CONTRACT FOR PROCESSING & ASSEMBLY

    Contract No: ________________
    Conclusion Date: ____________
    Conclusion Place: ___________
    Party A: __________ Company (Party of Processing or Assembling)
    Legal Address: ________________________________
    Tel: _______________ Fax: ______________ E-mail: ___________
    Party B:___________ Ltd. (Party of Supplying Materials and Parts)
    Legal Address: ________________________________
    Tel: _______________; Fax: ______________; E-mail: __________
    Party A and Party B, according to the laws and policies of the People''s Republic of China and the relevant regulations and the principles of equality and mutual benefit, have held discussions relating to the processing and assembling of (plastic toy products) and have reached agreement on the following contractual clauses:
    1. Responsibilities
    (1)Responsibilities of Party A
    1) Party A shall provide factory space consisting of _____ square metres, field of _____ square metres without covering, _____ factory management person and _____ workers for the first phase. The number of workers shall be increased to _____ twelve months after operation. Within the Contract term, Party A shall process the products for party B which shall be re-exproted to _____.
    2) The water supply and utility equipment required for processing shall be provided by Party A. If additional installations of water and electric facilities are required, the expenses thereof shall be borne by Party B.
    3) Party A shall arrange all the necessary import and export approvals required for processing and assembly and provide administration and accounting management for the processing plant. Party A cannot assign Party A''s responsibilities to any other party or individual in any way.
    (2) Responsibilities of Party B
    1) To provide the equipment with the total value of _____.
    2) To provide the raw materials, indirect materials and packaging materials for processing the products. Quantities and specifications are to be specified in separate processing contracts.
    3) In the event any personnel, including management shows substandard performance and makes no improvement after retraining, Party B shall have the right to request Party A to replace such persons. However, any physical search of the workers shall be regarded as illegal and prohibited.
    2. Quantity of Products
    During the first year, the total processing fee shall amount to _____. From the second year, the quantity shall be increased. Details shall be specified in separate processing contracts.
    3. Price & Salary
    (1) The trial production (including training) period shall be _____. During such period, the workers shall be paid _____ per month on the basis of _____ working days per month and _____ working hours per day.
    (2) After the trial production period, the worker''s payment shall be calculated according to actual production quantities. On the basis of mutual benefit, both parties shall consider the processing fee, which shall be specified in separate processing contracts, according to different kinds of products, specifications, styles and engineering procedures. In order to ensure the reasonable income of the workers, the worker''s monthly salary shall be maintained no lower than _____. If overtime work is required, payment shall be calculated separately. However, overtime shall not exceed _____ hours a day.
    (3) Expenses for water and electricity in Party A''s plant shall be borne by Party B.
    (4) Every month Party B shall pay _____ to Party A for management expenses.
    4. Proportion Products Damaged
    (1) During the trial production period, Party B shall absorb the cost of products damaged.
    (2) After the trial production period, the proportion of damaged products shall be mutually considered and decided by both parties and specified in separate processing contracts.
    5. Shipment of Raw Materials & Finished Products
    (1) Every month, Party B shall provide sufficient raw materials and packaging materials according to the contracted processing volume. To ensure the normal production of Party A''s plant, Party B shall ship such materials to the plant_____ days before the production of each lot of products. Except for reason of force majeure, the plant shall operate for more than _____ days in a month. In case production is held up for _____ days to insufficient supply of raw materials, Party B shall calculate the actual days when production is shut down and pay to Party A the workers'' living expenses at the rate of _____ per person per day.
    (2) To ensure the normal operation of Party B''s business activities, Party A shall deliver the finished products to Party B in accordance with the time of delivery, quality and quantity. Except for reason of force majeure, in case losses to Party B are caused due to Party A''s failure to make delivery as mentioned above, Party A shall be responsible for the compensation. Details of such compensation shall be mutually agreed upon in separate processing contracts.
