Document:

Unassociated Document

    

      EXHIBIT
        10.1

    

    

      FARO
        TECHNOLOGIES, INC. 

      EMPLOYMENT
        AGREEMENT

      

      ARTICLE
        I

      EFFECTIVE
        DATE AND PURPOSE

       

      This
        Employment Agreement (the “Agreement”)
        is
        made and entered into effective as of December 5, 2006 by and between FARO
        Technologies, Inc. (the “Company”)
        and
        KEITH S. BAIR (the “Executive”).
        The
        Company believes that an effective and stable management team is essential
        to
        promoting the best interests of the Company and its shareholders. Given the
        Executive’s strong performance and diligent work efforts, the Company wishes to
        assure Executive’s continued services in the event of a change of control. As a
        change in control of the Company may adversely affect Executive’s employment
        security the Company desires to provide an incentive for the Executive to
        remain
        employed with the Company during the period leading up to any such change
        of
        control, and to encourage the Executive to devote full and continued attention
        to the business of the Company and use best efforts to consummate any such
        change of control. 

      

      ARTICLE
        II

      DEFINITIONS

       

      Section
        2.1  Act
        means
        the Securities Exchange Act of 1934, as amended. 

       

      Section
        2.2  Affiliate
        and Associate
        shall
        have the respective meanings ascribed to such terms in Rule 12b-2 of the
        General
        Rules and Regulations of the Act.

       

      Section
        2.3  Beneficial
        Owner.
        For
        purposes of this Agreement, a Person shall be deemed to be the “Beneficial
        Owner” of any securities: 

       

      (a)  which
        such Person or any of such Person’s Affiliates or Associates has the right to
        acquire (whether such right is exercisable immediately or only after the
        passage
        of time) pursuant to any agreement, arrangement or understanding, or upon
        the
        exercise of conversion rights, exchange rights, rights, warrants or options,
        or
        otherwise; provided,
        however,
        that a
        Person shall not be deemed the Beneficial Owner of, or to beneficially own,
        securities tendered pursuant to a tender or exchange offer made by or on
        behalf
        of such Person or any of such Person’s Affiliates or Associates until such
        tendered securities are accepted for purchase; 

       

      (b)  which
        such Person or any of such Person’s Affiliates or Associates, directly or
        indirectly, has the right to vote or dispose of or has “beneficial ownership” of
        (as determined pursuant to Rule 13d-3 of the General Rules and Regulations
        under
        the Act), including pursuant to any agreement, arrangement or understanding;
        provided,
        however,
        that a
        Person shall not be deemed the Beneficial Owner of, or to beneficially own,
        any
        security under this Subsection (b) as a result of an agreement, arrangement
        or
        understanding to vote such security if the agreement, arrangement or
        understanding: (i) arises solely from a revocable proxy or consent given
        to such
        Person in response to a public proxy or consent solicitation made pursuant
        to,
        and in accordance with, the applicable rules and regulations under the Act
        and
        (ii) is not also then reportable on a Schedule 13D under the Act (or any
        comparable or successor report); or 

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (c)  which
        are
        beneficially owned, directly or indirectly, by any other Person with which
        such
        Person or any of such Person’s Affiliates or Associates has any agreement,
        arrangement or understanding for the purpose of acquiring, holding, voting
        (except pursuant to a revocable proxy as described in Subsection (b)(i) above)
        or disposing of any voting securities of the Company.

       

      Section
        2.4  Board
        (or Board of Directors)
        means
        the Board of Directors of the Company.

       

      Section
        2.5  Change
        of Control
        means
        the occurrence of any of the following: 

       

      (a)  any
        Person (other than (i) an Affiliate of the Company, (ii) any employee benefit
        plan of the Company or any Affiliate thereof, or (iii) any Person organized,
        appointed or established pursuant to the terms of any such benefit plan)
        is or
        becomes the Beneficial Owner of securities of the Company representing at
        least
        thirty percent (30%) of either (i) the combined voting power of the Company’s
        then outstanding securities; or (ii) the outstanding shares of the then
        outstanding shares of common stock of the Company; or

       

      (b)  a
        change
        in the composition of the Company’s Board of Directors such that the individuals
        who, as of the effective date of this Agreement, constitute the Board (such
        Board hereinafter referred to as the “Incumbent Board”) cease for any reason to
        constitute at least a majority of the Board; provided however, for purposes
        of
        this definition, that any individual who becomes a member of the Board
        subsequent to the effective date hereof, whose election or nomination for
        election was approved by a vote of at least a majority of those individuals
        who
        are members of the Board and who were also members of the Incumbent Board
        (or
        deemed to be such pursuant to this proviso) shall be considered as though
        such
        individual were a member of the Incumbent Board; but provided further, that
        any
        such individual whose initial assumption of office occurs as a result of
        either
        an actual or threatened election contest (as such terms are used in Rule
        14a-11
        of Regulation 14A promulgated under the Exchange Act) or other actual or
        threatened solicitation of proxies or consents by or on behalf of a Person
        other
        than the Board shall not be so considered as a member of the Incumbent Board;
        or

