Exhibit 10.7
AGREEMENT FOR THE LEASE OF HANGZHOU REAL PROPERTY
BETWEEN
Huawei Technologies Co. Ltd.
AND
Hangzhou Huawei-3Com Technology Co., Ltd.
----------
January 1, 2004
PARTIES TO THIS AGREEMENT:
The lessor of the real property:
Huawei Technologies Co. Ltd., a limited liability company registered in Shenzhen
city of Guangdong province and legally existing pursuant to the PRC laws
(hereinafter "Huawei" or "Party A")
AND
The lessee of the real property: Hangzhou Huawei-3Com Technology Co., Ltd., a
limited company established and legally existing pursuant to the PRC laws
(hereinafter "Party B").
(Together " the Parties")
WHEREAS, Huawei, 3Com Corporation, a Delaware corporation ("3Com") and 3Com
Technologies, a corporation organized under the laws of the Cayman Islands,
entered into that certain Contribution Agreement, dated March 19, 2003 (the
"Contribution Agreement"), pursuant to which Huawei agreed to lease the Hangzhou
Real Property to Party B; and
WHEREAS, the Parties wish to enter into this Agreement for the Lease of Hangzhou
Real Property (this "Agreement") and this Agreement is signed pursuant to
provisions of the relevant State and local published laws and regulations
published and available to foreign investors and according to the principles of
equality, voluntariness and consideration for use.
NOW, THEREFORE, in consideration of the premises and the mutual agreements and
covenants hereinafter set forth and intending to be legally bound hereby, the
Parties hereby agree as follows:
1. SCOPE OF LEASE
Party A hereby leases to Party B that certain portion of the Hangzhou Real
Property referred to in Clause 2.5 as the "Premises" in accordance with
this Agreement. Ownership of the land over the Hangzhou Real Property shall
belong to the People's Republic of China ("PRC"). The right to lease of the
real property over the land does not include any underground natural
resources, buried objects and municipal and public utilities.
2. TITLE AND LOCATION OF THE HANGZHOU REAL PROPERTY
2.1 Subject to Articles 16 and 17 hereof, Party A warrants that it has and
will maintain, throughout the Term of the Lease (as hereinafter
defined in Clause 3), (i) full ownership of the Buildings and other
improvements located on the Hangzhou Real Property and (ii) the right
to use the
1
Hangzhou Real Property for the purposes set forth herein and for a
period of not less than fifty (50) years pursuant to a land use
certificate ("Land Use Certification") granted by the PRC, free and
clear of (a) any liens, encumbrances, covenants, charges, burdens or
claims except those which do not materially and adversely affect the
operation of the Hangzhou Real Property by Party B and (b) any future
liens, mortgages or other encumbrances which provide that this
Agreement shall be subject to forfeiture or termination following a
foreclosure of such mortgage or other encumbrance. Party A further
warrants that Party B, on making the payments to Party A in accordance
with this Agreement and fulfilling its other obligations hereunder,
shall and may peaceably and quietly manage and operate the Hangzhou
Real Property during the entire Term of the Lease.
2.2 Notwithstanding anything to the contrary herein, Party A shall defend,
indemnify, protect and hold harmless Party B from and against any and
all liability, loss, claim, damage and cost (including reasonable
attorneys' fees) due to any termination of this Agreement or Party B's
right to occupy the Premises prior to the expiration of the Term of
the Lease as a result of any default by Party A under any current or
future mortgage or financing arrangement secured by the Hangzhou Real
Property or as a result of a failure to comply with any governmental
requirements.
2.3 Party A shall pay and discharge any ground rents or other rental
payments, concession charges and any other charges payable by Party A
in respect of the Hangzhou Real Property and, at its own expense,
undertake and prosecute all appropriate actions, judicial or
otherwise, required to assure such quiet and peaceable possession to
Party B. Party A shall further pay all real estate taxes and
assessments which may become a lien on the Hangzhou Real Property or
which may be due and payable during the Term of the Lease unless
payment thereof is in good faith being contested by Party A and
enforcement thereof is stayed. Party A shall not later than twenty
(20) days following written demand by Party B furnish to Party B
copies of official tax bills and assessments and tax receipts showing
the payment of such taxes and assessments.
2.4 The term "Hangzhou Real Property" as used herein means the office and
manufacturing facilities and other improvements and buildings,
including, without limitation, the Improvements defined and described
in Clause 9.1 hereof (the "Buildings") and the land upon which such
office and manufacturing facilities and other improvements and
buildings are located (the "Land") in Hangzhou, PRC and commonly known
as Huawei Hangzhou Production Centre. The location and size of the
Hangzhou Real Property is as follows:
Lot Number 11-01-(002)-0003 located on Liuhe Road,
Zhijiang Xxx-Xxxx Xxxxxxxxxx Xxxx, Xxxxxxxx Xxxxxxxx,
0
Xxxxxxxx, Xxxxxxxx Xxxxxxxx, PRC, with a total land area of
132,938 square meters and a total property gross floor area of
69,777.2 square meters which shall be determined by and recorded
in the Real Estate Certificate issued by the Hangzhou local
government. Such total property gross floor area includes (i)
7,687.34 square meters for the office tower (the "Office Tower
Space"), (ii) 4,204.72 square meters for the canteen (the
"Canteen Space"), (iii)31,592.87 square meters for the production
space, excluding the Expansion Premises (the "Initial Production
Space") and (iv)24,714.01 square meters for the Expansion
Premises.
The specific location of the Hangzhou Real Property is shown per the
co-ordinates in the maps attached hereto as Schedule 1. The
measurements provided in this Clause 2.4 are subject to confirmation
by the Real Estate Certificate as set forth in Clause 5.2 hereof.
2.5 The term "Premises" as used herein means that portion of the Hangzhou
Real Property to be leased to Party B on the Commencement Date (as
defined herein) consisting of the entire Hangzhou Real Property less
approximately 24,714.01 square meters of gross floor area located on
the second floor of the plant/production building (the "Expansion
Premises"), which Premises are more particularly described on Schedule
2 attached hereto.
2.6 Notwithstanding anything to the contrary herein, with the prior
consent of Party A, which consent shall not be unreasonably withheld,
Party B shall have the continuing right during the Term of the Lease
(as defined in Clause 3 below) to lease from Party A all or any
portion of the Expansion Premises for the remainder of the Term of the
Lease at the applicable rental rate specified in Clause 5.1 of this
Agreement for the Initial Production Space and otherwise upon the same
terms and conditions of this Agreement (the "Expansion Right"). Party
B may exercise such Expansion Right from time to time during the Term
of the Lease by delivering to Party A written notice (an "Expansion
Notice") specifying (i) the location and size of any portion of the
Expansion Premises to be leased and (ii) the date upon which Party B
intends to lease such Expansion Premises (or portion thereof), which
date shall be not less than thirty (30) days after the date of such
notice (each such date, an "Expansion Space Commencement Date").
Effective as of each Expansion Space Commencement Date, the Premises
herein shall be deemed to include that portion of the Expansion
Premises described in the applicable Expansion Notice and the rent
payable by Party B hereunder shall be increased by an amount equal to
the product of the gross floor
3
area of the portion of the Expansion Space set forth in the Expansion
Notice and the rental rate applicable from time to time to the Initial
Production Space set forth in Clause 5.1 of this Agreement. Party A
shall deliver the Expansion Premises (or any portion thereof) to Party
B in the condition required pursuant to Clause 3 hereof. The Expansion
Right shall continue until the earlier to occur of (i) the leasing of
the entire Expansion Premises by Party B pursuant to this Clause 2.6
and (ii) the termination or expiration of this Agreement.
