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Exhibit 4.10    
    

 
 

ALPHA PRO TECH, LTD.
  INCENTIVE STOCK OPTION AGREEMENT
  FOR KEY EMPLOYEES    
    

1.    Grant of Option.    

Alpha
Pro Tech, Ltd., a Delaware corporation (the "Company"), hereby grants to Michael Scheerer (the "Key Employee"), an option, pursuant to the
Company's 2004 Stock Option Plan (the "Plan"), to purchase an aggregate of 50,000 shares of Common Stock, $.01 par value ("Common Stock"), of the
Company at a price of $1.58 per share, purchasable as set forth in and subject to the terms and conditions of this option and the Plan. Except where the
context otherwise requires, the term "Company" shall include the parent and all subsidiaries of the company as defined in Sections 425(e) and 425(f) of the Internal Revenue Code of 1986, as amended
(the "Code"). 

2.    Incentive Stock Option.    ("ISO") 

This
option is intended to qualify as an Incentive Stock Option within the meaning of Section 422A of the Code. 

3.    Exercise of Option and Provisions for Termination.    

        (a)    Exercise Period    

Except
as otherwise provided in this Agreement, this option may be exercised prior to the tenth Anniversary of the date of grant, August 9, 2004,
(hereinafter the "Expiration Date") as to not more than the number of shares and during the period set forth in the table below. The right of exercise shall be cumulative so that if the option is not
exercised to the maximum extent permissible during any exercise period, it shall be exercisable, in whole or in part, with respect to all shares not so purchased at any time prior to the Expiration
Date or the earlier termination of this option. 

	Vesting Schedule
 
	 	Total No. of Shares Exercisable
 

	On or after the first succeeding anniversary of the date of grant of the ISO	 	50,000

This
option may not be exercised at any time on or after the Expiration Date. 

        (b)    Exercise Procedure    

Subject
to the conditions set forth in this Agreement, this option shall be exercised by the Key Employee's delivery of written notice of exercise to the Chief Financial Officer ("CFO") of the
Company, specifying the number of shares to be purchased and the purchase price to be paid therefore and accompanied by payment in full in accordance with Section 4. Such exercise shall be
effective upon receipt by the CFO of the Company of such written notice together with the required payment. The Key Employee may purchase less than the number of shares covered hereby, provided that
no partial exercise of this option may be for any fractional share or for fewer than ten whole shares. 

        (c)    Continuous Employment Required    

Except
as otherwise provided in this, Section 3, this option may not be exercised unless the Key Employee, at the time he or she exercises this option, is, and has been at all times since the
date of grant of this option, an employee of the Company. For all purposes of this option, (i) "employment" shall be defined in accordance with the provisions of Section 1.421(h) of the
Income Tax Regulations or any successor regulations, and (ii) if this option shall be assumed or a new option substituted therefore in a transaction to which Section 425(1) of the Code 

 

applies,
employment by such assuming or substituting corporation (hereinafter called the "Successor Corporation") shall be considered for all purposes of this option to be employment by the Company. 

        (d)    Exercise Period Upon Termination of Employment    

If
the Key Employee ceases to be employed by the Company for any reason other than death or disability or a discharge for "cause", as provided below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Expiration Date), provided that this option shall be exercisable only to the extent that
the Employee was entitled to exercise this option on the date of such cessation. 

        (e)    Exercise Period Upon Death or Disability.    

If
the Key Employee dies or becomes disabled (with the meaning of Section 22(e)(3) of the Code or any successor provision thereto) prior to the Expiration Date while he or she is an employee of
the company, or if the Key Employee dies within three months after the Key Employee ceases to be an employee of the Company (other than as the result of a discharge for "cause" as specified in
paragraph (f) below), this option shall be exercisable, within the period of one year following the date of death or disability of the Key Employee (but in no event after the Expiration Date),
by the Key Employee or by the person to whom this option is transferred by will or the laws of descent and distribution, provided that this option shall
be exercisable only to the extent that this option was exercisable by the Key Employee on the date of his or her death or disability. Except as otherwise indicated by the context, the term "Key
Employee", as used in this option, shall be deemed to include the estate of the Key Employee or any person who acquires the right to exercise this option by bequest or inheritance or otherwise by
reason of the death of the Key Employee. 

        (f)    Continuous Employment Required    

If
the Key Employee, prior to the Expiration Date, ceases his or her employment with the Company because he or she is discharged for "cause" (as defined below), the right to exercise this option shall
terminate immediately upon such cessation of employment. "Cause" shall mean willful misconduct in connection with the Key Employee's employment or willful failure to perform his or her employment
responsibilities in the best interests of the Company (including, without limitation, breach by the Key Employee of any provision of any employment, non-disclosure,
non-competition or other similar agreement between the Key Employee and the Company), as determined by the Company, which determination shall be conclusive. 

