Document:

Exhibit 10.11

 

WDO

 

The
undersigned:

 

1.                   PHILIPS ELECTRONICS NEDERLAND
B.V., acting herein under the name “EXPLOITATIEMAATSCHAPPIJ PHILIPS HIGH TECH
CAMPUS,” having a principal
place of business in (5656 AA) Eindhoven at Prof. Holstlaan 100, Building HTC, for
the purposes of this transaction represented by Mr. C.H.L. van der Linden
and Mr. J. Wilkes in their capacity as managing directors of the
company under its articles and in their capacity as special authorized
representatives of this company,

 

hereinafter
referred to as “Lessor,”

 

and

 

2.                   PHILIPS SEMICONDUCTORS B.V.,
acting herein for the account and risk of Philips Semiconductors-SLE, having its principal place of business in
(5656 AA) Eindhoven at Prof. Holstlaan 4, for the purposes of this
transaction represented by Mr. J. Lobbezoo and Mr. T. Claasen,

 

hereinafter
referred to as “Lessee,”

 

whereas:

 

•                       Lessor wishes to lease the office/business
premises referenced hereinafter to Lessee, and Lessee wishes to lease the
office/business premises referenced hereinafter from Lessor;

•                       Lessor derives its authority to lease out
said premises from a leasing agreement that it has entered into with Tetona
Investments B.V., with registered office in Amsterdam;

•                       Unless context indicates otherwise,
references in the present agreement to leasing between the parties shall be
understood as denoting subleasing;

•                       The parties wish to set forth their
arrangements concerning this leasing in writing.

 

do
hereby agree to the following:

 

1.                   The Leased Property, Intended
Purpose and Use

 

1.1            The present leasing agreement relates to the
office/business premises with a leasable floor area (“v.v.o.”) of 5,768 m2,
which has been constructed at Prof. Holstlaan in Eindhoven and is also referred
to as “Building WDO,” in both respects in accordance with the site plan and
other plans attached as Annex 2, with which the parties are sufficiently
acquainted, hereinafter referred to as “the leased property,” with 130 parking
spaces in a parking garage on the Philips High Tech Campus to be further
specified.

 

1.2            The leased property may be used exclusively
as office/business premises, research and/or development premises, or
laboratories.

 

	
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1.3            Lessee is not permitted, without the prior
written consent of Lessor, to use the leased property for any purpose other
than as described in Sec. 1.2.

 

1.4            The maximum permitted load on the floor(s) of
the leased property is 400 kilograms per square meter.

 

1.5            After consultation with Lessee, Lessor’s site
management is entitled to reduce the number of parking spaces allotted to
Lessee, if a change in the expected number of parking spaces needed for the
users of the Philips High Tech Campus constitutes reasonable cause to do so.
The rental fee for the leased property shall in that case be lowered by €919
per parking space per year for each parking space by which Lessee’s allotment
is reduced. If at any time Lessee uses more or fewer parking spaces than the
amount to which it is entitled under the terms of the present agreement (“actual
overuse” or “actual underuse”), then it shall be charged an amount of €919 per
actually overused parking space per year or be given a discount of €919 per
actually underused parking space per year, or, if the actual overuse or actual
underuse occurs for a period longer or shorter than one year, an amount
prorated to the duration of the actual overuse or actual underuse, all as
further stipulated in the regulations of the Philips High Tech Campus, to be
approved by the Managing Board, on which one or more representatives of Lessor
and one or more representatives of Lessee shall hold seats.

 

2.                   Terms and Conditions

 

2.1            The following are integral parts of the
present agreement:

 

(i)                  the
“General Stipulations of Leasing Agreements for Office Premises and Other
Business Premises Not Subject to Article 7A (1624) of the Civil Code,” filed at
the Office of the District Court in The Hague on February 29, 1996 and
registered there under No. 34/996, hereinafter referred to as the “General
Stipulations”;

 

(ii)               the
appendix to the present agreement contained in Annex 6 to the present
agreement, hereafter referred to as the “Appendix”;

 

(iii)            the
annexes to the present agreement.

 

The
parties are acquainted with the contents of the General Stipulations, the
Appendix, and the annexes. Lessee has received a copy thereof and declares its
acceptance thereof upon signing the present agreement.

 

2.2            The stipulations of Sec. 2.1 apply insofar as
not provided otherwise in the present agreement or unless the application
thereof with respect to the leased property is not possible.

 

3.                   Term, Duration, and Termination

 

3.1            The present agreement enters into force on
June 27, 2002, hereinafter referred to as the “effective date.”
Notwithstanding the provisions of Stipulations 17.1-17.3 of the “General Stipulations,”
Lessee is obligated to accept leasing of the leased property and the
appurtenant parking spaces effective from June 27, 2002, hereafter
referred to as the “date of delivery,” and Lessor is obligated, effective from
the date of delivery, to provide leasing of the leased property and the

 

	
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appurtenant
parking spaces. If the leased property is not available on the date of
delivery, Lessor shall, with due regard for Lessee’s reasonable interests, set
a new date that shall replace the date of delivery and shall also be referred
to hereinafter as the “date of delivery.”

 

3.2            The present agreement ends, without any
notice requirement, on June 27, 2007 (hereinafter referred to as the “end
date”), unless the agreement is extended or has been previously terminated
pursuant to the terms of the present agreement. Lessor shall notify Lessee at
least six months prior to the end date whether the agreement can be extended.
If the present agreement has been extended pursuant to the terms of the
agreement, it ends, without any notice requirement, on the last day of the
extension period, unless the agreement is again extended or has been previously
terminated pursuant to the terms of the present agreement.

