Heilongjiang Lanxi Sunrise Linen Textile Industry Co., Ltd. Lanxi Tianqianfang Linen Co., Ltd. Fixed Asset Lease Agreement Lanxi County, Heilongjiang, China July 1, 2010
Heilongjiang
Lanxi Sunrise Linen Textile Industry Co., Ltd.
Lanxi
Tianqianfang Linen Co., Ltd.
Fixed
Asset Lease Agreement
Lanxi
County, Heilongjiang, China
July 1,
2010
1
Signatory
parties to this Agreement:
| Party A ("Lessor"): | Lanxi Tianqianfang Linen Co., Ltd |
| Address: | Group 39 of the Fourth Neighborhood, Chengdong Street, |
| Lanxi County | |
| Legal Representative: | FU Lijie |
| Party B ("Lessee"): | Heilongjiang Lanxi Sunrise Linen Textile Industry Co., Ltd. |
| Address: | Chengdong Street, Lanxi County, Heilongjiang |
| Legal Representative: | GAO Ren |
Pursuant to the relevant provisions of
the "People's Republic of China Contract Law," Party A and Party B have reached
consensus after full discussion and, on the basis of equality, voluntariness,
fairness and trust, have entered into this agreement in connection with the
matter of Party B leasing production facilities and equipment from Party
A:
Article
1 Basic
Facts Relevant to This Agreement
1.1 Party
A is a valid and existing limited liability company incorporated in accordance
with the People's Republic of China law and registered with Heilongjiang Lanxi
Administration of Industry and Commerce. It has registered capital of
RMB 10,000,000.00 and holds Enterprise Business Person Operation Permit (No.
232325100007352) with linen and linen products processing and sales, and
merchandise import/export as its scope of operation; the period of operation
starts on August 10, 2006 and ends on August 9, 2026.
1.2
Party B is a legally valid and existing limited liability company incorporated
in accordance with the People's Republic of China law and registered with
Heilongjiang Suihua City Administration of Industry and Commerce. It
has registered capital of RMB 6,000,000.00 and holds Enterprise
Business Person Operation Permit (No. 2232325100000046) with production of linen
yarn, linen fiber and linen products and technology development and consulting
as its scope of operation; the period of operation starts on June 11, 2002 and
ends on June 10, 2014.
1.3 Based
on the need of its business development, Party B intends to acquire Party A and
eventually become the sole holder of all the equity in Party A through the means
of purchasing all the equity interest from Party A's current
shareholders. For that purpose, Party B entered into
"Company Acquisition Intent Agreement" with Party A and its relevant
shareholders on April 26, 2010, and pursuant to the said agreement, Party B has
completed its financial and legal due diligence investigation
of Party A. The due diligence investigation has not
uncovered any pledge, proceedings, unsubstantiated assets and material business
risk that have not been disclosed and that could have materially affected the
proposed equity acquisition.
2
1.4 In
consideration of Party B's current operation need, the two parties agree:
subject to the final approval of this agreement by each party's respective
board, Party B will lease from Party A production facilities and equipment that
Party A legally owns pursuant to the provisions of this agreement, and the two
parties will, in full consideration of Party B's current operational need,
financing arrangement and matters acknowledged by both, follow the basic model
of "Lease First, Acquire Later" in order to realize the final objective of Party
B becoming the sold owner of all the equity interest in Party A as contemplated
in the "Company Acquisition Intent Agreement" between Party A, Party A's
relevant shareholders and Party B.
1.5 This
agreement is the preliminary substantive part of Party B's acquisition of Party
A. During the period of Party B's leasing production facilities and
equipment from Party B, the "Company Acquisition Intent Agreement" between the
two parties shall remain valid; and Party B shall have the right of first
refusal during the effective period hereof and within 6 months after the
expiration of the lease period hereof.
Article
2 Object
of Lease and Its Condition
2.1 The
object of the lease ("TOL") contemplated herein between Party A and Party B is
all of the fixed assets (including but not limited to all the real estate
properties, production facilities and equipment and supporting facilities that
Party A legally owns currently) that Party A currently legally
owns.
2.2 The
real estate property that Party A is to lease to Party B is situated in Group 39
of the Fourth Neighborhood; the said property has total construction area of
7,119.52 meter2 (see
Attachment 1 for all the certificates for this property) and its original design
purpose is industrial use.
2.3 Party
A as the holder of the ownership right to this property holds its ownership
certificates (certificates numbers: 2010-00774, 2010-00775, 2010-00776 and
2010-00777); as of the effective date of this agreement, there is no pledge or
warranty of any kind attached to it.
2.4 The
names, model, specification and quantity of equipment to be leased out by Party
A are listed in a table, which is attached as Attachment 2.
Article
3 Purpose of
Lease
3.1 Party
A has already inspected Party B's business permit, relevant production and
operation certificates or the scope of operations in which Party B has proposed
to be engaged. Party B promises to Party A that Party B will use TOL
it leases strictly for activities within the approved scope of operations and
for the purpose it is designed for and engage in the production of linen and
linen products and the operation of linen product processing.
