Document:

kl07044_exhibit10-7.htm

    
      

    

     

    Exhibit 10.7

    

    

    

    

    

    

    

    Guarantee
Agreement

    

    

    

    

    

    

    

     

    

    

    

    

    

    

    

    

    

    China
Construction Bank

    Hunan
Branch

    

    

    

     

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    
 

    Contract
Number: 4306877002004003

    

    

    

    

    Guarantor
(Party A): Shenzhen Zhaoheng Industrial Co., Ltd

    

    Address:
No.5015 Shennan Road                             Zip:
518015

      Luohu
District, Shenzhen City

    

    Legal
Representative ( Person in-Charge):   Guosheng Xu

    

    Facsimile:
0755-82071998                                Telephone:
0755-82071998

    

    

    
 

    

    

    

    

    

    Creditor
(Party B): China Construction Bank., Ltd. Shimen Branch

    

    Address:
Central Liyang Road, Chujiang Town                   Zip: 415300

      Shimen County

    

    Person
in-Charge: Chun Yang

    

    Facsimile:
0736-5322584                                Telephone:
0736-5327049

    

    

     

    
 

    
 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    

    Guarantor
(hereinafter “Party A”): Shenzhen Zhaoheng Industrial
Co., Ltd.__

    

    Creditor
(hereinafter “Party B”): China Construction Bank Co.,
Ltd. Shimen Branch

    

    Party A
agrees to provide joint liability guarantee for the indebtedness under the Capital Loan Agreement in
Renminbi, Contract No. 4306877002004003, (hereinafter "Underlying
Contract") between Hunan Sanjiang Electric
Power Co., Ltd. (hereinafter "Debtor") and Party B, in order to ensure
performance under the Underlying Contract and to safeguard realization of Party
B's rights as a creditor. Party A and Party B upon consultation have reached the
following agreement in accordance with relevant laws and regulations, for mutual
observance and compliance.

     

    Article
1.        Type of Guarantee

     

    Party A
shall provide a joint liability guarantee.

     

    Party A
hereby confirms that when the Debtor fails to perform its obligations in
compliance with the Underlying Contract, notwithstanding any security under the
Underlying Contract available for the benefit of Party B (including but not
limited to guarantee, mortgage, pledge, letter of guarantee, standby letter of
credit), Party B shall be entitled to directly request Party A to perform its
guarantee obligations within the scope of the guarantee.

     

    Article
2.         Scope of
Guarantee

     

    Loan
principal in the amount of Renminbi (currency
type) 30
million (capital), together with interest (including compound interest
and penalty interest), damages for breach of contract, compensation and expenses
incurred by Party B in realizing its rights as a creditor (including, without
limitation, expenses in connection with litigation, arbitration, property
preservation, travel, enforcement, and appraisal as well as auction
expenses).

     

    Article
3.          Period of
Guarantee

     

    The
Period of Guarantee shall commence from the date of effectiveness hereof and
continue until two (2) years after the term of the Underlying Contract has
expired. In case of agreement by Party A for an extension under the loan, the
Period of Guarantee shall continue until two (2) years after the extended term
of the Underlying Contract has expired.

     

    Artile
4.            Variations
to the Underlying Contract

     

    Party A
confirms, that except for the following cases, prior consent of Party A shall be
deemed as have been obtained in case of any variation to the Underlying Contract
mutually agreed between Party B and the Debtor, and Party A’s obligation
hereunder shall not be reduced or discharged thereby:

     

    
      	
              (1)  

            	
              The
      term of the Loan is extended;

            

    

     

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    
      	
              (2)  

            	
              The
      principal amount of the Loan is
raised.

            

    

     

                   
Article
5.           Effect and
Validity

     

                The
effect and validity of the agreement hereunder shall be separate from and
independent of that of the Underlying Contract; and invalidity of the Underlying
Contract shall not affect the effect and validity of the agreement hereunder. If
the Underlying Contract is held to be void, Party A shall be also jointly liable
for all obligations of the Debtor for return of properties and indemnification
against losses.

     

    Article
6.           Capacity as
a Guarantor

     

    During
the Period of Guarantee, Party A shall send a written notice to Party B in
advance in case of any of the following: loss or possible loss by Party A of its
capacity as a guarantor or any activities undertaken by the guarantor's legal
person or other organization such as tendering for a contract, lease, merger,
acquisition, joint venture, spin-off, joint operations, shareholding
reorganization or revocation etc. All obligations hereunder shall be resumed by
the organization newly formed through the above activities or by the agency
ordering the revocation. In case that Party B does not believe that the new
organization so formed has necessary capacity as a guarantor, Party A or the
agency ordering the revocation shall provide a new security acceptable to Party
B and enter with Party B into relevant security contract.