4.    Payment of Purchase Price.    

 Method of Payment.  

Payment
of the purchase price for shares purchased upon exercise of this option shall be made by delivery to the Company of cash or a check to the order of the Company in the amount equal to the
purchase price of such shares, or, in cash received from a broker-dealer to whom the Director has submitted notice together with irrevocable instructions to deliver promptly to the Company the amount
of proceeds from the sale of the shares subject to the stock option, necessary to pay the exercise price. 

5.    Delivery of Shares; Compliance with Securities Laws, Etc.    

        (a)    Registration of Option Shares.    

No
shares will be issued and delivered upon exercise of any option unless a registration statement under the Securities Act of 1933, as amended, with respect to the shares of 

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Common
Stock to be reserved for issuance upon the exercise of options to be granted under the 2004 Plan has become effective, and unless all other laws and regulations have been complied with. 

        (b)    Listing, Qualification, Etc.    

This
option shall be subject to the requirement that, if at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject hereto upon any
securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or
purchase of shares hereunder, this option may not be exercised, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained on
conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration or qualification. 

6.    Nontransferability of Option.    

Except
as provided in paragraph (e) of Section 3, this option is personal and no rights granted hereunder may be transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) nor shall any such rights be subject to execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this
option or of such rights contrary to the provisions hereof, or upon the levy of any attachment or similar process upon this option or such rights, this option and such rights shall, at the election of
the Company, become null and void. 

7.    No Special Employment Rights.    

Nothing
contained in the Plan or this option shall be construed or deemed by any person under any circumstances to bind the Company to continue the employment of the Employee for the period within
which this option may be exercised. However, during the period of the Key Employee's employment, the Key Employee shall render diligently and faithfully the services which are assigned to the Key
Employee from time to time by the Board of Directors or by the executive officers of the Company and shall at no time take any action which, directly or indirectly, would be inconsistent with the best
interests of the Company. 

8.    Rights as a Shareholder.    

The
Key Employee shall have no rights as a shareholder with respect to any shares which may be purchased by exercise of this option unless and until a certificate representing such shares is duly
issued and delivered to the Key Employee. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. 

9.    Adjustments.    

        (a)    General    

If,
as a result of a merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse
stock split or other distribution with respect to the outstanding shares of Common Stock or other securities, the outstanding shares of Common Stock are increased or decreased, or are exchanged for a
different number or kind of shares or other securities, or additional shares or new or different shares or other securities are distributed with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment may be made in (i) the number and kind of shares or other securities subject to this option and (ii) the 

3

 

price
for each share subject to this option, without changing the aggregate purchase price as to which this option remains exercisable. 

        (b)    Authority to Make Adjustments    

Adjustments
under this Section 9 will be made by a Committee of the Board of Directors appointed by the Board of Directors, whose determination as to what adjustments, if any, will be made and
the extent thereof will be final, binding and conclusive. No fractional shares will be issued pursuant to this option on account of any such adjustments. 

        (c)    Limits on Adjustments    

No
adjustment shall be made under this Section 9 which would, within the meaning of any applicable provision of the Code, constitute a modification, extension or renewal of this option or a
grant of additional benefits to the Key Employee. 

10.    Mergers, Etc.    

In
the event of a consolidation or merger in which the Company is not the surviving corporation, or which results in the acquisition of substantially all of the Company's outstanding Common Stock by a
single person, entity or group of persons or entities acting in concert, or in the event of the sale or
transfer of all or substantially all of the assets of the Company, or in the event of a reorganization or liquidation of the Company, prior to the Expiration Date or termination of this option, the
Director shall, with respect to this option or any unexercised portion hereof, be entitled to the rights and benefits, and be subject to the limitations, set forth in Section 9 of the Plan. 

11.    Limitations on Disposition of Incentive Stock Option Shares.    

It
is understood and intended that this option shall qualify as an "incentive stock option" as defined in Section 422A of the Code. Accordingly, the Key Employee understands that in order to
obtain the benefits of an incentive stock option under Section 421 of the Code, no sale or other disposition may be made of any shares acquired upon exercise of the option within one year after
the day of the transfer of such shares to him or her, nor within two years after the grant of the option. If the Key Employee intends to dispose, or does dispose (whether by sale, exchange, gift,
transfer or otherwise), of any such shares within said periods, he or she will notify the Company in writing within ten days after such disposition. 

12.    Withholding Taxes.    

The
Company's obligation to deliver shares upon the exercise of this option shall be subject to the Key Employee's satisfaction of all applicable federal, state and local income tax withholding
requirements. 

13.    Miscellaneous.    

	(a)
	Except
as provided herein, this option may not be amended or otherwise modified unless evidenced in writing and signed by the Company and the Key Employee.

