Factory Building Lease Agreement

EXHIBIT 10.6

Factory Building Lease Agreement

This Factory Building Lease Agreement (the “Lease Agreement”) is entered into as of March 1, 2008 (“Effective Date”) in the city of Shanghai, by and between SHANGHAI KAI HONG TECHNOLOGY CO., LTD. (hereinafter referred to as “DSH”) with its registered office at Xx.0 Xxxx 00 Xxx Xxxxxx Xxxx, Xxxxxxxxx Export Processing Zone, Shanghai, P.R.China and SHANGHAI YUAN HAO ELECTRONIC CO., LTD. (hereinafter referred to as “Yuan Hao”) with its registered office at Xx.0 Xxxx 00 Xxx Xxxxxx Xxxx, Xxxxxxxxx Export Processing Zone, Shanghai, P.R.China

DSH and Yuan Hao are collectively referred to as the “Parties” and individually as a “Party”.

WHEREAS,

The Parties agree on the lease of a portion of the first floor of the Factory Building (as defined below) and a portion of the second floor of the Factory Building. Yuan Hao represents that it is the lawful owner of the Factory Building.

1. Definitions

Unless otherwise defined in this Lease Agreement, the terms used herein shall have the following meanings:

1.1 “Factory Building” shall mean the three-story building located at Xx.0 Xxxx 00 Xxx Xxxxxx Xxxx, Xxxxxxxxx Export Processing Zone, Shanghai, P.R.China.

1.2 “First Floor” shall mean the portion of the first floor of the Factory Building that is to be leased (Exhibit 1, first floor layout of the Factory Building).

1.3 “Second Floor” shall mean the portion of the second floor of the Factory Building that is to be leased (Exhibit 1, second floor layout of the Factory Building).

1.4 “Lease Floors” shall mean First Floor and Second Floor of the Factory Building.

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1.5 “Lease Term” shall mean the period of time in which DSH is entitled to use the Lease Floors, and Yuan Hao is entitled to receive rent from DSH in accordance with the terms and conditions of the Lease Agreement.

1.6 “DSH #2 Building” shall mean the building in construction located at Xx.0 Xxxx 00 Xxx Xxxxxx Xxxx, Xxxxxxxxx Export Processing Zone, Shanghai, P.R.China.

2. The Standard of the Factory Building

2.1 Yuan Hao shall provide minimum quality standards for the Factory Building and shall guarantee that ancillary facilities of the Factory Building and supports for the Lease Floors (such as the Factory Building elevators) are in compliance with all the relevant quality standards and meet DSH’s demands and requirements.

3. Lease Term

3.1For the Lease Floors, the Parties agree that the Lease Term shall begin on March 1, 2008 until the time when DSH #2 Building is leased by DSH.

3.2 DSH shall decide the initial lease date of DSH #2 Building and shall notify such initial lease date of DSH #2 Building not less than thirty (30) days before the expiration of the Lease Term.

3.3 The Parties agree that the Lease Term for the Lease Floors shall be terminated without further extension unless DSH gives written notice of a request to extend such Lease Term not less than thirty (30) days before the expiration of the Lease Term. Yuan Hao shall not terminate this Lease Agreement without DSH’s written approval. During the Lease Term extension period, the items relating to the rental set forth in Article 5 of the Lease Agreement shall be adjusted on the basis of the market prices at the time of the Lease Term extension and after consultation between the Parties.

3.4 If during the Lease Term or the Lease Term extension period, Yuan Hao receives from a third party a bona fide, legally binding offer to lease the portion of the Fourth Floor not already leased by DSH, Yuan Hao shall notify DSH of this fact. The notice shall specify all the terms of the bona fide third party offer. DSH shall then have thirty (30) days to lease that portion of the Lease Floors specified in the third party’s bona fide

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offer for the rent and related details set forth in Articles 4 and 5. Yuan Hao shall not lease any portion of the Lease Floors to any third party until the thirty (30) days has expired without DSH exercising its right of first refusal. Any other terms not specified in this Lease Agreement regarding the Lease Floors, both Parties shall negotiate and sign a supplemental agreement for these unspecified terms. Such signed supplemental agreement shall constitute a part of the entire Lease Agreement and shall have the same effectiveness as the entire Lease Agreement.

4. Total Lease Area of the Lease Floors

4.1 First Floor has a total lease area of 998 square meters.

4.2 Second Floor has a total lease area of 1,292 square meters.

4.3 Lease Floors has a total lease area of 2,280 square meters.

5. Rental

5.1 The Parties agree that the monthly rent per square meter for the First Floor shall be Renminbi (“RMB”) 26.07 per square meter. The total monthly rent for the First Floor shall be RMB 25,757.16.

