles of Association;

      (2)   Dissolution, liquidation of the Company, and extension of the term
            of the corporate existence of the Company;

      (3)   Increase in the Registered Capital;

      (4)   Approval of transfer of the interest in the Registered Capital held
            by Parties;

      (5)   Division, merger or change of organization form of the Company;

      (6)   Creating or issuing a mortgage or pledge of, or any other security
            interest over or encumbrance of, the whole or any portion of the
            assets of the Company;

      (7)   Profit distribution or loss treatment;

      (8)   Approval of the balance sheet, profit and loss statement, cash flow
            statement and other annual financial statements;

      (9)   Any sale or other transfer of any intangible assets of the Company;

      (10)  Any sale or other transfer of tangible assets to any third party
            exceeding the

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            amount of one million six hundred Renminbi (RMB1,600,000) in
            aggregate;

      (11)  Equity investment by the Company to any other legal entity;

      (12)  Approval of the annual loan budget plan of the Company;

      (13)  Entering into any agreement or transaction with Party A, under which
            the Company shall pay, or bear a debt of, an amount exceeding eight
            hundred thousand Renminbi (RMB800,000) in aggregate;

      (14)  Appointment and dismissal of the auditor of the Company;

      (15)  Establishment of any subsidiaries of the Company;

      (16)  Addition of any new line of business or discontinuation of any
            existing line of business of the Company, amendment of the business
            scope of the Company;

      (17)  Approval of the annual business plan and annual investment plan;

      (18)  Appointment and dismissal of the General Manager of the Company; and

      (19)  Adopting rules and regulations of the Company;

8.5   Every Director shall have one (1) vote at the meeting of the Board of
      Directors (hereinafter referred to as the "Meeting").

8.6   Those issues listed in (1) through (14) in Article 8.4 shall be decided by
      unanimous vote of the Directors attending the Meeting in person or by
      proxy. Those issues listed in (15) through (19) in Article 8.4 shall be
      decided by a simple majority vote of all Directors attending the Meeting
      in person or by proxy.

8.7   The Chairman shall be the legal representative of the Company. When the
      Chairman cannot carry out his obligations for whatever reason, he can
      authorize another Director to act on behalf of him during the period of
      his absence.

8.8   The first Meeting shall be convened within thirty (30) days after the
      Establishment Date. Thereafter, each ordinary Meeting shall be convened
      once a year within two (2) months after closing date of each fiscal year
      at the head quarters of the Company. Any first or ordinary Meeting shall
      be convened and presided over by the Chairman. Should the Chairman be
      unable to convene or preside over the Meeting, he shall authorize another
      Director to convene and preside over the Meeting. If the Chairman or the
      Director authorized by the Chairman fails to give notice for convocation
      of any ordinary Meeting within two (2) months after the closing date of
      each fiscal year, then another Director may convene such ordinary Meeting
      and the

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      Director to be determined among the Directors then present shall preside
      over such ordinary Meeting.

8.9   If Chairman deems necessary or is requested by at least one third of
      Directors in a written manner, the Chairman shall convene an extraordinary
      Meeting at the head quarters of the Company. In such event, Chairman shall
      give each Director a written notice ten (10) days before such Meeting.
      Should the Chairman be unable to convene or preside over the extraordinary
      Meeting, he shall authorize another Director to convene and preside over
      the extraordinary Meeting. If the Chairman or another Director authorized
      by the Chairman fails to give notice for convocation of any extraordinary
      Meeting within ten (10) days after request in writing for convocation by
      the Director, then, the requesting Director may convene such extraordinary
      Meeting and the Director to be determined among the Directors then present
      shall preside over such extraordinary Meeting.

