Sample Business Contracts

FuTian Automobile Parts Purchase Contract - BeiQi FuTian Automobile Co. Ltd. and JingZhou HengLong Automotive Parts Co. Ltd.

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                                                       Serial Number: 2003H-0119

                    FUTIAN Automobile Parts Purchase Contract

Party A: BeiQi FuTian Automobile CO., Ltd.
Party B: JingZhou HengLong Automotive Parts CO., Ltd.

The Place of Sign:Beijing             The Date of Sign:Nov. 6th,2002



Chapter One             Commercial Clause
Chapter Two             Technology Clause
Chapter Three           Quality Clause
Chapter Four            Service Clause
Chapter Five            The Selection Clause of Products After Stop-Supply
Chapter Six             The Clause of Intellectual Property
Chapter Seven           The Dispute and Other Clauses
Appendix 1              The list of Parts purchase


Party A and Party B through  friendly  negotiation  and mutual  benefit  sign an
agreement as follows:

Chapter One: Commercial Clause

1.1 Party B should be  clearly  indicate  the part name,  type of model,  budget
price,  estimated  quantity,  batch  discount  rate  to  Party  A  (referred  to
attachment 6 - "List of Material of unit"

1.2 Based on `share the  benefit  and share the risk',  Party A will  adjust the
unit price subject to demand of market. Party B should co-operate with Party A's
lower cost strategy to honor the contract after adjusted price.

1.3 The methods of Delivery:

1.3.1 Transportation: by truck.

1.3.2 Packing:  Party B should specify the packing methods according Party A and
prove by Party  A.  Packing  methods:  Plastic  bag,  carton  box,  wooden  box,
container,  steel frame, steel box or others . For the cost of returned packing,
it should be negotiated by both parties.

1.3.3 Shipping destination:  Party B should deliver to the location indicated by
Party A.

1.3.4 Shipping cost: The cost of shipment should bear by Party B.

1.4 Payment:

1.4.1 The way of payment: By Bill of Exchange by bank check.

1.4.2 The date of payment:  Based on inventory of store of Party A and deducting
the quality  ensuring  deposit.  1.4.3 Party A will be based on quarter quote to
calculate and adjusting the amount of quality ensuring deposit quarterly.

1.5 Party A will  inform  Party B the  quantity  and  delivery  date  monthly in
writing. Party B should have the delivery ability 100%.

1.6  i(degree)Estimated  quantity of supply" of the  contract,  it means  annual
indication,  Party A have rights to adjust actual quantity  subject to demand of
market. Party B should make production plan based on Party A's plan.

1.7 If Party B fail to supply to Party A agreed  by the  contract,  Party B have
the rights to adjust the  quantity or cancel the supply.  Party B should pay all
losses to Party A.

1.8 If Party B cannot meet the supply  schedule  by any  reason,  Party B should
inform Party A in advance one month.  If the reason is identified as accident or
force  majeure,  then  Party B should  inform  Party A in writing or by phone to
explain the situation and possible shipment schedule.

1.9 If Party B does not meet shipment  required by Party A then Party A have the
rights to  require  Party B take a express  delivery  to the  location  or store
indicated by Party A but Party B should bear all the cost.

1.10  Party A have the  rights to audit,  visit  and  investigate  Party B's any
production process including raw materials, purchased items, process methods and
cost analyze...etc.

1.11 Party B guarantee to do the business with Party A always follow the rule of
fair competition.  Party B will not offer free gift, dinner,  free trip, expense
documentation  to Party A's stuffs of purchasing,  technical,  service and sales

1.12 Party B have the rights to report to Party A concerning their stuff ask the
commission  during the  executing  the contract  with  evidence and Party A will
solve it according the regulations of company.


1.13 To the  benefit of Party A and Party B, Party B does not have the rights to
disclose the price of contract to any third party, not allowed have the price of
other supplier,  searching, stealing or take unfair way to get price information
from Party B. When it happens Party A will terminate the contract straight way.

1.14 If Party B are cancelled the  certification  of supplier  during  effective
period of the contract  then the contract  becomes  terminated  from the date of
cancellation.  If Party B fail the normal supply to Party A within continued two
months then Party A have the rights to terminate the contract.

Technical Agreement

2.1 Party B should  develop,  manufacture,  supply and offer service of contract
products for Party A which specified in the technical agreement.

