EXECUTION COPY

Equity Joint Venture Contract

for the Establishment of

BMW BRILLIANCE AUTOMOTIVE LTD.

by and between

BMW Holding BV

Laan van Vredenoord 5
2289 DA Rijswijk ZH
Netherlands

and

Shenyang JinBei Automotive Industry Holdings Company Limited

6th Floor, Building B, No. 1 Shiji Road
Hunnan Industrial Zone, High-Tech District
Shenyang, Liaoning Province
People’s Republic of China

Table of Contents

EQUITY JOINT VENTURE CONTRACT

THIS EQUITY JOINT VENTURE CONTRACT (hereinafter the “Contract”) is entered into in Beijing on this 27th day of March 2003, in accordance with the Law of the People’s Republic of China on Sino-Foreign Equity Joint Ventures (the “Joint Venture Law”), the implementing regulations issued thereunder (the “Joint Venture Regulations”), and other applicable laws and regulations of the People’s Republic of China, by and between Shenyang JinBei Automotive Industry Holdings Company Limited (“BRILLIANCE”) and BMW Holding BV (“BMW”).

Preliminary Statement

The Parties hereby agree to jointly establish a Sino-foreign equity joint venture company (the “JV Company”) in the province of Liaoning, People’s Republic of China on the basis of the principles of equality and mutual benefit in accordance with the terms and conditions set forth below and with applicable laws and regulations.

Article 1           Definitions

Unless the terms or the context of this Contract otherwise provide, the following terms in this Contract shall have the meanings set forth below:

1.1		“Affiliate” of a Party shall mean, any company or other entity or natural person other than the JV Company that, through ownership or voting stock or otherwise, Controls or is Controlled by, or under common Control with, such Party. Within the PRC, the “company” as used in this Article 1.1 shall include any kind of business entity with legal person status under PRC Laws. Notwithstanding the foregoing, Brilliance Automotive Group Holdings Co., Ltd., Brilliance China Automotive Holdings Ltd., Shenyang Brilliance JinBei Automotive Co., Ltd., Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd., China Aerospace Brilliance Automotive Co., Ltd., JinBei General Motors Automotive Co., Ltd., Shenyang Xin JinBei Investment and Development Co., Ltd., and Shenyang JinBei Auto Industry Co., Ltd. shall be considered Affiliates of BRILLIANCE for the purposes of this Contract.
1.2		“Articles of Association” shall mean the Articles of Association of the JV Company as executed by the Parties in Beijing of even date and amended thereby from time to time.
1.3		“Assets” shall mean collectively the Existing Buildings and the Existing Equipment, which are owned by JinBei and which will be sold by JinBei to the JV Company pursuant to the Building Purchase Agreement and the Equipment Purchase Agreement.
1.4		“BMW AG” shall mean Bayerische Motoren Werke Aktiengesellschaft, the ultimate parent company of the BMW group of companies that directly owns one hundred percent (100%) of the shares of BMW.
1.5		“BMW Cars” shall mean any passenger cars that bear BMW trademarks.
1.6		“BMW Group” shall mean BMW AG and its Affiliates.
1.7		“BMW Holding BV” shall mean the Party to the Contract which is a wholly owned Affiliate of BMW AG.

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1.8		“Board” or “Board of Directors” shall mean the Board of Directors of the JV Company.
1.9		“Brilliance Group” shall mean Brilliance China Automotive Holdings Ltd. and its Affiliates.
1.10		“Building Purchase Agreement” shall mean the agreement under which JinBei shall sell the Existing Buildings to the JV Company.
1.11		“Business License” shall mean the business license to be issued to the JV Company by the PRC State Administration for Industry and Commerce.
1.12		“Business Plan(s)” shall mean the business plan(s) of the JV Company that are determined in accordance with Article 4.4.2 of this Contract.
1.13		“Business Registration Authority” shall mean the PRC State Administration for Industry and Commerce or its successor or local office in charge of company registration.
1.14		“Change of Law” shall mean any event or circumstance, as further discussed in Article 3.5, where the PRC local or national government or any other local or national public body or authority in the PRC that has the power to make decisions or rules binding upon the JV Company, undertakes any of the following: adopts any new law, regulation, decree or rule, amends or repeals any provision of any existing law, regulation, decree or rule, or adopts any different interpretation or method of implementation of any law, regulation, decree or rule.
1.15		“China” or the “PRC” shall, for purposes of this Contract, mean the People’s Republic of China, exclusive of the province of Taiwan and the Special Administrative Regions of Hong Kong and Macau.
1.16		“Contract Execution Date” shall mean the date that both Parties have duly executed this Contract.
1.17		“Control(s)” or “is Controlled by” or any reference to “Control” in this Contract shall mean the direct or indirect possession, by a company or other entity or natural person, of the power to direct or cause the direction of the management and policies of a Party, of Brilliance Group or of BMW Group by means including, but not limited to, ownership of fifty percent (50%) or more of the voting stock or registered capital, or the power to appoint or elect a majority of the directors, or the power to appoint the general manager or the principal person in charge of a business entity.
1.18		“Conversion Rate” shall mean the median of the official selling and buying EUR-RMB exchange rate published by the People’s Bank of China on the date on which the Parties shall make their respective contributions to the registered capital of the JV Company in accordance with Article 5.4.
1.19		“Directors” shall mean the persons appointed by the Parties to serve as members of the Board of Directors.
1.20		“Effective Date” shall mean the effective date of this Contract, which shall be the date on which the Contract and the Articles of Association are approved by the Examination and Approval Authority.
1.21		“Equipment Purchase Agreement” shall mean the agreement under which JinBei shall sell the Existing Equipment to the JV Company.

