Agreement No.: ZMZ-2013-0031-11

 

Guarantee Agreement

 

(Applicable for guarantee made by company)

 

[English Translation]

 

Agreement Date: June 16, 2013

  

 

 

 

Table of Contents

 

1 Secured Principal Debt   1         2 Scope of Guarantee   2         3 Manner
of Guarantee   3         4 Period of Guarantee   4         5 Entire Guarantee
Agreement   4         6 Commitment and Guarantee of Party B   4         7
Obligations of Party B   5         8 Undertaking of Guarantee Liability   6    
    9 Breach Liability   8         10 Disputes Resolution   8         11 Advice
and Delivery   8         12 Effectiveness of Agreement   9         13 Other
Terms   9         14 Other agreed Terms   9         Exhibit One: Payment Advice
(Format Text)   11

  

 

 

 

Guarantee Agreement

 

Agreement No.: ZMZ-2013-0031-11

 

Creditor: China National Foreign Trade Financial & Leasing Co., LTD (hereinafter
called “Party A”)

Address: Building #11 of Beijing Xiyuanfandian, No.1, Sanlihe Road, Haidian
District, Beijing

Post Code: 100044

Legal Representative: Jianping Ding

Tel: 010-68321866

Fax: 010-68322705

 

Guarantor: Baoding Shengde Paper Company Limited (hereinafter called “Party B”)

Address: Juli Road, Xushui County, Baoding City, Hebei Province

District, Beijing

Post Code: 072550

Legal Representative: Zhenyong Liu

Tel: 0312-8698192

Fax: 0312-8698191

 

In order to ensure the realization of Party A’s rights as a creditor, Party B
voluntarily provide guarantee to Party A. To specify both parties’ rights and
liabilities, Party A and Party B agree to enter into this Agreement according to
the “Contract Law”, “Guarantee Law” and other relevant law and regulations of
the People’s Republic of China.

 

1Secured Principal Debt

 

1.1The secured principal debt is Party A’s right to Hebei Baoding Orient Paper
Milling Company Limited (hereinafter called “Lessee”) according to the
“Financing & Lease Agreement” (hereinafter called “Principal Agreement”)
numbered ZMZ-2013-0031, which is entered by Party A and the Lessee on June 16,
2013.

 

1

 

  

1.2The amount and terms of the principal debt are subject to the “Actual Rent
Payment Schedule,” which is specified in the Principal Agreement. If any
adjustment of People’s Bank of China benchmark lending rate occurs during the
term of the lease, the amount and terms shall be subject to changes according to
the “Notice of Rent Adjustment.”

 

1.3If the Principal Agreement fails to take effect, becomes invalid in all or in
part, is revoked or canceled, the secured principal rights shall be the Lessee’s
liabilities to Party A for returning property and reimbursement for losses under
the Principal Agreement.

 

2Scope of Guarantee

 

2.1The scope of guarantee includes the rent, penalty, damages, all expenses paid
by Party A to reinforce the creditor’s rights (including but not limited to
litigation fees, arbitration fees, legal fees, travel expenses, and expenses for
auction and evaluation for retrieving leased property under the Principal
Agreement) and all other fees attributable to the Lessee. The scope of guarantee
also includes any amounts arising from adjustments triggered by change in the
interest rate according to provisions under the Principal Agreement.

 

3Manner of Guarantee

 

3.1This Guarantee is an irrevocably joint and several liabilities Guarantee.
Party B bears joint and several liabilities to all debts of the Lessee under the
Principal Agreement.

 

3.2If the Lessee fails to fulfill all debt obligations within the stipulated
period according to the Principal Agreement, Party A then has the right to
demand Party B to perform the guarantee obligation.

 

3.3Regardless of Party A’s other security for its rights under the Principal
Agreement (including but not limited to other guarantees, collateral, mortgage,
pledge and so on), regardless of when or whether the above mentioned other
security takes effect, regardless of Party A’s possible claim to other
guarantor, regardless of any third party agreeing to take all or partial debt
obligation under the Principal Agreement, and regardless of whether other
guarantee is provided by the Lessee, the guarantee liability of Party B under
this Agreement cannot be waived. Party A has the right to demand Party B to bear
the guarantee liability within the scope of guarantee according to this
Agreement, and Party B shall not raise any objection.

