Document:

Unassociated Document

Exhibit 10.4

 

	
MANUFACTURING AGREEMENT

 

This Manufacturing Agreement (“Agreement”) dated 4th of April, 2011, is entered into by Innovative Wireless Technologies, Inc., a corporation organized and existing under the laws of the State of Delaware, USA (“IWT”), and CJSC “Innovation Weapons Technologies”, a closed joint-stock corporation organized and existing under the laws of Russian Federation (“Manufacturer”) and, each of whom is individually referred to as a “Party” and both of whom are sometimes collectively referred to as “Parties.”

 

	
RECITALS

 

	
A. 

	
IWT is engaged in the business of inventing, engineering, and marketing innovative products and technologies, including the products described herein. Manufacturer has experience and expertise in manufacture of such products or its parts.

 

	
B. 

	
Upon and subject to the terms and conditions of this Agreement, IWT has retained Manufacturer’s services to provide production of various products or its parts (the “Product”) described in appendix I.

 

	
C. 

	
IWT grants the right to exercise intellectual property in its possession for manufacturing purposes to the Manufacturer. No Product or its parts shall be produced by the Manufacturer for resale or distribution purposes outside of the Russian Federation other than by IWT. In exchange, Manufacturer shall manufacture the Product or its parts exclusively for IWT to be sold and distributed by IWT throughout the world, shall not disclose any information on inventions, improvements, discoveries, designs, data, concepts, ideas, processes, methods, techniques, know-how, and information, including schematics, and engineering drawings respecting the Products conceived, made or produced by Manufacturer during the course of performing design, engineering, fabrication or manufacturing services under this Agreement, or made or produced as the result of the joint efforts of Manufacturer and IWT pursuant to this Agreement to third parties.

 

	
AGREEMENT

 

Now therefore, in consideration of the mutual promises and covenants made herein by each Party to the other, the Parties hereby agree as follows:

 

	
ARTICLE I

 

	

1.1

	
DESIGN AND DEVELOPMENT — REVIEW AND CHANGES. IWT and Manufacturer will hold ongoing design reviews in accordance with its standard development operating procedures, via email. Changes in Project Specifications will be by mutual consent. Manufacturer agrees to use its best efforts to accommodate IWT on such changes in scope and/or specifications as may be reasonably requested by IWT with appropriate changes (as pre-approved by IWT) in the purchase orders.

 

  

1

  

 

	
1.2 

	
VERIFICATION TESTING.  For all Products or its parts specification, Manufacturer shall draft appropriate verification protocol and perform the testing in accordance with that protocol. IWT shall author the system verification protocol and IWT shall accomplish verification and validation of the Product (“Verification Testing”). Third party (independent qualified testing facility) testing, in addition to related test materials, as shall be approved in advance by IWT, shall be paid by IWT, and shall be an agent of IWT. Test materials shall be the exclusive property of IWT. IWT will collect and/or prepare for Manufacturer data including vibration, shock, temperature, etc. of the actual environment where the product will be used. IWT will also perform operation verification during and at the end of development, operation verification on the actual test drive (field test), life and durability test, and the final acceptance tests.

 

	
1.3 

	
REJECTION OF WORK.  Should IWT determine that any verification or testing of Manufacturer’s work does not conform to applicable specifications, then IWT shall (i) notify Manufacturer of such problems; and (ii) permit Manufacturer a reasonable opportunity to make any necessary corrections. Manufacturer shall resubmit to IWT revised testing or other work corrected to meet the relevant specifications within thirty (30) days of notice to Manufacturer. IWT shall have thirty (30) days after such resubmittal within which to notify Manufacturer in writing of IWT’s approval of the corrected work or of IWT’s discovery of any additional discrepancies between that work and the relevant specifications. If discrepancies still exist, IWT and Manufacturer shall decide the appropriate action to be taken by mutual Agreement, in advance.

 

	
1.4 

	
CONFIDENTIAL INFORMATION.  “Confidential Information” means, without limitation, all information pertaining to the business of IWT and Manufacturer including, but not limited to, the Product invention, ideas, trade secrets, know-how, research and development, training, software, programs, hardware configuration information, price lists, data, manuals, handbooks, sponsors, investors, business strategies and plans, marketing, sales records, drawings, specifications, designs, materials, parts lists, customer lists, consumer information, suppliers, contract terms, test criteria, vendor lists, financial information, intellectual property, and all other information or data of any kind or character relating to the business of IWT or Manufacturer, including but not limited to, any invention, writing, idea, discovery, or improvement made or conceived by IWT or Manufacturer directly or indirectly as a result of performing work for IWT pursuant to this Agreement, whether or not reduced to writing, and which is not generally available to the public. However, Confidential Information shall not include any of the foregoing which has become publicly known and made generally available through no wrongful act of Manufacturer or any third party. Prior to execution of this Agreement; the parties have executed the Mutual Nondisclosure Agreement attached hereto as Appendix I. In the event there is a conflict between the terms of the Mutual Nondisclosure Agreement and this Agreement, this Agreement shall govern.

 

	
1.5 

	
TECHNOLOGY OWNERSHIP.  The parties agree as follows:

 

  

2

  

 

	
  

	(a) 	
IWT shall own all “Project Technology” which shall be defined as: all inventions, improvements, discoveries, designs, data, concepts, ideas, processes, methods, techniques, know-how, and information, including schematics, and engineering drawings respecting the Products conceived, made or produced by Manufacturer during the course of performing design, engineering, fabrication or manufacturing services under this Agreement, or made or produced as the result of the joint efforts of Manufacturer and IWT pursuant to this Agreement.  The term “Project Technology” shall exclude any of Manufacturer’s or IWT’s proprietary processes used in the manufacture of the Product.

 

	
  

	(b)  	
Manufacturer shall own all of its “Technology and Manufacturing Processes” which shall be defined as follows:  its proprietary electronic technology and processes and know-how and assembly and manufacturing processes and technology and know-how developed or acquired by Manufacturer prior to the exercise of this Agreement.

 

 

	
  

	(c) 	
Nothing in this Agreement shall be deemed to prevent Manufacturer from engaging in the design, engineering, fabrication or manufacture of products embodying or using Manufacturer’s Technology and Manufacturing Processes; provided that such products do not embody or use any of IWT’s confidential information or Project Technology. Manufacturer shall not produce, or allow to be produced Product with the scope of IWT’s Core Technology, without IWT’s prior approval, and if approved, the payment of a patent fee (royalty fee) shall be payable to IWT, as defined by IWT. Manufacturer shall put the production of the Product out to subcontractors as needed, as pre-approved by IWT.

 

	
1.6 

	
PRIORITY AMONG CONTRACT DOCUMENTS.  The whole of this Agreement and Appendixes attached hereto are to be taken together so as to give effect to very part thereof to the maximum extent practicable, with each document helping to interpret the other.  In the event of any conflict or inconsistency between the terms of this Agreement and the terms of any other document, the terms of this Agreement shall prevail.

 

	
ARTICLE 2

	
MANUFACTURING OBLIGATIONS

 

	
2.1 

	
MANUFACTURING.  During the term of this Agreement, Manufacturer shall timely manufacture the Product or its parts in compliance with the Product Specifications described in Appendix I (the “Product”).  Both during the term and following termination of this Agreement, in perpetuity, Manufacturer shall not supply the Product (or any prototype thereof), or Product Specifications, to any third party whatsoever.

 

	
2.2 

	
PURCHASE ORDERS. Purchase orders shall be described separately in appendix III (Purchase Order)

 

	
2.3 

	
SHIPMENT.  The delivery of each Purchase Order shall be within the time specified in the Purchase Order.  All deliveries to IWT are F.O.B. in Moscow, Russian Federation, at point of manufacture using carriers and billing account numbers as specified in writing by IWT. All risk of loss after shipment by Manufacturer is borne by IWT. Manufacturer agrees to properly label all shipping documents with the U.S. Classification Codes as supplied by IWT to expedite processing through U.S. Customs. If Manufacturer fails to properly note said U.S. Classification Codes, resulting in import taxes due by IWT, Manufacturer shall be responsible to reimburse IWT for all such taxes, due and payable upon evidence shown to Manufacturer by IWT.

