China Automotive Systems Inc · 10KSB · For 12/31/03 · EX-10.5

Filed On 4/19/04 5:29pm ET   ·   SEC File 0-33123   ·   Accession Number 1010549-4-267

Annual Report -- Small Business   ·   Form 10-KSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10KSB       Annual Report -- Small Business                       63    327K 
 2: EX-10.1     Automobile Parts Purchase Contract                     8     39K 
 3: EX-10.2     Cherry Automobile Parts Purchase Contract              6     35K 
 4: EX-10.3     Automotive Purchase Contract                           5     25K 
 5: EX-10.4     License and Technical Assistant Agreement              7     36K 
 6: EX-10.5     License Agreement                                     15     72K 
 7: EX-23.1     Subsidiaries of the Company                            1      8K 
 8: EX-31.1     Section 302 Certification of Ceo                       2±    12K 
 9: EX-31.2     Section 302 Certification of Cfo                       2±    12K 
10: EX-32.1     Section 906 Certification of Ceo                       1      7K 
11: EX-32.2     Section 906 Certification of Cfo                       1      7K 
12: EX-99.1     Code of Conduct and Ethics                             5     25K 
13: EX-99.2     Audit Comittee Charter                                 5     22K 

EX-10.5   ·   License Agreement
Exhibit Table of Contents

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                                                                    Exhibit 10.5

 LICENCE AGREEMENT

This Agreement is made the 29 day of October 2001                               

BETWEEN                                                                         

BISHOP  STEERING  TECHNOLOGY  LIMITED (ABN 99 002 954 690) of 10 Waterloo  Road,
North Ryde, New South Wales, 2113 Australia                                     

AND JINGZHOU  HENGLONG  AUTOMOTIVE  PARTS of Henglong Road,  Yuqiao  Exploration
District, Jingzhou, Hubei Province, China                                       

RECITALS                                                                        

A.   Bishop  possesses  rights to  certain  patents,  patent  applications,  and
Confidential Information relating to Licensed Products.               

B.   Licensee  has  requested  a  non-exclusive  licence  from Bishop to use the
     Confidential  Information  and  Licensed  Patents  for the  purposes of the
manufacture and sale of the Licensed Products.                        

C.   Bishop has agreed to grant such a licence upon the following terms.        

AGREEMENTS                                                                      

1.   INTERPRETATION                                                             

1.1  In this  Agreement and in the recitals to this  Agreement  except where the
context otherwise requires:                                           

     1.1.1     "Bishop"  means Bishop  Steering  Technology Ltd and includes its
successors and assigns.                           

     1.1.2     "Confidential  Information"  means all  information  relating  to
               Bishop,  its  business,  products,  customers or  suppliers,  the
               design,  manufacture,  installation and operation of the Licensed
               Products (whether or not the patents in respect of those Licensed
               Products  are  current or  expired)  and to  systems,  apparatus,
               methods  and  processes  for the  manufacture  of  such  Licensed
               Products  (whether  or  not  embodied  in  documentary  or  other
               physical   form),   including,   but  not  limited   to,   patent
               applications;  product  and  machine  designs;  manufacturing  or
               assembly  drawings;  prototypes;  CAD,  CAM  and  other  computer
               software  for use in the design or  manufacture  of the  Licensed
               Products;   parts  lists;   technical   reports;   operation  and
               maintenance  manuals;   material   specifications  and  materials
               treatment    procedures;     tooling    design    specifications;
               manufacturing,    inspecting,   quality   control   and   testing
               procedures;  and know how relating to the design and  manufacture
     of the Licensed Products, other than information which:

               a.   was  and  can be  demonstrated  to have  been,  lawfully  in
                    Licensee's   possession  or  known  to  Licensee   prior  to
disclosure by Bishop; or                

               b.   is or comes into the public  domain  otherwise  than through
                    any act of the  Licensee  or through any  disclosure  by any
       person acquiring the same from the Licensee; or

               c.   is  disclosed  to the  Licensee by a third  party  having no
                    obligations of confidence to Bishop in respect thereof,  and
                    has not been disclosed to that third party in consequence of
a breach of confidence.                 

               A reference in this clause to "Bishop" shall be deemed to include
               a reference to each  company  related,  now or in the future,  to
Bishop.                                           

     1.1.3     "Effective  Date"  means  the  date  specified  in  Item 1 of the
Schedule.                                         

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     1.1.4     "Improvements"  means  all new or  improved  designs  or  models,
               developments,  enhancements  or derivatives  relating to steering
               gear  incorporating  or  capable  of being used in respect of the
               Licensed Products or Licensed Patents, whether patentable or not,
               which  would make the  Licensed  Products or such  steering  gear
               cheaper,  more effective,  more useful or more valuable, or would
               in any other way render the  Licensed  Products or such  steering
gear preferable in commerce.                      

     1.1.5     "Labour Rate" means the rate  specified in Item 4 of the Schedule
               per hour for each  representative  of Bishop  referred to in this
               Agreement.  The labour  rate shall be revised  upon or after each
               and every  anniversary of the Effective  Date in accordance  with
               the calculation  specified in Item 7 of the Schedule and shall be
effective immediately following such anniversary. 

     1.1.6     "Licensee" means JINGZHOU HENGLONG  AUTOMOTIVE PARTS and includes
its successors and permitted assigns.             

     1.1.7     "Licensed Manufacturing  Territory" means the territory described
in Part 1 of Item 2 of the Schedule.              

     1.1.8     "Licensed Patents" means each patent or patent application now or
               to be included or deemed to be included in Item 3 of the Schedule
               and  continuations,  divisions  or reissues of those  patents and
patent applications.                              