       

      (c)  the
        approval by the shareholders of the Company of any one of the following
        transactions:

       

      
        
           

        

        
          -2-

          
            

          

        

        
           

        

      

       

      	(i)  	
              a
                reorganization, merger or consolidation of the Company with any other
                Person, other than one which results in the voting securities of
                the
                Company outstanding immediately prior to such merger or consolidation
                continuing to represent (either by remaining outstanding or by being
                converted into voting securities of the surviving entity or any parent
                there) at least 50% of the combined voting power of the voting securities
                of the Company or such surviving entity or any parent thereof outstanding
                immediately after such merger or consolidation;
                or

            

       

      	(ii)  	
              an
                agreement for the sale of disposition by the Company of all or
                substantially all of the Company’s assets, other than a sale or
                disposition by the Company of all or substantially all of the Company’s
                assets to an entity, at least 75% of the combined voting power of
                the
                voting securities of which are owned by shareholders of the Company
                in
                substantially the same proportions as their ownership of the Company
                immediately prior to such sale.

            

       

      (d)  Notwithstanding
        the foregoing, no “Change in Control” shall be deemed to have occurred if there
        is consummated any transaction or series of integrated transactions immediately
        following which the record holders of the common stock of the Company
        immediately prior to such transaction or series of transactions continue
        to have
        substantially the same proportionate ownership in an entity which owns all
        or
        substantially all of the assets of the Company immediately following such
        transaction or series of transactions.

       

      Section
        2.6  Cause
        shall be
        determined by the Board of the Company means (a) an act of fraud or embezzlement
        against the Company or acceptance of a bribe or kickback; (b) the conviction
        or
        a plea of nolo
        contendere
        by the
        Executive of a felony or of a crime involving fraud, dishonesty, violence
        or
        moral turpitude; (c) willful and continued refusal to substantially perform
        assigned duties (other than any refusal resulting from incapacity due to
        physical or mental illness or Disability); and (d) willful engagement in
        gross
        misconduct materially and demonstrably injurious to the Company.

       

      Section
        2.7  Change
        of Control Date
        means
        the first date on which a Change of Control has occurred.

       

      Section
        2.8  Code
        means
        the Internal Revenue Code of 1986, including any amendments or successor
        tax
        codes. Any reference to a specific provision of the Code shall mean any
        successor provision thereto.

       

      Section
        2.9  Disability
        means a
        disability that would entitle the Executive to payment of monthly disability
        payments under any Company long-term disability plan. 

       

      
        
           

        

        
          -3-

          
            

          

        

        
           

        

      

       

      Section
        2.10  Good
        Reason
        means
        any of the following to which the Executive has not consented in writing:
        (a) a
        material breach by the Company of the Company’s obligations to the Executive
        under this Agreement, which breach is not cured to the Executive’s reasonable
        satisfaction within ten (10) days after written notification to the Company
        describing in reasonable detail such breach and stating that such notice
        is
        being delivered pursuant to this Agreement; (b) a reduction in the Executive’s
        base salary to an amount below the base annual salary in effect as of the
        date
        of this Agreement; (c) a material reduction in the Executive’s benefits,
        including retirement, Company-paid insurance, sick leave, expense reimbursement
        and vacation time, as provided by the Company (except consistent with a general
        reduction of such benefits to executives of the Company as a whole); (d)
        an
        ongoing material and substantial diminution in the duties of the Executive
        not
        consistent with that of an executive with his position and duties; or (e)
        relocation of the Executive’s principal office to a location more than 25 miles
        from the Company’s headquarters on the date of this Agreement.

       

      Section
        2.11  Person
        means
        any individual, firm, partnership, corporation or other entity, including
        any
        successor (by merger or otherwise) of such entity, or a group of any of the
        foregoing acting in concert.

       

      ARTICLE
        III 

      EVENTS
        UPON CHANGE OF CONTROL

       

      Section
        3.1  Change
        of Control Payment.
        If the
        Executive is actively employed by
        the
        Company or any of its Affiliates on the day immediately preceding the Change
        of
        Control Date, the Executive shall receive a Change of Control payment equal
        to
        one (1) times the greater of (A) Executive’s base annual salary as of the date
        of this Agreement; and (B) Executive’s then-current base annual salary. The
        payment described herein shall be paid to the Executive in a cash lump sum
        on,
        or as soon as practicable after, the Change of Control Date. 