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1.22		“Establishment Date” shall mean the date described in Article 3.4 of this Contract.
1.23		“Euro” or “EUR” shall mean the lawful currency of the member States of the European Currency Union.
1.24		“Event of Force Majeure” shall mean any unforeseeable or unavoidable event or circumstance beyond the control of a Party occurring after the execution of this Contract including, without limitation, fire, storm, typhoon, flood, earthquake, explosion, war and serious strikes or work stoppages, which prevents the performance, in whole or in part, of this Contract or any of its obligations by any Party or by the JV Company.
1.25		“Examination and Approval Authority” shall mean the appropriate government department with authority to approve this Contract and the Articles of Association under applicable laws and regulations.
1.26		“Existing Buildings” shall mean the existing factory buildings, structures and fixtures located on the Site that shall be sold to the JV Company under the Building Purchase Agreement.
1.27		“Existing Equipment” shall mean the existing equipment located on the Site that shall be sold to the JV Company under the Equipment Purchase Agreement.
1.28		“JinBei” shall mean Shenyang Brilliance JinBei Automotive Co., Ltd., which is a company established and existing under the laws of the PRC.
1.29		“Joint Venture Term” shall mean the duration of the JV Company as provided for in Article 22 of this Contract.
1.30		“JV Products” shall mean those BMW Cars listed as follows (which list may be modified by the Parties from time to time upon mutual consent) and all parts and components that are used for production of such passenger cars by the JV Company.

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1.31		“Land Use Rights Lease Contract” shall mean the contract under which the JV Company will lease the land use rights to the Site from the relevant government authority in Shenyang.
1.32		“M1 Products” shall mean the JinBei passenger cars bearing the Zhonghua brand and its succeeding models hereto.
1.33		“Other Contracts” shall mean the Building Purchase Agreement, Equipment Purchase Agreement, Plant Lease Agreement I, Plant Lease Agreement II, Services Agreement I, Services Agreement II, and the Parts and Components Supply Agreement, Land Use Rights Lease Contract. Unless otherwise specified, “Other Contracts” denotes all of these agreements. The Other Contracts shall not violate any mandatory provisions of applicable PRC Laws.
1.34		“Parties” shall mean BRILLIANCE and BMW, collectively; and, “Party” shall mean each of BRILLIANCE or BMW, individually.
1.35		“Parts and Components Supply Agreement” shall mean the contract under which BMW AG supplies parts and components to the JV Company necessary for production of the JV Products.
1.36		“Plant Lease Agreement I” shall mean the agreement to be entered into by the JV Company and JinBei in accordance with applicable PRC Laws under which the JV Company will lease certain plant/office premises on the Site to JinBei.
1.37		“Plant Lease Agreement II” shall mean the agreement to be entered into by the JV Company and JinBei in accordance with applicable PRC Laws under which JinBei will lease certain plant/office premises to the JV Company.
1.38		“PRC Holding Company” shall mean an investment company established by BMW or its Affiliate in China in accordance with applicable PRC Laws.
1.39		“PRC Laws” shall mean all laws, regulations, decrees or other acts of a legally binding nature that are in force from time to time in the PRC including any amendment or substitution thereof.
1.40		“Premium Market Cars” shall mean those passenger cars of the brands in the “premium” market segments of passenger cars, a non-exhaustive list of which is set forth as follows:

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1.41		“Renminbi” or “RMB” shall mean the lawful currency of the PRC.
1.42		“Return on Sales” or “ROS” shall mean a percentage equal to net pre-tax income for a fiscal year divided by net sales for the same period.
1.43		“Services Agreement I” shall mean the agreement to be entered into by the JV Company and JinBei in accordance with applicable PRC Laws under which the JV Company will provide certain services and facilities to JinBei.
1.44		“Services Agreement II” shall mean the agreement to be entered into by the JV Company and JinBei in accordance with applicable PRC Laws under which JinBei will provide certain services and facilities to the JV Company.
1.45		“Shenyang JinBei Automotive Industry Holdings Company Limited” shall mean the Party to the Contract which is ninety percent (90%) owned by Shenyang Xin JinBei Investment and Development Company Limited and ten percent (10%) owned by Shenyang JinBei Auto Industry Company Limited.
1.46		“Site” shall mean that piece of land which is situated at Shanzuizi Road, Dadong District, Shenyang City, Liaoning Province, PRC, the location, layout, and boundaries of which are shown and detailed in the Building Purchase Agreement. The Site has been used by JinBei before the establishment of the JV Company and will be leased to the JV Company, under the Land Use Rights Lease Contract .
1.47		“Technology License Agreement” shall mean the Technology License Agreement between BMW AG and the JV Company, pursuant to which BMW AG will license to the JV Company the right to use certain technology and operational know-how in connection with the production, sale and service of the JV Products.
1.48		“Trademark License Agreement” shall mean the Trademark License Agreement between the JV Company and BMW AG, which is the registrator in the PRC of the trademark “BMW” in English and “BAO MA (pin yin) and (Bao Ma in Chinese script)” in Chinese, pursuant to which BMW AG will license to the JV Company the right to use the trademark “BMW” in English and “BAO MA (pin yin) and (Bao Ma in Chinese script)” in Chinese in connection with the sale of the JV Products.
1.49		“Transfer Price” shall mean the price for the transfer of the equity interest as defined in Article 24.1.2.

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1.50		“United States Dollars” or “US Dollars” or “USD” shall mean the lawful currency of the United States of America.
1.51		“WTO” shall mean the World Trade Organization.