 

  

3

  

 

	
2.4 

	
PURCHASE ORDER CANCELLATION.  IWT shall not cancel a purchase order once any down payment has been made to the Manufacturer.

 

	
2.5 

	
PRICING.  IWT shall pay for production of the Product as defined in the Payment for Products and Services as described in Appendix III (Product Order).

 

	
2.6

	
  PAYMENT.  IWT shall pay Manufacturer in accordance with attached Payment for Products and Services as described in Appendix III (Product Order).

 

	

2.7

	
WARRANTY.  Manufacturer warrants and represents that it shall strictly adhere to the Product Specifications set forth in Appendix I attached hereto and by reference made a part hereof. Manufacturer warrants and represents that it has the requisite and necessary experience, all necessary licenses and permits, equipment, facilities and personnel to properly perform the manufacturing services in accordance with the Product Specifications, and further warrants and represents that it is not a party to any other Agreement that would in any way conflict with, or restrict, its ability to perform the manufacturing services. During the term of the warranty. Manufacturer assumes full responsibility for the repair or replacement of units in the field whereby greater than 10% of units exhibit one specific failure mechanism (“Catastrophic Failure”).

 

	
2.8 

	
DEFECTIVE PRODUCTS.  Manufacturer warrants for a period of 18 (eighteen) months from shipment that all Products sold to IWT shall be free from any defects in Manufacturer materials, and workmanship, and shall conform to Product Specifications. Warranty repair services shall be provided at Manufacturer’s manufacturing facilities in Moscow, free of charge, F.O.B. Manufacturer shall within two weeks of receipt of returned products provide a report to IWT detailing those products accepted under warranty and any that are not accepted under warranty due to physical damage or improper use. Manufacturer will use its best efforts to repair defective products as quickly as possible with “turnaround time” (time for repair after receipt of units) to be four (4) weeks from receipt at the Manufacturer facility. Shipment of the repaired or replaced warranted products to IWT’s location shall be at the expense of Manufacturer. Shipment of the repaired or replaced non-warranted products to IWT’s location shall be at the expense of IWT. IWT shall establish Customer Service Center, to respond to customer complaints and provide repairs where practical. Manufacturer shall provide IWT with technical information necessary for such repairs. In the event a product modification shall become necessary, Manufacturer shall make such modifications, as approved by IWT, at a separate cost borne by IWT. For non-warranted repairs, Manufacturer shall report to IWT an estimated time to repair failed units, and shall not proceed with repairs until such time that IWT has provided approval for said repairs. For problems due to incorrect use of the Product, or factors external to the Product, or repairs for unwarranted units, Manufacturer shall repair at a separate cost borne be IWT. Manufacturer shall repair or exchange, and ship to IWT, the returned Product within four (4) weeks of receipt of Product by Manufacturer.

 

  

4

  

 

	
ARTICLE 3

	
REGULATORY RESPONSIBILITY; TRADEMARKS; SALES

 

	
3.1

	
REGULATORY APPROVALS.  IWT shall undertake and be responsible for the procurement of any and all regulatory approvals and/or registrations and customs approval necessary for sale of the Product.  Manufacturer shall aid and cooperate with, where appropriate, IWT in fulfilling the responsibilities set forth in this Section.

 

	
3.2 

	
MANUFACTURER’S QUALIFICATIONS.  Manufacturer is ISO 9001 certified and shall notify IWT of any change in that status during the term of this Agreement.  Should Manufacturer lose its status as ISO 9001 certified, it shall have a period of 30 days to have the certification reinstated and if not reinstated within this cure period, IWT shall have the right to terminate this Agreement in accordance with Section 5.3.

 

	
3.3 

	
TRADEMARKS.  IWT shall have the sole right to prepare, file, prosecute and maintain trademark applications or registrations with respect to the Product throughout the world excluding Russian Federation.  All such applications and registrations shall be at IWT’s expense.  IWT shall retain ownership of these applications and registrations throughout the term of this Agreement and thereafter.

 

	
3.4

	
PUBLIC RELEASE OF INFORMATION.  Any public statement, verbal or written, regarding the other party shall be approved by the other party in advance.  The foregoing shall not prevent either party from issuing a press release or making a public filing where required by law.

 

	
ARTICLE 4

	
PRODUCT LIABILITY

 

	
4.1 

	
NOTICE OF PRODUCT LIABILITY CLAIMS.  Each Party shall notify the other promptly in writing of any product liability claim brought with respect to the Product based on alleged defects in the design, manufacture, packaging, or labeling of the Product or other adverse claim regarding the Product.  Upon receiving such written notice, IWT shall assume and have sole control of the defense of any such claim, including the power to conduct and conclude any and all negotiations, compromises or settlements.  Manufacturer shall promptly comply with all reasonable requests from IWT for information, materials or assistance with respect to the conduct of such defense.

  

5

  

 

	
4.2 

	
NOTICE OF INVESTIGATION.  Manufacturer and IWT shall promptly notify each other of any potential or actual investigation or governmental activity relating to the Product.

 

	
4.3 

	
Manufacturer agrees to reimburse IWT for any and all monies paid to Manufacturer by IWT for inventory which is lost or damaged due to a natural disaster which destroys inventory owned by IWT at Manufacturer’s facility.

 

	
ARTICLE 5

	
TERM AND TERMINATION; FORCE MAJEURE

 

	
5.1 

	
INITIAL TERM.  Unless terminated sooner pursuant to the further provisions of this Article, this Agreement shall expire in 5 (five) years from the date hereof.

 

 

	
5.2 

	
EXTENSIONS.  IWT has three successive options to extend the term of Agreement for a period of one (1) additional year (an “Extension Period”).  IWT’s right to exercise each option to extend the Agreement for another year is expressly conditioned upon IWT not being in default under this Agreement at the time the option is exercised and not being in default between the time the option is exercised and the start of the Extension Period.

 

	
5.3 

	
TERMINATION BY IWT.  IWT shall have the right to terminate this Agreement if Manufacturer fails to perform in accordance with this Agreement and its appendices and fails to cure such default within sixty (60) days of written notice.

 

	
5.4 

	
TERMINATION BY Manufacturer.  Manufacturer shall have the optional right to terminate this Agreement on written notice to IWT if IWT (a) has failed to make any payments required by this Agreement in the time provided therefore and (b) following sixty (60) days’ notice of such failure from Manufacturer, IWT does not pay all delinquent sums in full.

 

	
5.5 

	
TERMINATION BY EITHER PARTY.  In addition to their respective rights set forth in Sections 5.3 and 5.4, either party shall have the right to terminate this Agreement on written notice to the other party under the following circumstances:

 

	
  

	(a) 	
by mutual Agreement;

 

	
  

	(b)	
if the other party materially defaults in the performance of any material obligation hereunder, and such default continues for more than thirty (30) business days after receiving written notice from the other party of such default; provided, however, there shall be no default under this provision if the defaulting party has cured the default within sixty (60) business days after the giving of notice;

 

	
  

	(c)	
in the event that the other party is declared insolvent, or bankrupt by a court of competent jurisdiction, or a voluntary petition of bankruptcy is filed in any court of competent jurisdiction by such other party, or such other party shall make or execute an assignment for the benefit of creditors, or a receiver is appointed by a court of competent jurisdiction over all or a substantial portion of the other party’s assets and such receivership is not dismissed within 30 days of appointment, or

 

  

6

  

 

	
  

	(d) 	
in the event of the issuance of a final order, decree or other action by any competent judicial authority or governmental agency which restrains, enjoins or prohibits the sale or introduction into interstate commerce of the System and such restraint, injunction or prohibition is not vacated within 30 days thereafter.

