<PAGE>

                                                                   EXHIBIT 10.26

                             Dated 1st March, 2000
                             ---------------------


                 (1)     CHINA BEARING HOLDINGS LIMITED
                                      and
                 (2)     ASEAN CAPITAL LIMITED
                                      and
                 (3)     CHINA INTERNATIONAL BEARING
                         HOLDINGS LIMITED
                                      and
                 (4)     SUNBASE ASIA, INC.
                                      and
                 (5)     SMITH ACQUISITION COMPANY, INC.
                                      and
                 (6)     SUNBASE INTERNATIONAL (HOLDINGS) LIMITED
                                      and
                 (7)     EXTENSIVE RESOURCES LIMITED
                                      and
                 (8)     GLORY MANSION LIMITED
                                      and
                 (9)     WARDLEY CHINA INVESTMENT TRUST
                                      and
                 (10)    MC PRIVATE EQUITY PARTNERS ASIA LIMITED
                                      and
                 (11)    CHINE INVESTISSEMENT 2000


                 ________________________________________________

                            SUPPLEMENTAL AGREEMENT

                            in respect of certain
                           arrangements relating to

                        CHINA BEARING HOLDINGS LIMITED

                 ________________________________________________


                                Chao and Chung

<PAGE>

                               Table of Contents
                               -----------------

<TABLE>
<CAPTION>

             Description                     Page No.
             -----------                     --------
<S>                                          <C>
1.           INTERPRETATION                         2

2.           CONDITION                              3

3.           AGREEMENT                              4

4.           COMPLETION                             4

5.           EFFECT OF THIS AGREEMENT               6

6.           COSTS AND EXPENSES                     6

7.           GOVERNING LAW AND JURISDICTION         6

8.           GENERAL PROVISIONS                     6

9.           COUNTERPARTS                           7

SCHEDULE 1                                          8

Form of the New Share Mortgage                      8

SCHEDULE 2                                         19

Form of the Release                                19

SIGNATURE PAGES                                    24

ANNEXURE 1

FORM OF THE ESCROW LETTER

ANNEXURE 2

FORM OF THE CONSENT
</TABLE>
<PAGE>

THIS AGREEMENT is made on the 1/st/ day of March, 2000.

(1)  CHINA BEARING HOLDINGS LIMITED, the registered office of which is at Cedar
     House, 41 Cedar Avenue Hamilton HM12, Bermuda (the "Company");

(2)  ASEAN CAPITAL LIMITED, the registered office of which is at Omar Hodge
     Building, Wickhams Cay I, P.O. Box 362, Road Town, Tortola, British Virgin
     Islands ("ACL");

(3)  CHINA INTERNATIONAL BEARING HOLDINGS LIMITED, the registered office of
     which is at 19th Floor, 51-57 Gloucester Road, Wanchai, Hong Kong
     ("CIBHL");

(4)  SUNBASE ASIA, INC., the registered office of which is at 1280 Terminal Way,
     Suite 3, Reno Nevada 89502, United States of America ("SAI");

(5)  SMITH ACQUISITION COMPANY, INC., a California corporation doing business as
     Southwest Products Company, the registered office of which is at 2240 Buena
     Vista, Irwindale, CA 91706, United States of America ("SPC");

(6)  SUNBASE INTERNATIONAL (HOLDINGS) LIMITED the registered office of which is
     at 19th Floor, 51-57 Gloucester Road, Wanchai, Hong Kong ("SIHL");

(7)  EXTENSIVE RESOURCES LIMITED, the registered office of which is at P.O. Box
     71, Craigmuir Chambers, Road Town, Tortola, British Virgin Islands ("ERL");

(the parties at (1), (2), (3), (4), (5), (6) and (7) hereinafter collectively
referred to as "Sunbase Parties");

(8)  GLORY MANSION LIMITED, the registered office of which is at Craigmuir
     Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands ("GML");

(9)  WARDLEY CHINA INVESTMENT TRUST, the registered office of which is at c/o
     Suite 1610, P.O. Box 1016, 885 West Georgia Street, Vancouver B.C., V6C
     3E8, Canada ("WCIT");

(10) MC PRIVATE EQUITY PARTNERS ASIA LIMITED the registered office of which is
     at P.O. Box 309, Ugland House, South Church Street, Grand Cayman, Cayman
     Islands, British West Indies ("MC Partners"); and

(11) CHINE INVESTISSEMENT 2000, a Luxembourg-registered Unit Trust, the
     registered office of which is at L1118 Luxembourg, 14 Rue Aldringen ("CI
     2000");
<PAGE>

(the parties at (8), (9), (10) and (11) hereinafter collectively referred to as
the "Investors" and each an "Investor")

WHEREAS:-

(A)  The parties hereto (except SIHL and ERL) entered into the Subscription
     Agreement (as defined below) under which the Investors subscribed for
     Debentures of an aggregate principal value of  $11,500,000.

(B)  The Sunbase Parties (except SIHL and ERL) breached certain of their
     obligations under the Subscription Agreement and the Investors agreed not
     to exercise their rights under the Subscription Agreement in relation
     thereto subject to and upon the terms and conditions set out in the
     Settlement Agreement (as defined below).

(C)  Certain obligations of the Sunbase Parties under the Settlement Agreement
     have not been complied with.

(D)  SAI and SPC have entered into an agreement with William McKay as purchaser
     and with Samuel T. Mok as voting trustee for all of the issued and
     outstanding shares of capital stock of SPC whereby SAI will sell its entire
     interests in its subsidiary, SPC.

(E)  The parties hereto agree to supplement the repayment arrangements
     contemplated in the Settlement Agreement on the terms and conditions set
     out herein.

