PIPE GAS FRANCHISE AGREEMENT FOR YU COUNTRY Yu Country Public Utilities Management Division Yu Country Jin Li Gas Co., Ltd. December 26, 2006
PIPE
GAS FRANCHISE AGREEMENT FOR YU
COUNTRY
Yu
Country Public Utilities Management Division
Yu
Country Xxx Xx Gas Co., Ltd.
December
26,
2006
TABLE
OF
CONTENTS
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General
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Chapter
2
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Definitions
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Chapter
3
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Grant
and Cancellation of Franchise
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Chapter
4
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Termination
of Franchise Agreement
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Chapter
5
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Construction,
Maintenance and Upgrade of Gas Facilities
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Chapter
6
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Security
of Gas Supply
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Chapter
7
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Quality
and Service Standards
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Chapter
8
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Fees
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Chapter
9
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Rights
and Obligations
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Chapter
10
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Breach
of Agreement
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Chapter
11
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Force
Majeure
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Chapter
12
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Settlement
of Disputes
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Miscellaneous
Provisions
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Chapter
14
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Applicable
Law
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Chapter 1
General
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1.1
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In
order to regulate pipe gas franchise operation in Yu
Country, to strengthen market supervision, to safeguard public interests
and public security, both parties agree to enter into this Agreement
in Yu
Country, Zhangjiakou Ciry, Hebei Province on this day of December
26, 2006 through
legal procedure, pursuant to Administrative
Measures on the Franchise Operation of Municipal Public Utilities
by
the Ministry of Construction and administrative regulations for municipal
public utilities in Hebei Province.
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1.2
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This
Agreement is signed by and between the Yu
Country Public Utilities Management Division
(hereinafter referred to as Party A), entrusted by Yu Country Municipal
Government and Yu Country Xxx Xx Gas Co., Ltd. (hereinafter referred
to as
Party B)
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Party
A:
Yu
Country Public Utilities Management Division
Legal
address:
Legal
representative: Xx Xxxxxxx (Director)
Party
B:
Yu Country Xxx Xx Gas Co., Ltd.
Legal
address:
Registration
No.: 1307262000143
Legal
representative: Ma Jiali (Board Chairman)
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1.3
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The
principles of franchising:
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Both
parties agree to comply with the following principles:
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(1)
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openness,
equality, justice and priority of public
interests.
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(2)
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compliance
with Chinese laws.
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(3)
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in
accordance with urban planning and gas
planning.
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(4)
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providing
users with high quality services, and reasonable price of gas
supplies.
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(5)
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ensuring
safe and stable supply of pipe gas; improving management performance
and
technical level.
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(6)
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effective
use of clean energy; promoting sustainable development of gas
industry.
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Chapter
2
Definitions
For
the
purposes of this Agreement,
the following terms and phrases shall have the meaning and interpretation given
herein.
2.1
“China” means the People’s Republic of China, not excluding Hongkong SAR, Macao
SAR and Taiwan Region for the purpose of this Agreement only
2.2
“Laws” means any applicable Chinese laws, administrative regulations, regional
regulations, autonomous regulations and separate regulations, rules, judicial
interpretation and other legally biding regulative documents.
2.3
“Gas”
means LPG, natural gas, artificial coal gas and other gas fuels for civil,
commercial and industrial use.
2.4
“Pipe
Gas” means gas provided to users through pipelines.
2.5
“Pipe
Gas Operation” means operation of pipe gas supply and related
services.
2.6
“Pipeline Network” means principal pipelines, branch pipelines and community
pipelines that are used to transit gas, regulator stations/boxes at the joint
of
pipelines and auxiliary facilities.
2.7
“Municipal Pipe Gas Facilities” means all the gas pipeline facilities outside
the red line of municipal planning.
2.8
“Community Pipe Gas Facilities” means all the gas pipeline facilities within the
red line of municipal planning.
