Xi’an TCH Energy Technology Co., Ltd

Pucheng Xin HengYuan Biomass Power Generation Co., Ltd

 

Biomass Power Generation Project Lease Agreement

 

September, 2013

 

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Biomass Power Generation Project Lease Agreement

 

Lessor: Xi’an TCH Energy Technology Co., Ltd (hereinafter refers to as Party A)

 

Leasee: PuCheng XinHengYuan Biomass Power Generation Co., Ltd. (hereinafter
refers to as Party B)

 

Whereas:

 

1. In order to improve the efficiency of assets operation and decrease the
management cost, Party A agrees Party B to lease its biomass power generation
assets, and Party B agrees to lease such biomass power generation assets and pay
the leasing fee according to this Agreement.

 

2. Both Parties have received valid authorization for the lease agreement, and
such lease does not need any further review, verification or approval by
relevant government agencies.

 

3. Through friendly negotiation, Parties reach the agreement on Party B leasing
Party A’s biomass power generation assets. According to the Contract Law of
China and other laws and regulations, Parties hereby enter into the lease
agreement that is binding on both.

 

Article 1 Lease scope

 

1.1 The Phase I and Phase II biomass power generation equipment assets that
Party B leases from Party A (hereinafter referred to as “Lease Project”) has a
total installed capacity of 2 x 12,000 kw. The details of the Lease Project see
“Target Assets List” as an attachment of this Agreement.

 

1.2 Party B leases the Lease Project for its power generation purpose, and Party
B will enjoy the incomes from such power generation.

 

1.3 Party B operates the Lease Project, keeps its own accounts, and is
responsible for its own profits or losses. Party B shall bear all the taxes and
fees in connection with the operation of the Lease Project.

 

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Article 2 Lease Term

 

The Lease Term is as follows:

 

Phase I of the project: June 29, 2010 to June 28, 2025.

 

Phase II of the project: September 2, 2013 to June 28, 2025.

 

Upon the expiration, Party A will transfer the lease assets to Party B at no
cost.

 

Article 3 Leasing fee and method of payment

 

3.1 The leasing fee is RMB 3.8 million per month. The payment of the leasing fee
will be made monthly by wire.

 

3.2 Party B ensures to make payment of leasing fees on the 15th of each
month.(If the 15th of the month is a weekend or national holiday, such payment
shall be made on the first working day after the weekend or holiday) Party B
shall pay a default fee to Party A everyday that equals to 0.08% of leasing fee
for everyday of its delaying payment.

 

3.3 Party B confirms that the operation expense, depreciation and the amount of
power generated of the lease project remain the same during the lease term.

 

Article 4 Lease Deposit

 

4.1 To ensure the operating profit of the Lease Project and Party B to fulfill
its obligations under this Agreement, both Parties agree that Party B shall pay
Party A certain amount of security deposit. The security deposit will guarantee
Party B operates the project honestly, manage the power generation assets
diligently and carefully and bear the operating risk during the operation
period.

 

4.2 Party B shall pay RMB 3.8 million to Party A as deposit within 10 days after
the execution of the agreement. ( RMB 1.9 million has been paid for phase I, the
actual deposit payment is RMB 1.9 million this time.)

 

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4.3 If there is any damage or loss to the Lease Project caused by the operating
risk during Party B’s operation process, Party A has the rights to deduct the
relevant amount from leasing deposit paid by Party B as a compensation based
upon specific situation according to this Agreement and its attachment. If the
deposit is not enough to pay for Party A’s loss, Party A has the right to
request Party B to pay for the difference.

 

4.4 Upon the expiration of this Agreement, Party A shall return the deposit to
Party B after Parties conclude the accounting based upon this Agreement,
excluding the amount that should be deducted subject to this Agreement and its
attachment.

 

Article 5 Rights and Obligations of Party A

 

5.1 Party A has the right to supervise Party B on Lease Project. For the
behaviors that could damage the Lease Project and affect the economy of the
operation, Party A has the right to stop them and terminate this Agreement.

 

5.2 Party B shall pay the leasing fee on schedule. If Party B delays the
payment, Party A has the right to deduct the fee from leasing deposit. If the
deposit is not enough to pay for the leasing fee, Party A has the right to
request Party B to pay the default fee subject to this Agreement and request
Party B to compensate Party A’s losses.