     

    During
the Period of Guarantee, Party A shall not without written consent by Party B
provide any security to any third party in excess of its capacity.

     

    Article
7.            Financial
Supervision against the Guarantor

     

    During
the Period of Guarantee, Party B is entitled to monitor and supervise over the
capital and financial conditions of Party A, and Party A shall provide relevant
accurate information such as financial statements.

     

    Article
8.            Accelerated
Performance of the Guarantee Obligation

     

    During
the Period of Guarantee, when Party B declares accelerated maturity of the
indebtedness under the Loan in accordance with the Underlying Contract, Party B
is entitled to request Party A to perform its guarantee obligations within 15 banking days of
the accelerated maturity date, and in which case Party A agrees to perform its
guarantee obligations as required by Party B.

     

    Article
9.             Transfer
of Amounts Payable

     

    In
connection with all amounts payable by Party A under its Scope of
Guarantee,

     

    Party B
is entitled to transfer such amounts payable from accounts opened
and

     

    maintained
by Party A with China Construction Bank Co., Ltd.

     

    Article
10.            Miscellaneous

     

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    
      	
              (3)  

            	
              Party
      A's guarantee obligations shall not be reduced or discharged on account of
      any circumstance such as Debtor's merger, spin-off, shareholding
      reorganization, decrease or increase in capital, joint venture, joint
      operation,, or change of Debtor's name
etc.

            

    

     

    
      	
              (4)  

            	
              The
      Guarantor is obliged to supervise and monitor any use of the loan proceeds
      by the Debtor.

            

    

     

    
      	
              (5)  

            	
              In
      case foreign exchange loan is extended by Party B to the Debtor, Party A
      agrees to perform its guarantee obligations in the currency specified in
      such foreign exchange loan contract; in case of performance in any other
      currency,

            

    

     

    
      	
               
      

            	
              consent
      shall be obtained from Party B and any payment on the repayment date shall
      be converted at the selling rate published by Party B for such
      foreign

            

    

     

    
      	
               
      

            	
              exchange
      on that date.

            

    

     

    
      	
              (6)  

            	
              The
      following space is intentionally left
  blank__________;

            

    

     

    
      	
              (7)  

            	
              _______________________________________________;

            

    

     

    
      	
              (8)  

            	
              _______________________________________________.

            

    

     

    Article
11               Dispute
Resolution

     

    Any
dispute arising during the performance of this agreement may be settled through
consultation. If the consultation fails, it shall be settled through the first of the
following methods:

     

    
      	
              (1)  

            	
              Bring
      a suit before the court in the jurisdiction where Party B
      domiciles;

            

    

     

    
      	
              (2)  

            	
              File
      the dispute to   BLANK  arbitration
      commission for arbitration (Arbitration place is   BLANK 
      ) in accordance with the effective arbitration rules of the
      arbitration commission at the time of applying for arbitration.
      Arbitration award  shall be final and conclusive and be binding
      on both Parties.

            

    

     

    During
the suit or arbitration, the provisions in this agreement which are not in
dispute shall still be performed.

     

    Article
12             Effectiveness
of the Agreement

     

    The
Agreement shall come into effect once it is executed by the legal representative
(person in-charge) or authorized representative of Party A and affixed with the
official seal of Party A (executed by Party A is enough, if Party A is a natural
person) and executed by the person in-charge or authorized representative of
Party B and affixed with the official seal of Party B.

     

    Article
13              The
Agreement is executed in seven original
copies

     

    Article
14              Representations

     

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     

    
      	
              (1)  

            	
              Party
      A is clearly aware of Party B's scope of business and limit of
      authorization;

            

    

     

    
      	
              (2)  

            	
              Party
      A has read all provisions herein and is particularly aware of the
      provisions highlighted in bold. At the request of Party A, Party B has
      explained relevant provisions hereunder. Party A is fully aware of and
      completely understands the meaning of each provision as well as its
      related legal consequences;

            

    

     

    
      	
              (3)  

            	
              Party
      A is authorized to enter into and execute the Agreement
      herein.

            

    

     

     

     

    

     

    Party A
(Seal): (Seal)

     

    Legal
representative (person in-charge) or authorized representative
(Signature):

     

                                                                                                                                /s/ Guosheng
Xu

     

                                   
March 15, 2004

     

    

     

    Party B
(Seal): (Seal)

     

    Person
in-charge or authorized representative (Signature):                 /s/ Chun
Yang

     

                                   March
15, 2004

     

    

     

     

     

    

    6kl07044_exhibit10-8.htm

    
      

    

    Exhibit
10.8

    

    

    

    

    

    

    

    

    

    Capital
Loan Agreement in Renminbi

    

    

    

    
 

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    China
Construction Bank

    Hunan
Branch

    

    

    

    
 

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    

    

    Contract
Number: 430688643200700011

     

    

    Loan
Category: Working capital loan

    

    

    

    Borrower
(Party A):  Hunan Sanjiang Electric Power Co., Ltd.