2.9
“User-Affected-Projects” means occurrence of any of the following situations (1)
the suspense of gas supply or substantial decrease of gas pressure affecting
over 1000 households, lasting more than 24 hours; (2) affecting traffic of
vehicles and pedestrians on major and minor trunk roads for over 48 hours;
(3)
affecting the use of other public facilities.
2.10
“Gas
Emergencies” means all incidents related to pipe gas that requires urgent and
irregular response, such as gas explosion, combustion and leak.
2.11
“Franchise” means Party B’s exclusive right authorized by Party A of
constructing, operating and maintaining the pipe gas facilities, supplying
customers with gas through pipeline, providing charged fix service on pipe
gas
facilities in the authorized area during its operation.
2.12
“Force Majeure” means events and situation which are unforeseeable, unavoidable
or insurmountable. With this precondition, Force Majeure shall include but
not
be limited to:
(1)
lightening, earthquake, volcano eruption, land slide, flood, storm, tsunami,
typhoon, tornado or draught;
(2)
epidemic disease and plague;
(3)
war,
invasion, armed conflict or act of foreign enemy, use of military power, riot
or
terrorism;
(4)
strike across an industry, a city, a region or a country;
(5)
decrease of gas-supply quality or deduction of gas-supply amount which is not
caused by Party B.
2.13
“Day,
Month, Quarter, Year” means calendar day, month, quarter and year.
Chapter
3
Grant and Cancellation of Franchise
3.1
Grant
of Franchise
(1)
This
Agreement is hereby signed between Party A and Party B;
3.2
Franchise Term
The
franchise granted under this Agreement shall be for a term of 25 years, starting
on November 8, 2005 and ending on November 7, 2030.
3.3
Franchise Location
The
franchise granted under this Agreement shall be within the Yu Country Municipal
Administrative Region.
3.4
Scope
of Franchise
The
scope
of franchise granted under this Agreement include: constructing, managing and
operating natural gas projects, LPG projects and auxiliary facilities; providing
related rescue and rush-repair services; constructing and operating gas
stations; sales of gas; gas supply and sales services for industrial,
commercial, public construction, residential and transportation
uses.
3.5
Transfer and Pledge of Franchise
Any
franchise and other related rights granted under this Agreement cannot in any
event be sold, transferred, leased, assigned or disposed of to a third party
unless otherwise agreed between Party A and Party B, during the franchise
term.
3.6
Cancellation of Franchise
Party
A
has the right to terminate the Franchise Agreement granted to Party B and take
over it upon occurrence of any of the following situations:
(1) Disposition
of the franchise by transfer, lease, lien and etc.;
(2) Pledging
the Company assets without authorization;
(3) Mismanagement
that causes serious quality and safety accidents and seriously affects the
public interest;
(4) Unauthorized
and arbitrary termination and suspension of operation that affects the public
interest and safety; and
(5) Other
situations as specified under the applicable laws, regulations and
rules.
Chapter
4
Termination of Franchise Agreement
4.1
Expiration
of the Franchise Agreement
The
Franchise Agreement shall terminate automatically upon the expiration date
of
the franchise term.
4.2
Termination of the Agreement
(1)
In
the case of Force Majeure or as deemed necessary by one party, both Parties
shall negotiate to terminate this Franchise Agreement prior to the expiration
date, and sign a Termination Agreement. Without agreement through consultation,
no party shall terminate this Franchise Agreement unilaterally prior to the
expiration date.
(2)
Both
parties shall terminate this Franchise Agreement upon the cancellation of
franchise.
4.3
Termination Date of the Franchise Agreement
(1)
the
expiration date of the Franchise Agreement
(2)
the
effective date of the termination
(3)
the
cancellation date of Franchise
4.4
Termination Agreement
(1)
If
the Franchise Agreement shall be terminated due to the expiration, both parties
shall sign a Termination Agreement through negotiation completed 180 days prior
to the expiration date.