     1.1.9     "Licensed   Products"  means  roll  imprinted   (symmetrical  and
               asymmetrical  non-ATS)  components  for hydraulic  power steering
               valves,  falling within the scope of one or more of the claims of
               one or  more  of the  Licensed  Patents  or  made  by  apparatus,
               methods, machines or processes falling within the scope of one or
               more  of the  claims  of one or  more  of the  Licensed  Patents,
               whether  or not the  Licensed  Patents  or any of them are  still
current.                                          

     1.1.10    "Licensed Sales  Territory"  means those  countries  described in
Part 2 of Item 2 of the Schedule.                 

    1.1.11   "Trade  Mark" means the trade mark  "Bishop"  and any other trade
               marks of Bishop that Bishop may from time to time agree are to be
covered by this Agreement.                        

1.2  A company  shall be deemed to be related  to  another  company if the first
company is:-                                                          

1.2.1     the holding company of the other company; or                

     1.2.2     a subsidiary of the other company or deemed to be a subsidiary of
              the other company by operation of any applicable legislation; or

     1.2.3     a subsidiary of the holding  company or ultimate  holding company
               of the other  company or deemed to be a subsidiary of the holding
               company  or  ultimate  holding  company  of the other  company by
operation of any applicable legislation.          

1.3  A reference to a singular  number shall be deemed to include a reference to
a plural number and vice versa.                                       

1.4  A reference  to one gender  shall be deemed to include a  reference  to the
other genders and each of them.                                       

1.5  A reference  to a person  shall be deemed to include a reference  to a body
     corporate  or other  legal  entity,  partnership  or  other  unincorporated
association, and to a government.                                     

1.6  A reference to any  legislation  includes any regulation or instrument made
     under it and where  amended,  re-enacted  or replaced  means that  amended,
re-enacted or replacement legislation.                                

1.7  The  Schedule  and any  annexures  to this  Agreement  form part of and are
deemed to be incorporated into this Agreement.                        

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2.   LICENCE                                                                    

2.1  Bishop grants to Licensee a non-exclusive,  non-transferable licence to use
     the Licensed Patents and Confidential  Information relating to the Licensed
Products to:                                                          

     2.1.1     Manufacture  Licensed  Products  in  the  Licensed  Manufacturing
Territory;                                        

   2.1.2     Sell the Licensed Products in the Licensed Sales Territory; and

     2.1.3     Sell  assembled  hydraulic  power  steering  gears  incorporating
     Licensed Products outside the Licensed Sales Territory.

2.2  No licence,  either  express or  implied,  is granted by Bishop to Licensee
     hereunder with respect to any patent, copyright, trade secret, Confidential
  Information or know-how except as specifically stated in this Agreement.

3.   TRADE MARK                                                                 

3.1  Bishop grants to Licensee a non-exclusive  licence to use the Trade Mark in
     the Licensed Manufacturing Territory and in the Licensed Sales Territory in
respect of Licensed Products for the term of this Agreement.          

3.2  Licensee must:                                                             

     3.2.1     Include on a  nameplate  attached  to each  Licensed  Product the
               following  words or such  other  words,  to the same  effect,  as
Bishop may from time to time approve:             

             "Incorporates technology licensed from Bishop Steering Technology
Ltd";                                             

     3.2.2     Use the Trade Mark on all Licensed Products  manufactured or sold
               by it, and ensure that the following  words (or such other words,
               to the same  effect,  as Bishop may from time to time  specify or
      approve) clearly and legibly appear near the Trade Mark:

a.   Where the Trade Mark is registered:          

                    "(R)  Registered  Trade Mark - Used under  licence  from the
    proprietor, Bishop Steering Technology Ltd."

b.   Where the Trade Mark is not registered:      

                    "TM  Trade  Mark used  under  licence  from the  proprietor,
Bishop Steering Technology Ltd."        

     3.2.3     Comply  with  and  observe  all  rules,  directives,   standards,
               specifications  and  instructions  made,  issued  or laid down by
               Bishop  regarding the use of the Trade Mark and the marketing and
labelling of the Licensed Products;               

     3.2.4     Only use the Trade Mark in the depictions  approved by Bishop and
only in respect of the Licensed Products.         

3.3  Licensee must not, whether during or after this Agreement:                 

     3.3.1     Represent  in any way that it owns the Trade Mark or is  entitled
           to use the Trade Mark otherwise than as a licensee of Bishop;

     3.3.2     Do  anything  calculated  or likely to  disparage  or damage  the
               goodwill,  reputation or industrial or  intellectual  property of
Bishop in the Trade Mark;                         

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     3.3.3     Use the Trade Mark in respect of any goods or services other than
the Licensed Products;                            

     3.3.4     Apply for or seek to  register  the Trade Mark in its own name in
any country; or                                   

    3.3.5     Attack or contest the rights of Bishop in and to the Trade Mark.

3.4  If requested by Bishop, Licensee must execute all such documents and do all
     such acts and things as may be  necessary  for  Licensee to be entered as a
registered or authorised user of the Trade Mark in any country.       