NOW IT IS HEREBY AGREED as follows:-

1.  INTERPRETATION
    --------------

(A)  In this Agreement:-

     "Completion"         means performance by the parties hereto of their
                          respective obligations set out in Clause 4;

     "Completion Amount"  means the sum of $2,600,000 payable by the Company to
                          the Investors at Completion;

     "Consent"            means a letter of consent in the form annexed hereto
                          as Annexure 2 in connection with the Sale;

     "Escrow Agent"       means Jenkens & Gilchrist of 1919 Pennsylvania Avenue,
                          NW Suite 600, Washington D.C. 20006-3404;

                                       2
<PAGE>

     "Escrow Letter"               means an escrow letter in the form annexed
                                   hereto as Annexure 1 given or to be given by
                                   the Investors to the Escrow Agent in
                                   connection with, inter alia, the Completion
                                   Amount;

     "Existing Share Mortgage"     means the Deed of Mortgage dated 16/th/
                                   October, 1998 relating to 1,000,000 issued
                                   shares in the capital of Tianjin Development
                                   Holdings Limited executed by ERL in favour of
                                   Brilliant Future Holdings Limited pursuant to
                                   the Settlement Agreement;

     "New Share Mortgage"          means the form of share mortgage set out in
                                   Schedule 1;

     "Release"                     means the release of the Guarantee in the
                                   form as set out in Schedule 2;

     "Sale"                        the sale by SAI of its entire interests in
                                   SPC in accordance with the agreement referred
                                   to in Recital (D);

     "Settlement Agreement"        means an agreement dated 16/th/ October, 1998
                                   made between the parties hereto in respect of
                                   the Debentures issued by the Company;

     "Subscription Agreement"      means an agreement dated 2nd August, 1996
                                   relating to the subscription by the Investors
                                   for the Debentures issued by the Company; and

     "$"                           means United States dollars, the lawful
                                   currency of the United States of America.

(B)  In this Agreement, unless otherwise defined, words and expressions defined
     in the Settlement Agreement (including the schedules thereto) or in the
     Subscription Agreement as adopted for use in the Settlement Agreement, when
     used in this Agreement, bear the same respective meanings in this
     Agreement.

2.   CONDITION
     ---------

     The obligations of the respective parties hereto under this Agreement are
     conditional on (i) the Consent being duly executed by the parties thereto
     upon signing of this Agreement; (ii) the Release being duly executed by the
     parties thereto upon signing of this Agreement and the same having been
     delivered to the Escrow Agent by GML (as hereby expressly authorised by all
     parties

                                       3
<PAGE>

     hereto) pursuant to the Escrow Letter; and (iii) the Sale being completed
     on or before 10/th/ April, 2000 (or such later date as may be agreed by the
     Investors in writing), to the intent that none of the parties shall be
     bound by any provisions herein unless the Sale is completed on or before
     the said date.

3.   AGREEMENT
     ---------

3.1  The parties hereto agree to supplement the terms and conditions of the
     Settlement Agreement as follows:-

     (A)  the Company shall pay to the Investors on Completion the Completion
          Amount in settlement of such part of the principal amount and interest
          as equivalent to the Completion Amount comprised in those outstanding
          repayment instalments specified in the Repayment Schedule which are
          overdue for repayment as at the date of Completion (the "Overdue
          Amount");

     (B)  the remaining balance of the outstanding overdue repayment instalments
          shall remain immediately repayable and all subsequent repayment
          instalments set out in the Repayment Schedule respectively falling due
          for payment by the Company thereafter shall remain due and payable on
          the respective dates specified therefor in the Repayment Schedule;

     (C)  ERL shall execute the New Share Charge in favour of Brilliant Future
          Holdings Limited (as trustee for an on behalf of the Investors) in
          replacement of the Existing Share Mortgage on Completion; and

     (D)  upon receipt of the New Share Charge duly executed, the Investors will
          execute the Release, and will send by courier the Release to the
          Escrow Agent in accordance with the terms of the Escrow Letter.


4.   COMPLETION
     ----------

(A)  Completion shall take place at the offices of Chao and Chung at Suites
     2601-5, Asia Pacific Finance Tower, Citibank Plaza, 3 Garden Road, Hong
     Kong on the second Business Day (or such other day as the Company, SAI and
     the Investors may agree) following the last to occur (i) completion of the
     Sale; (ii) receipt by the Investors from the Escrow Agent of the Completion
     Amount pursuant to the Escrow Letter; and (iii) release of the Release by
     the Escrow Agent pursuant to the Escrow Letter.

(B)  At Completion, the following transactions shall take place:-

     (1)  the Company shall:-

          (i)  deliver to the Investors a certified copy of the board resolution

                                       4
<PAGE>

                 of the Company approving and authorising execution and
                 completion of this Agreement and resolving to effect and do all
                 that is necessary to give effect to this Agreement;


          (ii)   deliver to the Investors a certified copy of the board
                 resolution of SAI approving and authorising execution and
                 completion of this Agreement and resolving to effect and do all
                 that is necessary to give effect to this Agreement and the
                 Guarantee;

          (iii)  deliver to the Investors a certified copy of the board
                 resolution of CIBHL approving and authorising the execution and
                 completion of this Agreement and resolving to effect and do all
                 that is necessary to give effect to this Agreement and the
                 Guarantee;

          (iv)   deliver to the Investors a certified copy of the board
                 resolution of ACL approving and authorising the execution and
                 completion of this Agreement and resolving to effect and do all
                 that is necessary to give effect to this Agreement and the ACL
                 Undertaking;

          (v)    deliver to the Investors a certified copy of the board
                 resolution of SIHL approving and authorising the execution and
                 completion of this Agreement and resolving to effect and do all
                 that is necessary to give effect to this Agreement; and

          (vi)   deliver evidence satisfactory to the Investors that the Company
                 has effected payment by cashier order to Chao and Chung in
                 respect of all the costs and expenses referred to in Clause 6
                 hereof, the amount of which shall be notified to the Company by
                 the Investors prior to Completion;

     (2)  ERL shall execute and deliver to Brilliant Future Holdings Limited the
          New Share Mortgage and the board resolution of ERL approving and
          authorising the execution and completion of this Agreement and the New
          Share Charge and resolving to effect and do all that is necessary to
          give effect to this Agreement and the New Share Charge; and

(C)  All the events which are to take place at Completion shall take place
     simultaneously and no party shall be obliged to complete this Agreement
     unless the other parties simultaneously comply with their respective
     obligations contained in sub-clause (B) of this clause.