	(b)
	All
notices under this option shall be mailed or delivered by hand to the parties at their respective addresses set forth beneath their names below or at such other address as may be
designated in writing by either of the parties to one another.

	(c)
	This
option shall be governed by and construed in accordance with the laws of the State of Delaware 

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	Date of Grant:	 	 	 
	

August 9, 2004	
 	

ALPHA PRO TECH, LTD.
	

 	
 	

By:	

 
	 	 	 	

	

 	
 	

Title:	

 
	 	 	 	

	

 	
 	

Address:	

 
	 	 	 	

	

 	
 	

 	

 
	 	 	

	 	 	 	 
	
	 	 	 

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KEY EMPLOYEE'S ACCEPTANCE
  (Please sign and return this page to Lloyd Hoffman.)    
    

        The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of the
Company's 2004 Stock Option Plan. 

	

 	
 	

 	
 	

KEY EMPLOYEE
	

DATE:	
 	

 	
 	

 
	 	 	
	 	

	 	 	 	 	 
	

 	
 	

 	
 	

ADDRESS
	

 	
 	

 	
 	

 
	 	 	 	 	 
	 	 	 	 	

	 	 	 	 	 
	

 	
 	

 	
 	

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Exhibit 4.10

ALPHA PRO TECH, LTD. INCENTIVE STOCK OPTION AGREEMENT FOR KEY EMPLOYEES

KEY EMPLOYEE'S ACCEPTANCE (Please sign and return this page to Lloyd Hoffman.)QuickLinks
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Exhibit 10.1  

 
 

Trusteeship Administration Contract    
    

	Owner of Hotel:	 	Dongjin Taoyuan filiale, Shaanxi New Taohuayuan Tourism Trading Ltd
	

Administration Company:	
 	

Shaanxi New Taohuayuan Culture Tourism Co., Ltd

Subscription
Date: 15th January, 2004 

Trusteeship Administration Contract  

Items  

	Item 1. Definition	 	 
	

Item 2. Responsibilities of Administration Company	
 	

 
	 	
 2.1 Services of Administration Company	
 	

 
	 	
 2.2 Trade Name, Brand Name, Service Title and Service Mark	
 	

 
	 	
 2.3 Advertisement	
 	

 
	 	
 2.4 Assistance on hotel management	
 	

 
	 	
 2.5 Management	
 	

 
	

Item 3. Responsibilities of Hotel Owner	
 	

 
	 	
 3.1 Increase or replace furniture, equipment and facilities	
 	

 
	 	
 3.2 Maintenance of building structure—Modification and expansion	
 	

 
	 	
 3.3 Tax responsibility of Hotel owner	
 	

 
	

Item 4. Insurance	
 	

 
	

Item 5. Financial item	
 	

 
	 	
 5.1 Bank account	
 	

 
	 	
 5.2 Receivable basic managerial expense of Administration Company	
 	

 
	 	
 5.3 Management expense of encouragement	
 	

 
	

Item 6. Time limit of Contract	
 	

 
	

Item 7. Common time limit	
 	

 
	 	
 7.1 Ownership of Hotel estate	
 	

 
	 	
 7.2 Ending of responsibilities—irresistible affairs	
 	

 
	 	
 7.3 Ending of contract	
 	

 
	 	
 7.4 Inherit and Transfer	
 	

 
	 	
 7.5 Law application and solutions for dispute	
 	

 
	 	
 7.6 Relationship of two parties	
 	

 
	

Item 8. Others	
 	

 
	 	
 8.1 Integrated contract	
 	

 
	 	
 8.2 Announcement	
 	

 
	 	
 8.3 Registration and other procedures	
 	

 

The two parties of the Contract: 

	1.
	Dongjin
Taoyuan filiale, Shaanxi New Taohuayuan Tourism Trading Ltd ("Owner of the Hotel"), is a legal enterprise, which was set up under Act of People's Republic of China. The
legal address is No. 1, Shanji Road, Modern agriculture integrated development area, Xi'an, China. The development area occupies around 400.76 acre. It boasts itself as a great-scale,
high-efficient and elaborate base of high-tech agriculture planting and a tourism place, with various modern facilities equipped. The company characterizes the cuisine culture
of Yellow River. The company business involves restaurant, casual entertainment, tourism and agricultural cultivation.

	2.
	Shaanxi
New Taohuayuan Culture Tourism Co., Ltd ("Administration company"), was registered under Chinese Law. The legal address is No. 1, Dongfeng Road, Weiyang Tourism
development Area, Xi'an, Shaanxi Province, China. The company characterizes Yellow River and folk-custom culture and involves restaurants, hotels, and tourism service businesses. 

