Document:

kl07044_exhibit10-11.htm

    
      

    

     

    Exhibit 10.11

     

    

    

    

    Contract
Number: 2007
Year  Shimen No. 0004

    

    

    

    

    

    

    

    Industrial
and Commercial Bank of China

    Fixed
Asset Loan Agreement

    

    

     

    

     

    

     

     

    

     

    

     

    Borrower
(Party A):  Hunan Zhaoheng Hydropower Co., Ltd.

     

    Domicile
(Address): Power Station Road, Chujiang Township, Shimen County

     

    Legal
Representative: Hong Zhu

     

    

     

    

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

    

    Domicile
(Address): Chujiang Road, Chujiang Town, Shimen County

    

    Legal
Representative (Person in-Charge): Zidan Xu

    

     

    

     

    
      
        
           

        

        
          1

          
            

          

        

        
           

        

      

    

    

    

    

    Table
of Contents

    

     

    Article
1.         Representations and
Warranties of Party A

     

    Article
2.         Type of the Loan

     

    Article
3.         Purpose of the
Loan

     

    Article
4.         Amount and Term of the
Loan

     

    Article
5.         Interest Rate and Interest
Calculation

     

    Article
6.         Conditions of Grant of the
Loan

     

    Article
7.         Grant Plan of the
Loan

     

    Article
8.         Capital Source and
Method of Repayment

     

    Article
9.         Security

     

    Article
10.       Rights and Obligations of Both
Parties

     

    Article
11.       Liabilities for Breach of
Contract

     

    Article
12.       Effectiveness, Modification,
Rescission and Termination of the Agreement

     

    Article
13.       Dispute Settlement

     

    Article
14.       Other Matters agreed

     

    Article
15.        Appendix

     

    

    

     

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
 

     

    Whereas
Party A applies for a loan from Party B and Party B agrees to grant a loan to
Party A for the purpose as specified in Section 3.1 hereunder.  To
specify their rights and obligations, Party A and Party B hereby enter into this
Agreement after negotiation in accordance with the Contract Law, General Rules
of Loan and relevant laws and regulations.

     

    Article
1.       Representations and Warranties of
Party A

     

    1.1   Party A
is an entity with the qualification of a legal person (or a sub-organization
legally authorized by a legal person) that is set up in accordance with the law
and has right to execute the Agreement;

     

    1.2   The
project that will be constructed using the Loan under this Agreement has been
approved by the related government organizations;

     

    1.3   All
accounting reports and materials for the investigation, evaluation, and
management of the Project that provided by Party A are true, accurate, and
complete.

     

    Article
2.       Type of the Loan

     

    2.1   The Loan
under this Agreement is fixed asset loan.

     

    Article
3.        Purpose of the
Loan

     

    3.1       The
loan hereunder shall be used for the Sanjiangkou Hydropower
Station Left Bank Expansion Project;

     

    3.2       Party
A shall not change the purpose of the loan hereunder without the written consent
of Party B.

     

    Article
4.         Amount and Term of the
Loan

     

    4.1         The
amount of the loan under this Agreement is (in word): Renminbi 160 million and (Arabic
numerals) RMB 160,000,000.00.
 (In the event of any discrepancy between the word and Arabic numerals
amount, the word shall prevail; the same applies below);

     

    4.2          The
term of the loan hereunder is 180 months,
from March 23,
2007 to March 23,
2022.

     

    Article
5.         Interest Rate and
Interest Calculation

     

    5.1           The
interest of loan hereunder accrues on a daily basis from the date of practical
withdrawal (daily interest = annual interest/360) and settled on monthly
(monthly/ quarterly) basis.  The interest settlement day is the 20th of each month (the
20th
of each month/the last month of each quarter).  If the 20th day is
non-bank working day, the interest settlement day shall be the following bank
working day.  The interest shall be paid up with principal upon maturity of
loan;

     

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

     

    5.2         The interest rate of
the loan hereunder is calculated in accordance with the way stipulated under
5.2.1:

     

    5.2.1              The
interest rate is a fixed annual rate of 7.11% , which is
unchanged during the term of the Loan;

     

    5.2.2              The
interest rate of the Contract is calculated at      BLANK    %
(upward/downward) from the benchmark interest rate of the corresponding grade of
the People’s Bank of China. The interest rate will be adjusted every period,
which is     BLANK  (year/half a
year/quarter/month). The date of interest rate determination for the first
period shall be the effective date of the loan Agreement. The interest rate for
the first period shall be calculated by Party B in accordance with the benchmark
interest rate of the corresponding grade of the People’s Bank of China on the
effective date of the loan Agreement and the floating interest rate agreed by
both Parties, that is the annual rate of     BLANK    %.
The interest rate determination time for the second or later period is the
corresponding date of the effective date of the loan Agreement. The interest
rate is calculated in accordance with the benchmark interest rate of the
corresponding grade of the People’s Bank of China on the effective date of the
loan Agreement and the floating interest rate agreed by both Parties. If there
is no corresponding date of the effective date in the month of adjustment, the
last date of the month shall be the corresponding date.

