1.1

“Affiliate” of a Party means any company or other entity other than the JV Company and the other Party to this Contract which, through ownership of voting stock or otherwise, directly or indirectly, Controls or is Controlled by, or under common Control with that Party.

1.2

“Ancillary Contracts” means the Land Use Rights Transfer Contract, the License Contract, the Trademark License Contract, and the Supply Contract.

1.3

“Articles of Association” means the Articles of Association of the JV Company that are signed by the Parties simultaneously with this Contract and are attached hereto as Appendix 2.

1.4

“Asset Appraisal Report” means the appraisal report to be issued by an accounting firm to be retained by Party A to valuate the tangible and intangible assets to be contributed by Party A to the JV Company.

1.5

“Board” means the board of directors of the JV Company.

1.6

“Business License” means the business license to be issued to the JV Company by the PRC State Administration for Industry and Commerce (including its authorized local branches, as applicable).

1.7

“Chery” means Chery Automobile Co., Ltd.

1.8

“Company Establishment Date” means the date of issuance of the Business License.

1.9

“Contract Term” means the term of this Contract as set forth in Article 17.

1.10

“Control” means that power, which is possessed directly or indirectly by a person or entity, to direct or cause the direction of the management and policies of another person or entity through ownership of more than fifty percent (50%) of the voting stock or equity interest.

1.11

“Effective Date” means the date when this Contract comes into force, which shall be the date on which this Contract and the Articles of Association are approved by the Examination and Approval Authority.

1.12

“Examination and Approval Authority” means the appropriate PRC government department with the legal authority to approve this Contract and the Articles of Association under the applicable PRC laws and regulations.

1.13

“JV Company” means Chery Quantum Auto Co., Ltd., the Sino-foreign equity joint venture limited liability company formed by Party A and Party B pursuant to this Contract.

1.14

“JV Products” means those products produced by the JV Company, which are set forth in Appendix 1, and any other products that the Parties agree, in writing, that the JV Company shall produce.

1.15

“Land Use Rights Transfer Contract” means the contract to be executed between Party A and the JV Company, pursuant to which Party A will transfer the land use rights over the Site to the JV Company as part of its contribution to the registered capital of the JV Company.

1.16

“License Contract” means the contract to be executed between Party A and the JV Company, pursuant to which Party A will license to the JV Company for production of the JV Products any relevant intellectual property rights, technology, know-how which Party A owns or otherwise is entitled to grant a license.

1.17

“Model” means Motor Vehicles of a common style and design, which are designated by Party A or its Affiliates with a common alpha-numeric designation, and which are of same or similar size or dimension. For example, the Party A vehicles designated as B21 is one Model.

1.18

“Motor Vehicle” means passenger cars, sport utility vehicles, light trucks, and other self-propelled land vehicles used for transportation of people or goods, provided however that agricultural transportation equipment and material transportation handling equipment are not included.

1.19

“Phase One” means the period of time during which the JV Company is expected to launch those JV Products specified in Appendix 1.

1.20

“PRC” means the People’s Republic of China; provided that, for the purpose of this Contract, the term shall not include Taiwan, the Special Administrative Region of Macau, and the Special Administrative Region of Hong Kong.

1.21

“Renminbi” or “RMB” means the lawful currency of the PRC.

1.22

“Second-Convened Meeting” shall have the meaning ascribed in Article 9.10.

1.23

“Senior Management Employees” means the JV Company’s General Manager, Deputy General Manager, Chief Financial Officer, and other management employees who directly report to the General Manager.

1.24

“Site” means that parcel of land, the location and boundaries of which are shown on the map attached hereto as Appendix 3.

1.25

“Supervisor” has that meaning as set forth in Article 10.1.

1.26

“Supervisory Committee” means the supervisory committee of the JV Company as constituted in accordance with Article 10 of this Contract.

1.27

“Supply Contract” means the supply contract to be executed between Wuhu Chery Automobile Purchasing Co., Ltd. and the JV Company, pursuant to which the JV Company shall purchase components and parts from Wuhu Chery Automobile Purchasing Co., Ltd.

1.28

“Trademark License Contract” means the contract to be executed between Chery and the JV Company, pursuant to which Chery will license certain trademarks to the JV Company.

1.29

“Third Party” means any natural person, legal person or other organization or entity that is other than the Parties to this Contract.

1.30

“Three Funds” means the JV Company’s reserve fund, enterprise development fund, and employee bonus and welfare fund as stipulated in the Joint Venture Regulations.

1.31

“United States Dollars” or “US$” means the lawful currency of the United States of America.

1.32

“Working Employees” means all employees of the JV Company, other than the Senior Management Employees.

2.1

The Parties to this Contract are:

(1)

Party A: Wuhu Chery Automobile Investment Co., Ltd., a limited liability company duly organized and existing under the laws of the PRC, with its legal address at 8 Changchun Road, Wuhu Economic and Technological Development Area, Anhui Province, PRC.

Legal Representative of Party A:

(2)

Party B: Quantum (2007) LLC, a limited liability company established and existing under the laws of the State of Delaware, the United States of America, with its legal address at 16192 Coastal Highway, Lewes, Delaware 19958, USA.

Legal Representative of Party B:

2.2

If a Party changes its legal representative, it shall promptly notify the other Party in writing of such change and the name, position and nationality of its new legal representative.

3.1

The Parties hereby agree to establish the JV Company promptly after the Effective Date in accordance with the Joint Venture Law, the Joint Venture Regulations, the Company Law, other relevant PRC laws and regulations, and the provisions of this Contract.

3.2

The name of the JV Company shall be in Chinese and Chery Quantum Auto Co., Ltd. in English.

3.3

The legal address of the JV Company shall be No. 1 Songshan Road, Wuhu, Anhui Province, PRC.

3.4

The JV Company may establish branch offices and subsidiaries within or outside of the PRC with the consent of the Board, and, if required, with approval from the relevant governmental authorities.

3.5

The JV Company shall be an enterprise legal person under the laws of the PRC. The activities of the JV Company shall be governed by the laws, decrees, rules and regulations of the PRC, and its lawful rights and interests shall be protected by the laws, decrees, rules and regulations of the PRC.

3.6

The JV Company shall be a limited liability company. Unless otherwise provided in this Contract or otherwise agreed by a Party in writing, such Party shall only be liable to the JV Company to the extent of that Party’s respective subscribed contributions to the JV Company’s registered capital that are required to be made pursuant to this Contract. Unless otherwise provided in a written agreement signed by a Party, creditors of the JV Company and other claimants against the JV Company shall have recourse only to the assets of the JV Company and shall not seek compensation, damages or other remedies from such a Party.

Subject to the foregoing, in accordance with relevant PRC laws and regulations, the Parties shall share the profits and bear risks and losses of the JV Company in proportion to their capital contributions to the JV Company.

4.1

The purpose of the JV Company is to use efficient and advanced technology, product planning and management, production and distribution techniques to manufacture in the PRC, market and sell the JV Products worldwide, to improve the value and competitiveness of such products, to introduce new products, and to obtain satisfactory economic benefits for the Parties.

4.2

The business scope of the JV Company shall be to produce Motor Vehicles in the PRC, and to sell and distribute worldwide Motor Vehicles produced by the JV Company, and the parts, components and accessories therefor.

4.3

The JV Company’s production scale is expected, in Phase One, to reach no less than 150,000 Motor Vehicles per annum. In accordance with relevant market and sales conditions, such scale may be gradually expanded.

5.1

The JV Company’s total amount of investment shall be One Thousand and Five Hundred Million United States Dollars (US$ 1,500,000,000), and its registered capital shall be Five Hundred Million United States Dollars (US$500,000,000).

5.2

The Parties’ contributions to the JV Company’s registered capital shall be as follows:

5.2.1

Party A’s contribution to the registered capital of the JV Company shall be the equivalent of Two Hundred and Seventy Five Million United States Dollars (US$275,000,000), representing fifty five percent (55%) of the equity interest in the JV Company’s registered capital. Party A shall provide the following as its contribution to the JV Company’s registered capital:

(A)

an amount of RMB cash equal to the difference between Two Hundred and Seventy Five Million United States Dollars (US$275,000,000), on the one hand, and, on the other hand, the value of the land use rights referred to in Section B below and the amount of the license fee referred to in Section C below;

(B)

those land use rights for the Site as further detailed and set forth in the Appendix 3, which have a total value appraised by an evaluation institute recognized by the PRC government, and confirmed by the relevant PRC state assets administration authorities; and

(C)

an amount of the license fees to be agreed by the Parties in the License Contract, and which the Parties agree shall constitute a part of Party A’s contribution to the registered capital of the JV Company.

5.2.2

Party B’s contribution to the registered capital of the JV Company shall be Two Hundred and twenty five Million United States Dollars (US$225,000,000), representing forty five percent (45%) of the equity interest in the JV Company’s registered capital. Party B shall make such contribution, in cash, in United States Dollars.

5.3

Subject to the fulfillment of the conditions precedent in Article 5.6, the Parties shall make their contributions to the JV Company’s registered capital, in amounts specified in Article 5.2 and as follows:

5.3.1

Each Party shall pay fifteen percent (15%) of its capital contribution referred to in Article 5.2 to the JV Company within ninety (90) days of the Company Establishment Date; and

5.3.2

Each Party shall contribute the balance of its capital contribution to the JV Company within ten (10) calendar days upon the fulfillment of the condition precedent stipulated in Article 5.6.2.

5.4

In the event that any Party fails to make its capital contribution, in whole or in part, in accordance with Article 5.3, such Party shall pay simple interest to the JV Company on the unpaid amount (or the value of the in-kind contribution) from the date due until the date the contribution is made. Such interest shall be computed using the London Interbank Offered Rate (“LIBOR”) quoted for the corresponding period for United States Dollars plus five (5) percentage points.

If any Party does not make its capital contribution in accordance with Article 5.3.1 or Article 5.3.2, the other Party shall have the right to terminate this Contract and claim damages from the breaching Party.

5.5

Each time a Party makes a contribution to the JV Company’s registered capital, an accountant registered in the PRC and agreed upon by both Parties shall, at the expense of the JV Company, promptly verify the contribution and issue a capital verification report to the JV Company. Such capital verification report shall be prepared on the basis that any capital contribution in the form of cash shall be deemed to be made on the date on which the relevant amount of cash has been deposited into a bank account of the

5.6

No Party shall be obligated to make any contribution to the JV Company’s registered capital if any of the following conditions has been neither satisfied nor waived, in writing, by both Parties:

5.6.1

the Business License has been issued; and

5.6.2

the Ancillary Contracts have been duly executed by the Parties thereto and become effective.

5.7

Any increase in the registered capital and total investment of the JV Company shall require the written consent of both Parties and the unanimous approval of the Board.

5.7.1

The Parties shall contribute to any increase in registered capital in proportion to their respective shares of registered capital at the time of such increase, unless otherwise agreed in writing by the Parties and the Board.

5.7.2

All increases in the registered capital and total investment shall be approved by the Examination and Approval Authority, if required by relevant PRC laws and regulations. Upon receipt of such approval, the JV Company shall register the increase in the registered capital and total investment with the competent Administration for Industry and Commerce.

5.7.3

In the event that the registered capital of the JV Company is increased, any Party which provides Renminbi cash as capital contribution shall be credited with a US$ amount equivalent to such RMB cash amount. Such US$ equivalent shall be calculated using the median of the official buying and selling rates for United States Dollars that is published by the People’s Bank of China on the date on which that RMB contribution was made.

5.8

Subject to Article 9.15(k) and (1), the JV Company shall be responsible for obtaining any loans or other financing that may be required by the JV Company to finance its operation and capital expenditures. Subject to the foregoing, the Parties shall cooperate with each other and the JV Company in facilitating the approval and grant by third party lenders of loans to the JV Company. In order to fund the difference between the total amount of investment and the registered capital, the JV Company may obtain, in accordance with the following, loans from banks or other authorized lenders in the PRC or from banks, export credit agencies, international financial organizations and other lenders abroad:

(a)

The JV Company shall first attempt to obtain such a loan on its own credit.

(b)

Secondly, the JV Company may pledge or mortgage its assets for the benefit of any lender as collateral for a loan by any such lender.

(c)

Thirdly, the Parties shall provide whatever support is required to fund the difference between the total amount of investment and the registered capital, either by way of shareholder loans and/or by guarantees in proportion to their respective share of registered capital of the JV Company at the time of the borrowing by the JV Company.

5.9

Any cost incurred by a Party in connection with the making of a capital contribution, loan, advance, guarantee or otherwise shall be paid by such a Party unless otherwise has been agreed in writing between the Parties.

5.10

No Party to this Contract may sell, assign, transfer or otherwise dispose of all or part of its equity interest in the registered capital of the JV Company (each, an “Equity Interest”) to a Third Party without the prior written consent of the other Party.

5.10.1

Notwithstanding Article 5.10, Party B agrees that Party A shall have the right at any time to assign all or part of its Equity Interest to an Affiliate and Party A agrees that Party B shall have the right at any time to assign all of its Equity Interest to an Affiliate that is a US corporation and is 100% owned by Israel Corporation, a corporation duly organized and existing under the laws of Israel (“Party B’s Assignee”). Any assignment by Party A of its Equity Interest to its Affiliate and any assignment by Party B of its Equity Interest to Party B’s Assignee are hereinafter in each case referred to as (“Internal Assignment”). By entering into this Contract, the Parties shall be deemed to have provided their respective consents to any Internal Assignment and shall waive their respective preemptive rights to purchase the Equity Interest to be assigned. The Parties shall cause their respective directors appointed at the Board to vote in favor of such Internal Assignment and shall execute all documentation and take any other action required to carry out such Internal Assignment.

5.10.2

If required by relevant PRC laws and regulations, an assignment of Equity Interest under this Article 5.10 shall be submitted to the Examination and Approval Authority for approval. Upon receipt of such approval, the JV Company shall register the change in ownership with the competent Administration for Industry and Commerce.

5.11

No Party shall mortgage, pledge or otherwise encumber all or any part of its Equity Interest without the prior written consent of the other Party.

5.12

The Parties agree to provide, in proportion to their respective share of the registered capital of the JV Company at the time of borrowing by the JV Company, guarantees acceptable to a Third Party lender or lenders in order to ensure that the JV Company can borrow loans in an aggregate principal amount of up to four hundred million United States Dollars (US$ 400,000,000) in connection with the implementation of Phase One by the JV Company.

5.13

The Parties hereto agree, notwithstanding anything to the contrary contained in this Contract, that nothing herein shall be construed as an obligation of any Party to provide additional contributions to the JV Company in excess of the contributions set forth in Article 5.2 hereof or financial support to the JV Company, including in the form of guarantees, other than guarantees required to be provided pursuant to Article 5.12 hereof, in each case without the prior consent of such Party.

6.1

In addition to its other obligations under this Contract, Party A shall have the following responsibilities:

6.1.1

assist the JV Company, upon its request, to apply for all approvals, licenses and permits required for the establishment and operation of the JV Company;

6.1.2

assist the JV Company, upon its request, to apply for the preferential tax treatment and other investment incentives available under the applicable PRC laws and regulations;

6.1.3

assist the JV Company, upon its request, in obtaining visas and working permits for its foreign employees in the PRC;

6.1.4

assist the JV Company, upon its request, to purchase, lease or otherwise procure from sources in the PRC equipment and machinery, tools, raw materials, office furniture and equipment, vehicles and other materials required for the JV Company’s production and operations;

6.1.5

assist the JV Company, upon its request, to recruit skilled managers and technical employees;

6.1.6

assist the JV Company, upon its request, to negotiate agreements for the provision of utility services and power; and

6.1.7

handle other matters entrusted to it by the Board.

6.2

In addition to its other obligations under this Contract, Party B shall have the following responsibilities:

6.2.1

upon request by the JV Company, assist the JV Company’s employees and members of the Board to obtain visas and other necessary travel documents for business travel outside the PRC on behalf of the JV Company;

6.2.2

assist the JV Company, upon its request, to comply with any relevant product quality, technical, or environmental standards which apply to the JV Products outside of the PRC;

6.2.3

assist the JV Company, upon its request, to set up subsidiaries outside of the PRC and to sell the JV Products outside of the PRC; and

6.2.4

handle other matters entrusted to it by the Board.

6.3

Unless otherwise agreed in writing, the Parties shall be paid a reasonable compensation by the JV Company for the services provided to the JV Company under this Article 6, except if such compensation is already provided for in the relevant Ancillary Contracts.

7.1

Each of the Parties hereby represents and warrants to the other Party that, as of the date this Contract is signed and as of the Effective Date:

(a)

such Party is duly organized, validly existing under the laws of the place of its establishment or incorporation;

(b)

such Party has all requisite power and capacity required to enter into this Contract;

(c)

such Party has taken all corporate actions necessary to authorize it to enter into this Contract, and its representative whose signature is affixed hereto is fully authorized to sign this Contract and to bind such Party thereby;

(d)

upon the Effective Date, this Contract shall be legally binding on such Party;

(e)

all negotiations relative to this Contract and the transactions contemplated hereby have been carried on by such Party and its respective representatives without any assistance or the intervention of any person or entity requested by that Party or any of its Affiliates so as to give rise to any valid claim against such Party or its respective Affiliates, for a brokerage commission, finder’s fee, or other like payment.