        In
order to improve the management and economic benefit of restaurants business of Shaanxi Wenhao zaliang shifu Ltd, and utilize the advantages on restaurants management of
Shaanxi New Taohuayuan Culture Tourism Co., Ltd, which includes the managerial HR, professional technician, the distribution of main material purchase and employee training. two parties negotiated
sparingly, regarding the transaction of the owner of restaurant entrusting Administration company to manage the hotel, both parties make an agreement as follow: 

Item 1. Definition  

        Being affirmed by both sides, the words, which are used in the Contract and related or additive document, possess the following definition. 

        1.1    Hotel:    be defined as the position of the building, which includes furniture, facilities and business
equipment. The particular items are list on latter part. Hotel is also defined as the business operation there under the contract. 

        1.2    Construction:    be building and facilities which belong to the land estate naturally or designedly, and all
facilities equipped for the constructions. Such as heating system, air-condition system, water pipe facilities and electronic appliance, indoor and outdoor symbols, elevators, etc. 

        1.3    Furniture, Facilities and Equipment (F.F.E):    be defined as all furniture, facilities, equipment, office
installment, decorators (fixed or movable items including carpet and wall decoration), kitchen room, bar, laundry facilities, telephone facilities, bathroom facilities, material delivery equipment,
truck and other hotel equipment and materials (the fixed capital item that has one year usage above, and unit value over 800 RMB). 

        1.4    Operation equipment (O.E):    be defined as the small items in hotel operation. Such as silver ware, bed sheet,
tablecloth, crockery, small kitchen facilities and uniform. The items are easy-consuming items that have less than one-year usage, unit value less than 800 RMB. The specific
classification standard refers to united accounting system of the hotel. 

        1.5    Accounting year:    be defined that start from 1st January to
31st December, the first accounting year should start from the first day of business to 31st December of the same year. 

        1.6    Gross income:    is defined as the result of operation income subtracts business tax. Any direct or
non-direct income happened during hotel operation, including gross sales of suite, food and beverage sales, service sales, using income and leasing income by other hotels' operation. It
either includes the operation or leasing income of shopping mall, external investment of the owner, fixed assets income, deposit interest, compensating income, the tips on customer's receipt and the
balance in case of foreign currency account instead RMB. 

        1.7    Gross operation profit (GOP):    is explained as the margin of gross income and hotel operation expense during
an accounting year (or part of an accounting year). 

 

        1.8    Operation expense:    is depend on the united regulation, including the following items: 

        (A)  The
payable items or tax items that come from salaries, expenditures, other regular or temporal, and other money distributed to hotel operation employees, which include
welfare and food expense for any employees and general manager, other welfare of living, transportations, employees' food, etc. 

        (B)  The
cost of consuming food and beverage and commonly cost related to revenue. 

        (C)  Based
on local practice, the actual bad debt that confirmed by the directorate. 

        (D)  The
expense of employment of accountants and lawyers if required by hotel operation. 

        (E)  The
basic administrative expense for Administration Company as what item 5.1 appoints. 

        (F)  Expenditure
of every business facilities required and it's purchasing and replacing. 

        (G)  Expenditure
of advertisement, business expansion and public relationship. 

        (H)  The
quotient that hotel should be charged, being in the advertisement, business expansion expenditure provided by administration company as item 2.3.3 appointed. 

        (I)   The
expenditures of heating, water, electricity, coal gas, telephone and any other kind of public facilities, happened for hotel consuming. 

        (J)   The
commission, expense, expenditure and booking expense to sales agent and credit card Company. 

        (K)  The
repair, maintenance and replacement expense for managing normal hotel operation, except the expense of item 3.1 and 3.2 that belongs to the responsibilities
of the owner. 

        (L)  Operation
expense commonly caused by hotel or Administration Company. 

        1.9    Irresistible affairs:    the following constitutes irresistible affairs 

        (A)  War,
invade, rebel, revolution, insurrection and domestic war. 

        (B)  The
government measure, status and order made by government being a governor. 

        (C)  The
accident caused by earthquake or any natural power and other uncertain or irresistible reason. 

        (D)  Labor
dissension. 

        (E)  The
affairs that being under considerate control but seriously influence the ability of hotel operation. 

Item 2. The responsibilities of Administration Company  

        2.1    Service of Administration Company    

        Under
the period of validation, Administration Company should comply with the Law of People's Republic of China, and achieve all missions under the scope of hotel management and market
expansion representing owner of the hotel. Administration Company should endeavor to manage the hotel effectively and efficiently. 

        2.2    Trade Name, Brand Name, Service Title and Service Mark    

        Based
on procedure of Chinese law, the name of the hotel is "Wenhao zaliang shifu" 

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        Within
the period of validation, the administration company allows the owner of hotel doing publication activities, related hotel business and the use of Trade Name, Brand Name, Service
Title and Service Mark of Taohuayuan. 