 

3.3            If Lessor in any way obtains the authority to
lease the leased property and the appurtenant parking spaces to Lessee after
the end date, the present agreement shall, if so requested by Lessee, be
extended for the duration of the period for which Lessor has obtained said
authority. Both Lessor and Lessee can, however, limit said extension to a
period of five years. In the event of any extension of the present agreement,
Lessor and Lessee shall decide on a new rental fee by mutual consent, with said
rental fee to be in conformity with market conditions. However, the rental fee
shall in all instances be adequate to cover Lessor’s reasonable costs arising
from the acquisition, use, administration, and preservation of the aforesaid
authority, said costs expressly including but not limited to the financing
costs and/or rental fees incurred by Lessor with respect to the leased property
and the appurtenant parking spaces. Lessor and Lessee shall enter into consultation
concerning a further extension of the present agreement no later than six
months prior to the end of the extension period.

 

Lessor
shall make every commercially reasonable effort to obtain the authority
referred to in the first sentence of this section under terms and conditions
convenient to Lessor.

 

3.4            Lessor is entitled to effect premature
termination of the present agreement, with notice:

 

(i)                  effective
from the date on which its authority to lease the leased property and the
appurtenant parking spaces to Lessee ends;

 

(ii)               if
a circumstance as specified in Stipulation 7 of the “General Stipulations”
arises; or

 

(iii)            if
Lessee is no longer a subsidiary of Koninklijke Philips Electronics N.V. within
the meaning of Article 24a, Book 2, of the Civil Code.

 

Premature
termination of the present agreement by Lessee is not possible. Insofar as
Lessor has granted its advance, written, express consent thereto, Lessee has
the authority to substitute a third party in its stead, in whole or in part, with
respect to the present agreement. Lessor shall not withhold its consent on
unreasonable grounds nor attach unreasonable conditions to its consent to the
substitution. At Lessee’s request, Lessor shall make every commercially
reasonable effort to find a third party for the aforesaid substitution. Any
costs incurred through such efforts shall be

 

	
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borne
by Lessee, if approved in advance and in writing by Lessee.

 

3.5            Notice as referred to in Sec. 3.4 shall
be effected by way of writ or by registered mail.

 

4.                   Payment Obligation, Payment
Period

 

4.1            Lessee’s payment obligation arising from the
present agreement comprises:

 

•                       the rental fee (said fee being inclusive of
the fee for leasing the parking spaces named in Sec. 1)

 

•                       the value-added tax owed on this rental fee
or any amount corresponding thereto, in accordance with and with due regard for
the provisions of Stipulations 15.2 and 15.3 of the General Stipulations,
provided that the parties have agreed to a rental fee subject to value-added
tax

 

•                       compensation for the user-specific
investments as referred to in Sec. 9.6.

 

4.2            The annual rental fee is €1,043,388 (one
million forty-three thousand three hundred eighty-eight euros). This amount is
derived as the total of €160.18 per square meter of v.v.o. per year for the
leased property plus €919 per parking space per year.

 

4.3            The rental fee is adjusted one year after the
effective date in the first instance, and subsequently as of February 1 of
each year, in accordance with Stipulations 4.1 and 4.2 of the “General
Stipulations,” on the understanding that the consumer price index series
CPI-Employees Low (1990=100) is replaced by the consumer price index series
CPI-Employees Low (1995=100).

 

4.4            The fees for additional facilities and
services are determined in accordance with Stipulation 12 of the “General
Stipulations.” Such fees shall be subject to a system of advance payments with
settlement at a later date, as indicated there.

 

4.5            The payments to be made to Lessor by Lessee
are due in lump sums payable in advance for successive payment period(s) as
indicated in Sec. 4.6 and must be paid in full prior to or on the first
day of the period to which the payments relate.

 

4.6            The rental fee per payment period of one
calendar month is €86,949.00. The rental fee per year is €1,043,388.00. These
amounts are exclusive of value-added tax.

 

4.7            In view of the effective date of the lease,
the first payment period relates to the period from the date of delivery
through the last day of the respective calendar month. The amount owed for that
period shall be prorated according to the number of days in that period. Lessee
shall pay that amount, plus any value-added tax owed thereon, prior to the date
of delivery.

 

4.8            The leasable floor area named in
Sec. 1.1 has been determined in accordance with the

 

	
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measurements
indicated in the Measurement Certificate prepared in conformity with NEN 2580,
Elta J. Claas. Adjustments between Lessee and Lessor for under- or
over-measurement of the leased property are barred.

 

5.                   Value-Added Tax

 

5.1            The parties agree that Lessor shall charge
Lessee no value-added tax on the rental fee if they belong to the same VAT tax
entity. If Lessor and Lessee cease to belong to the same VAT tax entity,
Annex 5 shall apply immediately.

 

6.                   Facilities and Services

 

6.1            The Philips High Tech Campus shall offer a
number of centrally provided additional facilities and services for all
lessees. These are facilities and services that are of interest to all lessees
and are not business-specific, such as catering, security, landscaping, etc.
The Philips High Tech Campus site management and Lessee shall in due course
enter into consultation concerning additional facilities and services to be
utilized by Lessee by way of the consultation body established for this
purpose, known as the “Managing Board.”

 

6.2            If specific facilities and/or services on the
so-called Central Strip of the Philips High Tech Campus are provided or
offered, Lessee is immediately barred from (further) offering, directly or by
way of third parties, these or comparable facilities and/or services on the
High Tech Campus to its employees whose normal workplace is on the Philips High
Tech Campus.

 

6.3            Lessee and the Philips High Tech Campus site
management shall enter into further agreements concerning the terms and
conditions of facilities and services as referred to in Sec. 6.1 and 6.2.
The fees to be charged to Lessee shall be determined in conformity with market
conditions.