3.5  Licensee  acknowledges the exclusive  ownership by Bishop of the Trade Mark
and all goodwill in the Trade Mark.                                   

4.   PATENT PROVISIONS                                                          

4.1  Licensee must place on all Licensed Products manufactured or sold by it the
     appropriate  patent number of each Licensed Patent (if any) applying to the
     Licensed   Product  in  the  Licensed  Sales  Territory  and  the  Licensed
     Manufacturing Territory, or in the case of a patent application,  the words
     "Patent  Pending" or such other words,  to the same  effect,  as Bishop may
from time to time stipulate.                                          

4.2  Bishop may without being obliged to do so, submit to Licensee a copy of the
     patent  specification  of any  patent  application  in  respect  of any new
     invention  filed  after the  Effective  Date by  Bishop  which  relates  to
Licensed Patents.                                                     

4.3  Licensee  may,  within 5 months  from the receipt of the copy of any patent
     specification  submitted  under Clause 4.2,  request  Bishop to include the
     application  (if  filed  in  the  Licensed  Manufacturing  Territory)  as a
     Licensed  Patent  under this  Agreement or to file a  corresponding  patent
     application in the Licensed Manufacturing Territory and to then include the
     application as a Licensed Patent under this Agreement. If the parties agree
     in  writing  as to the  additional  terms to apply  to such  filing  and/or
  inclusion and to the licensing of the patent pursuant to this Agreement:

     4.3.1     Bishop will file the  application  (if not  already  filed in the
Licensed Manufacturing Territory);                

     4.3.2     The  application  shall  be  deemed  to have  been  automatically
             included in the appropriate part of Item 3 of the Schedule; and

     4.3.3     This  Agreement  shall be deemed to be amended by the  additional
terms agreed.                                     

4.4  Bishop  warrants  that  as of the  Effective  Date  and to the  best of its
     knowledge  and  belief  there are no  material  facts  known to it which it
     believes affect the validity of any of the Licensed Patents. Except for the
     foregoing,  Bishop does not make any  representation to Licensee  regarding
     the scope or enforceability of the Licensed Patents and it does not warrant
     that any Licensed  Products  manufactured or sold under this Agreement will
not infringe patents or intellectual property rights of others.       

5.   IMPROVEMENTS                                                               

5.1  Licensee  will  fully and  promptly  disclose  to Bishop  all  Improvements
developed by or for Licensee.                                         

5.2  Licensee hereby assigns to Bishop all its right,  title and interest in and
     to all  Improvements  upon their creation.  Bishop grants to the Licensee a
 non-exclusive perpetual royalty free licence to use those Improvements.

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6.   CONFIDENTIAL INFORMATION                                                   

6.1  Bishop  shall  use its best  efforts  to  provide  Licensee  with  accurate
     Confidential  Information  relating to the  Licensed  Products but makes no
     warranty  and shall  have no  liability  to  Licensee  with  respect to the
Confidential Information or the Licensed Products or the use thereof. 

6.2  Licensee must keep secret and confidential the Confidential Information and
     must not at any time whether during the currency of this Agreement or after
     its expiration or termination  without the prior written  consent of Bishop
     disclose,  divulge, make known, or in any way communicate, to any person in
     any part of the world, or permit or allow any of its employees or agents to
     disclose,  divulge,  make known or in any way  communicate to any person in
     any part of the world, any of the Confidential  Information,  other than to
     Licensee's own employees,  sub-contractors  or consultants who need to know
     the  Confidential  Information for the strictly limited purpose of enabling
     Licensee  to  exercise  its rights or perform  its  obligations  under this
Agreement.                                                            

6.3  Licensee  acknowledges  that the  Confidential  Information  is and will be
     disclosed  to it on the  express  condition  that it be used  only  for the
     limited  and  specific  purpose  of  Licensee  exercising  its  rights  and
     performing  its  obligations  under this  Agreement  and Licensee  will not
     otherwise use or attempt to use any of the Confidential Information for its
own advantage or gain directly or indirectly.                         

6.4  Licensee must not use or attempt to use any of the Confidential Information
     in any manner which may cause or be  calculated  to cause injury or loss to
Bishop or any company related to Bishop.                              

6.5  Licensee  must  not  copy the  Confidential  Information  or allow it to be
 copied in whole or in part without the prior written consent of Bishop.

6.6  Licensee shall take or cause to be taken such reasonable precautions as may
     be  necessary  to  maintain   the  secrecy  and   confidentiality   of  the
     Confidential Information and to prevent its disclosure,  including ensuring
     that each employee, sub-contractor or consultant of Licensee who comes into
     possession of the Confidential  Information or any part of it enters into a
     confidentiality  agreement  in  favour  of  Bishop  binding  the  employee,
     sub-contractor  or consultant to keep the Confidential  Information  secret
     and  confidential,  in terms  substantially  the same as the  provisions of
Clauses 6.2, 6.3, 6.4, 6.5, 6.6, and 6.7.                             

6.7  Subject  only to Clauses  14.3 and 14.4,  Licensee  will  immediately  upon
     demand,  either  deliver up to Bishop or destroy (and certify to Bishop the
     proper destruction of) all material (whether documents, microfilm, magnetic
     tape, cassette or disk, computer software,  laser disk, or any other medium
     of storing or recording  information)  comprising or containing  any of the
     Confidential Information,  including any and all copies in whole or in part
     thereof and any material on which Licensee has itself recorded or stored in
any form the Confidential Information or any part of it.              

6.8  Nothing in Clauses 6.2 to 6.7 will prevent the  disclosure  of  information
     that is required to be disclosed in order to comply with any applicable law
     or  legally  binding  order  of  any  court,  government,   semi-government
authority or administrative or judicial body, provided that Licensee: 

     6.8.1     informs  Bishop  in  writing,  with as  much  advance  notice  as
               possible, of the proposed disclosure,  giving full details of the
               circumstances  of the  proposed  disclosure  and of the  relevant
information to be disclosed;                      

     6.8.2     gives Bishop a reasonable  opportunity  to challenge the proposed
     disclosure in a court of law or other appropriate body;

     6.8.3     furnishes only that portion of the Confidential Information which
               it is advised by written  opinion of its legal counsel is legally
required to be disclosed; and                     

     6.8.4     exercises  its best efforts to obtain  reliable  assurances  that
               confidential  treatment  will  be  accorded  to the  Confidential
Information.                                      

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7.  TECHNICAL ASSISTANCE & TRAINING                                           

 7.1 In consideration  for the annual  technology  assistance fee referred to in
     8.1 below, Bishop will provide the following goods and services to Licensee
     during  the  year  following  the  Effective  Date  or  anniversary  of the
Effective Date on which the fee is paid or payable:                   

7.1.1     technical assistance;                                       

     7.1.2     engineering   samples  of  Bishop   steering   technologies   for
evaluation purposes;                              

     7.1.3     machine spares for Bishop-designed and manufactured  machines for
the manufacture of Licensed Products; and         

7.1.4     on site support, training and maintenance,                  

     Provided that the cost of such goods and services in any one such year does
not exceed the fee specified in Item 6 of the Schedule.               