(2)
If
the Franchise Agreement shall be terminated due to the cancellation of
Franchise, both parties shall sign a Termination Agreement 180 days prior to
the
termination date.
4.5
Guidelines on the ownership and disposition of assets
(1)
The
ownership of assets belongs to the investor.
(2)
Assets disposition shall be based on the evaluation of Party B’s assets made by
the intermediary agency approved by both parties.
(3)
When
Party B’s franchise expires, its assets must be transferred, and the
compensation for the transferred assets must be provided based on the
evaluation.
Chapter
5
Construction, Maintenance and Upgrade of Pipe Gas Facilities
5.1
Construction of Pipe Gas Facilities
In
the
region designated by this Agreement, Party B shall be responsible for the
investment and construction of municipal pipe gas facilities, according to
the
requirements of urban planning.
5.2
Land
Use
In
the
franchise term, the land on which Party B invests to build pipe gas facilities
shall be regarded as land for public utilities use. Party B shall pay taxes
and
fees for urban infrastructure land use. Party B shall not change the purpose
of
land or transfer or pledge the land-use right without approval.
5.3
Operation, Maintenance and Upgrade of Pipe Gas Facilities
In
the
franchise term, Party B shall be responsible for the operation, maintenance
and
upgrade of pipe gas facilities, based on national and regional standards as
well
as relevant regulations.
5.4
Expropriation and Compensation
If
Party
A needs to expropriate legally the pipe gas facilities due to public interests,
Party B shall cooperate with Party A, and Party A shall give Party B reasonable
compensation.
Chapter
6
Security
of Gas
Supply
6.1
Security
Requirements
Party
A
and Party B shall both strictly abide by national and regional safety laws,
regulations, rules and policy documents. Party B promises to meet national,
industrial and regional standards on gas supply, operation, quality, security
and service. Party B shall be responsible for pipe gas supply security, public
security and safe use publicity in the franchise region based on
laws.
6.2
Gas
Security System
Party
B
shall build and improve the responsibility system as well as the security
system, so as to ensure safe and stable gas supply, operation and service and
to
prevent accidents.
When
accidents happen and during accidents, Party B shall use all kinds of emergency
measures to remedy, so as to minimize the impact of accidents on users and
the
public. Meanwhile, Party B must notify relevant departments according to
national security administrative regulations.
Party
B
shall strengthen inspection and eliminate potential hazards. Party B shall
promptly stop all the possible threat to gas infrastructure, and inform relevant
departments, persuade and inform in writing the organizations and individuals
violating the security regulations to make correction. As for those who do
not
follow the instruction, Party B shall notify Party A or administrative and
law
enforcement agencies in writing. Party A, on receiving reports from Party B,
shall promptly coordinate with law enforcement agencies to investigate and
to
punish.
6.3
Security Prevention
Party
B
shall strictly follow the guidelines in pipe gas operation, maintenance and
repair, and carry out regular inspections of the operation and performance
of
pipe gas facilities. In necessary cases, Party B shall carry out evaluation
on
the quality of underground pipeline network, and report to Party A regularly
on
the operation of the facilities if necessary ( in case of natural disasters
and
serious accidents).
The
obligations of each party shall be clarified in Gas Supply Contracts signed
between Party B and the users.
6.4
Emergency Repair
Party
B
shall make a plan for emergency repair, rescue and disaster relief, and build
a
guarantee system effective in organizing, directing, supplying equipment and
materials, so that when gas emergencies happen, the guarantee system can be
launched smoothly. Party B shall have a pipe gas facilities emergency repair
team, providing around-the-clock emergency hotline.
6.5
Safe
Use of Pipe Gas
Party
B
shall examine the pipes of customers and propagandize the knowledge of safe
use,
answer users’ inquiries, and raise people’s awareness in protecting pipe gas
facilities.