3. TERM
Subject to the any provisions in this Agreement regarding the
expiration or early termination of this Agreement, the term of the
lease for the Premises shall be sixty (60) months (the "Term of the
Lease") commencing on the later of January 1, 2004 or the date by
which all of the following have occurred: (i) Party A has
substantially completed the Improvements (as defined in Clause 9) in
accordance with this Agreement; (ii) Party A has delivered possession
of the Premises to Party B in good, vacant, broom clean condition,
with all building systems in good working order, with all Utilities
(as defined in Clause 7.5 hereof) completed and installed and serving
the Hangzhou Real Property and otherwise in compliance with all laws
and in the condition required under this Agreement; and (iii) Party A
has obtained all approvals, certificates and permits from the
appropriate governmental authorities required for the legal occupancy
of the Hangzhou Real Property for the permitted use, including,
without limitation, the permits and approvals described in Clause 7.1
(a) - (c) hereof (the "Commencement Date"). Party B acknowledges that
Party A may not obtain the Real Estate Certificate, the building
ownership certificate and the registration of this Agreement with the
local government authorities (collectively, the "Outstanding Permits")
prior to the Commencement Date; however, Party A shall use its best
efforts to obtain such items as soon as possible and shall deliver a
notice or a copy of each such item to Party B within 15 days of the
date each such item is obtained.
4. USE OF THE HANGZHOU REAL PROPERTY
4.1 The Hangzhou Real Property may be used for the following
purposes:
4.1.1 industrial purposes including but not limited to the
production, manufacturing, blending, packaging, processing,
transportation, supply, distribution, marketing, sale and
storage of industrial products;
4.1.2 office, laboratory, warehouse and factory purposes and
other ancillary facilities in support of the activities
listed in paragraph 4.1.1 above;
4.1.3 for any purposes of the operation of Party B including but
not
4
limited to dormitories of employees, food and beverage
facilities, public, medical and recreation facilities; and
4.1.4 for all other lawful commercial and business purposes and
any other uses incidental or related to the foregoing.
Party A represents and warrants that each of the uses described
in this Clause 4.1 are authorized by applicable law and
governmental certificates and permits in effect as of the date of
this Agreement and shall be permitted under the Real Estate
Certificate and the building ownership certificate.
4.2 If the purpose of the Hangzhou Real Property specified in this
Agreement needs to be changed during the Term of the Lease beyond the
usage scope of the Hangzhou Real Property set forth in Clause 4.1 and
approved by the appropriate governmental authorities, the consent of
Party A shall be obtained by Party B, a new lease contract or relevant
amendment contract shall be executed, the rents for the lease of the
Premises shall be increased or decreased in accordance with the fee
charge criteria for the land use right of the Hangzhou Real Property
by the PRC and the relevant formalities of registering the land use
rights and real property shall be completed, all in accordance with
the relevant published laws and regulations available to foreign
investors.
5. RENT, TAXES, INSURANCE, OPERATING EXPENSES AND UTILITIES
5.1 Party A guarantees to Party B that save for the payment due under this
Clause 5, Party B shall not be required to pay any other fees, rates,
levies, expenses, charges or taxes of' any kind (such as land contract
tax, stamp duties, acquisition of agricultural land tax and
reclamation fees) related to or payable for the Outstanding Permits or
the signature of this Agreement, or any fees, compensation or taxes
payable for compensation of crops and trees and for removal or
relocation of existing users or occupants (if any) on the Hangzhou
Real Property. Party B agrees to pay Party A the rents in respect of
the Premises for the period from the Commencement Date to the date of
termination of the "Term of the Lease" (provided that the specific
payment terms and conditions shall be in accordance with the
provisions of Clause 6). The rents shall be calculated from the
Commencement Date.
Both Parties hereby agree and confirm that the monthly rents for the
Premises shall be as follows:
For the period beginning on the Commencement Date and continuing
through the expiration of the Term of the Lease, the monthly
rents shall be (i) XXX 00 xxxx/xxxxxx xxxxx/xxxxx of the gross
floor area of the Office Tower Space and the Canteen Space
5
and (ii) XXX 00 xxxx/xxxxxx xxxxx/xxxxx of the gross floor area
of the Initial Production Space.
5.2 The Parties acknowledge that the Real Estate Certificate has not been
issued as of the execution date of this Agreement. The Parties
covenant and agree to jointly instruct the Hangzhou local government
authority to issue the Real Estate Certificate so as to include
separate measurements of the gross floor area for each floor of each
Building. Upon receipt of the Real Estate Certificate in the required
form, the Parties agree to calculate the gross floor area for each of
the Office Tower Space, the Canteen Space, the Initial Production
Space and the Expansion Premises based on such Real Estate Certificate
and, if such amounts differ from those currently set forth in Clause
2.4 hereof, either revise such amounts in Clause 2.4 hereof or execute
a separate memorandum or agreement which sets forth such information.
If the gross floor area amounts set forth in the Real Estate
Certificate differ from those set forth in Clause 2.4, within thirty
(30) days of notice from either Party, Party B shall pay any
underpayment or Party A shall refund any overpayment made as a result
of payment of monthly rents prior to such date based on the gross
floor area amounts set forth in Clause 2.4.
5.3 Party A shall be responsible for and shall pay when due any and all
real estate taxes and assessments in connection with the Hangzhou Real
Property. Party A shall furnish to the Party B copies of (i) any tax
invoice or receipt or any other evidence of tax payment and (ii) any
notice or documents from the tax authority in relation to the tax
payment or tax fine. Party B agrees to coordinate with Party A for any
claims that may arise relating to the taxation of the Hangzhou Real
Property and Party A shall indemnify, defend, protect and hold
harmless Party B from and against any actual costs, claims or expenses
incurred therefore by Party B (including, without limitation, all
legal fees and expenses).
5.4 Party A shall, at its expense, at all times during the Term of the
Lease procure and maintain adequate insurance to cover the full
replacement cost of the Hangzhou Real Property against loss or damage
to the Hangzhou Real Property from fire, explosion, aircraft, water
apparatus, flood, earthquake, boiler and machinery breakdown and such
other perils considered necessary, customary or practical in fully
protecting the Hangzhou Real Property and maintain adequate
comprehensive general liability insurance fully protecting Party A
arising out of the ownership, possession and use of the Hangzhou Real
Property.
All such liability insurances shall note the interest of Party B as an
"additional insured".
Party A shall furnish to Party B satisfactory evidence of all
insurances maintained by Party A pursuant to this Clause.
6
5.5 Subject to the provisions of this Contact, Party B shall be
responsible for and bear the full cost for the operation of its
business at the Premises and for all utilities (including heating,
cooling and ventilating) and telecommunications (including
telephone/fax and internet connection) used by Party B at the
Premises. Party B agrees to pay all electricity, water and gas (if
any) consumed by Party B at the Premises on the basis of separate
meters installed or to be installed at Party B's option and/or to
refund to Party A the costs thereof on reasonable written notice to
Party B (in case any of the same are payable or charged in respect of
the Party A's account). In case any of the foregoing costs in this
Clause are paid or charged in respect of Party A's account, they shall
be refunded by Party B to Party A within thirty (30) days after
receipt by Party B of written notice and upon Party B's verification
of the costs are correct and in order.
6. PAYMENT AND CURRENCY
Party B will pay the rents for the Premises in RMB.
Party B will pay to Party A as a security deposit an amount equal to the
monthly rent for the first two (2) months of the Term of the Lease. Such
security deposit will be refunded to Party B within fifteen (15) days of
the date of the expiration of the Term of the Lease or the date of its
early termination in accordance with Clause 13 of this Agreement or
otherwise.
Both Parties hereby agree the payment terms are as follows:
6.1 Within 15 days after the Commencement Date, Party B will pay Party A
in one installment the rent at the rates set forth in Clause 5.1.1
from the Commencement Date through the last day of the calendar
quarter in which the Commencement Date occurs.
6.2 Commencing from the first day of the calendar quarter immediately
succeeding the calendar quarter in which the Commencement Date occurs
through the remainder of the Term of the Lease, Party B shall pay rent
at the rates set forth in Clause 5.1.1 quarterly on the fifth day of
the first month of each calendar quarter (January 5, April 5, July 5
and October 5) of each year of the Term of the Lease.
6.3 For any lease period shorter than a quarter, the rent thereof shall be
calculated on a daily basis.
6.4 Party A shall issue to Party B the relevant payment notice in respect
of any payment 30 days before the due payment date. If Party A has not
issued any payment notice in time, the relevant due payment period
shall be extended correspondingly. Party A shall issue to Party B the
official receipt within 5 days after any payment of Party B has been
effected in the bank account designated by Party A.
7
6.5 With 60 days of the expiry or termination of the Term of the Lease of
the Premises, Party A shall refund to Party B any advance payment
(including rent).