 

	
5.6 

	
SURVIVAL.  The termination or expiration of this Agreement shall be without prejudice (a) to the rights of any party to receive upon its request all payments accrued and unpaid, or all documents, data and deliverables not delivered, as of the date of such expiration or termination; (b) the rights and remedies of either party with respect to any previous breach or default under any representation, warranty or covenant herein contained; (c) rights under any other provision of this Agreement which expressly and necessarily calls for performance after expiration or termination, and (d) Manufacturer shall not produce, nor allow to be produced, the Product.

 

	
5.7 

	
FORCE MAJEURE.  If the performance of this Agreement or of any obligation hereunder is prevented, or restricted or interfered with by reason of any event of Force Majeure, the Party so affected, upon prompt notice to the other Party, shall be excused from performance, but only for the duration of such inability, provided that the Party so affected shall use its best effort to avoid or remove such causes of nonperformance, and shall continue performance hereunder with the utmost dispatch whenever such causes are removed.

 

	
ARTICLE 6

	
INDEMNITY

 

	
6.1 

	
MANUFACTURER INDEMNITY.  Manufacturer agrees to indemnify, defend and hold harmless IWT or any of their respective customers, against any claim arising out of or relating to any loss or damage, including bodily injury or death, incurred by reason of or resulting from a defect in the product caused by Manufacturer’s design, engineering, fabrication, manufacture, packaging or labeling thereof; provided that the Product is used for its intended purpose. Manufacturer shall not be required to pay any compensation for damages, loss or cost, which are due to loss of sales opportunity. Manufacturer shall not be responsible for the loss of recorded data unless due to Product defect which was made intentionally or due to gross negligence by Manufacturer.

 

	
ARTICLE 7

	
MISCELLANEOUS

 

	
7.1 

	
NOTICES.  Any notices required or permitted to be given to a Party hereunder shall be in writing and shall be delivered or sent to such Party at its address given below:

 

	
  

	
(a)

	
if to Manufacturer:

 

  

7

  

 

	
  

	
CJSC “Innovation Weapons Technologies”

	
  

	
General Director: Evgeniy Spiridonov

	
  

	
Tel: +7(495) 921-21-50

	
  

	
fax: +7(495) 921-32-19

	
  

	
Address: 115088, Moscow, 2nd-Yuzhnoportoviy pr. - 20а/4

 

	
  

	
(b)

	
if to IWT: Innovative Wireless Technologies, Inc.

	
  

	
Address: 3655 Nobel Drive, San Diego, CA 92122 US Nobel Executive Center, Suite 520 Tel. +1 858 735 88 65 begin_of_the_skype_highlighting   

 

or such other address as such Party may hereafter specify; and shall be deemed given (i) when personally delivered to such Party; (ii) when transmitted by facsimile and receipt of such transmission is confirmed by facsimile; (iii) after air courier service confirm the receipt via an established air courier service; or (iv) if mailing via certified airmail, after receipt is confirmed.

 

	
7.2 

	
ATTORNEYS’ FEES.  In the event of any litigation, arbitration, judicial reference or other legal proceeding involving the Parties to this Agreement to enforce any provision of this Agreement, to enforce any remedy available upon default under this Agreement, or seeking a declaration of the rights of either Party under this Agreement, the prevailing Party shall be entitled to recover from the other such attorneys’ fees and costs as may be reasonably incurred, including the costs of reasonable investigation, preparation and professional or expert consultation incurred by reason of such litigation, arbitration, judicial reference, or other legal proceeding.

 

	
7.3 

	
ARBITRATION. All disputes, controversies, or claims arising out of or relating to this contract shall be submitted binding arbitration in accordance with the applicable rules of the American Arbitration Association then in effect.

 

	
7.4

	
GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance with the substantive laws of the State of California without regard to that state’s choice of law provisions.

 

 

	
[Signature Page follows]

 

  

8

  

 

IN WITNESS WHEREOF, the Manufacturer and IWT have executed or caused this Agreement to be executed as of the Effective Date set forth above.

 

	
CJSC “INNOVATION WEAPONS

TECHNOLOGIES”

	 	
INNOVATIVE WIRELESS TECHNOLOGIES, INC.

	 	 	 	 
	

By: Evgeniy Spiridonov

	 	

By: Pavel Alpatov

	 
	 	 	 	 
	

/s/ Evgeniy Spiridonov

	 	

/s/ Pavel Alpatov

	 
	
General Director

	 	
Chief Executive Officer, President

	 

 

  

9

  

 

	
Appendix I

	
Product and Parts Specification

 

This Product and Parts Specification dated 4th of April, 2011, is specified by Innovative Wireless Technologies, Inc., a corporation organized and existing under the laws of the State of Delaware, USA (“IWT”), and CJSC “Innovation Weapons Technologies”, a closed joint-stock corporation organized and existing under the laws of Russian Federation (“Manufacturer”) and, each of whom is individually referred to as a “Party” and both of whom are sometimes collectively referred to as “Parties.”

 

In consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties intend to define “Product” as a list of products and corresponding Product Specification described in 2011 catalogues listed and available for download on IWT’s web site:

 

	
www.kellaniwt.com

 

Parties accept Product names listed in these catalogues and shall refer to them for their reference whenever Product Order is produced. If Product Order consists of Product parts, than such are defined separately in Product Order.

 

	
CJSC “INNOVATION WEAPONS

TECHNOLOGIES”

	 	
INNOVATIVE WIRELESS TECHNOLOGIES, INC.

	 	 	 	 
	

By: Evgeniy Spiridonov

	 	

By: Pavel Alpatov

	 
	 	 	 	 
	

/s/ Evgeniy Spiridonov

	 	

/s/ Pavel Alpatov

	 
	
General Director

	 	
Chief Executive Officer, President

	 

  

10

  

 

	
Appendix II

 

	
Mutual Nondisclosure Agreement

 

This Mutual Non-Disclosure Agreement (the “NDA”) is made and entered effective as of 4th of April 2011, by and between CJSC “INNOVATION WEAPONS TECHNOLOGIES”, a Russian closed join-stock corporation, and INNOVATIVE WIRELESS TECHNOLOGY, a Delaware corporation, to assure the protection and preservation of the confidential and/or proprietary nature of information to be disclosed or made available to each other in connection with the Manufacturing Agreement.

 

In reliance upon and in consideration of the following undertakings, the parties agree as follows:

 

1.           Subject to the limitations set forth in paragraph 2, all information disclosed to the other party, whether marked confidential or not, shall be deemed to be “Proprietary Information.”  In particular, Proprietary Information shall be deemed to include any technology, content, trade secret, information, process, technique, training manual, workbook, algorithm, computer program (source and object code), design, drawing, formula, business plan or test data relating to any research project, work in process, future development, engineering, manufacturing, marketing, servicing, financing, strategic partnership or personnel matter relating to the disclosing party, its present or future products, services, sales, suppliers, clients, customers, employees, investors, business plans, business strategies, cost of operations, and strategic relationships, whether in oral, written, graphic or electronic form.  If Proprietary Information is disclosed in oral form, the disclosing party shall thereafter summarize it in writing and transmit it to the other party within thirty (30) days of the oral disclosure.

 

2.           The term “Proprietary Information” shall not be deemed to include information which:  (a) is now, or hereafter becomes, through no act or failure to act on the part of the receiving party, generally known or available; (b) is known by the receiving party at the time of receiving such information as evidenced by its records; (c) is hereafter furnished to the receiving party by a third party, as a matter of right and without restriction on disclosure; (d) is independently developed by the receiving party without any breach of this NDA; or (e) is the subject of a written permission to disclose provided by the disclosing party.