8.10  Unless waived in writing by all the Directors, the notice of the Meeting
      shall be given to all the Directors and Parties by means of courier or
      registered airmail at the address set forth in Article 26.4 at least
      thirty (30) days prior to the date of the ordinary Meeting and ten (10)
      days prior to the date of the extraordinary Meeting. The notice shall (i)
      be written in the Chinese and English languages, (ii) specify the place,
      date and time of the Meeting, (iii) state clearly and precisely all
      matters which are to be considered at the Meeting and (iv) be accompanied
      with all materials and documents in the Chinese and English languages
      which will be presented to the Meeting for consideration. No business
      other than that specifically stated in the notice shall be transacted at
      any Meeting.

8.11  The Meeting shall require a quorum of four (4) Directors, provided that
      the Director appointed by Party B shall be present in person or by proxy.
      In case of non-quorum or absence of such Director, the Meeting shall be
      adjourned to the time and date to be agreed upon among all the Directors
      then present, and notified to all the Directors in writing.

8.12  The Meeting shall be conducted in Chinese and English languages. The
      Company shall, at its cost, arrange for the presence of at least one (1)
      skilled Chinese-English interpreter at every Meeting.

8.13  Each Party shall cause the Directors appointed by it to attend the
      Meetings. Should the Director be unable to attend the Meeting, he may
      appoint a proxy in writing to attend and vote in the Meeting in his place.
      In case the Director neither attends nor appoints a proxy to attend the
      meeting for any reason other than the force majeure events set forth in
      Article 21, such Director shall be deemed to be present at such Meeting
      for satisfying the quorum requirement, and shall be deemed to have voted
      to concur with the votes cast by a majority of the Directors present at
      such Meeting in person or by proxy.

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8.14  In lieu of the Meeting, a written resolution may be adopted by the Board
      of Directors. Any written resolution of any Meeting shall require the
      confirmation by the number of Directors necessary to make a resolution as
      stipulated in Articles 8.6 and 8.11. A written resolution may consist of
      several documents in the same form each signed by one (1) or more
      Directors.

8.15  Minutes shall be made by the Company for each Meeting and signed by all
      the attending Directors or by the attending proxy. Such minutes shall
      cover the agenda, the decision made, and time and place of the Meeting.
      Such minutes shall be written in English and Chinese, both of which
      versions shall be equally authentic, and shall be filed by the Company for
      record. The Company shall send the copy of such minutes to both Parties
      within ten (10) days from the Meeting.

8.16  No Director shall be entitled to receive any remuneration, allowance or
      other fees from the Company as a Director, provided that all the expenses
      such as air tickets and accommodation fees incurred to Directors for
      attending the Meeting or otherwise performing the Directors' duties shall
      be borne by the Company.

                                    ARTICLE 9
                       OPERATION MANAGEMENT ORGANIZATION

9.1   The Company shall establish a management organization for its daily
      operation and management. The Company shall have the following
      departments: Research & Development, Sales, Financing, Services, etc.,
      which shall be led by a General Manager.

9.2   The Company shall have one (1) General Manager, who shall be nominated by
      Party A and appointed by the Board of Directors. The Company may also have
      several Deputy General Managers to be appointed by the General Manager.

9.3   The General Manger shall be directly responsible to the Board of
      Directors. He shall carry out decisions of the Board of Directors and
      matters delegated therefrom, organize and be responsible for the daily
      management of the Company, including routine Research & Development, and
      other business and administrative tasks, in accordance with this Contract.

9.4   The General Manager and Deputy General Managers may be dismissed by the
      Board of Directors at any time if they engage in graft or are found to be
      guilty of serious dereliction of duty.

9.5   The department managers of the Company shall be appointed by the General
      Manager. The department managers shall be responsible for the operation of
      various

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      departments respectively, shall handle the matters delegated by the
      General Manager and Deputy General Managers and shall be responsible to
      the Company.

9.6   During the tenure of office, the General Manager shall not be allowed to
      take concurrently position in other companies or entities.

                                   ARTICLE 10
                             PURCHASE OF EQUIPMENT

In accordance with this Contract and the Articles of Association, the Company
shall have the right to purchase the relevant equipment and instruments
necessary for its corporate activities.