 

7.                   Bank Guarantee

 

7.1            Contrary to Stipulation 8 of the “General
Stipulations,” Lessee is not obligated to furnish a bank guarantee to Lessor.

 

8.                   Coordination

 

8.1            Lessor designates as its agent for
performance of the present agreement the Philips High Tech Campus site
management, which shall act on its behalf.

 

9.                   Special Stipulations

 

9.1            Substantive alterations in the leased
property require the advance written approval of Lessor.

 

	
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9.2            Notwithstanding the authorities to terminate
the present agreement that Lessor may hold under the provisions of
Sec. 3.4(iii) of the agreement, the parties agree that if Lessee ceases to
belong to the tax entity for value-added tax to which Lessor and Lessee belong
at the time when the agreement is entered into, then they, if Lessor fails to
exercise its authority to terminate the present agreement as described
hereinabove, effective from the time at which Lessee ceases to belong to the
tax entity as referred to hereinabove, shall enter into a new leasing agreement
with respect to the leased property and the appurtenant parking spaces:

 

(i)                  in
which it is stipulated that the rental fee shall be subject to value-added tax;

(ii)               that
shall incorporate the stipulations as attached to the present agreement as
Annex 5;

(iii)            whereby
said agreement shall be substantively identical to the present agreement,
except that Sec. 7 of the present agreement shall be replaced by a new
Sec. 7 reading as follows: “The bank guarantee referred to in
Stipulation 8.1 of the “General Stipulations” shall be in an amount
equivalent to six times the rental fee for the leased property per month plus
the costs of the additional facilities and services over that same period, as
stipulated in the agreement that the present agreement replaces and at the time
immediately preceding the time at which the present agreement replaces the
previous agreement.”; and

(iv)           in
which it is stipulated that the present agreement is terminated effective from
the date on which the new agreement enters into force.

 

9.3            The October 1998 report by DNV B.V.
concerning the exploratory soil study and the March 1999 report by Oranjewoud
B.V. (Document No. 947051772) concerning the soil study are deemed the
environmental study whose performance is required prior the start of the
present agreement, as referred to in Stipulation 2.6.1 of the General Stipulations.

 

9.4            With the prior written consent of Lessor,
Lessee has the right, with due regard for locally applicable ordinances and
other regulations, to place advertising materials on, in, near, or alongside
the leased property. Lessor shall not exercise its right to place advertising
materials on and/or alongside the leased property as referred to in the “General
Stipulations.”

 

Lessor
shall grant or deny written consent in conformity with the policy pertaining
thereto, to be established as appropriate by the steering committee.

 

9.5            The following elements of
Stipulations 9.2.1 and 9.2.4 of the “General Stipulations” are considered
altered:

 

(i)                  the
following is added to the stipulation under 9.2.1(c): “insofar as mounted on
the interior of the leased property and subject to renovation owing to normal
wear and tear”;

(ii)               the
following is added to the stipulation under 9.2.1(d): “subject to renovation
owing to normal wear and tear”;

(iii)            in
the stipulation under 9.2.1(g), the parentheses around “and renovation of small
components” are disregarded;

(iv)           in
the stipulation under 9.2.4, the phrase “and the cleaning of ventilation
conduits is

 

	
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disregarded.”

 

Costs
of maintenance, repair, and renovation that are not borne by Lessee pursuant to
the stipulations of (i) through (iv) shall be borne by Lessor.

 

9.6            Notwithstanding the provisions of
Stipulation 5.1 of the “General Stipulations,” with respect to the
so-called user-specific investments made by Lessor on behalf of Lessee as
further specified in Annex 7 to the present agreement, the interest and
repayment of principal on said user-specific investments shall be paid by
Lessee in the form of an annual payment over the term of the present agreement,
due each January 1, of €310,829.00, this being the annual annuity for
interest and repayment of principal for said user-specific investments
calculated with a term of 15 years and an interest rate of 7% per annum paid in
arrears. At the end of the present leasing agreement, unless Lessor is at fault
for termination, the cash value—calculated at an interest rate of 7% per annum
paid in arrears—of the remaining annual annuities—over the period of 15 years
after the date of delivery—shall be payable immediately and in full by Lessee
to Lessor. If a subsequent owner or lessee wishes to retain user-specific
investments in the leased property, Lessee’s obligation to remove user-specific
investments at the end of the leasing agreement expires and any compensation
paid for them by the subsequent owner or lessee shall be for the benefit of
Lessee.

 

9.7            The present agreement supersedes all prior
arrangements made between Lessee and Lessor with respect to the subject matter
of the present agreement (including all appurtenant annexes).

 

Made
and subscribed in duplicate

 

	
  Place:

  	
   

  	
   

  	
   

  	
  Place:Eidhoven

  
	
  Date

  	
   

  	
   

  	
   

  	
  Date: 9-26-2002

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Philips Semiconductors B.V.

  	
   

  	
   

  	
   

  	
  Philips Electronics Nederland
  B.V.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
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  J. Lobbezoo

  	
  T. Claasen

  	
   

  	
  J. Wilkes

  	
   

  	
  C.H.L. van der Linden

  
								

 

	
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7Exhibit 10.12

 

 

Dated as 29 of March 2002

 

 

 

China-Singapore Suzhou Industrial Park Development Co., Ltd.

 

 

And

 

 

Phillips Semiconductors (Suzhou) Co., Ltd.