    

    Address:
No. 001 South Power Station Road                Zip:
415300

           
  Chujiang Township, Shimen County

    

    Legal
Representative ( Person in-Charge):   Hong Zhu

    

    Facsimile:
0736-7705511                            Telephone:
0736-7703900

    

     

    

    

    

    

    Lender
(Party B): China Construction Bank Co., Ltd. Changde Branch

    

    Address:
130 Dongting Avenue                          Zip:
415000

    

    Person
in-Charge: Xiaoping Meng

    

    Facsimile:                                     Telephone:
7709217

     

    

    

    

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    Borrower
( hereinafter “Party A”):  Hunan Sanjiang Electric Power Co.,
Ltd

     

    Lender (
hereinafter  “Party B”): China Construction Bank Company Limited,
Changde Branch

     

     

    Party A
applies to Party B for borrowing money and Party B agrees to grant the
loan.  In accordance with the relevant laws, statutes and regulations,
the Parties enter into and abide by this contract upon
consultation.

     

    Article
1. Amount
of the Loan

     

    Party A
borrows Renminbi (in capital) 43 million from Party
B.

     

    Article
2. Purpose
of the Loan

     

    Party
borrows the Loan for the purpose of working
capital.

     

    Article
3. Term
of the Loan

     

    Term of
the loan stipulated herein is 36 months, commencing
from July 15, 2007
to April 30,
2010.

     

    If the
starting date of the period of the loan hereunder is inconsistent with that
indicated in the indebtedness certificate, the date on the indebtedness
certificate for the first grant of the loan shall prevail. The indebtedness
certificate is an integral part of this contract and has equal legal effect with
this contract.

     

    Article
4. Interest
Rate of the Loan, Penalty Rate, Calculation and Settlement of
Interest

     

    
      	
              1.  

            	
              Interest
      rate of the loan

            

    

     

    Interest
rate of the loan hereunder is monthly
(annual/monthly) interest rate of the second category of
the following:

     

    
      	
              (1)  

            	
              Fixed
      interest rate, namely,   blank    .
      The interest rate will remain unchanged during the period of the
      loan;

            

    

     

    
      	
              (2)  

            	
              Floating
      interest rate, which is 0% upward
      (upward/downward) the base interest rate, shall be adjusted every 12 (twelve)
      months starting from the interest accrual date.  Interest
      adjustment day shall be the corresponding date to the interest accrual
      date in that month and shall be the last day of that month if there is no
      corresponding day.

            

    

     

    
      	
              2.  

            	
              Penalty
      rate

            

    

     

    
      	
              (1)  

            	
              The
      penalty rate is
      monthly (annual/monthly)
rate;

            

    

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    
      	
              (2)  

            	
              If
      Party A fails to use the loan according to the stipulated purpose, penalty
      rate shall be the second category
      of the following:

            

    

     

    
      	
              (i)  

            	
              Fixed
      interest rate, which is BLANK;

            

    

     

    
      	
              (ii)  

            	
              Floating
      interest rate, which is 100% upward the
      base interest rate, shall be adjusted every 12(twelve)
      months starting from the interest accrual date.  The
      penalty rate adjustment date shall be the corresponding date to the
      interest accrual date in that month and shall be the last day of that
      month if there is no corresponding
date.

            

    

     

    
      	
              (3)  

            	
              Penalty
      rate for the overdue repayment of the loan hereunder shall be the second category
      of the following

            

    

     

    
      	
              (i)  

            	
              Fixed
      interest rate, which is BLANK;

            

    

     

    
      	
              (ii)  

            	
              Floating
      interest rate, which is 50% upward the
      base interest rate, shall be adjusted every 12(twelve)
      months starting from the interest accrual date.  The
      penalty rate adjustment date shall be the corresponding date to the
      interest accrual date in that month and shall be the last day of that
      month if there is no corresponding
date.

            

    

     

    
      	
              3.  

            	
              The
      accrual date under this agreement is the date the loan is first
      transferred into the account of Party
A

            

    

     

    The base
interest rate when the loan is first issued under this agreement is the loan
interest rate of the same grade promulgated by the People’s Bank of China on the
interest accrual day.  Thereafter, while adjusting the interest rate
or the penalty rate under this agreement, the base interest rate is the loan
interest rate of the same grade promulgated by the People’s Bank of China on the
adjusting day.  If the People’s Bank of China does not promulgate the
base interest rate of the same grade, the base interest rate shall be the
interest rate recognized by the banking industry or the common interest rate of
the same grade, subject to conditions otherwise agreed by the
parties.