                                   ARTICLE 11
                    PERSONNEL ADMINISTRATION AND TRADE UNION

11.1  With regard to issues relating to employment, dismissal, wages, labor
      insurance, welfare and reward and penalty of the workers of the Company,
      the Board of Directors should discuss and work out a labor contract and
      then implement it in accordance with "The Law of the People's Republic of
      China on Foreign-Capital Enterprise" and the its implementing measures.
      The labor contract, after its execution, should be kept in the file of the
      local labor administration department.

11.2  The employment conditions for the Company's employees and their numbers
      will meet the business demands of the Company. In all cases, the Company
      shall employ only those employees who are sufficiently qualified for
      employment, as determined through examinations, interviews or other
      appropriate means conducted by the Company. Neither Party shall employ any
      former employees (except for employees dispatched by such Party) of the
      Company who have retired, resigned or been dismissed by the Company,
      within three (3) years from such retirement, resignation or dismissal.

11.3  The employees of the Company shall have the right to establish their trade
      union and take part in its activities in accordance with the stipulations
      of "Trade Union Law of the People's Republic of China." The trade union
      shall have the right to negotiate with the Company regarding incentives,
      punishment, dismissal, salary, welfare, labor protection, and labor
      insurance issues, etc.

                                   ARTICLE 12
                                    TAXATION

12.1  The Company shall pay all the taxes required by the relevant laws and
      regulations of

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      the PRC. Party A shall make the best effort to get the most favorable
      taxation treatment (including without limitation tax exemptions,
      reductions, privileges and preferences) for the Company, which are
      available or will become available under such laws and regulations.

12.2  The employees of the Company should pay individual income tax according to
      the "Individual Income Tax Law" of the PRC.

                                   ARTICLE 13
                               PROFIT DISTRIBUTION

13.1  If at the end of each fiscal year the Company makes a profit, then after
      deduction of income tax payable and after allocation of (i) the Reserve
      Fund and (ii) Bonus and Welfare Fund for Staff and Workers in accordance
      with the Foreign-Capital Enterprises Law, the net profit shall be
      distributed to Parties in proportion to their respective ratio to the
      contributions to the Registered Capital actually paid at that time, as
      decided by the Board of Directors. The proportion of such allocation of
      the Reserve Fund and Bonus and Welfare Fund for Staff and Workers shall be
      decided by the Board of Directors subject to applicable laws and
      regulations of the PRC. The above distribution shall be made in the same
      currency as the payments by Parties of contributions to the Registered
      Capital, within thirty (30) days after the resolution of the Board of
      Directors. Party A shall assist the Company in remitting such profit to
      Party B.

13.2  Notwithstanding the provision of Article 13.1, in no event the Company may
      distribute the profit in any fiscal year unless the losses of the previous
      year(s) that has not been made up, if any, has been offset. Losses
      incurred by the Company in any fiscal year may be carried over to the next
      fiscal year. Should the income in the such next year be insufficient to
      make up the said losses, the balance may be made up with further
      deductions against income year by year over a period not exceeding three
      (3) years.

13.3  The plan for profit distribution or retention shall be decided by the
      Board of Directors within two (2) months after the end of each fiscal
      year.

                                   ARTICLE 14
                                FINANCIAL AFFAIRS

14.1  The fiscal year of the Company shall start from April 1st and close on
      March 31st. The first fiscal year shall start from the date of the
      Establishment Date. All accounts and statements shall be written both in
      English and Chinese, both of which versions shall be equally authentic.

                                       14
<PAGE>

14.2  The Company shall handle its accounting affairs in compliance with
      applicable laws and regulations of the PRC. To the maximum extent
      permitted by such laws and regulations, the Company shall adopt generally
      accepted international accounting principles.

14.3  The Company shall open both Renminbi and foreign currency accounts with
      one (1) or more banks legal established in the PRC.