(D)  For the avoidance of doubt, the continuing obligations of the Sunbase
     Parties under the Settlement Agreement shall not cease as a result of
     Completion other than for SPC, whose continuing obligations under the
     Settlement Agreement are released by the operation and effect of the
     Release after Completion.

                                       5
<PAGE>

5.   EFFECT OF THIS AGREEMENT
     ------------------------

     Provided that Completion takes place as provided in Clause 4 the Settlement
     Agreement shall thenceforth be read and construed and will continue to take
     effect subject only to the express modification provided herein and for
     this purpose each of the Sunbase Parties hereby agrees, acknowledges and
     declares that it shall continue to be bound of each and all of the
     undertakings, covenants, obligations and agreements on its part undertaken
     in (as the case may be) the Settlement Agreement, the Guarantee, the ACL
     undertaking and the Existing Share Mortgage as the same is (and to the
     extent) expressly modified by this Agreement.  But if Completion shall fail
     to take place as herein provided, all of the rights, obligations and
     liabilities of the respective parties under and pursuant to the Settlement
     Agreement, the Guarantee, the Undertaking and the Existing Share Mortgage
     shall be preserved.


6.   COSTS AND EXPENSES
     ------------------

     The legal costs incurred in connection with the preparation and negotiation
     of this Agreement and ancillary documentation shall be borne by the
     Company.


7.   GOVERNING LAW AND JURISDICTION
     ------------------------------

7.1  This Agreement shall be governed by and construed in accordance with the
     laws of Hong Kong and each party hereby submits to the non-exclusive
     jurisdiction of the courts of Hong Kong as regards any claim or matter
     arising under this Agreement.

7.2  Each of the parties hereto irrevocably agrees for the benefit of each of
     the Investors that the courts of Hong Kong shall have jurisdiction to hear
     and determine any suit, action or proceeding, and to settle any disputes,
     which may arise out of or in connection with this Agreement and, for such
     purposes, irrevocably submits to the jurisdiction of such courts.

7.3  Each of the parties hereto irrevocably waives any objection it might now
     or hereinafter have to the courts referred to in Clause 7.1 above nominated
     as the forum to hear and determine any suit, action or proceeding, and to
     settle any disputes, which may arise out of or in connection with this
     Agreement and agrees not to claim that any of such courts is not a
     convenient or appropriate forum.


8.   GENERAL PROVISIONS
     ------------------

8.1  As regards any date or period time shall be of the essence of this
     Agreement.

                                       6
<PAGE>

8.2  This Agreement shall be binding on and enure for the benefit of the
     successors of each of the parties and shall not be assignable.

8.3  The exercise of or failure to exercise any right to remedy in respect of
     any breach of this Agreement shall not, save as provided herein, constitute
     a waiver by such party of any other right or remedy it may have in respect
     of that breach.

8.4  Any right or remedy conferred by this Agreement on any party for breach of
     this Agreement shall be in addition and without prejudice to all other
     rights and remedies available to it in respect of that breach.

8.5  The Settlement Agreement as expressly modified by this Agreement
     constitutes the entire agreement between the parties with respect to its
     subject matter and shall (including the Repayment Schedule as modified as a
     result of the application of the Completion Amount as provided in Clause
     3.1(A) above) remain binding on and enforceable against the parties
     thereto, and no variation of the Settlement Agreement as so modified shall
     be effective unless made in writing and signed by all of the parties.

8.6  Save and except the Subscription Agreement, the Settlement Agreement, the
     ACL Undertaking and the Guarantee or any other signed agreements in
     connection with the aforesaid, this Agreement supersedes all and any
     previous agreements, arrangement or understanding between the parties
     relating to the matters referred to in this Agreement and all such previous
     agreements, understanding or arrangements (if any) shall cease and
     determine with effect from this date hereof.

8.7  If at any time any provision of this Agreement is or becomes illegal, void
     or unenforceable in any respect, the remaining provisions hereof shall in
     no way be affected or impaired thereby.


9.   COUNTERPARTS
     ------------

     This Agreement may be executed by the parties hereto in any number of
     counterparts and on separate counterparts, each of which when so executed
     shall be deemed an original but all of which shall constitute one and the
     same instrument and is binding on all parties.

AS WITNESS whereof this Agreement has been duly executed on the date first above
written.

                                       7
<PAGE>

                                  SCHEDULE 1
                                  ----------

                        Form of the New Share Mortgage
                        ------------------------------

                                       8
<PAGE>

                                                                EXHIBIT 10.26(a)

                          Dated   1st March,     2000
                          ---------------------------



                          Extensive Resources Limited



                                      AND



                       Brilliant Future Holdings Limited





                      ___________________________________

                               Deed of Mortgage
                                  relating to
                Shares in Tianjin Development Holdings Limited



                      ___________________________________


                                Chao and Chung
                                   Hong Kong

                                       9
<PAGE>

     THIS DEED  is made on the  1st    day of    March        2000


     BETWEEN

     (1)  Extensive Resources Limited, a company incorporated in British Virgin
          Islands and having its registered address at P.O. Box 71, Craigmuir
          Chambers, Road Town, Tortola, British Virgin Islands (hereinafter
          referred to as the Chargor); and

     (2)  Brilliant Future Holdings Limited, a company incorporated in British
          Virgin Islands and having its registered address at the offices of
          Offshore Incorporations Limited, P.O. Box 957, Offshore Incorporations
          Centre, Road Town, Tortola, British Virgin Islands (hereinafter
          referred to as the "Chargee").