 

3.           Each party shall maintain all Proprietary Information in trust and confidence and, except as expressly set forth herein, shall not disclose to any third party or use any Proprietary Information for any unauthorized purpose.  Each party may use such Proprietary Information only to the extent required to accomplish the purposes of the Manufacturing Agreement executed between the parties as of even date herewith.  Proprietary Information shall not be used for any purpose or in any manner that would constitute a violation of any laws or regulations, including without limitation, the export control laws of the United States.  No rights or licenses to trademarks, inventions, copyrights or patents are implied or granted under this NDA.

 

  

11

  

 

4.           Proprietary Information shall not be reproduced in any form except as required to accomplish the intent of this NDA.

 

5.           Each party under this NDA shall advise its employees who might have access to Proprietary Information of the confidential nature thereof and agrees that its employees shall be bound by the terms of this NDA.  No Proprietary Information shall be disclosed to any employee who does not have a need for such information.  The receiving party shall not disclose any Proprietary Information to any third party without the disclosing party's express, written consent.

 

6.           All Proprietary Information (including all copies thereof) shall remain the property of the disclosing party and shall be returned to the disclosing party after the receiving party's need for it has expired, or upon request of the disclosing party, and in any event, upon completion or termination of this NDA.

 

7.           Notwithstanding any other provision of this NDA, disclosure of Proprietary Information shall not be precluded if such disclosure:

 

(a)           is in response to a valid order of a court or other governmental body of the United States or any political subdivision thereof; provided, however, that the responding party shall first have given notice to the other party hereto and shall have made a reasonable effort to obtain a protective order requiring that the Proprietary Information so disclosed be used only for the purposes for which the order was issued;

 

(b)           is otherwise required by law; or

 

(c)           is otherwise necessary to establish rights or enforce obligations under this NDA, but only to the extent that any such disclosure is necessary.

 

8.           This NDA shall continue in full force and effect for so long as the parties continue to exchange Proprietary Information.  This NDA may be terminated by either party at any time upon thirty (30) days written notice to the other party.  The termination of this NDA shall not relieve either party of the obligations imposed by Paragraphs 3, 4, 5, 6 and 11 of this NDA with respect to Proprietary Information disclosed prior to the effective date of such termination and the provisions of those Paragraphs shall survive the termination of this NDA for a period of five (5) years from the date of such termination.

 

9.           Any dispute or claim hereunder between the named Parties, shall be resolved by binding arbitration before the American Arbitration Association in Orange County, California under the laws of the State of California. This shall be the exclusive remedy between the Parties, and both parties hereby give up any rights to trial by jury, court, appeal, or any other judicial mechanism for resolving disputes.

 

10.           This NDA contain the final, complete and exclusive NDA of the parties relative to the subject matter hereof and supersedes all prior and contemporaneous understandings and NDAs relating to its subject matter.  This NDA may not be changed, modified, amended or supplemented except by a written instrument signed by both parties.

 

  

12

  

 

11.           Each party hereby acknowledges and agrees that in the event of any breach of this NDA by the other party, including, without limitation, the actual or threatened disclosure or unauthorized use of a disclosing party's Proprietary Information without the prior express written consent of the disclosing party, the disclosing party will suffer an irreparable injury, such that no remedy at law will afford it adequate protection against, or appropriate compensation for, such injury.  Accordingly, each party hereby agrees that the other party shall be entitled to specific performance of the receiving party's obligations under this NDA, as well as such further relief as may be granted through binding arbitration.

 

12.           The parties’ rights and obligations under this NDA will bind and inure to the benefit of their respective successors, heirs, executors and administrators and permitted assigns.

 

13.           If any provision of this NDA is found by a proper authority to be unenforceable, that provision shall be severed and the remainder of this NDA will continue in full force and effect.

 

14.           Any notices required or permitted hereunder shall be given to the appropriate party at the address specified below or at such other address as the party shall specify in writing. Such notice shall be deemed given upon the personal delivery, or sent by certified or registered mail, postage prepaid, three (3) days after the date of mailing.

 

In Witness Whereof, the parties hereto have executed this NDA as of the date set forth in the first section hereof.

 

	
CJSC “INNOVATION WEAPONS

TECHNOLOGIES”

	 	
INNOVATIVE WIRELESS TECHNOLOGIES, INC.

	 	 	 	 
	

By: Evgeniy Spiridonov

	 	

By: Pavel Alpatov

	 
	 	 	 	 
	

/s/ Evgeniy Spiridonov

	 	

/s/ Pavel Alpatov

	 
	
General Director

	 	
Chief Executive Officer, President

	 

  

13

  

 

Appendix III

Product Order No1 04.20.2011

This initial Product Order (the “PO”) is made and entered effective as of 20th of April 2011, by and between CJSC “INNOVATION WEAPONS TECHNOLOGIES” (“Manufacturer”), a Russian closed join-stock corporation, and Innovative Wireless Technologies, Inc., a corporation organized and existing under the laws of the State of Delaware, USA (“IWT”), to assure timely and appropriate advance production to enter the world market.

 

In reliance upon and in consideration of the following undertakings, IWT places the initial Product Order to the Manufacturer for the product parts described below:

 

	
Product part name:

	
Quantity

	
total price in USD

	
price in USD per unit

	
IWT STLED ULTRA (1LED) receiver + remote, body

	
1500

	
133,877.21

	
89.25

	
IWT STLED ULTRA II (4LED) receiver + remote, body

	
1000

	
119,084.12

	
119.08

	
IWT LED RF (1LED) receiver + remote

	
500

	
43,804.31

	
87.61

	
KOMAK (AK mounting bracket, grip remote, IWT STLED RF receiver), body

	
1000

	
226,020.05

	
226.02

	
interchangeable heads:

	  	  	  
	
1 LED green body

	
100

	
3,631.55

	
36.32

	
1 LED red body

	
100

	
3,497.97

	
34.98

	
1 LED IR 850 body

	
25

	
978.05

	
39.12

	
1 LED IR 940 body

	
25

	
978.05

	
39.12

	
1 LED UV body

	
50

	
1,902.17

	
38.04

	
3 LED white body

	
100

	
5,892.66

	
58.93

	
3 LED IR 850 body

	
10

	
743.03

	
74.30

	
3 LED IR 940 body

	
10

	
743.03

	
74.30

	
4 LED white body

	
100

	
6,321.34

	
63.21

 

Total cost: 547,474 USD (five hundred forty seven thousand four hundred and seventy four US dollars and 0/100 cents).

 

All prices are FOB Moscow, Russian Federation

 

All payables shall be due upon delivery without any down payments.

 

	
CJSC “INNOVATION WEAPONS

TECHNOLOGIES”

	 	
INNOVATIVE WIRELESS TECHNOLOGIES, INC.

	 	 	 	 
	

By: Evgeniy Spiridonov

	 	

By: Pavel Alpatov

	 
	 	 	 	 
	

/s/ Evgeniy Spiridonov

	 	

/s/ Pavel Alpatov

	 
	
General Director

	 	
Chief Executive Officer, President

	 

  

14Electronic Supervision No.: 4401162010B00830

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Ministry of Land and Resources of the People’s Republic of China

and

State Administration of Industry and Commerce of the People’s Republic of China

 

  

  

  

 

Contract Serial No.: Sui Guo Di Chu He No. 440116-2010-000067

 

Contract for Grant of State-owned Construction Land Use Right

Parties to this Contract:

	
Grantor:

	
State-owned Land Resources and Housing Bureau of Guangzhou Municipality 

	; 
	
Mailing Address:

	
No. 193 Haoxian Road, Guangzhou 

	; 
	
Zip Code:

	
510030 

	; 
	
Telephone:

	
020-83334718 

	; 
	
Fax:

	
020-83331307 

	; 
	
Opening Bank:

	
                                  /

	; 
	
Account No.:

	
                                  /

	. 
	  	  	 