14.4  The Company shall adopt accrual basis of accounting and the debit and
      credit methods for bookkeeping, and shall adopt the Renminbi as its
      account-keeeping unit. The conversion between Renminbi and other
      currencies shall be in accordance with the exchange rate on the day of
      conversion published by the People's Bank of China.

14.5  After closing date of each fiscal year, the General Manager shall
      supervise the preparation of the previous year's balance sheet, profit and
      loss statement, cash flows statement and profit distribution and loss
      treatment statements. After they have been examined and signed by an
      auditor set forth in Article 14.8, no later than thirty (30) days after
      the end of each fiscal year, these statements shall be submitted to the
      Board of Directors for examination and approval, and to each Party. Such
      audited financial statements furnished to Party B shall be accompanied
      with an English translation.

14.6  All matters concerning foreign exchange shall be handled according to the
      Regulations for Exchange Control of the PRC and other relevant laws and
      regulations of the PRC.

14.7  Each Party shall have the right to access to all accounting books and
      records of the Company at its own expenses to examine the accounts of the
      Company, provided that such Party shall give the Company a seven (7) day
      period written notice. The Company shall keep all of such books and
      records at its headquarters during the term of its corporate existence.

14.8  The accounts of the Company shall be audited at least annually by an
      auditor (hereinafter referred to as the "Auditor") who shall be an
      internationally recognized accounting firm registered in the PRC and shall
      be appointed by the Board of Directors upon nomination by both Parties, at
      the expense of the Company.

14.9  Each Party may, at its own expense and at any time, appoint an accountant
      for its own audit (hereinafter referred to as the "Accountant"), who may
      be either an accountant registered abroad or registered in the PRC.
      Auditing results by the Accountant shall not be deemed as an official
      report issued by the Company, provided, however, that the Company shall
      fully cooperate with the Accountant in its auditing and provided, Further,
      that the auditing results by the Accountant shall be

                                       15
<PAGE>

      properly reflected to the Company, to the extent permitted by applicable
      laws and regulations of the PRC.

14.10 Complete access to the accounting books and records shall be given by the
      Company to the Auditor and the Accountant, and the Company and the Party
      who appoints the Accountant shall cause the Auditor and the Accountant,
      respectively, to maintain the confidentiality OF the Company's financial
      information and carry out its audit without prejudice to regular operation
      of the Company. Any auditing conducted pursuant to Articles 14.7 and 14.9
      shall be made during the normal business hours of the Company.

14.11 The Company shall furnish each Party with monthly financial statements
      including without limitation balance sheet, profit and loss statement and
      cash flows statement, as well as monthly sales and operating report and
      other reasonable reporting documents, within thirty (30) days after the
      end of each month. All of such information furnished to Party B shall be
      accompanied with an English translation. Notwithstanding the foregoing, in
      the term until March, 2004, the Company shall furnish each Party with such
      financial statements within thirty (30) days after the end of each fiscal
      quarter.

14.12 Except the contributions to the Registered Capital set forth in Article
      6.2, all financial requirements for operation of the business activities
      of the Company shall be provided internally, provided that, if sufficient
      funds are not available internally, the Company shall raise the necessary
      funds by borrowing from sources on its own loan capacity within the limit
      of annual loan budget approved by the Board of Directors pursuant to
      Article 8.4. Parties acknowledge that under no circumstances shall Party B
      have any obligation to provide any guarantee in connection with any debt
      of the Company.

                                   ARTICLE 15
                              TERM OF THE COMPANY

The term of the corporate existence of the Company shall be twenty (20) years
from the Establishment Date, unless otherwise agreed by both Parties and decided
by the Board of Directors subject to the approval from the Approval Authority.

                                   ARTICLE 16
                       LIABILITIES FOR BREACH OF CONTRACT

16.1  If either Party fails to make contributions to the Registered Capital
      pursuant to Articles 6.2 and 6.3, such Party (hereinafter referred to as
      "Failing Party") shall pay an amount equivalent to two percent (2%) of
      such outstanding contributions as a

                                       16
<PAGE>

      delay penalty to the other Party (hereinafter referred to as "Non-Failing
      Party"). to case Failing Party fails to make contributions to the
      Registered Capital more than one (1) month, Non-Failing Party shall have
      the right to terminate this Contract immediately, in addition to the
      above-mentioned delay penalty.