(f)

neither the signature of this Contract nor the performance of its obligations hereunder will conflict with, or result in a breach of, or constitute a default under, any provision of the Articles of Association, by-laws or other documents of such Party, or any law, regulation, rule, authorization or approval of any government agency or body, or of any contract or agreement, to which such Party is a party or subject;

(g)

no lawsuit, arbitration, other legal or administrative proceeding, or governmental investigation is pending or, to the best of such Party’s or its Affiliate(s)’ knowledge, is threatened, against such Party or its Affiliate(s) that would affect in any way its ability to enter into or perform this Contract or any of the Ancillary Contracts; and

(h)

all documents, statements and information in the possession of such Party relating to the transactions contemplated by this Contract which may have a material adverse effect on such Party’s ability to fully perform its obligations hereunder or which, if disclosed to the other Party, would have a material effect on the other Party’s willingness to enter into this Contract, have been disclosed to the other Party.

7.2

Party B represents and warrants that it is not Controlled directly or indirectly by any person, company, corporation or entity which directly or indirectly produces, distributes or sells, under any trademarks or brand names, passenger cars and/or the parts, components, and accessories therefor.

7.3

Party B represents and warrants that Israel Corporation holds and will hold, directly or indirectly, at least 40% of voting power and remain the largest shareholder in Party B during the Contract Term and members of the Ofer family on the date hereof control the majority of the voting power in Israel Corporation; provided that in no event will Israel Corporation transfer directly or indirectly any equity interest in Party B to any company that engages in the automotive business (other than Chery) [***]; and further provided that, subject to the above, that nothing herein shall limit the ability of Israel Corporation from implementing an internal reorganization, recapitalization or other similar transactions.

7.4

Party A represents and warrants that Chery holds and will hold, directly or indirectly, at least 40% of voting power and remain the largest shareholder in Party A during the Contract Term; provided that, subject to the above, nothing herein shall limit the ability of Chery from implementing an internal reorganization, recapitalization or other similar transactions.

7.5

Party A represents and warrants that Chery currently is entitled to use the granted land use rights over the Site for industrial purposes for at least 25 years and that pursuant to the terms and conditions of the Land Use Right Transfer Contract, on the date of transfer of the land use right over the Site from Party A to the JV Company, such right will be free of any security interest or adverse claims and Party A has no knowledge of any fact or circumstance that would give rise to any security interest or adverse claims by any third party in respect of the Site.

7.6

Each Party shall indemnify the other Party against all losses, expenses and liabilities arising from a breach of any of the representations, warranties and undertakings set forth in Article 7.1, and Party B shall indemnify Party A against all losses, expenses and liabilities arising from a breach of any of the representations, warranties and undertakings set forth in Articles 7.2 and 7.3. Party A shall indemnify Party B against all losses, expenses and liabilities arising from a breach of any of the representations, warranties and undertakings set forth in Article 7.4 and 7.5.

7.7

[***]

7.8

[***]

8.1

Party A will license to the JV Company any relevant intellectual property rights, technology, know-how that Party A owns or otherwise is entitled to grant a license, for the production of those JV Products set forth in Appendix 1, pursuant to the terms and conditions of the License Contract. In the event that the JV Company intends to produce any Motor Vehicles which are not set forth in Appendix 1, the JV Company and Party A or Party A’s Affiliate shall discuss and enter into a license contract, pursuant to which Party A or Party A’s Affiliate will license to the JV Company for the production of such Motor Vehicle any relevant intellectual property rights, technology, know-how that Party A or Party A’s Affiliate owns or otherwise is entitled to grant a license. The JV Company shall be responsible for its product planning and management. Product planning and management shall mean the management of the following:

(a)

concept definition of the JV Products other than those set forth in Appendix 1;

(b)

target market definition;

(c)

brand positioning; and

(d)

outsourcing of engineering contracts to or through Chery to make the JV Products meet target customer and regulatory requirements.

8.2

The brand(s), trade name(s), trademark(s), emblem(s) or the like to be used for, in connection with or on the JV Products or parts therefor or equipment shall be determined by Party A subject to consent of Party B. Party A or its Affiliates shall own any and all intellectual property rights (including but not limited to statutory or common law intellectual property rights) in respect of any brand(s), trade name(s), trademark(s), emblem(s) or the like to be used for, in connection with or on any of the JV Products or parts therefor or equipment. Party A or its Affiliates then shall license such brand(s), trade name(s), trademark(s), emblem(s) or the like to the JV Company for its use, pursuant to the terms and conditions of the Trademark License Contract. Those brand(s), trade name(s), trademark(s), emblem(s) or the like which will be created specially for the JV Company will be owned by Chery or Affiliates, and will be licensed to the JV Company for its exclusive use during the existence of the JV Company for, in connection with or on the JV Products and parts therefor pursuant to the terms and conditions of the Trademark License Contract, and no other parties including Chery and its Affiliates are permitted to use such brand(s), trade name(s), trademark(s), emblem(s) or the like, unless otherwise agreed jointly by the General Manager and CFO of the JV Company.

8.3

The Board shall ratify, and an authorized representative of the JV Company shall countersign, the Ancillary Contracts at the first meeting of the Board after all the Ancillary Contracts are finalized. Each Party hereby agrees that it shall consent and shall cause the directors appointed by each Party to consent to the JV Company’s due execution of and entry into the Ancillary Contracts.

8.4

The JV Company will have an exclusive right to produce and sell those Models for which Party A has granted the JV Company an exclusive right to produce pursuant to the terms and conditions of the License Contract or those Models for which Party A may grant to the JV Company an exclusive right to produce pursuant to any other license contracts.

8.5

The JV Company will sell and distribute the JV Products worldwide, primarily in the United States of America and in Europe. If Party A or its Affiliates have established a distribution network in any country, the JV Company will distribute the JV Products in such country through Party A’s or its Affiliates’ entire or part of the distribution network. For any country in which Party A or its Affiliates have not established a distribution network, the JV Company may establish wholly-owned sales subsidiaries in order to carry out its sales and distribution activities.

8.6

The Parties agree that Party A or its Affiliate shall have an exclusive right to supply to the JV Company the parts and components which may be required for the production of the JV Products and which also are used or will be used for the production of any Motor Vehicles by Party A or any of its Affiliates. The JV Company shall purchase such parts and components pursuant to the terms and conditions set forth in the Supply Contract. Party A or its Affiliates may directly supply such parts and components to the distributors or dealers of the JV Products.

8.7

If, for whatever reason, the JV Company, is unable to sell the JV Products in a certain country because of restrictions imposed on Party B or its Affiliates under laws and regulations to which Party B or its Affiliates are subject, then the JV Company shall take whatever action is necessary to enable Party A and/or its designates to sell and/or to distribute the JV Products in that country pursuant to an agreement entered into between Party A and the JV Company.

9.1

The JV Company shall have a board and the Company Establishment Date shall be considered as the date on which the Board is established.

9.2

The Board shall consist of five (5) directors, three (3) of whom shall be appointed by Party A and two (2) of whom shall be appointed by Party B.

9.3

Each director shall be appointed for a term of four (4) years; provided that, the Party which has appointed a director may remove that director and appoint a replacement at any time. A director may serve consecutive terms if reappointed by the Party that originally appointed him/her.

9.3.1

If a seat on the Board is vacated by the retirement, resignation, disability or death of a director or by the removal of such director by the Party which originally appointed him/her, the Party which originally appointed such director shall appoint a successor to serve out such director’s term.

9.3.2

At the time this Contract is signed and each time a director is appointed or replaced, each Party shall notify the other Party in writing of the name of the appointee or replacement.

9.4

Party A shall designate a director to serve as the Chairperson of the Board. Party B shall designate a Vice Chairperson of the Board.

9.5

The JV Company shall indemnify each director against all claims and liabilities incurred by reason of his/her being a director of the JV Company, provided that the director’s acts or omissions giving rise to such claim or liability did not constitute intentional misconduct or gross negligence or a violation of criminal laws.

9.6

The first meeting of the Board shall be held in the PRC within thirty (30) days following the Company Establishment Date. Thereafter, the Board shall hold at least

two (2) regular meetings in each calendar year. The Chairperson of the Board has the right to convene an interim meeting of the Board following notice to all directors in accordance with Article 9.8, and shall convene an interim meeting of the Board upon request of at least two (2) directors to convene such a meeting.

9.7

Board meetings shall be held at the registered address of the JV Company or such other place as may be agreed to by the Chairperson of the Board. Meetings may also be held by telephone or other electronic audio or video means such that everyone can hear each other at all times. Participation by a director or his/her proxy in a meeting held by such means shall constitute presence of such director or his proxy in person at a meeting.

9.8

A written notice of convocation of a Board meeting, that is in both English and Chinese and includes the time, place, date and agenda of the Board meeting, shall be distributed to all directors of the Board at least thirty (30) calendar days in advance of that meeting.

9.9

Four (4) directors present in person or by proxy shall constitute a quorum for all meetings of the Board of Directors, and no meeting shall be held and no resolution shall be adopted unless a quorum is present.

9.10

If, at any properly convened meeting, no quorum is constituted because less than four (4) directors are present in person or by proxy, then the Chairperson of the Board shall convene another meeting (the “Second-Convened Meeting”) as soon as practical (but not later than thirty (30) days thereafter) by giving seven (7) days’ notice to each director. In the event that there are directors who fail to attend that Second-Convened Meeting in person or by proxy, then those directors who are present at that meeting in person or by proxy shall be deemed to constitute a quorum.

9.11

If a director is unable to attend a Board meeting, he/she may issue a proxy in writing and entrust another director, the General Manager or the CFO as his/her representative to attend the meeting on his/her behalf. The representative so entrusted shall have the same rights and powers as the director who entrusted him/her. One representative who is a director may represent more than one other director by proxy. The Parties shall ensure that their appointed directors attend each Board meeting, either in person or by proxy. A director may also attend the meeting by telephone or video conference, provided that, he/she can hear and be heard by all other directors at the meeting.

9.12

When the General Manager is not a director, he/she may attend Board meetings only upon the request of the Board and in a non-voting capacity. If a matter concerning the appointment, dismissal, performance or remuneration of the General Manager who is also a director is to be discussed by the Board, then, at the request of any other director, the General Manager shall leave that Board meeting during which the discussion of such matter and any vote corresponding to it occurs.

9.13

The Board will cause complete and accurate minutes to be kept of all Board meetings in writing and in English and Chinese.

9.13.1

Unless otherwise required under applicable laws and regulations, minutes of all meetings of the Board shall be signed by the directors present at the relevant meeting, and then be distributed to all the directors as soon as practicable after each meeting but not later than thirty (30) days from the date of such meeting.

9.13.2

The JV Company shall maintain a file of all Board meeting minutes and make the same freely available to the Parties and their authorized representatives.

9.14

The Board shall decide all matters of major importance to the JV Company, including, but not limited to, the following matters:

(a)

amendment of the Articles of Association;

(b)

merger of the JV Company with another organization;

(c)

termination or dissolution of the JV Company or the suspension of its operations;

(d)

increase or assignment of the JV Company’s registered capital;

(e)

investment by the JV Company in other companies and establishment of branches;

(f)

addition or elimination of any JV Product;

(g)

profit distribution plans, plans for making up losses, and the amount of allocations to the Three Funds;

(h)

approval of the JV Company’s annual and long-term business plans;

(i)

appointment, dismissal, salary and other compensation benefits of the General Manager, Deputy General Manager and Chief Financial Officer;

(j)

employee salary and welfare system of the JV Company;

(k)

decisions on matters relating to the liquidation work in accordance with Article 18 of this Contract and relevant laws and regulations; and

(l)

any other matters referred to the Board that, pursuant to relevant laws and regulations requires a resolution by the Board.

9.15

The adoption of resolutions concerning the following matters shall require the unanimous assent of all the directors who are present, in person or by proxy, at a duly convened meeting of the Board:

(a)

amendment of the Articles of Association;

(b)

merger, acquisition of equity interests in another entity, consolidation of the JV Company with another organization, division of the JV Company;

(c)

termination or dissolution of the JV Company or the suspension of its operations;

(d)

increase, decrease or transfer of the JV Company’s registered capital;

(e)

execution or termination by the JV Company of any material partnership or joint venture contract whereby the agreed amount of equity investment by the JV Company is more than four million United States Dollars (US$4,000,000);

(f)

profit distribution plans, designation of the external annual auditors of the JV Company for annual auditing;

(g)

approval of annual budget, mid and long term business plans;

(h)

approval of the liquidation plan in accordance with Article 18.11 of this Contract;

(i)

any change of any significant accounting principles and practices, subject to the applicable PRC laws and regulations;

(j)

enter into any contract or other arrangement with a Party, a member of the Board or an Affiliate or any other Third Party entering into an agreement with JV Company on behalf of any Party, whereby a single transaction or a series of related transactions within a twelve (12) months’ period exceeds a contract value of aggregate two million United States Dollars (US$ 2,000,000), unless such contract or other arrangement is entered into pursuant to an existing agreement or contract approved by the Board, an item expressly approved by the Board in an annual budget of the JV Company or any Board resolutions;

(k)

issue of any debenture or the creation of any mortgage, charge, lien, encumbrance or other Third Party security interest over any of the JV Company’s material fixed assets or sell, convey, transfer, lease or otherwise dispose of, or grant an option or other right to purchase, lease or otherwise acquire (whether in one transfer or a series of related transfers) all or a material part of the JV Company’s fixed assets or the giving by the JV Company of any guarantee or indemnity to or becoming surety for any Third Party, provided that in all cases a single transaction or a series of related transactions within a twelve (12) months’ period exceeds a transaction value of aggregate five million United States Dollars (US$ 5,000,000);

(1)

any borrowing in excess of five million United States Dollars (US$ 5,000,000);

(m)

a decision to initiate an IPO of the shares of the JV Company;

(n)

settle any litigation matter or claim which would adversely affect the JV Company to conduct business or where the amount under dispute exceeds seven million United States Dollars (US$ 7,000,000), save that where any action is to be taken against one or more Parties or their Affiliates or any other Third Party entering into an agreement with JV Company on behalf of any Party, the approval of those Parties shall not be required;

(o)

capital expenditures and investments exceeding the approved annual budget by more than ten percent (10%) or whereby a single transaction or a series of related transactions within a twelve (12) months’ period exceeds an investment value of aggregate four million United States Dollars (US$ 4,000,000), whichever is higher;

(p)

any other matters referred to the Board that, pursuant to relevant laws and regulations or this Contract or the Articles of Association requires an unanimous resolution by the Board.

9.16

The Board may, without convening a meeting, adopt any resolution, other than those requiring a unanimous vote, if at least three (3) of the directors then holding office consent in writing to such action. The Chairperson or any person authorized by the Chairperson pursuant to Article 9.4 shall send a written notice in both Chinese and English with the proposed agenda and the proposed resolutions to all directors at least twenty (20) calendar days in advance of the adoption of such resolutions. The directors shall inform the Chairperson or such person authorized by the Chairperson of his or her position on the proposed resolutions within fourteen (14) days of the aforementioned notice. Such written consent shall be filed with the minutes of the relevant Board proceedings and shall have the same force and effect as a majority vote of the directors present at a meeting of the Board. Such consent may be signed in counterparts which, taken together, shall constitute a single consent document. Those resolutions which require unanimous Board approval may be adopted without a meeting if all directors then holding office consent to such an action.

9.17

Directors shall serve without any remuneration, but all reasonable costs which are within the scope approved by the Board, including travel and accommodations, and which are incurred by the directors in the performance of their duties as directors shall be borne by the JV Company.

9.18

If for whatever reason the Board is unable to arrive at a decision on any matter, where the lack of the decision would materially and adversely affect the business operation of the JV Company and would cause serious harm to either of the Parties’ material interests under this Contract or any of the Ancillary Contracts, then, within sixty (60) days after the matter is first raised at a meeting of the Board, either Party shall be entitled to serve a notice (the “Conciliation Notice”) on the other Party requiring the Parties to attempt to promptly resolve the matter.

9.19

The Party who issues a Conciliation Notice shall describe in the Conciliation Notice the matter to be discussed, its position on the matter, and its evidence and arguments in support of its position. The other Party shall, within thirty (30) days of the date of the Conciliation Notice, give a written response to the Party who issued the Conciliation Notice.

9.20

Within sixty (60) days from the date of the Conciliation Notice, a meeting of the Board shall be scheduled in which the Board shall finally decide on the matter described in the Conciliation Notice. If, for whatever reason, the Board at its meeting is unable to arrive at a decision on this matter, an event of deadlock shall be deemed to exist and either Party shall be entitled to terminate this Contract pursuant to Article 18.1.