     

    Withdrawal
by installment, whatever the time of installments is in a period, the interest
rate is all made according to the rate determined on the effective date of the
loan contract or the corresponding date and adjusted on the corresponding date
of the effective date of the loan contract of next period.

     

    The
corresponding date of the effective date of the loan agreement refers to the
corresponding date a period after the effective date of the loan agreement. For
instance, if the effective date of the loan agreement is May 9 one year,
the corresponding date of the second period (a period is one month) is
June 9 of the year; the corresponding date of the second period (a period
is one quarter) is August 9 of the year; the corresponding date of the second
period (a period is half a year) is November 9 of the year; the corresponding
date of the second period (a period is a year) is May 9 of the next year,
and so on.

     

    5.2.3    Others:  the following space is
intentionally left
blank                                                 

     

    ______________________________________________________________________.

     

    Party B
shall notify Party A in writing within 30 days from the date of change of
interest rate, but whether the notification is delivered shall not affect the
execution of the interest rate;

     

    5.3              In
case the People’s Bank of China adjusts the interest rate and calculation
method, the interest rate shall be conducted subject to the
adjustment.

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    Article
6.      Conditions of Grant of the
Loan

     

    6.1                 Every
time before the Loan can be granted, Party A has to fulfil the following
conditions:

     

    6.1.1              The
security contract has been executed and taken into effect in accordance with the
law;

     

    6.1.2              The
principal and other related fund of the project that will be built up by the
loan under this Agreement have been fully ready in accordance with the
stipulated time and ratio;

     

    6.1.3              Cost
overrun does not occur or has been resolved by Party A;

     

    6.1.4              The
Project is being contructed in accordance with the planned
progress;

     

    6.1.5              Party
A has conducted the loan grant procedures as stipulated herein;

     

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

     

    6.1.7              Party
A has provided other materials relating to the Loan hereunder in accordance with
Party B’s requirement.

     

    Article
7.         Grant Plan of the
Loan

     

    7.1                The
grant plan of the Loan under this Agreement shall be executed in accordance with
the Section
7.1.1 of
the following:

     

    7.1.1              Party
A shall collect the Loan in one time on March 23, 2007 and
transfer all the amount to its account opened with Party B;

     

    7.1.2              Party
A shall collect the Loan by installment, and the specific collecting amount and
date are as follows:

     

    7.1.2.1           BLANK Year  BLANK  Month
BLANK  Day, Amount (in
word) BLANK
Yuan (Arabic numerals BLANK
Yuan);

     

    7.1.2.2           BLANK Year  BLANK  Month
BLANK  Day, Amount (in
word) BLANK
Yuan (Arabic numerals BLANK
Yuan);

     

    7.1.2.3           BLANK Year  BLANK  Month
BLANK  Day, Amount (in
word) BLANK
Yuan (Arabic numerals BLANK
Yuan);

     

    7.1.2.4           BLANK Year  BLANK  Month
BLANK  Day, Amount (in
word) BLANK
Yuan (Arabic numerals BLANK
Yuan);

     

    7.1.2.5           BLANK Year  BLANK  Month
BLANK  Day, Amount (in
word) BLANK
Yuan (Arabic numerals BLANK
Yuan);

     

    7.1.3              Other
grant plan: the
following space is intentionally left
blank                     

     

     

    
      
        
        

      

      
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    __________________________________________________________________.

     

    7.2              Party
A shall collect the Loan as specified in Section 7.1 hereunder, or collect
it in advance or postpone     BLANK    
days with the written consent of Party B for special reasons;

     

    7.3              If
Party A wants to cancel partial or all of the amount that has not been collected
under this Agreement, a written application has to be submitted 30 days in
advance of the withdrawal date, and the written consent of Party is
required;

     

    7.4              The
practical withdrawal and repayment date shall be the date stated on the
indebtedness certificate between Party A and Party B. The indebtedness
certificate or loan collection certificate is the integral part of the
Agreement. Apart from the date, in case of any discrepancy between indebtedness
certificate and the Agreement, the Agreement shall prevail.

     

    Article
8.           Capital
Source and Method of Repayment

     

    8.1              Party
A repays the principal and interest of the loan hereunder with the capital from
the sources, including but not limited to:

     

    8.1.1           Sales income of power
generation                                                                
;

     

    8.1.2           BLANK                                                                                                              
.

     

    8.2              In case of any provision on
the capital source of Party A’s repayment as specified in
any other contracts in which Party A is one party, the provision
shall not affect the fulfillment of repayment obligation under this
Agreement.
Party A, in any case, shall not invoke
Section 8.1 to refuse the fulfillment
of repayment obligation hereunder.