     Bishop will invoice Licensee monthly for such goods and services,  and will
     indicate in each  invoice the  cumulative  total of such  invoices  for the
     year, as compared with the  technology  assistance fee paid by Licensee for
that year.                                                            

     If Licensee requires any engineering  samples or machine spares as referred
     to in 7.1.2 and 7.1.3,  it must  place a written  order for them on Bishop.
     Bishop will give Licensee a written quotation for the supply of the samples
     or spares.  If Licensee does not accept that quotation,  Bishop will not be
obliged to supply the samples or spares.                              

The cost of such goods and services will be calculated as follows:    

     7.1.5     the  cost  of  the   technical   assistance,   on  site  support,
               maintenance   and  training   referred  to  in  7.1.1  and  7.1.4
               respectively  will be  calculated on the basis of the Labour Rate
               and the cost to Bishop of the  materials  used,  and will exclude
              any costs and expenses as referred to in 7.4, 7.5 and 7.6 below;

     7.1.6     the cost of any  engineering  samples and machine spares supplied
               by Bishop, as referred to in 7.1.2 and 7.1.3  respectively,  will
               be the amount  quoted by Bishop in the  quotation for the samples
               or  spares  as the case may be  (calculated  on the  basis of the
               Labour  Rate,  Bishop's  then  current  prices  for the  goods in
               question, and the cost to Bishop of the materials used in any one
               such year), which has been accepted by Licensee,  with or without
amendments agreed between Bishop and Licensee.    

7.2  If Bishop agrees to supply  Licensee in any one year of this Agreement with
     goods  and/or  services as referred to in Clause 7.1 which  exceed in total
     value the fee specified in Item 6 of the Schedule, Licensee will pay Bishop
     for such excess (on the valuation  basis  referred to in Clause 7.1) within
30 days of invoice.                                                   

7.3  Licensee may carry over up to 50% of the unused balance of any single years
     technical  assistance  fee up to a  maximum  of  A$50,000.00.  This  unused
     balance  will be deemed to be added to the  amount  specified  in Item 6 in
     respect  of the  subsequent  years and to have been paid by  licensee.  Any
 unused balance from any one year is limited to the following year only.

7.4  Bishop undertakes to accept visits from Licensee's  representatives for the
     purpose of providing technical  assistance and training.  Such visits shall
     be subject to mutually acceptable arrangements and timing and in accordance
     with Bishop's  current work load and  commitments.  All reasonable  travel,
     accommodation,  labour  and other  costs  incurred  by  Bishop  shall be at
     Licensee's expense.  All labour costs by Bishop (calculated on the basis of
the Labour Rate) shall be fully reimbursed by Henglong.               

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7.5  Visits by Bishop's  representatives to Licensee's factories for the purpose
     of providing technical assistance and training shall be subject to mutually
     acceptable  arrangements and timing and in accordance with Bishop's current
     work  load  and   commitments.   All  reasonable   business  class  travel,
     accommodation and other out-of-pocket  expenses incurred by Bishop shall be
fully reimbursed by Licensee.                                         

7.6  If and when  Licensee  requests  Bishop to do work in  relation  to any new
     development  or project then Bishop  agrees to submit a proposal  outlining
     the  terms  Bishop  would be  prepared  to offer for doing  such  work.  If
     Licensee  accepts  the  Bishop  proposal,  it  will  issue  Bishop  with an
appropriate purchase order.                                           

7.7  If Bishop,  upon the  request of  Licensee,  agrees to provide  information
     pertaining  to Licensed  Products  which is not  available to Bishop at the
     date of the  request  and which has to be  specially  prepared  by  Bishop,
     Licensee shall promptly  reimburse  Bishop for all costs which it incurs in
preparing such information for Licensee.                              

8.   COMPENSATION, RECORDS & REPORTS                                            

8.1  In  consideration  of the licence  granted  pursuant to this  Agreement  by
     Bishop  to   Licensee,   Licensee   shall  pay  to  Bishop  the   following
non-refundable amounts:                                               

     8.1.1     For each Licensed  Product  manufactured  by Licensee the royalty
specified in Item 5 of the Schedule.              

     7.1.2     An annual technical  assistance fee, being as specified in Item 6
               of the  Schedule  for  each  and  every  year of the term of this
               Agreement,  and pro  rata  for any  part of a year to the date of
               expiration or  termination of this  Agreement.  Licensee will pay
               this fee 3 days after the Effective  Date and then within 30 days
               of each and every  anniversary of the Effective Date,  regardless
               of the amount of goods and/or  services  provided by Bishop under
               Clause 7.1 in the previous year. Licensee will open a irrevocable
               Letter of Credit equal to the value of the  technical  assistance
     fee for Year 2 to Year 5 inclusive with reputable bank.

8.2  The royalty  rates  specified in Items 5 of the  Schedule  shall be revised
     upon or as soon as  practicable  after  each and every  anniversary  of the
     Effective Date in accordance with the calculation in Item 7 of the Schedule
     and such revised  royalty  shall be effective  from and  including the next
quarter immediately following such anniversary.                       