6.6
Reports on User-Affected-Projects
If
Party
B’s maintenance and transformation of pipe gas facilities may affect users,
Party B shall inform users 72 hours before projects begin, and notify users
and
the public through media in advance the general information of projects, such
as
construction term, level of impact and affected region.
6.7
Emergencies Notice
If
the
gas emergencies being handled by Party B affect or may affect a large group
of
users, Party B shall simultaneously inform Party A of the emergencies, and
notify users who are affected or may be affected through proper
means.
Chapter
7
Quality
and Service Standards
7.1
Quality
Party
B
shall set up a quality guarantee system, to ensure pipe gas quality, pipeline
transportation pressure, pipeline pressure to gas cookers, combustion heat
value, Xxxxx-index, gas odorization etc. can meet the quality requirements
hereafter set forth in Appendix 4.
7.2
Service Standards
Party
B
shall, according to users’ practical needs, provide users with such
comprehensive services as business hotline, a chain of service stations,
business reception, regular meter reading, facilities installation and
inspection, which shall meet the standards hereafter set forth in Appendix
5.
Chapter
8
Fees
8.1
Approved Price
Both
parties agree through consultation as follows:
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(1)
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initial
residential installation fee: XXX 0000/xxxx for a household
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(2)
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gas
price: RMB 2.5 per cubic meter
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The
payment charged by Party B from users in its service region shall be in
accordance with pricing standard document published by Party A together with
the
local department in charge of pricing.
The
charging standard of other paid services provided by Party B shall be approved
by the local department in charge of pricing separately.
8.2
Payment of Gas Price
Gas
Price
shall be price per cubic meter times gas consumption, or shall be calculated
by
heat unit price. The payment of gas price shall be made in ways of regular
meter
reading or IC card deposit, based on applicable law.
8.3
Price
Adjustment Procedure
In
the
cases of major changes in operational cost which can not be attributed to Party
B, Party B can apply for adjustment of pipe price. Party A shall provide
adjustment advice to upon verification.
8.4
Cost
Regulation
Party
A
has the rights to supervise
the operational cost of pipe gas enterprises, and assess the operational
performance of the enterprises.
Chapter
9
Rights and Obligations
9.1
Rights of Party A
(1)
Party
A supervises Party B’s franchise operations according to national laws,
regulations and technological standards.
(2)
Party
A supervises Party B’s implementation of the Franchise Agreement. Party A can
hire intermediary agencies to evaluate Party B’s assets and operations, and make
suggestions to Party B based on the evaluation results.
(3)
Party
A has the right to review whether Party B’s Pipe Gas Five Year Plan and Annual
Investment Plan is in accordance with the general urban planning.
(4)
Party
A takes users’ complaints about Party B, investigates the situations and settles
the problems according to law.
(5)
Other
regulative rights granted by laws, rules and regulations.
9.2
Obligations of Party A
(1)
Party
A shall ensure the integrity of the franchise. During the franchise term, Party
A shall not grant the franchise to a third party in the franchise region which
has been granted to Party B.
(2)
Party
A shall be responsible for the coordination with the local government and
relevant departments of the government and shall provide the following
warranties to Party B in the form of official government documents:
·
to
grant
Party B the exclusive right to construct and operate natural gas project
within
the urban planned area of Yu County for 25 years and ensure the legality
thereof; not to approve any new pipe gas project during such time;
·
to
ensure
that Party B shall enjoy the relevant government preferential policies relating
to business investment and raising of capital, urban infrastructure construction
and land grant in Yu County. Considering that the Pipeline Project is an
urban
infrastructure project, any government fees to be incurred by Party B for
the
destruction of municipal roads for the construction of the condensed gas
station
and pipeline network shall be deducted and exempted.