     WHEREAS:-

     (A)  The Chargor is the beneficial owner of the Mortgaged Shares (as
          defined hereinafter).

     (B)  The Chargor agreed pursuant to the Settlement Agreement to charge in
          favour of the Chargee the Mortgaged Shares and executed the Existing
          Share Mortgage.

     (C)  The Chargor has agreed pursuant to the Supplemental Agreement to
          execute this Deed in replacement of the Existing Share Mortgage.


     IT IS HEREBY AGREED as follows:-

     1.   Interpretation
          --------------

     1.1  Except as otherwise expressly provided, terms defined in the
          Supplemental Agreement shall have the same respective meanings when
          used in this Deed.

     1.2  In this Deed the following expressions shall have the following
          meanings respectively:-

          "Disposal" means, any sale, assignment, exchange, transfer,
          concession, loan, lease, surrender of lease, tenancy, licence, direct
          or indirect reservation, waiver, compromise, release, dealing with or
          in or granting of any option, right of first refusal or other right or
          interest whatsoever or any agreement for any of the same and Dispose
          shall be construed accordingly;

          "Encumbrance" means any mortgage, charge, pledge, lien (other than a
          lien arising by statute or operation of law) or other encumbrance,
          priority or security interest, deferred purchase, title retention,
          leasing, sale-and repurchase

                                      10
<PAGE>

          or sale-and leaseback arrangement whatsoever or in any assets, rights
          or interest of whatsoever nature and includes any agreement for any of
          the same;

          "Mortgaged Shares" means the 1,000,000 shares in the capital of
          Tianjin Development held by the Chargor to be mortgaged hereunder and
          for the time being subject to the charge created hereunder;

          "Settlement Agreement" means a settlement agreement dated 16th
          October, 1999 as modified by a supplemental agreement dated 1st March,
          2000 relating to certain repayment arrangements of the Company; and

          "Tianjin Development" means Tianjin Development Holdings Limited, a
          company incorporated in Hong Kong and listed on The Stock Exchange of
          Hong Kong Limited.

     1.3  In this Deed, unless the context otherwise requires:-

          (a)  words and expressions defined in the Companies Ordinance (Cap.
               32) of the Laws of Hong Kong shall bear the same meanings when
               used herein;

          (b)  references to any statutes or statutory provision shall include
               any statute or statutory provision which amends, replaces or re-
               enacts, or has amended, replaced or re-enacted, it, and vice
               versa, and shall include any statuary instrument, order,
               regulation or other subordinate legislation made thereunder.

          (c)  references to Clauses, paragraphs, Recitals and Schedules are to
               clauses and paragraphs of, and recitals and schedules to, this
               Agreement and references to sub-clauses are to sub-clauses of the
               clause in which the reference appears;

          (d)  references to a "company' shall be construed so as to include any
               company, corporation or other body corporate, wherever and
               however incorporated or established;

          (e)  references to a "person" shall be construed so as to include any
               individual, firm, company, government, state or agency of a
               state, local or municipal authority or government body or any
               joint venture, association or partnership (whether or not having
               separate legal personality); and

          (f)  words importing the singular include the plural and vice versa,
               words importing one gender include every gender.

                                      11
<PAGE>

2.   Share Mortgage
     --------------

2.1  The Chargor, as beneficial owner, mortgages and agrees to mortgage to the
     Chargee (as trustee for and on behalf of the Investors) by way of first
     mortgage all of  the Mortgaged Shares as a continuing security for the
     discharge of such obligations of the Company under the Settlement Agreement
     as shall fall to be performed.

2.2  In furtherance of the security constituted by this Deed the Chargor shall
     deliver to the Chargee the share certificates representing the Mortgaged
     Shares (and the Chargee hereby acknowledge receipt thereof) together with
     duly executed but undated sold notes, instruments of transfer in respect of
     the Mortgaged Shares in favour of the Chargee and/or its nominees.

3.   Covenants
     ---------

3.1  The Chargor covenants with the Chargee:-

     (a)  to reimburse to the Chargee all costs, charges and expenses which may
          be incurred by it under or arising out of this Deed or in connection
          with the Mortgaged Shares (but excluding any costs, charges and
          expenses incurred by the Chargee in connection with the preparation
          and negotiation of this Deed);

     (b)  at all times to comply in all respects with any law or directive and
          any conditions in relation to this Deed and the Settlement Agreement;
          and

     (c)  on demand made at any time after the security constituted by this Deed
          becomes enforceable, procure that the Mortgaged Shares are transferred
          into and registered in the share register of  Tianjin Development in
          the name of the Chargee and/or its nominees.

3.2  The Chargor covenant with the Chargee that it will not create or permit to
     subsist any Encumbrance over or Dispose of the Mortgaged Shares (or the
     equity of redemption in relation to the same) except with the prior consent
     of the Chargee.

4.   Share Rights
     ------------

4.1  Until the security constituted by this Deed becomes enforceable, the
     Chargor shall be entitled to exercise any voting rights in respect of the
     Mortgaged Shares provided that the Chargor will not exercise, or permit the
     exercise of, voting rights in respect of any of the Mortgaged Shares in
     such manner as will, in the opinion of the Chargee, contravene any of the
     provisions of, or jeopardise any of the security created by this Deed and
     the Settlement Agreement.

                                      12
<PAGE>

4.2  Upon the security constituted by this Deed becoming enforceable the Chargee
     or its nominees, may (to the entire exclusion of the Chargor) at any time,
     at the  Chargee's discretion, exercise any voting rights in respect of the
     Mortgaged Shares and all the powers given to trustees by Section 11(4) and
     (5) of the Trustee Ordinance (Cap.29) in respect of securities subject to a
     trust and all powers or rights which may be exercised by the person or
     persons in whose name or names the Mortgaged Shares are registered under
     the terms hereof or otherwise.