	
Grantee:

	
Guangzhou 7 Days Four Seasons Hotel Co., Ltd 

	; 
	
Mailing Address:

	
Room 703, 17 Xiangshan Road, Science City, Guangzhou Hi-tech Development Zone 

	; 
	
Zip Code:

	
510290 

	; 
	
Telephone:

	
020-89226505 

	; 
	
Fax:

	
020-89226157-6505 

	; 
	
Opening Bank:

	
                                  /

	; 
	
Account No.:

	
                                  /

	. 

 

  

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Chapter 1     General Provisions

Article 1      Pursuant to the Property Law of the People’s Republic of China, Contract Law of the People’s Republic of China, Law of the People’s Republic of China on Land Administration, Law of the People’s Republic of China on Administration of Urban Real Estate and other relevant laws, administrative regulations and provisions of land supply policies, the parties enter into this Contract on the principles of equality, free will, reciprocal consideration and good faith.

Article 2      The land granted hereunder is owned by the People’s Republic of China and the Grantor is authorized by law to grant the state-owned construction land use right hereunder.  Subterranean resources and buried things are not within the scope of the grant of state-owned construction land use right.

Article 3      During the term of grant, the Grantee has the right to possess, use, make profits from and lawfully dispose of the state-owned construction land it has acquired in accordance with the law and has the right to use the land to construct buildings, structures and their auxiliary facilities in accordance with the law.

Chapter 2     Delivery of Land and Payment of Land Premium

Article 4      The plot number of the land granted hereunder is KXCD-F2-2.  The total area of the land plot is Seven Thousand and Fifteen (in words) square meters and 7,015 (in figures) square meters, of which Seven Thousand and Fifteen (in words) square meters (7,015 square meters, in figures) will be granted hereunder.

 

The land granted hereunder is located west of Kaichuang Avenue, Science City, Guangzhou Hi-tech Development Zone.

The boundaries of the land granted hereunder is      /      and the boundary map of the land granted hereunder is attached hereto as Appendix 1.

The vertical limits of the land granted hereunder are      /    as its upper limit and      /     as its lower limit. The vertical limits of the land granted hereunder are set forth in Appendix 2 attached hereto.

The spatial extent of the land granted hereunder refers to a closed space with the aforesaid boundary points forming its vertical planes and the upper and lower limits forming its horizontal planes.

Article 5      The land granted hereunder will be used for commerce and finance purposes.

Article 6      The Grantor agrees to deliver the land to the Grantee before November 23, 2010.  The Grantor also agrees that on the delivery date, the land shall meet the conditions set forth in clause (2) under this Article:

(1)           the land shall be leveled out and meet the conditions of                    /                ;

  

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the surrounding infrastructure shall meet the conditions of                         /                 ;

	 	
(2)

	
“as is” conditions.

Article 7      The term of the state-owned construction land use right granted hereunder shall be forty years, starting from the date of delivery set forth in Article 6 hereof; if the land is allocated (leased) state-owned construction land for which grant formalities need to be completed for its use, the term of grant shall start from the execution date of this Contract.

Article 8      The land premium of the state-owned construction land use right granted hereunder shall be Renminbi Twenty Three Million Nine Hundred and Ninety Thousand yuan (in words) (RMB23,990,000 yuan, in figures) with Renminbi Three Thousand Four Hundred and Nineteen Point Eighty-One yuan (in words) per square meter (RMB3419.81 yuan, in figures).

Article 9      The deposit of the land hereunder shall be Renminbi Two Million and Four Hundred Thousand yuan (in words) (RMB2,400,000, in figures).  The deposit may be used to offset the land premium.

Article 10    The Grantee agrees to pay the Grantor the said land premium of the state-owned construction land use right in accordance with clause (1) under this Article:

(1)           within 30 days after the execution of this Contract, the Grantee shall make full payment of the land premium of the state-owned construction land use right in one lump sum;

(2)           the Grantee shall pay the land premium of the state-owned construction land use right in     /    installment(s), in amounts and at times set forth below.

If the land premium of the state-owned construction land use right is paid by installments, the Grantee shall pay interest to the Grantor for the second and subsequent installments at the interest rate of loans publicized by the People’s Bank of China on the date when the first instalment of the land premium is paid.

Article 11    The Grantee shall, after it has fully paid the land premium in accordance with this Contract, apply for the registration of the grant of the state-owned construction land use right by presenting this Contract, receipt for the payment of the land premium and relevant certificates.

Chapter 3     Land Development, Construction and Use

Article 12    The Grantee agrees that the investment intensity to develop the land hereunder shall meet the criteria stipulated in clause (2) of this Article:

(1)           if the land hereunder is used for construction of industrial projects, the Grantee agrees that the total investment in fixed assets for the land hereunder shall be no less than the approved or registered amount of Renminbi           /          yuan (in words) (RMB     /    yuan, in figures) and the investment intensity shall be no less than Renminbi          /         yuan (in words) per square meter (RMB     /    yuan, in figures).  The total investment in fixed assets of the construction project with respect to the land hereunder shall include buildings, structures and their auxiliary facilities as well as investment in equipment and land premium.

 

  

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(2)           if the land hereunder is used for construction of non-industrial projects, the Grantee promises that the total development and investment amount for the land hereunder shall be no less than Renminbi           /         yuan (in words) (RMB       /       yuan, in figures).

Article 13    If the Grantee intends to construct new buildings, structures and their auxiliary facilities within the boundary of the land granted hereunder, requirements in the zoning plan with respect to the land granted hereunder determined by the planning administrative department of the municipal (county) government (as described in Appendix 3) shall be met, including:

Usage of main buildings:  hotel and related businesses and office area for headquarters, with complementary commercial facilities for demonstration, training and other purposes;

Usage of auxiliary buildings: hotel and related businesses and office area for headquarters, with complementary commercial facilities for demonstration, training and other purposes;

Gross floor area: 21,045 square meters;

Plot ratio: no higher than 3 and no lower than    /   ;

Maximum building height:  45 meters;

Building density ratio: no higher than 40% and no lower than     /    ;

Green space ratio: no higher than     /     and no lower than 35%;

Other requirements for land use described in Appendix 3.

Article 14    The Grantee agrees to construct the supporting facilities for the land granted hereunder in accordance with clause     /    of this Article:

(1)           if the land hereunder is used for construction of industrial projects, under the planning and design conditions determined by the planning department, the land used for internal office buildings and domestic service facilities within the boundary of the land granted hereunder shall be of an area not exceeding   /  % of the aggregate area of the land granted hereunder, that is, not exceeding     /    square meters and of a gross floor area not exceeding     /     square meters.  The Grantee agrees not to build non-production facilities within the boundary of the land granted hereunder, including but not limited to residential building, expert building, hotel, guest house and training center;

 

  

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(2)           if the land granted hereunder is used for construction of residential projects, under the planning and construction conditions determined by the planning and construction administrative departments, the aggregate number of residential apartments within the boundary of the land granted hereunder shall be no less than   /  , of which, residential apartments with a floor area under 90 square meters shall be no less than   /   and meet the requirement of   /  .  The land used for developing residential apartments under 90 square meters within the boundary of the land granted hereunder shall be no less than   /   % of the aggregate floor area of the land granted hereunder.  As to the economically affordable housing and low-rent housing that are constructed within the boundary of the land granted hereunder, the Grantee agrees to handle them in accordance with clause   /   of this Article upon the completion of construction:

1. to transfer to the local government;

2. to be purchased by the local government;

3. to follow relevant administrative regulations on construction and sale of economically affordable housing;

4.                       /                    .

Article 15    The Grantee agrees to concurrently construct the following engineering supporting facilities within the boundary of the land granted hereunder this Contract, and transfer the same to the government without compensation upon the completion of construction: ____/__ .

Article 16    The Grantee agrees to commence the construction before May 23, 2011 and complete the construction before November 23, 2012 for the construction projects of the land granted hereunder.