     

    8.3              Party
A shall repay interest on time and in full as specified in the Agreement and
repay the principal as the method listed in Section 8.3.2 as
follows:

     

    8.3.1           One-off
repayment. Party A shall repay all the principal of loan on BLANK Year BLANK Month BLANK
Day;

     

    8.3.2           Repayment
by installment. The amount and date of repayment are as follows:

     

    8.3.2.1        2010 Year 03 Month 23 Day, Amount
(word): five
million Yuan;
(Arabic numerals:  5,000,000
Yuan);

     

    8.3.2.2        2011 Year 03 Month 23 Day, Amount
(word): five
million Yuan;
(Arabic numerals:  5,000,000
Yuan);

     

    8.3.2.3        2012 Year 03 Month 23 Day, Amount
(word): five
million Yuan;
(Arabic numerals:  5,000,000
Yuan);

     

    8.3.2.4        2013 Year 03 Month 23 Day, Amount
(word): five
million Yuan;
(Arabic numerals:  5,000,000
Yuan);

     

     

    
      
        
        

      

      
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    8.3.2.5        2014 Year 03 Month 23 Day, Amount
(word): ten
million Yuan;
(Arabic numerals:  10,000,000
Yuan);

     

    (An
additional page could be attached when there are many installments)

     

    (Please
see the attached page)

     

    8.3.3   Other
repayment methods: BLANK                                               

     

              
BLANK                                                        
                           
.

     

    8.4              For
early repayment, Party A shall apply to Party B 30 days in advance in
writing and obtain the written consent of Party B;

     

    8.5              Party
A shall obtain consent from Party B for early repayment, and shall compensate
the foreseeable income loss and other expenses of Party B.  The early
repayment of principal shall be at least BLANK Yuan (word) and
shall be the integral multiple of BLANK Yuan
(word);

     

    8.6              In the event of early
repayment of principal of the Loan, the repayment shall be made in the reversed
order of the repayment plan stipulated in Section 8.3.2
herein.

     

    8.7              Party
A shall deposit sufficient funds for repayment of the principal and interest due
in the account opened with Party B prior to the interest settlement date or
principal repayment date, and authorize Party B to deduct money from the account
on such date.

     

    Article
9.           Security

     

    9.1     The
security method of the loan hereunder is: guarantee;

     

    9.2              Party
A shall be obliged to actively assist Party B and procure Party B to enter into
the guarantee contract numbering 2007 Shimen (guarantee) No.
0001 with the guarantor, to specify the detailed matters under the
Agreement;

     

    9.3              In
the event of any change in the security hereunder adverse to the indebtedness
owing to Party B, upon notification of Party B, Party A shall provide Party B
with other security satisfactory to Party B as required by Party B.

     

    Article
10.          Rights and
Obligations of Both Parties

     

    10.1     Rights
and Obligations of Party A:

     

    10.1.1          Party
A shall withdraw and use the loan in accordance with the term and purpose as
specified in the Agreement;

     

    10.1.2          Party
A shall obtain consent from Party B for early repayment;

     

    10.1.3          Party
A shall accept voluntarily Party B’s investigation, inquiry, and supervision
over the use of loan under the Agreement;

     

     

    
      
        
        

      

      
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    10.1.4           Party
A shall actively cooperate with Party B in supervision, inquiry, and
investigation over its production, operation, project contruction, and financial
condition, and have obligation to provide Party B with the related financial
reports and materials such as income statement and balance sheet;

     

    10.1.5           Party
shall actively support Party B’s participation in the investigation over the
budget estimates, budget, and financial statements of the Project, project
bidding, testing of the finished project, and other related
matters;

     

    10.1.6           Party
A shall repay the principal and interest of the Loan hereunder as stipulated in
the Agreement;

     

    10.1.7           Party
A shall undertake the expenses incurred under the Agreement, including but not
limited to the expenses of notarization, evaluation, appraisal and registration,
etc;

     

    10.1.8           Party
A shall send the receipt of the collection letter or document posted by Party B
within 3 days after the document is received and signed;

     

    10.1.9           In case of contracting, lease, joint
stock restructuring, joint operation, merger, acquisition, joint venture,
division, decrease of registered capital, changes in equity, major assets
transfer and other activities that may impair Party B’s right and interest,
Party A shall notify Party B at
least thirty days in advance and obtain the written consent of Party
B.  Otherwise, Party A shall not undertake the above activities until
all the debts are discharged;

     

    10.1.10         Party
A shall notify Party B in writing of any change of its domicile, corresponding
address, business scope, legal representative, and other industrial and
commercial registrations within 7 days after the change;

     

    10.1.11         In
case of any circumstances which threatens the normal operation and seriously
affects the obligation of repayment under this Agreement, including but limited
to material economic disputes, bankruptcy, deteriorated financial position,
Party A shall immediately notify Party B in writing;

     

    10.1.12         In
case of going out of business, dissolution, cessation of production for
rectification, cancellation or revocation of business license, Party A shall
notify Party B within 5 days in writing and ensure repayment of the principal
and interest immediately;

     

    10.2              Rights
and Obligations of Party B:

     

    10.2.1           Asks
Party A to provide all the relevant materials;

     

    10.2.2           Deducts
principal, interest, compound interest, penalty interest and other expenses
which Party A shall pay as specified in the Agreement from the account of Party
A in accordance with the Agreement or the laws and regulations;

     

    10.2.3           If Party A evades the
supervision of Party B, delays the repayment of the principal and interest or
commits other material breaches of contract, Party B shall be entitled to
implement credit sanction, report such situation to the relevant
authority or organization and publicly claim for the repayment through
media;

     

     

     

    
      
        
        

      

      
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    10.2.4           Advances
the Loan in full to Party A on schedule as stipulated herein (except the delay
caused by Party A);

     

    10.2.5            Keeps
confidential the materials provided by Party A concerned information of
liabilities, finance, production, operation, etc., unless otherwise required by
the Agreement, laws and regulations.