8.3  Royalties for each calendar quarter (or part in the case of a period at the
     beginning or end of this Agreement being less than a calendar  quarter) are
     payable,  unless otherwise agreed between Licensee and Bishop,  by the 15th
     day of the  second  month  following  the  end of  such  quarter  (15th  of
     February, May, August and November). All royalty payments are to be paid in
     Australian  Dollars [at the official rate (buying  rate)  prevailing at the
     Licensee's  bank in the Licensed  Manufacturing  Territory on the due dates
for remittance].                                                      

8.4  Each royalty payment shall be accompanied by a report showing:             

     8.4.1     For each  calendar  quarter,  the  number  of  Licensed  Products
               manufactured   in  that   quarter  by   Licensed   Product   type
               identification  number, vehicle make, model and all other details
               necessary or reasonably  requested by Bishop for  calculating the
amounts payable to Bishop;                        

     8.4.2     If  requested  by Bishop  from time to time,  forward  orders and
               projected  sales of Licensee's  vehicles  incorporating  Licensed
       Products for the 10 years following the calendar quarter.

8.5  Licensee will advise Bishop immediately it decides to cease production of a
model incorporating a Licensed Product.                               

8.6  Without limiting in any way Bishop's remedies  elsewhere  contained in this
     Agreement, Licensee must pay Bishop interest on all overdue payments due to
     Bishop under this  Agreement at the Indicator  Lending Rate of Interest (or
     its  successor  as the base rate of interest  charged on loans in excess of
     $100,000) from time to time charged by Westpac  Banking  Corporation,  plus
     three percent (3%) per annum,  calculated on daily rests from and including
     the due date to and  including  the date of  payment.  The  payment of such
     interest  shall  not  replace  any of  Bishop's  other  rights  under  this
     Agreement or at law resulting from Licensee's default by failure to pay any
amount due.                                                           

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8.7  Licensee  shall at all times  during the life of this  Agreement  and for 3
years after its expiration or termination:                            

     8.7.1     keep  and  preserve  full and  proper,  accurate  and  up-to-date
               records  which  contain  complete  data from which amounts due to
    Bishop under this Agreement can be readily calculated;

     8.7.2     permit,    upon   reasonable    notice,   any   duly   authorised
               representative  of Bishop to have access to all relevant  records
of Licensee;                                      

     8.7.3     supply to such  representatives  upon request all information and
               explanations  required  by them to verify  the  reports  provided
               under  Clause  8.4 and  the  amounts  due to  Bishop  under  this
Agreement; and                                    

     8.7.4     permit such  representatives  to take copies of and extracts from
      the Licensee's records for the purposes of verification.

8.8  Bishop  will treat as  confidential  all and any  information  obtained  by
     Bishop or its  representatives  from Licensee under Clause 8.7 and will not
disclose any such information to its other licensees.                 

8.9  Bishop  may from time to time  appoint  an  external  auditor  to audit the
     accounts  and records of Licensee  and/or the reports  provided by Licensee
     pursuant to Clause 8.4, and Licensee shall in the event of such appointment
     make available or cause to be made  available to such external  auditor all
     its accounts and records and shall provide or cause to be provided all such
     information and  explanations  as such auditor shall require.  The costs of
     such audit shall be borne by Bishop unless the audit reveals the Licensee's
     records or accounts or reports are  inaccurate or in error to the extent of
     2% or more of the  royalties or other  amounts  payable to Bishop,  for the
     period covered by such audit, in which case the auditor's fees and expenses
shall be paid by the Licensee.                                        

8.10 If Bishop  determines  that the amounts  payable to it under this Agreement
     have been  underpaid,  Licensee must  immediately  pay that difference plus
interest to Bishop.                                                   

8.11 If requested  by Bishop,  Licensee  must pay on Bishop's  behalf and deduct
     from the payments due to Bishop under this Agreement,  the withholding tax,
     if any, imposed upon Bishop with respect to such payments by the country of
     the Licensee.  Licensee shall provide Bishop with evidence  proving payment
of such withholding tax in the name of and on behalf of Bishop.       

9.   SUB-LICENCES                                                               

9.1  Licensee  may  not  sub-license  any of its  rights  under  this  Agreement
(whether to subcontractors or otherwise).                             

10.  DILIGENCE                                                                  

10.1 Effective  from the first  anniversary  of the Effective  Date,  Bishop may
     remove from this Agreement any Licensed Patent in respect of which Licensee
     has not commenced commercial  production of Licensed Products or in respect
     of which  Licensee has not  manufactured  Licensed  Products in  commercial
quantities for at least 12 months.                                    

10.2 Any removal under Clause 10.1 shall be  conditional  upon  Bishop's  giving
     Licensee 6 months'  notice of its  intention to remove the patents and will
be effective immediately upon the expiration of the notice period.    

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11.  INFRINGEMENTS & EXCLUSIONS                                                 

11.1 Each party shall notify the other  immediately of any actual,  suspected or
     anticipated  infringement of the Trade Mark or any of the Licensed  Patents
     or any misuse of the  Confidential  Information  of which it becomes aware.
     The  notification  shall contain  suggestions as to the damage or potential
     damage  which  either or both  parties are then  suffering or are likely to
suffer from such an infringement or misuse.                           

11.2 Bishop  may in its  absolute  discretion  determine  whether or not to take
     legal or other action  against any third party for an actual or  threatened
     or suspected  infringement of the Trade Mark or any of the Licensed Patents
     or any misuse of the Confidential Information in the Licensed Manufacturing
     Territory or the Licensed  Sales  Territory,  and if Bishop  elects to take
legal or other action Bishop:                                         

11.2.1    shall bear all costs of the action;                         

     11.2.2    shall have sole control over the form and conduct of such action;

     11.2.3    may settle,  compromise  or  discontinue  the action as it thinks
fit;                                              

     11.2.4    shall be entitled to any award of costs  and/or  damages  made in
relation to such action; and                      

     11.2.4    shall indemnify  Licensee  against any costs or damages for which
               Licensee  may  become  liable  as a  result  of  the  proceedings
               provided that Licensee has not  authorised or  contributed to the
acts giving rise to the liability.                