16.2  If either Party violates any stipulation of this Contract, the other Party
      shall have the right to demand the breaching Party compensation for losses
      or adoption of other reasonable remedial measures. If the losses suffered
      by the non-breaching Party still can not be made up completely after
      taking such remedial measures, the non-breaching Party shall retain the
      right to claim for damages. The liability for damages by the breaching
      Party shall be equal to the loss directly suffered by the non-breaching
      Party from such breach. In addition to the right of the non-breaching
      Party specified in this Article 16.2, the Company shall have the right to
      demand the breaching Party compensation for losses.

                                   ARTICLE 17
                     AMENDMENT, TERMINATION OF THE CONTRACT

17.1  Any amendment to this Contract shall become effective upon signature in
      writing by both Parties.

17.2  Each Party may terminate this Contract by notice to the other Party in
      writing immediately if (i) the other Party is adjudicated a bankrupt,
      makes a general assignment for the benefit of creditors or otherwise
      becomes insolvent, (ii) a petition is filed against the other Party under
      a bankruptcy law, a corporate reorganization law or any other law for the
      relief of debtors (or law analogous in purpose of effect) and such
      petition is not dismissed within thirty (30) days after filing, or (iii)
      the other Party enters dissolution or liquidation proceedings.

17.3  If either Party commits any breach of its material obligations under this
      Contract other than the payment obligations of its contribution set forth
      in Article 6.2, the other Party may give to the breaching Party a written
      notice specifying the nature of the breach. If the breaching Party fails
      to cure such breach within ninety (90) days from the date such notice is
      given to the breaching Party, the non-breaching Party may terminate this
      Contract at the expiration date of such ninety (90) day period.

17.4  When the Framework Contract set forth in Article 7(2) is terminated and no
      alternative agreement is executed, each Party may terminate this Contract
      forthwith by giving a written notice to the other Party.

17.5  If a material disagreement concerning the operation or management of the
      Company arises between Parties, which either Party deems in good faith to
      be an irreconcilable disagreement, and such Party believes in good faith
      that such irreconcilable

                                       17
<PAGE>

      disagreement still exists even thirty (30) days after such Party gives the
      other Party a written notice thereof, such Party shall have the right to
      terminate this Contract forthwith by giving a written notice to the other
      Party.

17.6  In case that either Party causes a notice to terminate this Contract to be
      given in accordance with Article 17.2, to the extent permitted by
      applicable laws, the terminating Party (hereinafter referred to as the
      "Non-Bankrupt Party") shall have the option to purchase, or cause any
      third party(ies) designated by it to purchase, and the Party that caused
      such notice of termination to be given (hereinafter referred to as the
      "Bankrupt Party") shall have the obligation to sell all the interest in
      the Registered Capital then owned by the Bankrupt Party. In case of
      exercising such option, the Non-Bankrupt Party shall notify the Bankrupt
      Party in writing of its intention within thirty (30) days from the date on
      which the notice of termination is given to it. The price of such interest
      shall be decided by negotiation between Parties within sixty (60) days
      after the notice of the intention to exercise the option is given. If
      Parties fail to reach an agreement on the price of the interest within
      such period, such price shall be decided upon Bankrupt Party's share of
      the net worth of the Company, as determined on the basis of the latest
      available balance sheet prepared by an internationally recognized
      accounting firm designated by the Non-Bankrupt Party using the assets
      revaluation method and taking into account the tangible and intangible
      asset of the Company. As used herein, the "Bankrupt Party's share" means
      the proportion of the interest held by the Bankrupt Party in the
      then-current Registered Capital. The costs and expenses incurred in
      employing such internationally recognized accounting firm shall be borne
      and paid by the Non-Bankrupt Party. Immediately after the sale of interest
      pursuant to this Article 17.6, the Party who sells its interest of the
      Company shall cause the Directors appointed by it and the General Manager
      and Deputy General Managers directly or indirectly nominated by it, if
      any, to resign from their posts in the Company.