       

      Section
        3.2  Accelerated
        Vesting of Options.
        Upon a
        Change of Control, all unvested options with respect to the Company’s stock held
        by the Executive shall vest and become immediately exercisable and shall
        be
        exercisable for a period ending on the later of (A) the fifth anniversary
        of the
        Change of Control Date or (B) the last date that such option would otherwise
        be
        exercisable under the terms of the option agreement or the plan pursuant
        to
        which such option was granted; provided, that in no event shall any option
        be
        exercisable after the expiration of the original term of the
        option.

       

      ARTICLE
        IV

      SEVERANCE
        PAYMENTS

       

      Section
        4.1  Severance
        Payments Upon Certain Terminations of Employment.
        Upon
        the termination of the Executive’s employment by the Executive for Good Reason
        or by the Company without Cause, the Executive shall be entitled to the
        following severance:

       

      
        
           

        

        
          -4-

          
            

          

        

        
           

        

      

       

      (a)  The
        Company shall make payments to the Executive of continued salary for one
        year at
        a rate equal to the Executive’s base salary in effect at the time of such
        termination, payable pursuant to normal payroll procedures of the
        Company;

       

      (b)  The
        Company shall pay to Executive, in a lump sum and as promptly as practicable
        after such termination, Executive’s earned but unpaid compensation accrued
        through the date of such termination;

       

      (c)  All
        of
        the Executive’s unvested options for shares of the Company’s stock and all of
        the Executive’s unvested shares of restricted shares of the Company’s stock
        shall automatically vest in full as of the date of such
        termination;

       

      (d)  Until
        the
        earlier of (i) twelve (12) months following termination; or (ii) the Executive’s
        securing coverage, through another employer, of benefits similar to those
        provided by the Company, the Company shall provide the same coverage to the
        Executive under the Company’s “employee welfare benefit plans” (as defined in
        Section 3(1) of the Employee Retirement Income Security Act of 1974) as is
        provided by the Company to comparable employees, or, in lieu of such coverage,
        the Company may reimburse the Executive on a net after-tax basis, for the
        cost
        of individual insurance coverage for the Executive and his dependents under
        a
        policy or policies that provide benefits not less favorable than the benefits
        provided under such employee welfare benefit plans; and

       

      (e)  The
        Company also shall pay to the Executive all reasonable attorney’s fees and
        expenses incurred by the Executive in disputing in good faith any issue
        hereunder relating to the termination of Executive’s employment, in seeking in
        good faith to obtain or enforce any benefit or right provided by this Agreement
        or in connection with any tax audit or proceeding to the extent attributable
        to
        the application of Section 4999 of the Code to any payment or benefit provided
        hereunder. Such payments shall be made within five (5) business days after
        delivery of the Executive’s written requests for payment accompanied with such
        evidence of fees and expenses incurred as the Company reasonably may
        require.

       

      The
        Executive shall not be required to mitigate the amount of any payment or
        benefit
        contemplated by this Agreement (whether by seeking new employment or in any
        other manner). No such payment shall be reduced by earnings that the Executive
        may receive from any other source.

      

      ARTICLE
        V

      NONQUALIFIED
        DEFERRED COMPENSATION OMNIBUS PROVISION

       

      Section
        5.1  General.
        It is
        intended that any payment or benefit which is provided pursuant to or in
        connection with this Agreement which is considered to be nonqualified deferred
        compensation subject to Section 409A of the Code shall be paid and provided
        in a
        manner, and at such time and in such form, as complies with the applicable
        requirements of Section 409A of the Code to avoid the unfavorable tax
        consequences provided therein for noncompliance. In connection with effecting
        such compliance with Section 409A of the Code, the following shall
        apply:

       

      
        
           

        

        
          -5-

          
            

          

        

        
           

        

      

       

      (a)  Notwithstanding
        any other provision of this Agreement, the Company is authorized to amend
        this
        Agreement, to delay the payment of any monies and/or provision of any benefits
        in such manner as may be determined by it to be necessary or appropriate
        to
        comply, or to evidence or further evidence required compliance, with Section
        409A of the Code (including any transition or grandfather rules
        thereunder);

       

      (b)  If
        the
        Executive is a “key employee” of a publicly traded corporation within the
        meaning of Section 416(i) and any payment or provision of any benefit hereunder
        is subject to Section 409A in connection with a “separation from service” within
        the meaning of the U.S. Treasury Regulations promulgated under Section 409A,
        no
        payment or benefit shall be made or provided until the earlier of (i) the
        expiration of the six (6) month period measured from the date of the Executive’s
“separation from service”; or (ii) the date of the Executive’s death (the “409A
        Payment Date”). In the event such payments are otherwise due to be made
        installments or periodically during the period from “separation of service” to
        the 409A Payment Date (the “Deferral Period”), the payments which would
        otherwise have been made during the Deferral Period shall be accumulated
        and
        paid in a lump sum upon the 409A Payment Date, and the balance of the payments
        shall be made as otherwise scheduled. In the event benefits are required
        to be
        deferred, any such benefit may be provided during the Deferral Period at
        the
        Executive’s expense, with the Executive having a right to reimbursement from the
        Company once the Deferral Period ends, and the balance of the benefits shall
        be
        provided as otherwise scheduled.