Unless otherwise stated, all references to numbered Articles and Annexes are to Articles and Annexes of this Contract.

Article 2           Parties

2.1		Parties
		The Parties to this Contract are:

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

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2.2

Representations and Warranties

2.2.1

Each Party hereby represents and warrants to the other Party that as of the date hereof and as of the Effective Date:

(i)		it is a legal person, duly organized, validly existing and in good standing under the laws of the place of its establishment or incorporation; its ownership and Control has not changed in any way since the 23rd day of March, 2003. A duly certified copy of the Articles of Association as registered with the Business Registration Authority has been presented to the other Party on or before the date of the execution of this Contract;
(ii)		its legal representative is duly and fully authorized and empowered to sign, execute and give effect, on its behalf, to this Contract, the Articles of Association, and any agreements and documents referred to in this Contract and to which it is a party;
(iii)		its execution, delivery and performance of this Contract, the Articles of Association and any other agreements and documents contemplated hereunder will not violate any of its constitution documents, any other agreement or obligation of such Party, any judgment or arbitral award binding such Party, or any currently effective law, regulation or decree of the jurisdiction in which it is organized or incorporated, that may be applicable to any aspect of the transactions contemplated hereunder;
(iv)		it has all requisite power, authority and approval required to enter into this Contract and upon the Effective Date will have all requisite power, authority and approval to duly perform each of its obligations hereunder;
(v)		upon the Effective Date, the provisions of this Contract shall constitute its legal and binding obligations;
(vi)		it has disclosed, in writing, all material information in its possession relating to the cooperation between the Parties set out under this Contract, as well as the establishment and operation of the JV Company which might have a material adverse effect on its ability to fully perform its obligations hereunder, or which if disclosed to the other Party, could have a material effect on the other Party’s willingness to enter into this Contract, and none of the information provided by it to the other Party contains any material statements which are false or misleading; and
(vii)		no lawsuit, arbitration, other legal or administrative proceeding, or governmental investigation is pending, or to the best of its knowledge, threatened, against it that would affect in any way its ability to enter into or perform this Contract;

	2.2.2		Brilliance represents and warrants that it is not Controlled directly or indirectly by any company, corporation or entity which directly or indirectly produces, distributes or sells, inside or outside China, passenger cars under any trademarks or brandnames other than “JinBei” and “Zhonghua”.
	2.2.3		BMW represents and warrants that it is not Controlled directly or indirectly by any company, corporation or entity which directly or indirectly produces, distributes or sells, inside or outside the Federal Republic of Germany,

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			passenger cars under any trademarks or brandnames other than “BMW”, “MINI” and “Rolls-Royce”.
	2.2.4		Each Party shall indemnify the other Party against all direct losses, expenses and liabilities arising from a breach of any of the foregoing representations and warranties. For the avoidance of doubt, for the indemnification provided in this clause, each Party shall not be responsible for the other Party’s indirect, special, punitive or consequential losses, damages, costs or expenses including loss of profit, loss of use, loss of contracts, and loss of production.

Article 3        Establishment and Legal Form of JV Company

3.1		Establishment of Company

3.2		Limited Liability Company

	3.2.2		Except as otherwise provided in this Contract, once a Party has paid in full its contribution to the registered capital of the JV Company, it shall not be required to provide further funds to or on behalf of the JV Company by way of capital contribution, loan, advance, guarantee or otherwise.
	3.2.3		Unless otherwise agreed in writing 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 a Party.
	3.2.4		In no event shall any Party be responsible for any losses, risks, liabilities or obligations whatsoever resulting from any act of the other Party.

3.3		Name and Address of Company

The name of the JV Company shall be “BMW BRILLIANCE Automotive Ltd.” in English and “” in Chinese. The legal address of the JV Company shall be Shanzuizi Road, Dadong District, Shenyang City, Liaoning Province, PRC.

3.3.1

The JV Company shall use the BMW name and logo as long as BMW maintains at least a fifty percent (50 %) interest in the registered capital of the JV Company, unless otherwise agreed by BMW. At the expiry or termination of this Contract, the JV Company immediately shall change its name by

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			removing therefrom the word “BMW” as well as stop using the BMW name and logo without replacing them with any similar word, expression, or symbol, as provided for in more detail in the Trademark License Agreement.
	3.3.2		Should BMW, against its own volition, partly or wholly lose its equity participation in the JV Company or should BMW as a result of any legal, judicial, official or other measure no longer be able to use any of its material rights as provided for under this Contract or should the powers of BMW’s representatives in the Board or BMW’s right to nominate people to be the members of the Management of the JV Company as provided for under this Contract or under the PRC Laws be diluted, the JV Company immediately shall, unless otherwise approved by BMW, change its name as well as stop using the BMW name and logo without replacing them with any similar word, expression, or symbol, as provided for in more detail in the Trademark License Agreement. BRILLIANCE undertakes not to continue or take over the JV Company’s business using the BMW name or logo or any similar word, expression, or symbol.

3.4		Date of Establishment
		The date of the establishment of the JV Company shall be the date on which the JV Company is issued its Business License.
3.5		Change of Law

	3.5.1		If, after the date of the execution of this Contract, a Change of Law occurs and it will, upon application by the JV Company and the Party concerned and upon approval by the relevant government authorities, result in treatment to the JV Company or to any Party substantially more favorable than the terms of this Contract (without resulting in less favorable treatment to the other Party), then the JV Company and the Party concerned shall promptly apply to receive the benefits of such more favorable treatment and the other Party shall use all reasonable efforts to facilitate such application.
	3.5.2		If, after the date of the execution of this Contract, a Change of Law occurs and it directly or indirectly causes material adverse consequences to the JV Company or to any Party’s benefits under this Contract, then upon written notice thereof from the JV Company (acting through its Board) to the Parties or by the affected Party to the other Party, the Parties shall promptly consult with each other and determine whether:

	(i)		to continue to implement this Contract in accordance with the original provisions thereof; or
	(ii)		to effectuate necessary adjustments in order to preserve each Party’s benefits under this Contract on a basis no less favorable than the benefit it would otherwise receive had such a Change of Law not occurred.