     

    Article
11.          Liabilities for
Breach of Contract

     

    11.1              Both
Parties shall fulfill the obligations as specified in the Agreement after the
Agreement takes into effect. Any Party who fails to fulfill the obligations
hereunder shall bear the liabilities of breach of contract;

     

    11.2              Should
Party A fail to apply for or withdraw the loan as stipulated in Section 7.1
hereunder, Party B has the right to claim delay damages in accordance with the
interest rate hereunder for each day of delay;

     

    11.3              Should
Party B fail to provide loan as stipulated in Section 7.1 hereunder, Party
B shall pay delay damages in accordance with the interest rate hereunder for
each day of delay;

     

    11.4              Should Party A make early
repayment without the written consent of Party B, Party B shall have the right
to claim interest according to the term and interest rate stipulated hereunder;

     

    11.5              Should Party A fail to repay
the principal and interest under the Agreement on time, Party B has the right to
request for repayment within a specified time. Party A shall authorize
Party B to
deduct all the debts hereunder from the accounts
opened with the
Industrial and Commercial Bank of China and their branches and collect an
additional (30-50%) penalty interest to the overdue loan and
30% (30-50%) compound
interest to the
overdue interests;

     

    In case of foreign exchange
deduction, the deduction shall be subject to the
buy rate which Party B announces on the day of deduction;

     

    11.6              Should
Party A fail to use the loan for the purpose as stipulated in the Agreement,
Party B has the right to cease to issue the Loan, reclaim part or all of the
Loan or terminate the Agreement. Besides, Party B is entitled to claim penalty
interest at a rate of 50% (50-100%) upward
the original interest rate on any balance of the Loan used by Party A in breach
of this Agreement for the days of breach, and collect compound interest at the
rate of 50% (50-100%) upward
the original interest rate on the unpaid interest;

     

    11.7              For
the interests Party A fails to repay on time during the term of the Loan, Party
A shall pay the compound interest in accordance with the interest rate
stipulated in the Agreement. After the loan is overdue, the compound interest
shall be calculated according to the interest rate stipulated in
Section 11.5 hereof;

     

     

    
      
        
        

      

      
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    11.8              The
heavier penalty shall apply upon simultaneous occurrence of the situations as
specified in Section 11.5 and 11.6 in use of loan. Party B shall not be
simultaneously entitled to two types of penalties;

     

    11.9              In case Party A is involved
in one of the following situations, Party A shall rectify it and take the
remedial measures which Party B is satisfied with
within 7 days after receiving the notification from Party B. Otherwise Party B
shall have the
right to cease
or cancel the Loan that has not been granted to Party A and reclaim part or all of the Loan in advance. For the loan
that could not
be drawn back, penalty is imposed on a daily basis in accordance with overdue
loan interest rate:

     

    11.9.1           providing
Party B with the balance sheet, income statement and other financial materials
which are false or hide material facts;

     

    11.9.2           not
cooperating with or refusing Party B’s supervision over the use
of  the Loan and related production, operation and financial
activities;

     

    11.9.3           transferring,
disposal of or threatening to transfer or dispose of the major assets without
the consent of Party B;

     

    11.9.4           the
important part of or all the assets of Party A being held by other creditors or
taken over by trustee, receiver or similar personnel, or the assets are detained
or frozen, which may cause serious losses to Party B;

     

    11.9.5           Contracting,
leasing, joint stock restructure, joint operation, merger, acquisition, joint
venture, division, decrease of registered capital, changes in equity, equity
transfer conducted without the consent of Party B and other events that shall
impair and endanger the rights and benefits of Party B;

     

    11.9.6           Alteration
of such items in the industry and commerce registration such as address,
corresponding address, business scope and legal representative, or major
external investment, which have seriously affected or may affect the
indebtedness owing to Party B;

     

    11.9.7           Major
economic disputes, deteriorated financial situation, etc. which may seriously
affect or endanger the exercise of Party B’s rights; Any other event that may
endanger or cause serious losses to the execution of the creditor’s rights of
Party B under the Agreement;

     

    11.9.8           Any
other event that may endanger or cause serious losses to the exercise of the
creditor’s rights of Party B under the Agreement;

     

               Article
12 Effectiveness, Modification, Rescission and Termination of the
Agreement

     

    12.1             
The Agreement shall come into effect after the execution of both parties hereto;
where security is available, it shall become effective from the date when
security contract becomes effective and terminate after all the principal,
interests, compound interest, penalty interest, penalty and other payables are
paid up;

     

     

    
      
        
        

      

      
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    12.2             Should Party A be involved
in any situation as below, Party B shall have the right to terminate the
Agreement and
require Party B to return the principal and interest in advance
and compensate losses:

     

    12.2.1           Going out of business,
dissolution,
cessation of production for rectification, cancellation
or revocation of business license;

     

    12.2.2           The security hereunder
changes against the rights of Party B, and Party A fails to provide
new
security as
required by Party B;

     

    12.2.3           Party
A fails to repay the loan on schedule or use the loan for the purpose stipulated
herein, default in
interest or other serious breach of the Agreement;