2.2 Develop new products:

2.2.1 Party B should rationalize their system to increase ability of development
and co-operate with Party A's progress.

2.2.2  Party  A  will  give  the  first  selected   candidate  to  the  supplier
participating and develop the new products. Party A have the rights to terminate
the  contract  of the  supplier is not  co-operating  and  effecting  developing
schedule and quality of the new contract products


3. 1 Quality control system requirement:

3.1.1  Party B  should  build up  their  quality  control  system  according  to
ISO/TS16949  or QS9000 and pass the audit to have the  certificate in the end of

3.1.2  Party A should  audit the Party B's quality  control  system on site when
supplied  contract  products have big quality  problem or annual audit  process.
Party B should fix the problems specified in Party A's audit report.

3.2 In-coming materials inspection and quality control:

3.2.1 Party B should attach the inspection  report with delivery to Party A, The
quality  standard should follow state and industry  standard but agreed by Party

3.2.2  When Party B have the  certificate  of  ISO/TS16949  and grade A supplier
proved by Party A, Party A will agree to  inspection  free of supplied  contract

3.2.3 If Party A found  defected parts on the  production  line,  Party B should
come to fix it within 24 hours  after  received  phone call or fax  informed  by
Party A but  Party A have  the  rights  to fix it by  themselves  in the case of
emergence. Party B should bear all the cost incurred.

3 .2.4  Party B should  bear the  compensate  if Party B caused  Party A stop to
produce and cause the loss in the reason of supply, quality,  service, etc., the
compensation includes: profits with contract, administration expense, transports
expense, price for repairing,  labor cost, travel charge.. Party A has the right
to carry on 2 times of claim of the actual  compensation to Party B and take the
measure of adjusting the supply  quantity,  stopping  supplying or terminate the

3.3    Quality control to vendors

3.3.1  Party B should  require  quality  standard as  ISO/TS1699  and QS9000 for
development and quality to vendors

3.3.2 Party A should have a copy of name list of  qualified  vendors and Party B
should  inform  Party A in case any  change in the name  list.  Party A have the
rights to  specify  the  responsibility  of  vendors  according  requirement  of

3.3.3 Party A have the rights conducting quality audits on site to the vendors.

3.4 Products quality audit:

3.4.1  Party B  should  set up  internal  quality  audit  system  and  submit  a
reliability  test report of the  function/safety  components to Party A at least
once a year.


3.4.2 Party A have the rights to audit the quality via third party. Party A will
pay the cost if  passed  the  audit  but  Party B will pay the cost if it cannot
passed the audit.

3.5 Stabilize quality level

3.5.1 Party B should control the process ability to satisfy the quality level.

3.5.2  According  manual of PPAP,  Party B should adapt their quality  system in
case of any change in design,  modification,  materials and production  site and
submit the report for prove by Party A.

3.6 Products reliability requirements:

------ --------------- -------- ------------------------------------------------
                                              PPM MarketPPM value
 Item    Description     Model
------ --------------- -------- ------------------------------------------------

                                   First      Second      Third       Fourth
                                  Quarter     Quarter     Quarter     Quaeter
------ --------------- -------- ----------- ----------- ----------- ------------
  1     Steering gear    1027A     2559         2559       1706       1706
------ --------------- -------- ----------- ----------- ----------- ------------

3. 7  Quality problem

3.7.1 Party A should  feedback to Party B all the quality  problems  incurred in
incoming material  inspection,  production  process and after sales service.  In
case request by Party B, Party A should present the faulty parts.

3.7.2  Party B should take a effective  way to solve the  quality  problems  and
report to Party A based on "8D" methods.

3.8 Penalty

3.8.1  Party A will  evaluate  PPM  quarterly,  if the value of PPM over 1% then
claim  0.01%  of  quarterly  sales  price  but if over 5%  will  stop or  cancel
qualification of Party B as a supplier.

3.8.2 Party A have the rights to take an action to return the contract products,
setting time frame to make  modification,  lower the  quantity,  stop supply and
cancel qualification if the products, process and quality system cannot meet the
requirements of Party A. Or make a penalty of RMB$5,000 - 500,000 to Party B.

3.8.3 In case of  claims by Party A,  Party A will  present  the claim  list and
calculation  documentation to Party B. Party B should agree within one week. The
account  department  of Party A will  deducted  claim amount from the payment of
Party B.

3.8.4 If Party A does not executing their claim. It is not means Party A relieve
the claiming  rights but Party still have the rights for claim within  effecting
period of the contract.


4.1 Before market service:

4.1.1 If any quality  problems  incurred in production  line of Party A, Party B
have the  responsibility to solve the problem by site service people.

