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Contract - UTStarcom (China) Ltd. and Henan Telecommunications Corp.


Contract No.: UTA-BJ-0011-004                                  Project No.: PAS

The Buyer:                                The Seller:

Henan Telecommunications Corporation,     UTStarcom (China) Ltd.
Luoyang Branch

No. 216 Zhong Zhou Zhong Street,          11th Floor, CNT Manhattan Building,
Luoyang, 471000                           No. 6 Chao Yang Men Bei Da Jie Street,
                                          Beijing, 100027

Tel: (0379) - 9937662                     Tel: (010)-65542030
Fax: (0379) - 3942706                     Fax: (010)-65542058

         This contract is made between the Buyer and the Seller, whereby the
Buyer agrees to buy and the Seller agrees to sell the under-mentioned
commodities according to the terms and conditions as stipulated hereinafter: PAS
Wireless Citywide Telephone System.

     1.   Total Contract Price: [*]

     2.   Name of Commodities or Services: PAS Citywide Telephone System for
          Henan telecommunications Corporation, Luoyang Branch.

               (Please refer to the attached list for quantity, specifications
               and unit price.)

     3.   Date of Shipment: [*].

     4.   Place of Destination: Henan telecommunications Corporation, Luoyang
          Branch (No. 216 Zhong Zhou Zhong Street Luoyang) and Yanshi
          Telecommunication Bureau.

     5.   Packing:

               The goods shall be packed in new strong cases suitable for long
          distance transportation and well protected against dampness, moisture,
          shook and rust. The Seller shall be liable for any damage to the goods
          on account of improper packing.

     6.   Shipping Marks:

               The Seller is required to mark clearly on the surface of each
          package the package number, measurements and such cautions as "This
          Side Up", "Handle with Care" and "Keep Away from Moisture" in unfading
          ink and put on shipping marks.

     7.   Transportation:

          7.1  The Seller shall bear all the expenses and risks involved in the
               handling of the goods until the moment when the goods have
               officially been handed over to the relevant transportation unit
               designated by the Buyer.

          7.2  The transportation and insurance costs from Hangzhou or Huizhou
               Railway Stations (or from the Sellers' warehouse, if shipped by
               highway) to the place of destination designated by the Buyer
               shall be borne by the Buyer.

     8.   Acceptance of Goods:

          8.1  Upon arrival of the goods, the Buyer shall check the goods
               immediately in the presence of the Seller's representative and
               sign on the shipping list as a certificate of acceptance of the
               goods. If shipped by air, railway or postal service, the
               carrier's shipping list shall serve as a certificate of
               acceptance of the goods.

          8.2  In case of missing parts or damages due to the Seller's improper
               packing, the Buyer shall make a detail record, or commission the
               China Commodity Inspection Bureau for a reexamination and
               issuance of a certificate, or require the representatives of the
               Buyer and the Seller to sign a memorandum to serve as a
               certificate for the replacement of missed or damaged parts. If
               the Buyer opens the cases by itself or fails to make a written
               claim on missing or damaged parts within [*] upon arrival of the
               goods, the Buyer shall be deemed to have accepted the goods.

     9.   Terms of Payment:

               General Provisions:

               If the payment by the Buyer to the Seller is made in [*], the
          exchange rate shall be based on the average price of a given foreign
          currency published by the People's Bank of China on the same day when
          the Seller receives such payment.

               The payment shall be made by T/T to Beijing Industry and Commerce
          Bank of China, Chao Yang Branch, Ri Tan Lu Office, for the account
          number [*].

          9.1  Terms of Payment for the Equipment as Follows:


               9.1.1 Down Payment

                         [*] of the total contract price, or [*] shall be paid
                     as down payment by the Buyer to the Seller within [*] upon
                     execution of the Contract.

                         If the down payment is delayed, the date of shipment
                     for the goods will be delayed accordingly.

               9.1.2 Payment upon Arrival of the Goods

                         [*] of the total contract price, or [*] shall be paid
                     by the Buyer within [*] upon arrival of all the equipment.

               9.1.3 The remaining [*] of the total contract price, or [*] shall
                     be paid by the Buyer within [*] upon certification of
                     quality of final test or within [*] upon arrival of the
                     goods, whichever is earlier.