     

    12.3              In
case Party A wants to extend the loan, it shall submit written application and
the written opinions of guarantor’s consent of providing guarantee continuously
30 days prior to the expiration of the contract. The term of loan shall not be
extended until Party B agrees to extend the Loan after inspection and the
Parties execute an agreement for extension. The loan Agreement shall remain in
force before the Parties hereto execute the extension agreement;

     

    12.4              After
the Agreement takes into effect, any Party shall not modify or terminate in
advance the Agreement unless otherwise specified in the Agreement. The
modification or termination of the Agreement, if required, shall be subject to
the written agreement of both Parties hereto through consultation. The Loan
Agreement shall remain in force before the new written agreement is entered
into;

     

    Article
13.          Dispute
Settlement

     

    13.1              Any
dispute arising from execution of the Agreement shall be firstly settled by both
Parties hereto through consultation;

     

    In case
no settlement can be reached through consultation, the disputes shall be
submitted  through the method listed under Section
13.1.2:

     

    13.1.1           File
the dispute to   BLANK_______for
arbitration;

     

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

     

    Article
14. Other Matters Agreed

     

    14.1     The following space is
intentionally left blank._________________________

     

    ______________________________________________________________________;

     

    14.2     The following space is
intentionally left blank._________________________

     

    ______________________________________________________________________;

     

    14.3     The following space is
intentionally left blank._________________________

     

     

    
      
        
        

      

      
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    _______________________________________________________________________.

     

    Article
15.          Appendix

     

    15.1              The
appendices hereto are an integral part of the Agreement. The Agreement and the
appendices hereto have the equal legal force;

     

    15.2              In
case the day of withdrawal or repayment is not a bank working day during the
performance of the Agreement, it shall be postponed to the following bank
working day;

     

    15.3              The
Agreement is made in triplicate with the
equal legal effect. Each of Party A, Party B and   guarantor shall hold
one.

     

    

     

     Party
A (Seal): (Seal)

     

     Legal
representative or authorized representative (Signature):

     

                                /s/
Hong Zhu

     

                                                March 23,
2007

     

    

     

    Party B
(Seal): (Seal)

     

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

     

                                /s/
Zidan Xu

     

                            March 23, 2007

     

    

     

    

     

    

     

    

    
      
        
           

        

        
          12

          
            

          

        

        
           

        

      

    

    

    Project
Loan Repayment Schedule of Zhaoheng Hydropower Co., Ltd

     

    
      	
              Year
      2010

               

            	
              5
      million Yuan

            
	
              Year
      2011

               

            	
              5
      million Yuan

            
	
              Year
      2012

               

            	
              5
      million Yuan

            
	
              Year
      2013

               

            	
              5
      million Yuan

            
	
              Year
      2014

               

            	
              10
      million Yuan

            
	
              Year
      2015

               

            	
              10
      million Yuan

            
	
              Year
      2016

               

            	
              10
      million Yuan

            
	
              Year
      2017

               

            	
              10
      million Yuan

            
	
              Year
      2018

               

            	
              20
      million Yuan

            
	
              Year
      2019

               

            	
              20
      million Yuan

            
	
              Year
      2020

               

            	
              20
      million Yuan

            
	
              Year
      2021

               

            	
              20
      million Yuan

            
	
              Year
      2022

            	
              20
      million Yuan

               

            
	
              Term:
      15 years

            	
              160
      million Yuan

            

    

    

     

     

     

    13kl07044_exhibit10-12.htm

    
      

    

     

    Exhibit 10.12

    

    

    

    

    

    Contract
Number: 2007, Shimen (mortgage) No. 0005

    

    

     

    

     

    

    

    Mortgage
Contract

    

    

    

    

     

    

     

    

     

    

     

    Mortgagor
(Party A): Hunan Zhaoheng Hydropower Co., Ltd

     

    Domicile
(Address): Power Station Road, Chujiang Town, Shimen County

     

    Legal
Representative: Hong Zhu

     

     

     

    Mortgagee
(Party B): Shimen Branch of Industrial and Commercial Bank of China Co.,
Ltd

     

    Domicile
(Address): Chujiang Road, Chujiang Town, Shimen County

     

    Legal
Representative(Person in-charge): Zidan Xu

     

    

     

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    

    Table
of Contents

    

     

    Article
1.     
Representations and Warranties of Party A

     

    Article
2.      Type and
Amount of the Indebtedness To Be Secured

     

    Article
3.      Term of the
Underlying Contract

     

    Article
4.      Scope of
Guarantee

     

    Article
5.     
Collateral

     

    Article
6.      Mortgage
Registration

     

    Article
7.      Possession and
Management of the Collateral

     

    Article
8.     
Insurance

     

    Article
9.      Realization of
Security

     

    Article
10.    Rights and
Obligations of Party A

     

    Article
11.    Rights and
Obligations of Party B

     

    Article
12.    Breach of
Contract

     

    Article
13.    Effectiveness,
Amendment and Termination of the Contract

     

    Article
14.    Dispute
Settlement

     

    Article
15.    Other Issues
Agreed

     

    Article
16.    Appendix

     

    Article
17.    Supplementary
Provisions

     

    

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

     

    

     

    Hunan
Zhaoheng Hydropower Co., Ltd. (hereinafter "Debtor") and Party B under this
Contract have entered into a Loan Agreements, the contract number of which is
2007 Shimen No.0004, (hereinafter “Underlying Contract”) on March 23, 2007.
Party A agrees to provide mortgage guarantee to secure the indebtedness of the
Debtor under the Underlying Contract. Party A and Party B upon consultation have
reached the following Contract in accordance with the Contract Law and the
Guarantee Law of People’s Republic of China and other relevant laws and
regulations, for mutual observance and compliance.