3.5.3

Article 3.5.2 shall not apply to any Change of Law that takes effect after the date of the execution of this Contract if, before that date, such Change of Law has been announced by the relevant PRC authorities as a measure necessary to implement the PRC’s accession to the WTO and the Parties were aware of or could reasonably have been aware of that Change of Law and its consequences.

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3.6

Branches

The JV Company may establish branch offices and subsidiaries anywhere inside and outside of the PRC, subject to compliance with PRC Laws and upon the approval of both the Board of Directors and if required the Examination and Approval Authority. Subject to receipt of all required approvals and licenses the JV Company shall establish a distribution and sales branch in Beijing in which its distribution, sales and marketing activities will be located.

Article 4        Purpose and Scope of Business of JV Company

4.1		Purpose
		The purpose of the JV Company is to use efficient and advanced technology and management, production and distribution techniques to manufacture and sell the JV Products, to secure the quality, the value and competitiveness of such products, and to obtain satisfactory economic benefits for the Parties.
4.2		Business Scope

	4.2.1		The business scope of the JV Company shall be to produce BMW passenger cars, engines, parts and components, and accessories therefore; to sell the products produced by itself; and to provide after-sales services (including spare parts) in connection with its products.
	4.2.2		The JV Company also will conduct all business activities necessary for or ancillary to the activities listed in Article 4.2.1 including, but not limited to, industrial, engineering, commercial, financial, marketing, financial services, and training activities.
			At the discretion of the Board of Directors and subject to compliance with PRC Laws and the obtaining of approval from the Examination and Approval Authority, additional products might be manufactured, marketed, sold and serviced by the JV Company.

4.3		Production Scale
		The annual production scale of the JV Company is estimated to be 30,000 passenger cars when the JV Company is operating at full scale.
4.4		Initial Business Case / Business Plan / Budget

	4.4.1		The Parties have prepared on a best estimate basis an initial business case which reflects their common understanding of the estimated profitability of the JV Company (the “Initial Business Case”). The Initial Business Case sets out the financial plan of the JV Company for the years 2003 – 2010.
	4.4.2		The Board of Directors shall annually approve a long-range plan for the JV Company (the “Business Plan”) covering a six-year period starting with the following calendar year. The creation of Business Plans is a rolling process with each Business Plan replacing the Business Plan that was approved for the preceding year. The format of the Business Plans are stated in Annex 1 hereto.

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	4.4.3		The Board of Directors shall annually approve a budget for the JV Company for the following calendar year (the “Budget”). The Budget shall set forth the detailed financial planning of the JV Company. The format of the Budget are stated in Annex 1 hereto. The Budget shall be prepared together and in compliance with the Business Plan and shall be in compliance with the cost positions of the Business Plan that are applicable for the same calendar year.
	4.4.4		The Board shall approve the Business Plans and the Budgets prepared and submitted by the Management; provided that the Management prepares the Business Plans and Budgets in accordance with the requirements of Articles 4.4 and 4.5 of this Contract and any internal rules and guidelines adopted by the Board.

4.5

Benchmarks / ROS

	4.5.1		Based on the Initial Business Case the Parties have agreed to calculate certain percentage figures that shall apply to the following cost positions of the JV Company: (i) cost of production, (ii) cost of wholesale and (iii) cost of retail. The percentage figures indicate the percentages of the respective cost positions of the adjusted turnover of the JV Company as provided in the Business Plan approved in the current year. The single cost items covered by these cost positions are defined in Annex 2.
	4.5.2		In order to provide guidance to the Management of the JV Company, the Parties have agreed on certain target percentage figures for each of the cost positions mentioned in Article 4.5.1 (the “Benchmarks”). . The Initial Business Case also provides a percentage for the Return on Sales of the JV Company on an annual basis. The Benchmarks and the percentage for the Return on Sales will be set forth in a separate agreement to be entered into between the Parties.
	4.5.3		Unless the Board of Directors has revised the Benchmarks in accordance with Article 7.2.1(b)(viii), the Business Plan and the Budget shall be prepared by the Management in compliance with the Benchmarks and the ROS for the applicable calendar year.
	4.5.4		When implementing the Budget during a calendar year, the General Manager is, subject to internal rules and guidelines adopted by the Board of Directors, authorized to deviate from each of the Benchmarks and/or the ROS provided that such deviation shall at all times satisfy both of the following conditions:

	(i)		in case of a deviation from a Benchmark, the deviation shall be within fifteen percent (15%) greater or fifteen percent (15%) less of the relevant Benchmark; and
	(ii)		in case of a deviation from the ROS, the deviation shall be within five percent (5%) greater or five percent (5%) less of the ROS.

Article 5        Total Investment and Registered Capital

5.1		Total Amount of Investment
		The total amount of investment of the JV Company shall be four hundred fifty million Euro (€450,000,000).