      

      ARTICLE
        VI

      SUCCESSORS
        AND ASSIGNS

       

      Section
        6.1  Successors
        and Assigns of Company.
        If the
        Company sells, assigns or transfers all or substantially all of its business
        and
        assets to any Person or if the Company merges into or consolidates or otherwise
        combines (where the Company does not survive such combination) with any Person
        (any such event, a "Sale of Business"), then the Company shall assign this
        Agreement to such Person and cause such Person to expressly assume and agree
        to
        perform from and after the date of such assignment all of the terms, conditions
        and provisions imposed by this Agreement upon the Company. In case of such
        assignment by the Company and the assumption and agreement by such Person,
        "Company" as used in this Agreement shall thereafter mean the Person that
        assumes and agrees to perform this Agreement as provided for in this Section
        or
        that otherwise becomes bound by all the terms and provisions of this Agreement
        by operation of law, and this Agreement shall inure to the benefit of, and
        be
        enforceable by, such Person. The Executive shall, in his or her discretion,
        be
        entitled to proceed against any or all of such Persons, any Person which
        theretofore was such a successor to the Company and the Company (as so defined)
        in any action to enforce any rights of the Executive. Except as provided
        in this
        Section, this Agreement shall not be assignable by the Company. 

       

      
        
           

        

        
          -6-

          
            

          

        

        
           

        

      

       

      Section
        6.2  Successors
        and Assigns of Executive.
        The
        Executive shall not have the right to assign, transfer, alienate, anticipate,
        pledge or encumber any portion of a payment due hereunder, nor shall such
        amounts be subject to seizure by legal process by any creditor of such
        Executive. All rights of the Executive under this Agreement shall inure to
        the
        benefit of and be enforceable by the Executive's personal or legal
        representatives, executors, administrators, heirs and beneficiaries. In the
        event of the Executive's death, all amounts payable to the Executive under
        the
        Agreement if the Executive had lived, shall be paid to the Executive's estate,
        heirs or representatives.

       

      ARTICLE
        VII

      MISCELLANEOUS

       

      Section
        7.1  Notices.
        Notices
        given pursuant to this Agreement shall be in writing and shall be deemed
        given
        when personally delivered or sent by telecopy transmission or three (3) days
        after being sent by
        United
        States mail, postage prepaid to the parties at their respective address set
        forth below:

       

      To
        the
        Company:

      

      FARO
        Technologies, Inc.

      Attention:
        Chief Executive Officer

      125
        Technology Park

      Lake
        Mary, FL
        32746

      

      To
        the
        Executive:

      

      To
        Executive’s address contained in the Company’s records.

      

      Section
        7.2  Severability.
        The
        provisions of this Agreement shall be regarded as divisible, and if any of
        such
        provisions or any part are declared invalid or unenforceable by a court of
        competent jurisdiction, the validity and enforceability of the remainder
        of such
        provisions or parts and the applicability thereof shall not be affected
        thereby.

       

      Section
        7.3  Withholding.
        The
        Company shall be entitled to withhold from amounts to be paid to the Executive
        any federal, state or local withholding or other taxes or charges which it
        is
        from time to time required to withhold. The Company shall be entitled to
        rely on
        an opinion of nationally recognized tax counsel if any question as to the
        amount
        or requirement of any such withholding shall arise.

       

      Section
        7.4  Entire
        Agreement.
        This
        Agreement embodies the entire Agreement and understanding between the Company
        and Executive relating to the subject matter hereof.

       

      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

       

      Section
        7.5  Governing
        Law; Resolution of Disputes.
        The
        laws
        of the State of Florida and the federal laws of the United States of America,
        excluding the laws of those jurisdictions pertaining to resolution of conflicts
        with laws of other jurisdictions, govern the validity, enforcement,
        construction, and interpretation of this Agreement. In the event that there
        is
        any litigation under this Agreement, Executive and the Company (a) consent
        to
        the personal jurisdiction of the state and federal courts having jurisdiction
        in
        Orange County, Florida, (b) stipulate that the proper, convenient, and exclusive
        venue for any legal proceeding arising out of this Agreement is Orange County,
        Florida, for a state court proceeding, or the Middle District of Florida,
        Orlando Division, for a federal court proceeding, and (c) waive any defense,
        whether asserted by motion or pleading, that Orange County, Florida, or the
        Middle District of Florida, Orlando Division, is an improper or inconvenient
        venue. 

       

      Section
        7.6  No
        Waiver.
        No
        waiver of any provision of this Agreement shall be valid unless in writing
        and
        signed by the person against
        whom it is sought to be enforced. The failure by either party to insist upon
        strict performance of any provision will not be construed as a waiver or
        relinquishment of the right to insist upon strict performance of the same
        provision at any other time, or any other provision of this
        Agreement.