4.3  The Chargor (or as appropriate his nominee) shall be entitled to retain for
     its own benefit any dividends, distributions or other monies paid (and
     which the Chargee has agreed should be paid) on or in respect of the
     Mortgaged Shares prior to the security constituted by this Deed becoming
     enforceable.  All dividends, distributions or other monies paid or payable
     on or in respect of the Mortgaged Shares at any other time or without the
     prior approval of the Chargee, if received by the Chargor or its nominee,
     shall be paid over to (and pending such payment shall be held on trust for)
     the Chargee.

5.   Enforcement
     -----------

5.1  The Chargee shall be entitled to declare all or any part of the security
     constituted by this Deed enforceable at any time immediately upon the
     breach of any of the obligations of the Company under the Settlement
     Agreement as the same is certified in writing by the Chargee.

5.2  Upon or at any time after the security constituted by this Deed has become
     enforceable, the Chargee shall have the right, at any time, without notice
     or any other action with respect to the Chargor, to take such steps as are
     necessary to effect a transfer of the Mortgaged Shares to itself (and/or
     its nominees) and/or sell the Mortgaged Shares or any of them in such
     manner, at such price or prices, without being responsible for any loss, as
     the Chargee may at its absolute discretion deem expedient, and the Chargee
     shall not be responsible for any loss from or through brokers or others
     employed in the sale of the Mortgaged Shares or for any loss or
     depreciation in value of any of the Mortgaged Shares arising from or
     through any cause whatsoever.  The Chargee shall be entitled to reimburse
     itself out of the proceeds of sale all costs, charges and expenses incurred
     by it in such sale and is authorised to apply any net proceeds of the
     Mortgaged Shares towards payment of the outstanding principal and interest
     due from the Company to the Investors under the Settlement Agreement in
     proportion to the principal amounts of the Debentures held by each of the
     Investors respectively.

5.3  The Chargor agrees that upon any Disposal of the Mortgaged Shares or any
     other rights under this Deed, the Chargee may make or purport to make a
     statement in writing signed by the Chargee that this Deed is enforceable
     and that the power of sale has become exercisable which statement shall be
     conclusive evidence of the fact in favour of any purchaser or other person
     acquiring any of the Mortgaged Shares or other rights and every purchaser
     will

                                      13
<PAGE>

     take the same free of any rights of the Chargor. The Chargor shall
     indemnify the Chargee against any claims or demands which may be made
     against the Chargee by such purchaser and any liability, loss, cost or
     expense which the Chargee may suffer or incur by reason of any defect in
     the Chargor's title to the Mortgaged Shares.

5.4  The Chargor agrees to waive any right to require that, prior to the
     enforcement of the security constituted by this Deed, proceedings be taken
     against the Chargor so that action be taken to realize the security held
     pursuant to this Deed.

6.   Power of Attorney
     -----------------

6.1  The Chargor, by way of security, irrevocably appoints the Chargee and each
     of its directors, officers and managers for the time being, with full power
     of substitution and delegation, to be his attorney acting singly or
     together and in his name, on his behalf to do all such assurances, acts or
     things as he ought to do under the covenants and provisions contained in
     this Deed and generally in his name and on his behalf to exercise all or
     any of the powers, authorities and discretions conferred by or pursuant to
     this Deed on the Chargee and generally to execute, seal and deliver and
     otherwise perfect any deed, assignment, transfer, assurance, agreement,
     instrument, or act which may in the opinion of the Chargee (or any
     substitute attorney) be required or considered proper, necessary or
     desirable for any of the purposes of this Deed.

6.2  The Chargor ratifies and confirms and agrees to ratify and confirm whatever
     any attorney mentioned in this clause does in the exercise or purported
     exercise of all or any of the powers, authorities and discretions under
     this clause.

7.   Termination
     -----------

     This Deed shall terminate automatically upon performance of all the
     obligations of the Company under the Settlement Agreement whereupon the
     Chargee shall:-

     (a)  redeliver to the Chargor the share certificates and instruments of
          transfer in respect of the Mortgaged Shares or the remainder of them
          (if any);

     (b)  generally take such other action as may be reasonably required at the
          cost of the Chargor to release the Chargor from and to discharge this
          Deed.

8.   Indulgence
     ----------

     This Deed and the rights of the Chargee under it shall not be discharged or
     in any way affected by:-

                                      14
<PAGE>

     (a)  any time, indulgence, waiver or consent at any time given to, or any
          compromise or composition entered into or made with, the Chargor or
          any other person or any other release (conditional or otherwise) of
          the Chargor or any other person;

     (b)  any amendment, variation, supplement or notation, to or of the
          Settlement Agreement or any of them (whether or not the change
          effected by such amendment, variation, supplement or notation is
          material);

     (c)  any assignment by the Chargee of their rights and obligations under
          the Settlement Agreement;

     (d)  any defect, irregularity or deficiency in any provision of any of the
          Settlement Agreement, or the obligations of any party thereunder being
          or becoming terminated, invalid, illegal or unenforceable at any time
          and/or for any reason (whether or not known to the Subscriber);

     (e)  any party thereto not being bound by the terms of the Settlement
          Agreement, whether as a result of any failure to execute, or any
          deficiency in the execution of, the same or as a result of any defect
          in or insufficiency or want of the necessary powers or any irregular
          or improper exercise thereof, whether or not known to the Chargee or
          for any other reason whatsoever; or

     (f)  the insolvency, bankruptcy, dissolution, winding-up, liquidation,
          amalgamation, reconstruction, reorganization, charge in constitution,
          death or incapacity of  the Chargor.

9.   General
     -------

9.1  The rights and remedies provided in this Deed are cumulative and not
     exclusive of any rights or remedies provided by law or under the Settlement
     Agreement.

9.2  Any provision of this Deed may be amended only if the Chargor and the
     Chargee agree in writing.

9.3  (A)  Any notice or other communication given or made under this Agreement
          shall be in writing.

