Zhong
      Chai Machinery Distribution and 

    Operation
      Management Agreement

     

    
      	
              Party
                A:

            	
              USUNCO
                AUTOMOTIVE LIMITED 

            


      	 	10510 Hillsboro
              Road, Santa Ana, CA 92705 USA 


    

     

    
      	
              Party
                B:

            	
              Xinchai
                Holding Group Co., Ltd.

            


    

     

    This
      joint venture agreement expires on July 2nd, 2021.

     

    
      	
              1.

            	
              Both
                parties agree to set up joint venture Zhejiang Zhong Chai Machinery
                Co.
                Ltd. The daily operation will be managed by Party
                B.

            


    

     

    
      	
              2.

            	
              Party
                A agrees joint venture and Party B jointly manage the allocation
                of the
                working capital.

            


    

     

    
      	
              3.

            	
              Party
                B will manage the duty function, compensation and job assignment
                of the
                work force in the joint venture. 

            


    

     

    
      	
              4.

            	
              Both
                parties agree that the joint venture will be responsible for the
                marketing
                and sales of all the diesel engines and related products manufactured
                by
                Xinchai Diesel Engine Co. Ltd. The joint venture is permitted to
                use
                Xinchai’s brand and trademark. 

            


    

     

    
      	
              5.

            	
              Party
                B ensures the joint venture’s year end dividend shall be no lower than the
                current interest rate issued by China Central Bank on Party A net
                asset
                contribution. 

            


    

     

    
      	
              6.

            	
              The
                joint venture will have the board meeting at least once a
                year.

            


    

     

    
      	
              7.

            	
              In
                the event of any important business events or any issues related
                to joint
                venture’s asset and equity such as debt offering, loan application,
                collateral, investment, restructure etc, board of directors will
                decide in
                accordance with the joint venture bylaw.


            


    

     

    
      	
              8.

            	
              Party
                A agrees not to request for dividend for just itself during the term
                of
                this agreement.

            


    

     

    
      	
              9.

            	
              Both
                parties agree not to reduce registered capital within the 15-year
                term of
                this agreement.

            


    

     

    
      	
              10.

            	
              Party
                B agrees that, during the 15-year term of this agreement, the joint
                venture’s operation and management will obey all the laws and regulations
                of China and local government. 

            


    

     

    
      	
              11.

            	
              During
                the 15-year term of this agreement, the joint venture shall timely
                provides each party with monthly, quarterly and annual financial
                reports.
                

            


    

     

    
      	
              12.

            	
              During
                the 15-year term of this agreement, Party A shall have the right
                to
                appoint its own CPA firm to review and audit joint venture’s annual
                financials. The joint venture should cooperate with auditor during
                the
                review and audit. Party A will be responsible for the audit
                fee.

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              13.

            	
              Upon
                the expiration of the agreement, both parties will appoint a mutually
                acceptable and reputable Chinese auditor compliant with GAAP to review
                the
                financials. In the event that taxation, accounting and business related
                liabilities go beyond this agreement, Party B will be responsible
                for all
                the cost.

            


    

     

    
      	
              14.

            	
              The
                termination of this agreement shall be mutually agreed by a written
                approval.

            


    

     

    
      	
              15.

            	
              In
                the event that party’s capital structure and investors occurs major
                changes, this agreement will be terminated.


            


    

     

    
      	
              16.

            	
              This
                agreement becomes effective with both parties’
                signatures.

            


    

     

    
      	
              17.

            	
              Any
                unfinished issues will be solved through negotiation and discussion.
                Appendix to this agreement will be
                provided.

            


    

     

    
      	 Party
              A	 	 Party
              B
	 	 	 
	 	 	 
	 <Signed>	 	 <signed>
	 Chairman	 	 
	 20061027	 	 20061027