 

 

 

CONTRACT FOR CUSTOM-BUILT LEASE FACTORY

 

Phase 1A

 

Contract No.: L/B2002-03-1

 

 

 

March 29, 2002

 

Page 1

 

Lessor:                     China-Singapore Suzhou Industrial Park Development co., Ltd. with its
address at 12 Floor, International Building, No. 2 Suhong Road, Suzhou
Industrial Park, Jiangsu Province, People’s Republic of China, and its Legal
Representative is Cheng Deming. (hereinafter referred to as: “Party A”)

 

Lessee:                    Phillips Semiconductors (Suzhou) Co., Ltd., with its legal address at
188 Suhong XI Road, Suzhou Industrial Park, Jiangsu Province, People’s
Republic of China; and its legal representative is Robert Westerhof.
(hereinafter referred to as: “Party B”)

 

In
accordance with the Contract Law of People’s Republic of China and other
related laws and regulations, both Party A and Party B, after
friendly negotiation, agree to enter into and sign this Custom-built Factory
Lease Contract (hereinafter referred to as: “Contract”) for the purpose of
defining their respective rights and obligations.

 

Article 1      Specifications,
Location and Size

 

1.1                         Party A shall in conformity with the
Construction Requirements of Party B as further specified in Annex 1
hereto (hereinafter referred to as “Construction Requirements”) assign the
design and be responsible for construction of a custom-built factory for the
use of Party B (hereinafter referred to as: “Factory”) in accordance with
relevant laws and regulations. The Lay out drawing of the Building, as modified
from time to time with the written confirmation made by both Parties, is
attached hereto as Annex 2. Upon Final Acceptance (as defined
hereinafter), Party B shall lease the Factory to Party A. The total
construction area shall be approximately thirty-three thousand square meters
(13,000 m2), subject to the final survey result made by the
competent survey company who is approved by governmental authority.

 

1.2                         The Site on which the Factory shall be built is located on the North of
the Suhong Xi Road within the Suzhou Industrial Park as indicated in Annex 3
hereto (hereinafter referred to as: “Site”). The land area is 44,823.68 square
metres.

 

Article 2      Construction

 

2.1                         Party A shall, base on the Construction Requirements, select one
or more subcontractors (hereinafter referred to as: “Subcontractor(s)”) to
conduct the

 

Page 2

 

construction.
To the extent permitted by law, Party A shall be fully liable for the
Subcontractor(s).

 

2.2                         Each Party shall appoint one person to organize the acceptance
group to test whether the Factory and the Site are in conformity with the
Construction Requirements hereinafter referred to as: “Acceptance Test”).

 

Upon
successful passing of the Acceptance Test, Party A and Party B shall
sign a Certificate of Final Acceptance in duplicate, one for each Party (hereinafter
referred to as “Final Acceptance”). Unless and until the Site and/or the
Factory fulfill the conditions set out in the Construction Requirements, Party A
shall promptly make for its own account the necessary repairs, modifications
and adjustments and shall upon completion thereof offer the Site and Factory,
as the case may be, again for Acceptance Test and to sign Certificate of Final
Acceptance.

 

Upon
successful passing of the Final Acceptance, Party A will deliver to Party B
a certified copy of the Certificate of Land Use Right of the Site, the Property
Ownership Certificate of the Factory and the Building Lease Permit with respect
to the Factory, citing that Party A is the duly owner of the land use
right of this Site and the Factory. As for the failure to provide Party B
with the above-mentioned Certificates due to the failure of passing the fire
prevention test or due to reasons not caused by Party A, e.g. the
installation of supporting factory infrastructure facilities, a copy of such
Certificates shall be provided by Party A to Party B once obtained by
Party A. All above actions shall not affect the installation of Factory
facilities and production equipment, provided that the design drawings of which
have been approved by relevant government authority(ies).

 

2.3                         Part A shall organize the construction in accordance with relevant laws
and regulations with respect to the public bidding and discussion of tender.

 

2.4                         Failure to fulfill the obligations under the Article 2.11, 2.12
and 2.13 for reasons not caused by Party B or under the event of Force
Majeure, Party  B is entitled to claim from Party A, including but
not limited to the compensation for construction delay and construction
suspension as well as penalty in the amount of RMB 0.4% (point four pro mille)
of total construction cost for every day of delay period, however, with the
total amount of compensation to be paid by Party A for losses incurred by Party B
herein not exceeding 2.5% (two and half percent) of the total construction
cost.

 

Page 3

 

The
Party B may, without prejudice to any other method or recovery, deduct the
amount of penalties of such damages from any amount due or to become due to Party A.

 

2.5                         Failure to fulfill the obligations under the Article 2.11, 2.12
and 2.13 for reasons caused by Party B, Party A is entitled to claim
from Party B, including but not limited to the compensation for
construction delay and construction suspension as well as a penalty in the
amount of RMB 0.4% (point four pro mille) of total construction cost for every
day of delay period, with the total amount of compensation to be paid by Party A
for losses incurred by Party B herein not exceeding 2.5% (two and half
percent) of total construction cost.

 

2.6                         With the understanding that the fire prevention test will not be
proceeded until the completion of internal decoration, Party A and Party B
hereby agree that the Acceptance Test may be conducted prior to acquirement of
the Certificate of Fire Prevention Test. However, failing to pass the Fire Prevention
Test due to the reason of Party A, the Final Acceptance Certificate for
the Factory shall not be signed and Party A shall take remedial measures
to pass the Fire Prevention Test. The above actions shall not affect the
Installation of Factory facilities and production equipment, provided that the
Design Drawings of which have been approved by relevant government authorities.

 

2.7                         The above payment or deduction of such compensation shall not relieve Party A
from his obligation to complete the Factory and Site, or from any other of his
obligations and liabilities under the Contract including any claim for damages
or losses as a consequence of the failure to comply with the time of
completion.

 

2.8                         An independent construction auditing organ with the qualification of
auditing the construction price, recognized by the related government
authorities shall be jointly selected by both parties to certify the actual
price listed in Article 10.2(ii) at the time of the Final Acceptance.