     (B)  Any such notice or other communication shall be addressed as provided
          in sub-clause (C) and, if so addressed, shall be deemed to have been
          duly given or made as follows:-

          (i)  if sent by personally delivery, upon delivery at the address of
               the relevant party;

                                      15
<PAGE>

          (ii)  if sent by post, two clear Business Days (if within Hong Kong)
                or 7 Business Days (if overseas) after the date of posting; and

          (iii) if sent by facsimile, when despatched;

          PROVIDED THAT if, in accordance with the above provisions, any such
          notice or other communication would otherwise be deemed to be given or
          made outside working hours, such notice or other communication shall
          be deemed to be given or made at the start of working hours on the
          next Business Day. "Working hours" means 9:00a.m. to 5:30p.m. on the
          Business Day.

(C)  The relevant addressee, address and facsimile number of each party for the
     purposes of this Agreement are:-

     (i)  in the case of the Chargor:-

          Address:   c/o China International Bearing Holdings Limited
                         19th Floor, First Pacific Bank Centre
                         51-57 Gloucester Road, Hong Kong

          Facsimile: (852) 2865 4293
          Attention: Mr. Roger Li / Mr. Chen Hong Fei

     (ii) in the case of the Chargee:-

          Address:   c/o HPEM, Level 17, 1 Queen's Road,
                         Central, Hong Kong

          Facsimile: (852) 2845 9992
          Attention: Mr. George Raffini/Ms. Glory Gunawan

     or in each case at or to such other address, facsimile number of individual
     as the receiving party may have notified the sending party provided that
     such notification shall only be effective on the date specified in the
     notification as the date on which the change is to take place or if no date
     is specified or the date specified is fewer than five clear Business Days
     after the date on which notice if given, the date falling five clear
     Business Days after notice of any change has been given.

9.4  The illegality, invalidity or unenforceablility of any provision of this
     Deed under the law of any jurisdiction shall not affect its legality,
     validity or enforceability under the law of any other jurisdiction nor the
     legality, validity or enforceability of any other provision.

                                      16
<PAGE>

9.5  This Deed shall enure to the benefit of the parties hereto and their
     respective permitted successors, assignees and transferees.

9.6  The Chargor and the Chargee may not assign or transfer any or all of their
     rights or obligations under this Deed.

10.  Law
     ---

     This Deed shall be governed by and construed in accordance with the laws of
     Hong Kong.


AS WITNESS whereof this Deed has been duly executed on the date first above
written.

                                      17
<PAGE>

SEALED WITH THE COMMON SEAL     )
OF EXTENSIVE RESOURCES LIMITED  )
in the presence of:-            )




SIGNED BY Tien-yo Chao             )
AS DULY AUTHORISED ATTORNEY        )
FOR AND ON BEHALF OF               )
BRILLIANT FUTURE HOLDINGS LIMITED  )
in the presence of:-               )

                                      18
<PAGE>

                                  SCHEDULE 2
                                  ----------

                              Form of the Release
                              -------------------

                                      19
<PAGE>

                                                                Exhibit 10.26(b)

                  Dated           1st March               2000
                  --------------------------------------------



               (1)       Glory Mansion Limited

                                   and

               (2)       Wardley China Investment Trust

                                   and

               (3)       MC Private Equity Partners Asia Limited

                                   and

               (4)       Chine Investissement 2000

                                   and

               (5)       Sunbase Asia, Inc.

                                   and

               (6)       China International Bearing Holdings Limited

                                   and

               (7)       Smith Acquisition Company, Inc



               _____________________________________

                              RELEASE

               _____________________________________

                                      20
<PAGE>

THIS RELEASE is made this 1st day of March 2000

BY:

(1)  Glory Mansion Limited, the registered office of which is at Craigmuir
     Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands ("GML");

(2)  Wardley China Investment Trust, the registered office of which is at c/o
     Suite 1610, P.O. Box 1016, 885 West Georgia Street, Vancouver B.C., V6C
     3E8, Canada ("WCIT");

(3)  MC Private Equity Partners Asia Limited, the registered office of which is
     at P.O. Box 309, Ugland House, South Church Street, Grand Cayman, Cayman
     Islands, British West Indies ("MC Partners");

(4)  Chine Investissement 2000, a Luxembourg-registered Unit Trust, the
     registered office of which is at L1118 Luxembourg, 14 Rue Aldringen ("CI
     2000");

     (The parties referred to at (1), (2), (3) and (4) hereinafter collectively
     referred to as "Investors" and each an "Investor")

(5)  Sunbase Asia, Inc., the registered office of which is at 1280 Terminal Way,
     Suite 3, Reno Nevada 89502, United States of America ("SAI");

(6)  China International Bearing Holdings Limited, the registered office of
     which is at 19th Floor, 51-57 Gloucester Road, Wanchai, Hong Kong
     ("CIBHL");

     (The parties referred to at (5) and (6) hereinafter collectively referred
     to as "Continuing Guarantors" and each a "Continuing Guarantor").

(7)  Smith Acquisition Company, Inc., a California corporation doing business as
     Southwest Products Company, the registered office of which is at 2240 Buena
     Vista, Irwindale, CA 91706, United States of America ("SPC");


WHEREAS:-

(A)  SPC and the Continuing Guarantors signed a guarantee in favour of the
     Investors dated 16/th/ October, 1998 (the "Guarantee") securing payment of
     certain amounts (the "Debt") and performance of certain obligations.

(B)  In consideration of the Debt being partially discharged pursuant to a
     Supplemental Agreement dated 1/st/ March, 2000 executed between, inter
     alia, SPC, the Continuing Guarantors, the Investors and certain other
     parties, the Investors have agreed to discharge and release the obligations
     of SPC under the Guarantee on the terms and conditions contained herein.