11.3 Licensee  will  give  Bishop  all  authority,  information  and  assistance
     requested  by  Bishop  to  assist  it  to  initiate,  litigate,  settle  or
     compromise any proceedings by Bishop in respect of any such infringement or
misuse.                                                               

11.4 Licensee  shall  indemnify  and hold  Bishop  harmless  from any  liability
     arising  out  of  or  related  to  any  defects  in  design,  materials  or
     workmanship in Licensed Products manufactured by or for Licensee under this
Agreement.                                                            

11.5 Licensee  must  promptly  give  written  notice to Bishop of any  actual or
     threatened  infringement suit against Licensee or its customers which would
     affect the manufacture, use or sale of Licensed Products. Bishop shall make
     available  to  Licensee  free of  charge  any and  all  information  in its
     possession  which  Bishop  believes  will assist  Licensee in  defending or
otherwise dealing with such suit.                                     

11.6 Except  as  expressly  set  out  in  this  Agreement,  all  conditions  and
     warranties, express or implied, and whether as to the Licensed Patents, the
     Confidential  Information,  Licensed  Products  manufactured,  sold or used
     under this  Agreement,  or otherwise,  are hereby  expressly  negatived and
     excluded, and in no event shall Bishop be liable for any indirect, economic
or consequential loss or damage.                                      

11.7 Where the laws of any country or state in which this Agreement is effective
     implies into this Agreement any term, condition or warranty, and those laws
     avoid or prohibit  provisions  in a contract  excluding or modifying  them,
     then the term, condition or warranty shall be deemed to be included in this
     Agreement  PROVIDED THAT Bishop's  liability for a breach of any such term,
     condition or warranty,  including any economic or consequential  loss which
     Licensee may sustain,  shall be limited to the maximum extent  permitted by
the law of that country or state.                                     

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12.  DURATION                                                                   

12.1 This Agreement  shall be deemed to have commenced on the Effective Date and
     unless terminated  pursuant to Clause 13.1, will remain in force and effect
     for the period specified in Item 8 of the Schedule from the Effective Date.

13.  TERMINATION                                                                

13.1 Either party may terminate this  Agreement and the licences  hereby granted
by written notice to the other if:-                                   

     13.1.1    the other party  breaches any of the provisions of this Agreement
               which is capable  of being  remedied  and fails to  rectify  such
          breach within 14 days of being required in writing to do so;

     13.1.2    the other party commits a material breach of this Agreement which
is not capable of being remedied within 14 days;  

     13.1.3    an order is made or an  effective  resolution  is passed  for the
               winding up of the other party  (other than for the  purposes of a
solvent reconstruction or amalgamation);          

     13.1.4    a receiver or official  manager of the other party's  property or
               assets or any part thereof is appointed,  or an official  manager
of the other party is appointed;                  

     13.1.5    the  other  party,  without  the  prior  written  consent  of the
               terminating  party,  makes an  assignment  for the benefit of its
               creditors  or any of them  or  enters  into  any  arrangement  or
               composition  with its creditors or any of them or threatens to do
so; or                                            

     13.1.6    the  other  party  ceases  to carry on its  business  or stops or
  suspends payment of its debts or threatens to do so.

13.2 Any termination of this Agreement shall be without  prejudice to the rights
     of any party  against any other party which may have accrued up to the date
of such termination.                                                  

14.  POST TERMINATION/EXPIRATION                                                

14.1 Expiration or termination of this Agreement  shall not relieve  Licensee of
     any  obligation  to pay to Bishop any  royalties  or other  amount that had
accrued prior to such expiration or termination.                      

14.2 The  obligations  set out in Clauses 3.3, 6.2 to 6.7 inclusive,  8.7, 11.1,
     11.5, 13.2,  14.1, 14.3 to 14.5 inclusive,  15.1 to 15.4 inclusive and 16.1
     to 16.8  inclusive  of this  Agreement  shall  survive  the  expiration  or
termination of this Agreement.                                        

14.3 On the termination or expiration of this Agreement, the Licensee must:     

     14.3.1    immediately  deliver to Bishop an inventory  listing all Licensed
               Products  manufactured pursuant to the terms of this Agreement by
               the Licensee but as yet unsold,  and to stop any manufacturing of
               the Licensed Products except for reasonable completion of work in
               progress  as at the date of  termination  or  expiration,  which,
               subject to the payment of all royalties in respect  thereof,  may
        continue for up to a period of one year after termination;

     14.3.2    except to the extent  necessary to enable it to complete any work
               in progress pursuant to Clause 14.3.1,  immediately deliver up to
               Bishop all material (whether drawings,  prototypes,  or any other
               medium  of  storing  or  recording   or  embodying   information)
               comprising or  containing  any of the  Confidential  Information,
               including  any and all copies in whole or in part thereof and any
               material on which  Licensee  has  recorded or stored in any form,
the Confidential Information or any part of it;   

     14.3.3    except as permitted in Clause  14.3.1,  immediately  cease to use
           any of the Licensed Patents and Confidential Information; and

     14.3.4    except as permitted in Clause 14.3.1, immediately cease using the
               Trade Mark and co-operate in the cancellation of any registration
               of  Licensee  as a  user  of  the  Trade  Mark  in  the  Licensed
               Manufacturing  Territory or the  Licensed  Sales  Territory,  and
               shall execute all documents and do all things as may be necessary
or desirable in connection with such cancellation.