7. GUARANTEES BY PARTY A
Party A hereby guarantees to Party B that:
7.1 Party A has received (a) the land use rights certificate relating to
the Hangzhou Real Property pursuant to which the PRC has granted to
Party A the right to use the Hangzhou Real Property for the purposes
specified herein for a period of not less than fifty (50) years, (b)
the approval relating to the change in scope of use and (c) the
approval of the renovations of the Hangzhou Real Property and the
construction of the Improvements. Party A agrees to use its best
efforts to obtain the building ownership certificate as soon as
possible and will provide a copy to Party B within 15 days after
obtaining it.
7.2 Party A has the right to sign this Agreement with and lease the
Hangzhou Real Property to Party B, and Party A has completed all
necessary formalities and obtained all documents, permits and
approvals as necessary for the signature and performance of this
Agreement as well as the lease of the Hangzhou Real Property hereunder
and the construction of the Improvements, including but not being
limited to completing the relevant registration and obtaining the
relevant approvals, approval documents and certificates (except
registration of this Agreement with the local government, which Party
A agrees to use its best effort to obtain as soon as possible and will
provide a copy to Party B within 15 days after obtaining it).
7.3 No Hazardous Materials are present on the Hangzhou Real Property,
except in compliance with applicable Environmental Laws. The
operations and activities conducted by Party A, and its agents,
employees and contractors on the Hangzhou Real Property, including,
without limitation, the construction of the Improvements, have been
conducted at all times during the past two years, in compliance with
all applicable Environmental Laws and Environmental Permits. To the
knowledge of Party A, no Action is pending or threatened under any
Environmental Laws against or relating to the Hangzhou Real Property,
Party A or the operations and activities conducted by Party A on the
Hangzhou Real Property.
7.4 Except as contemplated by this Agreement, Party A has not leased or
subleased any portion of the Hangzhou Real Property to any other
Person, and, to the knowledge of Party A, no other Person has any
right to the use, occupancy or enjoyment thereof, nor has Party A
assigned any of its interest under the Hangzhou Real Property. The
execution, delivery and
8
performance of this Agreement will not materially adversely affect the
continued use or possession of Hangzhou Real Property.
7.5 As of the Commencement Date, all telephone, telecommunication, water,
sewer, gas, steam and electrical lines and cables and surface drainage
systems necessary for the use of the Hangzhou Real Property by Party B
and the conduct of its business and operations thereon (collectively,
the "Utilities") will be completed and installed on the Hangzhou Real
Property in compliance with all applicable laws. As of the
Commencement Date, all utility lines serving the Premises will be
separately metered and located in the rights of way of public roadways
bordering the Hangzhou Real Property and will be set up to serve the
Hangzhou Real Property independently of the neighboring properties.
7.6 Capitalized terms used but not otherwise defined in this Clause 7
shall have the meanings set forth in the Contribution Agreement.
8. GUARANTEES BY PARTY B
Party B hereby guarantees to Party A during the Term of the Lease when
Party B shall remain the lessee that it shall:
8.1 pay rents for the Premises in accordance with this Agreement;
8.2 not use the Premises for any illegal purpose, or beyond the purpose
described in Clause 4.1; and
8.3 abide by the publicly applicable laws and regulations of the PRC
affecting the use of the Premises.
9. CONSTRUCTION OF IMPROVEMENTS
9.1 Party A shall construct improvements and renovations to the Hangzhou
Real Property (the "Improvements") in accordance with (i) the plans
and specifications (the "Plans") previously delivered to and approved
in writing by 3Com, (ii) the estimate of the total cost of the
Improvements (the "Cost Estimate") attached hereto as Schedule 3 and
(iii) the terms of this Agreement.
9.2 Party A represents that it has submitted the Plans to all appropriate
governmental agencies and has obtained all governmental approvals
required for such Plans and the construction of the Improvements.
Party A shall have no right to require extra work or change orders
with respect to the construction of the Improvements. Party B shall
have the right to request changes to the Plans by way of written
change orders (each, a "Change Order", and collectively, "Change
Orders"). Provided such Change Order is reasonably acceptable to Party
A, Party A shall prepare and submit promptly to Party B a memorandum
setting forth the impact
9
on cost and schedule resulting from said Change Order (the "Change
Order Memorandum of Agreement"). Party B shall, within three (3) days
following Party B's receipt of the Change Order Memorandum of
Agreement, either (i) execute and return the Change Order Memorandum
of Agreement to Party A, or (ii) retract its request for the Change
Order. Party B shall pay to Party A, upon completion of the
Improvements, any increase in the actual total cost to construct the
Improvements solely resulting from the Change Order, as set forth in
the Change Order Memorandum of Agreement.
9.3 The Improvements shall be constructed by Party A in accordance with
all rules, regulations, codes, ordinances, statutes, and laws of any
governmental or quasi-governmental authority and in accordance with
the Plans as amended.
9.4 Party B shall have the right to submit a written "punch list" to Party
A setting forth any defective item of construction, and Party A shall
promptly cause such items to be corrected. Party B's acceptance of the
Premises or submission of a "punch list" shall not be deemed a waiver
of Party B's rights to have defects in the Improvements or the
Hangzhou Real Property repaired at no cost to Party B. Party B shall
give notice to Party A whenever any such defect becomes reasonably
apparent, and Party A shall repair such defect as soon as possible.
9.5 Notwithstanding anything to the contrary in this Agreement, effective
upon delivery of the Premises to Party B, Party A does hereby warrant
that (i) the construction of the Improvements was performed in
accordance with all rules, regulations, codes, statutes, ordinances,
and laws of all governmental and quasi-governmental authorities, in
accordance with the Plans, and in a good and xxxxxxx-like manner, (ii)
all material and equipment installed in the Hangzhou Real Property
conformed to the Plans and was new and otherwise of good quality,
(iii) the electrical, plumbing, and mechanical systems servicing the
Hangzhou Real Property are in working order and in good condition, and
(iv) the roof is in good condition and water tight.
9.6 Party A shall pay for all costs of the design, permitting,
development, construction and installation of the Improvements;
provided, however, that, within thirty (30) days after the later of
the Commencement Date and the date that Party A delivers to Party B
paid invoices and such other documents as may be reasonably required
by Party B to evidence the payment by Party A of the Party B Costs (as
hereinafter defined), Party B shall reimburse Party A for (i) the
costs and expenses of those portions of the Improvements identified on
Schedule 4 attached hereto and (ii) any increase in the actual total
cost to construct the Improvements solely resulting from any Change
Order, as set forth in any Change Order Memorandum of Agreement that
has been accepted and approved by
10
Party B (collectively, the "Party B Costs"). Notwithstanding anything
to the contrary herein, Party B's obligation to pay the Party B Costs
described in clause (i) of the immediately preceding sentence shall in
no event exceed $5,250,000 (U.S.). Party B shall have the right to
review and audit the construction documents, contractor quotations and
contracts, change orders, invoices and applications for payment
submitted by Party A's contractors.
9.7 The Party B Costs shall not include and in no event shall Party B have
any obligation to pay for the following: (i) costs for improvements
which are not shown on or described in the Plans unless otherwise
approved by Party B; (ii) costs incurred to remove Hazardous Materials
(as defined in the Contribution Agreement) from the Hangzhou Real
Property or the surrounding area; (iii) attorneys' fees incurred in
connection with negotiation of construction contracts, and reasonable
attorneys' fees, experts' fees and other costs in connection with
disputes with third parties; (iv) costs incurred as a consequence of
delay (unless the delay is caused by Party B), construction defects or
default by a contractor; (v) costs recoverable by Party A upon account
of warranties and insurance; (vi) restoration costs in excess of
insurance proceeds as a consequence of casualties; (vii) penalties and
late charges attributable to Party A's failure to pay construction
costs, delay or default under any construction contract; (viii) costs
to bring the Hangzhou Real Property into compliance with applicable
laws and restrictions, including, Environmental Laws (as defined in
the Contribution Agreement); (ix) wages, labor and overhead for
overtime and premium time; (x)offsite management or other general
overhead costs incurred by Party A; and (xi) construction management,
profit and overhead charges. Party B shall be entitled to surrender
the Improvements upon the termination of this Agreement.