        2.3    Advertisement    

        2.3.1    Group advertisement, expansion and public relation    

        Administration
Company prepares every publication, advertisement, public relation and endeavor to promote the hotel by performance and activities. 

        2.3.2    The hotel of the Administration Company would recommend the hotel to customers of the hotel owner. Similarly, the hotel
should recommend the other hotels of Administration Company to customers.    

        2.3.3    Apportion of group advertisement and operation expansion    

        The
hotel shall be responsible for the same benefit together with Administration Company, and implement the advertisement and operation expansion activities mentioned in the section. 

        2.4    Assistance in hotel management    

        Administration
Company will assistant hotel on operation expansion in order to fulfill the operation expansion policy that Administration Company pushes. The place of expansion activity
should be proper market that local market and other administrative company consent 

        Administration
Company will make operational expansion plan annually, and the plan will be went through by owner of the hotel. In addition, Administration Company will provide necessary
assistance and direction, especially in following aspects: 

	•
	To
confirm the business policy of the hotel occupancy

	•
	To
make goals as concerned of occupancy, revenue, and targeted customers, etc.

	•
	To
set price and issue the price of hotel operation (Restaurants, Bars and conference facilities, etc.)

	•
	To
ascertain special business condition

	•
	To
set up sales on credit

	•
	To
establish different operating method and procedures toward various customers.

	•
	To
analyze business performance and permanent controlling system 

        Administration
Company will make certain promotion and business expansion on hotel management, which includes: 

	•
	To
set up the promotion and business expansion policy of the hotel

	•
	To
prepare advertising document and booklet, according to the standard sample provided by Administration Company

	•
	To
distribute the documents to hotel of the Group, substitution office of Administration Company. 

        Administration
Company will send person to assist during business expansion activities in special district. 

        The
hotel needs to participate the business exhibit and exhibitions that Administration Company participates. The hotel bears direct participating expense. Administration Company needs
to make a budget and acquire the agreement of the owner before this plan. 

3

 

        2.5    Management    

        2.5.1    Daily operation management    

        Administration
Company will achieve relevant and necessary management service representing owner of the hotel, which including: 

        (A)  Common
hotel organization 

        (B)  Human
Resource management.    According to Chinese related law, Administration Company as the agent of the owner owns the right of decision on every employee
choosing, training, assigning, redeploying or dismissal. In terms of usual business method, Administration Company offers employee training chronically. Administration Company shall assign the general
manager, who takes fully charge of operation and management of the hotel. 

        (C)  According
to setting up salaries and other welfares of hotel employees, Administration Company is entitled to distribute service fee and regular extra subvention to
employees, representing the owner of hotel. 

        (D)  Setting
up all items, charges and prices, and revenues in any kind during supervision and control of hotel business, or any types of service charge and receipt, etc. Any
person without the permission from Administration Company, can not acquire the discount price or free accommodation and service, excepting the person mentioned in (B), which include the press or other
public news agent, or travel agent and others, who are appointed by Administration Company in accordance with the common situation of the industry. 

        (E)  Set
down the place and shop position for business usage, ensuring relative shops operating their business without influencing the honored standard of hotel. 

        (F)  Make
purchasing policy of the following: commodities, supplies, and materials; Ensure the necessary stock-in-trade to maintain the normal
business operation; Choose the supplier to ensure the most favorable condition under negotiated supply agreement. 

        (G)  Constitute
the credit policy and set up credit organization for supplier and hotel customers, consulting with credit card issuer. 

        (H)  According
to the business that Administration Company considers as necessary or adequate, Administration Company can take any action on lawsuit and other law action. 

        (I)   Except
the owner of hotel has the responsibilities on maintenance, Administration Company should maintain well condition of the hotel pursuant to managerial standard,
including repairing and maintenance. Every relative expense will be taken as the operating expense of the hotel. If the expense exceed 200,000 RMB, it should be submitted to owner of the hotel and
apply for approval. If the property needs to change or amend in a great degree, and require retaining experts for consulting, based upon both sides agree, the owner of the hotel should undertake the
retaining expense. 

        (J)   Bargain
and sign agreement and preparing law document relating to relative normal business of the hotel. 

        (K)  Financial
and Accounting management, consulting the following items. 

        2.5.2    Accounting    

        Administration
Company should represent the benefits of owner pursuant to Chinese law, and should fully record the accounting transaction relating to hotel operation. Such accounting
record should follow the united rules. But when necessary, the owner or the representation is entitled to observe or audit entire account book. However, the above action shall possibly avoid
obstructing 

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business
of the hotel. In any case, before the agreement expired, the full record shall provide to owner of the hotel. Accounting record should be written by Chinese, regulation of under Chinese
accountant system. 