 

2

 

 

4Period of Guarantee

 

4.1The period of guarantee for Party B’s joint and several liabilities to the
guarantee is two years from the date of complete fulfillment of the principal
debt. If the debt is paid by installment, then the period of guarantee is two
years from the last debt payment. If Party A declares early maturity of debt
pursuant to provisions of the principal Agreement, then the early maturity date
is the date of complete fulfillment of the debt.

 

4.2If Party A and the Lessee mutually agree to change the period of debt
fulfillment in the Principal Agreement without the written consent by Party B,
then the period of guarantee is the same as the above mentioned in Section 4.1.

 

5Entire Guarantee Agreement

 

5.1This Agreement has an independent irrevocability. The effectiveness of the
secured rights and debts under this Agreement shall not affect the effectiveness
of this Agreement. Even if the secured principal debt is invalid in all or in
part due to any reason, this Agreement is still valid.

 

6Commitment and Guarantee of Party B

 

6.1Party B is a legally established and validly subsisting legal entity and has
the legal qualification to sign this Agreement. Its agent signing this Agreement
has received proper authorization.

 

6.2Party B guarantees that its guarantee under this Agreement has been approved
with all necessary internal resolutions, authorization and relevant government
department’s approval (if necessary) subject to the procedure and purview of
company’s bylaw. Party B is responsible for all documents’ authenticity,
legitimacy and integrity.

 

6.3Party B guarantees to timely repay any remaining amount of debt on behalf of
the Lessee in the event that the Lessee has not repaid any debt that becomes
due.

 

3

 

 

6.4If one of the following events occurs, Party B shall continue to bear the
guarantee responsibility according to the Agreement without getting consent from
Party B:

 

(a)Party A negotiates changes to the Principal Agreement with the Lessee, and
the changes do not increase the Lessee’s debt or extend the period of debt. Rent
increased by Notice of Rent Adjustment delivered by Party A according to
Principal Agreement. Or rent payment date is adjusted by Party A after
confirmation of lease commencement date according to provisions under the
Principal Agreement;

 

(b)The rent changes due to floating rent rate or rent adjustment after the
confirmation of lease commencement date;

 

(c)Party A transfers the principal debt to a third party;

 

(d)If China Orient Asset Management Corporation, Shijiazhuang Branch acquires
the rights and obligations under the Principal Agreement according to the Long
Term Acquisition Commitment Letter.

 

6.5Party B promises that all of its taxes have been paid before signing of this
Agreement, and it has no record of any tax delinquency or tax evasion.

 

6.6Party B promises to obtain written consent from Party A or make satisfactory
arrangement for its guarantee liability under this Agreement in advance of any
merger, demerger, reduction of registered capital, changes of equity,
transferring of significant asset and credit, significant investment, increase
of debt financing or other action that may have negative impact on Party A’s
benefits, otherwise Party B is prohibited to take any of the above mentioned
action.

 

6.7Party B promises that before Party A’s rights under the Principal Agreement
has been fully satisfied, Party B will not cause any damage to Party A’s
interests and its claim of subrogation or recourse right to the Lessee or other
guarantors. Party B also agrees that any payment of debt under the Principal
Agreement is in priority to realization of its own subrogation or recourse right
against the Lessee. Specifically, before the full payment of debt to Party A:

 

4

 

  

(a)Party B agrees not to claim subrogation or recourse right to the Lessee or
other guarantors. If for any reason, Party B realizes the above right, Party B
shall first pay off any unpaid balance of debt to Party A.

 

(b)If debt under the Principal Agreement is collateralized by any other property
or right, Party B agrees not to claim any right to the proceeds from the
disposition of such other property or right in the grounds of excising
subrogation right or other rights. The proceeds from the above mentioned
property or right disposition shall be first used to pay off the unpaid balance
of debt to Party A.

 

(c)If the Lessee or other guarantor provide counter-guarantee to Party B, Party
B shall first use the proceeds from such counter-guarantee to pay off any unpaid
balance of debt to Party A.

 

7Obligations of Party B

 

7.1Party B has the liability to pay off debt on behalf of the Lessee according
to this Agreement.

 

7.2During the guarantee period, Party A has the right to supervise Party B’s
funds and property, has the right to require Party B to provide its financial
statements (including but not limited to Balance Sheets, Income Statements and
Cash Flows Statements, etc.) or other documents. Party B shall provide such
documents in time.

 

7.3During the guarantee period, Party B shall provide an audited annual report
to Party A within 90 days after its fiscal year end.