 

5.3 Party A shall not interfere with Party B’s normal operation and management
activities. The incomes that Party B obtains during its lease term belong to
Party B after payment of the leasing fee in full and leasing deposit.

 

5.4 A shareholder of Party B shall provide joint liability guarantee to Party A
to ensure that Party B will make full payment of leasing fees on time and
perform its obligations under this Agreement.

 

Article 6 Rights and Obligations to Party B

 

6.1 During the operating period, Party B has the rights to autonomous
management, assuming full responsibilities for profits and losses, and
independent and separate accounts.

 

6.2 Party B shall complete all related review and approval procedures for the
Lease Project and obtain the operating rights for the Lease Project by itself.

 

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6.3 Party B shall ensure the integrity and good operating condition of the Lease
Project. If the Lease Project has problems during operation, Party B is
responsible for the repair, maintenance and their costs.

 

6.4 Party B shall pay the leasing fee on schedule and give written notice to
Party A when making such payments.

 

6.5 Party B shall pay the lease deposit in full, and such deposit accrues no
interest.

 

6.6 During the operating period, Party B shall not terminate or cancel this
Agreement without Party A’s consent. If this Agreement is terminated due to
Party B’s reason and it has caused losses to Party A, it shall be considered as
a breach of Agreement by Party B. Party B shall pay the breach of contract
penalty to Party A and be responsible to compensate Party A’s losses (subject to
the evaluation of the third party).

 

Article 7 Force Majeure (as defined by the law)

 

If the “Lease Project” could not be appropriately used due to force majeure,
Party A or Party B can be partially or wholly exempted from its liability
practically and realistically according to the impact caused by the force
majeure. Either Party that suffers a force majeure shall notify the other party
within 2 working days and provide proofs for the force majeure within 15 days,
and shall endeavor to retrieve any loss as much as possible. Party A has the
right to terminate this Agreement if this Agreement cannot be performed due to
the force majeure.

 

Article 8 Liability of breach of contract

 

8.1 Unless otherwise agreed in this Agreement or other written consents by
Parties, neither party can modify or terminate this Agreement during the term
without the written consent from the other party. If any party breaches this
Agreement, it shall pay for all the losses suffered by the other party as a
result of its breach.

 

8.2. Party B shall pay a default fee to Party A each day that equals to 0.08% of
the leasing fee for everyday of its delaying payment.

 

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8.3 If Party B defaults payment of leasing fee accumulatively for 3 months, it
is considered as lack of ability to pay leasing fee, and Party A has the right
to terminate this Agreement, and Party B shall compensate all the losses of
Party A and pay default fees.

 

8.4 If Party B breaches the term of Article 6 of this Agreement and causes
losses to Party A, Party B shall be responsible to compensate Party A’s losses
and pay a breach of contract penalty fee that equals to 40% of the overall
leasing fees of this Agreement to Party A. At the same time, Party A has the
right to seek compensation from the person who provides guarantee for the Party
B.

 

Article 9 Effect of the Agreement

 

This Agreement is established when both Parties sign and seal the agreement.
This Agreement will take effect on the date when Parties sign “Target Assets
List” and “Joint Liability Guarantee Agreement”. If the dates are different on
the aforementioned documents, this Agreement takes effect on the date of the
last agreement is signed.

 

If any term of this Agreement is considered invalid by the Court, the validity
of other terms of this Agreement shall not be affected.

 

Upon this agreement takes effect, the assets lease agreement by the Parties
dated June 29, 2010 shall stop its effect from September 1, 2013.

 

Article 10 Settlement of dispute

 

Any disputes arising out of this Agreement shall be settled through friendly
negotiation, in case no settlement can be reached, each party can file a law
suit to the local People’s Court with jurisdiction in which the Party A is
located.

 

Article 11 Others

 

1. For any other matters not addressed in this Agreement, Party A and Party B
may reach “Supplement Agreement”, and “Supplement Agreement” has the same legal
effect to this Agreement.

 

2. Party B agrees, during the implementation of this Agreement, Part A can
change or assign this Agreement to any other party that Party A designates, if
necessary. Party B shall not assign/transfer its rights and obligations under
this Agreement without the written approval of Party A.

 

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3. This Agreement has six original copies. Party A and Party B each holds three
copies and they all have same legal effect.

 

Party A :     (sealed) Party B :     (sealed)     Signature of representative:  
Signature of representative:     Signing date Signing date

 

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