9.21

Notwithstanding any provisions of Article 9.20, in the event the Board at its meeting referred to in Article 9.20 is unable to arrive at a decision on any matters referred to in Article 9.15 (g), (h) and (o), then such matters shall be decided by a simple majority of the directors who are present, in person or by proxy, at such meeting. If a matter shall be brought to the Board for a decision pursuant to the preceding sentence relating to any of the matters set forth therein at any time during the term of the JV Company, then upon the third occurrence of such event, an event of deadlock shall be deemed to exist and either Party shall be entitled to terminate the Contract pursuant to Article 18.1.

10.1

The JV Company shall have a Supervisory Committee which shall consist of three (3) supervisors (each, a “Supervisor”), with one convener (the “Convener”) elected by a majority of the Supervisors from among its members. When the Convener is unable to exercise his/her duties and powers, then a Supervisor who has been designated, in writing, by the Convener shall perform the Convener’s duties on the Convener’s behalf.

10.2

The Supervisory Committee shall exercise the following duties and powers:

(a)

to inspect the financial affairs of the JV Company;

(b)

to supervise the Board and Senior Management Employees in the performance of their duties, put forward proposals on the dismissal of any such person who violates laws or administrative regulations, the Articles of Association or any resolution of the Board;

(c)

to request that the Board members, the General Manager of the JV Company, and other Senior Management Employees redress conduct which is detrimental to the interests of the JV Company;

(d)

to institute legal proceedings against Directors or Senior Management Employees of the JV Company in accordance with Article 152 of the PRC Company Law; and

(e)

to exercise other duties and powers specified in the Company Law and the Articles of Association.

10.3

The Supervisory Committee shall convene at least two (2) meetings each year. Written notice shall be sent by its Convener to each Supervisor at least fourteen (14) calendar days prior to the meeting.

10.4

The notice of meetings of the Supervisory Committee shall include the following contents: the date, place and time of the meeting, main contents and topics for discussion and the date of dispatch of the notice.

10.5

Supervisors shall be elected in accordance with the following rules:

(a)

Party A shall be entitled to appoint one (1) Supervisor, Party B shall be entitled to appoint one (1) Supervisor, and staff and workers of the JV Company shall appoint one (1) Supervisor through a democratic vote.

(b)

No member of the Board, General Manager of the JV Company, or Senior Management Employees may concurrently act as a Supervisor of the JV Company.

10.6

The term of office of a Supervisor shall be three (3) years. Supervisors may be re-elected to serve consecutive terms.

10.7

All of the Supervisors must be present at a duly convened meeting in order to constitute a valid quorum.

10.8

Decisions adopted at a meeting of the Supervisory Committee shall only be valid if adopted by the affirmative vote of more than fifty percent (50%) of the Supervisors present in person or by proxy at a duly convened meeting.

10.9

The Parties shall ensure that their appointed Supervisors attend each meeting of the Supervisory Committee, either in person or by proxy.

10.10

Meetings of the Supervisory Committee may be attended by the Supervisors in person, or by conference telephone or similar communication equipment where all persons participating in the meeting can hear and speak to each other or by proxy and such participation shall constitute presence in person. If a Supervisor is unable to attend for any reason, he/she may appoint another Supervisor or person by proxy to attend on his/her behalf.

10.11

The Supervisory Committee may adopt any resolution without a meeting if all the Supervisors then holding office consent unanimously in writing to such action.

10.12

Supervisors shall serve without any remuneration, but all reasonable costs which are within the scope approved by the Supervisory Committee, including travel and accommodations, and which are incurred by the supervisors in the performance of their duties as supervisors shall be borne by the JV Company.

10.13

The JV Company shall indemnify each of Supervisors against all claims and liabilities incurred by reason of that person being a Supervisor of the JV Company, provided that the acts or omissions of the giving rise to such claim or liability did not constitute intentional misconduct or gross negligence or a violation of criminal laws.

11.1

The JV Company’s management organization shall be under the leadership of a General Manager who shall report directly to the Board. In addition to the General Manager, the JV Company also shall have other Senior Management Employees as set forth in this Contract and the Articles of Association, or as determined by the Board. All Senior Management Employees shall be responsible to and shall report to the General Manager.

11.2

The Senior Management Employees shall be nominated and appointed as follows:

11.2.1

The General Manager shall be nominated by Party A. Such nomination shall be presented to the Board. The Board shall then approve the nomination by a simple majority vote of those directors on the Board who are present in person or by proxy at a duly convened Board meeting and the approval of the Board shall not be unreasonably withheld. Party A may propose at any time to dismiss the General Manager and the approval of the Board shall not be unreasonably withheld.

11.2.2

The chief financial officer (“CFO”) shall be nominated by Party B. Such nomination shall be presented to the Board. The Board shall then approve the nomination by a simple majority vote of those directors on the Board who are present in person or by proxy at a duly convened Board meeting and the approval of the Board shall not be unreasonably withheld. Party B may propose at any time to dismiss CFO and the approval of the Board shall not be unreasonably withheld.

11.2.3

The General Manager and CFO each shall serve for a term of four (4) years. Each of the General Manager and CFO may each serve successive terms, if re-nominated by the Party who initially nominated him or her.

11.2.4

The appointment and dismissal of the Deputy General Manager shall be determined by the General Manager and approved by the Board. The Deputy General Manager shall be in charge of one of the functional departments of the JV Company. Subject to Articles 11.2.1 and 11.2.2, other Senior Management Employees shall be nominated, appointed, or dismissed directly by the General Manager.

11.3

All replacements for the General Manager, CFO, and other Senior Management Employees, whether by reason of retirement, resignation, disability or death or by removal for any reason by the General Manager or the Party which nominated or appointed him/her in accordance with Article 11.2, shall be nominated and appointed in the same manner as the original appointee in accordance with Article 11.2.

11.4

The General Manager shall be in charge of the day-to-day operation and management of the JV Company and shall carry out all matters entrusted to him/her by the Board. All other Senior Management Employees shall assist the General Manager in his/her work and shall carry out the functions delegated to him/her by specific written authorization of the General Manager.

11.5

The General Manager has the right and the responsibility to take actions and make decisions, in accordance with this Contract and the Articles of Association, that are within the scope of operations set out in the annual business plan approved by the Board, or are within such additional scope of authority as the Board may delegate to the General Manager.

11.6

Unless otherwise approved by the Board, the General Manager and all other Senior Management Employees shall perform their duties on a full-time basis and, except for positions which they hold with a Party or its Affiliate, shall not concurrently serve as a manager, an employee or a consultant of any other company or enterprise, nor shall they serve as a director of, or hold any interest in, any company or enterprise that competes with the JV Company.

11.7

The General Manager and CFO shall provide the Board with at least sixty (60) days’ written notice prior to resigning from their respective duties.

11.8

The JV Company shall indemnify the Senior Management Employees against all claims and liabilities incurred by reason of that person being a Senior Management Employee of the JV Company, provided that the acts or omissions of the Senior Management Employee giving rise to such claim or liability did not constitute intentional misconduct or gross negligence or a violation of criminal laws.

12.1

Matters relating to the recruitment, employment, dismissal, resignation, wages and welfare of the Senior Management Employees and the Working Employees of the JV Company shall be handled in accordance with the Labor Law of the People’s Republic of China and related PRC national and local government regulations (hereinafter collectively referred to as the “Labor Laws”). The JV Company’s internal labor policies and the major rules and regulations shall be approved by the Board, and the JV Company’s detailed rules and regulations shall be determined by the General Manager and CFO provided that such internal policies and rules and regulations shall not conflict with the Labor Laws.

12.2

All employees shall be employed by the JV Company in accordance with the terms of labor contracts entered into between the JV Company and individual employees. Such labor contracts shall provide, among other terms, such appropriate restrictive covenants as may be determined necessary by the General Manager concerning competition and confidentiality. Every employee shall also sign a separate confidentiality agreement with the JV Company.

12.3

Employees will be selected according to their professional qualifications, individual characteristics and working experience. The specific number and qualifications of the Working Employees shall be determined by the General Manager, in accordance with the operating needs of the JV Company.

12.4

Each employee may be examined and interviewed by the General Manager (or his/her designated representative) prior to commencement of employment by the JV Company. The General Manager shall have the right to decide, on behalf of the JV Company, whether to employ any person, except for those employees whose appointment and dismissal shall be approved by the Board, in accordance with this Contract.

12.5

All employees hired by the JV Company (other than employees seconded or transferred from Party A) must complete satisfactorily an appropriate probationary period of employment before they will be considered regular employees of the JV Company. The General Manager may discharge any employee during the probationary period if he/she determines that such employee is not suitable to the requirements of the JV Company.

12.6

The JV Company shall conform to rules and regulations of the PRC government concerning labor protection and ensure safe and civilized production. Labor insurance for the Working Employees of the JV Company shall be handled in accordance with the Labor Laws.

12.7

Employees shall have the right to establish a labor union in accordance with the Trade Union Law and other labor laws that are applicable to Sino-foreign equity joint ventures. The labor union shall have one chairperson. In accordance with the Trade Union Law, the JV Company shall allot each month two percent (2%) of the total amount of the real wages received by the JV Company employees for payment into a labor union fund, such payment to be a pre-tax expense of the JV Company. The labor union may use these funds in accordance with the relevant control measures for labor union funds formulated by the All China Federation of Trade Unions.

13.1

The JV Company shall have a CFO. The CFO, under the leadership of the General Manager, shall be responsible for the financial management of the JV Company.

13.2

The General Manager and the CFO shall prepare the JV Company’s accounting system and procedures in accordance with the Enterprise Accounting System in the PRC and other relevant PRC laws and regulations, and shall submit the same to the Board for adoption. Once adopted by the Board, the accounting system and financial accounting procedures shall be filed with the department in charge of the JV Company and with the relevant local department of finance and the tax authorities for the record.

13.3

The JV Company shall adopt Renminbi as its bookkeeping base currency, but may also adopt United States Dollars or other foreign currencies as supplementary bookkeeping currencies.

13.4

All accounting records, vouchers, books and statements of the JV Company must be made and kept in Chinese. Upon reasonable request, the JV Company shall provide each Party with full access to its accounting records, vouchers, books and statements during normal business hours.

13.5

For the purpose of preparing the JV Company’s accounts and statements, calculation of profits to be distributed to the Parties, and for any other purposes where it may be necessary to effect a currency conversion, such conversion shall be made using the median rate for buying and selling for such currency announced by the People’s Bank of China on the date of actual receipt or payment by the JV Company.

13.6

An accountant independent of any Party, who is registered in PRC, shall be engaged by the Board as its auditor to examine and verify the JV Company’s annual financial statements and reports. The JV Company shall submit to the Parties an annual statement of final accounts in both Chinese and English not later than sixty five (65) calendar days after the end of the fiscal year in a form consistent with PRC laws and regulations. Upon request of Party B, the JV Company will prepare and submit to Party B quarterly statements within thirty (30) calendar days in a form consistent with PRC laws and regulations. The JV Company shall prepare and submit to the Parties financial statements in accordance with International Accounting Standards subject to an agreement between the Parties as to whether Party B or the JV Company shall bear the cost and expense to be incurred by the JV Company in connection therewith.

13.7

The JV Company shall separately open foreign exchange accounts and Renminbi accounts at banks within the PRC that have been approved and duly certified by the relevant PRC government authorities. Following approval by the State Administration of Foreign Exchange, the JV Company may also open foreign exchange bank accounts outside of the PRC. The JV Company shall apply for and maintain a Foreign Exchange Registration Certificate in accordance with applicable legal requirements. The JV Company’s foreign exchange transactions shall be handled in accordance with PRC laws and regulations concerning foreign exchange control.

13.8

The JV Company shall be responsible for maintaining a balance in its foreign exchange receipts and expenditures, primarily through the export of JV Products. However, in order to maintain such balance, the JV Company may also purchase foreign exchange from banks in accordance with the relevant laws of the PRC and adopt other methods permitted under the laws of the PRC. All costs incurred in converting Renminbi to foreign exchange in connection with the operating expenses of the JV Company shall be treated as operating expenses of the JV Company.

13.9

The JV Company shall adopt the calendar year as its fiscal year. The JV Company’s first fiscal year shall commence on the Company Establishment Date and shall end on the immediately succeeding December 31.

13.10

After payment of income taxes by the JV Company in accordance with relevant laws of China, the Board will determine the annual allocations to the Three Funds from the after-tax net profits.

13.11

The distribution of after-tax profits to the Parties shall be handled in accordance with those laws of the PRC that apply to financial administration of foreign-invested enterprises, and shall be carried out as follows:

13.11.1

The Board shall, once every year and by a formally adopted resolution, decide on the amount of after-tax profit of the JV Company (after allocations to the Three Funds) to be retained in the JV Company for expanding its production and operations and the amount to be distributed to the Parties in proportion to their respective actual shares of the JV Company’s registered capital at the time of the Board resolution.

13.11.2

If the JV Company carries losses from the previous years, the profit of the current year shall first be used to cover those losses. No profit shall be distributed unless the deficit from the previous years is made up. The profit retained by the JV Company and carried over from the previous years may be distributed together with the distributable profit of the current year, or after the deficit of the current year is made up therefrom.

13.11.3

The profits available for distribution shall be calculated in Renminbi. After the JV Company has made payments in respect of its foreign exchange obligations, Party B shall be entitled to receive its share of profits in foreign exchange, with translation from Renminbi to United States Dollars for calculation purposes made at the median rate for buying and selling published by the People’s Bank of China on the date on which remittance to Party B is made. All costs incurred in converting Renminbi to foreign currency in connection with the distribution of profits to Party B, including the remittance thereof, shall be borne by Party B.

14.1

The JV Company shall pay all taxes and duties required under the national and local laws and regulations of the PRC. The JV Company’s PRC and expatriate personnel shall pay individual income tax in accordance with the Individual Income Tax Law of the People’s Republic of China.

14.2

The JV Company will submit an application for confirmation of the JV Company as a “Technologically Advanced Enterprise” pursuant to relevant regulations and, upon receipt of such confirmation, shall register with the local tax authorities for the preferential tax treatment granted to Technologically Advanced Enterprises. The JV Company will apply for other preferential tax treatment which may be available to the JV Company from time to time under the applicable PRC laws and regulations.

14.3

The JV Company, at its own expense, shall take out and maintain at all times during the Contract Term adequate insurance for the JV Company against loss or damage by fire, natural disasters, and such other risks as are customarily insured against in the industry during the construction of a manufacturing plant and operation of a manufacturing company. The JV Company shall also obtain and pay for all types of insurance required by laws and regulations of the PRC.

14.3.1

The property, transport and other types of insurance of the JV Company will be denominated in RMB, as appropriate.

14.3.2

The JV Company shall take out the appropriate amount of product liability and personal injury insurance in order to indemnify and protect the JV Company from Third Party product liability and personal injury claims.

14.4

The JV Company shall take out the required insurance from an insurance company or organization that is authorized by the relevant PRC authorities.

15.1

Prior to and during the Contract Term, each Party has disclosed or may disclose to the other Party confidential and proprietary information and materials concerning their respective businesses, financial condition, proprietary technology, research and development, and other confidential matters. Furthermore, during the Contract Term, the Parties may obtain such confidential and proprietary information concerning the JV Company and the JV Company may obtain such confidential and proprietary information of the Parties. Except as otherwise provided in the Ancillary Contracts, each of the Parties and the JV Company receiving such information as aforesaid (hereinafter referred to as “Confidential Information”) shall, for the Contract Term and a period of ten (10) years thereafter:

(1)

maintain the confidentiality of such Confidential Information; and

(2)

not disclose it to any person or entity, except to their respective employees and advisors who need to know such Confidential Information to perform their work responsibilities for the establishment and operation of the JV Company.

15.2

The provisions of Article 15.1 above shall not apply to Confidential Information that:

(1)

can be proved to have been known by the receiving party by written records made prior to disclosure by the disclosing party;

(2)

is or becomes public knowledge otherwise than through the receiving party’s breach of this Contract;

(3)

was obtained by the receiving party from a Third Party having no obligation of confidentiality with respect to such Confidential Information; or

(4)

is required pursuant to any applicable securities law or regulation or by order of any competent court or governmental authority or any stock exchange to be disclosed.

15.3

Each Party shall advise its officers, directors, senior staff, and other employees receiving such Confidential Information of the existence of and the importance of complying with the obligations set forth in Article 15.1.

15.4

If required by any Party, the JV Company shall execute a separate confidentiality agreement with provisions consistent with those set out above with respect to Confidential Information obtained by the JV Company from such Party or its Affiliates.

15.5

Each of the Parties and the JV Company shall formulate rules and regulations to cause its directors, senior staff, and other employees, and those of their Affiliates, also to comply with the confidentiality obligations set forth in this Article 15. All officers, Board members, managers and other employees of the JV Company shall be required to sign a confidentiality undertaking, in a form acceptable to all Parties.

15.6

The provisions of this Article 15 shall not prejudice any rights or obligations that any Party or the JV Company might have under the provisions of applicable laws and regulations of the PRC.