          9.2  In the event that a payment required by Section 9.1 is not made
               by the Buyer within the stipulated time, the Buyer shall pay to
               the Seller, in addition to the amount owned, a late payment
               penalty equal to [*] of the amount owned per week. Any fractional
               part of a week is to be considered as a full week. The total
               amount of late payment penalty shall not, however, exceed [*] of
               the total amount owned.

     10.  Equipment Installation:

          10.1 The Buyer is responsible for the installation of the equipment.

          10.2 The Seller is responsible for the technical support during the
               installation of the equipment.

     11.  Warranty:

          11.1 The Seller warrants the equipment supplied hereunder to be free
               from defects in workmanship and materials. The Seller's warranty
               for equipment and materials will commence upon delivery of the
               goods and will continue for a period of [*]. During the warranty
               period, the Seller will, at its option, either repair or replace
               those equipment and materials not in conformity with the
               aforementioned warranty. If the Buyer determines that certain
               parts be returned to the Seller, the [*] shall bear the
               transportation cost for the return of such parts inside China and
               for the return of the repaired or replaced parts to the Buyer's


          11.2 The Seller warrants to eliminating errors from the software it

          11.3 The foregoing warranty does not extend to any equipment or part
               that has been:

               11.3.1 Damaged due to improper use or accidents;

               11.3.2 Wired, repaired or altered by anyone other than the Seller
                      or its representatives;

               11.3.3 Damaged due to improper installation, storage, handling or
                      maintenance by anyone other than the Seller or its
                      representatives; and

               11.3.4 Removed from its original site of installation, or due to
                      expendable components such as fuses, light bulbs, motor
                      brushes and the like.

     12.  Force Majeure

               The Seller shall not be liable for any loss, damage, delay of the
          goods or failure of their performance resulting directly or indirectly
          from any cause which is beyond its reasonable control, which includes
          but is not limited to the laws, regulations, acts of any government

     13.  Late Delivery and Penalty:

               In case of delayed shipment, except for force majeure, the Seller
          shall pay to the Buyer for every week of delay a penalty amounting to
          [*] of the total value of the goods whose shipment has been delayed.
          Any fractional part of a week is to be considered as a full week. The
          total amount of penalty shall not, however, exceed [*] of the total
          value of the goods involved in late shipment and is to be deducted
          from the amount due at the time of payment.

     14.  Arbitration

               The parties shall strictly execute this Contract in accordance
          with the relevant laws and regulations of the PRC. All disputes
          arising out of the execution of the Contract shall be settled through
          mutual understanding and friendly negotiations. In case no settlement
          can be reached through negotiations, either party can apply to the
          appropriate organization for arbitration or medication. The
          arbitration fees shall be borne by the losing party.


     15.  Limitation of Liability

          15.1 In the event of any breach of this Contract by the Seller, or of
               any losses or injuries to the Buyer arising out of this Contract
               for which the Seller is liable, the Seller's total cumulative
               liability for such breaches, losses and injuries shall be the
               lesser of:

               a.   The actual value of the damages or losses caused to the

               b.   The total payment made to the Seller.

          15.2 The Seller shall not be liable for any consequential or
               incidental losses or damages resulting from this Contract.

     16.  Validity and Termination of the Contract and Miscellaneous Matters:

          16.1 This Contract will come into force upon affixation of the seals
               by the parties and execution by the representatives of the

          16.2 This Contract will be terminated upon fulfillment of the
               respective duties and obligations by the parties.

          16.3 The Seller hereby grants the Buyer the license to use the
               software contained within the equipment purchased. The Buyer or
               its representatives shall not de-compile, disassemble or reverse
               the software unless consented in writing by the Seller.

          16.4 This Contract can only be amended by an instrument in writing
               signed and sealed by the duly authorized representatives of the

          16.5 During the course of performance of this Contract, all notices
               between the parties shall be delivered by telex, facsimile or
               certified mail.

          16.6 This Contract is made in both Chinese and English, and the
               versions in two languages shall be equally authentic. In case of
               discrepancy between the two versions, the Chinese version will

     17.  Remarks:

               The Contract is made in two originals, of which each party holds


         The Buyer:

         Henan Telecommunications Corporation, Luoyang Branch
                       (Corporate Seal)

         Representative: (Signature)
         Date:   October 28, 2000

         The Seller:

         UTStarcom (China) Ltd.

         Representative: (Signature)
         Date:   October 28, 2000

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