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5.2		Registered Capital
		The registered capital of the JV Company shall be one hundred fifty million Euro (€150,000,000).
5.3		Contribution to Registered Capital

	5.3.1		BRILLIANCE’s contribution to the registered capital of the JV Company shall be seventy-five million Euro (€75,000,000), and shall represent fifty percent (50%) of the total registered capital of the JV Company. BRILLIANCE’s registered capital contribution shall be made in cash in RMB in an amount equivalent to seventy-five million Euro (€75,000,000) converted at the Conversion Rate on the date on which the capital contribution is due pursuant to the terms of Article 5.4 below.
	5.3.2		BMW’s contribution to the registered capital of the JV Company shall be seventy-five million Euro (€75,000,000), which shall represent fifty percent (50%) of the total registered capital of the JV Company. BMW’s registered capital contribution shall be made in cash in Euro. The amount shall be translated into RMB at the Conversion Rate for recording purposes.

5.4

Contribution Schedule

	5.4.1		Both Parties shall make their contributions to the registered capital of the JV Company within ninety (90) calendar days of the issuance of the Business License of the JV Company.
	5.4.2		Notwithstanding the provisions of Article 5.4.1, a Party shall not be obligated to make its contribution if it is clear that the other Party will not be able to make its capital contribution as provided in Article 5.4.1.
	5.4.3		In the event that any Party fails to make its capital contribution, in whole or in part, in accordance with the terms of this Article 5, such Party shall pay simple interest to the JV Company on the unpaid amount from the date due until the date the contribution is made at the rate for short-term (6 months) commercial loans offered by the Shenyang branch of Bank of China in Renminbi on the due date plus two percent (2%), if the contribution is to be made in Renminbi, and at the LIBOR for Euro rate, fixed on the due date at 11:00 am (GMT) for commercial short term loans of three months plus two percent (2 %), if the contribution is to be made in Euro. If any Party does not make its capital contribution in full within ninety (90) days of the due date, the other Party shall have the right to terminate this Contract, and/or claim damages from the breaching Party.

5.5

Investment Certificates

	5.5.1		The JV Company shall retain, at its expense, an accountant, certified and registered in China and acceptable to the Parties, who promptly shall verify the capital contributions by the Parties and issue a capital verification report to the JV Company. Any capital contribution in the form of cash shall be deemed to have been made on the date on which the relevant amount of cash has been deposited into a bank account in the name of the JV Company.
	5.5.2		Within thirty (30) days from receipt of the capital verification report, the JV Company shall issue investment certificates to each Party evidencing the contributions by each Party on the basis of such report. The certificates shall

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be signed by the Chairman and the Vice-Chairman of the Board and sealed with the JV Company’s seal. Each investment certificate shall indicate the following: the name of the JV Company; the Establishment Date; the names of the Parties; amount of the capital contribution and the date on which such contribution was made; the certificate’s date of issue. A copy of the investment certificate shall be submitted to the Examination and Approval Authority 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

Financing

	5.6.1		The balance between the total amount of investment and registered capital of the JV Company, pursuant to approval by the Board and in accordance with the business needs of the JV Company, may be raised by the JV Company through loans from domestic and/or foreign banks or other financial institutions or, if permitted by law, through loans from the Parties or their Affiliates. Such loans provided by the Parties or their Affiliates shall be referred to as “Shareholder Loans”.
	5.6.2		The JV Company shall be responsible for obtaining any loans or other financing that may be required by it to finance its operations and capital expenditures. If and to the extent the JV Company is unable to raise funds through loans from domestic and/or foreign banks or other financial institutions at rates that the Board determines to be competitive, each Party shall on a pro rata basis in accordance with its share of the registered capital of the JV Company, itself or through its Affiliates, provide Shareholder Loans to the JV Company which shall not exceed the maximum amount of loans as provided for in the Business Plan applicable for the respective time period. In the event the financing needs of the JV Company as proposed by the Board shall exceed the maximum amount of loans as provided for in the Business Plan applicable for the respective time period, both Parties shall seriously consider whether to provide any additional Shareholder Loans in excess of such maximum amount of loans.
			If BRILLIANCE or its Affiliates registered in the PRC are not permitted under PRC Laws to provide Shareholders Loans, then BRILLIANCE shall be obliged to cause its Affiliates registered outside of the PRC to provide Shareholder Loans or guarantees to the JV Company. If BRILLIANCE fails to do so, then BMW shall not have the obligation to provide Shareholder Loans. If BMW or its Affiliates are not permitted under the Dutch laws and regulations to provide Shareholders Loans, then BMW shall be obliged to cause its Affiliates to provide Shareholder Loans or guarantees to the JV Company. If BMW fails to do so, then BRILLIANCE shall not have the obligation to provide Shareholder Loans.
	5.6.3		If agreed between the Parties, the Parties may at their discretion provide for other forms of financial assistance to the JV Company. Unless otherwise agreed to by the Parties, any method of financial assistance by either of the Parties as provided for under this Article 5.6.3 shall be made only to the extent that the other Party provides an equal amount of financial assistance on a pro rata basis in accordance with its shareholding in the JV Company. If a Party has provided the JV Company with other forms of financial assistance under this Article, the Party’s obligation to provide for Shareholder Loans as provided for under Article 5.6.2 shall be reduced accordingly.

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5.7

Increase of Registered Capital

	5.7.1		Any increase in the registered capital of the JV Company shall be approved by a unanimous vote of all of the Directors of the Board and, if required by PRC Laws, submitted to the Examination and Approval Authority for approval. Upon receipt of such approval, the JV Company shall register the increase in the registered capital with the Business Registration Authority pursuant to PRC Laws.
	5.7.2		Unless otherwise agreed to by the Parties and approved by the Board, the Parties shall make any increase in the registered capital in the same proportions as their originally-subscribed contributions to the registered capital. The Parties may agree, in writing, to adjust their registered capital proportions, subject to PRC Laws and any required approval of the Examination and Approval Authority.
	5.7.3		If further registered capital is required for the business of the JV Company the Parties will give serious consideration to any information and proposals provided in this regard.