4.2 After market service:

4.2.1 Party B will do the warranty service on behalf of Party A and follow their
specification.  4.2.2 Party A will announce the "Service police of vehicle" same
time and it will be the warrantee  service by joint service for FUZTIAN  vehicle
end users  between  Party A and Party B and it becomes the police of service net
work to end users.


4.2.3 The service  (including service news and cost and so on) will be monitored
and managed by Party A but the accuracy of information  should be more than 90%.
Every service station should be feed backed the "Products warrantee form" to the
service  department  of Party A and the faulty  parts should keep two months for
identification of the response party, confirmation and quality analyzing.  Party
A will with stuffs of service  station jointly to process the faulty parts if no
request from application for faulty parts after two months.

4.2.4 Party A should inform the Party B all the information  related to warranty
service and warrantee rate. If Party B have any questions should contact related
department within 15 days after receiving information.  If it is necessary Party
B present actual faulty parts and all the cost incurred in shipment will be paid
by Party A.

4.2.5  Incurred  the  actual  warranty  cost will be paid in credit of Party B's
account monthly.

4.2.6 If  quality  problems  occurred  in batch or  series  then  Party B should
departure  their  service  people  to  indicate  station  informed  by  Party A.
Otherwise  Party A have the rights to solve the quality  problems by  themselves
but occurred all cost will be deducted from Party B's account.

4.2.7 The quality penalty occurred in quality control  monitoring program should
be paid by Party B.

4.2.8 Par Party A should audit the Party B's quality control system on site when
supplied contract products have big quality problem or annual audit process.ty A
will  claim 3-5 times of  actual  cost  occurred  in call back the  faulty  cars
because of response party is party B.

4.3 Spare parts supply:

4.3.1  Party B should  conduct  the  quality  control  and  packing  requirement
according  government  regulations and industrial  technical  standard.  Party B
should not supply any spare parts with FUTIAN mark to third party or personnel.

4.3.2 Party B offer the warrantee condition will follow the car warrantee police
offered by Party A referred to clause 4.2 of the contract.

4.3.3 The quality of spare parts should as same as Clause "Quality".

4.4 Special condition service:

4.4.1(pound)(0)Party  B will bear partial cost of warrantee  maintenance service
(only applied to engine, gear box and steering) and occurred cost will credit to
Party B's account by Party A. The warrantee service cost will set as follows:

------------------ -------------- ------------- ------------ -------------------
Description        Model          Material      Labor        Total cost
------------------ -------------- ------------- ------------ -------------------
Steering unit      1027                                      18
------------------ -------------- ------------- ------------ -------------------

4.4.2 Party B will joint with Party A for market promotion after  negotiating by
both parties.

4.5 The service of stop production and supply

4.5.1  Party B should  supply the spare parts to Party A within five years after
production stopped.

4.5.2 The  quality  deposit  will be not  allowed to  withdraw at least one year
after stop production. Bridge clause after stop supply

5.1 If the reason of stop  supply if on the Party B side then this clause is not


5.2 Party B stop supply because of technical,  quality and service, Party B will
apply the bridge  sequence  of supply and stock less then one month,  the reject
parts are not put in count.

5.3 Party B stop the supply  because of market price.  In this case Party A will
apply bridge sequence but stock should less then one month.

5.4 Party B stop supply because of changed  purchase  police or other police and
Party A agree the bridge sequence but only apply for one-month stock.

5.5  Party B should  submit  the  report  in  writing  within 10 days in case of
mentioned situation otherwise will treat as no bridge sequence by Party A.

Intellectual property

6.1 The  intellectual  property  of auto parts  should be treated as belonged to
both parties.

6.2 Party B have the rights to use module,  drawings and  simples...etc.  During
the contract effecting period.  Party B should treat it as confidential and keep
in safety place.

6.3 Party B does not have the rights to disclosure any technical  information to
third party including modules,  drawings and samples without pre-agreed by Party
A. Party B should not  manufacture  the same  products and supply to other users
after terminate the contract.

6.4 Party B should not supply  the  contract  products  to third  party  without
pre-agreed  by Party A.

6.5 Party A have the rights require Party B to pay 5 times penalty of bleach the
contract if Party B bleach the above clause of the  contract.  The amount of the
penalty will deducted from Party B's account.


7.1 Any conflicts should solve by both parties through friendly negotiation.  If
it can not solve the problems then put into local court.