·
to
require the inclusion of construction of pipeline gas project as part of
any new
real estate development project and any renovation or expansion projects
related
thereto in order to obtain the required government approval; The government
departments that are in charge of urban construction, planning, public
utilities, real estate must supervise closely to ensure that pipeline gas
projects are designed, constructed and inspected simultaneously and together
with the principal projects, and can only be constructed by Party B; otherwise,
such projects shall not be approved for construction, inspection and no sales
permit shall be issued therefor.
(3)
Party
A shall be responsible for assisting Party B in the following
matters:
·
the
application and registration procedures to establish the gas project
company;
·
the
procedures for land use, planning, fire protection and commencement of project
construction;
·
making
available water, electricity and transportation and handle other infrastructure
related matters and assisting Party B to organize the design and construction
of
the project;
·
application
of all potentially available tax and administrative fee waivers and
deductions
·
timely
provision of the municipal planning and relevant materials to Party B upon
its
request;
·
uniform
planning, implementation and management of pipeline gas project in accordance
with the urban planning of Yu Country; complete and improve the pipe gas
network
in stages in accordance with users’ requests.
9.3
Rights of Party B
(1)
Party
B has the exclusive rights to pipe gas business in the franchise
region.
(2)
Party
B has the rights to invest and develop pipe gas in the franchise
region.
(3)
Party
B has the rights to ensure the safe operation of gas pipeline network.
(4)
Party
B has the rights to refuse supplying gas to users whose pipe gas facilities
can
not meet national safety technical standards and have potential safety hazards,
or users who severely violate gas supply contracts or use gas illegally.
(5)
Other
rights given by laws, regulations and this Agreement.
9.4
Obligations of Party B
(1)
Party
B shall make both long term and short term investment plans for pipe gas
development, and make investment pursuant to general urban planning and gas
planning.
(2)
Party
B shall provide gas and relevant services according to national, industrial,
regional and corporate standards.
(3)
Party
B shall maintain the normal operation of gas pipe facilities and pipeline
network, and ensure the continuity of gas supply. In the cases of failure or
accidents, Party B shall immediately carry out emergency repair and
rescue.
(4)
Party
B has the obligation to offer universal service and continuous operation. Party
B shall not suspend gas supply, dismiss or close without permission from Party
A.
(5)
Party
B shall accept daily supervision, regulation and temporary takeover by Party
A,
allow other regulative measures and supervision by the public.
(6)
Party
B has the obligation and must compensate Party A for the environmental pollution
and any damage, fees, loss caused by the construction, operation and maintenance
of municipal pipe gas facilities, excluding the damage, fees, loss due to Party
A’s breach of the agreement or the environmental pollution which Party B is not
responsible for as stated in this Agreement.
(7)
Party
B must submit to Party A upon completion all the technical data in the design,
construction and operation of the municipal pipe gas facilities, including
design report, calculation and design documents, operational data, so that
Party
A can supervise the design, construction process and operation of facilities.
(8)
Party
B shall ensure normal supply and continuous service during the period designated
by the grantor after the cancellation and termination of franchise. Party B
shall be fully responsible for the safety, service and personnel resettlement
during the transitional period before transferring the necessary assets to
maintain franchise operations and all the documents to the enterprise designated
by the grantor.
Chapter
10
Breach of Agreement
10.1
Compensation Liability
Conduct
of any Party that violates any term under this Agreement shall be deemed as
breach of agreement. The Breaching Party bears compensation liability, including
the damages caused by the Non-Breaching Party to a third party, due to the
breaching party’s violation.
The
Non-Breaching Party shall minimize the loss due to the violation of the
Breaching Party.
Should
part of the loss occur due to the action or inaction of the Non-Breaching Party,
equivalent amount shall be deducted from indemnity paid by the Breaching
Party.
10.2
Advance Notice
When
Party B knows or should know that it is no longer capable to honor this
Agreement, it shall inform Party A in written forms in advance, and help Party
A
carry out temporary takeover plan. If Party B fails to inform Party A promptly,
which leads to loss or major social impact, Party B and its responsible person
shall bear relevant legal responsibilities.