9.8 So long as such occupancy does not interfere with Party A's
construction of the Improvements, with prior approval of Party A,
which approval shall not be unreasonably withheld, Party B shall have
the right to enter the Hangzhou Real Property prior to the completion
of the Improvements for the purpose of installing its equipment, data,
telecommunications systems and trade fixtures. Such occupancy shall be
subject to all of the terms of this Agreement except the obligation to
pay rent.
10. TERMS AND CONDITIONS OF THE HANGZHOU REAL PROPERTY LEASE
10.1 Positioning of Boundary Markers
Prior to the official signing of this Agreement, Party A and Party B
shall have inspected and ascertained the boundary markers at various
boundary location points from the marks at various boundary location
points shown on the Hangzhou Real Property and shall have confirmed
the areas of the Hangzhou Real Property.
11
10.2 Vacant Possession of the Hangzhou Real Property
10.2.1 Party A shall clear the Hangzhou Real Property and deliver the
same to Party B free of inhabitants and cleared of all buildings,
structures, foundations thereof, and other properties, articles
and materials that Party B considers to be unnecessary. Party B
shall not have any responsibility for or be liable to any
inhabitant or other person claiming to have any right with
respect to the Hangzhou Real Property or for any land use right,
building, structure and foundation thereof, or other property,
articles and materials remaining on the Hangzhou Real Property
belonging to such other persons after the delivery of the
Hangzhou Real Property by Party A to Party B.
10.2.2 Party A shall be responsible for the payment of any
compensation or taxes payable to the existing inhabitants or
occupants of the Hangzhou Real Property for their relocation,
resettlement or the loss of their buildings, structures or other
properties, crops or trees and shall indemnify, defend, protect
and hold harmless Party B in full amount against any expenses or
costs (including, without limitation, legal fees and expenses)
incurred by Party B or claims against Party B as a result of a
breach of Party A's obligations under this clause.
10.3 Delivery
10.3.1 Party A represents that it expects the Commencement Date to
occur on or about January 1, 2004 and guarantees that the
Commencement Date shall occur by February 1, 2004 (the "Outside
Date").
For the avoidance of doubt, both Parties agree and confirm that
commencing from the Commencement Date, Party B shall have the
right to use the Premises according to the uses as provided in
this Agreement.
10.3.2 In addition to and without prejudice to other rights and
remedies of Party B, in the event that Party A fails to deliver
the Premises to Party B on or before the Outside Date as a result
of Party A's action or omission, Party B shall have the right to
terminate this Agreement partly or wholly, and Party A shall
indemnify, defend, protect and hold harmless Party B against any
loss, cost, claim or damage suffered by Party B in connection
therewith. Upon any termination of this Agreement by Party B
pursuant to this Clause 10.3.2, any monies previously paid by
Party B to Party A in connection with this Agreement shall be
returned to Party B.
12
10.4 Environmental Protection and Breach of Guarantees
10.4.1 Party A warrants that as at the date of this Agreement:
10.4.1.1 The Hangzhou Real Property complies with all
Environmental Laws and Environmental Permits; and
10.4.1.2 Party A shall retain, remain liable for and indemnify,
defend, protect and hold harmless Party B from and against
and under no circumstances shall Party B be liable for any
Liabilities, obligations, judgments, penalties, fines, costs
or expenses (including reasonable attorneys' fees and
environmental consultant costs) of any kind or nature, or
the duty to indemnify, defend or reimburse any Person with
respect to: (i) the presence on or before the Commencement
Date of any Hazardous Material in the soil, groundwater,
surface water, air or building materials of the Hangzhou
Real Property, or known to be migrating to the Hangzhou Real
Property as of the Commencement Date or otherwise resulting
from the operations of Party A, and its agents, employees
and contractors, at the Hangzhou Real Property prior to the
Commencement Date ("Pre-Existing Contamination"); (ii) the
migration at any time prior to or after the Commencement
Date of Pre-Existing Contamination to any other real
property, or the soil, groundwater, surface water, air or
building materials thereof; (iii) the exposure of any Person
to Pre-Existing Contamination or to Hazardous Materials in
the course of or as a consequence of any activities of Party
A and its agents, employees and contractors on the Hangzhou
Real Property, without regard to whether any health effect
of the exposure has been manifested as of the Commencement
Date; (iv) the violation of any Environmental Laws relating
in any manner to the operations of Party A and its agents,
employees and contractors or the Hangzhou Real Property
prior to the Commencement Date; (v) any actions or
proceedings brought or threatened by any third party with
respect to any of the foregoing; and (vi) any of the
foregoing to the extent they continue after the Commencement
Date.
10.4.1.3 Notwithstanding anything to the contrary herein, Party A
agrees to assist and cooperate with Party B to obtain any
Environmental Permits required to be obtained by Party B in
connection with the conduct of its business at
13
the Premises.
10.4.1.4 For purposes of this Clause 10.4.1, capitalized terms
used but not otherwise defined in this Agreement shall have
the meanings set forth in the Contribution Agreement.
The above warranties shall be true and correct as of the date of
this Agreement and the Commencement Date.
10.4.2 Party A shall indemnify, defend, protect and hold harmless
Party B and hold Party B harmless from and against all expenses,
liability, loss, damages, including (but not limited to) interest
and fines, incurred by, or claims against, Party B as a result of
a breach of the warranties in Clauses 7 and 10.4.1.
10.4.3 Party B shall indemnify, defend, protect and hold Party A
harmless from and against all expenses, liability, loss, damages,
including (but not limited to) interest and fines, incurred by or
claims against, Party A as a result of a breach of Clause 8 of
this Agreement.
10.5 Rights of Way
10.5.1 Party A shall, free of any charge over and above the rents,
also provide or procure the provision of all necessary
permissions and rights (including but not being limited to
convenient and safe rights of way as necessary for the access to
the Hangzhou Real Property and rights of access without
obstruction) for the use, construction, operation and maintenance
by Party B and/or its contractors/licensors/suppliers/ patentees
of the following facilities or infrastructure outside the
Hangzhou Real Property for the duration of the Term of the Lease:
10.5.1.1 storm water drainage corridor and perimeter storm drain
channel and outfall;
10.5.1.2 pipelines including the effluent discharge pipeline;
10.5.1.3 access for roads and utility provisions; and
10.5.1.4 others; ditches, tunnels, bridges etc.
10.6 Erection of Fences, Walls etc.
Party B shall be entitled, based on the relevant regulations, to erect
or install in accordance with PRC laws such fences, walls, rails or
other partitions on and within the boundaries of the Hangzhou Real
Property as
14
it sees fit and to affix, exhibit, erect or paint any nameplate,
signboard, placard, poster or other advertisement or boarding on such
partitions or on the Hangzhou Real Property.
10.7 Quiet Enjoyment
Party A guarantees that for the duration of the Term of the Lease,
Party B shall enjoy the undisturbed use of the Hangzhou Real Property
and shall peaceably and quietly have, hold and enjoy the Premises for
the Term of the Lease, without disturbance, hindrance, ejection or
molestation by or from Party A or anyone claiming by, through or under
Party A, and free of any encumbrance created or suffered by Party A.
11. EXPIRATION OF THE TERM OF THE LEASE
11.1 Party B shall return the Premises to Party A at the expiration of the
Term of the Lease in the condition existing at the Commencement Date,
ordinary wear and tear, casualties, condemnation or other taking or
repossession by the PRC, Hazardous Materials (other than those
released or emitted by Party B), alterations or other interior
improvements which it is permitted to surrender at the termination of
this Agreement and repairs, replacements and renewals for which Party
A is responsible hereunder, excepted.
12. REPAIRS AND CHANGES
12.1 Repairs and Maintenance.
12.1.1 In this Clause:
12.1.1.1 "the specific problems" means:
(i) fire or any other event against which Party A is
obliged to insure under Clause 5.3 or has insured;
(ii) any non-performance by Party A of its obligations under
subclauses 12.1.3 or 12.1.4 of this Clause or under any
other provision of this Agreement;
(iii) any lack of repair in the Hangzhou Real Property
arising from or caused by any defect in design
workmanship or materials in the construction or fitting
out of the Hangzhou Real Property by Party A or any
alterations carried out to the Hangzhou Real Property
by Party A or any other latent defect;
(iv) any repairs or work to the Hangzhou Real Property
required in order to comply with any requirement or
15
recommendation of any statute, statutory instrument,
by-law or any public governmental or statutory
authority or person or by insurers.