Article 6         Transfer of Interest in the Registered Capital of the JV Company

6.1		Except as otherwise provided in this Contract, neither Party shall, without the prior written consent of the other Party assign, pledge or otherwise encumber any of its interest in the registered capital of the JV Company.
6.2		Notwithstanding Article 6.1 above, either Party (the “Assigning Party”) shall be entitled to transfer or assign all of its interest in the registered capital of the JV Company to one of its wholly-owned Affiliates, provided that the following occur (and that such provisions shall apply to any further transfer from an Affiliate to another Affiliate):

	6.2.1		the Assigning Party shall give to the other Party (the “Non-assigning Party”) not less than one month’s prior written notice of its intention to effect such transfer;
	6.2.2		the transferee or assignee (collectively, the “Assignee”) shall execute with the “Non-assigning Party”, a revised version of this Contract and of the Articles of Association, which documents shall, unless otherwise agreed between the Non-assigning Party and the Assignee, be the same as the versions prior to the transfer or assignment, except that the Assignee shall be substituted for the Assigning Party as a Party to those documents;
	6.2.3		the Assigning Party, by its execution of this Contract, unconditionally and irrevocably guarantees as a separate liability to the Non-Assigning Party that the Assignee will perform all of its obligations under this Contract;
	6.2.4		the Assigning Party shall procure that a legally binding contract is executed with the Assignee that, at the option of the Assigning Party, permits the re-transfer to the Assigning Party of all such shares and/or, as the case may be, any such loan capital, debentures or other securities previously so transferred, and that the Assigning Party shall exercise that option prior to any such permitted Assignee ceasing to be a wholly-owned Affiliate of the Assigning Party;

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	6.2.5		all its interest shall be transferred, as a whole, by the Assigning Party to the Affiliate in order to avoid further partitioning of the equity interest;
	6.2.6		the Affiliate is a duly incorporated, validly existing entity that is acceptable to the Non-Assigning Party.

6.3		Notwithstanding Article 6.1 above, BMW shall be entitled to transfer or assign all or some of its interest in the registered capital of the JV Company to a PRC holding company to be established as an Affiliate of BMW Group under PRC Laws and subject to all necessary licenses and approvals, provided that all conditions provided for under Article 6.2.1, 6.2.2, 6.2.3, 6.2.4 and 6.2.6 above are met.
6.4		Each Party hereby agrees that it shall consent and shall cause the Director(s) appointed by it to consent to any proposed assignment of registered capital by any Party pursuant to Article 6.2 or Article 6.3.
6.5		In addition to the conditions set out in Article 6.1 above, any transfer, pledge or encumbrance of interest in the registered capital of the JV Company shall be subject to the unanimous approval of the Board of Directors, which approval shall not be unreasonably withheld or delayed.
6.6		All equity transfers shall be submitted to the Examination and Approval Authority for approval. Upon receipt of the approval, the JV Company shall register the change in equity with the Business Registration Authority.
6.7		Each Party or its Affiliates shall remain the legal owner of all of its or its Affiliates’ Shareholder Loans to the JV Company, and the legal owner of all debentures and other securities issued or provided by the JV Company to such a Party. Neither Party shall be entitled to dispose of, transfer or assign to any third party its Shareholder Loans which it has provided to the JV Company, or the debentures or other securities which the JV Company has issued or provided to the Party, except in conjunction with a transfer of the Party’s interest in the registered capital of the JV Company, as permitted by this Contract, or except with the prior written consent of the super majority of the Board of Directors.

Article 7        Board of Directors

7.1

Formation of the Board

	7.1.1		The date of establishment of the Board of Directors shall be deemed to be the Establishment Date.
	7.1.2		The Board of Directors initially shall be composed of thirteen (13) Directors of which six (6) shall be appointed by BRILLIANCE, six (6) shall be appointed by BMW, and one (1) Director shall be an independent Director first nominated by BMW and then mutually appointed by the Parties. The Parties agree that three (3) years after the Establishment Date the Board shall be reduced to a total of seven (7) Directors, of which three (3) Directors shall be appointed by BRILLIANCE, three (3) shall be appointed by BMW, and one (1) Director shall be an independent Director first nominated by BMW and then mutually appointed by the Parties. The independent Director shall be independent of BMW to the extent that the Director is not employed by BMW. If the ratio of the Parties’ contributions to the registered capital changes, the proportionate number of Directors shall change accordingly in accordance with applicable legal procedures.