     

    
      	
              4.  

            	
              Interest
      on the loan shall accrue from the date the loan is transferred into the
      account of Party A. Interest accrues upon the loan hereunder on a daily
      basis. Daily interest rate =monthly interest rate/30=annual interest
      rate/360. If Party A fails to pay the interest on schedule, compound
      interest shall accrue from the next
day.

            

    

     

    
      	
              5.  

            	
              Settlement
      of Interest

            

    

     

    
      	
              (1)  

            	
              In
      case of fixed interest rate applicable to this loan, the interest will be
      settled at the stipulated interest rate. In case of a floating interest
      rate, interest will be calculated at the interest rate applicable to each
      floating period. If there are several times of interest floating in a
      single interest settlement period, interest accrued in such interest
      settlement period shall be a total of respective interests in each
      floating period;

            

    

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    
      	
              (2)  

            	
              Interest
      on the loan hereunder will be settled on a monthly basis
      (monthly/quarterly). Interest settlement day is fixed at the twentieth day
      of every month
      (month/end of quarter).

            

    

     

           Article 5. Grant
and Use of the Loan

     

    
      	
              1.  

            	
              Precedent
      Conditions of Grant of the Loan

            

    

     

    
      	
              (1)  

            	
              Unless
      wholly or partially waived by Party B, Party B shall be obliged to grant
      the loan only after the following precedent conditions are
      met:

            

    

     

    
      	
              (i)  

            	
              Party
      A has properly handled the approval, registration, delivery and other
      legal formalities relating to the loan hereunder in accordance with the
      relevant laws and regulations;

            

    

     

    
      	
              (ii)  

            	
              If
      there is security for this contract, the security contract or other
      security method conforming to the requirements of Party B has taken into
      effect;

            

    

     

    
      	
              (iii)  

            	
              Party
      A does not incur any event of default as stipulated
  herein;

            

    

     

    
      	
              (iv)  

            	
              Other
      precedent conditions as stipulated by the
  Parties:

            

    

     

            The following space
is intentionally left
blank                                  

     

               
____________________________________________________________

     

    
      	
              (2)  

            	
              Party
      B will commence with granting the loan within ___ bank
      business days after Party A has satisfied the above precedent
      conditions.

            

    

     

    
      	
              2.  

            	
              Using
      Plan of the Loan

            

    

     

    
      	
              (1)  

            	
              July 15, 2007,
      amount: 43
      million

            

    

     

     (the
following space is intentionally left blank)

     

    
      	
              (2)  

            	
              ____Year____Month___Day       Amount______

            

    

     

    
      	
              (3)  

            	
              ____Year____Month___Day       Amount______

            

    

     

    
      	
              (4)  

            	
              ____Year____Month___Day       Amount______

            

    

     

    
      	
              (5)  

            	
              ____Year____Month___Day       Amount______

            

    

     

    
      	
              (6)  

            	
              ____Year____Month___Day       Amount______

            

    

     

              
Article 6. Repayment

     

    
      	
              1.  

            	
              Principle
      of repayment

            

    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

     

    Any
repayment by Party A hereunder shall be made based on the following
principles:

     

    
      	
              (1)  

            	
              Repayment
      of principal shall be prior to repayment of interest under the following
      situations: the principal of the loan has been overdue beyond 90 days,
      interest has been overdue beyond 90 days, Party A’s business operation or
      projects related to the Loan have been terminated though the loan has not
      become mature or the overdue has not been beyond 90 days, and other loans
      stipulated by the laws and
regulations.

            

    

     

    
      	
              (2)  

            	
              Except
      as situations otherwise listed in the Article 6 1 (1) above, any repayment
      shall be made based on the principle that repayment of interest shall be
      prior to repayment of principal, and the interest shall be paid off
      together with the principal upon the last installment of
      repayment.

            

    

     

    
      	
              2.  

            	
              Payment
      of interest

            

    

     

    Party A
shall pay Party B the interest due on interest settlement day. The first date
for paying interest is the first interest settlement day after the loan is
granted. Upon the last installment of repayment, the interest shall be paid off
together with the principal.

     

    
      	
              3.  