10.3
Amendment
If
Party
A believes Party B’s conduct can lead to the cancellation of the Franchise,
Party A shall inform Party B in written forms, and shall offer Party B a Cure
Period of 30 days since the day of the written notice.
Party
B
shall correct mistakes or eliminate obstacles within the Cure Period, or raise
an objection to Party A’s inform.
Chapter
11 Force
Majeure
11.1 Exemption
from liability
Should
any Party be prevented from performing its complete or partial obligations
under
this agreement due to the occurrence of any event of Force Majeure, such party
can suspend its obligations under this Agreement (excluding obligations occurred
before the Force Xxxxxx events that should be but has not yet been
met.)
If
Party
A or Party B suspends its obligations based on the previous term, it must resume
its obligations as soon as possible once the event of Force Majeure
ends.
11.2
Limited
exemption from liability
The
following occurrences shall not be regarded as Force Majeure
events:
|
(1)
|
equipment
failure or damage due to normal attrition, inappropriate maintenance
or
insufficient inventory of component parts.
|
|
(2)
|
any
conduct, event or situation that only leads to non-economy when
implementing this Agreement.
|
11.3
Obligations of the Party Claiming Force Majeure
The
Party
claiming Force Majeure shall promptly inform the other party in writing once
it
knows about the Force Majeure event, stating details of such event, the possible
impact on the Party’s implementation of its contractual obligations and its
predicted period, as well as any other information the other party may
reasonably request for. In the event of Force Majeure, each Party shall bear
its
own expenses and costs incurred by Force Majeure.
The
Party
claiming Force Majeure shall, in all times, use all reasonable endeavours to
avoid or minimize the consequences of such Force Majeure.
Chapter
12 Settlement of Disputes
12.1
Consultation
In
the
event of any dispute, controversy or claim arising out of or under or relating
to this Agreement, or about the interpretation of the terms in this
Agreement(including the existence, validity or termination hereof) or arising
from the implementation of this Agreement, the Parties shall attempt in the
first instance to resolve such dispute through friendly consultations.
12.2
Arbitration or Litigation
In
the
event such dispute is not resolved through consultations according to 12.1,
the
dispute can be submit for arbitration before the China International Economic
and Trade Arbitration Commission ("CIETAC").
Chapter
13 Miscellaneous Provisions
13.1
Signing of the Agreement
This
Agreement shall be signed when representatives of both Party A and Party B
have
been duly authorized to sign it, and the internal approval procedure of this
Agreement has been completed both at Party A and Party B.
13.2
Commencement of this Agreement
This
Agreement commences on the date when it is signed and sealed by representatives
of both Parties. Supplemental agreements and Appendix are part of this
Agreement. Such supplemental agreements and Appendix shall have the same force
and effect as this Agreement.
13.3
Amendment to the Agreement
During
the effective period of this Agreement, if this Agreement or part of this
Agreement can not be performed due to changes in applicable laws and regulations
or relevant policies, amendment or supplemental agreements can be made to this
Agreement through consultation between the two Parties.
13.4
Severability
If
any of
the provisions of this Agreement is, or is determined to be illegal, invalid
or
unenforceable by any arbitration tribunal or court with jurisdiction, the
validity and enforceability of other provisions shall not be
affected.
13.5
Continuing Validity
Provisions
of dispute settlement and provisions agreed to remain valid under this Agreement
after it terminates, shall survive the termination of this
Agreement.
Chapter
14 Applicable Law
14.1
This
Agreement and its Appendix are executed in the Chinese language in 4
originals. Each Party holds 2 originals. All Appendix shall have the same force
and effect as this Agreement.
14.2
This
Agreement shall be governed and interpreted by the laws of the People's Republic
of China.
Party
A:
Yu
Country Public Utilities Management Division
Sealed
Party
B:
Yu Country Xxx Xx Gas Co., Ltd.
Sealed