     

    Article
1.           Representations
and Warranties of Party A

     

    1.1        Party
A is the full, effective and lawful owner or the State-authorized administrator
of the collateral under this Contract, and there is no dispute regarding the
ownership or right of administration for the collateral;

     

    1.2        Party
A fully understands the purpose of the Loan under the Underlying Contract and
has provided the security under this Contract of its own will;

     

    1.3        Party
A has disclosed and explained all defects of  the
collateral;

     

    1.4        The
collateral under this Contract is allowed by law to be mortgaged;

     

    1.5        There
is no restriction against the establishment of the mortgage under this
Contract;

     

    1.6        There
is no seizure, attachment or supervision existing over the
collateral;

     

    1.7        In
case that Party A leases partial or all of the collateral to other party, Party
A shall notify the Lessee of the mortgage and notify Party B of the lease in
writing.

     

    Article
2.           Type and
Amount of the Indebtedness To Be Secured

     

    2.1        The
mortgage under this Contract is to secure the indebtedness owed by the Debtor to
the Mortgagee derived from the Loan, the amount of which is RMB 160 million,
granted by Party B under the Underlying Contract.

     

    Article
3.           Term of the
Underlying Contract

     

     3.1       The
term of the Underlying Contract hereunder is 180 months,
from March 23,
2007 to March 23,
2022.  If there is any change, the term shall be determined by
the Underlying Contract.

     

    Article
4.           Scope of
Guarantee

     

    4.1        The
security under this Contract  shall be to secure all of the loan
principal, interest, compound interest, penalty interest, damages, compensations
and all the expenses incurred in realizing the Mortgagee's rights and other fees
payable under the Underlying Contract.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    Article
5.           Collateral

     

    5.1        The
collateral under this Contract is described in detail in the List of
Collateral;

     

    5.2        The
estimated value of the collateral contained in the abovementioned List of
Collateral is the basis of value evaluation when Party B dispose the collateral
in accordance with Article 9 of this Contract and shall impose no restriction on
realizing the Mortgagee's right by Party B;

     

    5.3        The
relevant certificate and materials of the collateral shall be kept by Party B
after having been confirmed and sealed by both Parties unless otherwise
stipulated by laws and regulations.

     

    Article
6.           Mortgage
Registration

     

    6.1        The
Parties shall register the mortgage at the relevant mortgage registration office
within 15 days after execution of this Contract as required by laws or agreed by
both Parties;

     

    6.2        The
Parties shall alter the registration at the relevant mortgage registration
office  within 15 days in case of alteration of the mortgage as
required by laws.

     

    Article
7.            Possession
and Management of the Collateral

     

    7.1        The
collateral shall be possessed and managed by Party A. Party A shall maintain the
integrity of the collateral and shall not impair the value of the collateral
through improper utilization. Party B is entitled to supervise the possession
and management of the collateral;

     

    7.2        In
case of loss or damage to the collateral, Party A shall notify Party B promptly
and take necessary efforts to minimize the loss. Party A shall also provide
Party B with necessary proof of the loss or damage issued by the relevant
authorities.

     

    Article
8.            Insurance

     

    8.1        Party
A shall purchase the basic property insurance and additional BLANK insurance for
the collateral within 15 days after execution of this Contract. The insured
period shall be no shorter than the term of the Loan under the Underlying
Contract and the insured value shall be no less than the principal and interest
of the Loan;

     

    8.2        Party B shall be the first
beneficiary listed under such insurance. There shall be no restriction of Party
B's interest and right under such insurance;

     

    8.3        Party
A should not terminate or cancel the insurance for any reason during the valid
period of this Contract. Party B is entitled to renew the insurance at the cost
of Party A in case of termination of the insurance;

     

    8.4        The
insurance compensation shall be used to repay the Loan under the Underlying
Contract or to restore the value of the collateral as agreed by Party
B.