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	7.1.3		The Chairman of the Board shall be appointed by BRILLIANCE and the Vice-Chairman by BMW. The Directors, Chairman and Vice-Chairman each shall have a term of office of three (3) years, and each shall be eligible for consecutive terms of office upon reappointment by the original appointing Party.
	7.1.4		Any vacancy created in the Board of Directors shall be immediately filled by the Party who originally appointed the absent Director. Any Party at any time may remove any Director appointed by such Party and appoint in lieu thereof any other person to serve the remainder of the removed Director’s term. Each Party shall notify the other Party, in writing, each time it appoints or replaces a Director. Except as provided in Article 7.1.2, neither Party shall be entitled to nominate any Director to the Board who is not in a relationship of employment with it or with its Affiliates.
	7.1.5		The Chairman shall be the legal representative of the JV Company but the Chairman may not unilaterally take any action binding the JV Company without authorization of the Board. The Chairman shall exercise the functions in accordance with the provisions set forth in the Contract, the Articles of Association and the resolutions of the Board. Whenever the Chairman of the Board cannot exercise his/her functions for any reason, he/she shall authorize the Vice Chairman of the Board or, in the event the Vice-Chairman is not available, another Director, to represent the Chairman until the Chairman resumes his/her right or functions, or until a successor is appointed.
	7.1.6		Each Party shall cause the Directors appointed by it to act at all times lawfully and in good faith with respect to all matters relating to the business of the JV Company and this Contract and to any other contracts and agreements concluded pursuant to this Contract. A Party immediately shall discharge a Director it has appointed to Board, upon discovery by that Party that such Director has: violated this Contract, the Articles of Association or Articles 57 or 58 of the PRC Company Law or any other relevant PRC Laws; acted in bad faith or with gross negligence to the detriment of the JV Company; committed a crime; participated in corruption; or committed any other act that would be sufficient for removal of a director under PRC Laws.
	7.1.7		The JV Company shall indemnify each Director against all claims and liabilities incurred by reason of him/her being a director of the JV Company, provided that the Director’s acts or omissions giving rise to such claims or liabilities do not constitute intentional misconduct or gross negligence or a violation of criminal laws.

7.2

Powers of Board

	7.2.1		The Board of Directors shall be the highest authority of the JV Company and shall have the power to make decisions on all major and important matters of the JV Company, including, without limitation, the matters as follows:

	(a)		unanimity decisions

	(i)		amendment of the Articles of Association;
	(ii)		increase, decrease, transfer, assignment or pledge of the JV Company’s registered capital and the adjustment of the

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			proportions of each Party’s contribution to the registered capital;
	(iii)		merger of the JV Company with any other economic organization, or split or division of the JV Company;
	(iv)		suspension of the JV Company’s operation, and/or termination, dissolution or liquidation of the JV Company;
	(v)		distribution and payment of the JV Company’s profits;

	(b)		super-majority decisions

	(vi)		approval of the Business Plan and the Budget of the JV Company (hereinafter together referred to as the “Planning Documents”) as provided for in Articles 4.4 and 4.5, such approval to include the sales volume and the sales price (price to dealer) of the JV Products as part of the Planning Documents;
	(vii)		approval of retail prices (price to customer) or recommended retail prices of the JV Products as provided in Article 15.1;
	(viii)		revisions of the Benchmarks as provided for in Articles 4.5.3;
	(ix)		establishment of or investment in any company by the JV Company; sale, transfer, assignment or disposal by the JV Company of any equity interest in another company; establishment of a branch by the JV Company in the PRC or outside of the PRC;
	(x)		purchase, sale, transfer, assignment, or disposal by the JV Company of any of its fixed assets or real property with a value exceeding two hundred fifty thousand Euro (€250,000), or the Renminbi equivalent thereof unless such activity was separately approved in the Planning Documents;
	(xi)		without limitation on the authority of the General Manager under Article 4.5.4, any connected transaction between the JV Company and one Party (or any Affiliate of one Party), in which the amount of that connected transaction or the aggregate amount of that similar type of connected transaction (e.g. procurement of kits, procurement of technical services, procurement of IT-services etc.) within one calendar year exceeds one million Euro (€1,000,000) unless such transaction was separately approved in the Planning Documents; for connected transactions which are undertaken by the General Manager pursuant to Article 4.5.4, the JV Company shall not agree on any terms and conditions less favorable to it than those for connected transactions of a similar type that were approved as part of the Planning Documents (e.g. purchase of kits from BMW AG) governed by the Trademark License Agreement, Technology License Agreement, or the Other Contracts as applicable.

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	(xii)		without limitation on the authority of the General Manager under Article 4.5.4, the approval of any credit lines, structured financing, or issuance of public and private debentures by the JV Company in an aggregate amount exceeding three million Euro (€3,000,000), unless such transaction was separately approved in the Planning Documents;
	(xiii)		approval of any guarantee to be made by the JV Company or of any mortgage, pledge, or creation of any security interest in any material assets of the JV Company, that is both outside of the JV Company’s ordinary course of business and not included in the Planning Documents;
	(xiv)		approval of the accounting policy or any change thereof;
	(xv)		the final accounts and audited financial statements;
	(xvi)		the compensation of the General Manager and other Senior Corporate Officers;
	(xvii)		the selection of the JV Company’s principal financial services provider – if any – for the granting of loans and/or credits to end customers of the JV Products;
	(xviii)		any other matters requiring super-majority approval by the Board of Directors as expressly provided for in this Contract, the Articles of Association, or as determined by the Parties from time to time.

	(c)		simple majority decision

	(xix)		without prejudice to the provisions of Articles 9.1.1 and 9.2.4, approval of any major change in management organization;
	(xx)		approval of any fundamental management rules and guidelines of the JV Company;
	(xxi)		approval of labor and personnel policies;
	(xxii)		employment of an independent auditor;
	(xxiii)		annual insurance plan of the JV Company;
	(xxiv)		exercise of the JV Company’s options to require JinBei to buy back the Assets under the Equipment Purchase Agreement and the Building Purchase Agreement;
	(xxv)		any other matters requiring simple majority approval, by the Board as expressly provided for in this Contract, the Articles of Association, or as determined by the Board from time to time.