 

Both
parties shall jointly be responsible for the cost control of the construction
of the Factory and ensure that the total construction costs of the Factory does
not exceed USD three (3) million, regardless of the findings from such
construction auditing organ, except for the cost of the design changes or
engineering claims for the reasons not caused by Party A.

 

2.9                         Party A will provide all construction related documentation that Party A
should provide, as required by Party B for applying the necessary
certificates and approval from the government authority.

 

Page 4

 

2.10                   Party B will provide all construction related documentation that Party B
should provide, as required by Party A for applying the necessary
certificates and approvals from the government authority.

 

2.11                   Party B shall have the right to enter into the Factory building to
engage in the installation of supporting Factory infrastructure facilities
after 75 days of the signing of the Contract.

 

2.12                   A Civil Test Certificate (excluding the outdoor construction and
elevator installation) shall be acquired by Party A after 120 days of
the signing of the Contract provided that a Construction Planning Permit for
Factory building and Supporting Factory Infrastructure Facilities shall be
acquired (and Party A has an obligation to acquire) within 75 days of
the signing of the Contract.

 

2.13                   An Acceptance Certificate of the Factory’s outdoor construction and
elevator installation shall be obtained by Party A after 150 days of
the signing of the Contract, provide that the progress of outdoor construction
is not affected by the construction of supporting Factory infrastructure
facilities.

 

Article 3      Purpose of the
Factory

 

The
Factory shall be used by Party B for industrial and related offices
purposes only. Without permission of Party A, Party B shall not use
the Factory for any other purpose.

 

Article 4      Lease and
Lease Term

 

4.1                         Party A and Party B hereby agree that Party A will lease
to Party B, and Party B will accept such lease, the Factory and the
Site at the terms and conditions as set forth herein (hereinafter referred to
as: “Lease”). The lease term of the Factory (hereinafter referred to as: “Lease
Term”) shall commence from the date of June 1, 2002 and shall expire 10 calendar
years, each calendar year equaling 365 (three hundred and sixty five) days.
During the first 5 Calendar Years of the Lease Term, the Lease can not be
terminated and the rental payment for such 5-year period shall be fully made by
Party B even if Party B terminates this Lease earlier (hereinafter
referred to as: “Guaranteed Lease Term”), unless Party B exercises its
purchase option as referred to in Art. 10 herein during such Guaranteed
Lease Term.

 

4.2                         Following the expiration of the Guaranteed Lease Term and any renewed
period, Party B may unilaterally terminate the Contract by delivering to Party A
written notice three months prior to the termination date. Party B shall
return the Site,

 

Page 5

 

as
extended from time to time, and the Factory to Party A and shall
compensate for any of Party A’s direct losses and damages incurred by
delay of such returning due to Party B’s failure. Party B shall
return the Site, as extended from time to time, and Factory after the
termination of the Lease term at the statue as agreed on by the Certificate of
Final Acceptance (or any agreed on modification by Party A thereof) except
for normal wear and tear. Party B shall make for its own account the
necessary repairs, modifications and adjustments to turn the Site and/or
Factory into the said status.

 

4.3                         Subject to the agreement between the Parties on the new rental fee, the
term and conditions of any renewed lease contract shall be substantially the
same as to this Contract.

 

Article 5      Rental Payment

 

5.1                         The rental fee for the Factory and the Site is fixed for the first 5
years of the Lease Term (hereinafter referred to as: “Fixed Rental Period”) and
equals three point five United State Dollars per squire meter per month (USD 3.5/m(2)
per month). The total amount of rental payment in the Fixed Rental Period is
indicated in Annex 4. The total monthly rental shall be approximately
45,500 USD (such total monthly rental shall be adjusted in once in the
first then monthly rental payable by Party B right after the survey result
as mentioned in Article 1.1 herein has been issued).

 

After
the Fixed Rental Period, Party A shall have an option to adjust the rental
payment only subject to the inflation rate issued by the Statistical Bureau of
China in the concerned year, and shall not exceed (5%) percent of the rental
payment of the previous year.

 

5.2                         The rental fee shall as from the date of June 1, 2002 be paid by Party B
every calendar quarter within twenty-one days of the commencement of the
calendar quarter upon receipt of an invoice from Party A. Any payment
delay from Party B will be subject to the penalty of two point five
(0.025%) per cent over the delayed amount calculating every day from the delay
period. In case, due to the reason of Party A, the Civil Test Certificate
of the Factory or Acceptance Certificate of the Factory’s outdoor construction
and elevator installation is not timely obtained according Art. 2.12 and
2.13 or the fire prevention acceptance is not passed, Party B is entitled
not to pay the rental for the delaying period.

 

5.3                         In case Party B pays the Rental in Renminbi. The exchanged rate
between Renminbi and United States Dollars shall be the middle rate between
United

 

Page 6

 

States
Dollars and Renminbi published by Bank of China on the date of actual payment.

 

5.4                         If the due date for any payment falls on Saturday, Sunday or any public
holiday of PRC, that date shall be extended to the first working day after such
Saturday, Sunday or public holiday in the PRC.

 

Article 6           Deposit

 

6.1                         Party B shall pay to Party A the deposit in the amount of 6
months rental payment at the time of the first rental payment.

 

6.2                         The deposit paid by Party B will be set-off and treated as of the
6 months rental payment from Party B after the lease of 12 month Lease
Period.

 

Article 7           Obligations for Lessee

 

7.1                         The ownership of the Factory building belongs to Party A within
the Contract period. With Party A’s written consent, Party B shall not
transfer, sublease, mortgage or invest all or part of the Factory to any third
party, or any other action that infringes Party A’s ownership. Party B
shall take good care of the Factory and keep it in good condition, and make the
rental fee payment as scheduled.