15.7

This Article 15 shall remain binding on any natural or legal person who ceases to be a Party to this Contract through assignment of registered capital and of the corresponding contractual rights and obligations. In addition, the obligations and rights under this Article 15 shall survive the expiration or early termination of this Contract and shall remain in effect for the periods stated in this Article 15, notwithstanding the dissolution or liquidation of the JV Company.

16.1

Party B undertakes, and for its Affiliates it guarantees as a separate liability, that during the Contract Term, neither it nor any of its Affiliates shall itself or through entering into any joint venture or similar arrangement or through cooperation with an intermediary, unless with the express prior written consent of Party A:

16.1.1

carry on or be engaged, concerned or interested, directly or indirectly, whether as direct or indirect investor, shareholder, director, employee, partner, agent or otherwise, in carrying on, directly or indirectly, any aspect of:

(a)

the production, importation, distribution or servicing of complete vehicles, and the parts, components, or accessories therefor, in competition with the JV Company; and

(b)

participate in any activity or otherwise act in any way in competition with any business of the JV Company.

16.1.2

actively solicit, entice away or attempt to solicit or entice away from Party A or its Affiliates or the JV Company, any person who is an employee of the JV Company or who, as of the date of this Contract, is an officer, manager, consultant or employee of Party A or its Affiliates.

16.1.3

solicit, influence, entice or in any way divert any customer, distributor or supplier of Party A or of its Affiliates or of the JV Company to do business or in any way become associated with any competitor of Party A or of its Affiliates or of the JV Company.

16.2

The breach of any obligation under Article 16.1 by Party B or any of its Affiliates or their successors or assigns shall be referred to as an “IC Competition Event”.

16.3

Unless with the express prior written consent of Party B, Party A undertakes, and for its Affiliates (other than JV Company) it guarantees as a separate liability, that during the Contract Term, neither it nor any of its Affiliates shall itself or through entering into any joint venture or similar arrangement or through cooperation with an intermediary, produce and sell Motor Vehicles, unless such Motor Vehicles are distinctively different from Motor Vehicles that are JV Products, to the effect that physical shape and styling of body in white, dashboard, front and rear lighting, fender and bumper must not be identical.

16.4

The breach of any obligation under Article 16.3 by Party A or any of its Affiliates or their successors or assigns shall be referred to as a “Chery Competition Event”.

17.1

Unless earlier terminated pursuant to the terms of Article 18 hereof, the Contract Term shall commence upon the Effective Date and shall extend for a period of twenty-five (25) years from the Company Establishment Date.

17.2

If both Parties agree in writing to continue the JV Company, no less than six (6) months prior to the expiration of the Contract Term, each Party shall cause its directors on the Board to vote in favor of a resolution to submit an application to the Examination and Approval Authority to extend the Contract Term for a term permitted by the PRC laws and regulations in effect at the time such application is submitted. The Contract Term shall be extended upon approval of the Examination and Approval Authority.

18.1

Any Party shall have the right to terminate this Contract prior to the expiration of the Contract Term, by written notice to the other Party if any of the following events occur:

(a)

the circumstances described in Articles 5.4;

(b)

the circumstances described in Article 5.6;

(c)

the circumstances described in Article 9.20;

(d)

The other Party materially breaches this Contract or materially violates the Articles of Association, and such breach or violation is not cured within sixty (60) days of written notice to the breaching/violating Party; provided, however, that if the material breach or material violation cannot reasonably be cured within sixty (60) days or such longer term as the Parties may agree, but the breaching or violating Party commences to cure the breach or violation within the 60-day period and diligently continues to cure the breach or violation, the non-breaching or non-violating Party shall not have the right to terminate this Contract, unless the breaching or violating Party has not cured the breach or violation within six (6) months after that sixty (60) days period or such longer term the Parties had agreed upon;

(e)

the JV Company or the other Party becomes bankrupt, or is the subject of proceedings for liquidation or dissolution, or ceases to carry on business, or becomes unable to pay its debts as they come due;

(f)

the other Party transfers or mortgages, pledges or otherwise encumbers all or any part of its equity interest in the JV Company in violation of the provisions of this Contract;

(g)

any government authority having authority over any Party requires any provision of this Contract, the License Contract, the Business License or the Articles of Association to be revised in such a way as to cause significant adverse consequences to the JV Company or any of the Parties. In such case, neither Party may sue the other Party for breaching of its obligation under Article 5.3;

(h)

the assets of the JV Company, in whole or in substantial part, are nationalized or confiscated;

(i)

the conditions or consequences of an Excusing Event (as defined in Article 20) prevail with the result of a major impairment to the functioning of the JV Company for a period in excess of six (6) months, and the Parties have been unable to find an equitable solution pursuant to Article 20;

(j)

any Ancillary Contract is terminated other than the breaching Party; or

(k)

any other termination event, as specified in PRC laws and regulations, occurs.

18.2

In the event that any Party gives notice to terminate this Contract pursuant to Article 18.1(b), Party A or a third party designated by Party A shall purchase from Party B and Party B shall assign to Party A or such a third party whatever interest Party B may have under this Contract and in the JV Company for a price of US$10. Within 10 days of the date of the notice of termination, the Parties shall sign a contract for assignment of Party B’s interest mentioned in the immediately preceding sentence and shall cause the directors appointed by them to approve the contract for assignment. The form and substance of the contract for assignment shall be substantially similar to those of the one attached hereto as Appendix 4. The Parties shall further submit the contract for assignment and other related documents to the Examination and Approval Authority for approval.

18.3

If any Party gives notice to terminate this Contract pursuant to Articles 18.1 (other than Article 18.1(b)), then the Parties shall endeavor to resolve the problem through negotiation and agreement. If, within sixty (60) days of a Party’s receipt of such termination notice, the Parties have not agreed in writing to continue this Contract, then Party A shall have the right to purchase all of Party B’s interest in the registered capital of the JV Company (a “Buyout”) subject to the terms and conditions of Articles 18.5 and 18.6. Without limitation to the foregoing, the Buyout right of Party A set forth above shall not apply in the event of a breach by Party A (or any of its Affiliates) under Articles 18.1(a), (d), (f) or (j);

18.4

If Party B gives notice to terminate this Contract pursuant to Articles 18.1(a), (d), (f) or (j), then the Parties shall endeavor to resolve the problem through negotiation and agreement. If, within sixty (60) days of Party A’s receipt of such termination notice, the Parties have not agreed in writing to continue this Contract, then Party B shall have the right to sell all of Party B’s interest in the registered capital of the JV Company and Party A shall have the obligation to buy Party B’s interest in the registered capital of the JV Company subject to the terms and conditions of Articles 18.5 and 18.6.

18.5

Within 30 days following the sixty (60) day period referred to in Article 18.3, Party A may serve a notice on Party B, in which Party A exercises its right to buy out Party B’s interest in the JV Company in accordance with Article 18.3 (“Party A Notice”). Within 30 days following the sixty (60) day period referred to in Article 18.4, Party B may serve a notice on Party A, in which Party B requests Party A to buy out Party B’s interest in the JV Company in accordance with Article 18.4 (“Party B Notice”). Upon receipt of the Party A Notice or the Party B Notice, as the case may be, the Parties shall promptly negotiate the price at which Party A may purchase Party B’s interest in the JV Company (“Buyout Price”).

18.6

If the Parties fail to agree on the Buyout Price within thirty (30) days from the date of the Party A Notice or the Party B Notice, as the case may be, the Parties shall, unless otherwise agreed, jointly conduct a valuation for the purpose of determining the Buyout Price. For such valuation, each Party shall nominate an independent and competent appraiser within forty-five (45) days from the date of the Party A Notice or the Party B Notice, as the case may be. Within seventy-five (75) days from the Date of the Party A Notice or the Party B Notice, as the case may be, the appraisers shall make their determination of the Buyout Price in a written report setting forth detailed reasons for such determination.

18.7

After the Buyout Price has been determined pursuant to Article 18.5 or Article 18.6, the Parties shall enter into an agreement for transfer of interest in the registered capital of the JV Company, and each Party shall cause the directors appointed by such Party to approve the agreement.

18.8

If Party A does not exercise its Buyout right within thirty (30) days following the sixty (60)-day period provided for in Article 18.5, or Party B does not request Party A to purchase Party B’s interest in the JV Company in accordance with Article 18.5, or the two (2) valuations differ by more than ten percent (10%) of the higher one, then each Party and the directors on the Board appointed by each Party shall be deemed to have agreed both to terminate this Contract and to dissolve the JV Company. An application for such dissolution shall then forthwith be submitted to the Examination and Approval Authority.

18.9

Following an application to dissolve the JV Company pursuant to Article 18.8, the Board shall forthwith appoint a liquidation committee that shall have the power to represent the JV Company in all legal matters. The liquidation committee shall value and liquidate the JV Company’s assets in accordance with the applicable PRC laws and regulations and the principles set forth herein.

18.10

The liquidation committee shall be made up of three (3) members: Party A shall appoint two (2) members and Party B shall appoint one (1) member. Members of the liquidation committee may, but need not be, directors or senior employees of the JV Company. The liquidation committee may engage a lawyer and an accountant registered in the PRC to assist the liquidation committee. When permitted by PRC law, any Party may also appoint professional advisors to assist the liquidation committee. The Board shall report the formation of the liquidation committee to the relevant PRC government department in charge of the JV Company.

18.11

The liquidation committee shall conduct a thorough examination of the JV Company’s assets and liabilities, on the basis of which it shall develop a liquidation plan. If approved by the Board of Directors, such liquidation plan shall be executed under the liquidation committee’s supervision.

18.12

During the liquidation procedures, Party A shall have the option to purchase the assets of the JV Company which are used specifically for the production and /or testing of the JV Products at their original book value, and fully depreciated.

18.13

Subject to applicable PRC laws and regulations, the liquidation expenses, including remuneration to members and the lawyers and accountants assisting the liquidation committee, shall be paid out of the JV Company’s assets in priority to the claims of other creditors.

18.14

After the liquidation and division of the JV Company’s assets and the settlement of all of its outstanding debts, the balance shall be paid over to the Parties in proportion to their respective holdings in the equity interest of the registered capital of the JV Company at the time of liquidation. Party B shall have a priority to receive its share of the balance in foreign exchange.

18.15

On completion of all liquidation work, the liquidation committee shall provide to the Examination and Approval Authority a liquidation completion report which has been approved by the Board, shall hand in the JV Company’s Business License to the original registration authority, and shall complete all other formalities for nullifying the JV Company’s registration in the PRC and other jurisdictions, where applicable. Party B shall have a right to obtain, at its own expense, copies of all of the JV Company’s accounting books and other documents; but the originals of such books and documents shall be left in the care of Party A.

18.16

The obligations and benefits set forth in the liquidation provisions in this Article 18 shall survive termination or expiration of this Contract.

19.1

In the event that a breach of contract committed by a Party to this Contract results in the non-performance of or inability to fully perform this Contract or its Appendices, the liabilities arising from the breach of contract shall be borne by the Party in breach. In the event that a breach of contract is committed by more than one Party, each such Party shall bear its individual share of the liabilities arising from that breach of contract.

19.2

Notwithstanding Article 19.1, the aggregate liability of each Party under this Article 19 shall be limited to the amount of its subscribed contribution to the JV Company’s registered capital.

20.1

An “Excusing Event” shall mean any events which was unforeseeable at the time this Contract was signed, the occurrence and consequences of which cannot be avoided or overcome, and which arises after the Effective Date and prevents total or partial performance of this Contract by any Party of its commitments under this Contract. Such events shall include earthquakes, typhoons, flood, fire, war, failures of international or domestic transportation, acts of government or public agencies, epidemics, civil disturbances, strikes and any other instances which cannot be foreseen, avoided or overcome, including instances which are accepted as force majeure in general international commercial practice.

20.2

If an Excusing Event occurs, a Party’s obligations under this Contract that are affected by such an event shall be suspended during the period of delay caused by the Excusing Event and shall be automatically extended, without penalty, for a period equal to such suspension.

20.3

The Party claiming an Excusing Event shall promptly inform the other Party in writing and shall furnish within thirty (30) days thereafter sufficient evidence of the occurrence and duration of such Excusing Event. The Party claiming an Excusing Event shall also use all reasonable endeavors to terminate that Excusing Event.

20.4

When an Excusing Event occurs, the Parties shall immediately consult with each other in order to find an equitable solution and shall use all reasonable endeavors to minimize the consequences of such Excusing Event.

21.1

In the event a dispute between the Parties arising out of or in relation to this Contract, the Parties shall in the first instance each designate one or more representatives who shall promptly meet to attempt to resolve such dispute through friendly consultations.

21.2

If the dispute is not resolved through consultations within sixty (60) days after one Party has served a written notice on the other Party requesting the commencement of consultations, then the Parties shall refer and submit the dispute for final resolution by arbitration to the Hong Kong International Arbitration Center (HKIAC) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (“UNCITRAL Arbitration Rules”) as at present in force save as the same may be amended by this Article and the UNCITRAL Arbitration Rules shall be construed accordingly.

21.2.1

The place of arbitration shall be Hong Kong.

21.2.2

The arbitration shall be settled by three (3) arbitrators. Each Party shall appoint one arbitrator within the time stipulated in the UNCITRAL Arbitration Rules, failing which the appointment shall be made by HKIAC. The third arbitrator, who will act as the presiding arbitrator, shall be appointed by the HKIAC. The appointing authority shall be the HKIAC.

21.2.3

The language of the arbitration proceedings shall be English, provided that either Party may introduce evidence or testimony in languages other than English. The arbitrators may refer to both the English and Chinese texts of this Contract.

21.2.4

The arbitral tribunal shall have the authority and power to make such orders for interim relief, including injunctive relief, as it may deem just and equitable. A request for interim measures or equitable remedies, including injunctive relief, by a Party to a court shall not be deemed to be or construed as incompatible with, or a waiver of, this agreement to arbitrate.

21.2.5

The arbitration shall be kept confidential and the existence of the proceeding and any element of it (including but not limited to any pleadings, submissions or other documents submitted or exchanged, any evidence and any awards) shall not without prior consent by all Parties be disclosed beyond the Parties to the arbitration and their representatives, the arbitral tribunal, the administering institution (if any) and any person necessary to the conduct of the proceeding, except as may be lawfully required whether in judicial proceedings or otherwise in the normal course of business of the Parties.

21.2.6

The award of the arbitration tribunal will be final and binding on each of the Parties and may be enforced, if necessary, in any court of competent jurisdiction.

21.2.7

The Parties will use their best efforts to effect the prompt execution of any such awards and will render whatever assistance as may be necessary to this end, including, if necessary, compliance with the enforcement procedures stipulated in the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Arrangements Concerning Mutual Enforcement of Arbitration Awards between the Mainland and the Hong Kong Special Administrative Region.

21.3

The costs of arbitration including attorneys’ fees shall be borne by the losing Party unless otherwise decided in the arbitral award.

21.4

When any dispute occurs and when any dispute is under arbitration, except for the matters under dispute, the Parties shall continue to exercise their other respective rights and fulfill their other respective obligations under this Contract.

21.5

In any arbitration proceeding or legal proceeding to enforce an arbitral award, in any other legal action between the Parties relating to this Contract, including the Ancillary Contracts, each Party waives the defense of sovereign immunity and any other defense solely based upon the fact or allegation that it is a political subdivision, agency or instrumentality of a sovereign state.

22.1

The formation, validity, interpretation and implementation of this Contract, and any disputes arising under this Contract, shall be governed by the laws of the PRC.

23.1

To the extent permitted by PRC law, failure or delay on the part of any Party hereto to exercise a right under this Contract and the Appendices hereto shall not operate as a waiver thereof; nor shall any single or partial exercise of a right preclude any other future exercise thereof.

23.2

Except as otherwise provided herein, this Contract may not be assigned in whole or in part by any Party without the prior written consent of the other Party and, if required by PRC laws and regulations, the approval of the Examination and Approval Authority.

23.3

This Contract is made for the benefit of Party A, Party B and their respective lawful successors and assignees, and is legally binding on them. This Contract may not be amended orally, and any amendment hereto must be agreed to in a written instrument signed by all of the Parties and, if required by PRC laws and regulations, approved by the Examination and Approval Authority before taking effect.

23.4

The invalidity of any provision of this Contract shall not affect the validity of any other provision of this Contract. If a provision in this Contract is determined as invalid under applicable PRC laws and regulations, the Parties shall discuss and agree whether a replacement for or revision of such provision should be made.

23.5

This Contract is signed in the Chinese language in ten (10) originals and in the English language in ten (10) originals. Both the Chinese and English versions of the Contract shall be equally valid.

23.6

This Contract and the Appendices hereto constitute the entire agreement between the Parties with respect to the subject matter of this Contract and supersede all prior discussions, negotiations and agreements between them with respect to the subject matter of this Contract. In the event of any conflict between the terms and provisions of this Contract and the Articles of Association, the terms and provisions of this Contract shall prevail.

23.7

Prior to the date on which this Contract is duly executed by both Parties, any costs incurred by a Party in relation to this Contract and/or to the JV Company shall be borne by that Party. Those expenses and costs which are incurred by a Party for purposes of the JV Company’s establishment shall be reimbursed by the JV Company to that Party.