            	
              Plan
      of Repayment of Principal

            

    

     

    Party A
shall repay the principal of the Loan according to the following
plan:

     

    
      	
              (1)  

            	
              2009 Year 4  Month  30   Day         Amount:
      20
      million;

            

    

     

    
      	
              (2)  

            	
              2010 Year 4  Month    30
      Day         Amount:
      23
      million;

            

    

     

    The
following space is intentionally left blank

     

    
      	
              (3)  

            	
              ____
      Year  Month  __  Day         Amount:
      ________;

            

    

     

    
      	
              (4)  

            	
              ____
      Year __
      Month  __  Day         Amount:
      ________;

            

    

     

    
      	
              (5)  

            	
              ____
      Year __
      Month  __  Day         Amount:
      ________;

            

    

     

    
      	
              (6)  

            	
              ____
      Year __
      Month  __  Day         Amount:
      ________.

            

    

     

    
      	
              4.  

            	
              Method
      of repayment

            

    

     

    Party A
shall deposit sufficient funds in the account it has maintained with Party B
before the repayment date, which will be automatically used for repayment, or
transfer funds from other accounts for such repayment on the prescribed
repayment date. If Party A fails to made repayment on schedule, Party B shall be
entitled to transfer the corresponding money out of Party A’s account opened at
China Construction Bank Company Limited.

     

    
      	
              (1)  

            	
              Early
      Repayment

            

    

     

    
      	
              (2)  

            	
              Party
      A only needs notifying Party B in advance for early repayment of
      interest;

            

    

     

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      	
              (3)  

            	
              For
      early repayment of principal, Party A shall apply to Party B 20 bank
      business days in advance in writing and may early repay partial or all
      principal with the consent of Party
B.

            

    

     

    When
Party A early repays principal, interest will be calculated at the interest rate
of the loan as determined according to Article 4 hereof for the actual number of
days during which the loan is used.

     

    If Party
A early repays principal, it agrees to pay Party B compensation. Amount of the
compensation = early repaid principle × number of months of early repayment
x______(ratio of compensation). In case the prepayment made within one month
before the maturity date, the number of months left before the maturity date of
the Loan shall be counted as one.

     

    If Party
A makes repayment in installments, in the event of early repayment of partial
principal of the loan, the repayment shall be made in the reversed order of the
repayment plan. Upon early repayment, the loan interest rate stipulated herein
shall still be applicable to the outstanding loan.

     

    Article
7. Security
for the Loan

     

    If the
loan hereunder is a secured loan, the security method is the second of the
following:

     

    
      	
              1.  

            	
              Guarantee;

            

    

     

    
      	
              2.  

            	
              Mortgage;

            

    

     

    
      	
              3.  

            	
              Pledge;

            

    

     

    
      	
              4.  

            	
              Standby
      letter of credit;

            

    

     

    
      	
              5.  

            	
              Credit
      insurance.

            

    

     

    
      	
              6.  

            	
              Others:    BLANK        
      .

            

    

     

              
Article 8. Rights
and Obligations of Party A

     

    
      	
              1.  

            	
              Rights
      of Party A

            

    

     

    
      	
              (1)  

            	
              Requires
      Party B to grant the loan as stipulated
herein;

            

    

     

    
      	
              (2)  

            	
              Uses
      the loan for the purpose as stipulated
herein;

            

    

     

    
      	
              (3)  

            	
              Requests
      Party B to extend the Loan in accordance with the provisions set forth in
      this Agreement;

            

    

     

    
      	
              (4)  

            	
              Requires
      Party B to keep secret the relevant financial information and trade secret
      relating to production and operation provided by Party A, unless otherwise
      provided by laws, statutes and
regulations.

            

    

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

     

    
      	
              2.  

            	
              Obligations
      of Party A

            

    

     

    
      	
              (1)  

            	
              Party
      A shall provide the relevant financial accounting information and
      information on a monthly basis regarding its production and operation
      conditions, as required by Party B, including but not limited to providing
      the balance sheet and income statement (income and expenditure statement
      of public service unit) for the last quarter within the first 10 working days
      of the first month of each quarter, and providing the cash flow statement
      of each year by the end of such year, and shall be responsible for the
      trueness, completeness and validity of the information provided by
      it.