 

7.2                         The fixed assets of Party B kept at the Site shall be at Part B’s
risks and expenses.

 

7.3                         Party B shall take good care of the Factory to repair and maintain
it at its own cost and expenses, however, Party A shall be liable for such
cost and expenses within the guaranteed period 
as stipulated in relevant laws and regulations. Party A is entitled
to inspect the use and maintenance of the Factory from time to time, and Party B
shall facilitate such inspection.

 

7.4                         Party B shall be liable for any claim and compensation from any
third Party for the damage suffered by third Party caused by the
improper use of the Factory building by Party B.

 

Article 8           Obligations for Lessor

 

8.1                         During the term of this Contract, the right to use the Factory belongs
to Party B, and Party A shall be liable for any third party’s claim
against the ownership of

 

Page 7

 

the
Factory due to the reason of Party A, which shall not affect the use right
of Party B hereof. Party A shall indemnify Party B for any loss
suffered thereof.

 

8.2                         Prior to the Final Acceptance, Party A shall allow Party B to
conduct Internal installation provided that such internal installation does not
affect the normal construction progress of Party A. Before the internal
installation takes place, the Acceptance Test of the part of the Factory where
such internal installation shall take place should have been passed by both
Parties.

 

8.3                         Party A shall be responsible for procuring an all risk insurance
for the Factory and Site for the agreed catalogue of insurance at Party B’s
cost and expenses. In case any accident happens, the insurance compensation
from the insurance company for such accidents shall be used to cover the
repairing and maintenance of the Factory and Site. Party A shall provide
to Party B a copy of annual insurance policy on each third quarter of
every year.

 

8.4                         Party B may sublease any part of the Factory to its affiliate(s)
provided that a prior written notice is sent to Party A for such sublease,
and Party A shall provide its assistance and support to acquire the registration
of such sub-lease.

 

8.5                         Party A shall not sell and/or transfer all or part of the Factory
building to those who may engage in the similar business to that of Party B’s
during the Contract period of Party B.

 

8.6                         Party A may terminate the Contract only when Party B
substantially breaches the Contract including delay of the rental payment for
over three (3) months without any reason.

 

Article 9           Representations and Warranties

 

Party A represents and warrants that:

 

9.1                         the lease to Party B of the Factory and Site, as extended from
time to time, are permitted, entitled and authorized to such lease;

 

9.2                         no further approval or permission is required with respect to the rental
fees, as adjusted from time to time, as referred to in Article 5 hereof;

 

9.3                         the industrial and office use of the Site, as extended from time to
time, and the Factory as included in the business scope of Party B is
permitted.

 

Page 8

9.4           Party B, as long as it is in compliance
with the relevant governmental rules and regulations during the term of the
Lease Term, shall not be disturbed in its normal use of the Site, as extended
from time to time, and the Factory;

 

9.5           The construction of the Factory has
been approved by the relevant Chinese authorities and complies with all
applicable Chinese rules and regulations including safety and environmental
regulations;

 

9.6           Party B shall not be liable for any
soil and ground water pollution prior to the date of Final Acceptance. Both
parties shall have a qualified environmental inspection authority to test the
soil and ground water and to provide a related report before signing the
Certificate of Final Acceptance.

 

In case Party A fails to comply with these warranties and
representations, it shall indemnify to Party B for all losses, damages, costs
and expenses incurred by Party B as a consequence of such non-compliance.

 

Article 10 Purchase Option

 

10.1         Party A hereby grants Party B during
the Lease Term the irrevocable and unconditional right to purchase and obtain
the unrestricted title with full and transferable ownership of the Factory
and/or Site (or part of the Site), as extended from time to time (including,
but not limited to, the land use right and the Property Ownership) as to be
further laid down in a purchase contract. Party B may exercise this option by
issuing a written notice to Party A three (3) months in advance.

 

10.2         The purchase price (hereinafter
referred to as: "Purchase Price") is calculated on the basis of the
following formula:

 

Purchase Price = A - B + C + D

 

A             represents the total investment by Party A with respect
to the Factory and the Site, as extended from time to time, composing of the
following expenditures:

 

(i)            fee as paid or to be paid by Party A
to obtain the land-use right to the Site (the price shall be fixed at eighteen
United States Dollars (USD18/m2), as extended from time to time;
plus

 

(ii)           actual amount(s) paid by Party A to
the Subcontractor(s) and any related payments to design institute, project
supervisors and architects as well as

 

Page 9

 

 

 

their interests cost (but excluding the penalty and
compensation caused by Party A), all to be agreed on following the date of
Acceptance; plus

 

(iii)          the following taxes and duties payable
by Party A regarding the sale of the Factory and Site to Party B:

 

a.    Business Tax over the Purchase Price;

 

b.    Stamp Duty in respect of the purchase
contract mentioned above;

 

c.    Public Notary Fee over the purchase contract
for the above transaction (excluding 50% of the Public Notary Fee to be born by
Party B for the Transfer of land use right of the said Site);

 

d.    Education Surcharge;

 

B             represents the total amount of rental fees paid by Party
B to Party A up to the date of transfer of the Factory and the Site, as
extended from time to time, as a consequence of the exercise of this Purchase
Option;

 

C             represents the total amount of interest at the fixed
rate of 5.88% as calculated over the total amount under A plus D minus B hereof
as from the date of June 1, 2002 until the date when Party B pays up the
Purchase Price.

 

D             represents the total amount of the following taxes paid
by Party A during the Lease Term:

 

a.     Business Tax with respect to rental
payments;

 

b.     Education Surcharge;

 

c.     Stamp Duty in respect of this Contract;

 

d.     Real Estate Tax (after the Guaranteed Lease
Term).