                                   ARTICLE 18
                           DISSOLUTION AND LIQUIDATION

18.1  The Company shall be dissolved and liquidated in the event of the
      occurence of any of the following:

      (1)   If the accumulated losses of the Company exceed the then-current
            Registered Capital;

      (2)   The Company is unable to operate for consecutive six (6) months due
            to the occurrence of any event of Force Majeure (defined below) and
            Parties have been unable to find an equitable solution acceptable to
            both Parties;

      (3)   The Company declares losses for consecutive three (3) fiscal years;

                                       18
<PAGE>

      (4)   Any of the business license required for the operation of the
            Company shall expire, be terminated early or suspended for a
            continuous period of three (4) months;

      (5)   the Company goes bankrupt, files a petition thereof or becomes
            object of such petition;

      (6)   expropriation or requisition by the government or municipal
            authority of all or any material portion of the asset or property of
            the Company;

      (7)   Both Parties agree in writing to dissolved the Company;

      (8)   The term of the corporate existence of the Company expires;

      (9)   This Contract is terminated in accordance with Article 17.2 and the
            terminating Party has not exercised the option as provided for in
            Article 17.6 within the stipulated period;

      (10)  For whatever reason, the purchase and sale of the interest in the
            Company has not been effected pursuant to Article 17.6 within one
            hundred and eighty (180) days after the notice of the intention to
            exercise the option as provided for thereunder is given;

      (11)  This Contract is terminated pursuant to any of Articles 16.1,
            17.3,17.4 and 17.5.

18.2.1 In the event that the Company is dissolved in accordance with Article
       18.1, the procedures and principles of liquidation and a list of members
       of the liquidation committee of the Company shall be determined upon
       majority consent of the Board of Directors and a report stating them
       shall be submitted by the Company to the Approval Authority for approval.

18.2.2 Each member of the liquidation committee shall have equal right to one
       (1) vote at the meetings of the liquidation committee. Any matters
       considered and determined by the liquidation committee shall require the
       unanimous consent of all the members.

18.2.3 The liquidation committee shall inspect and evaluate all the assets
       (including, without limitation tangible and intangible properties and
       accounts receivable), indebtedness and other liabilities of the Company
       and shall prepare for use in the liquidation of the Company a balance
       sheet and inventory and liquidation plan. Upon confirmation by the Board
       of Directors and the Approval Authority of the liquidation plan, the
       liquidation committee shall carry out the liquidation of the Company
       according to such liquidation plan. For the purpose of preparing the
       liquidation plan, the

                                       19
<PAGE>

       liquidation committee may engage an internationally recognized accounting
       firm acceptable to Parties and cause such accounting firm to carry out
       inspection and evaluation of all the assets, indebtedness and other
       liabilities of the Company. The accounting firm's method of evaluation
       shall be properly reflected in the liquidation plan.

18.2.4 During the liquidation process of the Company, the liquidation committee
       shall represent the Company in bringing or defending court actions.

18.2.5 If there is any amount remaining after the deduction of all indebtedness
       and other liabilities (including, wthout limitation the liquidation
       expenses and remunerations), such remaining amount shall be distributed
       to Parties in accordance with the decision of the liquidation committee.

18.2.6 On the completion of the liquidation of the Company, the Board of
       Directors shall inspect all the books of account and documents of the
       Company in comparison with a list presented by the liquidation committee
       and after confirmation of accuracy thereof such books of account and
       documents shall be kept by Party A.