7.2 Miscellaneous matters should solve by negotiation of both parties.

7.3 Three copies of the contract. One for Party A and one for Party B.

7.4 Contract effecting period(pound)(0)Nov. 6th 2002 to Dec. 31th 2004

7.5 The contract  will become into force after  stamping  both  parties  company

Party A:Beiqi Futian Moto Co., Ltd.
Adress:Shayang Road, Changping District, Beijing
Authorized representative:

TEL: 010-80710462
FAX: 010-80716410
P.C.: 102206

Party B Jingzhou Henglong Automotive Parts Co., Ltd.
Adress:Henglong Road, Development zone, City Jingzhou, Hubei Province,
Authorized representative:

TEL: 0716-8324631
FAX: 0716-8312339
P.C.: 434000


Appendix 1
---------------------------- -------------- ------------ ---------- ------------
     Part Description           Part No.     Unit Price   Quantity    Extension
---------------------------- -------------- ------------ ---------- ------------
    Rack & Pinion Power        3401010-06     1620.00       16580    26859600.00
       Steering Gear
---------------------------- -------------- ------------ ---------- ------------
 Right Supporter Assembly      3403020-06      14.30        16580     237094.00
---------------------------- -------------- ------------ ---------- ------------
  Right Supporter Bushing      3403026-00       8.90        16580     147562.00
---------------------------- -------------- ------------ ---------- ------------
  Left Supporter Assembly      3403030-06      14.30        16580     237094.00
---------------------------- -------------- ------------ ---------- ------------
  Left Supporter Bushing       3403036-00       8.20        16580     135956.00
---------------------------- -------------- ------------ ---------- ------------
  Left Dust Boot Assembly      3403070-00      16.60        16580     275228.00
---------------------------- -------------- ------------ ---------- ------------
 Right Dust Boot Assembly      3403080-00      18.50        16580     306730.00
---------------------------- -------------- ------------ ---------- ------------
Adjustable Steering Column     3404020-06      470.70       16580    7804206.00
---------------------------- -------------- ------------ ---------- ------------
  Steering Column Bracket      3404050-06      23.50        16580     389630.00
---------------------------- -------------- ------------ ---------- ------------
        Lower Shaft            3404070-06      119.60       16580    1982968.00
---------------------------- -------------- ------------ ---------- ------------
           Block               3404084-00       2.80        16580     46424.00
---------------------------- -------------- ------------ ---------- ------------
           Clamp               3404085-00       3.20        16580     53056.00
---------------------------- -------------- ------------ ---------- ------------
     Retarder Assembly         3404110-06      226.00       16580    3747080.00
---------------------------- -------------- ------------ ---------- ------------
     Oil Pipe Assembly         3406020-06      14.50        16580     240410.00
---------------------------- -------------- ------------ ---------- ------------
High pressure Hose Assembly    3406030-06      173.70       16580    2879946.00
---------------------------- -------------- ------------ ---------- ------------
          Wahser               3406041-06       1.80        16580     29844.00
---------------------------- -------------- ------------ ---------- ------------
  Steering Pump Assembly       3407010-06      548.00       16580    9085840.00
---------------------------- -------------- ------------ ---------- ------------
         Reservior             3408010-06      110.00       16580    1823800.00
---------------------------- -------------- ------------ ---------- ------------
  Idler & supporter ASM.       3412010-06      65.50        16580    1085990.00
---------------------------- -------------- ------------ ---------- ------------
        Pump Pulley            3412021-06      33.50        16580     555430.00
---------------------------- -------------- ------------ ---------- ------------
        Pump Pulley            3412031-06      33.50        16580     555430.00
---------------------------- -------------- ------------ ---------- ------------
       Pump Bracket            3412040-06      45.40        16580     752732.00
---------------------------- -------------- ------------ ---------- ------------
          V Belt               3412045-06      13.80        16580     228804.00
---------------------------- -------------- ------------ ---------- ------------
         Bolt Kits             3412050-06       3.30        16580     54714.00
---------------------------- -------------- ------------ ---------- ------------
         Nut Kits              3412060-06       1.80        16580     29844.00
---------------------------- -------------- ------------ ---------- ------------
           Bolt               900119-08171      3.70        16580     61346.00
---------------------------- -------------- ------------ ---------- ------------
           Bolt               90401-16014       3.70        16580     61346.00
---------------------------- -------------- ------------ ---------- ------------
           Bolt               91612-61025       3.30        16580     54714.00
---------------------------- -------------- ------------ ---------- ------------
        Small Clamp           90467-16008       9.00        16580     149220.00
---------------------------- -------------- ------------ ---------- ------------
         Big Clamp            90467-21005       8.90        16580     147562.00
---------------------------- -------------- ------------ ---------- ------------
           Total                                                     60019600.00
---------------------------- -------------- ------------ ---------- ------------