If the Grantee is unable to commence construction as planned, it shall submit to the Grantor an application for extension 30 days in advance.  With the consent of the Grantor, the construction may be extended and the completion date shall be extended accordingly, provided that, no extension shall be longer than one year.

Article 17    When the Grantee carries out construction activities on the land granted hereunder, the connection of water pipes, gas pipes, sewage pipes and other facilities to the main pipes, lines of the plot and power stations outside the land, as well as projects to reach out to such outside facilities, shall be handled according to relevant provisions.

The Grantee agrees that the government shall have the right to enter into, pass and cross the land granted hereunder for purpose of laying various pipes and lines for public utilities facilities, provided that the government or entity responsible for the construction of public utilities shall indemnify the Grantee reasonably if any use of the land is affected thereby.

Article 18    The Grantee shall use the land pursuant to the purpose and plot ratio set forth herein and no unauthorized change is allowed.  If there is any change to the purpose of land use set forth herein during the term of grant, the parties agree to handle such change in accordance with clause (2) of this Article:

 

  

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(1)           the Grantor will take back the construction land use right for a fee;

(2)           to go through the approval formalities for changing the purpose of land use, to enter into an amendment to the contract for the grant of state-owned construction land use right or enter into a new contract for the grant of state-owned construction land use right in accordance with the law.  The Grantee shall make up for any shortage in the land premium of state-owned construction land use right by taking into consideration the difference between the evaluated market price of the construction land use right with the new purpose and the evaluated market price of the construction land use right with the previously approved purpose and register the change of the land use right.

Article 19    During the term of use of the land granted hereunder, the government shall reserve its right to adjust the zoning plan with respect to the land hereunder.  If there is any change to the existing zoning plan, the existing buildings on the land shall not be affected, provided that, if the buildings, structures or their auxiliary facilities on the land are to be transformed, renovated or rebuilt during the term of use, or the term is to be renewed upon expiration, the then effective zoning plan shall apply.

Article 20    Prior to the expiration of the term of use set forth in this Contract, the Grantor may not take back the state-owned construction land use right that has been lawfully used by the Grantee.  If, under special circumstances and in the interest of the public, it becomes necessary to take back the state-owned construction land use right prior to the expiration of the term of use, the Grantor shall submit its application in accordance with statutory procedures, and compensate the Grantee on the basis of the value of the buildings, structures and their auxiliary facilities on the land when they are taken back, the evaluated market price of the state-owned construction land use right for the remaining years and the evaluated direct losses.

Chapter 4     Transfer, Lease and Mortgage of

State-owned Construction Land Use Right

Article 21    After the Grantee has paid up in full the land premium in accordance with this Contract and procured the state-owned land use right certificate, it shall have the right to transfer, lease, or mortgage the state-owned construction land use right hereunder, wholly or partially, provided that, conditions set forth in clause (1) of this Article shall be satisfied for the transfer for the first time:

(1)           the Grantee has conducted its investment and development activities in accordance with the provisions herein, and has completed more than 25% of the total development and investment amount;

 

  

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(2)           the Grantee has conducted its investment and development activities in accordance with the provisions herein, and the land has been suitable for industrial or other construction purposes.

Article 22    Contracts for transfer, lease or mortgage of the state-owned construction land use right shall not violate the laws or regulations of the State and the provisions of this Contract.

Article 23    The rights and obligations set forth in this Contract and in the land registration documents shall be transferred accordingly after the state-owned construction land use right is transferred, wholly or partially.  The transferred state-owned construction land use right shall have a term equal to the term set forth herein less the years that have elapsed.

When the state-owned construction land use right hereunder is leased, wholly or partially, the rights and obligations set forth in this Contract and in the land registration documents shall continue to be exercised and assumed by the Grantee.

Article 24    When the state-owned construction land use right is transferred or mortgaged, the parties concerned shall go through the formalities for registration of change with the administrative department of state-owned land resources by presenting this Contract, relevant transfer or mortgage contract and the state-owned land use right certificate.

Chapter 5     Expiration of Term

Article 25    If a land user intends to continue its use of the land hereunder upon the expiration of the term set forth herein, it shall submit to the Grantor an application for renewal at least one year prior to the expiration of the term.  The Grantor shall grant its approval unless it may take back the land in the interest of the public.

The term of residential construction land use right shall be renewed automatically.

If the Grantor approves such renewal, the land user shall, in accordance with the law, go through the grant or lease formalities, enter into a new grant or lease contract and pay the land premium or rental for use of the land for a fee.

Article 26    If a land user has submitted an application for renewal upon the expiration of the term of grant, but it is in the interest of the public not to grant an approval, the land user shall hand over the state-owned land use right certificate and go through the formalities of the cancellation of registration of the state-owned construction land use right in accordance with relevant provisions and the Grantor shall take back the state-owned construction land use right without compensation.  The Grantor and the land user agree to handle the buildings, structures and their auxiliary facilities on the land hereunder in accordance with clause (1) of this Article:

(1)           the Grantor shall take back the buildings, structures and their auxiliary facilities on the land, and compensate the land user accordingly on the basis of the residual value of the buildings, structures and their auxiliary facilities when they are taken back;

 

  

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(2)           the Grantor shall take back the buildings, structures and their auxiliary facilities on the land without compensation.

Article 27    If a land user does not submit an application for renewal upon the expiration of the term of grant, it shall hand over the state-owned land use right certificate and go through the formalities of the cancellation of registration of the state-owned construction land use right in accordance with relevant provisions and the Grantor shall take back the state-owned construction land use right without compensation.  The Grantor shall take back the buildings, structures and auxiliary facilities on the land hereunder without compensation.  The land user shall keep the buildings, structures and their auxiliary facilities on the land fit for normal use, and shall not intentionally damage or destroy the buildings, structures or their auxiliary facilities.  If the buildings, structures or their auxiliary facilities on the land are unfit for normal use, the Grantor may request the land user to remove or demolish such buildings, structures or their auxiliary facilities and to restore the leveled site.

Chapter 6     Force Majeure

Article 28    Neither party hereunder shall be held liable for its failure to perform, in full or in part, this Contract, if such failure is attributable to a force majeure event, provided that, it shall take all necessary remedial measures to mitigate the losses caused by such force majeure event to the extent permissible.  If a force majeure event occurs during the course a party is delaying its performance of this Contract, such party shall not be exempted from its responsibility.

Article 29    The party hindered by a force majeure event shall notify the other party in writing, by mail, telegram or fax regarding the force majeure event within 7 days after the occurrence of such event, and shall send to the other party reports and certificates within 15 days regarding its failure to perform, in full or in part, this Contract, or the need for a delay of its performance hereunder.

Chapter 7     Liabilities for Breach

Article 30    The Grantee shall pay the land premium of the state-owned construction land use right on time in accordance with this Contract.  If the Grantee fails to pay the land premium of the state-owned construction land use right on time, the Grantee shall pay the Grantor an amount equal to 1 ‰ of the sums due and in arrears for each day of delay as liquidated damages.  If such delay lasts for more than 60 days and the Grantee is still unable to pay the land premium of the state-owned construction land use right upon the Grantor’s reminder, the Grantor shall have the right to terminate this Contract, the Grantee will not be entitled to the refund of the deposit and the Grantor may also seek indemnification from the Grantee against its losses.

Article 31    If the Grantee, for its own reasons, terminates its investment in the construction of the project, and intends to terminate this Contract and return the land to the Grantor, the Grantor shall, upon the approval of a People’s Government who has previously approved the land grant plan, refund the Grantee all or part of the land premium of the state-owned construction land use right (bearing no interest) in accordance with the following provisions, except that the deposit set forth in this Contract will not be refunded, and take back the state-owned construction land use right.  No compensation will be given for the existing buildings, structures and their auxiliary facilities within the boundary of the land while the Grantor may even request the Grantee to remove or demolish the existing buildings, structures and their auxiliary facilities and to restore the leveled site; provided that if the Grantor is willing to continue the use of the existing buildings, structures and their auxiliary facilities within the boundary of the land, the Grantor shall give reasonable compensation to the Grantee:

 

  

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(1)           if the Grantee makes an application to the Grantor no later than 60 days before the first anniversary of the commencement date of construction set forth in this Contract, the Grantor shall refund the Grantee the land premium of the state-owned construction land use right paid by it, except that the deposit will not be refunded.

