Franchise
Contract





Franchisor: Harbin Municipal
Urban Administrative Bureau


Address:
No. 283 Yiman Street, Nangang District, Harbin


Representative:                     Title:
Deputy Director


Authorized
agent: Li Ma      Title: Division
Chief








Franchisee:
Harbin Yifeng Group Co.,Ltd.


Address:
No. 19 Chengde Street, Daowai District, Harbin


Representative:
Yun Wang          Title:
CEO


Authorized
agent: Shibin Jiang    Title:





Harbin
Municipal Urban Administrative Bureau, the franchisor and Harbin Yifeng Group
Co.,Ltd., the franchisee sign the contract on franchise right of Harbin
Xiangyang MSW Landfill. The attachments are the indivisible part of the
contract, have the same legal effect. (both parties have fully understood the
attachments before the conclusion of the contract.)





Item
1 Franchise Project


Construction
and operation right of Harbin Xiangyang MSW Landfill





Item
2 Location and Construction


The
landfill, north to the Jinjia Village Xiangyang Town Xiangfang District Harbin,
14.5km from No.1 entrance of Hatory Highway, occupies not less than 40
hectares  (while the area should be decided by the actual
measurement).





Item
3 Ownership of Land


Franchisor
allocates the land of the landfill free of charge, and the franchisee only
enjoys the right to use, but with no right to mortgage or transfer. Upon the
expiration of the franchise contract, the franchisor shall freely take back the
right of land use. The use of existing land to engage with the project unrelated
to the landfill disposal should be agreed by the franchisor.





Item
4 Term


(A)           15-month
construction period, as of the completion of dedication of land


(B)           Term:
17 years or landfill capacity has reached the designed capacity in 17 years. The
operation period commence on the date of acceptance of the
waste.








Item
5 Construction and Operating Funds


The
franchisee full invests the landfill and set up an account jointly supervised by
two parties. In the meanwhile, the franchisee should provide the credit
certificate of project capital of 25 million. The amount and manner of
investment: In light of the preliminarily designed outline, the total investment
for the project is initially estimated as about 160 million (subject to the
approval of extended preliminary design), among which the investment of the
franchisee represents about 120 million (subject to the approval of extended
preliminary design). The franchisee’s eventual investment shall reach the level
of the above amount (calculated by the standard of static value in 2003
financial year) to ensure that all individual projects meet the design
requirements.




The
expenses of engineering design and supervision are paid by the franchisee to the
franchiser according to the standard of extended preliminary design when sign
the contract after winning the bid. It adopts the cash investment.





Item
6 Performance Guarantee


When sign
the contract, the franchisee should provide the bank guarantee in which the
amount represents 30% of the total investment, and also the annual inspection of
registered capital certificate issued by the industry and business section, as
well as financial report audited by the accounting firms. The bank guarantee can
be withdrew when the project’s construction and investment funds up to 30% of
the total investment.





Item
7Asset Management System





(A) The
franchisee provides the assets, liabilities, income and other relevant reports
every month, and ensures their accuracy and authenticity. The franchisor
establishes the cost information databases to form an effective restraint
mechanism of controlling the cost.


(B)In case of doubt about the
financial report the franchisee provides, the franchisor has the right to review
the relevant material.


(C) All
the assets can’t be sold or mortgaged in the course of franchising.





Item
8 Income from Operation, Ownership of the Assets upon Expiration of the
Franchise Contract


In the
course of franchising, the income from operation is owned by the franchisee;
upon expiration of the franchise contract, the franchisee pledges that all the
assets (including tangible and intangible assets) generated from the franchise
project shall be transferred to the franchisor in their integrity and free of
charge; and also ensures that all the assets are not in connection with mortgage
guarantee which would influence the integrity of property
right.








Item
9 Technology Standards for Franchise Project (omitted)




Item
10 Subsidy Standards for Waste Disposal


A、The franchisor
shall monthly pay waste disposal fee of 42 RMB per ton to the franchisee in
accordance with the required standards.


B、The franchisee
shall provide a monthly list of waste disposal expenses for the
franchisor.


C、In case of price
adjustment and standard adjustment by the nation and Harbin Environment Protect
Bureau, the waste disposal compensation will be adjusted in accordance with
hearing procedure. Before adjustment, the franchisee should perform in light of
the original standards.