23.8

Any notice or written communication provided for in this Contract from one Party to the other Party or to the JV Company shall be made in writing in Chinese and English and sent by courier service delivered letter or by facsimile with a confirmation copy sent by courier service delivered letter. The date of receipt of a notice or communication hereunder shall be deemed to be seven (7) business days after the letter is given to the courier service or one (1) business day after sending in the case of a facsimile, provided that the delivery or sending is evidenced by a confirmation of receipt as well as confirmation that the communication letter was sent. All notices and communications shall be sent to the appropriate address set forth below, until such address is changed by notice given in writing to the other Party.

23.9

The Appendices listed below constitute an integral part of this Contract and are equally binding on the Parties, along with these Articles 1-23. In the event of a conflict between the text of this Contract and any Appendix, the text of this Contract shall control.

2.1

The JV Company is jointly invested and established by:

(1)

Party A: Wuhu Chery Automobile Investment Co., Ltd., a limited liability company duly organized and existing under the laws of the PRC, with its legal address at 8 Changchun Road, Wuhu Economic and Technological Development Area, Anhui Province, PRC.

Legal Representative of Party A:

Name:              Zhou Biren

Position:          Chairman & General Manager

Nationality:     Chinese

(2)

Party B: Quantum (2007) LLC, a limited liability company established and existing under the laws of the State of Delaware, the United States of America, with its legal address at 16192 Coastal Highway, Lewes, Delaware 19958, USA.

Legal Representative of Party B:

Name:              Nir Gilad

Position:          Manager

Nationality:     Israeli

2.2

If a Party changes its legal representative, it shall promptly notify the other Party in writing of such change and the name, position and nationality of its new legal representative.

3.1

The JV Company is established in accordance with the Joint Venture Law, the Joint Venture Regulations, the Company Law, other relevant PRC laws and regulations, and the provisions of the Joint Venture Contract.

3.2

The name of the JV Company shall be in Chinese and Chery Quantum Auto Co., Ltd. in English.

3.3

The legal address of the JV Company shall be No. 1 Songshan Road, Wuhu, Anhui Province, PRC.

3.4

The JV Company may establish branch offices and subsidiaries within or outside of the PRC with the consent of the Board, and, if required, with approval from the relevant governmental authorities.

3.5

The JV Company shall be an enterprise legal person under the laws of the PRC. The activities of the JV Company shall be governed by the laws, decrees, rules and regulations of the PRC, and its lawful rights and interests shall be protected by the laws, decrees, rules and regulations of the PRC.

3.6

The JV Company shall be a limited liability company. Unless otherwise provided in these Articles of Association or otherwise agreed by a Party in writing, the liability of each Party to the JV Company shall be limited to the extent of that Party’s respective subscribed contributions to the JV Company’s registered capital that are required to be made pursuant to the Joint Venture Contract. Unless otherwise provided in a written agreement signed by a Party, creditors of the JV Company and other claimants against the JV Company shall have recourse only to the assets of the JV Company and shall not seek compensation, damages or other remedies from such a Party.

Subject to the foregoing, in accordance with relevant PRC laws and regulations, the Parties shall share the profits and bear risks and losses of the JV Company in proportion to their capital contributions to the JV Company.

4.1

The purpose of the JV Company is to use efficient and advanced technology, product planning and management, production and distribution techniques to manufacture in the PRC, market and sell the JV Products worldwide, to improve the value and competitiveness of such products, to introduce new products, and to obtain satisfactory economic benefits for the Parties.

4.2

The business scope of the JV Company shall be to produce Motor Vehicles in the PRC, and to sell and distribute worldwide Motor Vehicles produced by the JV Company, and the parts, components and accessories therefor.

4.3

The JV Company’s production scale is expected, in Phase One, to reach no less than 150,000 Motor Vehicles per annum. In accordance with relevant market and sales conditions, such scale may be gradually expanded.

5.1

The JV Company’s total amount of investment shall be One Thousand and Five Hundred Million United States Dollars (US$ 1,500,000,000), and its registered capital shall be Five Hundred Million United States Dollars (US$500,000,000).

5.2

The Parties’ contributions to the JV Company’s registered capital shall be as follows:

5.2.1

Party A’s contribution to the registered capital of the JV Company shall be the equivalent of Two Hundred and Seventy Five Million United States Dollars (US$275,000,000), representing fifty five percent (55%) of the equity interest in the JV Company’s registered capital. Party A shall provide the following as its contribution to the JV Company’s registered capital:

(A)

an amount of RMB cash equal to the difference between Two Hundred and Seventy Five Million United States Dollars (US$275,000,000), on the one hand, and, on the other hand, the value of the land use rights referred to in Section B below and the amount of the license fee referred to in Section C below ;

(B)

those land use rights for the Site as further detailed and set forth in the Appendix 3 in the Joint Venture Contract, which have a total value appraised by an evaluation institute recognized by the PRC government, and confirmed by the relevant PRC state assets administration authorities; and

(C)

an amount of the license fees to be agreed by the Parties in the License Contract, and which the Parties agree shall constitute a part of Party A’s contribution to the registered capital of the JV Company.

5.2.2

Party B’s contribution to the registered capital of the JV Company shall be Two Hundred and Twenty Five Million United States Dollars (US$225,000,000), representing forty five percent (45%) of the equity interest in the JV Company’s registered capital. Party B shall make such contribution, in cash, in United States Dollars.

5.3

Subject to the fulfillment of the conditions precedent in Article 5.6, the Parties shall make their contributions to the JV Company’s registered capital, in amounts specified in Article 5.2 and as follows:

5.3.1

Each Party shall pay fifteen percent (15%) of its capital contribution referred to in Article 5.2 to the JV Company within ninety (90) days of the Company Establishment Date; and

5.3.2

Each Party shall contribute the balance of its capital contribution to the JV Company within ten (10) calendar days upon the fulfillment of the condition precedent stipulated in Article 5.6.2.

5.4

In the event that any Party fails to make its capital contribution, in whole or in part, in accordance with Article 5.3, such Party shall pay simple interest to the JV Company on the unpaid amount (or the value of the in-kind contribution) from the date due until the date the contribution is made. Such interest shall be computed using the London Interbank Offered Rate (“LIBOR”) quoted for the corresponding period for United States Dollars plus five (5) percentage points.

If any Party does not make its capital contribution in accordance with Article 5.3.1 or Article 5.3.2, the other Party shall have the right to terminate the Joint Venture Contract and claim damages from the breaching Party.

5.5

Each time a Party makes a contribution to the JV Company’s registered capital, an accountant registered in the PRC and agreed upon by both Parties shall, at the expense of the JV Company, promptly verify the contribution and issue a capital verification report to the JV Company. Such capital verification report shall be prepared on the basis that any capital contribution in the form of cash shall be deemed to be made on the date on which the relevant amount of cash has been deposited into a bank account of the JV Company, and that any capital contribution in the form of assets shall be deemed to be made on the date on which such assets are transferred to the possession of the JV Company.

Within thirty (30) days from receipt of the capital verification report, the JV Company shall issue an investment certificate to such Party that is in the form prescribed by the Joint Venture Regulations, that is signed by the Chairperson of the Board, and that is chopped with the JV Company’s chop. Each investment certificate shall indicate the amount of the capital contribution and the date on which such contribution was made, and a copy shall be submitted to the Examination and Approval Authority and the competent Administration for Industry and Commerce for the record. The General Manager shall maintain a file of all capital verification reports and copies of all investment certificates that have been issued to the Parties.

5.6

No Party shall be obligated to make any contribution to the JV Company’s registered capital if any of the following conditions has been neither satisfied nor waived, in writing, by both Parties:

5.6.1

the Business License has been issued; and

5.6.2

the Ancillary Contracts have been duly executed by the parties thereto and become effective.

The Parties agree that if any of the above conditions precedent has not been satisfied or waived by each Party within three (3) months from the Company Establishment Date, or within any extended period of time as the Parties may agree in writing, then either Party shall have the right to terminate the Joint Venture Contract and the Articles of Association by written notice to the other Party, and neither Party shall have any right whatsoever to require any other Party to make any contribution to the registered capital of the JV Company or to require any other performance of the Joint Venture Contract or to claim any damages from the other Party.

Any capital contribution actually made to the JV Company prior to the date on which the Joint Venture Contract is terminated pursuant to this Article 5.6 shall be returned forthwith to the Party which made such contribution to the greatest extent possible. Following approval of termination of the Joint Venture Contract by the Examination and Approval Authority, the Business License shall be returned for cancellation forthwith.

5.7

Any increase in the registered capital and total investment of the JV Company shall require the written consent of both Parties and the unanimous approval of the Board.

5.7.1

The Parties shall contribute to any increase in registered capital in proportion to their respective shares of registered capital at the time of such increase, unless otherwise agreed in writing by the Parties and the Board.

5.7.2

All increases in the registered capital and total investment shall be approved by the Examination and Approval Authority, if required by relevant PRC laws and regulations. Upon receipt of such approval, the JV Company shall register the increase in the registered capital and total investment with the competent Administration for Industry and Commerce.

5.7.3

In the event that the registered capital of the JV Company is increased, any Party which provides Renminbi cash as capital contribution shall be credited with a US$ amount equivalent to such RMB cash amount. Such US$ equivalent shall be calculated using the median of the official buying and selling rates for United States Dollars that is published by the People’s Bank of China on the date on which that RMB contribution was made.

5.8

Subject to Article 6.15(k) and (l), the JV Company shall be responsible for obtaining any loans or other financing that may be required by the JV Company to finance its operation and capital expenditures. Subject to the foregoing, the Parties shall cooperate with each other and the JV Company in facilitating the approval and grant by third party lenders of loans to the JV Company. In order to fund the difference between the total amount of investment and the registered capital, the JV Company may obtain, in accordance with the following, loans from banks or other authorized lenders in the PRC or from banks, export credit agencies, international financial organizations and other lenders abroad:

(a)

The JV Company shall first attempt to obtain such a loan on its own credit.

(b)

Secondly, the JV Company may pledge or mortgage its assets for the benefit of any lender as collateral for a loan by any such lender.

(c)

Thirdly, the Parties shall provide whatever support is required to fund the difference between the total amount of investment and the registered capital, either by way of shareholder loans and/or by guarantees in proportion to their respective share of registered capital of the JV Company at the time of the borrowing by the JV Company.

5.9

Any cost incurred by a Party in connection with the making of a capital contribution, loan, advance, guarantee or otherwise shall be paid by such a Party unless otherwise has been agreed in writing between the Parties.

5.10

No Party may sell, assign, transfer or otherwise dispose of all or part of its equity interest in the registered capital of the JV Company (each, an “Equity Interest”) to a Third Party without the prior written consent of the other Party.

5.10.1

Notwithstanding Article 5.10, Party B agrees that Party A shall have the right at any time to assign all or part of its Equity Interest to an Affiliate and Party A agrees that Party B shall have the right at any time to assign all of its Equity Interest to an Affiliate that is a US corporation and is 100% owned by Israel Corporation, a corporation duly organized and existing under the laws of Israel (“Party B’s Assignee”). Any assignment by Party A of its Equity Interest to its Affiliate and any assignment by Party B of its Equity Interest to Party B’s Assignee are hereinafter in each case referred to as (“Internal Assignment”). By entering into the Joint Venture Contract, the Parties shall be deemed to have provided their respective consents to any Internal Assignment and shall waive their respective preemptive rights to purchase the Equity Interest to be assigned. The Parties shall cause their respective directors appointed at the Board to vote in favor of such Internal Assignment and shall execute all documentation and take any other action required to carry out such Internal Assignment.

5.10.2

If required by relevant PRC laws and regulations, an assignment of Equity Interest under this Article 5.10 shall be submitted to the Examination and Approval Authority for approval. Upon receipt of such approval, the JV Company shall register the change in ownership with the competent Administration for Industry and Commerce.

5.11

No Party shall mortgage, pledge or otherwise encumber all or any part of its Equity Interest without the prior written consent of the other Party.

5.12

The Parties agree to provide, in proportion to their respective share of the registered capital of the JV Company at the time of borrowing by the JV Company, guarantees acceptable to a Third Party lender or lenders in order to ensure that the JV Company can borrow loans in an aggregate principal amount of up to four hundred million United States Dollars (US$ 400,000,000) in connection with the implementation of Phase One by the JV Company.

5.13

The Parties hereto agree, notwithstanding anything to the contrary contained in these Articles of Association, that nothing herein shall be construed as an obligation of any Party to provide additional contributions to the JV Company in excess of the contributions set forth in Article 5.2 hereof or financial support to the JV Company, including in the form of guarantees, other than guarantees required to be provided pursuant to Article 5.12 hereof, in each case without the prior consent of such Party.

6.1

The JV Company shall have a Board and the Company Establishment Date shall be considered as the date on which the Board is established.

6.2

The Board shall consist of five (5) directors, three (3) of whom shall be appointed by Party A and two (2) of whom shall be appointed by Party B.

6.3

Each director shall be appointed for a term of four (4) years; provided that, the Party which has appointed a director may remove that director and appoint a replacement at any time. A director may serve consecutive terms if reappointed by the Party that originally appointed him/her.

6.3.1

If a seat on the Board is vacated by the retirement, resignation, disability or death of a director or by the removal of such director by the Party which originally appointed him/her, the Party which originally appointed such director shall appoint a successor to serve out such director’s term.

6.3.2

At the time these Articles of Association is signed and each time a director is appointed or replaced, each Party shall notify the other Party in writing of the name of the appointee or replacement.

6.4

Party A shall designate a director to serve as the Chairperson of the Board. Party B shall designate a Vice Chairperson of the Board.

The Chairperson of the Board shall be the legal representative of the JV Company, and shall have the authority delegated to him/her by the Board. The Chairperson shall act in accordance with the provisions of the Joint Venture Contract, those in these Articles of Association, and the applicable PRC laws and regulations.

Whenever the Chairperson of the Board is unable to perform his/her responsibilities for any reason, he/she may designate the Vice Chairperson or another director to act as proxy for the Chairperson in his/her capacity as legal representative of the JV Company.

6.5

The JV Company shall indemnify each director against all claims and liabilities incurred by reason of his/her being a director of the JV Company, provided that the director’s acts or omissions giving rise to such claim or liability did not constitute intentional misconduct or gross negligence or a violation of criminal laws.

6.6

The first meeting of the Board shall be held in the PRC within thirty (30) days following the Company Establishment Date. Thereafter, the Board shall hold at least two (2) regular meetings in each calendar year. The Chairperson of the Board has the right to convene an interim meeting of the Board following notice to all directors in accordance with Article 6.8, and shall convene an interim meeting of the Board upon request of at least two (2) directors to convene such a meeting.

6.7

Board meetings shall be held at the registered address of the JV Company or such other place as may be agreed to by the Chairperson of the Board. Meetings may also be held by telephone or other electronic audio or video means such that everyone can hear each other at all times. Participation by a director or his/her proxy in a meeting held by such means shall constitute presence of such director or his proxy in person at a meeting.

6.8

A written notice of convocation of a Board meeting, that is in both English and Chinese and includes the time, place, date and agenda of the Board meeting, shall be distributed to all directors of the Board at least thirty (30) calendar days in advance of that meeting.

For that meeting, the Chairperson shall prepare a draft of the agenda, and shall distribute the written agenda to each director at least seven (7) calendar days prior to the meeting.

6.9

Four (4) directors present in person or by proxy shall constitute a quorum for all meetings of the Board of Directors, and no meeting shall be held and no resolution shall be adopted unless a quorum is present.

6.10

If, at any properly convened meeting, no quorum is constituted because less than four (4) directors are present in person or by proxy, then the Chairperson of the Board shall convene another meeting (the “Second-Convened Meeting”) as soon as practical (but not later than thirty (30) days thereafter) by giving seven (7) days’ notice to each director. In the event that there are directors who fail to attend that Second-Convened Meeting in person or by proxy, then those directors who are present at that meeting in person or by proxy shall be deemed to constitute a quorum.

6.11

If a director is unable to attend a Board meeting, he/she may issue a proxy in writing and entrust another director, the General Manager or the CFO as his/her representative to attend the meeting on his/her behalf. The representative so entrusted shall have the same rights and powers as the director who entrusted him/her. One representative who is a director may represent more than one other director by proxy. The Parties shall ensure that their appointed directors attend each Board meeting, either in person or by proxy. A director may also attend the meeting by telephone or video conference, provided that, he/she can hear and be heard by all other directors at the meeting.

6.12

When the General Manager is not a director, he/she may attend Board meetings only upon the request of the Board and in a non-voting capacity. If a matter concerning the appointment, dismissal, performance or remuneration of the General Manager who is also a director is to be discussed by the Board, then, at the request of any other director, the General Manager shall leave that Board meeting during which the discussion of such matter and any vote corresponding to it occurs.

6.13

The Board will cause complete and accurate minutes to be kept of all Board meetings in writing and in English and Chinese.