7.2.2

Resolutions involving items in Article 7.2.1 shall be adopted by the following numbers of votes of all Directors present in person, by telephone or by proxy at duly convened Board meeting:

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	(a)		unanimous affirmative vote:             items listed under Article 7.2.1 (a)
	(b)		super-majority vote (i.e., at least three-fourths (3/4) of the Directors):             items listed under Article 7.2.1 (b)
	(c)		simple majority vote:             items listed under Article 7.2.1 (c)

7.2.3

Unless otherwise specified in this Contract, all other matters to be decided by the Board of Directors shall be resolved by a simple majority vote of the Directors present in person, by telephone or by proxy at a duly convened meeting of the Board.

7.3

Meetings

	7.3.1		The first Board meeting shall be held within fifteen (15) days from the Establishment Date.
	7.3.2		The Board shall meet at least once a year. Board meetings shall be held at the legal address of the JV Company, unless otherwise determined by the Board of Directors.
	7.3.3		Two-thirds of all of the Directors present in person or by proxy shall constitute a quorum for any Board meeting.
	7.3.4		If, at any properly convened meeting, no quorum is present, then the Board shall reconvene at the same time and place within ten (10) days following that convened meeting, as agreed between the Chairman and the Vice-Chairman or, if no agreement is reached, fourteen (14) days after that convened meeting. At such reconvened meeting, any Director absent from such reconvened meeting without having appointed a proxy shall be deemed to have abstained from voting and further shall be deemed present for purposes of quorum and for calculating the number of Directors attending the meeting. At such reconvened meeting only the affirmative vote of each and every Director of the Board present in person or by proxy shall be taken into account for calculating the majority required by Article 7.2.2.
	7.3.5		The Chairman shall preside over the Board meeting. The Chairman and the Vice-Chairman together shall set the agenda of Board meetings and shall be responsible for convening such meetings and for the keeping of the minutes of the meetings. Each Director and the General Manager may request to add to the agenda any items relating to the operation and activities of the JV Company that such Director or the General Manager deems necessary to be discussed at such meeting and shall notify the Chairman and the Vice-Chairman of such request in writing at least fourteen (14) days prior to the date of the meeting. In order to facilitate the smooth conduct of the Board’s business, the Chairman together with the Vice Chairman may appoint a secretary for the purpose of any Board meeting.
	7.3.6		The Chairman together with the Vice-Chairman shall call an interim meeting of the Board under a request thereof from no fewer than one-third of the Directors specifying the matters to be discussed, and shall notify all Directors in writing about the agenda and the subject(s) of the meeting.

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	7.3.7		Except in urgent cases, in which a matter must be decided within a shorter period in the interest of the JV Company the Chairman in coordination with the Vice-Chairman shall send written notice in both English and Chinese to all Directors at least fourteen (14) days prior to any regular, or ten (10) days prior to any interim meeting to be held, stating the agenda, time and place of the meeting. Such notice may, however, be waived by the unanimous consent of all Directors prior, after or at the meeting in person, by telephone or by proxy. Such notice periods shall not apply for any reconvened meeting as stated in Article 7.3.4 above.
	7.3.8		Each Party has the obligation to ensure that the Directors it appoints are present at the Board meeting in person or by proxy. Should a Director be unable to attend a Board meeting for any reason, she/he must appoint a proxy, in writing, by mail, facsimile or hand-delivery, to be present and to vote at the meeting on his/her behalf. A proxy may represent one or more Directors and shall have the same rights and powers as the Director who appointed him/her.
	7.3.9		Board resolutions, if so agreed by all Directors, also may be passed through a written circular vote via mail or facsimile exchange. Such written resolutions shall be filed with the minutes of the Board and shall have the same force and effect as a vote taken by the Directors physically present at a meeting.
	7.3.10		Board meetings may be held by telephone or other electronic audio or video means such that everyone can hear each other at all times and participation by a Director or his/her proxy in a meeting by such means shall constitute presence of such Director or his proxy in person at a meeting.
	7.3.11		Directors shall serve as Directors without remuneration, unless otherwise approved by the Board. All reasonable costs, including round-trip airplane tickets and reasonable accommodation incurred by any Director or his/her proxy for attending a Board meeting and for performance of duties assigned by the Board, shall be borne by the JV Company. Remuneration and other expenses of each Director unrelated to the JV Company’s business shall not be borne by the JV Company. If a Director also assumes a position as a manager or staff employee in the JV Company, he/she shall be compensated by the JV Company according to that position.
	7.3.12		The General Manager is entitled to attend the meetings of the Board of Directors, even if he or she is not a Director. The General Manager, however, does not have the right to vote at the Board of Directors’ meetings unless she/he also is a Director.

7.4		Minutes
		Unless a secretary is appointed, the minutes of meeting shall be prepared by the Chairman together with the Vice-Chairman. This duty shall include taking minutes of the meeting, and delivering the minutes and other documents relating to the meeting to the Directors. Minutes of Board meetings shall be signed by the Chairman and Vice-Chairman, unless otherwise required under applicable PRC Laws. Copies of the minutes of Board meetings shall be sent to each Party, shall be kept in English and Chinese, and shall be placed on file at the JV Company’s head office.

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7.5		Urgency
		If, in the reasonable opinion of the General Manager, a decision which would fall under the responsibility of the Board must be taken urgently in order to save the JV Company or the JV Company’s interest from loss or damages before a Board Meeting can be convened or a written resolution by the Board can be obtained, the General Manager, upon securing at least the prior consent of one Director appointed by BRILLIANCE and one Director appointed by BMW, may make the respective decision and submit the decision to the next meeting in which the retroactive authorization of the Board shall be sought. However, the General Manager immediately shall inform the Chairman and the Vice-Chairman, in writing, about the situation of urgency and the decision which is taken.

Article  8           Deadlock