            

    

     

    
      	
              (2)  

            	
              Party
      A shall use the loan for the purpose set forth in this Agreement and do
      not misuse or appropriate the loan;

            

    

     

    
      	
              (3)  

            	
              Party
      A shall actively cooperate with Party B and voluntarily accept the
      inspection and supervision by Party B of its production, operation and
      financial activity and the use of the loan
  hereunder;

            

    

     

    
      	
              (4)  

            	
              Party
      A shall repay the principal and interest of the loan on
      schedule;

            

    

     

    
      	
              (5)  

            	
              Party
      A and its investors shall not withdraw capital or transfer assets to evade
      their debts owing to Party B;

            

    

     

    
      	
              (6)  

            	
              Before
      repaying in full the principal and interest of the loan owing to Party B,
      Party A shall not use the assets deriving from the loan hereunder to
      provide security to any third party without the consent of Party
      B;

            

    

     

    
      	
              (7)  

            	
              During
      the term of this agreement, if Party A provides security for the debts of
      other person, which may affect Party A’s ability of repayment hereunder,
      Party A shall notify and acquire the consent of Party B in
      advance;

            

    

     

    
      	
              (8)  

            	
              In
      the event the guarantor hereunder winds up, goes out of business, cancels
      the registration or its business license is revoked, becomes bankrupt, is
      dismissed or suffers operating loss or partially or completely loses the
      ability of security corresponding to the loan hereunder, or the value of
      the collateral hereunder is decreased or damaged or lost by accident,
      Party A shall timely provide other security acceptable to Party
      B;

            

    

     

    
      	
              (9)  

            	
              During
      the term of this contract, in the event of any change in the name, legal
      representative (responsible person), domicile, business scope, registered
      capital of Party A, Party A shall notify Party B in
  time;

            

    

     

    
      	
              (10)  

            	
              During
      the term of this contract, in the event of contracting, leasing,
      shareholding system rebuilding, pooling, consolidation, merger, division,
      establishing a joint venture, application for closing business for
      reorganization, application for dissolution, application for bankruptcy on
      the part of Party A, which is sufficient to affect the realization of
      Party B’s rights with respect to the loan, Party A shall notify in writing
      and acquire the written consent of Party B at least 30 (thirty)
      days in advance, and ensure the repayment and security hereunder as
      required by Party B;

            

    

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

     

    
      	
              (11)  

            	
              During
      the term of this contract, in the event of such conditions as ceasing to
      product, going out of business, canceling the registration or revocation
      of business license, involvement in illegal activity or material
      litigation of the legal representative or main responsible person, serious
      difficulty in production and operation, deterioration of financial
      condition on the part of Party A which may have material adverse influence
      upon the performance by Party A of its obligation of repayment hereunder,
      Party A shall immediately notify Party B in writing and ensure the
      repayment and security hereunder as required by Party
  B;

            

    

     

    
      	
              (12)  

            	
              Party
      A shall assume the expenses of legal service, insurance, appraisal,
      registration, custody, verification and notarization relating to this
      contract and the security
hereunder.

            

    

     

           Article 9. Rights
and Obligations of Party B

     

    
      	
              1.  

            	
              Party
      B’s rights

            

    

     

    
      	
              (1)  

            	
              Party
      B has right to learn of the production, operation and financial activities
      of Party A and request Party A to provide such documents and materials as
      the relevant plans, statistics, financial statements and so
      on;

            

    

     

    
      	
              (2)  

            	
              Party
      B has right to deduct and transfer any amount in any currency from Party
      A’s account maintained with China Construction Bank Company Limited with
      respect to any amount payable by Party A to Party B based on this
      agreement;

            

    

     

    
      	
              2.  

            	
              Party
      B’s obligations

            

    

     

    
      	
              (1)  

            	
              Party
      B shall grant in full the loan on schedule as stipulated herein except the
      delay is caused by Party A;

            

    

     

    
      	
              (2)  

            	
              Party
      B shall keep secret the relevant financial information and trade secret
      relating to production and operation provided by Party A, unless otherwise
      provided by laws, statutes and
regulations.

            

    

     

           Article 10.  Liabilities
for Breach of  Agreement

     

    
      	
              1.  

            	
              Breach
      of the agreement

            

    

     

    
      	
              (1)  

            	
              Breach
      by Party A

            

    

     

    
      	
              (i)  

            	
              Fails
      to provide true, complete and valid financial information, information of
      production and operation condition and other relevant information as
      required by Party B;

            

    

     

    
      	
              (ii)  

            	
              Fails
      to use the loan for the purpose prescribed
  hereunder;

            

    

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

     

    
      	
              (iii)  

            	
              Fails
      to repay the principal and interest of the loan on
    schedule;

            

    

     

    
      	
              (iv)  

            	
              Rejects
      or prevents Party B from inspecting and supervising the use of the
      loan;

            

    

     

    
      	
              (v)  

            	
              Transfers
      assets and withdraws capital to evade the
debts;

            

    

     

    
      	
              (vi)  

            	
              Operation
      and financial condition deteriorates, Party A fails to discharge the debts
      due or Party A is or will be involved in material litigation or
      arbitration proceedings and other legal disputes, where Party B considers
      it may or has caused to an adverse effect or impair on the rights and
      interests of Party B hereunder;

            

    

     