       

      Section
        7.7  Counterparts.
        This
        Agreement may be executed in one or more counterparts, each of which shall
        be
        deemed to be an original but all of which together will constitute one and
        the
        same instrument.

       

      Section
        7.8  Headings.
        The
        headings contained are for reference only and shall not affect the meaning
        or
        interpretation of any provision of this Agreement

       

      Section
        7.9  Further
        Assurances.
        Each
        party hereto shall cooperate and shall take such further action and shall
        execute and deliver such further documents as may be reasonably necessary
        in
        order to carry out the provisions and purposes of this Agreement.

       

      Section
        7.10  No
        Strict Construction.
        The
        parties have jointly participated in the negotiation and drafting of this
        Agreement. In the event an ambiguity or question of intent or interpretation
        arises, this Agreement shall be construed as if drafted jointly by the parties
        hereto, and no presumption or burden of proof shall arise favoring or
        disfavoring any party by virtue of the authorship of any of the provisions
        of
        this Agreement.

       

      EXECUTIVE
        ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT, WAS AFFORDED SUFFICIENT
        OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL OF HIS CHOICE, AND TO ASK QUESTIONS
        AND RECEIVE SATISFACTORY ANSWERS REGARDING THIS AGREEMENT, UNDERSTANDS HIS
        RIGHTS AND OBLIGATIONS UNDER IT, AND SIGNED IT OF HIS OWN FREE WILL AND
        VOLITION.

       

      
        
           

        

        
          -8-

          
            

          

        

        
           

        

      

      

      IN
        WITNESS WHEREOF, the Executive and Company have executed this Agreement as
        of
        the date first written above.

       

       

      
        	 	 	 
	 	
                COMPANY:

              
	 	 
	 	FARO TECHNOLOGIES, INC.
	 
 	 
 	 
 
	 	 	/S/ Jay
                W.
                Freeland
	 	
                
Name:
                Jay W. Freeland
	 	Title: President
                and Chief Executive Officer

      
        	 	 	 
	 	
                EXECUTIVE:

              
	 
 	 
 	 
 
	 	 	/S/ Keith
                S.
                Bair
	 	
                
Name:
                Keith S. Bair
	 	 

       

      
        
           

        

        
          -9-Exhibit 10.13

Appendix 3

                             No.: 20062302300010008

                        LOAN CONTRACT OF CURRENT CAPITAL

                     AGRICULTURAL DEVELOPMENT BANK OF CHINA

<PAGE>

Borrower (full name): Heilong Jiang Flying Crane Dairy Co., Ltd

License no.: qiduheiqizongzi no. 000352

Legal representative (principal): Leng Youbin

Domicile (address): Qingxiang Street, Kedong Town, Kedong County

Post code: 164800

Bank and account number: Keshang branch of Construction Bank of China,
23001627950060500102

Telephone and fax: 0452-4312257

Loaner (full name): Kedong County branch of Agricultural Development Bank of
China

Legal representative (principal): Wang Jinhui

Domicile (address): Dongzhen Garden Residence Area, Kedong County

Post code: 164800

Telephone and fax: 0452-4329433

The borrower applies loan from the loaner, and the loaner agrees to grant loan
to the borrower. According to relative national laws and regulations, the
borrower and loaner reach the agreement after equal negotiation and conclude the
contract.

1 Type of the loan

The loan under the contract is other current fund loan for leading enterprise in
agriculture industrialization.

2 Purpose of the loan

Purpose of the loan under the contract is purchase of fresh milk and whey
powder. Without the permission of loaner, the borrower cannot change the purpose
of the loan in the contract.

3 Sum of the loan

The sum of the loan under the contract is RMB (in capital character) thirty
million Yuan (decimal RMB 30,000,000) (when the capital characters and decimal
digits are not consistent, the capital characters should be considered as
standard, the same below).

4 Loan term

The term of the loan under the contract is twelve months from July 27 2006 to
July 26 2007. The starting date of actual loan term is counted from the date of
borrower's first time drawing fund. And the actual drawing date and time of
termination are taken the date in the loan certificate as standard.

<PAGE>

5 Interest rate, penalty interest rate, interest calculation and interest
settlement

The loan interest rate under the contract is annual rate, and the interest rate
is the following item 5.1.1.

5.1.1 The loan interest of six months to one year (including one year) issued by
People's Bank of China is 5.85%.

5.1.2 ___ (Go up/float downward) % under the loan interest rate of issued by
People's Bank of China, and the interest rate is .

5.1.3 ___ (Up regulate/Down regulate) % under the loan interest rate of issued
by People's Bank of China.