        2.5.3    Perennial plan    

        (A)  At
least 30 days before the beginning of next fiscal year, Administration Company shall provide the perennial plan for next year to the owner, in which include
room occupancy and predicted income statement, operating expansion policy of hotel and the following budget: 

        Repair
and maintenance 

        The
cost of hotel renewing, rebuilding, reconstructing, adding and renewing for next fiscal year. 

        All
employees of every department of hotel, including salaries, wages, rewards and extra subvention. 

        When
owner of hotel receives perennial plans, the owner shall discuss over it and table a proposal until both sides fully agree. If the owner does not make a specific disagree letter on
perennial plan to Administration Company, it shall be seen as the owner has agreed. 

        (B)  When
Administration Company implement the responsibilities claimed in the agreement during every fiscal year, Administration Company must endeavor to follow the plan.
Except accidents or special condition, such as law revise or uncontrolled situation happens, Administration Company shall not over departure from the perennial plan. Any significant expense related to
perennial plan or the change of operating method happens, the owner of the hotel cannot refuse to approve. Administration Company does not make any assurance, guarantee and declare. All calculation
within the plan could only be reasonable prediction. 

        2.5.4    Financial Report    

        Within
the fiscal year, the management company shall present the owner one Income Statement signed by the General Manager (GM) or Chief Financial Officer (CFO) within 12 days
after each month, listing the operation income of the latest month and also a Balance Sheet as well. 

        By
the end of March of every year, the management company shall present the owner the Balance Sheet and Income Statement for the fiscal year ended at December 31. The Financial
Statement would not deem as being approved until the owner provides no opposed comments in written forms. 

        2.5.5    Group's Services and Benefit    

        The
owner shall pay the management company repair and maintenance fee for the estate, improvement fee in the business of operating assistance and management. These fees are recognized as
operating expenses. The above work includes not only those carried by the hotel employees but also those handled by the management company to provide technical assistance on structure, installation,
equipments, the change, amendment of the decoration, improvement and reconstruction. In addition, the expenses of providing services by the management professionals include salaries, allowance,
traveling expenses and accommodating expenses. 

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Item 3. Responsibility of the Owner  

        3.1    Augment and replacement of the furniture, equipments and installations.    

        The
furniture, equipments and installations required augment and replacement shall be included in the fixed assets, and handled by the owner. They are not consumable or raw materials of
the fixed assets, and therefore they should not be listed in the operating expenses. 

        3.2    Structure Construction—Amendment and Improvement    

        Within
the time limit, hotel owner shall take measure or job that maintain the standard of hotel or satisfy effective law or regulation. The hotel manager shall undertake the relative
charges. Administration Company shall submit the job sheet to hotel owner for consideration and approval. The hotel owner should implement the job within the reasonable time. If hotel manager consider
it unnecessary, it shall be informed to Administration Company within reasonable time. Under this situation, both side shall discuss and negotiate to meet an agreement. All the job shall possibly not
influence operation of the hotel. The schedule table and implement table shall submit to Administration Company for approval. 

        The
hotel owner also should carry out and pay for part of structure requirement damage once the occurrence the damage, as this hotel in repair finishing behind should have the standard
of un-damage or damage. The repair plan and schedule should submit to administration company for approval. If the hotel is all in an accident or the part of damage, and this has already in
the insurance itemed record to rule 7. As after affairs taking place the hotel owner of 90 days not yet to fact of that occurrence need to be set up or the structure repairs, the
management company contain power by oneself carry out that work, and keep connecting toward insurance company to take back the amount of money needed. 

        In
addition, Furthermore, in the contract term, if the hotel owner undertake other hotels for rebuilding or reconstructing, all of its should include the hotel, with in response to this
contract concerning item conducted by the management company and manage 

        3.3    The tax administration of the hotel owner    

        Within
this contract inside, the hotel owner will pay tax according to the PRC tax law and the relevant provision. 

        As
the hotel owner while specifying to expect inside the unpaid it the tax item that should be responsible for paying, the management company will have the power to give the hotel owner
notify for 30 days after is paid that amount of money in the name of the hotel owner by the hotel, that etc. is paid by the hotel of amount of money should from cope with to deduct to the bank
account of the hotel owner. 

Rule 4. Insurance  

        4.1    Insurance items    

        In
the term of this contract, the managing company should use the name of owner, to the insurance company to insure contiguously as follows, and to clear hotel owner that is insurant,
managing company is additional coinsure. 

        (A)  Property
Insurance that is according to the amount of money 100% of the examine report by accountant to insure (including basic insurance, thieves and burglars
insurance, glass broken insurance, and property revaluation insurance) 

        (B)  Machine
damage Insurance...that is according to the amount of money 100% of the examine report by accountant to insure (including computer insurance) 

6

 

        (C)  Public
responsibility Insurance...according to domestic law to insure. 

        (D)  the
profit or loss of property case to insure. 

        (E)  The
profits or loss of the machine damage insurance. 