6.13.1

Unless otherwise required under applicable laws and regulations, minutes of all meetings of the Board shall be signed by the directors present at the relevant meeting, and then be distributed to all the directors as soon as practicable after each meeting but not later than thirty (30) days from the date of such meeting.

6.13.2

The JV Company shall maintain a file of all Board meeting minutes and make the same freely available to the Parties and their authorized representatives.

6.14

The Board shall decide all matters of major importance to the JV Company, including, but not limited to, the following matters:

(a)

amendment of the Articles of Association;

(b)

merger of the JV Company with another organization;

(c)

termination or dissolution of the JV Company or the suspension of its operations;

(d)

increase or assignment of the JV Company’s registered capital;

(e)

investment by the JV Company in other companies and establishment of branches;

(f)

addition or elimination of any JV Product;

(g)

profit distribution plans, plans for making up losses, and the amount of allocations to the Three Funds;

(h)

approval of the JV Company’s annual and long-term business plans;

(i)

appointment, dismissal, salary and other compensation benefits of the General Manager, Deputy General Manager and Chief Financial Officer;

(j)

employee salary and welfare system of the JV Company;

(k)

decisions on matters relating to the liquidation work in accordance with Article 14 of these Articles of Association and relevant laws and regulations; and

(l)

any other matters referred to the Board that, pursuant to relevant laws and regulations, requires a resolution by the Board.

6.15

The adoption of resolutions concerning the following matters shall require the unanimous assent of all the directors who are present, in person or by proxy, at a duly convened meeting of the Board:

(a)

amendment of the Articles of Association;

(b)

merger, acquisition of equity interests in another entity, consolidation of the JV Company with another organization, division of the JV Company;

(c)

termination or dissolution of the JV Company or the suspension of its operations;

(d)

increase, decrease or transfer of the JV Company’s registered capital;

(e)

execution or termination by the JV Company of any material partnership or joint venture contract whereby the agreed amount of equity investment by the JV Company is more than four million United States Dollars (US$4,000,000);

(f)

profit distribution plans, designation of the external annual auditors of the JV Company for annual auditing;

(g)

approval of annual budget, mid and long term business plans;

(h)

approval of the liquidation plan in accordance with Article 14.11 of these Articles of Association;

(i)

any change of any significant accounting principles and practices, subject to the applicable PRC laws and regulations;

(j)

enter into any contract or other arrangement with a Party, a member of the Board or an Affiliate or any other Third Party entering into an agreement with JV Company on behalf of any Party, whereby a single transaction or a series of related transactions within a twelve (12) months’ period exceeds a contract value of aggregate two million United States Dollars (US$ 2,000,000), unless such contract or other arrangement is entered into pursuant to an existing agreement or contract approved by the Board, an item expressly approved by the Board in an annual budget of the JV Company or any Board resolutions;

(k)

issue of any debenture or the creation of any mortgage, charge, lien, encumbrance or other Third Party security interest over any of the JV Company’s material fixed assets or sell, convey, transfer, lease or otherwise dispose of, or grant an option or other right to purchase, lease or otherwise acquire (whether in one transfer or a series of related transfers) all or a material part of the JV Company’s fixed assets or the giving by the JV Company of any guarantee or indemnity to or becoming surety for any Third Party, provided that in all cases a single transaction or a series of related transactions within a twelve (12) months’ period exceeds a transaction value of aggregate five million United States Dollars (US$ 5,000,000);

(l)

any borrowing in excess of five million United States Dollars (US$ 5,000,000);

(m)

a decision to initiate an IPO of the shares of the JV Company;

(n)

settle any litigation matter or claim which would adversely affect the JV Company to conduct business or where the amount under dispute exceeds seven million United States Dollars (US$ 7,000,000), save that where any action is to be taken against one or more Parties or their Affiliates or any other Third Party entering into an agreement with JV Company on behalf of any Party, the approval of those Parties shall not be required;

(o)

capital expenditures and investments exceeding the approved annual budget by more than ten percent (10%) or whereby a single transaction or a series of related transactions within a twelve (12) months’ period exceeds an investment value of aggregate four million United States Dollars (US$ 4,000,000), whichever is higher;

(p)

any other matters referred to the Board that, pursuant to relevant laws and regulations or the Joint Venture Contract or the Articles of Association requires an unanimous resolution by the Board.

The adoption of all other resolutions besides those mentioned in this Article 6.15 shall require the assent of a simple majority of the directors who are present, in person or by proxy, at a duly convened meeting of the Board.

6.16

The Board may, without convening a meeting, adopt any resolution, other than those requiring a unanimous vote, if at least three (3) of the directors then holding office consent in writing to such action. The Chairperson or any person authorized by the Chairperson pursuant to Article 6.4 shall send a written notice in both Chinese and English with the proposed agenda and the proposed resolutions to all directors at least twenty (20) calendar days in advance of the adoption of such resolutions. The directors shall inform the Chairperson or such person authorized by the Chairperson of his or her position on the proposed resolutions within fourteen (14) days of the aforementioned notice. Such written consent shall be filed with the minutes of the relevant Board proceedings and shall have the same force and effect as a majority vote of the directors present at a meeting of the Board. Such consent may be signed in counterparts which, taken together, shall constitute a single consent document. Those resolutions which require unanimous Board approval may be adopted without a meeting if all directors then holding office consent to such an action.

6.17

Directors shall serve without any remuneration, but all reasonable costs which are within the scope approved by the Board, including travel and accommodations, and which are incurred by the directors in the performance of their duties as directors shall be borne by the JV Company.

6.18

If for whatever reason the Board is unable to arrive at a decision on any matter, where the lack of the decision would materially and adversely affect the business operation of the JV Company and would cause serious harm to either of the Parties’ material interests under the Joint Venture Contract or any of the Ancillary Contracts, then, within sixty (60) days after the matter is first raised at a meeting of the Board, either Party shall be entitled to serve a notice (the “Conciliation Notice”) on the other Party requiring the Parties to attempt to promptly resolve the matter.

6.19

The Party who issues a Conciliation Notice shall describe in the Conciliation Notice the matter to be discussed, its position on the matter, and its evidence and arguments in support of its position. The other Party shall, within thirty (30) days of the date of the Conciliation Notice, give a written response to the Party who issued the Conciliation Notice.

6.20

Within sixty (60) days from the date of the Conciliation Notice, a meeting of the Board shall be scheduled in which the Board shall finally decide on the matter described in the Conciliation Notice. If, for whatever reason, the Board at its meeting is unable to arrive at a decision on this matter, an event of deadlock shall be deemed to exist and either Party shall be entitled to terminate the Joint Venture Contract pursuant to Article 14.1.

6.21

Notwithstanding any provisions of Article 6.20, in the event the Board at its meeting referred to in Article 6.20 is unable to arrive at a decision on any matters referred to in Article 6.15 (g), (h) and (o), then such matters shall be decided by a simple majority of the Directors who are present, in person or by proxy, at such meeting. If a matter shall be brought to the Board for a decision pursuant to the preceding sentence relating to any of the matters set forth therein at any time during the term of the JV Company, then upon the third occurrence of such event, an event of deadlock shall be deemed to exist and either Party shall be entitled to terminate the Joint Venture Contract pursuant to Article 14.1.

7.1

The JV Company shall have a Supervisory Committee which shall consist of three (3) supervisors (each, a “Supervisor”), with one convener (the “Convener”) elected by a majority of the Supervisors from among its members. When the Convener is unable to exercise his/her duties and powers, then a Supervisor who has been designated, in writing, by the Convener shall perform the Convener’s duties on the Convener’s behalf.

7.2

The Supervisory Committee shall exercise the following duties and powers:

(a)

to inspect the financial affairs of the JV Company;

(b)

to supervise the Board and Senior Management Employees in the performance of their duties, put forward proposals on the dismissal of any such person who violates laws or administrative regulations, these Articles of Association or any resolution of the Board;

(c)

to request that the Board members, the General Manager of the JV Company, and other Senior Management Employees redress conduct which is detrimental to the interests of the JV Company;

(d)

to institute legal proceedings against Directors or Senior Management Employees of the JV Company in accordance with Article 152 of the PRC Company Law; and

(e)

to exercise other duties and powers specified in the Company Law and these Articles of Association.

The Supervisors are entitled to attend Board meetings, but shall not have the right to cast a vote at those Board meetings.

7.3

The Supervisory Committee shall convene at least two (2) meetings each year. Written notice shall be sent by its Convener to each Supervisor at least fourteen (14) calendar days prior to the meeting.

7.4

The notice of meetings of the Supervisory Committee shall include the following contents: the date, place and time of the meeting, main contents and topics for discussion and the date of dispatch of the notice.

7.5

Supervisors shall be elected in accordance with the following rules:

(a)

Party A shall be entitled to appoint one (1) Supervisor, Party B shall be entitled to appoint one (1) Supervisor, and staff and workers of the JV Company shall appoint one (1) Supervisor through a democratic vote.

(b)

No member of the Board, General Manager of the JV Company, or Senior Management Employees may concurrently act as a Supervisor of the JV Company.

7.6

The term of office of a Supervisor shall be three (3) years. Supervisors may be re-elected to serve consecutive terms.

7.7

All of the Supervisors must be present at a duly convened meeting in order to constitute a valid quorum.

7.8

Decisions adopted at a meeting of the Supervisory Committee shall only be valid if adopted by the affirmative vote of more than fifty percent (50%) of the Supervisors present in person or by proxy at a duly convened meeting.

7.9

The Parties shall ensure that their appointed Supervisors attend each meeting of the Supervisory Committee, either in person or by proxy.

7.10

Meetings of the Supervisory Committee may be attended by the Supervisors in person, or by conference telephone or similar communication equipment where all persons participating in the meeting can hear and speak to each other or by proxy and such participation shall constitute presence in person. If a Supervisor is unable to attend for any reason, he/she may appoint another Supervisor or person by proxy to attend on his/her behalf.

7.11

The Supervisory Committee may adopt any resolution without a meeting if all the Supervisors then holding office consent unanimously in writing to such action.

7.12

Supervisors shall serve without any remuneration, but all reasonable costs which are within the scope approved by the Supervisory Committee, including travel and accommodations, and which are incurred by the supervisors in the performance of their duties as supervisors shall be borne by the JV Company.

7.13

The JV Company shall indemnify each of Supervisors against all claims and liabilities incurred by reason of that person being a Supervisor of the JV Company, provided that the acts or omissions of the giving rise to such claim or liability did not constitute intentional misconduct or gross negligence or a violation of criminal laws.

8.1

The JV Company’s management organization shall be under the leadership of a General Manager who shall report directly to the Board. In addition to the General Manager, the JV Company also shall have other Senior Management Employees as set forth in the Joint Venture Contract and these Articles of Association, or as determined by the Board. All Senior Management Employees shall be responsible to and shall report to the General Manager.

8.2

The Senior Management Employees shall be nominated and appointed as follows:

8.2.1

The General Manager shall be nominated by Party A. Such nomination shall be presented to the Board. The Board shall then approve the nomination by a simple majority vote of those directors on the Board who are present in person or by proxy at a duly convened Board meeting and the approval of the Board shall not be unreasonably withheld. Party A may propose at any time to dismiss the General Manager and the approval of the Board shall not be unreasonably withheld.

8.2.2

The chief financial officer (“CFO”) shall be nominated by Party B. Such nomination shall be presented to the Board. The Board shall then approve the nomination by a simple majority vote of those directors on the Board who are present in person or by proxy at a duly convened Board meeting and the approval of the Board shall not be unreasonably withheld. Party B may propose at any time to dismiss CFO and the approval of the Board shall not be unreasonably withheld.

8.2.3

The General Manager and CFO each shall serve for a term of four (4) years. Each of the General Manager and CFO may each serve successive terms, if re-nominated by the Party who initially nominated him or her.

8.2.4

The appointment and dismissal of the Deputy General Manager shall be determined by the General Manager and approved by the Board. The Deputy General Manager shall be in charge of one of the functional departments of the JV Company. Subject to Articles 8.2.1 and 8.2.2, other Senior Management Employees shall be nominated, appointed, or dismissed directly by the General Manager.

8.3

All replacements for the General Manager, CFO, and other Senior Management Employees, whether by reason of retirement, resignation, disability or death or by removal for any reason by the General Manager or the Party which nominated or appointed him/her in accordance with Article 8.2, shall be nominated and appointed in the same manner as the original appointee in accordance with Article 8.2.

The General Manager, Deputy General Manager and CFO may be dismissed by the Board at any time, for intentional misconduct or gross negligence or for graft or serious dereliction of duties or other due causes as required by PRC law.

8.4

The General Manager shall be in charge of the day-to-day operation and management of the JV Company and shall carry out all matters entrusted to him/her by the Board. All other Senior Management Employees shall assist the General Manager in his/her work and shall carry out the functions delegated to him/her by specific written authorization of the General Manager.

The General Manager shall obtain the consent of CFO (such consent shall not be unreasonably withheld) before he can commit the JV Company to spend more than two million United States Dollars (US$ 2,000,000) in any transaction or series of related transactions within twelve consecutive months, unless such expenditure is approved by the Board in its annual budget. Any transaction or series of related transactions within twelve consecutive months in excess of five hundred thousand United States Dollars (US$ 500,000) between a Party or its Affiliates and the JV Company must be approved by both the General Manager and CFO.

8.5

The General Manager has the right and the responsibility to take actions and make decisions, in accordance with the Joint Venture Contract and these Articles of Association, that are within the scope of operations set out in the annual business plan approved by the Board, or are within such additional scope of authority as the Board may delegate to the General Manager.

8.6

Unless otherwise approved by the Board, the General Manager and all other Senior Management Employees shall perform their duties on a full-time basis and, except for positions which they hold with a Party or its Affiliate, shall not concurrently serve as a manager, an employee or a consultant of any other company or enterprise, nor shall they serve as a director of, or hold any interest in, any company or enterprise that competes with the JV Company.

8.7

The General Manager and CFO shall provide the Board with at least sixty (60) days’ written notice prior to resigning from their respective duties.

8.8

The JV Company shall indemnify the Senior Management Employees against all claims and liabilities incurred by reason of that person being a Senior Management Employee of the JV Company, provided that the acts or omissions of the Senior Management Employee giving rise to such claim or liability did not constitute intentional misconduct or gross negligence or a violation of criminal laws.

9.1

Matters relating to the recruitment, employment, dismissal, resignation, wages and welfare of the Senior Management Employees and the Working Employees of the JV Company shall be handled in accordance with the Labor Law of the People’s Republic of China and related PRC national and local government regulations (hereinafter collectively referred to as the “Labor Laws”). The JV Company’s internal labor policies and the major rules and regulations shall be approved by the Board, and the JV Company’s detailed rules and regulations shall be determined by the General Manager and CFO provided that such internal policies and rules and regulations shall not conflict with the Labor Laws.

9.2

All employees shall be employed by the JV Company in accordance with the terms of labor contracts entered into between the JV Company and individual employees. Such labor contracts shall provide, among other terms, such appropriate restrictive covenants as may be determined necessary by the General Manager concerning competition and confidentiality. Every employee shall also sign a separate confidentiality agreement with the JV Company.

9.3

Employees will be selected according to their professional qualifications, individual characteristics and working experience. The specific number and qualifications of the Working Employees shall be determined by the General Manager, in accordance with the operating needs of the JV Company.

9.4

Each employee may be examined and interviewed by the General Manager (or his/her designated representative) prior to commencement of employment by the JV Company. The General Manager shall have the right to decide, on behalf of the JV Company, whether to employ any person, except for those employees whose appointment and dismissal shall be approved by the Board, in accordance with these Articles of Association.

9.5

All employees hired by the JV Company (other than employees seconded or transferred from Party A) must complete satisfactorily an appropriate probationary period of employment before they will be considered regular employees of the JV Company. The General Manager may discharge any employee during the probationary period if he/she determines that such employee is not suitable to the requirements of the JV Company.

9.6

The JV Company shall conform to rules and regulations of the PRC government concerning labor protection and ensure safe and civilized production. Labor insurance for the Working Employees of the JV Company shall be handled in accordance with the Labor Laws.

9.7

Employees shall have the right to establish a labor union in accordance with the Trade Union Law and other labor laws that are applicable to Sino-foreign equity joint ventures. The labor union shall have one chairperson. In accordance with the Trade Union Law, the JV Company shall allot each month two percent (2%) of the total amount of the real wages received by the JV Company employees for payment into a labor union fund, such payment to be a pre-tax expense of the JV Company. The labor union may use these funds in accordance with the relevant control measures for labor union funds formulated by the All China Federation of Trade Unions.

10.1

The JV Company shall have a CFO. The CFO, under the leadership of the General Manager, shall be responsible for the financial management of the JV Company.

10.2

The General Manager and the CFO shall prepare the JV Company’s accounting system and procedures in accordance with the Enterprise Accounting System in the PRC and other relevant PRC laws and regulations, and shall submit the same to the Board for adoption. Once adopted by the Board, the accounting system and financial accounting procedures shall be filed with the department in charge of the JV Company and with the relevant local department of finance and the tax authorities for the record.