    (3) Both parties shall mutually inspect and document the equipment and materials provided by Party B, such as machinery, ventilation and lighting equipment and raw materials. After the finished products are inspected and shipped from the plant by Party B, Party A shall be free of any responsibility in regard to specifications, quality and quantity, etc.
    6. Method of Payment
    Payment of workers'' salary and management fee shall be settled once a month by D/P, which shall be conducted through Bank of China _________Branch by Party B''s bank in _____ (_____Bank, Account NO.______) in accordance with the invoices issued by Party A and a Trade Company (authorized by the local government to be in charge of affairs of processing and assembly and with foreign trade authority, hereinafter referred to as the Authorized Trade Company). In case Party B''s payment is delayed for _____ days, Party B shall be responsible for the interest incurred according to the bank''s interest rate; in case payment is not settled for _____ consecutive months, Party A shall have the right to suspend delivery of the finished products or take other measures.
    7. Labour Protection & Insurance
    (1) The plant shall take safety measures and protect the workers from dirt, smoke and poisonous materials. The factory shall be maintained ventilated and bright, and the surroundings clean and tidy.
    (2) The transportation expenses for the machinery, ventilation and lighting equipment, raw materials, indirect materials, packaging materials and the finished products shall be paid for by Party B.
    (3) All insurance for the transportation and storage of the above materials, machinery and equipment and coverage of the workers operating the machinery shall be arranged through the _____ Insurance Company of.
    8. Technical Exchange
    After the arrival of the equipment in the plant, Party B shall dispatch personnel to install such equipment, while Party A shall arrange personnel to assist the installation. When the trial production begins, Party B shall provide technical personnel to carry out the training until the workers have mastered the technology and the production operates normally. Party B shall be responsible for the technical personnel''s salary and all related expenses, and Party A shall provide daily necessities.
    9. Contract Term
    After this contract is signed and approved, Party B shall present to Party A its Commercial Registration and Bank Credit Certificate for Party A to arrange business licence and Customs Registration. The term of this contract shall be three years, e.g. from______ to________. If either party wishes to terminate in advance or extend the contract, the responsible party shall inform the other party three months in advance so that both parties can discuss and settle such a termination or extension. If either party terminates the contact before the term expires, the responsible party shall compensate the other party for the losses in such case, the responsible party shall pay the other party as compensation the amount of _____ times the monthly processing fee. The fee will be based on the average monthly fee of the previous _____ months.
    After the contract term expires, the real estate such as the factory building and dormitory building shall return to Party A and the machinery and equipment delivered by Party b shall be returned to Party B. Customs clearance procedures shall be gone through according to relevant regulations.
    Both parties agree that, within _____ days after the contract is signed and approved, Party B shall pay Party A the amount of _____ as its guarantee to carry out the contract. If, within _____ months after Party A''s receipt of such amount, Party B still cannot arrange to start production, the amount shall be forfeited to Party A unconditionally and Party A shall have the right to cancel the contract. If Party B can start production on time, the amount will be deducted from the processing fee.
    10. Arbitration
    Any dispute arising from or in connection with this Contract (and including all the separate processing contracts) shall be settled through amicable negotiation. Should no settlement be reached through negotiation, the case shall then be submitted to the China International Economic and Trade Arbitration Commission (CIETAC) ,Shenzhen Commission for arbitration that shall be conducted in Shenzhen in accordance with the CIETAC''s arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon parties.
    11. Language
    The present contract is drawn in Chinese and English as well, both texts being equally authentic. In case of any divergence of interpretation, the Chinese text shall prevail.
    12. Amendment and Copies
    This contact is made out in _____ copies respectively held by the Parties, the Customs, Vehicle Authority and the Authorized Trade Company. They shall have the same force.
    If there are other issues not covered in the contract, both parties can discuss to supplement or amend the contract and submit the results to relevant departments for approval.
    Party A: _____________________
    Party B:________________________
    Authorized Representative: ____
    Authorized Representative:________
    The Authorized Trade Company:_____________________