12.1.1.2 "Plant Machinery and Equipment" means all the pipes,
cabling and equipment, be it a fitting, fixture, or chattel
in the Hangzhou Real Property used in connection with, or
involved in providing the following:
(i) heating, ventilation and air-conditioning;
(ii) plumbing, sprinkler systems, drainage, water
purification and sewage or surface water disposal;
(iii) electricity, telecommunications installations,
aerials, facsimile, telex, lighting, radio alarm,
security, fire safety, public address and intercom
systems, computer systems including any hardware and
keying;
(iv) filter pumps, pumping stations, and all other equipment
plant and machinery on the Hangzhou Real Property;
(v) sanitary xxxx and fitted furniture;
(vi) elevators and escalators; and
(vii) all other building systems and services within the
Hangzhou Real Property.
12.1.2 Party B, subject to the provisions of this Clause 12, shall
maintain the Premises and the Plant Machinery and Equipment
serving the Premises in the state of repair and condition
existing at the Commencement Date excluding (i) any work of
renewal or replacement other than renewal or replacement of
insubstantial components of the Plant Machinery and Equipment
which renewal or replacement would be involved in normal routine
maintenance and servicing and (ii) any loss or damage or lack of
repair constituting or resulting from fair wear and tear and/or
the specific problems or any of them. Party B shall keep the
interior of the Premises well and suitably decorated at all
times.
12.1.3 Notwithstanding anything to the contrary herein, Party A shall
at its expense throughout the Term of the Lease where reasonably
necessary renew replace and rebuild the whole or any part of the
structure and fabric of the Hangzhou Real Property together with
any extensions, additions, alterations and improvements thereto
and shall further remedy any damage or defect constituting or
resulting from the specific problems or any of them.
16
12.1.4 Party A shall at its expense where reasonably necessary renew
or replace the whole or any part of the Plant Machinery and
Equipment and in particular shall be obliged to effect such
renewal or replacement at the request of Party B if the same has
ceased to be fit for its purpose or has ceased to be of the
standard appropriate for the proper operation of the Hangzhou
Real Property or if maintenance and/or servicing of the same
ceases to be reasonably economic.
12.1.5 In clarification of the foregoing, Party A agrees that Party A
shall perform and construct, and Party B shall have no
responsibility to perform or construct, any repair, maintenance
or improvements to the Hangzhou Real Property, including, without
limitation, the Plant Machinery and Equipment (i) necessitated by
the acts or omissions of Party A or its agents, employees or
contractors, (ii) for which Party A has a right of reimbursement
from others, (iii) to the structural portions of the Hangzhou
Real Property and (iv) which could be treated as a "capital
expenditure" under generally accepted accounting principles.
12.1.6 Notwithstanding anything to the contrary herein, in the event
Party A fails to perform any of its obligations under this
Agreement and (except in case of emergency posing an immediate
threat to persons or property, in which case no prior notice
shall be required) fails to cure such default within thirty (30)
days after written notice from Party B specifying the nature of
such default where such default could reasonably be cured within
said thirty (30) day period, or fails to commence such cure
within said thirty (30) day period and thereafter continuously
with due diligence prosecute such cure to completion where such
default could not reasonably be cured within said thirty (30) day
period, then Party B may, in addition to its other remedies, cure
any default of Party A at Party A's cost and deduct the cost of
such cure from rent.
12.2 Party B shall have the right to make, from time to time, such
alterations, additions or improvements in or to the Hangzhou Real
Property ("Alterations") which are customarily made in the operation
of the Hangzhou Real Property or reasonably required by Party B
subject to the prior approval of Party A, which shall not be
unreasonably withheld or delayed. The cost of such customary
alterations, additions or improvements shall be paid for by Party B in
line with the relevant laws and regulations of the PRC.
Notwithstanding anything to the contrary herein, Party B may construct
non-structural alterations, additions and improvements in or to the
Hangzhou Real Property without Party A's prior approval, if the cost
of any such project does not exceed 207,000 RMB ("Permitted
Alterations"); provided, however, that Party A shall
17
assist and cooperate with Party B to obtain any consents or approvals
from the relevant governmental authorities required in connection with
any Alterations performed or requested by Party B.
12.3 If at any time during the Term of the Lease, repairs (other than as
required under 12.1 of this Article), changes in the Hangzhou Real
Property, or replacements shall be required by reason of any laws,
ordinances or regulations, or by any order of governmental authority,
or shall be essential to the functioning of the Hangzhou Real
Property, such repairs, changes or replacements shall be paid for by
Party A and shall be made promptly and with as little hindrance to the
operation of the Hangzhou Real Property as possible.
12.4 Any extensions, alterations, additions or improvements not provided
for in 12.1, 12.2 and 12.3 of this Article shall, if mutually agreed
upon, be made promptly by Party A and shall be paid for by Party A in
line with the relevant laws and regulations of the PRC.
12.5 Notwithstanding anything to the contrary herein, in the event that the
Hangzhou Real Property suffers damages caused by the specific
problems, Party A shall remedy, repair and rebuild the Hangzhou Real
Property immediately and use its best efforts to guarantee Party B's
normal use of the Hangzhou Real Property during the course of such
repairs. Party A shall pay all costs and expenses of and related to
such repairs and remedies. If Party A does not perform its obligation
to make remedies as set forth above, Party B may make the remedies
itself and responsibility for the fees relating to the remedies shall
be born by Party A. If, after the aforesaid serious damages occur,
which affect Party B's ability to normally use the Premises, and Party
A can not, or fails to, fully remedy the same within ninety (90) days
thereafter, Party B may choose to issue written notice to Party A,
asking for termination of this Agreement. If Party B's use of the
Premises is interfered with due to any damage caused by the specific
problems which is not due to Party B's negligence or willful
misconduct, commencing five (5) days after the occurrence of such
damage, Party B's obligation to pay rent shall be equitably abated
based on the extent to which Party B's use of the Premises has been
diminished. If Party B's use of the Premises is interfered with due to
any damage caused by the specific problems which is due to Party B's
negligence or willful misconduct, then there shall be no abatement of
rent as aforesaid; provided, however, that, rent shall xxxxx (or Party
B shall receive a refund of rent already paid) in an amount equal to
the proceeds of any rental loss insurance that Party A may be entitled
to receive in connection with such damage. In the event Party B elects
to terminate this Agreement, Party B's obligation to pay rent
hereunder shall terminate as of the occurrence of such event.
12.6 Notwithstanding anything to the contrary herein, the Parties release
each
18
other and their respective agents, employees, successors, assignees
and subtenants from all liability for injury to any person or damage
to any property that is caused by or results from a risk which is
actually insured against, which is required to be insured against
under this Agreement, or which would normally be covered by all risk
property insurance, without regard to the negligence or willful
misconduct of the entity so released. All of Party A's and Party B's
repair and indemnity obligations under this Agreement shall be subject
to the waiver contained in this paragraph.
13. EARLY TERMINATION
Both Parties agree and confirm that, notwithstanding anything to the
contrary herein, Party B may, at any time after two (2) years following the
Commencement Date of this Agreement, partly or wholly early terminate this
Agreement with respect to all or any portion of the Hangzhou Real Property
based on the sole discretion of Party B without any liability (including
that Party B shall have no further no liability to pay rents and other fees
after such termination). The relevant rents shall be adjusted accordingly,
and Party A shall refund to Party B any overpaid rents or charges. Party B
shall give Party A at least six (6) month's prior written notice of
termination. As a consideration of the early termination, Party B agrees to
pay Party A the equivalent of one month's rent of the Premises under this
Agreement upon Party B's delivery of notice of termination.