5.2 The load rate of this contract will be implemented according to item

5.2.1 When the fiducial rate of china people bank is adjusted.

5.2.1 Fixed rate, it keeps invariability still during the loan tern.

5.2.2 Adjusting according to the change and rate charged by stage.

5.2.3 Rate charged by stage from the actual drawing day calculated by month.

5.3 The punish rate of load is according to year rate, include:

5.3.1 The punishing rate of overdue loads is according to the load rates of the
contract with additional 30%.

5.3.2 The punishing rate of loads not used for the specified purpose is
according to the load rates of the contract with additional 50%.

5.4 The load rate of this contract will be implemented according to item 5.4.2
when the fiducial rate of china people bank is adjusted.

Without adjustment

5.4.2 Adjusting according to the change and rate charged by stage.

The borrower did not use the loads for the specified purpose meanwhile it is
overdue, then the punishing rate is according to the higher one.

Interest calculation and settlement

5.6.1 The rate of this contract is calculating from the drawing day by date, and
charging according to the actual days and load rate of this contract.

<PAGE>

5.6.2 Compound interest will be charged when the borrower can afford the
interest during the loan term.

5.6.3 Compound interest will be charged according to the punishing rate when the
borrower can afford the interest, and if the borrower did not use the loads for
the specified purpose meanwhile it is overdue.

5.6.4 The interest settlement is charged by month, and the charging date is
twentieth of each month.

5.6.5The loaner has the right to calculate interest according to the adjusted
lending rate, punishing rate without notifying the borrower when the rate of
china people bank is adjusted and this is suitable for the loans of the
contract.

6. Drawing

The following premising conditions should be met before the borrower wants to
drawing, if not, the loaner has right to refuse the drawing application from the
borrower.

6.1.1 the approval, register, consignation and other procedures of contract are
transacted according to related law and statute.

6.1.2 if the loans of the contract are assured, then the assuring contract
established according to item 8.2 of this contract will be put into effect.

6.1.3 The breach of faith proceeding in this contract does not happen.

6.1.4 Other relevant materials about lenders' loan demand.

6.2 borrowers drawing should follow the promissory date and sum below:

6.2.1 07. 08. 2006, sum (capitalization) 17, 000, 000, 00 Yuan

6.2.2 08. 10. 2006, sum (capitalization) 8, 000, 000, 00 Yuan

6.2.3 08. 28. 2006, sum (capitalization) 5, 000, 000, 00 Yuan

6.2.4 ____________, sum (capitalization)

6.2.5 ____________, sum (capitalization)

6.3 borrowers who can not draw money according to article 6.2 for special reason
should put in written application fifteen working days before. And it can be
postponed (advance/ postpone) 10 days when lender written agree.

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6.4 If borrower request to cancel all or parts of the sum money that does not
draw, should put in written application fifteen working days before the
promissory drawing date in this contract. And it can be canceled when lender
written agree.

7  pay back money

7.1 borrowers should pay sufficient interest on schedule according to this
contract, and pay back the money follow 7.1.1.

7.1.1 The last pay back date should not be later than the date regulate in this
contract.

7.1.2 Pay back the principal according to the date and sum below:

7.2.2.1 07. 26. 2007, sum (capitalization)_____(minuscule RMB 30, 000, 000, 00);

7.2.2.2 __________, sum (capitalization)____________(minuscule RMB____________);

7.2.2.3 __________, sum (capitalization)____________(minuscule RMB____________);

7.2.2.4 __________, sum (capitalization)____________(minuscule RMB____________);

7.2.2.5 __________, sum (capitalization)____________(minuscule RMB____________).

7.3 if borrowers want to pay back money ahead the schedule he should put in
written application fifteen working days before pay back date, after lender
written agree, borrower can pay back parts of or all the money before. If the
borrower pays back money before, he should pay back money according to the
opposite sequence of the pay back plan.

7.4 borrowers should prepare enough interest or principal in the account opened
at lender before the pay back interest or principal date, and authorize the
lender drawing the money on the next day of interest pay back day or principal
pay back day according to this contract.

8 the borrowing mode in this contract is shown in 8.2:

8.1 credit mode

8.2 hypothecate mode. Hypothecate contract is sign additionally. Hypothecate
contract number: 20062302300010008.

9 borrower's rights and obligation

9.1 borrowers have rights to get loan policy and interest policy from the
lenders.

9.2 borrowers have rights to draw and use money according to the time limit and
use in the contact.

9.3 borrowers have rights to apply loan postpone when accord with lenders
demands.

9.4 borrowers have rights to ask the lenders keep secret of the loan, financial,
product, and operation condition of the borrowers. But legal regulate contracts
with other regulation is preclusive.

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9.5 borrowers should make sure the facticity, veracity, integrality and validity
of the materials it provide during loan inspect.

9.6 borrowers should provide actual, integrated, legal and valid financial
report forms and relevant documents, information and data. It should accept and
cooperate with the lender to inspect and supervise the operation, financial,
storing, and loan using condition.

9.7 borrowers should pay back the interests according to the contract.