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3.2 Party
B warrants that, during the term of the lease, Party B will not change the
nature of use originally planned and designed for TOL to use it in the
production and operation of products other than stipulated in 3.1 above without
obtaining prior written consent from Party A or without obtaining approval from
production safety regulatory authorities and fire departments in accordance with
the rules.
Article
4 Date
of Hand-over and Term of the Lease
4.1 Party
A and Party B agree that Party A will hand over to Party B TOL within 6 days
after this agreement becomes effective. At the time of hand-over,
Party A and Party B will each appoint three representatives to jointly perform
hand-over procedures and sign a "Hand-over Schedule", which is attached as
Attachment 3 hereto.
4.2 The
term of the lease is 1 year, starting from the effective date of this agreement
till June 30, 2011.
4.3 During
the term of this lease agreement, this agreement is automatically terminated if
Party A and its shareholders and Party B execute "Equity Acquisition Agreement,"
and the remaining rent must be returned by Party A in one lump sum to Party B
within 3 days upon such termination of this agreement.
4.4 Upon
expiration of the lease, Party B must hand back TOL according to the
schedule. If Party B needs to extend the lease, Party B must submit
written request for renewal of the lease 2 months prior to the expiration of the
lease and, upon Party A's consent, enter into a separate lease contract between
the two parties.
Article
5 Lease
Rent, Payment and Restriction
5.1 Party
A and Party B agree that the rent for TOL is ¥2.49 million per
year.
5.2 The
annual rent payment cycle is every 6 month, i.e., within 3 days of the
agreement's effectuation and the completion of the hand-over procedures, Party B
must make a one-time payment for 6-month's rent by wire transfer or in cash and
make the payment another one-time payment for next 6-month's rent 10 days before
the end of the first 6-month of the term.
Article
6 Party
A's Staff Arrangement and Settlement of Expenses
6.1 During
the term of the lease, Party B will keep all of Party A's staff in the front
production line and in the supporting logistics positions in the original posts
and pay them the salary at the rate of the average of their respective
12-month's salary but their labor relationship with Party A remain
unchanged.
4
6.2 Party
A's staff mentioned above must follow Party B's operation management, abide by
the labor disciplines, and Party A must assist Party B with personnel
management. Party B has the right to decide whether to retain those
of Party A's staff that do not follow operation management in consideration of
their performance at work.
6.3 Prior
to the effective date of this agreement, Party A is responsible for the expenses
arising from TOL such as electricity, water, gas, communication, equipment,
property management expenses, and must pay them on time.
6.4 During
the term of the lease, Party B is responsible for the expenses arising from TOL
such as electricity, water, gas, communication, equipment, property management
expenses, and must pay them on time.
Article
7 Requirements for the
Use of the Object of the Lease
7.1 Party
B must use TOL in the reasonable manner according to the purpose of use for TOL
stipulated herein and ensure the strict compliance with the requirements of the
law, statutes, regulations and operation rules related to operation safety
during the course of its use.
7.2 Party
A and Party B agree that, during the term of the lease, Party A must keep
reasonable maintenance, at its own expense, of the buildings and their
supporting structures included in TOL to ensure that Party B can use them in the
normal manner during the term of the lease; during the term of the
lease, Party B must keep reasonable maintenance at, its own expense,
of the equipment and facilities included in TOL. But Party A is
responsible for the repair, at its cost, of the equipment and facilities that
are worn out or experience breakdown due to inherent reasons during the normal
course of their use. Party A must perform the said repair within 2
days after receiving notice from Party B. If the repair is past due,
Party B may perform repair on its behalf and provide report on the
scope of repair and cost receipts promptly to Party A after the repair is
done.
7.3 During
the term of the lease, Party B must make reasonable use and take good care of
the said factory buildings and related facilities and equipment. If
they suffer damage or breakdown due to Party B's improper use or unreasonable
use, Party B must be responsible for the repair cost.
7.4 During
the term of the lease, Party B must provide assistance at the time when Party A
conducts inspection on the said factory buildings. Party A
has the right to notify Party B in writing if Party A find potential safety risk
in Party B's operation and demand Party B to take corrective
actions.
5
7.5 During
the term of the lease, Party B must obtain Party A's prior written consent
before Party B can add any special equipment, remodel, change production
technique of or reconstruct any relevant facilities and equipment. If
any action requires approval from competent authorities according to the rules,
Party A must file with the competent authorities for approval first before any
of the said actions can be taken.
Article
8 Condition of the
Object of the Lease at Its Return
8.1 Except
when Party A consents to the renewal of the lease, Party B must return TOL
within 6 business days upon the termination of this agreement. At
that time, Party A and Party B will each appoint 3 representatives to jointly
perform handover procedures and Party B must settle the fees and expenses for
which Party B is responsible.
8.2 Upon
termination of this agreement, Party B must hand back TOL in the condition that
meets the requirements for normal use.
Article
9 Sublease and
Transfer
9.1 During
the term of the lease, Party B may sublease TOL to other parties after obtaining
written consent from Party A.