                                   ARTICLE 19
                                  CHANGE OF LAW

If, after the execution date of this Contract, there arises any amendment,
enactment or repeal of the laws, rules, regulations or policies in the PRC which
is applicable and giving material effect to the Company and/or the activities of
Parties set forth herein (hereinafter referred to as the "Amendment"), Party A
shall make its best effort to inform Party B in writing of the Amendment so that
Parties shall discuss and determine whether or not they need to reflect the
Amendment to this Contract and the Articles of Association.

                                   ARTICLE 20
                                   INSURANCE

All insurances of the Company shall be effected with appropriate insurance
companies in the PRC. The procedures thereof shall be handled by the department
in charge.

                                   ARTICLE 21
                                 FORCE MAJEURE

In case of any Force Majeure event, such as earthquakes, typhoons, floods,
fires, wars, hostilities, civil wars, natural calamities, lockouts, epidemic,
embargo, governmental acts or other events beyond the reasonable control, which
directly affects, delay and/or encumber the

                                       20
<PAGE>

performance of this Contract, the affected Party shall not be liable for any
delay or inability of performance of its obligation hereunder, provided,
however, that such affected Party shall notify the other Party of the details of
the event within fifteen (15) days after the occurrence of such event, with the
valid certifying documents evidencing the occurrence of the event, and
explaining the reason for its inability or delay of the performance of all or
part of this Contract.

                                   ARTICLE 22
                                  ARBITRATION

22.1  Should any disputes, differences or controversies arise from the
      implementation of or relating to this Contract, Parties shall resolve them
      through friendly negotiations. If such disputes, differences or
      controversies cannot be solved by such negotiations, they shall be
      exclusively and finally settled by arbitration held in Singapore in
      accordance with the Rules of Arbitration of the International Chamber of
      Commerce, whose decision shall be final and legally binding on each Party.
      The arbitral tribunal shall consist of three (3) arbitrators to be
      appointed in accordance with such rules, and such arbitration shall be
      conducted in English language. The arbitration fees payable to the
      arbitration organization shall be borne by the losing Party unless
      otherwise determined in the arbitration award.

22.2  During the process of arbitration, this Contract shall be continuously
      performed except for those relating to discrepancies under arbitration.

                                   ARTICLE 23
                         EFFECTIVENESS OF THE CONTRACT

23.1  Appendixes attached hereto (Articles of Association) shall be made an
      integral part of this Contract.

23.2  This Contract shall become effective upon signature of both Parties.

23.3  Parties shall cause the Company to approve this Contract and observe the
      provisions of this Contract and the Articles of Association.

                                   ARTICLE 24
                                APPLICABLE LAWS

The formation of this Contract, its validity, interpretation, execution and
settlement of disputes in connection herewith shall be governed by the laws of
the PRC irrespective of its conflict of laws principles. Where no published laws
or regulations of the PRC cover any

                                       21
<PAGE>

matter herein contained, international legal principles and practices shall
apply.

                                   ARTICLE 25
                                    LANGUAGE

This Contract shall be written both in English and Chinese languages. Both
versions hereof shall be equally authentic.

                                   ARTICLE 26
                                 MISCELLANIOUS

26.1  Subtitles for each article are for clearness and do not affect the
      explanation of the content of the contract.

26.2  The original text of this Contract consisting of both Chinese and English
      versions shall be ten (10) copies, one (1) copy for each Party, one (1)
      copy for the Company and seven (7) copies for the Approval Authority and
      other governmental authority.

26.3  Parties agree that this Contract shall become null and void in case that
      no relevant business license is issued within one hundred forty (140) days
      after signature on this Contract.