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14.4 During the period of one year after the  termination  or expiration of this
     Agreement,  Licensee  may,  subject  to its  paying  royalty  payments  and
     reporting to Bishop as required under the terms of this Agreement,  dispose
     of  Licensed  Products  which  it had  on  hand  prior  to  termination  or
     expiration or manufactured as part of work in progress  completed  pursuant
     to  Clause  14.3.1,  provided  that  Clauses  8.1 to 8.11  inclusive  shall
continue to apply in respect of all such sales.                       

14.5 Upon the  completion of work in progress as referred to in Clause 14.3.1 or
     the  expiration  of the  period  of  one  year  after  the  termination  or
     expiration of this  Agreement  (whichever is the earlier),  Licensee  shall
immediately:                                                          

     14.5.1    cease  to use  any  of  the  Licensed  Patents  and  Confidential
               Information and Trade Marks and deliver up to Bishop all material
               (whether drawings,  prototypes, or any other medium of storing or
               recording or embodying information)  comprising or containing any
               of the Confidential Information retained by it for the purpose of
               completing  the work in progress  including any and all copies in
               whole or in part thereof and any  material on which  Licensee has
               recorded or stored in any form the  Confidential  Information  or
any part of it;                                   

    14.5.2     deliver up to Bishop all material (whether drawings,  prototypes,
               or  any  other  medium  of  storing  or  recording  or  embodying
               information)  comprising  or containing  any of the  Confidential
               Information,  including  any and all  copies  in whole or in part
               thereof and any material on which Licensee has recorded or stored
          in any form, the Confidential Information or any part of it.

15.  DISPUTE RESOLUTION                                                         

15.1 The parties  agree that if any dispute  arises  between them in relation to
     this Agreement they will use their best  endeavours to resolve that dispute
     in a spirit of good faith and on a commercially  realistic  basis by mutual
negotiation or by mediation prior to commencing litigious proceedings.

15.2 Any mediator  shall be an  independent  person chosen by the parties or, at
     their request,  by the Australian  Commercial  Disputes Centre.  Each party
     shall bear its own costs.  The costs of the mediator  shall be borne by the
parties equally.                                                      

15.3 If the parties fail to resolve any dispute,  controversy or claim by way of
mutual negotiation or by mediation:                                   

     15.3.1    Such  dispute,  controversy  or claim  shall be  referred  to and
               finally  determined by  arbitration  in accordance  with the WIPO
Arbitration Rules;                                

15.3.2    The arbitral tribunal shall consist of a sole arbitrator;   

15.3.3    The place of arbitration shall be Sydney, Australia.;       

     15.3.4    The  language  to be used in the  arbitral  proceedings  shall be
English;                                          

     15.3.5    Each  of  the  parties  may   disclose   the   existence  of  the
               arbitration, and the award need not be treated as confidential by
the parties;                                      

     15.3.6    The  arbitration  agreement  constituted  by this clause shall be
               governed by and construed in accordance with the law for the time
               being  and  from  time to  time  in  force  in New  South  Wales,
Australia.                                        

15.4 Notwithstanding Clause 15.3, Licensee acknowledges and agrees that:        

     15.4.1    1 an alleged  breach by  Licensee  of any of  Clauses  6.2 to 6.7
               inclusive will  constitute  exceptional  circumstances  entitling
               Bishop to obtain  injunctions  and other interim or  conservatory
measures;                                         

     15.4.2    an alleged infringement by Licensee of any of Bishop's patents or
               copyright  will entitle  Bishop to obtain  injunctions  and other
interim and/or final relief.                      

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16.  GENERAL                                                                    

16.1 This Agreement is governed by and must be construed in accordance  with the
     laws  of  New  South  Wales,   Australia.   Each  party   irrevocably   and
     unconditionally submits to the non-exclusive  jurisdiction of the Courts of
     New South Wales and all Courts  competent to hear appeals from any of those
Courts.                                                               

16.2 All  communications  whether  written or oral in respect of this  Agreement
shall be in English.                                                  

16.3 Failure  of  either  party to insist  upon the  strict  performance  of any
     provisions  hereof or to exercise any right or remedy shall not be deemed a
     waiver of any right or remedy with  respect to any  existing or  subsequent
     breach or default;  the  election by any party of any  particular  right or
     remedy  shall  not be deemed to  exclude  any  other;  and all  rights  and
remedies of all parties shall be cumulative.                          

16.4 If  any  provision  of  this  Agreement  is  void,  voidable,   illegal  or
     unenforceable in any state,  province or country in which this Agreement is
     intended to be  effective,  or if this  Agreement  would,  if a  particular
     provision were not omitted, be so void, voidable, illegal or unenforceable,
then:                                                                 

     16.4.1    if the  offending  provision  can be  read  down so as to make it
               valid and enforceable  without materially changing its effect, it
               must  be  read  down,  in so far as it  applies  in  that  state,
               province  or country,  to the extent  necessary  to achieve  that
result;                                           

     16.4.2    otherwise, that provision shall be severed from this Agreement in
               so far as it applies in that state, province or country, and this
               Agreement  shall be read and  construed and shall take effect for
               all  purposes  in that  state,  province  or  country  as if that
               provision  were not contained in this  Agreement,  but without in
               any  way  affecting  the  effectiveness,  validity,  legality  or
           enforceability of the remaining provisions of this Agreement.