                                      21
<PAGE>

NOW THIS RELEASE WITNESSETH that:

1.   In consideration of the Debt being partially discharged pursuant to the
     Supplemental Agreement as referred to in Recital (B) above, the Investors
     hereby discharge and release SPC from all liabilities and obligations due
     and owing as at the date hereof by SPC to the Investors under the Guarantee
     or any other documents in connection with the Debt including without limit
     the Settlement Agreement dated 16/th/ October, 1998 and the Supplemental
     Agreement (the "Debt Documents").

2.   Each of the Continuing Guarantors hereby acknowledges that its continuing
     obligations under the Guarantee shall remain notwithstanding the execution
     of this Release and that it shall have no rights against SPC under the
     Guarantee upon signing of this Release.

3.   This Release is governed by the laws of the Hong Kong Special
     Administrative Region of the People's Republic of China.


IN WITNESS WHEREOF this Release has been executed this 1st day of March 2000



SIGNED by Tien-yo Chao                       )
duly authorised attorney for and on behalf   )
of GLORY MANSION LIMITED                     )
in the presence of:-                         )



SIGNED by Tien-yo Chao                       )
duly authorised attorney for and on behalf   )
of WARDLEY CHINA                             )
INVESTMENT TRUST                             )
in the presence of:-                         )

                                      22
<PAGE>

SIGNED by Mr. Yasushi Okahisa                )
duly authorised for and on behalf            )
of MC PRIVATE EQUITY PARTNERS                )
ASIA LIMITED                                 )
in the presence of:-                         )



SIGNED by Tien-yo Chao                       )
duly authorised attorney                     )
for and on behalf                            )
of CHINE INVESTISSEMENT 2000                 )
in the presence of:-                         )



The Common Seal of                           )
SUNBASE ASIA, INC.                           )
was hereunto affixed                         )
in the presence of:-                         )



The Common Seal of                           )
CHINA INTERNATIONAL                          )
BEARING HOLDINGS LIMITED                     )
was hereunto affixed                         )
in the presence of:-                         )



SIGNED by                                    )
duly authorised for and on behalf            )
of SMITH ACQUISITION                         )
COMPANY, INC.                                )
in the presence of:-                         )

                                      23
<PAGE>

                                SIGNATURE PAGES
                                ---------------



SIGNED by  /s/ Roger Li                 )
duly authorised for and on behalf       )
of CHINA BEARING                        )    /s/ Roger Li
HOLDINGS LIMITED                        )
in the presence of:- /s/ Hongfei Chen   )



SIGNED by  /s/ Roger Li                 )
duly authorised for and on behalf       )    /s/ Roger Li
of ASEAN CAPITAL LIMITED                )
in the presence of:- /s/ Hongfei Chen   )



SIGNED by  /s/ Roger Li                 )
duly authorised for and on behalf       )
of  CHINA INTERNATIONAL                 )    /s/ Roger Li
BEARING HOLDINGS LIMITED                )
in the presence of:- /s/ Hongfei Chen   )



SIGNED by  /s/ Roger Li                 )
duly authorised for and on behalf       )    /s/ Roger Li
of SUNBASE ASIA, INC.                   )
in the presence of:- /s/ Hongfei Chen   )



SIGNED by                               )
duly authorised for and on behalf       )
SMITH ACQUISITION COMPANY, INC.         )    /s/ Samuel Mok Trustee
in the presence of:-                    )

                                      24
<PAGE>

SIGNED by Tien-yo Chao                       )
duly authorised attorney for and on behalf   )    /s/ Tien-yo Chao
of GLORY MANSION LIMITED                     )
in the presence of:- /s/ Desmond Chow        )
                       Desmond Chow
                        Solicitor
                      Hong Kong SAR

SIGNED by Tien-yo Chao                       )
duly authorised attorney for and on behalf   )
of WARDLEY CHINA                             )    /s/ Tien-yo Chao
INVESTMENT TRUST                             )
in the presence of:- /s/ Desmond Chow        )
                       Desmond Chow
                        Solicitor
                      Hong Kong SAR

SIGNED by Mr. Yasushi Okahisa                )
duly authorised for and on behalf            )
of MC PRIVATE EQUITY PARTNERS                )    /s/ Mr. Yasushi Okahisa
ASIA LIMITED                                 )
in the presence of:- /s/ Desmond Chow        )
                       Desmond Chow
                        Solicitor
                      Hong Kong SAR

SIGNED by Tien-yo Chao                       )
duly authorised attorney                     )
for and on behalf                            )    /s/ Tien-yo Chao
of CHINE INVESTISSEMENT 2000                 )
in the presence of:- /s/ Desmond Chow        )
                       Desmond Chow
                        Solicitor
                      Hong Kong SAR

SIGNED by /s/ Roger Li                       )
duly authorised for and on behalf            )
of EXTENSIVE RESOURCES                       )    /s/ Roger Li
LIMITED                                      )
in the presence of:- /s/ Hengfei Chen        )

                                      25
<PAGE>

SIGNED by /s/ Roger Li                  )
duly authorised for and on behalf       )
of  SUNBASE INTERNATIONAL               )    /s/ Roger Li
(HOLDINGS) LIMITED                      )
in the presence of:- /s/ Hongtei Chen   }

                                      26
<PAGE>

                                  ANNEXURE 1
                                  ----------

                           FORM OF THE ESCROW LETTER
                           -------------------------
<PAGE>

BY COURIER AND BY FAX (002-1-202-3261555)
-----------------------------------------

                                                               1/st/ March, 2000

Jenkens & Gilchrist
1919 Pennsylvania Avenue, NW
Suite 600
Washington D.C. 200060

Attn: Mr. Andrew C. Lynch / Mr. Christopher E. Ondeck
-----------------------------------------------------


Dear Sirs,

                        Re: Monies to be held in Escrow
                        -------------------------------

1.   We refer to (i) the Stock Purchase Agreement dated 31/st/ January entered
     into between Sunbase Asia, Inc ("SAI"), Samuel T. Mok, an investment group
     led by William McKay (the "Buyer") and Smith Acquisition Company Inc
     ("SPC") in connection with the sale and purchase of shares of capital stock
     of SPC (the "Sale"); and (ii) the Supplemental Agreement dated 1/st/ March,
     2000 entered into between SAI, ourselves and certain other parties in
     connection with certain supplemental arrangements relating to repayments
     prescribed in a Settlement Agreement dated 16/th/ October, 1998.