5.2 The Parties agree that the monthly rent per square meter for the Second Floor shall be RMB 26.07 per square meter. The total monthly rent for the Second Floor shall be RMB 33,682.44.

5.3 The Parties agree that the total monthly rent for the Lease Floors shall be RMB 59,439.60.

6. Deposit

DSH shall pay Yuan Hao a deposit amount of RMB 59,439.60 within ninty (90) days of the Effective Date of the Lease Agreement.

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7. Method of Payment

For the Fourth Floor, DSH shall pay the Rental in RMB to the RMB bank account as designated by Yuan Hao before the first day of every month.

8. Termination of the Lease Agreement

If either Party terminates the Lease Agreement prior to the expiration of the Lease Term without the consent from the other Party, the Party that terminates the Lease Agreement shall pay damages to the other Party to compensate for such Party’s actual loss. The amount of damages shall include, but not be limited to, the reasonable profits, out-of-pocket costs, legal service fees, Court fees, arbitration fees, accounting fees and removal or relocation fees.

9. Insurance and Repair Costs

9.1 During the term of the Lease Agreement, Yuan Hao shall purchase and maintain insurance coverage to cover any and all casualty damage to the Factory Building, and shall be responsible for repairing all structural damages to the Factory Building that are not the result of improper use by DSH. DSH shall be responsible for all repair costs arising from improper building usage by DSH. If Yuan Hao cannot obtain building insurance, DSH will need to obtain insurance for the Fourth Floor, and Yuan Hao will reimburse DSH for all costs of such insurance coverage.

9.2 Yuan Hao shall be entitled to inspect the Factory Building at reasonable intervals and upon reasonable notice to DSH. DSH shall provide assistance to allow such inspections.

10. Liability for Breach of the Lease Agreement

10.1 If DSH violates Article 5 of the Lease Agreement for failing to pay the Rental, then DSH shall pay a penalty at the rate of 0.011% of the Rental for each day of delay.

10.2 If Yuan Hao breaches Articles 2, 3, 11 and any of its warranties set forth in this Lease Agreement, Yuan Hao shall compensate DSH for all of DSH’s losses and damages including consequential, special, punitive and incidental damages.

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10.3 DSH shall not:

	(1)		sub-lease the Lease Floors or exchange the use of the Lease Floors with any third party without Yuan Hao’s prior written consent.
	(2)		alter the structure of the Lease Floors or damage the Factory Building without Yuan Hao’s prior written consent.
	(3)		change the lease purpose stipulated by the competent authorities without Yuan Hao’s consent.

11. Warranties

11.1 Yuan Hao hereby warrants that if the Factory Building is sold to any third party during the Lease Term or the period of renewal, such third party shall be required to fulfill all obligations of Yuan Hao under the Lease Agreement. If said third party fails to carry out the Lease Agreement, Yuan Hao shall compensate DSH for all of DSH’s losses and damages including consequential, special, punitive and incidental damages.

11.2 In case Yuan Hao mortgages the Factory Building to the third party, any loss suffered by DSH shall be paid by Yuan Hao.

12. Force Majeure

12.1. The definition of Force Majeure

Force Majeure shall mean any event which arises after the Effective Date that is beyond the control of the Parties, and is unforeseen, unavoidable and insurmountable, and which prevents total or partial performance by either Party. Such events shall include earthquakes, typhoons, flood, fire, war, acts of government or public agencies, strikes and ay other event which cannot be foreseen, prevented and controlled, including events which are recognized as Force Majeure in general international commercial practice.

12.2 Consequences of Force Majeure

a. If an event of Force Majeure occurs, the contractual obligation of a Party affected by such an event shall be suspended during the period of delay and the time for performing such obligation shall be extended, without penalty, for a period equal to such suspension.

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b. The Party claiming Force Majeure shall give prompt notice to the other Party in writing and shall furnish, within fifteen (15) days thereafter, sufficient proof of the occurrence and expected duration of such Force Majeure. The Party claiming Force Majeure shall also use all reasonable efforts to mitigate or eliminate the effects of the Force Majeure.

c. If an event of Force Majeure occurs, the Parties shall immediately consult with each other in order to find an equitable solution and shall use all reasonable efforts to minimize the consequences of such Force Majeure.

13. Effective Date of the Lease Agreement

The Lease Agreement shall become effective after the legal representatives or authorized representatives of both Parties affix their signatures and company seals on the Lease Agreement.