26.4  Any and all notices or other communications required or permitted to be
      made by either Party to the other Party pursuant to this Contract shall be
      delivered personally, sent by courier, sent by certified or registered air
      mail, postage pre-paid or transmitted by facsimile followed by
      confirmation delivered by courier or certified or registered air mail, to
      the other Party at the following addresses set forth below or the other
      address as specified by like notice from the other Party:

      (a)   If to Party A, to:
            Techfaith Holdings Limited
            Rm. 1909,19/F., Hutchison House, 10 Harcourt Rd., Central, Hong Kong
            Attention:     Mr. Dong Defu
            Facsimile No.: +(852)-2121 0345

      (b)   If to Party B, to:
            NEC Corporation
            4035, Ikebe-Cho, Tsuzuki-ku, Yokohama 224-8555, Japan
            Attention:     General Manager
                           Mobile Terminals Planning Division
            Facsimile No.: +81-(45) 9392345

                                       22
<PAGE>

      Such notices and communications shall be deemed given when so delivered if
      personally or by facsimile, three (3) days after deposit if by courier, or
      ten (10) days after deposit if by certified or registered air mail. Any
      and all such notices and communications shall be made in Chinese and
      English language.

26.5  No failure or delay of either Party to enforce any of the provisions of
      this Contract or to exercise any rights herein granted shall be considered
      a waiver by such Party thereof nor shall affect in any way such Party's
      right to enforce any or all of the provisions hereof.

26.6  Except as required under applicable laws and regulations, any conditions
      of this Contract and any information disclosed among Parties and the
      Company pursuant to this Contract (hereinafter collectively referred to as
      the "Confidential Information") shall be treated as confidential and shall
      not be disclosed to any third party without a prior written consent of the
      disclosing party, provided that the Confidential Information may be
      disclosed by the receiving party to its officers and employees whose
      duties require such disclosure for the execution and implementation of
      this Contract or to outside lawyers, accountants and consultants to the
      extent necessary for them to provide their professional assistance. In
      that event, the receiving party shall take all reasonable precautions,
      including the conclusion of confidentiality contracts with each of such
      employees, lawyers, accountants or consultants, to prevent such employees,
      lawyers, accountants or consultants from using the Confidential
      Information for their personal benefit and to prevent any unauthorized
      disclosure or publication of the Confidential Information. Notwithstanding
      the foregoing provision, the Confidential Information does not include
      information which (i) is available to the public or becomes available to
      the public through no fault of the receiving party, (ii) is properly
      within the legitimate possession of the receiving party prior to its
      receipt pursuant to this Contract, or (iii) is obtained without any
      confidentiality obligation by the receiving party from any third party
      with the proper right.

26.7  The provisions of Articles 14.10, 16, 17.6, 18, 22.1, 24, 25, 26.5, 26.6,
      26.7, 26.8 and 26.11 shall continue to survive any expiration of the
      corporate existence of the Company or termination of this Contract.

26.8  Except otherwise specifically provided for herein, nothing in this
      Contract shall be construed as granting to the other Party or the Company
      any right or license including without limitation the right to use trade
      name, trademark or service mark of either Party. If agreed upon between
      Parties, each Party may make press release regarding the Company and make
      reference to the name of the other Party.

26.9  Except otherwise expressly provided for in this Contract, neither this
      Contract nor any of the rights or obligations hereunder shall be
      assignable by either Party without

                                       23
<PAGE>

      the prior written consent of the other Party and approval by the Approval
      Authority (if necessary).

26.10 If any of the provisions of this Contract shall be held invalid or
      unenforceable, the validity or enforceability of the remaining provisions
      hereof shall not be affected thereby.

26.11 Except the Articles of Associate, this Contract shall constitute the sole
      and entire agreement and understanding between Parties relating to the
      subject matter hereof, and shall supersede and cancel all previous
      agreements, understandings, negotiations, commitments and representations
      made between Parties, orally or in writing, relating to subject matter
      hereof.

26.12 This Contract is executed in ten (10) counterparts by the duly authorized
      representatives of Parties as of 26th day of September, 2003.

(Signature Page)

PARTY A:

Signature: /s/ Dong Defu

Print name: Dong Defu

Title of Signatory: Chairman

Date: 2003/9/26

PARTY B:

Signature: /s/ Noboru Yasue

Print name: Noboru Yasue

Title of Signatory: Senior General Manager

Date: 2003/9/26

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