COMPENSATION TRADE CONTRACT

　　Contract No.： __________

　　Date of Signing： _________

　　Place of Signing： _______

　　The two Parties：

　　Party A： ________________________________

　　Address： ________________________________

　　Tel：_________________Fax： _______________

　　E-mail： _________________________________

　　Party B： ________________________________

　　Address： _______________________________

　　Tel：_________________Fax： ________________

　　E-mail：_________________________________

　　WITNESSETH

　　Whereas Party B has machines and equipment, which are now used in Party B''s manufacturing of _______, and is willing to sell to Party A the machines and equipment； and

　　Whereas Party B agrees to buy the products, _______, made by Party A using the machines and equipment Party B supplies, in compensation for the price of the machines and equipment, and

　　Whereas Party A agrees to purchase from Party B the machines and equipment, and

　　Whereas Party A agrees to sell to Party B the products, _______, in compensation of the price of Party B''s machines and equipment； Now therefore, in consideration of the premises¹ and covenants² described hereinafter, Party A and Party B agree a follows：

　　ARTICLE 1 TRANSACTIONS

　　A） Party B agrees to provide Party A with _________ machines to be used in production, their auxiliary³ machinery⁴, accessories and spare parts and a variety of measuring and testing instruments required in the process of production. The details of the models, names, specifications,quantity, prices, packing, delivery , etc. thereof shall be specified⁵ in an additional equipment-import agreement to be concluded by and between both parties which shall serve as an component⁶ part hereof.

　　B） The total value of the machines, auxiliary equipment, etc. supplied by part B shall be paid off by Party A with part of the manufactures made therewith and/or other goods, or with（designate name）products made in （Name of the plant）if both parties agree. The specific name（s）, quantity, price, delivery, etc. of the goods granted as the make-up payment shall be decided⁷ in an additional compensation goods-supply agreement made by the parties which shall serve as a component part hereof. The equipment-import agreement and compensation-goods-supply agreement aforesaid may be merged⁸ as one called sales agreement on compensation trade（See appendix）.

　　ARTICLE 2 PAYMENT

　　Both parties agree to open letters of credit in favor of each other, i.e. Party A will open, at regular intervals⁹, long term letters of credit in favor of Party B to pay by installments¹⁰ the total cost of the machines and auxiliary equipment provided by Party B； whereas Party B will open sight letters of credit in favor of Party A to pay the products to be delivered by Party A. Party A shall pay for the total cost of the machines and auxiliary equipment with the money remitted¹² by Party B as reimbursement¹⁴ for the products to be delivered by Party A. In case the sum to be paid by Party B fails to cover the value of the long-term letters of credit opened by Party A, the difference shall be made up by Party B by paying that much to Party A in advance, before the long-term letters of credit are due, to enable Party A to reimburse¹³ on time the long-term letters of credit it opens. The payment of the long-term letters of credit opened by Party A is based on Party B''s opening a sight letter of credit under the provisions and on its paying the advance required herein. Thus, Party B warrants, guarantees and covenants that it will open the letters of credit and pay the advance as provided herein.

　　ARTICLE 3 REIMBURSEMENT

　　Party A shall reimburse Party B for all the machines and auxiliary equipment supplied by Party B by delivering goods to Party B on a monthly basis and the reimbursement will last for___ year（s） and ____months（s）. The reimbursement shall start approximately ____month（s） after the first delivery of the machines and, in principle, the money to be reimbursed¹⁵ per month shall be ______percent of the total amount due for the machines. With a ______month（s） notice to Party B, Party A may reimburse Party B in advance.

　　Within the reimbursement period, Party B shall, under the provisions of the additional sales agreement aforesaid, open, sight, irrevocable, divisible and assignable letters of credit, covering the full amount, in favor of Party A.