10.3

The JV Company shall adopt Renminbi as its bookkeeping base currency, but may also adopt United States Dollars or other foreign currencies as supplementary bookkeeping currencies.

10.4

All accounting records, vouchers, books and statements of the JV Company must be made and kept in Chinese. Upon reasonable request, the JV Company shall provide each Party with full access to its accounting records, vouchers, books and statements during normal business hours.

10.5

For the purpose of preparing the JV Company’s accounts and statements, calculation of profits to be distributed to the Parties, and for any other purposes where it may be necessary to effect a currency conversion, such conversion shall be made using the median rate for buying and selling for such currency announced by the People’s Bank of China on the date of actual receipt or payment by the JV Company.

10.6

An accountant independent of any Party, who is registered in PRC, shall be engaged by the Board as its auditor to examine and verify the JV Company’s annual financial statements and reports. The JV Company shall submit to the Parties an annual statement of final accounts in both Chinese and English not later than sixty five (65) calendar days after the end of the fiscal year in a form consistent with PRC laws and regulations. Upon request of Party B, the JV Company will prepare and submit to Party B quarterly statements within thirty (30) calendar days in a form consistent with PRC laws and regulations. The JV Company shall prepare and submit to the Parties financial statements in accordance with International Accounting Standards subject to an agreement between the Parties as to whether Party B or the JV Company shall bear the cost and expense to be incurred by the JV Company in connection therewith.

10.7

The JV Company shall separately open foreign exchange accounts and Renminbi accounts at banks within the PRC that have been approved and duly certified by the relevant PRC government authorities. Following approval by the State Administration of Foreign Exchange, the JV Company may also open foreign exchange bank accounts outside of the PRC. The JV Company shall apply for and maintain a Foreign Exchange Registration Certificate in accordance with applicable legal requirements. The JV Company’s foreign exchange transactions shall be handled in accordance with PRC laws and regulations concerning foreign exchange control.

10.8

The JV Company shall be responsible for maintaining a balance in its foreign exchange receipts and expenditures, primarily through the export of JV Products. However, in order to maintain such balance, the JV Company may also purchase foreign exchange from banks in accordance with the relevant laws of the PRC and adopt other methods permitted under the laws of the PRC. All costs incurred in converting Renminbi to foreign exchange in connection with the operating expenses of the JV Company shall be treated as operating expenses of the JV Company.

10.9

The JV Company shall adopt the calendar year as its fiscal year. The JV Company’s first fiscal year shall commence on the Company Establishment Date and shall end on the immediately succeeding December 31.

10.10

After payment of income taxes by the JV Company in accordance with relevant laws of China, the Board will determine the annual allocations to the Three Funds from the after-tax net profits.

10.11

The distribution of after-tax profits to the Parties shall be handled in accordance with those laws of the PRC that apply to financial administration of foreign-invested enterprises, and shall be carried out as follows:

10.11.1

The Board shall, once every year and by a formally adopted resolution, decide on the amount of after-tax profit of the JV Company (after allocations to the Three Funds) to be retained in the JV Company for expanding its production and operations and the amount to be distributed to the Parties in proportion to their respective actual shares of the JV Company’s registered capital at the time of the Board resolution.

10.11.2

If the JV Company carries losses from the previous years, the profit of the current year shall first be used to cover those losses. No profit shall be distributed unless the deficit from the previous years is made up. The profit retained by the JV Company and carried over from the previous years may be distributed together with the distributable profit of the current year, or after the deficit of the current year is made up therefrom.

10.11.3

The profits available for distribution shall be calculated in Renminbi. After the JV Company has made payments in respect of its foreign exchange obligations, Party B shall be entitled to receive its share of profits in foreign exchange, with translation from Renminbi to United States Dollars for calculation purposes made at the median rate for buying and selling published by the People’s Bank of China on the date on which remittance to Party B is made. All costs incurred in converting Renminbi to foreign currency in connection with the distribution of profits to Party B, including the remittance thereof, shall be borne by Party B.

11.1

The JV Company shall pay all taxes and duties required under the national and local laws and regulations of the PRC. The JV Company’s PRC and expatriate personnel shall pay individual income tax in accordance with the Individual Income Tax Law of the People’s Republic of China.

11.2

The JV Company will submit an application for confirmation of the JV Company as a “Technologically Advanced Enterprise” pursuant to relevant regulations and, upon receipt of such confirmation, shall register with the local tax authorities for the preferential tax treatment granted to Technologically Advanced Enterprises. The JV Company will apply for other preferential tax treatment which may be available to the JV Company from time to time under the applicable PRC laws and regulations.

11.3

The JV Company, at its own expense, shall take out and maintain at all times during the Contract Term adequate insurance for the JV Company against loss or damage by fire, natural disasters, and such other risks as are customarily insured against in the industry during the construction of a manufacturing plant and operation of a manufacturing company. The JV Company shall also obtain and pay for all types of insurance required by laws and regulations of the PRC.

11.3.1

The property, transport and other types of insurance of the JV Company will be denominated in RMB, as appropriate.

11.3.2

The JV Company shall take out the appropriate amount of product liability and personal injury insurance in order to indemnify and protect the JV Company from Third Party product liability and personal injury claims.

11.4

The JV Company shall take out the required insurance from an insurance company or organization that is authorized by the relevant PRC authorities.

12.1

Prior to and during the Contract Term, each Party has disclosed or may disclose to the other Party confidential and proprietary information and materials concerning their respective businesses, financial condition, proprietary technology, research and development, and other confidential matters. Furthermore, during the Contract Term, the Parties may obtain such confidential and proprietary information concerning the JV Company and the JV Company may obtain such confidential and proprietary information of the Parties. Except as otherwise provided in the Ancillary Contracts, each of the Parties and the JV Company receiving such information as aforesaid (hereinafter referred to as “Confidential Information”) shall, for the Contract Term and a period of ten (10) years thereafter:

(1)

maintain the confidentiality of such Confidential Information; and

(2)

not disclose it to any person or entity, except to their respective employees and advisors who need to know such Confidential Information to perform their work responsibilities for the establishment and operation of the JV Company.

12.2

The provisions of Article 12.1 above shall not apply to Confidential Information that:

(1)

can be proved to have been known by the receiving party by written records made prior to disclosure by the disclosing party;

(2)

is or becomes public knowledge otherwise than through the receiving party’s breach of the Joint Venture Contract;

(3)

was obtained by the receiving party from a Third Party having no obligation of confidentiality with respect to such Confidential Information; or

(4)

is required pursuant to any applicable securities law or regulation or by order of any competent court or governmental authority or any stock exchange to be disclosed.

12.3

Each Party shall advise its officers, directors, senior staff, and other employees receiving such Confidential Information of the existence of and the importance of complying with the obligations set forth in Article 12.1.

12.4

If required by any Party, the JV Company shall execute a separate confidentiality agreement with provisions consistent with those set out above with respect to Confidential Information obtained by the JV Company from such Party or its Affiliates.

12.5

Each of the Parties and the JV Company shall formulate rules and regulations to cause its directors, senior staff, and other employees, and those of their Affiliates, also to comply with the confidentiality obligations set forth in this Article 12. All officers, Board members, managers and other employees of the JV Company shall be required to sign a confidentiality undertaking, in a form acceptable to all Parties.

12.6

The provisions of this Article 12 shall not prejudice any rights or obligations that any Party or the JV Company might have under the provisions of applicable laws and regulations of the PRC.

12.7

This Article 12 shall remain binding on any natural or legal person who ceases to be a Party to the Joint Venture Contract through assignment of registered capital and of the corresponding contractual rights and obligations. In addition, the obligations and rights under this Article 12 shall survive the expiration or early termination of the Joint Venture Contract and shall remain in effect for the periods stated in this Article 12, notwithstanding the dissolution or liquidation of the JV Company.

13.1

Unless earlier terminated pursuant to the terms of Article 14 hereof, the Contract Term shall commence upon the Effective Date and shall extend for a period of twenty-five (25) years from the Company Establishment Date.

13.2

If both Parties agree in writing to continue the JV Company, no less than six (6) months prior to the expiration of the Contract Term, each Party shall cause its directors on the Board to vote in favor of a resolution to submit an application to the Examination and Approval Authority to extend the Contract Term for a term permitted by the PRC laws and regulations in effect at the time such application is submitted. The Contract Term shall be extended upon approval of the Examination and Approval Authority.

14.1

Any Party shall have the right to terminate the Joint Venture Contract prior to the expiration of the Contract Term or any extension thereof, by written notice to the other Party, if any of the following events occur:

(a)

the circumstances described in Articles 5.4;

(b)

the circumstances described in Article 5.6;

(c)

the circumstances described in Article 6.20;

(d)

The other Party materially breaches the Joint Venture Contract or materially violates the Articles of Association, and such breach or violation is not cured within sixty (60) days of written notice to the breaching/violating Party; provided, however, that if the material breach or material violation cannot reasonably be cured within sixty (60) days or such longer term as the Parties may agree, but the breaching or violating Party commences to cure the breach or violation within the 60-day period and diligently continues to cure the breach or violation, the non-breaching or non-violating Party shall not have the right to terminate the Joint Venture Contract, unless the breaching or violating Party has not cured the breach or violation within six (6) months after that sixty (60) days period or such longer term the Parties had agreed upon;

(e)

the JV Company or the other Party becomes bankrupt, or is the subject of proceedings for liquidation or dissolution, or ceases to carry on business, or becomes unable to pay its debts as they come due;

(f)

the other Party transfers or mortgages, pledges or otherwise encumbers all or any part of its equity interest in the JV Company in violation of the provisions of the Joint Venture Contract;

(g)

any government authority having authority over any Party requires any provision of the Joint Venture Contract, the License Contract, the Business License or these Articles of Association to be revised in such a way as to cause significant adverse consequences to the JV Company or any of the Parties. In such case, neither Party may sue the other Party for breaching of its obligation under Article 5.3;

(h)

the assets of the JV Company, in whole or in substantial part, are nationalized or confiscated;

(i)

the conditions or consequences of an Excusing Event (as defined in Article 20 of the Joint Venture Contract) prevail with the result of a major impairment to the functioning of the JV Company for a period in excess of six (6) months, and the Parties have been unable to find an equitable solution pursuant to Article 20 of the Joint Venture Contract;

(j)

any Ancillary Contract is terminated other than the breaching Party; or

(k)

any other termination event, as specified in PRC laws and regulations, occurs.

14.2

In the event that any Party gives notice to terminate the Joint Venture Contract pursuant to Article 14.1(b), Party A or a third party designated by Party A shall purchase from Party B and Party B shall assign to Party A or such a third party whatever interest Party B may have under this Contract and in the JV Company for a price of US$ 10. Within 10 days of the date of the notice of termination, the Parties shall sign a contract for assignment of Party B’s interest mentioned in the immediately preceding sentence and shall cause the directors appointed by them to approve the contract for assignment. The form and substance of the contract for assignment shall be substantially similar to those of the one attached hereto as Appendix 4 of the Joint Venture Contract. The Parties shall further submit the contract for assignment and other related documents to the Examination and Approval Authority for approval.

14.3

If any Party gives notice to terminate the Joint Venture Contract pursuant to Articles 14.1 (other than Article 14.1(b)), then the Parties shall endeavor to resolve the problem through negotiation and agreement. If, within sixty (60) days of a Party’s receipt of such termination notice, the Parties have not agreed in writing to continue the Joint Venture Contract, then Party A shall have the right to purchase all of Party B’s interest in the registered capital of the JV Company (a “Buyout”) subject to the terms and conditions of Articles 14.5 and 14.6. Without limitation to the foregoing, the Buyout right of Party A set forth above shall not apply in the event of a breach by Party A (or any of its Affiliates) under Articles 14.1(a), (d), (f) or (j);

14.4

If Party B gives notice to terminate the Joint Venture Contract pursuant to Articles 14.1(a), (d), (f) or (j), then the Parties shall endeavor to resolve the problem through negotiation and agreement. If, within sixty (60) days of Party A’s receipt of such termination notice, the Parties have not agreed in writing to continue the Joint Venture Contract, then Party B shall have the right to sell all of Party B’s interest in the registered capital of the JV Company and Party A shall have the obligation to buy Party B’s interest in the registered capital of the JV Company subject to the terms and conditions of Articles 14.5 and 14.6.

14.5

Within 30 days following the sixty (60) day period referred to in Article 14.3, Party A may serve a notice on Party B, in which Party A exercises its right to buy out Party B’s interest in the JV Company in accordance with Article 14.3 (“Party A Notice”). Within 30 days following the sixty (60) day period referred to in Article 14.4 , Party B may serve a notice on Party A, in which Party B requests Party A to buy out Party B’s interest in the JV Company in accordance with Article 14.4 (“Party B Notice”). Upon receipt of the Party A Notice or the Party B Notice, as the case may be, the Parties shall promptly negotiate the price at which Party A may purchase Party B’s interest in the JV Company (“Buyout Price”).

14.6

If the Parties fail to agree on the Buyout Price within thirty (30) days from the date of the Party A Notice or the Party B Notice, as the case may be, the Parties shall, unless otherwise agreed, jointly conduct a valuation for the purpose of determining the Buyout Price. For such valuation, each Party shall nominate an independent and competent appraiser within forty-five (45) days from the date of the Party A Notice or the Party B Notice, as the case may be. Within seventy-five (75) days from the Date of the Party A Notice or the Party B Notice, as the case may be, the appraisers shall make their determination of the Buyout Price in a written report setting forth detailed reasons for such determination.

14.7

After the Buyout Price has been determined pursuant to Article 14.5 or Article 14.6, the Parties shall enter into an agreement for transfer of interest in the registered capital of the JV Company, and each Party shall cause the directors appointed by such Party to approve the agreement.

14.8

If Party A does not exercise its Buyout right within thirty (30) days following the sixty (60)-day period provided for in Article 14.5, or Party B does not request Party A to purchase Party B’s interest in the JV Company in accordance with Article 14.5, or the two (2) valuations differ by more than ten percent (10%) of the higher one, then each Party and the directors on the Board appointed by each Party shall be deemed to have agreed both to terminate the Joint Venture Contract and to dissolve the JV Company. An application for termination and dissolution of the JV Company shall be submitted to the Examination and Approval Authority.

14.9

Following an application to dissolve the JV Company pursuant to Article 14.8, the Board shall forthwith appoint a liquidation committee that shall have the power to represent the JV Company in all legal matters. The liquidation committee shall value and liquidate the JV Company’s assets in accordance with the applicable PRC laws and regulations and the principles set forth herein.

14.10

The liquidation committee shall be made up of three (3) members: Party A shall appoint two (2) members and Party B shall appoint one (1) member. Members of the liquidation committee may, but need not be, directors or senior employees of the JV Company. The liquidation committee may engage a lawyer and an accountant registered in the PRC to assist the liquidation committee. When permitted by PRC law, any Party may also appoint professional advisors to assist the liquidation committee. The Board shall report the formation of the liquidation committee to the relevant PRC government department in charge of the JV Company.

14.11

The liquidation committee shall conduct a thorough examination of the JV Company’s assets and liabilities, on the basis of which it shall develop a liquidation plan. If approved by the Board of Directors, such liquidation plan shall be executed under the liquidation committee’s supervision.

14.12

During the liquidation procedures, Party A shall have the option to purchase the assets of the JV Company which are used specifically for the production and /or testing of the JV Products at their original book value, and fully depreciated.

14.13

Subject to applicable PRC laws and regulations, the liquidation expenses, including remuneration to members and the lawyers and accountants assisting the liquidation committee, shall be paid out of the JV Company’s assets in priority to the claims of other creditors.

14.14

After the liquidation and division of the JV Company’s assets and the settlement of all of its outstanding debts, the balance shall be paid over to the Parties in proportion to their respective holdings in the equity interest of the registered capital of the JV Company at the time of liquidation. Party B shall have a priority to receive its share of the balance in foreign exchange.

14.15

On completion of all liquidation work, the liquidation committee shall provide to the Examination and Approval Authority a liquidation completion report which has been approved by the Board, shall hand in the JV Company’s Business License to the original registration authority, and shall complete all other formalities for nullifying the JV Company’s registration in the PRC and other jurisdictions, where applicable. Party B shall have a right to obtain, at its own expense, copies of all of the JV Company’s accounting books and other documents; but the originals of such books and documents shall be left in the care of Party A.

14.16

The obligations and benefits set forth in the liquidation provisions in this Article 14 shall survive termination or expiration of the Joint Venture Contract.

15.1

In the event a dispute between the Parties arising out of or in relation to these Articles of Association, the Parties shall in the first instance each designate one or more representatives who shall promptly meet to attempt to resolve such dispute through friendly consultations.

15.2

If the dispute is not resolved through consultations within sixty (60) days after one Party has served a written notice on the other Party requesting the commencement of consultations, then the Parties shall refer and submit the dispute for final resolution by arbitration to the Hong Kong International Arbitration Center (HKIAC) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (“UNCITRAL Arbitration Rules”) as at present in force save as the same may be amended by this Article 15 and the UNCITRAL Arbitration Rules shall be construed accordingly.