        (F)  Labor
insurance...the employer is relevant to its employee of liability insurance. 

        (G)  Car
Insurance (Include the carriage insurance and third party insurance). 

        (H)  Other
industries usual practice in the hotel and should throw it and should protect the project. 

        Above
project insurance, should insure in the insurance company of Chinese people's insurance company or Chinese government approval, its insurance expenses is included in the business
expenditure. 

        4.2    At the 15 days before starting practice, managing the company should carry out the above insurance project
procedure, and submit to hotel industries the relevant data.    

        4.3    Within the scope of above insurance, the owner and managing company agree on all indemnity and should dun for toward
insurance company each other, gaining the insurance indemnity to is used for repair accident to lose, if the indemnity of insurance company do not enough to pay for loss, and the reason of loss do not
done by any other reasons, the owner will agree to pay the shortage money.    

Rule 5. Financial items  

        5.1    Bank account    

        When
the hotel owner demand, managing company must provide the hotel owner according to the rule to hold the bank account and the account situation immediately, due to this contract
expired, the all amount of moneys of the every relevant hotel owner, button up in addition to managing the amount of money that the company presses this contracts provision to deserve, must transfer
to the hotel owner. 

        Managing
company will instead of hotel owner to negotiate to make selection at both of parties for main bank account. 

        The
above-mentioned bank account is in the contract term of validity contracted by Hotel Company, check and other withdrawn document will by two administrative personnel with
confidential "hotel"(one among those persons are pointed by the owner) and to approve to sign the rear together and then cover chapter. 

        5.2    Managing company should accept the basic managing fee    

        Since
the effective contract, the hotel owner should pay the basic managing fee 3,500,000 RMB Yuan yearly. Managing fee should pay seasonal, and settle the account yearly. 

        5.3    Praise managing fee    

        Since
the effective contract, unless rule 5.2 establishing the basic managing fee, managing company can following the method to account the praise managing fee. When the revenue
of managing company completes the yearly managing plan, managing company can withdraw 15% that exceeds the part to make. The hotel owner pay after settle the account. 

7

 

Rule 6. Contract expiration  

        The
term of validity of this contract will be become effective the word by the contract for 5 years. If managing company to reach to expect the result within five years, after the
hotel owner approval, can be continued by the managing company to conduct. 

Rule 7. General provisions  

        7.1    Hotel property right    

        The
hotel owner has full power in the hotel and other parts, or its lease business, and unless both of parties have already agree in this contract, it will not have industry mortgage,
and set the legal right or other burdens, and provide the evidence of the industry ownership fives to managing company. 

        In
addition, With this contract expiration, the hotel owner approval as follow: 

        (A)  Keep
it to own or lease to the hotel full power or basic rights of the industry form. 

        (B)  Don't
participate to the managing company normally legal conducts any stipulation action that the hotel has the influence. 

        (C)  Carry
on the law or other laws its necessity the action to protect above-mentioned etc. 

        (D)  Pays
and returns any with the hotel related rent, the special permission fee and/or the account payable, or the relative interest, and when or before acquit all due
mortgage and the burden pays all related principle and interest by stages. 

        (E)  Pays
all the real estate tax and the evaluation tax which can keep by hotel in management period. 

        If
the hotel owner can't pay this kind of rent, taxes or other burden, or above mortgage and the burden not been able to pay, all paid payment by hotel owner should deduct from hotel
owner's account. 

        7.2    The responsibility terminates—the force majored    

        If
because of the force majored situation occurred and makes both sides not to be able to carry out essential execution responsibility according to this provision of contract, regarding
this both sides may exempt its fault, generally has not respond to. 

        7.3    Ceasing of contract    

        (1)   If
any side breaks a contract and cannot carry out the responsibility of the this contract, and not to be able to carry out the responsibility after the other side send
the written request to attach registered
letter of the receipt latter 30 days, (If the breach of contract cannot complete in 30 days, if the side breach the contract has to carry on make up for this breach of contract, then may
suitably lengthen the deadline.) the other side has its right, but won't affect other rights and compensation, sends out with written attaches the receipt registered letter to terminate this contract,
but does not have to inform extra or compensate. 

        If
any side of the contract doesn't stand to the exercises of right of use to the breach of contract, cannot be esteemed gives up the right stand to action if subsequence the other side
has any event about breach the contract. 

        The
following situation will be esteemed breach the contract: 

        (A)  The
hotel owner has not been able to execute according to this contract or the source of wealth responsibility assigned by other contracts negotiate by the management
company and the hotel owner. 

8

 

        (B)  The
management company can't execute the responsibility with good service which stipulate by the company, or can't execute, maintain, observe the contract. 

        (C)  If
occurred the following situation, any side also may attach the receipt with the registered letter notify in written to terminate this contract. 