9.8 During the period of validity, if the borrower name, artificial person,
abode, address, telephone number, operation scope, subjection relation, company
constitution and internal organization changed, he should written inform the
lender in fifteen working days from the change day.

9.9 During the period of validity, if the borrower wants to guarantee for other
loan or mortagage his assets to the third, he must inform the lender in written
thirty working days before and get permission.

9.10 if lender have important business with other shareholder or other relevant
company (include but not limit important shunt-wound purchase and sale contract,
rent, raw material supply and financing current), or other important business
change, or the shareholder and company have financial crisis, lenders should
inform to the borrowers in written immediately.

9.11 During the period of validity, if the lender makes contract, rent, stock
change, pool, schism, unite, joint venture, decrease, investment, assets
transfer or other important investment that will affect the loan between them,
lender should inform borrowers in written thirty working days before, and get
permission of the borrower. And carry on the loan pay back and hypothecate
responsibility that borrower demand, otherwise lenders could not take the action
above.

9.12 if the lender has operation difficulty, financial deteriorates, economy
bothers or other lawsuit, arbitrage, criminal and administration punish that
will have disadvantageous affect of the finance, or the assets is obtained by
other loaners or taken over by appointed assignee, or the assets is detained,
congealed, all these may make the borrowers have great losing, lenders must
inform the borrowers in written immediately, and take the safeguard measure that
all charge in the contract can be paid on time according to borrowers demands.

9.13 During the period of validity, if the borrower has the situation of
production stopping, shut outing, logout registration, bankruptcy, borrower
should informs the lenders in written immediately, and make sure to pay back the
principal and interests immediately , or provide safeguard measure that lender
can accept.

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9.14 if the loan is hypothecate mode, once the hypothecate have changes that
goes against the creditor's rights, borrower should provide other legal
hypothecate that lender accept according to lender's demand.

9.15 The borrower should carry on the lawyer service, insurance, transportation,
evaluation, registration, reserving, appraisal, notarization fee of this
contract and relevant with hypothecate.

Tenth lenders' rights and obligation

10 The duty and right of loaner

10.1The loaner have the right to check and supervise the borrower`s such
conditions as the produce operation conditions, financial affairs, material
inventory and the utilization of loan. Besides, they also have right to call for
the borrower to provide such related papers, data and information as report of
financial accounting period .

10.2 According to the convention of contract, the loaner have the right to draw
in such cost payable paid for by borrower as principal of loan, interest,
penalized interest, compound interest and other cost from the account of
borrower.

10.3 As for such phenomenon as the borrower's escaping the supervising of loaner
,the arrears of principals or other serious breaching of faith behaviors , the
loaner have the right to carry out the loaning sanction , to report them to
related department or division and even have right to proclaim urging of the
payment by press and media .

10.4 According to the convention of contract, the loaner must provide the
borrower with full loan on schedule, with the exception of the delay caused by
the borrower.

10.5 Unless the special rules noted in the law and code and contract, the loner
must keep secret such information and conditions offered by the borrower as the
debt, finance, production and operation.

10.6 During the term of validity of contract, if there is some change in the
name, habitation ,address of the loaner , they must be inform the borrower in
written papers in 15 days after the alternation .

11 Responsibility of default

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11.1 After the contract is taken effect, both the loaner and the borrower should
fulfill their responsibility prescript in the contract, any side failing to
implement the duty of contract wholly or partly will take responsibility of
default.

11.2 If the borrowers don't transact or withdraw the loan, they should pay for
penalty fund according to the penalty amount and days as well as the interest
rate on borrowings defined in the contract.

11.3 On the premise of the borrower's implement of duty defined in the contract,
if the loaner don't transact or provide withdraw the loan in accordance with the
rules of contract , they should pay for penalty fund according to the penalty
amount and days as well as the interest rate on borrowings defined in the
contract.

11.4 If there is a lack of the agreement of loaner in written forms, the
borrower pay off the loan under the terms of the contract in advance, they
should pay for penalty fund according to the penalty amount and days as well as
the interest rate on borrowings defined in the contract.

11.5 If the borrower fail to pay off the loan in the time limit defined in the
contract, the loaner have the right to let the borrower pay off it in limit
time, and have the right to take the principal and interest of arrears directly
from any accounts opened by the borrower. At the same time, as for the prolonged
parts of loan, from the prolonged date, interest will be drawn according to the
forfeit interest rate, besides, as for the interest failing to pay off on
schedule, the compound interest must be drawn according to forfeit interest
rate.

11.6 If the borrower fail to make use of the loans according to the utilization
defined in the contract , the loaner have the right to stop offering loans and
call in loans or terminate contract ahead of time , besides , as for the loans
which is used breaching of faith , interest will be drawn according to the
forfeit interest rate from the beginning of default date , at the same time , as
for the interest failing to pay off on schedule , the compound interest must be
drawn according to forfeit interest rate.