 

10.3         The Purchase Price shall be payable
upon the completion in full of the transfer of above title and ownership.

 

10.4         Party A hereby represents and warrants
that:

 

Page 10

 

 

(i)                the title and ownership of the
Factory and the Site, as extended from time to time, is complete and full and
free of any lien, encumbrances, mortgages and the like;

 

(ii)               all required fees (including but
not limited to the land use right fee and taxes for acquiring and exercising
said title and ownership) are paid in full by Party A up to the date that the
Certificates of the Ownership of the Factory Building and the Land Use Rights
of the Site, as extended from time to time, as referred to in Article 2.2
herein, are delivered to Party B, and Party B does not need to pay any fee on
such transfer of the land use right;

 

(iii)              Party A has obtained all required
approvals, permits and the like to execute said transfer;

 

(iv)             the relevant Chinese rules and
regulations allow the Factory and the Site, as extended from time to time, to be
used for industrial operations, including those operations in the scope of
Party B and

 

(v)              that the term of the relevant land
use rights shall be the rest of 50 calendar years commencing from January 1,
2001.

 

10.5         Party A will at its own costs and
expenses provide the following documents within four (4) months following the
execution of the purchase contract by both parties, and Party B shall pay up
the Purchase Price simultaneously to Party A:

 

(i)                the original Certificate of
Land-use Right as granted (not allocated) with respect to the Site, as extended
from time to time; and

 

(ii)               the original Property Ownership
Certificate with respect to the Factory.

 

10.6         When paying the above mentioned
Purchase Price, Party B shall also pay the actual corporate income tax paid by
Party A as a result of the Rental it receives from Party B herein, which shall
be deemed as part of the Purchase Price. In the case that the taxable income as
shown in Party A’s accounts could deduct the capital loss incurred from the
Purchase Price received from Party B ("Capital Loss"), then the tax
benefit incurred from part or all of such Capital Loss should be deducted
hereof ("Deductible Amount"). (hereinafter referred to as "Party
A’s CIT")

 

Party A’s CIT shall be calculated with reference to
Annex 5, should be supported by relevant documents to be provided by Party A
including complete audited

 

Page 11

 

 

annual accounts of Party A and confirmed by Party B
before Party B pays the Purchase Price and Party A’s CIT.

 

Any remaining portion of the Deductible Amount enjoyed
by Party A for loss covering in the following years shall be refunded to Party
B.

 

Article 11 Land Reservation

 

Party A agrees to reserve for two (2) years from the signing date of
this Contract, a piece of land indicated in Annex 2A for Party B (hereinafter
referred as "Reserved Land"). Party B shall sign the Land Use Right
Transfer Contract in respect of the Reserved Land with Party A within such
period.

 

Unless otherwise agreed between the Parties, the purpose of Reserved
Land shall be the same as of this Contract.

 

Article 12 Force Majeure

 

Neither Party shall be liable for any damages or losses nor have the right
to cancel for any delay or default in performance hereunder if such delay or
default is caused by conditions beyond its reasonable control and what is not
foreseeable including acts of God, government imposed prohibition on the use of
the Site and the Factory, wars, insurrections, fires and floods; provided,
however, that either Party shall have the right to terminate this Contract upon
sixty (60) days prior written notice if the delay or default of the other Party
due to any of the above-mentioned causes continues for a period exceeding two
(2) months.

 

Article 13 Taxes, Duties and Other Levies

 

Party A shall be responsible to pay all taxes, levies and duties in
respect of the Site, as extended from time to time, and Factory (including, but
not limited to, business tax, land use tax, real estate tax, and income tax).
Stamp duties shall be paid by each party in accordance with the law.

 

Article 14 Applicable Law and Disputes Settlement

 

This Contract is governed and construed by the laws and regulations of
the People’s Republic of China. Any dispute or claim arising out of or in
connection with this Contract, including any question regarding its existence,
validity, or termination may be settled through amicable discussions between
the parties and if any agreement between the parties cannot be reached within
fifteen (15) days after written notification from one party to the other party
of the existence of the dispute, such

 

Page 12

 

 

dispute or claim shall be referred to and finally settled through
arbitration by China International Economic and Trade Arbitration Commission
Shanghai Branch ("Arbitration") in accordance with the Arbitration
Rules of the China International Economic and Trade Arbitration Commission ("CIETAC").
The law applicable to the Arbitration shall be the laws of the People’s
Republic of China. The arbitrators shall be appointed in accordance with the
CIETAC Rules whereby one arbitrator shall be appointed by Party A, one by Party
B and a third one by the arbitrators appointed by Party A and Party B,
respectively. The language to be used in the Arbitration proceedings shall be
Chinese and English. The Arbitration costs shall be born by one party or
parties as decided by the arbitration award.

 

Article 15 Effectiveness and Language Versions

 

This Contract is written in English and Chinese language, both having
the same effectiveness and each Party shall have one originally executed copy
in English and Chinese language. This Contract and its Annexes which shall form
an integral part thereof, shall enter into force after being executed and
affixed by both parties.

 

 

SIGNED by

the authorized representative of

CHINA-SINGAPORE SUZHOU

INDUSTRIAL PARK

DEVELOPMENT CO., LTD

 

[Illegible Stamp]

 

SIGNED by

the legal representative of

PHILIPS SE

(SUZHOU CO., LTD.

 

[Illegible Stamp]

 

Page 13

 

Annex 1:                Construction
Requirements

 

A             Construction
Range

 

Civil construction of warehouse:

 

Pile foundation

Main building

Doors and windows

Roof

Renovation Decoration:  Only include paint dope for inner & outer
walls and sunshade roof, decoration in toilet (floor tile brick, wall tile
brick, partition, mirror, floor board, dryer, suspended ceiling), floor tile
brick in stair well.