16.5 Licensee may not assign the benefit of or any of its rights or  obligations
     under this Agreement  without the prior written consent of Bishop which may
     be granted or withheld in the  absolute  discretion  of Bishop and which if
     granted may be granted  subject to such terms and  conditions as Bishop may
prescribe.                                                            

     Licensee will be deemed to have assigned its rights and  obligations  under
this Agreement if:                                                    

     16.5.1    any body corporate or any related  bodies  corporate not holding,
               or not holding  between them,  as at the date of this  Agreement,
               more  than 50% of the  issued  capital  or  voting  rights of the
               Licensee,  acquires or acquire between them so much of the issued
               capital or voting  rights of the  Licensee  as, when added to the
               issued capital or voting rights (if any)  previously held by such
               body  corporate  or related  bodies  corporate,  represent in the
               aggregate more than 50% of the issued capital or voting rights of
the Licensee;                                     

     16.5.2    any body corporate or any related  bodies not  controlling or not
               controlling  between them, as at the date of this Agreement,  the
               composition of the Licensee's  board of directors,  gains control
of the Licensee's board of directors; or          

     16.5.3    either of the changes  referred  to in 16.5.1 or 16.5.2  occur in
any holding company of the Licensee.              

               Without  limiting the  circumstances in which a body corporate is
               to be taken to control the composition of the Licensee's board of
               directors,  a body  corporate will be deemed to have such control
               if it has the power to appoint or remove all,  or a majority,  of
the directors of the Licensee.                    

16.6 This Agreement embodies the entire  understanding and agreement between the
parties as to the subject matter of this Agreement.                   

16.7 This Agreement may only be varied by the written agreement of the parties. 

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16.8 This  Agreement  may  consist  of a number of  counterparts,  and if so the
counterparts taken together constitute one and the same instrument.   

16.9 Any  notice  or  demand  under  or  relating  to this  Agreement  shall  be
     sufficiently  served if given or made by facsimile  or pre-paid  registered
     airmail letter to the party to be served at the following  addresses and to
     the attention of the following  employees,  or at such other address and/or
     to the  attention  of  such  other  employee  as may  from  time to time be
     notified  in writing by such party to the other  party,  and such notice or
     demand  shall be deemed to have been  delivered  at the time of dispatch in
     the case of a notice or demand sent by facsimile (provided the sender shall
     have  received a facsimile  transmission  report which  indicates  that the
     facsimile  was  sent  in  its  entirety  to  the  facsimile  number  of the
     addressee)  or on the third day  after  posting  in the case of a notice or
demand so sent by post:                                               

Bishop Steering Technology Limited

Postal address:      10 Waterloo Road 
                        North Ryde, NSW 2113
             Australia

Facsimile:           61  2  9878 6373 

 Attention:           Bernd Failenschmid

JINGZHOU HENGLONG AUTOMOTIVE PARTS

Postal address:      Henglong Road    
                               Yuqiao Exploration District
                                   Jingzhou, Hubei Province, China

  Facsimile:           [Insert fax number]

    Attention:           [Insert contact name]

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                                                        · Enlarge/Download Table


                                    SCHEDULE                                                     

Item 1                                                                                           

Effective Date: 31 October 2001                                                                  

Item 2                                                                                           

Part 1                                                                                           

Licensed Manufacturing Territory: People Republic of China                                       

Part 2                                                                                           

Licensed Sales Territory: People Republic of China                                               

Item 3                                                                                           

DESCRIPTION                   Country          Filing Date  Appl'n No.      Patent No.  Exp. Date

                                                                                                 
LINEAR LOW NOISE VALVE        Australia         15/01/93    33387/93          659917     15/01/13
LINEAR LOW NOISE VALVE        China             15/01/93    93101711.4      93101711.4   15/01/13
LINEAR LOW NOISE VALVE        Australian Prov   16/01/92    PL0446                       16/01/93
LINEAR LOW NOISE VALVE        PCT               15/01/93    PCT/AU93/00015                       
NEW DIE HEAD                  Australia         3/10/85     48263/85          556773      3/10/05
NEW DIE HEAD                  China             2/10/85     85108459            2177      2/10/00
NEW DIE HEAD                  Australian Prov   4/10/84     PG7491                               
NEW ROLL-IMPRINTING MACHINE   Australia         3/10/85     52114/86          566086      3/10/05
NEW ROLL-IMPRINTING MACHINE   Australian Prov   4/10/84     PG7491                               

Item 4                                                                          

Labour Rate: A$150.00 per hour                                                  

Item 5                                                                          

Royalty: to be agreed                                                           

Item 6                                                                          

--------------------- ------------------ ------------------ ------------------- 
YEAR 1                YEAR 2             YEAR 3             YEAR 4~10           
--------------------- ------------------ ------------------ ------------------- 
A$270,000.00          A$270,000.00       A$150,000.00       A$150,000.00        
--------------------- ------------------ ------------------ ------------------- 

Item 7                                                                          

The labour rate  specified  in Item 4 and the royalty  rates in Items 5 (in each
case as increased by previous  applications of this Item 7) will be increased by
5% upon or as soon as practicable  after,  but in either case with effect on and
from, each and every anniversary of the Effective Date.                         

Item 8                                                                          

Term: 10 years                                                                  

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EXECUTED AS AN AGREEMENT                                                        

Signed for and on behalf of Bishop Steering Technology Limited in the presence  
of:                                                                             

                                             -----------------------------------
                                        Signature of authorised person

-----------------------------------          -----------------------------------
Signature of witness                         Office held                        

-----------------------------------          -----------------------------------
Name of witness (print)                      Name of authorised person (print)  

Signed  for and on behalf of  [Insert                                           
full company  name of  Licensee]  in                                            
the presence of:                                                                

                                             -----------------------------------

                                        Signature of authorised person

-----------------------------------          -----------------------------------
Signature of witness                         Office held                        

-----------------------------------          -----------------------------------
Name of witness (print)                      Name of authorised person (print)