(2)           if the Grantee makes an application to the Grantor after the first anniversary of the commencement date of construction set forth in this Contract but no later than 60 days after its first anniversary and before its second anniversary, the Grantor shall refund the Grantee the land premium of the state-owned construction land use right paid by it after the deposit and the idle land fee are deducted in accordance with relevant provisions.

 

Article 32    If the land has been left unused for more than one year but less than two years for any reason whatsoever attributable to the Grantee, the Grantee shall pay the idle land fee in accordance with the law.  If the land has been left unused for two years and no construction has been commenced, the Grantor has the right to take back the state-owned construction land use right without compensation.

Article 33    If the Grantee fails to commence construction on the date set forth herein or otherwise agreed to when extension is approved, the Grantee shall pay the Grantor an amount equal to 1 ‰ of the aggregate land premium of the state-owned construction land use right for every day in delay as liquidated damages and the Grantor has the right to require the Grantee to continue the performance of this Contract.

If the Grantee fails to complete construction by the date set forth herein or otherwise agreed to when extension is approved, the Grantee shall pay the Grantor an amount equal to 1‰ of the aggregate land premium of the state-owned construction land use right for every day in delay as liquidated damages.

Article 34    If any of the total investment in fixed assets, investment intensity or total development and investment amount has not met the criteria set forth herein, the Grantor may require the Grantee to pay a portion of the land premium of the state-owned construction land use right as liquidated damages as is proportional to the actual shortage in relation to the required total investment or investment intensity, and also require the Grantee to continue the performance of this Contract.

Article 35    If the plot ratio, building density or any other index of the land hereunder has not met the lowest criteria set forth herein, the Grantor may require the Grantee to pay a portion of the land premium of the state-owned construction land use right as liquidated damages as is proportional to the actual shortage in relation to the required lowest criteria and also require the Grantee to continue the performance of this Contract; if the plot ratio, building density or any other index is higher than the highest criteria set forth herein, the Grantor has the right to take back any area of the land with an index higher than the highest criteria and require the Grantee to pay a portion of the land premium of the state-owned construction land use right as liquidated damages as is proportional to the actual excess in relation to the required criteria.

 

  

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Article 36    If any of the green space ratio, percentage of the land used for internal office buildings and domestic service facilities or floor area of internal office buildings and domestic service facilities with respect to the construction of industrial projects is higher than the criteria set forth herein, the Grantee shall pay the Grantor an amount equal to 200 ‰ of the land premium as liquidated damages and remove and demolish by itself corresponding green space, buildings and facilities.

Article 37    If the Grantee has paid the land premium of the state-owned construction land in accordance with the Contract, the Grantor shall deliver the land hereunder on time in accordance with this Contract.  If the Grantor has not delivered the land on time, which has delayed the Grantee’s possession of the land hereunder, the Grantor shall pay the Grantee an amount equal to 1‰ of the land premium of the state-owned construction land use right paid by the Grantee as liquidated damages for each day of delay and the term of land use shall commence on the date when the land is actually delivered.  If the Grantor has delayed its delivery of the land for more than 60 days and it is still unable to deliver the land upon the Grantee’s reminder, the Grantee has the right to terminate this Contract, the Grantor shall refund the Grantee twice the deposit, as well as the land premium of the state-owned construction land use right already paid and the Grantee may also seek indemnification from the Grantor against its losses.

Article 38    If the Grantor fails to deliver the land on time, the land delivered by the Grantor fails to meet the conditions set forth herein or the Grantor unilaterally changes the conditions for land use, the Grantee has the right to demand that the Grantor perform its obligations hereunder in accordance with the required conditions, and indemnify the Grantee against losses directly arising from the Grantor’s delay in the performance of this Contract.  The term of land use shall commence on the date when the land meets the required conditions.

Chapter 8     Governing Law and Dispute Resolution

Article 39    The formation, validity, interpretation, performance and settlement of disputes of this Contract shall be governed by the laws of the People’s Republic of China.

Article 40    Any dispute arising out of the performance of this Contract shall be resolved by the parties through negotiation.  If the parties are unable to settle such dispute through negotiation, the dispute shall be resolved in the manner set forth in clause (2) of this Article:

(1)           to submit the dispute to     /     Arbitration Commission for arbitration;

(2)           to file a lawsuit with a People’s Court in accordance with the law.

 

  

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Chapter 9     Miscellaneous

Article 41    The plan for the grant of the land hereunder is approved by the Management Committee of Guangzhou Economic and Technological Development Zone.  This Contract shall become effective as of the date of execution by the parties.

Article 42    Each of the parties hereunder undertakes that information about its name, contact address, telephone, fax, bank and authorized representative that is filled in this Contract is true and valid. When there is any change in such information, each party shall notify the other party in writing within 15 days of such change, otherwise, it shall be held liable for the other party’s failure to deliver a notice in a timely manner.

Article 43    This Contract and its appendixes have 25 pages in aggregate and the Chinese version shall prevail.

Article 44    Price, amount and area hereunder shall be expressed both in words and in figures.  A number in words shall be consistent with that expressed in figures.  If there is any inconsistency, the number expressed in words shall prevail.

Article 45    Matters uncovered hereunder may be agreed to between the parties and attached hereto with the same legal effect as this Contract.

Article 46    This Contract shall have ten (in words) counterparts of equal legal force.  The Grantor and the Grantee shall each hold two (in words) counterparts.

Supplementary Provisions

1.      The total investment for the land hereunder shall be no less than RMB670 million and the registered capital of the project shall be no less than RMB470 million.

2.      Within 2 years of execution of this Contract, the Grantee shall have the company’s registered address moved into Guangzhou Economic and Technological Development Zone.

3.      The Grantee shall increase its registered capital to US$150 million by June 30, 2012.

 

  

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  [signing page]

 

	
Grantor (Stamp): State-owned Land

Resources and Housing Bureau of

Guangzhou Municipality (stamp for land

grant contract)

	
 Grantee (Stamp): Guangzhou 7 Days Four

Seasons Hotel Co., Ltd

	 	 
	
Legal Representative (Authorized Representative)

	
Legal Representative (Authorized Representative)

	 	 
	
By:

	
Mo Guohong (signature)

	
By:

	
Ouyang Yong (signature)

November 23, 2010

 

  

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Appendix 1     Boundary Map of the Land Lot

 

  

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Appendix 2     Vertical Limits of the Land Lot

 

 

  

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Appendix 3     Zoning Requirements

 

The zoning requirements for the land lot No. KXCD-F2-2 located in Science City, Guangzhou Economic and Technological Development Zone are set out below to be complied with by the Grantee:

 

	
1.

	
General Zoning Guidelines

 

(1)         The land lot is located within the well landscaped Science City, so the layout and design of the buildings to be erected on the plot shall be modern and innovative and compatible with the natural environment.

 

(2)         The zoning plan shall show reasonable layout and clear-cut separation of architectural functions and take into consideration the spatial layout of buildings and landscape design.

 

(3)         The zoning plan shall meet the urban zoning requirements of the Guangzhou city and the region where the land lot is located.

 

(4)         The zoning and design and the property management upon the completion of the project shall adopt the concept of recycling economy so more new technologies and new energy-saving and environmentally friendly materials shall be utilized.

 

(5)         The project shall include buildings, open space, green space, parking space, roads and other facilities which are separated from each other clearly; and the planning of traffic lanes shall be reasonable and the landscape shall be well-designed.  A safe, soft, convenient and comfortable business environment shall be created.