Water supply and sewerage work:  Only include rainwater drainage and drainage
in toilet.

Ventilation and illumination: Only include ventilation
and built-in piping fittings in toilet.

Electrical works: Only include lightening
proof and grounding system.

Purchase and installation of elevator.

 

Civil construction Earthwork for the power
house of Engine Room

Pile foundation

Main building

Doors and windows

Roof

Decoration Renovation:  Only include paint dope for inner & outer
walls and sunshade roof, decoration in toilet (floor brick, wall brick,
partition, mirror, floor board, dryer, suspended ceiling), floor brick in stair
well.

Water supply and sewerage work: Only include
rainwater drainage and drainage in toilet.

Ventilation and illumination: Only include
ventilation and built-in fillings in toilet.

Electrical works: Only include lightening
proof and grounding system.

 

Appurtenant work for the power house of
Engine Room and warehouse

Outdoor road: Include underground drainage
and sewerage pipe

Outdoor service pipe

Outdoor Fire hydrant: loop Dual feed, outdoor
fire hose is included

Power supply: Two 15000 KVA cable duct. One
cable to the substation will be put in.

Street Lamp: Include the circuit (from the
Lamp control box to the ring circuit)

 

Page
14

 

 

Landscaping Greenery

Fence, Main gate, Guardroom

Parking lots, bicycle parking place

Water Pool

Chemical article warehouse

Pipe Rack frame (From Engine Room power house
to warehouse)

 

B             General
construction requirement:

 

1              Roof:  Heat prevention. 2.5cm-width (CHINESE
CHARACTERS) thermal insulating board

2              Roof:  Waterproof. YUWANG APP waterproof coiled
materials

3              Moisture proof layer:  Hai Long Jiang JUYLIAN SBC moisture proof
coiled materials

4              Paint Dope for inner wall and
sunshade roof:  NANBAO 815 water cement
paint

5              Paint Dope for outer wall:  NANBAO 815 paint

6              Sanitary ware:  HCG

7              Floor tile brick and inner wall
tile brick:  Suzhou Roma Rome or the
equivalent brand

8              Doors and windows:  Anodized aluminum alloy doors and windows

9              Elevator:  Odis

10            Outdoor road:  Concrete road. Trunk road:  9 meter in width, branch road: 6 meter in
width. Floor loading:  (CHINESE
CHARACTER)-20

11            Sewerage Pipe:  UPVC pipe. Diameter is no less than 300

12            Drainage pipe:      concrete pipe.  Diameter is no less that 450

13            Outdoor service pipe:  Diameter: 
150

14            Outdoor fire fighting pipe:  loop Dual feed. Diameter:  150

15            Road Lamp:  8 meters in height. Phillips brand

16            Landscaping Greenery:  Manila grass and (CHINESE CHARACTERS) grass

17            Fence:  Cast-iron guardrail

 

C             Special
requirement

 

1              Rolling Door:  Color steel plate

2              One gate with three rolling doors
each to the south and north of the warehouse. The width of the rolling doors is
3m, 3m and 2m respectively. Slope is needed at the area with 2m-width door for
the entry of Forklift.

3              For equipment lifting, a air
gas-tight door (2.25m in width and 2.5m in height) are needed at the exposed
wall of the production hall warehouse workshop

4              Power:  Grounding nets (power system,
lightening-proof system, anti-static system) under each building with grounding
device set aside (include test point). Ground resistance should be less than 1
ohm.

 

Page
15

 

 

5              One staircase to footpath at the
roof for both Engine room and powerhouse and warehouse each (From stair well)

6              White cement and 801 glue to be
brushed at the roof sunshade (include concrete girder) of warehouse workshop
(include pipeline room). Before the white cement ossified, polish at the uneven
area is required.

7              Cover the hole at the floor of pipeline
room of 2nd and 3rd floor of the warehouse with heat-treated zinc-coated
skid-proof iron plate, fastened with bolt. For the thickness of the plate, as
long as it can stand the worker operators and is not out of shape.

8              Warehouse elevator:  Both for passengers and cargo (Loading
2000kg, inner size 2000(L) x 1800(W) x 2100(H). Two sets of control button and
Time-delay switch. Two doors opened at the south and north respectively for one
of the elevators.

9              Except for the workshop and
suspended ceiling, white cement paint at the inner wall, the bottom of the
girder and floor.

10            Decoration at the toilet:  Wall bricks and floor bricks, suspended
ceiling with FC board, FUMEIJIA partition, Store room at toilet.

Sanitary ware:  HCG brand, Middle level
above.

Inductor at the washroom.

11            Decoration at Stair well:  Floor tile bricks (skid-proof), white cement
paint. Stainless steel guardrail for stairs.

12            All out door are Stainless steel
safety door except for rolling door

13            Asbestos construction materials are
prohibited.

14            Roof loading for warehouse:  500kg/m2. Floor loading for warehouse, Roof
and floor payload loading of Engine room and Powerhouse:  1000kg/m2.

15            Requirement for hazzardous articles
warehouse, water pool and piping racks will be provided by Phillips separately.

 

D             Inspection

 

In accordance with the relevant national
inspection regulation and the special requirement required provided by Phillips.

 

Page
16

 

 

Annex 2:                Layout Drawing of Factory Building

 

Page
17

 

 

Annex 2A:             Map of Reserved Land

 

Page 18

 

 

 

Annex
3:                Redline Plan

 

Page 19

 

 

Annex 4:                Rental Payment Schedule

 

Page
20

 

 

Annex 5:                Calculation Table for Party A’s Corporate Income Tax

 

Page
21

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