English version of Premises Leaseback Agreement, dated August 26, 2008, by and between the Companys wholly owned subsidiary Kaifeng High Pressure Valve Co., Ltd. and Kaifeng High Pressure Valve Steel Casting Limited Liabilities Company

1  

Party A is a duly established foreign invested enterprise.  It owns the land use right to the land lot located at No. 93, Xin Song Road, Kaifeng City, Henan and the titles to the buildings thereon.  This land lot has been granted by the state for the purpose of industrial use.

2  

Party B is a limited liability company established by two natural persons (Zhang Peizhuang and Fang Binjie).

3  

Now, the Parties have agreed that Party A will lease parts of Factory Premises on the aforesaid land to Party B.

1.1  

The Factory Premises to be leased by Party A to Party B are located at No. 93, Xin Song Road, Kaifeng City, Henan with total construction area of 27,451 m2.  Reference is made to Appendix I to this Agreement for the numbers of the building title certificates for the Factory Premises to be leased to Party B (the Factory Premises to be leased to Party B by Party A would hereinafter be referred to as the “Factory Premises”).

1.2  

Party A hereby enters into this lease with Party B as the owner of titles to the Factory Premises.  Before entering into this Agreement, Party A has demonstrated to Party B the Agreement for Transfer of Land Use Right and Housing Titles under which Party A obtained titles to The Factory Premises

2.1  

Party A has examined the business license or the contemplated business scope of Party B.  Party B warrants to Party A that Party B will use The Factory Premises strictly in accordance with its approved business scope during Party B’s lease thereof.

2.2  

Party B warrants that Party B will not, unless having been approved in writing by Party A or by competent regulatory authorities (including work safety authority, fire control authority, etc.) according to relevant regulations, conduct in the Factory Premises any production activities other than those set forth in Article 2.1.

3.1  

Party A will deliver The Factory Premises to Party B immediately after Party A acquires title to the Factory Premises pursuant to the Agreement for Transfer of Land Use Right and Housing Titles entered into between Party A and Party B on August 26, 2008.  The term of this lease will start on the date of such delivery and lasts for one whole year.

3.2  

Upon expiration of this lease, Party B will return The Factory Premises on a timely basis.  If Party B intends to extend the lease, it will inform Party A in writing of its intent for extension of the lease three months prior to the expiration to the lease.  If Party A so agrees, both Parties will sign a new Factory Premises Lease Agreement.

4.1  

The annual total rental for The Factory Premises will be the RMB equivalent of US$ 80,000 (the applicable conversion rate will be the foreign exchange rate quoted by the People’s Bank of China for Renminbi on the date of the execution of this Agreement).

4.2  

Party B will pay each annual rental prior to December 31 each year.  Party B will wire transfer the payment to the below bank account designated by Party A, or pay the amount in other methods as agreed upon in writing by the Parties:

5.1  

At the delivery of The Factory Premises, Party B will pay no earnest money for the lease of The Factory Premises.

5.2  

During the term of this lease, Party B will be responsible for payment of fees relating to tap water, electricity, gas, telecommunication, facilities, property management, etc.

5.3  

During the term of this lease, Party A is responsible to secure property insurance for The Factory Premises, and Party B is responsible to secure property insurance for Party B’s assets in The Factory Premises.

6.1  

During the term of this lease, Party B shall be responsible for reasonable maintenance of the equipment and other assets inside the building; Party A will, at its own cost, be responsible to maintain and repair for damages during ordinary use of the Factory Premises unless such damages are caused by Party B’s fault or negligence.  Party A will repair within three working days after the receipt of Party B’s notice.  If Party A fails to repair within the aforesaid time limit, Party B could repair such damages itself, and then promptly inform Party A of such repair and present to Party A relevant invoices for the expense incurred, and Party A will bear expenses reasonably incurred in connection with Party B’s repair.

6.2  

During the term of this lease, Party B will reasonably use and take care of The Factory Premises and relevant facilities.  Party B will bear maintenance costs relating to damages to the Factory Premises arising out of Party B’s improper or unreasonable use thereof.

6.3  

During the term of this lease, both Parties will coordinate with each other in good faith, and ensure the Factory Premises in usable and safe condition.  When Party A examines the Factory Premises for its duty of safety administration, Party B will coordinate with Party A.  Upon discovering hidden work safety risks with Party B, Party A has the right to inform Party B in writing and require it to rectify.

6.4  

If Party B is to add equipment or decorations in the Factory Premises, it shall obtain Party A’s written consent in advance.

7.1  

Unless Party A has agreed to the extension of this Agreement, Party B will return the Factory Premises within ten days from the expiration of this lease.

7.2  

The Factory Premises so returned by Party B will be maintained in such condition as after normal use.

8.1  

During the term of this lease, Party B will obtain Party A’s consent in writing before it sub-leases any part or the whole of the Factory Premises to any third party.

8.2  

During the term of this lease, Party B will obtain Party A’s consent in writing before Party B delegates its lease of the Factory Premises to a third party or exchanges its lease of the Factory Premises with a third party.  After such delegation or exchange, the third party which has entered into the delegation or exchange of the lease of the Factory Premises will enter into a agreement with Party A for a change in the lessee and proceeds to perform this Agreement.

8.3  

During the term of this lease, if Party A intends to sell or pledge the Factory Premises, it will inform Party B three months in advance.  When Party A is to sell The Factory Premises or the mortgagee is to foreclose on the Factory Premises, Party B has the right of first refusal to acquire the Factory Premises on the same terms.