　　ARTICLE 4 STANDARD MONEY AND PRICE STANDARD

　　The standard money for this transaction is （Name of currency）. All the machinery, auxiliary equipment and measuring and testing instruments , etc. provided by Party B shall be valued with （Name of currency）, while the goods provided by Party A to Party B as reimbursement shall be valued with the basis price （Name of currency） of the same goods exported by Party A at the time when this agreement is entered into, and the total price （Name of currency） shall be changed into that of （Name of currency） in accordance with the exchange rate then.

　　ARTICLE 5 INTREREST

　　Party A shall pay the interest on its long-term letters of credit and the interest on the cash in advance rendered by Party B. The annual interest rate is agreed upon at_____%.

　　ARTICLE 6 TECHNICAL SERVICE

　　The machinery, after arrival at its destination, shall be installed by Party A, Party B shall dispatch its technicians to render spot instructions and other necessary technical assistance during the installation of the main machines, as may be requested by Party A in case of necessity, Party B shall be liable for the losses resulted in such a course of installation from technical default on its part.

　　ARTICLE 7 ADDITIONAL EQUIPMENT

　　During the enforcement of this agreement, if it is found necessary that, in addition to the machinery and equipment listed herein, some new accessories or measuring and testing instruments are needed for completion of the project, （an） additional order（s） may be made through negotiation¹⁶ by the parties. The new items thus added shall be incorporated in agreement.

　　ARTICLE 8 INSURANCE

　　The machinery and auxiliary equipment, after shipment, shall be insured by Party B. The title thereof shall be transferred into Party B after full payment therefore is made by Party B, thereafter, the unforeseeable losses concerning the machinery and auxiliary equipment shall be indemnified for first by the Insurance Company to Party B, then Party B shall remit¹¹ for Party A,in proportion, the sum already paid by Party A for the machinery or equipment involved in the contingency¹⁷.

　　ARTICLE 9 LIABILITY FOR BREACH¹⁸ OF AGREEMENT

　　Party B shall , if it fails to comply with this agreement to make purchase of the goods delivered by Party A as reimbursement, or Party A shall, if it fails to comply with this agreement to deliver the goods it is due to provide, be deemed liable for a breach of agreement and shall compensate¹⁹ the non-breaching Party for the loss caused thereupon and shall pay the non-breaching Party a fine accounting²⁰ for % of the total value of the goods in question.

　　ARTICLE 10 PERFORMANCE GUARANTEE

　　To guarantee the implementation²¹ of this agreement, each party shall submit to the other party a letter of guarantee issued by its bank respectively. The guaranteeing bank of Party A is ______ Bank, ______, while the guaranteeing bank of Party B is ______Bank, ______.

　　ARTICLE 11 AMENDMNET

　　The modification²² of this agreement in particular cases shall be agreed upon by both parties through negotiations²³.

　　ARTICLE 12 Force Majeure

　　In case that one or both parties are impossible to perform the duties provided herein on account of force majeure, the party （or parties） in contingency shall inform the other party （or each other） of the case immediately and may, provided the case is duly verified by the competent authorities, delay in performance of or not perform the relevant duties hereunder the be partially²⁴ or entirely²⁵ exempted²⁶ from the liability for breach of this agreement.

　　ARTICLE 13 ARBITRATION²⁷

　　Any dispute arising from or in connection with this Contract shall be submitted to China International Economic and Trade Arbitration Commission,Shenzhen Commission for arbitration which shall be conducted in accordance with the Commission''s arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding²⁸ upon both parties and the applicable law is the material law of P.R.C.

　　Notwithstanding any reference to arbitration, both Parties shall continue to perform their respective obligations under the Contract unless otherwise agreed.

　　ARTICLE LANGUAGE AND EFFECTIVE DATE

　　There are two originals hereof made respectively in Chinese and ______, both of which are of the same effect.

　　This agreement shall come into effect on the date when both parties set their hands hereunto and remain effective for_____ years. Upon its expiration²⁹, the parties may, if they choose, extend the term hereof for _____years or execute a new cooperation agreement, provided they apply to and approved by the Authority agencies concerned.

　　Party A        Party B

　　Representative of___ Representative of____

　　（Authorized Signature）___ （Authorized Signature）

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