9.2 During
the term of the lease, Party A cannot transfer any part of TOL specified in this
agreement.
Article
10 Conditions for
Dissolution of this Agreement
10.1 Party
A and Party B agree that, during the term of the lease, this agreement is
automatically terminated, without each party having any liability to the other,
upon the occurrence of any of the following:
10.1.1 The land use right to
the land occupied by the factory buildings included in POL is reclaimed in
accordance with the law.
10.1.2 The factory buildings
included in POL is expropriated in accordance with the law for public social
benefits.
10.1.3 The factory buildings
included in POL is listed in the group of buildings that may be torn down or
relocated in accordance with the law due to urban construction
needs.
10.1.4 The factory buildings
included in POL is destroyed or lost as a result of irresistible
force.
6
10.2 Party
A and Party B agree that, during the term of the lease, one party may notify the
other in writing to dissolve this agreement upon the occurrence of any of the
following. The party in breach of this agreement must make a payment
for breach damage to the other party in the amount equal to 30% of the annual
rent; if the party in breach causes loss to the other party and the breach
damage is insufficient to compensate for the loss, it must also compensate for
the difference between such loss and the breach damage.
10.2.1 Party A fails to hand
over TOL on time and still fails to hand over within 5 days after Party B's
demand notice.
10.2.2 TOL handed over by
Party A poses risk to operation safety or has defects that may be potential fire
hazards.
10.2.3 Party A finds that
Party B does not make normal, reasonable use of TOL or its use poses risk to
operation safety and, after being notified and demanded for corrective measures,
Party B refuses to take actions or its actions are ineffective.
10.2.4 Party B changes the
nature of use designed for the said factory buildings without authorization,
before obtaining written consent from Party A and/or approval from relevant
authorities, to engage in operation and production activities for products other
than specified in this agreement.
10.2.5 Party B adds or
remodels any special equipment, or produces, is the operation of, transports,
stores and uses, hazardous material without obtaining prior written consent from
Party A or the approval from operation safety authorities or fire
departments.
Article
11 Breach
Liability
11.1 This agreement must be performed
completely by both parties in the spirit of honesty and
trust-worthiness. Any failure to perform this obligations herein by
any party that result in the inability to exercise the rights hereunder by the
other party constitutes an act of breach; other than the circumstances provided
herein under which neither party bears any liability for breach, the party in
breach must bear the breach liability toward the other.
11.2 If
the party in breach causes loss to the other party, the party in breach must
compensate the other party for the loss caused by its breach, and such
compensation for loss must include the economic benefits that would have been
received had this agreement been performed normally.
Article
12 Resolution of
Conflict
7
12.1 This
agreement is governed by the laws and statutes of People's Republic of
China.
12.2 Any
dispute arising from the course of performing by agreement by Party A and Party
B must be settled by consultation; if such consultation fails, either of the two
parties may resort to litigation for resolution in accordance with the relevant
provisions of "People's Republic of China Contract Law" and "People's Republic
of China Civil Litigation Law."
Article
13 Notices
13.1 Party
A's name for communication: Lanxi Tianqianfang Linen Co., Ltd
Address: Group 39 of
the Fourth Neighborhood, Xxxxxxxxx Xxxxxx, Xxxxx
Xxxxxx, 000000
Legal
Representative: FU Lijie
13.2 Heilongjiang
Lanxi Sunrise Linen Textile Industry Co., Ltd.
Address: Xxxxxxxxx
Xxxxxx, Xxxxx Xxxxxx, Xxxxxxxxxxxx 000000
Legal
Representative: GAO Ren
Article
14 Other
Provisions
14.1 The
understanding and interpretation of this agreement must be done within the scope
of its purpose and its original meaning; the headings herein are provided for
convenience of reference only and should in no way interfere with the
interpretation of this agreement.
14.2 This
agreement becomes established after it is signed by the respective legal
representatives or authorized agents of both parties and is imprinted with the
seals of its respective legal person.
14.3 This
agreement becomes effective when it is approved by both the resolution of Party
A's shareholders assembly and by the resolution of Party B's board of directors;
such resolutions must be attached hereto as Attachment 4.
14.4 Other
matters not covered herein will be stipulated separately in a supplemental
agreement upon consultation between the two parties; such supplemental agreement
and all attachments are the inseparable part hereof.
14.5 At
the time of signing this agreement, both Party A and Party B fully understand
their respective rights, obligations and responsibilities and the execution of
this agreement is an expression of each other's true intent; both Party A and
Party B are willing to strictly perform the agreement in accordance with the
provisions herein.
14.6 This
agreement is in quadruplicates with 2 to each party and all have the equal
effect.
8
Below is
the signature space for the parties hereto:
Party A
(seal): Lanxi Tianqianfang Linen Co., Ltd (seal)
Legal
Representative (signature): FU Lijie (signature)
Authorized
Representative: (signature):
July 1, 2010
Party A
(seal): Heilongjiang Lanxi Sunrise Linen Textile Industry Co., Ltd.
(seal)
Legal
Representative (signature): GAO Ren (signature)
Authorized
Representative: (signature):
July 1,
2010