14. REMOVAL OF ASSETS AND OTHERS
14.1 Upon the expiry, or early termination of the Term of the Lease, Party
B shall be entitled and obligated to remove all of its movable trade
fixtures, furniture, equipment and other personal property (including
any which Party B may have in the Hangzhou Real Property under Party
B's control) (the "Personal Property"), and in the event of Party B's
failure to do so, Party A shall be entitled to cause any such property
on the Hangzhou Real Property to be removed and stored for the account
of Party B; and Party B shall be entitled but not obligated to remove
fixtures, fittings and other assets affixed or fastened to or upon the
Hangzhou Real Property. Notwithstanding anything to the contrary
herein, (i) Party B shall not be required to remove any portion of the
Improvements constructed on the Hangzhou Real Property upon the
expiration or early termination of this Agreement and (ii) Party A
shall have no lien or other interest in the Personal Property.
14.2 Party A shall allow Party B ten (10) days after the expiry or early
termination of the Term of the Lease to carry out the procedures for
the removal of the assets referred to in Clause 14.1 above. Party B
shall be exempted from paying any rents or other fees during this
period.
14.3 Party A shall ensure that Party B and any party, shall not be claimed,
19
sued, prosecuted and penalized for using the Hangzhou Real Property
according to the uses as provided in this Agreement and otherwise
shall fully indemnify, defend, protect and hold harmless Party B and
other parties for losses, damages, liabilities, claims, attorneys'
fees, costs and expenses arising from (i) such claims, suits,
prosecutions and penalties, (ii) the negligence or willful misconduct
of Party A or its agents, contractors, licensees or invitees, (iii)
Party A's violation of any law, order or regulation, (iv) a breach of
Party A's obligations or representations under this Agreement or (v)
Party A's failure to have the Outstanding Permits. In addition, Party
B shall indemnify, defend, protect and hold harmless Party A from all
losses, damages, liabilities, claims, attorneys' fees, costs and
expenses arising from the negligence or willful misconduct of Party B
or its agents, contractors, licensees or invitees, Party B's violation
of any law, order or regulation, or a breach of Party B's obligations
or representations under this Agreement.
15. RESUMPTION OR REMOVAL OF THE HANGZHOU REAL PROPERTY
15.1 During the subsistence of this Agreement, Party A shall not resume,
remove or consent to remove the Hangzhou Real Property for any reason
(including but not limited to urban planning). However, if the
People's Government of the Municipality of Hangzhou resume, remove or
consent to remove the Hangzhou Real Property prior to the expiration
of the Term of the Lease for the need of public welfare in accordance
with the relevant legal procedures under extraordinary and compelling
circumstances, then the remaining Term of the Lease and all rent and
other obligations of Party B hereunder shall cease as of the date of
such termination. The aforesaid extraordinary and compelling
circumstances shall in no circumstance include any actions or
involvement by Party A' that initiate or would otherwise result in a
taking of the Hangzhou Real Property.
15.2 In the event Party A has to resume, remove or consent to remove the
Hangzhou Real Property in accordance with Clause 15.1, Party B shall
be entitled to remove its assets on the Hangzhou Real Property in
accordance with Clause 14. Party A shall give Party B sufficient time
of notice of such event. In addition, in the event that any award or
other monetary compensation is made in connection with such event,
Party B shall be entitled to receive a portion of such award or
monetary compensation equal to an amount determined by multiplying the
total amount of such award or monetary compensation by a fraction, the
numerator of which shall be the amount of the Party B Costs and the
denominator of which shall be the total construction cost for the
Hangzhou Real Property, which total construction cost shall not exceed
USD $55,000,000 for purposes of such calculation. Notwithstanding the
foregoing, if the governmental authorities provide any assistance or
20
compensation intended for lessees of the Hangzhou Real Property, then
Party B shall be entitled to seek and retain such assistance or
compensation and such assistance or compensation shall not be included
in the calculation described in the immediately previous sentence.
16. TRANSFER
16.1 Party B shall use the Premises only in accordance with the terms and
condition of this Agreement. During the Term of the Lease, with prior
consent of Party A, which consent shall not be unreasonably withheld,
Party B may assign, relet or sublet in whole or part the Premises.
Notwithstanding anything to the contrary herein, (i) Party B may,
without Party A's prior written consent but with prior written notice
to Party A, sublet the Premises or assign this Agreement to (a) an
entity controlling, controlled by or under common control with Party
B, (b) a successor entity related to Party B by merger, consolidation,
nonbankruptcy reorganization, or government action, or (c) a purchaser
of substantially all of Party B's assets located at the Premises and
(ii) a sale or transfer of Party B's capital stock shall not require
any consent of Party A; provided; however, that Party A agrees to
assist and cooperate with Party B to obtain any required governmental
consent or approval in connection with any assignment of this
Agreement, sublease of the Premises or sale or transfer of Party B's
capital stock or other transaction or event that may constitute an
assignment or sublease under applicable law.
16.2 In the event Party B assigns part or all of its rights and obligations
under this Agreement to an unrelated third party, Party B shall obtain
the prior written consent from Party A, which shall not be
unreasonably withheld. Upon the occurrence of any assignment of all or
any portion of this Agreement by Party B, whether to an unrelated
party or otherwise, the assignee shall be responsible for the payment
of rent or for the performance of any other obligations so assigned
and Party B shall be released and exempted from the payment and
performance of such rent and other obligations from and after the date
of such assignment.
16.3 During the lease period, Party A shall not transfer the Hangzhou Real
Property or its rights under this Agreement or its ownership of the
state-owned land use right with respect to the Hangzhou Real Property
to any third party, including, without limitation, to its parent or
any subsidiary or affiliate in whole or part unless Party A has
complied with the terms of Article 17 hereof.
17. RIGHT OF FIRST NEGOTIATION AND RIGHT OF FIRST REFUSAL
17.1 Party A covenants and agrees that, if Party A at any time intends to
sell, market for sale or otherwise transfer its interest in the
Hangzhou Real Property during the Term of the Lease, Party A shall
deliver to Party B a written notice (the "Right of First Negotiation
Notice") thereof and shall negotiate in good faith exclusively with
Party B for a period of twenty
21
(20) business days after Party B's receipt of such Right of First
Negotiation Notice (the "Standstill Period") to sell the Hangzhou Real
Property to Party B for a purchase price equal to the fair market
value of the Hangzhou Real Property (excluding the value of any
improvements or alterations to the Premises paid for by Party B) and
upon such other reasonable terms and conditions as to which Party A
and Party B may agree (the "Right of First Negotiation"). During the
Standstill Period, Party A shall not solicit any other offers for the
purchase or sale of the Hangzhou Real Property or otherwise market the
Hangzhou Real Property or negotiate with any other potential
transferees of the Hangzhou Real Property. If the Parties fail to
agree on terms for the sale of the Hangzhou Real Property during the
Standstill Period, then, subject to the Right of First Refusal below
and any other applicable provisions of this Agreement, Party A shall
thereafter be free to market and sell the Hangzhou Real Property;
provided, however, that if Party A fails to sell the Hangzhou Real
Property within one hundred eighty (180) days after the expiration of
such Standstill Period, then Party B shall again have a Right of First
Negotiation in the event Party A thereafter intends to or continues to
sell, market for sale or otherwise transfer its interest in the
Hangzhou Real Property during the Term of the Lease (including any
extensions thereof).
17.2 If at any time during the Term of the Lease, Party A shall solicit or
receive an offer (an "Offer") to purchase or otherwise acquire Party
A's interest in the Hangzhou Real Property that it is willing to
accept, then Party B shall have a right of first refusal (the "Right
of First Refusal") to purchase the Hangzhou Real Property on the same
terms and conditions set forth in the Offer. Party A, promptly
following Party A's receipt of the Offer, shall deliver written notice
to Party B (the "Offer Notice") specifying the terms and conditions
contained in the Offer, together with a copy of the Offer. Party B may
exercise its Right of First Refusal by providing Party A with written
notice of its exercise within ten (10) business days after the date of
receipt of the Offer Notice (the "Offer Acceptance Period"); provided,
however, that if Party B receives an Offer Notice within a Standstill
Period, the Offer Acceptance Period shall not commence until the
expiration of the Standstill Period. If Party B fails to exercise its
Right of First Refusal within such Offer Acceptance Period, then Party
B shall be deemed to have elected not to exercise its Right of First
Refusal with respect to the particular Offer at issue. Notwithstanding
the foregoing, if Party A negotiates with the proposed purchaser terms
that differ from those contained in the Offer, then Party A shall be
required to submit such different terms to Party B and Party B shall
have an additional ten (10) business days after the receipt of such
different terms to accept or reject such revised Offer.