Item11
Rights and Duties of Both Parties during the Construction Period





(A)
            Rights
      and obligations of both parties during the construction
    period





1 Rights
and obligations of the franchisor





(1) Be
responsible for the supervision in the course of construction


(2) Be
responsible for the early-stage preparation of project, including some approval
and coordination work such as project feasibility studies, environmental
assessment, extended preliminary
design and land planning.


(3) Be
responsible for handling land acquisition procedures, and providing the land use
right for the franchisee.


(4) Be
responsible for water supply and temporary power in construction site; and also
the external-line for permanent use of electricity and road construction outside
the factory.


2
            Rights
      and obligations of the franchisee





(1) Be
responsible for investment and construction of waste disposal project and
guarantee the achievement of disposal capacity of 1,200 tons per
day.


(2) All
the projects must meet the construction regulations and standard for quality
inspection and assessment required by the state and Harbin.








(3) After
winning the bid, the conclusion of the contract, and the completion of the
dedication of land, complete the first phase construction in 12 months and meet
the acceptance standard. In case of irresistible natural disasters, geological
data not in conformity with the actual situation, the extension of time for
completion can be permitted (mutually agreed upon by the Parties).(4) Be
responsible for constituting three-level quality guaranteeing system to ensure
excellent project quality


(5) The
supervisory units determine that the tender documents prepared by the franchisee
in the way of bidding. The construction unit is authorized by the franchisee in
accordance with relevant regulations.(6) To ensure quality of the project, the
purchase of engineering equipment and materials must be in the way of bidding.
(except for patented products).(7) Within two weeks after acceptance of project,
deliver engineering technology materials, construction completion check and
acceptance and property list to the franchisor as record filing with six
copies.





(B)
            Rights
      and duties of both parties during the operations management
      period





1 Rights
and obligations of the franchisor





(1) Be
responsible for supervision and management in the course of operational
management.


(2)
Guarantee franchise right of the franchisee in the course of franchising.
(3)After the completion of landfill project and put into operation, the
franchisor shall pay compensation to the franchisee in accordance with the
capacity of disposal, that is, payment is due on the 10th of
the month by the standard that the disposal capacity of 800 ton per day (less
than 800 ton per day, pay the compensation in light of the same standard). The
franchisor should settle the compensation of the last month before 10th of
the month.


(4) Be
responsible for the rated capacity of waste shipped to the landfill, and to
ensure that average waste volume not less than 800 tons per day.


(5)
During operation, in case of standard adjustment by the nation and Harbin
Environment Protect Bureau, be responsible to supervise the franchisee to
perform according to the standards, and adjust the waste disposal compensation
in light of hearing procedure.


(6) Upon
expiration of the franchise contract, to accept the property and management
rights free of charge.





2
            Rights
      and obligations of the franchisee


(1)
            Within
      one month before the operation of the landfill, to provide the technology
      operation management manual.


(2) Be
responsible for operations management and maintenance of the landfill, and
accept supervision and inspection of the franchisor.








(3) Be
responsible for the maintenance of housing, construction (structure) building
materials, equipment to ensure their normal functions.


(4) Be
responsible for receiving all the solid waste shipped by the franchisor, in the
case of accepting the waste shipped by the non-franchisor, should with the
consent of the franchisor, and ensure normal operation of waste disposal
continuously throughout the year.


(5) Be
responsible for the timely report to the franchisor about the operation and
management of the landfill. The report of waste volume should be provided daily,
monthly and annually. To provide monthly and annual reports of operation
including personnel and equipment; facilities and equipment maintenance; water,
electricity, oil and material consumption; the waste volume; landfill
operations; landfill gas collection and processing; production and handling of
leachate; environmental protection situation; environmental monitoring
conditions and other matters.


(6) To
request for the waste volume and compensation of last month on the 5th of
the month for the franchisor to review.


(7)
During cooperation period, to ensure the waste disposal standards timely amended
according to the national standard to guarantee the indicators meet the
standards of the state and Harbin municipal environmental protection, and to
deliver the cost variance due to the amendment of standards to the franchisor.
Price adjustment shall be put forward according to hearing
procedures.