14. Language of the Lease Agreement

The Lease Agreement is made and executed in Chinese and English, both versions having equal validity except as prohibited by law.

15. Settlement of Dispute

15.1 Friendly consultations

a. In the event of any dispute, difference, controversy or claim arising out of or related to the Lease Agreement, including, but not limited to, any breach, termination or validity of the Lease Agreement, (the “Dispute”) then upon one Party giving the other Party notice in writing of the Dispute (the “Notice of Dispute”), the Parties shall attempt to resolve such Dispute through friendly consultation.

b. If the Dispute has not been resolved through friendly consultations with thirty (30) days from the Notice of Dispute, the Dispute shall be resolved by arbitration in accordance with Article 15.2 of this Lease Agreement. Such arbitration may be initiated by either Party.

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15.2 Arbitration

The arbitration shall be conducted by Shanghai Arbitration Commission in Shanghai, China in accordance with its procedure and rules. The arbitration award shall be final and binding on the Parties. The costs of arbitration shall be borne by the losing Party except as may be otherwise determined by the arbitration tribunal.

15.3 Continuance of performance

Except for the matter in Dispute, the Parties shall continue to perform their respective obligations under the Lease Agreement during any friendly consultations or any arbitration pursuant to this Article 15.

15.4 Separability

The provisions of this Article 15 shall be separable from the other terms of the Lease Agreement. Neither the terminated nor the invalidity of the Lease Agreement shall affect the validity of the provisions of this Article 15.

16. Applicable Law

The validity, interpretation and implementation of the Lease Agreement and the settlement of Disputes shall be governed by relevant laws of the People’s Republic of China and regulations that are officially promulgated and publicly available.

17. Compliance with the Foreign Corrupt Practices Act

17.1 Yuan Hao acknowledges that DSH is a corporation with substantial presence and affiliation in the United States and, as such, is subject to the provisions of the Foreign Corrupt Practices Act of 1977 of the United States of America, 15 U.S.C. §§ 78dd-1, et seq., which prohibits the making of corrupt payments (the “FCPA”). Under the FCPA, it is unlawful to pay or to offer to pay anything of value to foreign government officials, or employees, or political parties or candidates, or to persons or entities who will offer or give such payments to any of the foregoing in order to obtain or retain business or to secure an improper commercial advantage.

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17.2 Yuan Hao further acknowledges that it is familiar with the provisions of the FCPA and hereby agrees that Yuan Hao shall take or permit no action which will either constitute a violation under, or cause DSH to be in violation of, the provisions of the FCPA.

18. Miscellaneous

18.1 Any amendment to this Lease Agreement shall be in writing and duly signed by both Parties. Such amendment shall constitute a part of the entire Lease Agreement.

18.2 Both Parties acknowledge that they are aware of their respective rights, obligations and liabilities and will perform their obligations under the Lease Agreement in accordance with the provisions of the Lease Agreement. If one Party violates the Lease Agreement, the other Party shall be entitled to claim damages in accordance with the Lease Agreement.

18.3 Any notice or written communication requited or permitted by this Lease Agreement shall be made in writing in Chinese and English and sent by courier service. The date of receipt of a notice or communication shall be deemed to be seven (7) days after the letter is deposited with the courier service provided the deposit is evidenced by a confirmation receipt. All notice and communications shall be sent to the appropriate address set forth below, until the same is changed by notice given in writing to the other Party.

To: DSH
Address: Xx.0 Xxxx 00 Xxx Xxxxxx Xxxx, Xxxxxxxxx Export Processing Zone, Shanghai, P.R.China
Attn.: Shanghai Kai Hong Technology Co., Ltd.

To: Yuan Hao
Address: Xx.0 Xxxx 00 Xxx Xxxxxx Xxxx, Xxxxxxxxx Export Processing Zone, Shanghai, P.R.China
Attn.: Shanghai Yuan Hao Electronic Co., Ltd.

18.4 This Lease Agreement comprises the entire understanding between the Parties with respect to its subject matters and supersedes any previous or contemporaneous

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communications, representations, or agreements, whether oral or written. For purposes of construction, this Lease Agreement will be deemed to have been drafted by both Parties. No modification of this Lease Agreement will be binding on either Party unless in writing and signed by an authorized representative of each Party.

Shanghai Kai Hong Technology Co., Ltd.
 

By  

Authorized Representative 

Date: 

Shanghai Yuan Hao Electronic Co., Ltd.
 

By  

Authorized Representative 

Date: 

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