Notwithstanding anything to the contrary herein, if Party A receives
an Offer and Party A has not delivered a Right of First Negotiation
Notice to Party B within one
22
hundred eighty (180) days prior to Party A's receipt of such Offer,
then Party B shall be entitled to exercise both the Right of First
Negotiation and the Right of First Refusal; provided, however, that if
Party B exercises the Right of First Negotiation in connection with
any such Offer, then the Offer Acceptance Period shall not commence
until the expiration of the Standstill Period.
17.3 The Right of First Refusal and Right of First Negotiation shall be
continuous during the Term of the Lease. Party B's rejection of any
particular Offer or Right of First Negotiation Notice shall not
relieve Party A of its obligation to again deliver an Offer Notice or
Right of First Negotiation Notice to Party B with respect to any
subsequent Offer received or solicited by Party A or any subsequent
intention by Party A to sell, market for sale or otherwise transfer
its interest in the Hangzhou Real Property. Any transfer of the
Hangzhou Real Property or Party A's interest therein shall be subject
to the terms and conditions of this Agreement. Notwithstanding
anything to the contrary herein, Party A may not sell, market for sale
or otherwise transfer its interest in less than all of the Hangzhou
Real Property.
18. LIABILITY FOR BREACH OF AGREEMENT
18.1 Subject to the following provisions, in the event that a Party commits
a breach of one or more of its obligations under this Agreement, then
the non-breaching Party shall deliver notice to the breaching Party
promptly upon the non-breaching Party's knowledge of such breach, and,
upon receipt of such notice, the breaching Party shall be liable to
pay damages to the non-breaching Party for any loss suffered by such
non-breaching Party that was reasonably foreseeable as likely to
result from the breach.
18.2 If Party B fails to pay any amount payable hereunder on the date that
such payment is due under this Agreement, Party A shall be entitled,
for as long as the said breach continues to prevail, to issue a notice
in writing (the "Notice of Breach") to Party B requiring Party B to
remedy the breach within thirty (30) days of the Notice of Breach (the
"Remedy Period"). If Party B still fails to pay the required amount
within the Remedy Period, Party B shall pay to Party A a penalty on
the overdue amount from the thirty-first (31st) day after the amount
becomes overdue to the date of actual payment at the rate of five one
hundredths of a percent (0.05%) per day.
If Party B fails to pay the required amount within thirty (30) days
after the expiry of the Remedy Period and such failure is not due to a
breach by Party A of any provision of this Agreement, Party A shall
have the right to terminate this Agreement forthwith by written notice
to Party B. In the event that Party A chooses to terminate this
Agreement, Party B shall not be discharged any liability for payment
of any overdue amount and any
23
penalty assessed pursuant to the immediately preceding paragraph
payable by Party B to Party A under this Agreement.
19. APPLICABLE LAW
19.1 This Agreement, including but not by way of limitation its validity,
application, interpretation and implementation, and the merits of any
dispute, controversy or claim arising out of or relating to this
Agreement, shall be governed by PRC Law
19.2 In this Agreement, PRC Law means the laws, regulations, provisions,
measures, rules, and decrees of the PRC which are of general
application ("PRC Law").
19.3 The Parties have entered into this Agreement in reliance on the terms
as set out herein and a reasonable interpretation thereof.
19.4 If Party B in implementing this Agreement or in carrying out its
activities would encounter any material difficulties in or as a result
of the implementation, application or interpretation of PRC Law, Party
A shall, at the request of Party B, render all reasonable assistance
with respect to the same.
20. SOVEREIGN IMMUNITY
Each Party hereby irrevocably and unconditionally waives and agrees not to
claim or plead:
20.1 any right of immunity (whether characterized as sovereign immunity or
otherwise) in respect of itself or any of its property or assets,
including immunity from jurisdiction, immunity, from attachment prior
to entry of judgment, immunity of attachment in aid of execution of
judgment, and immunity from execution of judgment; or
20.2 any defense based on the fact or allegation that it is an agency or
instrumentality of a sovereign state;
all in respect of any legal suit, action or proceeding arising out of
or relating to this Agreement. The term "judgment" as used herein
shall also refer to the recognition and enforcement of an arbitral
award.
21. PARTIAL INVALIDITY
21.1 The validity, of the remaining provisions of this Agreement shall not
be affected by a decision by a court, arbitration panel,
administrative board or agency or other institution having competent
jurisdiction to the effect that any provision of this Agreement is
void, illegal, unenforceable or contrary to law or public policy.
24
21.2 If as a result of such decision any of the rights or obligations of a
Party hereto are adversely affected, then such Party shall be entitled
to notify the other Party in writing thereof, asking for joint
consultations specifying the rights or obligations so affected and the
amendment proposed. Thereupon the Parties shall promptly meet and
negotiate in good faith to arrive at an amendment of the provision of
this Agreement so affected, in such manner as will most closely and
accurately reflect the intents and purposes of this Agreement so that
such provision becomes legal, enforceable and consistent with the law
and public
21.3 If the Parties within a period of two (2) months from the date of
commencement of such consultations do not agree that the Party's
rights or obligations have been adversely affected or do not agree
upon an appropriate amendment to this Agreement, then there shall be
deemed to exist a dispute that may be referred to arbitration pursuant
to Clause 23.
22. CHANGE IN THE LAW
22.1 Unless otherwise expressly specified in the laws and regulations of
the PRC, any subsequent legislation or subsequent amendments to laws
and regulations shall have no retroactive force.
22.2 The Parties may, if they so agree in writing, make variation or
amendments to this Agreement according to subsequent legislation or
laws and regulations.
22.3 If any relevant provisions of the current regulations and/or documents
of the Zhejiang Province or Hangzhou Municipality are amended or any
relevant new provisions are stipulated by the regulations and/or
documents of the Zhejiang Province or Hangzhou Municipality or any act
or decision by an authority, is taken or made which adversely affect
Party B's rights or obligations under this Agreement, the Parties
hereby agree that these rights and obligations can still be exercised
and performed by Party B on the basis of this Agreement.
22.4 Subject to Clause 22.3, Party A further agrees that if any relevant
provisions of the current PRC law are amended or any relevant new
provisions are stipulated by PRC law or any act or decision by an
authority is taken or made (any such event hereinafter referred to as
an "Event of Change") which adversely affect Party B's rights or
obligations under this Agreement, then the Parties shall, at Party B's
request, promptly meet and discuss in good faith and in a spirit of
mutual understanding and cooperation to determine the action that
should be taken by Party A to put Party B as closely or as accurately
as possible back into the position it was in prior to the Event of
Change. Party A shall use its best endeavors to assist Party B in this
regard.
25
22.5 If the Parties within a period of two (2) months from the date of
commencement of such consultations do not agree that the Parties'
rights or obligations have been materially affected or do not agree
upon an appropriate amendment to this Agreement, then there shall be
deemed to exist a dispute that may be referred to arbitration pursuant
to Clause 23.
23. ARBITRATION
23.1 The Parties shall endeavor to resolve any dispute, claim or
controversy which may arise out of or in connection with this
Agreement or the application, implementation, validity, breach or
termination thereof (a "Dispute") through friendly consultations
between them.
In the event that any Dispute cannot be or has not been solved through
consultation within a period of two (2) months from the date of
commencement of such consultations or any Party refuses to enter into
or persistently delays in entering into consultations, such Dispute
shall be exclusively submitted to and finally settled by arbitration
by the China International Economic and Trade Arbitration Commission
("CIETAC") in Beijing under the Arbitration Rules of CIETAC in force
on the date of this Agreement (the "CIETAC Rules"). In the event of
any conflict between the CIETAC Rules and the provisions of this
Agreement, the provisions of this Agreement shall prevail to the
extent permitted by the PRC Law and the CIETAC Rules.
23.2 The number of arbitrators shall be three (3). Each of the Parties
shall appoint one (1) arbitrator. The Chairman of CIETAC shall appoint
the third arbitrator who shall be the chairman of the arbitration
panel.