9.1  

During the term of this lease, upon any of the below circumstances, the Agreement will terminate and neither Party will be liable to the other:

A  

The land use right to the land covered by the Factory Premises is duly taken back by the State ahead of schedule.

B  

The Factory Premises are duly requisitioned for public interests.

C  

For purpose of urban planning, the Factory Premises are duly listed among properties required to be demolished and relocated.

D  

During the term of this lease, the Factory Premises are identified as hazardous Factory Premises, or are demolished or lost due to force majeure.

E  

Other circumstances under which the lease may be terminated, as agreed upon by the Parties in writing.

9.2  

Under any of the below circumstances, either Party may inform the other to terminate the Agreement.  If such breach of the Agreement by one Party has caused damages to the other Party, the breaching Party will indemnify the non-breaching Party for all the direct damages incurred by the non-breaching Party:

A  

Party A fails to deliver the Factory Premises within the time limit, and fails again to do so thirty days after Party B’s notice.

B  

The Factory Premises delivered by Party A do not conform to the provisions of the Agreement, thus frustrating the purpose of this lease; or the Factory Premises delivered by Party A pose danger to workplace safety or contain defect in fire-control rating.

C  

Party A discovers workplace safety problems in Party B, and informs Party B in writing and requires it to remedy the Factory Premises, but Party B fails or refuses to remedy.

D  

Without Party A’s consent in writing and approvals from competent regulatory authorities, Party B changes the Factory Premises’ intended or planned production use and conducts production activities other than those set forth in Article 2.1.

E  

Without Party A’s consent in writing or approvals from competent regulatory authorities (including work safety authority, fire control authority, etc.), Party B adds new facilities, modify internal designs, or produces, operates, transports, stores and uses hazardous materials or disposes of hazardous chemicals.

F  

Without Party A’s consent in writing, Party B sub-leases the Factory Premises, transfers the lease to a third party, or exchanges the lease with a third party.

G  

Party B has been in default on the rental payment for an aggregate of twelve months.

H  

The Factory Premises suffer damages due to Party B’s improper use thereof or any other negligence.

I  

Other circumstances under which this lease may be terminated, as agreed on by the Parties in writing.

10.1  

If The Factory Premises contain defects when delivered, Party A will repair such defects within ten days from the delivery.  If Party A fails to repair within such time limit,  the rental that Party A is entitled to will be reduced and relevant provisions relating to the rental will be amended.

10.2  

 Party A will indemnify Party B for any damages Party B has suffered due to the fact that Party A fails to inform Party B of the existence on Factory Premises of any mortgage or of any restriction on alienation of its title.

10.3  

If Party B changes the construction structure of the Factory Premises, or violates relevant technical standards or provisions on fire control and safety without Party A’s consent in writing, or exceeds the scope of Party A’s consent in writing, Party A is entitled to Party B’s restoration of the Factory Premises and payment for damages.

11.1  

This agreement is governed by the laws and regulations of the People’s Republic of China.

11.2  

If any dispute arises during the performance of this agreement, it will be resolved by the Parties through negotiation.  If no resolution could be made through negotiation, the dispute will be resolved through arbitration.  The Parties mutually agree that the dispute will be submitted to Shanghai sub-commission of the China International Economic and Trade Arbitration Commission, and will be arbitrated according to its arbitration rules.  The arbitration award is final and binding on both Parties.

12.1  

Nothing contained in this Agreement will constitute or create between either Party and any of its officers, directors, employees or agents, an agency or representative relationship or a partnership, nor will this Agreement create any express or implied right, power or authority of Party B to enter into any agreement, or to incur any liability or obligation, on behalf of Party A.  Party A will not be held liable under any circumstances under this Agreement to Party B or any third party for any act or omission by Party B that takes place before or after the execution of this Agreement.

12.2  

. Under no circumstances will Party A be held liable under this Agreement for any obligations, commitments or liabilities that existed, exist or will exist with respect to any social insurance contribution, employee welfare plan, pension plan, severance payment, workers compensation, redundancy cost, or any other mandatory or optional welfare plan, for the benefit of, or relating to, any present or former employee (including any beneficiary of any such employee) of Party B or its predecessors.

12.3  

 During the term of this lease, if Party A is to mortgage a part or the whole of the Factory Premises, it will inform Party B in writing and warrants to Party B: if relevant parties are to dispose of The Factory Premises by sale thereof, Party A will, 10 days in advance to such disposal, inquire Party B in writing if Party B will exercise its right of first refusal with respect to the Factory Premises.

12.4  

This agreement will take effective after both Parties have signed and attached their official seals to it.  After the effectiveness of the Agreement, Party A will be responsible to register it according to relevant regulations and obtain the registration certificate for the lease agreement.

12.5  

After the registration of this agreement, if this agreement is revised or terminated, Party A will be responsible to go through formalities for alternation or termination registration with the original registration authority within fifteen days from such alternation or termination.

12.6  

The Parties may negotiate with each other and reach mutual consent on any matter not covered in this agreement and then enter into supplemental articles.  The supplemental articles and the appendix to this agreement are indivisible parts of this agreement, and any handwritten or printed word filled in any blank in this agreement, its supplemental articles or its appendix will have the same effect as the main body of this agreement.

12.7  

This Agreement and its appendix will be executed in three originals.  Party A and Party B will each hold one original, and another original should be filed with Kaifeng real estate administrative authority.  Each of the three originals should have equal legal effect.