11.7 If the browner have one of the following conditions, and after receiving
the written notice from the loaner, they must be correct it and take
corresponding remedial measure approved be the loaner in 7 days, otherwise, the
loaner have the right to stop offering or cancel the loans which are not
withdrawn by the borrower, to take back part of or all the loans in advance; as
for the loans which can not be taken back, peaty fund will be drawn according to
forfeit interest rate by days.

<PAGE>

11.7.1 Provide the loaner with illusory or important fact hidden audit data of
loan, or illusory or important fact hidden balance sheet, profit and loss
account, and other financial accounting data.

11.7.2 Breach the cause of 9.6 of the ninth item in this contract

11.7.3 Breach the cause of 9.8 of the ninth item in this contract, and the
realization of creditor's rights are affected or threatened seriously.

11.7.4 Breach the cause of 9.9 of the ninth item in this contract

11.7.5 Breach the cause of 9.10 of the ninth item in this contract, and the
safety of creditor's rights are affected.

11.7.6 In violation of Section 9-11 of this contract, endangering the credit of
the creditor;

11.7.7In violation of Section 9-12 of this contract, seriously hindering the
realization of the right of the creditor or leading to a possible damage to the
creditor;

11.7.8Any acts that might seriously hinder the realization of the right of the
creditor or might damage the creditor's right;

11-8  In case if a litigation or an arbitration has to be brought up by the
      creditor to realize his own rights because of violation of the contract by
      the borrower all expenses related, like travel expenses, lawyer's fee and
      other fees should be borne by the borrower.

12 Effect, Revision and Termination of this Contract

12-1  This contract shall come into effect upon the date when it is dully signed
      and stamped by both the lender and the borrower. If the loan is made
      against a security it should come into effect when the guarantee contract
      stipulated in section 8-2 of this contract has come into effect.

12-2  Should the borrower be unable to repay the loan and wish to extend the
      credit he/she should make an application to the creditor for extension of
      the loan 10 days ahead of the due date of the loan contract. If the loan
      has been made against a security the borrower has to submit a written
      approval from his guarantor for extension of the credit and any other
      legal security for the loan. When the creditor agrees to make the
      extension a new loan contract has to be made between the creditor and the
      borrower.

12-3  In cases of the following the creditor is entitled to terminate this
      contract and demands repayment of the loan principal together with its due
      interest ahead of the due date and to demand compensation for loss
      incurred:

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12-3-1 Breaches of section 9-13;

12-3-2 Breaches of section 9-14;

12-3-3 Failure of 2 months (seasons) in a row or an accumulation of 2 months
      (seasons) to pay interest stipulated by this contract.

12-3-4 Any other serious acts in violation of this contract.

12-4  When this contract has come into effect and unless otherwise stipulated in
      this contract no party to this contract is entitled to revise or terminate
      this contract. Should a revision or a termination of this contract be
      needed the other party should be notified in writing of the intention and
      a written agreement has to be reached between both parties for the
      revision or termination.

13 Settlement of Disputes

      Any disputes arising out of execution of this contract should be settled
      through negotiation between both parties. Should negotiation fail to reach
      a settlement the disputes should be settled according to stipulations of
      Section 13-1-1.

13-1  To be brought up to the people's court of the place where the creditor
      resides,

13-2  To be brought up to an arbitration panel at the place to be arbitrated
      according to the arbitration clauses presently in practice.

13-3  Any terms and conditions not in dispute in this contract shall be of
      effect in the process of litigation or arbitration.

14 Other terms and conditions stipulated by both parties:

15 Supplementary Rules

15-1  The appendix to this contract forms an indispensable part of this contract
      and is of the same legal power as the text of this contract.

15-2  Unless otherwise stipulated communications between both parties shall be
      made and sent to each other in writing form. When telexes and telegrams
      are sent by the creditor to the borrower or mails delivered to a post
      office shall be regarded as having reached the borrower.

15-3  Should any date of withdrawal or payment be not a statutory workday during
      execution of this contact the withdrawal or payment shall be postponed to
      the next workday.

15-4  This loan contract shall be made in four (4) copies, of which both parties
      shall keep one each, the Kedong County Real Estate Trading Office and the
      Kedong County State Land and Resources Bureau shall keep one each, each of
      which will be equally legal binding.

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16 Special Reminding Notes:

      The creditor has reminded the borrower to make a full and accurate
      understanding of the connotation and explanation of the terms and
      conditions and their legal consequence of this loan contract and the
      creditor has made explanation of the lending terms and conditions of this
      contract to the borrower. Understanding of this loan contract from both
      parties is in full agreement.

The Borrower (Official Seal)                      The Lender (Official Seal)

Legal Person Representative (person in charge):   Legal Person Representative
                                                  (person in charge)

Empowered Agent:                                  Empowered Agent:

July 27, 2006                                     July 27, 2007

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