    
      	
              (vii)  

            	
              Any
      other debt undertaken by Party A has affected or may affect the
      performance of Party A of its obligations
  hereunder;

            

    

     

    
      	
              (viii)  

            	
              Fails
      to perform other due indebtedness owing to Party
  B;

            

    

     

    
      	
              (ix)  

            	
              During
      the term of this Contract, Party A incurs changes in operation method or
      conversion of operational mechanism us as contracting, leasing,
      consolidation, merger, establishing a joint venture, division, pooling,
      shareholding system restructuring, where Party B considers it may or has
      caused to an adverse effect or impair on the rights and interests of Party
      B hereunder;

            

    

     

    
      	
              (x)  

            	
              Other
      condition which Party B considers sufficient to affect the exercise of
      Party B’s rights;

            

    

     

    
      	
              (xi)  

            	
              Breaches
      other obligations as stipulated
herein.

            

    

     

    
      	
              (2)  

            	
              If
      the guarantor is involved in the following circumstances and Party A fails
      to provide new security as required by Party B, it shall be deemed that
      Party A has breached this contract:

            

    

     

    
      	
              (i)  

            	
              The
      guarantor is involved in such circumstances as contracting, leasing,
      consolidation, merger, establishing a joint venture, division, pooling,
      shareholding system rebuilding, bankruptcy, cancellation which is
      sufficient to affect the guarantor’s capacity of undertaking the joint and
      several guarantee liability;

            

    

     

    
      	
              (ii)  

            	
              The
      guarantor provides any third party with security beyond its
      capacity;

            

    

     

    
      	
              (iii)  

            	
              The
      guarantor loses or may lose its ability of
  security;

            

    

     

    
      	
              (iv)  

            	
              Other
      breaches by the guarantor as stipulated in the guarantee
      contract.

            

    

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

     

    
      	
              (3)  

            	
              If
      the mortgagor is involved in the following circumstances and Party A fails
      to provide new security as required by Party B, it shall be deemed that
      Party A has breached this contract:

            

    

     

    
      	
              (i)  

            	
              The
      mortgagor fails to purchase insurance for the mortgaged property as
      required by Party B, or fails to dispose of the insurance compensation as
      stipulated in the mortgage contract after the occurrence of the insurance
      accident;

            

    

     

    
      	
              (ii)  

            	
              In
      the event of damage, loss, devaluation of the collateral caused by the
      behavior of any third party, the mortgagor fails to dispose of the damages
      as stipulated in the mortgage
contract;

            

    

     

    
      	
              (iii)  

            	
              The
      mortgagor donates, transfers, leases, re-mortgages, moves or otherwise
      disposes of the collateral without written consent of Party
    B;

            

    

     

    
      	
              (iv)  

            	
              The
      mortgagor disposes of the collateral with the consent of Party B but fails
      to dispose of the proceeds therefrom as stipulated in the mortgage
      contract;

            

    

     

    
      	
              (v)  

            	
              In
      the event of the damage, loss or devaluation of collateral which is
      sufficient to affect discharging of the debts hereunder, the mortgagor
      fails to reinstate the value of collateral or provide other security as
      acceptable by Party B;

            

    

     

    
      	
              (vi)  

            	
              Other
      breaches by the mortgagor as stipulated in the mortgage
      contract.

            

    

     

    
      	
              (4)  

            	
              If
      the pledgor is involved in the following circumstances and Party A fails
      to provide new security as required by Party B, it shall be deemed that
      Party A has breached this contract:

            

    

     

    
      	
              (i)  

            	
              The
      pledgor fails to purchase insurance for the pledged property as required
      by Party B, or fails to dispose of the insurance compensation as
      stipulated in the pledge contract after the occurrence of the insurance
      accident;

            

    

     

    
      	
              (ii)  

            	
              In
      the event of damage, loss, devaluation of pledged property caused by the
      behavior of any third party, the pledgor fails to dispose of the damages
      as stipulated in the pledge
contract;

            

    

     

    
      	
              (iii)  

            	
              The
      pledgor disposes of the pledged property with the consent of Party B but
      fails to dispose of the proceeds therefrom as stipulated in the pledge
      contract;

            

    

     

    
      	
              (iv)  

            	
              In
      the event of the damage, loss or devaluation of pledged property which is
      sufficient to affect the repayment of the principal and interest, the
      pledgor fails to reinstate the value of pledged property or provide other
      security acceptable to Party B;

            

    

     

    
      	
              (v)  

            	
              Other
      breaches by the pledgor as stipulated in the pledge
    contract.