(8) To
undertake all the responsibility and compensation for consequential economic
losses, due to failure to operate according to "Technical Code For Municipal
Solid Waste Sanitary Landfill ", which cause damage to environment and other
losses. To bear the responsibility for the compensation and disputes caused by
improper construction and operation.


(9) Upon
expiration of the franchise contract, to transfer the property and management
rights to the franchisor free of charge.




Item
12 Termination and Change of Franchise Right


1 Where
in the course of franchising, if there is necessity to alter the contents of the
contract, the two parties of the contract shall sign a supplementary agreement
on the basis of negotiation together.


2 Where
the franchisee has any of the following acts in the course of franchising, the
franchisor approved by the Harbin Municipal Government shall terminate the
franchising agreement according to law. The rights and obligations of both
parties shall be implemented according to the contract until it expires
;(1)Failure to perform the contract according to the requirements; waste
disposal capacity do not meet the relevant standards and norms, not to rectify
and improve within a definite time


(2)Without
the approval of the government and the franchisor, transfer or change franchise
right without authorization


(3)
Without the approval of the government and the franchisor, shut down or go out
of business without permission,








3 Where
the franchise right is altered or terminated, the franchisee shall manage to
deal with the assets treatment and personnel placement to ensure the continuity
of service.


4 As the
particularity of the landfill operation, whatever causes termination of the
contract, the franchisor has the right to timely access to landfill sites and
use all the facilities and equipment to maintain the normal operation of the
landfill. The franchisee shall work with the franchisor and the staff shall be
subject to work transfer.




Item
13 Supervision Mechanisms


Harbin
Municipal Urban Administrative Bureau, as the representative of Harbin Municipal
Government, is responsible for the authorization of franchise right and entrust
Harbin Environmental Sanitation Administrative Office to implement supervision
and perform the relevant rights and undertake responsibilities.





1
Monitoring market behavior of the franchisee during operation period, the
quality and quantity of waste disposal, and the performance of the
contract


2
Punishing failure to perform the contract according to the requirements, the
quality of waste disposal does not meet relevant standards and
norms


3 The
quality check measured by monthly hundred-mark system on the operation of
landfill, the detailed measures see attachment 1





Item
14 Liabilities for Breach of Contracts


1 Unable
to provide the condition for the project within the specified time resulted in
the delay of the project and the extension of time for completion


2 After
winning the bid, the conclusion of the contract, and the completion of the
dedication of land, the franchisee still can’t start operation within one month
so that the termination of the contract (except for the reasons of the approval
procedures of construction and unfinished construction design)


3 The
franchisee fails to perform the contract during the construction period, such as
delay of duration, non-completion and so on, which results in the delay of
construction project. Every day of delay, the franchisee shall compensate two
ten thousandth of the investment of the phased project for the
franchisor.


4 During
the operation period, if the franchisee fails to timely process the waste
according to the daily processing capacity, shall assume the liabilities. The
franchisor shall deduct the fee by the untreated waste.


5 During
the operation period, there is a problem caused by the franchisee that the
environment indicators are not up to the standard, shall rectify and improve
according to the requirements of relevant departments of the state and accept
the consequences.


6 After
the conclusion of the contract, either party terminate the contract without the
consent of the other party is deemed to breach the contract and shall compensate
all the economic losses and undertake 10% of the performance bonds of the other
party as penalty for breach.








7 Upon
the expiration of the franchise contract, if the assets transferred by the
franchisee to the franchisor are not in accordance with the regulations in
Article 8, the franchisee shall assume liabilities for
compensation.


8 A party
who is unable to perform a contract due to force majeure is exempted from
liabilities for breach.


Should
the articles stipulated in this Contract be in conflict with the provisions
specified by the state, the state-specified provisions should be taken as valid
and binding.Pending
issues are through mutual consultation.


Upon the
expiration of the franchise contract, this contract shall be terminated and
cease to be in force naturally.





Supplement


1
Supervision and Inspection Scheme of Quality and Quantity in Harbin Xiangyang
MSW landfill


2
Technology Operation Management Manual of Harbin Xiangyang MSW
landfill


3
Technical Code for Sanitary Landfill of Municipal Solid Waste


4
Construction Standard for Municipal Solid Waste Sanitary Landfill Engineering
Project


5
Technology Standard for Environment Monitoring on Solid Waste
Landfill