 

7.4During the guarantee period, Party B shall allow Party A to review its
financial books and financial conditions in Party B’s office and respective
agencies or domicile at any time, and provide necessary conditions for review.

 

7.5During the guarantee period, Party B shall advise Party A for the following
events within three days of occurrence:

 

(a)Serious deterioration of operating or financial conditions;

 

(b)Party B has delinquent debts to Party A or other financial institutions;

 

5

 

  

(c)Party B, legal representative, or key management personnel of Party B is
involved or will be involved in criminal cases or other legal disputes; or Party
B is involved in significant law suits, arbitration or administrative sanction,
or its key assets are taken in property preservation or other coercive measures.

 

(d)Party B suffers from situations such as production suspension, out of
business, dissolution, suspension for rectification, cancellation or revocation
of its business license, applying for (or being brought to) bankruptcy,
insolvency, division, merger and so on, which causes losses or reduction of its
capability for guarantee.

 

7.6Party B shall timely advise Party A of any of its changes in records at the
government industrial and commercial administrative departments, and shall
provide photocopy of the original sealed document of such changes to Party A.

 

7.7If Party B does not fulfill the payment liability on behalf of the Lessee
according to this Agreement, Party B shall waive the right to object to Party
A’s application of payment order and enforcement from the appropriate
jurisdiction of the Peoples’ Court in the People’s Republic of China.

 

8Undertaking of Guarantee Liability

 

8.1If any of the following events occur, Party A has the right to directly
demand Party B to pay off all the amounts payable to Party A:

 

(a)The Lessee fails to pay any installment rent and other fees according to the
Principal Agreement;

 

(b)The Lessee breaches the liability of the Principal Agreement, and Party A
decides to terminate the Principal Agreement before the expiration date;

 

(c)During the performance period of the Principal Agreement, the Lessee is
brought to a bankruptcy proceeding, out of business, dissolution, liquidation,
suspension for rectification, cancellation or revocation of business license, or
is involved or will be involved in significant lawsuit, arbitration or other
legal disputes;

 

(d)During the performance period of the Principal Agreement, the Lessee is
involved in situations such as merger, transfer, change of ownership equity,
restructuring and so on, which has an impact on its ability to timely pay rent
and other fees according to the Principal Agreement.

 

6

 

 

8.2If any of the situations under Section 8.1 occurs, Party A has the right to
send Payment Advice (see attachment No. 1) to Party B.

 

8.3After receiving the Payment Advice from Party A, which requires Party B to
perform the guarantee liability, Party B shall unconditionally perform all
guarantee liability according to the scope of guarantee within ten days.

 

8.4Party A is under no obligation to send Party B any advice or other documents
sent by Party A to the Lessee according to the Principal Agreement, including
but not limited to Notice of Rent Adjustment. However, Party B shall still bear
the guarantee liability according to this Agreement.

 

8.5Payment to Party A from Party B shall be applied in the following sequence:

 

(a)Fees to assert the rights over the principal debt or guaranteed interests;

 

(b)Penalty attributable to Party B;

 

(c)Damages attributable to Party B;

 

(d)Penalty attributable to the Lessee;

 

(e)Damages attributable to the Lessee;

 

(f)The Lessee’s delinquent rent and other fees payable.

 

Party A has the right to adjust the above sequence if necessary.

 

8.6Party B’s guarantee is in the same currency with the Lessee’s rent payable
according to Principal Agreement.

 

8.7Any new guarantee to the debt under the Principal Agreement set by Party A
shall not imply any reduction/waiver or change to Party B’s guarantee liability.
Party B promises not to request Party A to reduce or waive its guarantee
liability for this reason.

 

8.8Party B promises not to request Party A to reduce or waive its guarantee
liability for reasons such as reduction or waiver of other parties’ guarantee
liability under the Principal Agreement by Party A, or Party A’s giving up of
property collateral under this Agreement.

 

7

 

 

9Breach Liability

 

9.1If Party B fails to pay off all fees payable as per Party A’s requirement
according to Section 8.3 of this Agreement, Party B shall pay penalty to Party A
at a rate of 0.05% per day from the delinquent date to the full-payment date.

 

9.2After this Agreement takes effect, both parties shall perform all obligations
under this Agreement. The party that breaches the Agreement but not performing
the obligation to the fullest extent shall bear the relative breach liability
and indemnify the other party for the losses.