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Article
9.         Realization of
Security

     

    9.1        In
realizing the Mortgagee's right in accordance with laws, Party B is entitled to
use the collateral to make up for the indebtedness as agreed by both Parties or
settle the outstanding indebtedness by the proceeds derived from the sale or
auction of the collateral;

     

    9.2        Party
A shall assist Party B to realize its right and shall not cause any
hindrance.

     

    Article
10.          Rights and
Obligations of Party A

     

    10.1       After effectiveness of this
Contract, Party A shall not create any mortgage, pledge on the collateral or
lease, transfer or donate the collateral to any third party without getting
written consent from Party B;

     

    10.2       The assignment of the
creditor rights under the Underlying Contract to a third party by Party B in
accordance with the relevant laws shall not affect Party A’s obligations under
this Contract;

     

    10.3       Except for the cases that
the term of the Loan under the Underlying Contract is extended or the principal
amount of the Loan is raised, Party A’s consent is not required for 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;

     

    10.4       In
case of devaluation of the collateral due to Party A's conduct, Party A shall
cease such conduct and restore the value of the collateral or provide extra
security;

     

    10.5       In case of devaluation of
the collateral due to reasons other than Party A's fault, Party A will bear the
obligation of security only within the limitation of the compensation received
by Party A. The remaining collateral shall still be mortgaged to secure the
indebtedness of the Debtor;

     

    10.6       In
case of expropriation of the collateral by the State, the relevant compensation
shall be used to settle the indebtedness of the Debtor before maturity or be
deposited in a third party designated by both Parties;

     

    10.7       Party
A shall bear all the expense and cost under this Contract, including but not
limited to: attorney services, insurance, authentication, evaluation,
registration, transfer and litigation;

     

    10.8       Party
A shall make proper arrangement about the security in case of division, merger,
and shareholding system rebuilding of Party A;

     

    10.9       In case of damage or
possible damage by third party to the collateral, Party A shall notify Party B
in time and assist Party B to prevent the damage;

     

    10.10     Party
A shall promptly notify Party B in writing in case of the following
events:

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    10.10.1  Change
of its management system, such as contracting, leasing, pooling, merger,
division, shareholding system rebuilding, establishing a joint venture, and
etc;

     

    10.10.2  Change
of its business scope, registered capital and joint stock
restructuring;

     

    10.10.3  Involvement
of major economic dispute;

     

    10.10.4  Dispute
over ownership of the collateral;

     

    10.10.5  Bankruptcy,
cessation of operation, dissolution, cessation of production for rectification,
cancellation or revocation of business license;

     

    10.10.6  Change
of its domicile, telephone number, or legal representative;

     

    10.11      Under
the circumstances stated in 10.10.1 or 10.10.2, Part A shall notify Party B 30
days in advance; under other circumstances stated in 10.10, Party A notify Party
B in writing within 5 days after the occurrence of such event;

     

    10.12      In
case the collateral is project being constructed, Party A shall actively
cooperate PartyB to register the real estate mortgage at the relevant mortgage
registration office after the project is complete and is issued the property
right certificate;

     

    10.13      Party
A is entitled to cancel the mortgage once all indebtedness under the Underlying
Contract has been paid.

     

    Article
11.          Rights and
Obligations of Party B

     

    11.1       Party
B is entitled to dispose the collateral in case of failure by the Debtor to pay
the loan principal, interest or other fees upon maturity date of the Underlying
Contract;

     

    11.2       Party B is entitled to
dispose the collateral in advance and the right of first claim to the proceeds
in case that:

     

    11.2.1    The
Underlying Contract is terminated in accordance with laws or as stipulated in
the Underlying Contract;

     

    11.2.2    The
loan becomes mature before expiry of term in accordance with the Underlying
Contract and the indebtedness under the Underlying Contract has not been
settled;

     

    11.3       Party
B is entitled to ask for Party A's assistance in its effort to prevent damage of
the collateral by any third party;

     

    11.4       Party B shall notify Party
A promptly in case of the assignment of the creditor’s right under the
Underlying Contract during the term of the Contract in accordance of the
laws;

     

    11.5       After
the realization of the security, Party B shall assist Party A's execution of
recourse right against the Debtor;

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    11.6       Party
B shall repay the residual proceeds of the collateral to Party A once all
secured indebtedness has been paid;

     

    Article
12.          Breach of
Contract

     

    12.1       Party
A shall compensate Party B for any loss due to false statements or undertakings
by Party A in Article 1 of this Contract;

     

    12.2       Both
Parties shall perform their obligations under this Contract strictly after the
effectiveness of the Contract. The breaching party shall compensate the other
party any loss suffered due to its breach of Contract;

     

    12.3       In case that this Contract
becomes invalid due to fault of Party A, Party A shall compensate Party B for
all loss within the limitation of the security amount.

     

    Article
13.          Effectiveness,
Amendment and Termination of the Contract

     

    13.1       The
Contract shall come into effect once it is executed and affixed with the
official seals by both Parties and registered with the relevant mortgage
registration office as required by laws;  the contract shall terminate
when the principal, interest, compound interest, penalty interest, damages for
breach of contract, compensation and expenses in realizing the creditor’s right,
and all other related expenses under the Underlying Contract have all been paid
off;

     

    13.2       The
effect and validity of the Contract 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 Contract hereunder. If
the Underlying Contract is held to be void, Party A shall be also liable for all
obligations of guarantee under this Contract;

     

    13.3       After
the effectiveness of the Contract, neither Party shall have the right to amend
or cancel the Contract in advance unilateraly.This Contract may be amended or
terminated in writing by both Parties through consultation.  Befor the
written agreement is reached, all terms stipulated in this Contract shall remain
valid.