            

    

     

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

     

    
      	
              (5)  

            	
              In
      the event the security contract or other security does not take effect, is
      valid or rescinded, or the guarantor is involved in other circumstances of
      partially or completely losing the ability of guarantee or rejects to
      performance the obligations of security, and Party A fails to provide new
      security as required by Party B, it shall be deemed that Party A has
      breached this contract.

            

    

     

    
      	
              2.  

            	
              Remedies
      for Breaches of Agreement

            

    

     

    In the
event of the breaches in above Article 10, 1 (1) to 1(5), Party B shall be
entitled to exercise one or more of the following rights:

     

    
      	
              (1)  

            	
              Stop
      granting the loan, accelerate the maturity immediately and require Party A
      to promptly repay the principal, interest and expenses of all the mature
      or immature debts hereunder;

            

    

     

    
      	
              (2)  

            	
              Charge
      liquidated damages against Party A at             ‰
      of the principal of the loan. ;

            

    

     

    
      	
              (3)  

            	
              In
      the event Party A fails to use the loan for the purpose as stipulated
      herein, interest and compound interest shall accrue at penalty rate
      according to the interest settlement method hereunder from the date of
      violation to the date on which the principal and interest are repaid in
      full;

            

    

     

    
      	
              (4)  

            	
              Before
      maturity date, compound interest will be calculated and payable upon the
      interest not repaid by Party A on schedule according to the rate and
      settlement method as stipulated in Article 4
  hereof.

            

    

     

    
      	
              (5)  

            	
              For
      the overdue repayment, interest and compound interest shall accrue on the
      repayment in arrears and any principal and interest wholly or partially
      declared early maturity by Party B, pursuant to the penalty rate and
      interest settlement method stipulated in this agreement, for a period
      commencing from the overdue date to the date when the principal and
      interest are repaid in full. Delay in the repayment of the loan means
      Party A fails to satisfy the loan on schedule or repays the loan exceeding
      the prescribed installments;

            

    

     

    
      	
              (6)  

            	
              Transfer
      any amount in any currency out of Party A's account opened in China
      Construction Bank;

            

    

     

    
      	
              (7)  

            	
              Request
      Party A to provide new security at the requirements of Party B for all the
      debts hereunder;

            

    

     

    
      	
              (8)  

            	
              Exercise
      security rights;

            

    

     

    
      	
              (9)  

            	
              Rescind
      this agreement.

            

    

     

          Article 11. Other
Matters agreed

     

    
      	
              1.  

            	
              The
      following space is intentionally left
  blank_____________;

            

    

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

     

    
      	
              2.  

            	
              __________________________________________________;

            

    

     

    
      	
              3.  

            	
               __________________________________________________;

            

    

     

    
      	
              4.  

            	
              __________________________________________________;

            

    

     

            Article 12.  Dispute
Settlement

     

    Any
dispute arising during the performance of this agreement may be settled through
consultation. If the consultation fails, it shall be settled through the first of the
following methods:

     

    
      	
              1.  

            	
              Bring
      a suit before the court in the jurisdiction where Party B
      domiciles;

            

    

     

    
      	
              2.  

            	
              File
      the dispute to   blank  
      arbitration commission for arbitration (Arbitration place is   blank   )
      in accordance with the effective arbitration rules of the arbitration
      commission at the time of applying for arbitration. Arbitration award is
      will be final and bind the Parties.

            

    

     

    During
the suit or arbitration, the provisions in this agreement which are not in
dispute shall still be performed.

     

    Article
13.  Effectiveness
of the Agreement

     

    This
agreement will take into effect upon execution of the legal representatives
(persons in-charge) or authorized representatives of the parties, affixed with
the official seals of both parties.

     

    Article
14.  There
are 6 (six)
duplicate copies of this agreement.

     

    Article
15.  Representations

     

    
      	
              1.  

            	
              Party
      A is clearly aware of the business scope and authority of Party
      B;

            

    

     

    
      	
              2.  

            	
              Party
      A has read all the terms and conditions of this Agreement. Party B has
      made the corresponding interpretation of the terms and conditions of this
      Agreement as requested by Party A. Party A has fully learned and
      understood the meaning and the corresponding legal consequence of the
      terms and conditions of this
Agreement;

            

    

     

    
      	
              3.  

            	
              Party
      A has right to enter into this
Agreement.

            

    

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    

     

     Party
A (Seal): (Seal)

     

     Legal
representative (person in-charge) or authorized representative
(Signature):

     

    /s/ Zhengxi Wang

     

    July 10, 2007

     

    

     

    

    

     

    Party B
(Seal): (Seal)

     

    Person
in-charge or authorized representative (Signature):

     

    /s/ Bing Zhao

     

    July 10, 2007

     

    
 

     

     

     

    14

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