 

10Disputes Resolution

 

10.1If any dispute occurs for the interpretation and performance of this
Agreement, both parties shall resolve the disputes through friendly negotiation.
If there is any dispute that cannot be resolved through friendly negotiation,
either party can submit a lawsuit to the People’s Court of the People’s Republic
of China in Party A’s jurisdiction.

 

10.2In case there is any dispute between Party A and Party B, both parties shall
continue to execute the other sections which have no relationship with the
disputes during the disputes resolution period.

 

11Advice and Delivery

 

11.1Except as otherwise agreed in this Agreement, any advice or other
communication under this Agreement shall be made in written form, and be
delivered to the address specified in the first page of this Agreement by a
designated person, express courier, registered mail and fax.

 

(a)If delivered by a designated person, the delivery date for the material or
advice shall be the date of receipt;

 

(b)If delivered by an express courier, the delivery date for the material or
advice shall be three days after delivery to the express courier;

 

(c)If delivered by registered mail, the delivery date for the material or advice
shall be five days after delivery to the registered mail;

 

(d)If deliver by fax, the delivery date is the day of dispatch of fax.

 

8

 

 

11.2If the address of any party changes, the party shall notify the other party
within seven days. Otherwise, the party failing to give notice shall bear all
liabilities and consequences.

 

12Effectiveness of Agreement

 

12.1This Agreement becomes effective after being signed and sealed by the legal
representatives (or authorized representative) of both parties.

 

12.2This Agreement is signed in four copies, with two copies retained by each
party. The copies retained by the parties have the same effect.

 

13Other Terms

 

13.1The invalidity of any section in this Agreement for any reason shall not
affect the validity and enforceability for the other sections of this Agreement,
and both parties shall continue to fulfill the other sections.

 

13.2Any tolerance, grace period, preference or deferred exercise of right
provided by Party A to Party B shall not affect, prejudice or restrict any of
Party A’s right according to this Agreement, and shall not be regarded as waiver
to the right and benefit or as waiver to any liability of Party B under this
Agreement.

 

13.3This Agreement is signed as a result of negotiations between the two
parties. Both parties have reviewed all sections and have no dissent at the time
of signing. Both parties have accurate understanding for the legal implication
of the sections regarding their respective rights and obligations.

 

14Other Agreed Terms

 

None.

 

If there is any conflict between a Chinese language provision and the
corresponding English language provision in this Agreement, the Chinese language
provision will prevail.

 

9

 

 

Signature page for “Guarantee Agreement” numbered ZMZ-2013-0031-11

 

Party A: China National Foreign Trade Financial & Leasing Co., LTD

                 (Company Seal)

 

Signature of Legal Representative (or authorized representative):

/s/Jianping Ding

 

Party B: Baoding Shengde Paper Company Limited

               (Company Seal)

 

Signature of Legal Representative (or authorized representative):

/s/Zhenyong Liu

 

10

 

 

Exhibit One: payment advice (format text)

 

Payment Advice

 

TO:                           (Guarantor)

 

Re.: Guarantee liability under “Guarantee Agreement” numbered

 

According to the “Guarantee Agreement” numbered             signed by our
company and your company dated         month      day,        year, your company
promise to bear joint liability guarantee to our principal credit on behalf of
 (Lessee) according to “Financing and Lease Agreement” numbered
           signed on month         day,         year. Now the following events
have occurred according to “Guarantee Agreement” (Please tick √ to the
corresponding events):

 

¨The Lessee fails to pay any installment rent and other fees according to
Principal Agreement;

 

¨The Lessee breaches the liability of the Principal Agreement, Party A decides
to terminate the Principal Agreement before the expiration date;

 

¨During the performance period of the Principal Agreement, the Lessee is brought
to a bankruptcy proceeding, out of business, dissolution, liquidation,
suspension for rectification, cancellation or revocation of business license, or
is involved or will be involved in significant lawsuit, arbitration or other
legal disputes;

 

¨During the performance period of the Principal Agreement, the Lessee is
involved in situations such as merger, transfer, change of ownership equity,
restructuring and so on, which has impact on its ability to timely pay rent and
other fees according to the Principal Agreement.

 

Your company is required to timely pay off RMB               yuan to our
company’s bank account as below within Ten days after receiving this Advice:

 

Opening Bank:

 

Account Name:

 

Account Number:

 

Please pay your attention: If your company fail to pay off all payable fess
according to our requirement, your company shall pay penalty to us at a rate of
0.05% per day from overdue date to payment date.

 

China National Foreign Trade Financial & Leasing Co., LTD

 

Date:

 

11