 

(6)         The land development shall consider and utilize the natural landscape within the land lot and purposively preserve existing trees to feature the harmony between human and nature.

 

(7)         The style of buildings shall be compatible with surrounding natural environment and the building design shall meet the prevailing buildings codes of the People’s Republic of China and the urban planning and management requirements of the Guangzhou city.

 

	
2.

	
Land Information

 

(1)         Land usage: commerce and finance (C2), primarily for hotel and related businesses and office area of headquarters, with complementary commercial facilities for demonstration, training and other purposes.

 

(2)         Land location: west of Kaichuang Avenue, Science City

 

Geographic map No.: 32-62-14

 

(3)         Total land area: 7,015 square meters

 

	
3.

	
Economic and Technical Specifications and Requirements

 

(1)         Building density ≤ 40%

 

  

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(2)         Floor-to-area ratio ≤ 3

 

(3)         Green space ratio ≥ 35%

 

(4)         Building height ≤ 45 meters

 

	
4.

	
Building Design Requirements

 

	
  

	
(1)

	
The building interval shall meet the requirements in the Technical Standards and Guidelines for Urban Zoning and Management of Guangzhou Municipality - Section of Construction Project Planning and Management. Calculations of the building setback lines and the horizontal distance between a building and the street line shall be generally reduced half based on the requirements set out in the above guidelines.

 

	
  

	
(2)

	
Building setbacks from lot lines:

 

A building shall be set back from Kaichuang Avenue for at least 15 meters and set back from the lot lines on other sides for at least 10 meters.  The setback area shall be maintained as green space.  The existing village road to Xintang Village west of the land lot shall not be blocked.

 

	
5.

	
Public Facilities Construction Requirements

 

	
  

	
(1)

	
The public facilities required for this project and their construction requirements are as below:

 

	
  

	
a.

	
a taxi station which has a land area of 300 square meters with entrance and exit properly placed;

 

	
  

	
b.

	
a garbage collection facility which has a floor area of 100 square meters, is close to main and accessory roads for convenient transportation and designed to minimize impact to surrounding areas, and is surrounded by a green belt of width no less than 3 meters;

 

	
  

	
(2)

	
The public facilities shall be constructed, inspected and accepted and put into operation concurrently with the main structures of the project.

 

	
  

	
(3)

	
The design and layout of the public facilities shall meet the purposes they are intended to serve and the requirements from the competent authorities and the stipulations in the Technical Standards and Guidelines for Urban Zoning and Management of Guangzhou Municipality - Section of Detailed Construction Planning as well.

 

	
6.

	
Zoning Requirements for Roadway

 

	
  

	
(1)

	
The horizontal distance between the lot lines and the street lines, street line inflection coordinates and curve radius are shown in the map.

 

	
  

	
(2)

	
Location of access to roadway

 

  

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For motor vehicles: two on the east side.  An access shall be placed at least 70 meters away from the crossing of city public roads and the location shall be away from street lamps and other public facilities.  The net width of an access shall be no more than 10 meters.  A main access shall have a buffer zone.

 

For non-motorized vehicles and pedestrian: properly placed according to the master layout plan.

 

	
  

	
(3)

	
Parking space requirements

 

	
  

	
a.

	
Motor vehicles: 0.8 parking area for every 100 square meters floor area (a loading dock and a space for getting on or off taxies for every 5,000 square meters floor area).

 

	
  

	
b.

	
Non-motorized vehicle: 1.5 parking area for every 100 square meters floor area.

 

	
  

	
c.

	
Garage construction requirements:

 

	
  

	
(i)

	
Generally a garage shall be constructed within a building (including an underground garage).  Outdoor parking space may be provided but shall be located at a designated area.  The ground of outdoor parking area shall be covered by grasses and trees shall be planted to provide shade.

 

	
  

	
(ii)

	
The ramp of the entrance and exit of an underground garage shall be located inside the building lines.

 

	
  

	
(iii)

	
No underground garage shall be constructed below public green space or within the building setback area on the front of a road.  If a garage has to be constructed under public green space, the depth of the soil on the top of the garage shall be more than 2 meters (also in compliance with the requirements for laying pipes and cables) and the level of the top side soil shall be no more than 0.2 meter higher than the level of an adjacent road.

 

	
  

	
(iv)

	
The parking facilities for motor vehicles and non-motorized vehicles shall be designed, constructed and put into use concurrently with the main structures of the project.

 

	
7.

	
Special Zoning Requirements

 

	
  

	
(1)

	
The zoning plan and construction design, if concerning cultural relics, public security and fire prevention, environmental protection, sanitation, flood prevention and drainage, electricity, transportation, geological disasters and other issues, shall comply with the special zoning requirements for each of the foregoing items.

 

	
  

	
(2)

	
Zoning requirements for vertical engineering:

 

  

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The road elevation within the land lot shall be determined according to the principle of balance of rock and soil volume, taking into consideration the proper connection to existing planned roads.

 

The slope of the ground and roadway within the land lot shall meet the relevant technical specifications; and the ground elevation and the direction of drainage slope shall be determined based on the road elevation within the land lot.

 

	
8.

	
Additional Requirements

 

The constructor and the designer shall prepare the planning and design documents for our approval in strict compliance with the zoning requirements above.  The documents to be submitted include: planning and design blueprints (including master layout plan, green space plan, vertical planning diagram, roadway and transportation planning diagram, pipes and cables diagram, and floor plan and elevation plan of individual buildings), design specifications and renderings (including color master layout plan, bird’s eye view image and building facades image) and electronic copies of those documents (in *.dwg, *.doc and *.jpg formats).

 

  

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Appendix 4     Complementary Conditions

 

	
1.

	
Roadway, Drains and Sewers

 

The Grantor shall have roadway connected at least to the location of the main entrance and exit of the land lot and have the user manhole for connection to mains of drains and sewers laid closely to the terminal sewer manhole within the lot lines.  The Grantee shall bear the costs for construction of access to roadway and connection of terminal sewer manhole to user manhole of mains of drains and sewers; and the Grantee shall also bear the costs for removal or change of pipes and cables for power supply, water supply, street lamps, drainage and telecommunication associated with the construction of access to roadway.

 

	
2.

	
Water Supply

 

Upon the execution of this Contract, the Grantee shall as soon as possible apply to the water supply management center of the development zone for water supply.  The Grantee shall bear the connection costs and the Grantor shall make the connection available to the Grantee.

 

	
3.

	
Power Supply

 

Upon the execution of this Contract, the Grantee shall as soon as possible apply to the power supply authority for permanent power supply.  The Grantee shall bear the connection costs and the Grantor shall make the connection available to the Grantee.

 

	
4.

	
Telecommunication

 

The Grantee shall apply to the branch of the telecommunication bureau in the development zone for telephone service.  Once the application is approved, a line will be connected to the telecommunication cables closest to the Grantee and the distributing cabinet will be installed at the connection point.  The Grantee shall bear the connection costs and the Grantor shall make the connection available to the Grantee.

 

	
5.

	
Land Leveling and Delivery

 

After the execution date of this Contract, the Grantor shall deliver the land to the Grantee on an as-is basis.

 

6.             Within 30 days of execution of this Contract, the land bureau of the development zone shall, together with the Grantee, verify the boundary posts of the land lot according to the lot lines map at the costs of the Grantee.  The Grantee shall protect and not move such posts.  Once the posts are damaged or moved, the Grantee shall promptly report to the land bureau of the development zone requesting re-erection of the posts at the costs of the Grantee.

 

The Grantee shall adopt effective means (including building permanent walls) to protect the land lot and prevent secret evacuation of soil and discharge of solid waste and shall properly construct site drainage to prevent soil erosion which may affect adjacent land lot and public facilities.  In the event of secret evacuation of soil and discharge of solid waste, soil erosion and land subsidence, the Grantee shall be liable for making corrections.

 

  

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