     

    Article
14.          Dispute
Settlement

     

    14.1       Any
dispute arising during the performance of this Contract may be settled through
consultation. If the consultation fails, it shall be settled through the 14.1.2 of the
following methods:

     

    14.1.1     File
the dispute to   BLANK_
for arbitration;

     

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

     

    Article
15           Other Issues
Agreed

     

    
              15.1   The following space is
intentionally left blank

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    _________________________________________________________________________;

     

    
             
15.2    The following space is
intentionally left blank

    

     

    __________________________________________________________________________;

     

    
             
15.3    The following space is
intentionally left blank

    

     

    ____________________________________________________________________________.

     

    Article
16.          Appendices

     

    16.1    The
appendices hereto are an integral part of the Contract. The Contract and the
appendices hereto have the equal legal force:

     

    16.2    The
appendices of this Contract include the following:

     

    Appendix
1: List of Collateral

     

    Appendix
2: BLANK

     

    Article
17.           Supplementary
Provisions

     

    The
Contract is executed in triplicate with
the equal legal effect.  Each of Party A, Party B, and the relevant
mortgage registration office shall hold one.

     

    
 

     

     Party
A (Seal): (Seal)

     

     Legal
representative or authorized representative (Signature):

     

                                 /s/
Zhengxi Wang

     

                                                 March 23,
2007

     

    

     

    Party B
(Seal): (Seal)

     

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

     

                                        /s/ Zidan
Xu

     

                                        March 23,
2007

     

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    List
of the Payment Statistic of Hunan Zhaoheng Hydropower Co., Ltd’s Left Bank

    Expansion
Project (List of Collateral)

    

    March 31, 2007 Currency:
Renminbi

     

    
      	
              No.

            	
              Name
      of the Project

            	
              Amount
      Paid

            	
              Notes

            
	 	 	 	 
	
              1

            	
              Hydraulic
      turbo-generator group

            	
              35,040,000

            	 
      
	
              2

            	
              Project
      construction supervision

            	
              1,110,000

            	 
      
	
              3

            	
              Civil
      engineering construction

            	
              56,791,300

            	
              Including
      payment for materials  and prepayment for the
      project

            
	
              4

            	
              Hoists,
      clean up machines

            	
              2,452,200

            	 
      
	
              5

            	
              The
      manufacture and installation of gate

            	
              5,200,000

            	
              Including
      payment for materials  and prepayment for the
      project

            
	
              6

            	
              Mechanical
      and electrical installation work

            	
              6,400,000

            	 
      
	
              7

            	
              Dam
      safety monitoring

            	
              908,700

            	 
      
	
              8

            	
              Overhead
      crane

            	
              1,448,700

            	 
      
	
              9

            	
              220
      KV Main transformer

            	
              5,180,000

            	 
      
	
              10

            	
              GIS
      equipment

            	
              2,945,000

            	 
      
	
              11

            	
              Computer
      monitoring equipment

            	
              840,000

            	 
      
	
              12

            	
              Insulation
      equipment

            	
              870,000

            	 
      
	
              13

            	
              DC
      power supplies

            	
              342,000

            	 
      
	
              14

            	
              Axis
      control equipment

            	
              538,800

            	 
      
	
              15

            	
              110KV
      High-voltage Switch Cabinet

            	
              2,660,000

            	 
      
	
              16

            	
              110KV
      interval

            	
              270,000

            	 
      
	
              17

            	
              Storage
      tank equipment

            	
              48,600

            	 
      
	
              18

            	
              Automation
      components

            	
              99,000

            	 
      
	
              19

            	
              Oil-processing
      equipment

            	
              27,000

            	 
      
	
              20

            	
              Fan

            	
              126,700

            	 
      
	
              21

            	
              Drainage
      pump

            	
              147,500

            	 
      
	
              22

            	
              Water
      filter

            	
              79,000

            	 
      
	
              23

            	
              Air
      compressor

            	
              214,100

            	 
      
	
              24

            	
              water
      supply pump

            	
              31,500

            	 
      
	
              25

            	
              Gas
      storage tank

            	
              94,800

            	 
      
	
              26

            	
              Fire
      fighting equipment

            	
              1,137,700

            	 
      
	
              27

            	
              Bus

            	
              118,400

            	 
      
	
              28

            	
              Plant
      transformer

            	
              3,500,000

            	 
      
	
              29

            	
              Industrial
      TV

            	
              200,000

            	 
      
	
              30

            	
              Metal
      roof

            	
              4,200,000

            	 
      
	
              31

            	
              Low-voltage
      switch cabinet

            	
              297,700

            	 
      
	
              32

            	
              Lighting
      system, cables

            	
              8,500,000

            	 
      
	
              33

            	
               Cable
      bridge

            	
              240,000

            	 
      
	
              34

            	
              22KV
      Access system

            	
              15,800,000

            	 
      
	
              35

            	
              Other
      sporadic projects

            	
              15,000,000

            	 
      
	
              36

            	
              Materials
      for Guangdong Yuantian

              mechanical
      and electrical installation work

            	
              5,801,100

            	 
      
	
              37

            	
              Loan
      interest

            	
              29,670,000

            	 
      
	
              38

            	
              Other
      project costs

            	
              35,000,000

            	 
      
	
              39

            	
              Plant
      renovation project

            	
              3,000,000

            	 
      
	 
      	
              Total

            	
              246,329,800

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