15.2.1

The place of arbitration shall be Hong Kong.

15.2.2

The arbitration shall be settled by three (3) arbitrators. Each Party shall appoint one arbitrator within the time stipulated in the UNCITRAL Arbitration Rules, failing which the appointment shall be made by HKIAC. The third arbitrator, who will act as the presiding arbitrator, shall be appointed by the HKIAC. The appointing authority shall be the HKIAC.

15.2.3

The language of the arbitration proceedings shall be English, provided that either Party may introduce evidence or testimony in languages other than English. The arbitrators may refer to both the English and Chinese texts of these Articles of Association.

15.2.4

The arbitral tribunal shall have the authority and power to make such orders for interim relief, including injunctive relief, as it may deem just and equitable. A request for interim measures or equitable remedies, including injunctive relief, by a Party to a court shall not be deemed to be or construed as incompatible with, or a waiver of, this agreement to arbitrate.

15.2.5

The arbitration shall be kept confidential and the existence of the proceeding and any element of it (including but not limited to any pleadings, submissions or other documents submitted or exchanged, any evidence and any awards) shall

not without prior consent by all Parties be disclosed beyond the Parties to the arbitration and their representatives, the arbitral tribunal, the administering institution (if any) and any person necessary to the conduct of the proceeding, except as may be lawfully required whether in judicial proceedings or otherwise in the normal course of business of the Parties.

15.2.6

The award of the arbitration tribunal will be final and binding on each of the Parties and may be enforced, if necessary, in any court of competent jurisdiction.

15.2.7

The Parties will use their best efforts to effect the prompt execution of any such awards and will render whatever assistance as may be necessary to this end, including, if necessary, compliance with the enforcement procedures stipulated in the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Arrangements Concerning Mutual Enforcement of Arbitration Awards between the Mainland and the Hong Kong Special Administrative Region.

15.3

The costs of arbitration including attorneys’ fees shall be borne by the losing Party unless otherwise decided in the arbitral award.

15.4

When any dispute occurs and when any dispute is under arbitration, except for the matters under dispute, the Parties shall continue to exercise their other respective rights and fulfill their other respective obligations under these Articles of Association.

15.5

In any arbitration proceeding or legal proceeding to enforce an arbitral award, in any other legal action between the Parties relating to these Articles of Association, each Party waives the defense of sovereign immunity and any other defense solely based upon the fact or allegation that it is a political subdivision, agency or instrumentality of a sovereign state.

17.1

These Articles of Association are made for the benefit of Party A, Party B and their respective lawful successors and assignees, and are legally binding on them: These Articles of Association may not be amended orally, and any amendment hereto must be agreed to in a written instrument signed by all of the Parties and, if required by PRC laws and regulations, approved by the Examination and Approval Authority before taking effect.

17.2

The invalidity of any provision of these Articles of Association shall not affect the validity of any other provision of these Articles of Association. If a provision in these Articles of Association is determined as invalid under applicable PRC laws and regulations, the Parties shall discuss and agree whether a replacement for or revision of such provision should be made.

17.3

These Articles of Association is signed in the Chinese language in ten (10) originals and in the English language in ten (10) originals. Both the Chinese and English versions of these Articles of Association shall be equally valid.

17.4

Any notice or written communication provided for in this Articles of Association from one Party to the other Party or to the JV Company shall be made in writing in Chinese and English and sent by courier service delivered letter or by facsimile with a confirmation copy sent by courier service delivered letter. The date of receipt of a notice or communication hereunder shall be deemed to be seven (7) business days after the letter is given to the courier service or one (1) business day after sending in the case of a facsimile, provided that the delivery or sending is evidenced by a confirmation of receipt as well as confirmation that the communication letter was sent. All notices and communications shall be sent to the appropriate address set forth below, until such address is changed by notice given in writing to the other Party.

1.1

All terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Articles of Association.

1.2

“Examination and Approval Authority” means the original examination and approval authority of the JV Company, i.e. MOFCOM.

1.3

“Registration Authority” means the registration authority of the JV Company, which is the Anhui Province Administration for Industry and Commerce.

2.1

Article 5.1 of the Articles of Association originally reads:

“5.1

The JV Company’s total amount of investment shall be One Thousand and Five Hundred Million United States Dollars (US$ 1,500,000,000), and its registered capital shall be Five Hundred Million United States Dollars (US$500,000,000).”

It shall now be revised to read:

“5.1

The JV Company’s total amount of investment shall be Seven Thousand and Three Hundred Sixty-four Million and Four Hundred Thirty Thousand RMB (RMB 7,364,430,000), and its registered capital shall be Three Thousand and Eight Hundred Seventy-five Million RMB (RMB 3,875,000,000).”

2.2

Article 5.2.1 of the Articles of Association originally reads:

“5.2.1

Party A’s contribution to the registered capital of the JV Company shall be the equivalent of Two Hundred and Seventy Five Million United States Dollars (US$275,000,000), representing fifty five percent (55%) of the equity interest in the JV Company’s registered capital. Party A shall provide the following as its contribution to the JV Company’s registered capital:”

It shall now be revised to read:

“5.2.1

Party A’s contribution to the registered capital of the JV Company shall be Two Thousand and One Hundred Thirty-one Million and Two Hundred Fifty Thousand RMB (RMB 2,131,250,000), representing fifty-five percent (55%) of the equity interest in the JV Company’s registered capital. Party A shall provide the following as its contribution to the JV Company’s registered capital:”

2.3

Article 5.2.1(A) of the Articles of Association originally reads:

It shall now be revised to read:

2.4

Article 5.2.2 of the Articles of Association originally reads:

“5.2.2

Party B’s contribution to the registered capital of the JV Company shall be Two Hundred and twenty five Million United States Dollars (US$225,000,000), representing forty five percent (45%) of the equity interest in the JV Company’s registered capital. Party B shall make such contribution, in cash, in United States Dollars.”

It shall now be revised to read:

“5.2.2

Party B’s contribution to the registered capital of the JV Company shall be One Thousand and Seven Hundred Forty-three Million and Seven Hundred Fifty Thousand RMB (RMB 1,743,750,000), representing forty-five percent (45%) of the equity interest in the JV Company’s registered capital. Party B shall make such contribution, in cash, in United States Dollars or Euro. The equivalent United States Dollars or Euro amount shall be calculated based on the median rate of Renminbi to United States Dollars or Euro, as appropriate, published by the People’s Bank of China on the date when the JV Company receives in its capital account each instalment of the capital contribution made by Party B. Party B has already contributed Two Hundred Million United States Dollars (US$ 200,000,000) in cash which was received by the JV Company in its capital account on December 29, 2007, equivalent to One Thousand and Four Hundred Sixty Million and Nine Hundred Twenty Thousand RMB (RMB 1,460,920,000).”

2.5

Article 5.3.2 of the Articles of Association originally reads:

“5.3.2

Each Party shall contribute the balance of its capital contribution to the JV Company within ten (10) calendar days upon the fulfilment of the condition precedent stipulated in Article 5.6.2.”

It shall now be revised to read:

“5.3.2

Each Party shall contribute the balance of its capital contribution to the JV Company within sixty (60) calendar days upon the fulfilment of the condition precedent stipulated in Article 5.6.”

2.6

Article 5.6 of the Articles of Association originally reads:

“5.6

No Party shall be obligated to make any contribution to the JV Company’s registered capital if any of the following conditions has been neither satisfied nor waived, in writing, by both Parties:

5.6.1

the Business License has been issued; and

5.6.2

the Ancillary Contracts have been duly executed by the parties thereto and become effective.

The Parties agree that if any of the above conditions precedent has not been satisfied- or waived by each Party within three (3) months from the Company Establishment Date, or within any extended period of time as the Parties may agree in writing, then either Party shall have the right to terminate the Joint Venture Contract and the Articles of Association by written notice to the other Party, and neither Party shall have any right whatsoever to require any other Party to make any contribution to the registered capital of the JV Company or to require any other performance of the Joint Venture Contract or to claim any damages from the other Party.

Any capital contribution actually made to the JV Company prior to the date on which the Joint Venture Contract is terminated pursuant to this Article 5.6 shall be returned forthwith to the Party which made such contribution to the greatest extent possible. Following approval of termination of the Joint Venture Contract by the Examination and Approval Authority, the Business License shall be returned for cancellation forthwith.”

It shall now be revised to read:

“5.6

“No Party shall be obligated to make any further contribution to the JV Company’s registered capital beyond the contributions already made prior to the signing of the Contract Amendment No. 1 and this Articles of Association Amendment No. 1 if any of the following conditions has been neither satisfied nor waived, in writing, by both Parties:

5.6.1

The Contract Amendment No.1 and this Articles of Association Amendment No 1. have been approved by the Examination and Approval Authority;

5.6.2

The Contract Amendment No.1, and this Articles of Association Amendment No 1. have been filed with the Registration Authority; and

5.6.3

the Land Use Rights Transfer Contract, the Supply Contract and the License Contract have been duly executed by the Parties thereto and become effective.

Any capital contribution actually made to the JV Company prior to the date on which the Joint Venture Contract and the Articles of Association are terminated pursuant to this Article 5.6 shall be returned forthwith to the Party which made such contribution to the greatest extent possible. Following approval of termination of the Joint Venture Contract and the Articles of Association by the Examination and Approval Authority, the Business License shall be returned for cancellation forthwith.”

3.1

This Articles of Association Amendment No. 1 shall become effective on the date on which the Examination and Approval Authority has approved the amendments set out in Article 2 hereof without any variations which are not acceptable to any of the Parties.

4.1

All other terms of the Articles of Association not amended by the provisions of this Articles of Association Amendment No. 1 shall remain the same and shall remain effective and binding on the Parties thereto.

4.2

No amendment or modification of this Articles of Association Amendment No. 1 shall be effective unless made in writing and signed by the Parties and approved by the Examination and Approval Authority.

4.3

This Articles of Association Amendment No. 1 is signed in Chinese and English, with ten (10) originals in each language. Both language versions shall be equally valid.

4.4

This Articles of Association Amendment No. 1 is an integral part of the Articles of Association, and shall be equally valid with the Articles of Association. In the event of any conflict or discrepancy between the provisions of the Articles of Association and the provisions of this Articles of Association Amendment No. 1, the provisions of this Articles of Association Amendment No. 1 shall take precedence over the provisions of the Articles of Association.

1.1

All terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Articles of Association.

1.2

“Examination and Approval Authority” means the original examination and approval authority of the JV Company, i.e. MOFCOM.

1.3

“Registration Authority” means the registration authority of the JV Company, which is the Anhui Province Administration for Industry and Commerce.

2.1

Article 5.2.1(A) of the Articles of Association shall be revised to read as follows:

2.2

Article 5.2.1(B) of the Articles of Association shall be revised to read as follows:

2.3

Article 5.2.1(C) of the Articles of Association shall be deleted.

2.4

Article 5.3.2 of the Articles of Association shall be revised to read as follows:

2.5

Article 5.6 of the Articles of Association shall be revised to read as follows:

2.6

Article 14.2 of the Articles of Association shall be revised as follows:

2.7

Article 14.3 of the Articles of Association shall be revised as follows:

4.1

All other terms of the Articles of Association not amended by the provisions of this Articles of Association Amendment No. 2 shall remain the same and shall remain effective and binding on the Parties thereto.

4.2

No amendment or modification of this Articles of Association Amendment No. 2 shall be effective unless made in writing and signed by the Parties and approved by the Examination and Approval Authority.

4.3

This Articles of Association Amendment No. 2 is signed in Chinese and English, with ten (10) originals in each language. Both language versions shall be equally valid.

4.4

This Articles of Association Amendment No. 2 is an integral part of the Articles of Association, and shall be equally valid with the Articles of Association. In the event of any conflict or discrepancy between the provisions of the Articles of Association and/or the Articles of Association Amendment No. 1 agreed by the Parties on July 17, 2008 on the one side and the provisions of this Articles of Association Amendment No. 2 on the other side, the provisions of this Articles of Association Amendment No. 2 shall take precedence over the provisions of the Articles of Association and the Articles of Association Amendment No. 1 agreed by the Parties on July 17, 2008.

1.1

All terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Articles of Association.

1.2

“Registration Authority” means the registration authority of the JV Company, which is the Anhui Province Administration for Industry and Commerce.

2.1

Article 5.1 of the Articles of Association shall be revised to read as follows:

2.2

Article 5.2.1 of the Articles of Association shall be revised to read as follows:

(A)

an amount of RMB cash equal to the difference between One Thousand and Four Hundred Sixty Million and Nine Hundred Twenty Thousand RMB (RMB 1,460,920,000), on the one hand, and, on the other hand, the value of the land use rights referred to in Section B below. Party A has already contributed Two Hundred Forty-eight Million and Three Hundred Sixty Thousand RMB (RMB

(B)

those land use rights for the Site as further detailed and set forth in the Appendix 3 to the Contract, which have a total value appraised by an evaluation institute recognized by the PRC government, and confirmed by the relevant PRC state assets administration authorities of Two Hundred and Fifty-eight Million Three Hundred and Ninety-two Thousand Nine Hundred and Sixty-six RMB (RMB 258,392,966) and have been contributed to the JV Company already.”

2.3

Article 5.2.2 of the Articles of Association shall be revised to read as follows:

2.4

Article 5.7.3 of the Articles of Association shall be revised to read as follows:

2.5

Article 5.8 of the Articles of Association shall be revised to read as follows:

(a)

The JV Company shall first attempt to obtain such a loan on its own credit.

(b)

Secondly, the JV Company may pledge or mortgage its assets for the benefit of any lender as collateral for a loan by any such lender.”

2.6

Article 5.9 of the Articles of Association shall be revised to read as follows:

2.7

Article 5.12 of the Articles of Association shall be revised to read as follows:

2.8

Article 5.13 of the Articles of Association shall be revised to read as follows:

2.9

Article 6.2 of the Articles of Association shall be revised to read as follows:

2.10

Article 6.14 of the Articles of Association shall be revised to read as follows:

(a)

amendment of the Articles of Association;

(b)

merger, acquisition of equity interests in another entity, consolidation of the JV Company with another organization, division of the JV Company;

(c)

termination or dissolution of the JV Company or the suspension of its operations;

(d)

increase, decrease or transfer of the JV Company’s registered capital;

(e)

investment by the JV Company in other companies and establishment of branches;

(f)

addition or elimination of any JV Product;

(g)

profit distribution plans, plans for making up losses, and the amount of allocations to the Three Funds;

(h)

approval of the JV Company’s annual and long-term business plans;

(i)

appointment, dismissal, salary and other compensation benefits of the Senior Management Employees and the salary and other compensation benefits of the General Manager and Chief Financial Officer;

(j)

employee salary and welfare system of the JV Company;

(k)

decisions on matters relating to the liquidation work in accordance with Article 14 of these Articles of Associations and relevant laws and regulations;

(l)

execution or termination by the JV Company of any material partnership or joint venture contract whereby the agreed amount of equity investment by the JV Company is more than four million United States Dollars (US$4,000,000);

(m)

designation of the external annual auditors of the JV Company for annual auditing;

(n)

approval of annual budget, mid and long term business plans;

(o)

approval of the liquidation plan in accordance with Article 14.11 of these Articles of Association;

(p)

any change of any significant accounting principles and practices, subject to the applicable PRC laws and regulations;

(q)

enter into any contract or other arrangement with a Party, a member of the Board or an Affiliate or any other Third Party entering into an agreement with JV Company on behalf of any Party, unless such contract or other arrangement is entered into pursuant to an existing agreement or contract approved by the Board, an item expressly approved by the Board in an annual budget of the JV Company or any Board resolutions;

(r)

issue of any debenture or the creation of any mortgage, charge, lien, encumbrance or other Third Party security interest over any of the JV Company’s material fixed assets or sell, convey, transfer, lease or otherwise dispose of, or grant an option or other right to purchase, lease or otherwise acquire (whether in one transfer or a series of related transfers) all or a material part of the JV Company’s fixed assets or the giving by the JV Company of any guarantee or indemnity to or becoming surety for any Third Party, provided that in all cases a single transaction or a series of related transactions within a twelve (12) months’ period exceeds a transaction value of aggregate five million United States Dollars (US$ 5,000,000);

(s)

any borrowing in excess of five million United States Dollars (US$ 5,000,000);

(t)

a decision to initiate an IPO of the shares of the JV Company;

(u)

settle any litigation matter or claim which would adversely affect the JV Company to conduct business or where the amount under dispute exceeds seven million United States Dollars (US$ 7,000,000), save that where any action is to be taken against one or more Parties or their Affiliates or any other Third Party entering into an agreement with JV Company on behalf of any Party, the approval of those Parties shall not be required;

(v)

capital expenditures and investments exceeding the approved annual budget by more than ten percent (10%) or whereby a single transaction or a series of related transactions within a twelve (12) months’ period exceeds an investment value of aggregate four million United States Dollars (US$ 4,000,000), whichever is higher; and