23.3 The arbitrators shall in all respects be impartial and independent. So
far as possible, the arbitrators shall not be nationals or former
nationals of the PRC.
23.4 The arbitration proceedings shall be conducted in both the Chinese and
English languages.
23.5 The arbitration award shall be in lieu of any other remedy, shall be
final and binding on the Parties and shall in all respects be fully
valid and enforceable against the Parties or their assets wherever
they may be found.
23.6 At any oral hearing of evidence in connection with the arbitration,
each Party thereto or its legal counsel shall have the right to
examine its witnesses and to cross-examine the witnesses of the
opposing Party. No evidence of any witness shall be presented in
written form unless the opposing Party shall have the opportunity to
cross-examine such witness, except as the Parties to the Dispute
otherwise agree in writing or except
26
under extraordinary circumstances where the arbitrators determine that
the interests of justice require a different procedure.
23.7 Without in any way limiting the foregoing and notwithstanding anything
herein to the contrary, the Parties may, upon the prior mutual written
consent, submit any Dispute to one expert or as the case may be three
experts acceptable to the Parties for consideration and advice. Each
Party agrees, in the event such submission is made, to reasonably
consider the advice of such expert in connection with such Dispute and
to bear the cost of obtaining such advice in equal shares. Prior to
submitting such Dispute to such an expert or such experts, the Parties
may agree that the advice of the expert or experts shall be binding on
the Parties.
23.8 This Agreement shall be performed continuously by the Parties during
the course of arbitration except for matters in dispute and any matter
reasonably relating thereto.
24. FORCE MAJEURE
24.1 Any obligation of a Party and the corresponding obligation of the
other Party shall be temporarily suspended during the period in which
such Party is unable to perform by reason of a Force Majeure Event,
but only to the extent of such inability to perform.
24.2 The Party asserting the occurrence of a Force Majeure Event shall
before the occurrence of a Force Majeure Event if it is predicted, and
in any case immediately after the commencement of a Force Majeure
Event notify the other Party of the occurrence of such Event,
specifying the estimated period and degree of suspension or disruption
of its operations. Such notice shall be by the most rapid and
effective means available in the circumstances.
24.3 The Party asserting such suspension of obligations shall have the
burden of proving that the circumstances constitute valid grounds
therefore under this Clause.
24.4 For the purposes of this Agreement, "Force Majeure Event" means any of
the following objective circumstances which is unforeseeable,
unavoidable and not able to be overcome:
24.4.1 Act of God, fire, explosion, earthquake, thunder, storm,
typhoon, tornado, hurricanes, landslide, flood, washout or
epidemic;
24.4.2 war, riot, civil war, blockade, insurrection, sabotage, acts of
public enemies, civil disturbances;
24.4.3 boycott, strike (including a general strike), lockout or other
27
similar industrial disturbance; and
24.4.4 any other act or omission beyond the reasonable control of the
Party asserting the occurrence of the Force Majeure Event.
An order, judgment, ruling, decision or other act, or failure to
act, of any governmental, civil or military authority shall not
be considered a "Force Majeure Event".
25. NOTICES
25.1 All notices and communications required or permitted to be delivered
hereunder shall be in writing and delivered by hand or sent by post or
by facsimile to the other Party. Such notices or communications shall
be deemed to have been received, unless proved otherwise:
25.1.1 if delivered by hand, when left at the other Party's address
against written receipt:
25.1.2 if sent by post, ten (10) days after the date of posting; and
25.1.3 if sent by facsimile upon receipt by the sender of the
recipient Party's answer back code at the end of transmission.
25.2 All notices and communications shall be delivered to the addresses or
fax number set out in the "Schedule of Notice Address and Account
Information" attached to the execution clause to this Agreement until
such address or fax number is changed by written notice from one Party
to the other Party in accordance with the procedures of this Clause.
26. EFFECT
This Agreement shall come into force and effect upon signature by the legal
or authorized representatives of the Parties and affixing by them the
official chop of the Parties.
27. LANGUAGE
This Agreement is written in both the Chinese and English language. Both
language versions shall have equal effect.
28. EXECUTION
This Agreement is executed as of January 1, 2004.
29. AMENDMENT AND WAIVER
29.1 No amendment of any of the provisions of this Agreement or waiver of
any rights or obligations of the Parties under this Agreement shall be
valid
28
and effective unless it is in writing, refers specifically to this
Agreement and:
29.1.1 In the case of an amendment, is signed by both Parties: or
29.1.2 In the case of a waiver, is signed by the Party waiving its
right or the other Party's obligation.
29.2 The waiver by a Party of its right to either exercise any right it has
under this Agreement or enforce any obligation the other Party has
under this Agreement shall not operate as a waiver such Party's right
to exercise such right or enforce such obligation on any future
occasion, unless the waiver is expressly stated to have such effect.
30. FILING
Party A shall be responsible for any registrations related to this
Agreement from time to time throughout the Term of the Lease including the
filing of this Agreement with applicable local authorities in charge of
land and building registration within 15 days from the execution of the
Agreement and including any additional filings, registrations or permits
required from time to time to maintain this Agreement; provided, however,
that Party B shall cooperate with Party A in connection with any such
filing or registrations. The costs and fees for such filings and
registrations shall be borne by the Parties in accordance with applicable
law and custom; however, Party A shall indemnify, defend, protect and hold
harmless Party B from any failure to file this Agreement or obtain such
registrations.
31. EFFECTIVENESS
The Agreement shall be in effective upon the execution thereof by all
Parties.
32. ADDITIONAL IMPROVEMENTS
Notwithstanding anything to the contrary herein, Party B shall have the
continuing right during the Term of the Lease (as defined in Clause 3
below) to lease from Party A any additional buildings and improvements
constructed by Party A on the Land (the "Additional Improvements") upon the
same terms and conditions of this Agreement, including the applicable
rental rate hereunder. Party A agrees to notify Party B of its intent to
construct any such Additional Improvements and to allow Party B to
participate in the design and planning of such Additional Improvements,
including any interior tenant finishes and improvements, which shall be
constructed and paid for pursuant to the framework set forth in Clause 9 of
this Agreement.
33. THIRD PARTY BENEFICIARY
The Parties hereby acknowledge and agree that 3Com shall be an express
third
29
party beneficiary to this Agreement and that, so long as 3Com continues to
be a shareholder of the JVCO (as such term is defined in the Contribution
Agreement), this Agreement may not be amended or modified without the prior
written consent of 3Com.
34. COUNTERPART SIGNATURES
This Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which, taken together, shall
constitute but one agreement.
30
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and
year first above written
HUAWEI TECHNOLOGIES CO., LTD.
[COMPANY CHOP]
By: /s/ MR. DU CHUNPING
---------------------------------
Name: Mr. Du Chunping
Title: Head of Facilities
HANGZHOU HUAWEI-3COM TECHNOLOGY CO., LTD.
[COMPANY CHOP]
By: /S/ XXXXX XXX
---------------------------------
Name: Xxxxx Xxx
Title: General Counsel
SCHEDULE OF NOTICE ADDRESS AND ACCOUNT INFORMATION
PARTY A
Legal Address:
Huawei Technologies Co., Ltd.
4th Fl., R&D Building
Huawei Industrial Base
Bantian, Longgang
Xxxxxxxx 000000, Xxxxx
Attention: Zhang Xu Ting
General Counsel
Fax: 00-000-0000-0000
Payment Recipient Bank Account Name: Huawei Technologies Co., Ltd.
Account Opening Bank: [SPECIFIC INFORMATION OMITTED]
Account No.: [SPECIFIC INFORMATION OMITTED]
PARTY B
Legal Address:
Huawei Hangzhou Manufacture Base
East of Liuhe Road, Zhijiang Science Park
Hangzhou Xx-xxxx Xxxxxxxx Xxxx
Xxxxxxxx 000000, Xxxxx
Attention: Chief Operating Officer & General Counsel
Fax No: 00-000-0000-0000
Bank: [SPECIFIC INFORMATION OMITTED]
Account No.: [SPECIFIC INFORMATION OMITTED]
With a copy to:
3Com Corporation
000 Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
X.X.X.
Attention: Chief Financial Officer
General Counsel
Fax: (0-000) 000-0000
[Schedules of Maps and Related Build-Out Information Omitted]