        When
the hotel was broke seriously and wrecked but the hotel owner according to the 3.2nd provision decided does not carry on repair and re-build the hotel, all managements
come to an end the indemnity fund of loss of insurance should be assigned fairly according to all quarters benefit ratio by the hotel owner and the management company. 

        When
the hotel incapably reimburses the item of debt, break-up, the court, liquidation, detained the weal receive or the inventory calculates. 

        7.4    Inheritance and the transfer    

        If
no hotel owner's written agreement in anticipation (This agreement cannot be delay reasonably), the management company should has no right to transfer and avert to any third party the
responsibility under the contract 

        This
provision cannot prevent the hotel owner and the management company averts the responsibility under the contract to the subsidiary company or subordinate company, which the
bilateral group has the same benefit. 

        Before
approving by managing company, the hotel owner can't transfer or sell this contract to any third parties, and such allow shouldn't procrastinate unreasonably, while the
requirement of managing company, the hotel owner should submit a capital holder, partner, sole of holding company's name and address to the managing company. 

        The
hotel owner and managing company the hotel owner and the management company, which its assignee and accept of assignee can use the same rights of the contract. 

        7.5    The solve of appropriately law and dispute    

        (1)   The
solve of the establishment, effect, explain implement and dispute of this contract which are protected by PRC law. 

        (2)   Any
of carrying out originally the contract to take place of or have something to do with this contract of all dispute, the both parties should solve through the amity
consultation, if the consultation can't solve, should hand over the arbitrate in the local court verdict. 

        (3)   In
arbitrating process, in addition to both parties having the controversy to arbitrate under way of part, this contract should continue to implement. 

        7.6    Relationship    

        Hotel
owner authorizes Administration Company as its agent who is all-powerful represented by hotel owner to conduct according to this contract and take charge of hotel
administration and management. 

        Hotel
owner admits this contract is a management service contract. Except this contract has another regulation, hotel owner may not cancel this by itself. 

        This
contract doesn't mean that hotel owner and Administration Company have any joint venture or partner relationship. Administration Company doesn't own any debt that is because of
executing following hotel operation duty or hotel owner in its debt, duty and the other debt. 

        This
contract does not accredit Administration Company to affix any promissory note, letter of undertaking, loan contract or other debt file, or represent hotel owner or hotel to borrow
any money 

9

 

for
part of operating expenses. Especial assert and agree again that administration company has no power to acquire other private wealth by hotel's whole or part section or any account or hotel or
hotel management to be engagement, trust and others, etc. (Except the contract that is annotated admitted rent by this contract.) Both agree that abstracting by this agreement administration company
will have full powers to take charge of and decision-making power in administration a hotel, management and execute task. Administration company will have duty for hotel owner as good and profession
attitude and loyal and assiduous to execute its duty, and will utmost fulfill this contract's duty. 

        In
the validity term of the contract, administration company agrees to hotel owner that formally accredits officer, accountant, agent and law appointed person that have right to come
into hotel anywhere in reasonable time to inspect and investigate. However mentioned action above should be as far as possible to avoid hampering hotel's management. 

The 8th sundries  

        8.1    Whole contract    

        This
contract includes understanding of contract stipulation, contract and every sort that both sides agree relating to hotel management. If one wants to amend this contract, it begins
effective that need by both sides' contract date is in the same day or after this by marking date and by both sides' signing file and be approved by examine and approve agency. 

        8.2    Notification    

        Dominium
notification which either sends to the other must send by an expert in person and be signed by the other or sent to the hotel owner and management company's address with
acknowledgment in registered form or to another address which is appointed by both according to this notification. 

        8.3    Register and other procedure    

        Hotel
owner should transact this contract or all afterward step for altering contract necessary ratify, register and execute in demand to ensure this contract can practice in effect
under applied law. Hotel owner will bear all procedure expense. 

        8.4    Appointed person specification    

        Administration
company appointed person specification listed as contract accessories form, and administration company can adjust to this specification according to practical management
situation, but is must before changing appointed person, and to serve a notice in writing to hotel company, and detailed mention changing cause and possibility from it that affects daily
administration in the hotel company, and administration corporate reply scheme and plan. If there is possible to cause significant affection, they should negotiate with Hotel Company that
corresponding adjust administrative fee proceed. 

10

(This
page is for document subscription) 

	Owner of hotel:	 	Dongjin Taoyuan filiale, Shaanxi New Taohuayuan Tourism Trading Ltd
	

Authorized representative:	
 	

Wang qiang (Signiture)
	

Administration Company:	
 	

Shaanxi New Taohuayuan Culture Tourism Co., Ltd

(Sealed)
	

Authorized representative:	
 	

Wang yanru (Signiture)
	

Date:	
 	

 
	

Place:	
 	

Xi'an, China

[Original
Chinese text as translated on previous page] 

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