2.   For the purpose of facilitating completion of the Sale, we enclose a duly
     executed release (the "Release"), to be dated the day as mentioned in
     paragraph 4 below, in relation to the release of SPC from its obligations
     under the Guarantee dated 16th October, 1998.

3.   You are instructed to hold the Release in escrow pending the transfer by
     you (solely from the proceeds of the Closing (as "Closing" is referred to
     and defined in the said Stock Purchase Agreement)) of the following
     respective amounts by telegraphic transfer into the following bank
     accounts:-

     The HSBC Private Equity Fund, L.P.
     ----------------------------------

     --------------------------------------------------------------------------
     Bank:                    HSBC Bank USA, New York
                              140 Broadway
                              New York NY10015
                              U.S.A.
                              SWIFT: MRMD US 33
     --------------------------------------------------------------------------
     Account name:            HSBC International Trustee Limited a/c HPEF
                              (General)
     --------------------------------------------------------------------------
     Account no:              000-05073-3
     --------------------------------------------------------------------------
     Amount:                  US$1,356,522
     --------------------------------------------------------------------------
<PAGE>

     Wardley China Investment Trust
     ------------------------------

     --------------------------------------------------------------------------
     Bank:                       Brown Brothers Harriman and Co., New York
     --------------------------------------------------------------------------
     Account name:               Royal Trust Corporation of Canada, London
     --------------------------------------------------------------------------
     Account no:                 7027436
     --------------------------------------------------------------------------
     SWIFT CODE:                 BBHCUS33
     --------------------------------------------------------------------------
     For further credit to:      Wardley China Investment Trust
     --------------------------------------------------------------------------
     Account no:                 877653
     --------------------------------------------------------------------------
     Amount:                     US$452,174
     --------------------------------------------------------------------------


     MC Private Equity Partners Asia
     -------------------------------

     --------------------------------------------------------------------------
     Bank:                       Bangkok Bank Public Company Ltd Singapore
     --------------------------------------------------------------------------
                                 180 Cecil Street, Singapore 069546
     --------------------------------------------------------------------------
     Account no:                 0700-388629-412
     --------------------------------------------------------------------------
     Account holder              MC Private Equity Partners Asia
     --------------------------------------------------------------------------
     Currency Type               US$ ACU Call
     --------------------------------------------------------------------------
     PIC of Bank                 Ms Sumalee (Tel: 65-229-7429)
     --------------------------------------------------------------------------
     Amount:                     US$452,174
     --------------------------------------------------------------------------


     Chine Investissement 2000
     -------------------------

     --------------------------------------------------------------------------
     Bank:                       Bank of America New York
     --------------------------------------------------------------------------
     SWIFT:                      BWORFRPP
     --------------------------------------------------------------------------
     Account name:               Banque Worms, Paris
     --------------------------------------------------------------------------
     For further credit to:      Chine Investissement 2000
     --------------------------------------------------------------------------
     Account no.:                0356631361P
     --------------------------------------------------------------------------
     IBAN Code:                  FR60-3099-8000-0303-5663-1361-P76
     --------------------------------------------------------------------------
     Amount:                     US$339,130
     --------------------------------------------------------------------------

4.   Upon our receipt of the respective amounts and in the manner set out in
     paragraph 3 which should not be later than 15/th/ April, 2000 and subject
     to paragraph 5 below, we shall promptly notify you in writing and you may
     release and deliver the Release to the Buyer and insert as the date of the
     Release (which you are hereby authorised to do on our behalf) the day on
     which the Release is so released and delivered to the Buyer. Save as
     aforesaid, you shall not release or otherwise deal with the Release.

5.   If we do not receive the sum and in the manner set out in paragraphs 3 on
     or before 15/th/ April, 2000, we shall have the right by written notice to
     you to demand the prompt return of the Release to us, whereupon you are
     obliged to return the Release by courier to Glory Mansion Limited (on
     behalf of itself and the rest of us), care of HSBC Private Equity (Asia)
     Limited at Level 17, 1 Queen's Road Central, Hong Kong.  If the Release is
     not released pursuant to
<PAGE>

     this letter by April 30, 2000, you have the option of returning the Release
     to us (by returning it to Glory Mansion Limited in the manner
     aforementioned), and upon such return of the Release the obligations of you
     arising from this letter shall cease and terminate.

6.   You need to have no regard to the sufficiency, accuracy or genuineness of
     any notice or confirmation received by you in your capacity as escrow agent
     hereunder of any incapacity and limitation upon the powers of any person
     signing and issuing such notice or confirmation which appears on its face
     to be in order and may assume such notice or confirmation which appears on
     its face to be in order is correct and properly made.

7.   This letter shall be governed by and construed in accordance with the laws
     of The Hong Kong Special Administrative Region of the People's Republic of
     China ("Hong Kong").  All disputes in connection with this letter shall be
     subject to the non-exclusive jurisdiction of the courts of Hong Kong.

8.   This letter shall not be amended or varied except by written notification
     duly executed by all parties hereto.

9.   By signing and acknowledging the terms of this letter, you irrevocably
     agree to strictly abide by and adhere to the provisions of this letter.

10.  Please countersign below to acknowledge your agreement to the above.


<TABLE>
<CAPTION>
                               Yours faithfully,
<S>                                             <C>




/s/ Tien-yo Chao                                /s/ Tien-yo Chao
------------------------------------            ---------------------------------
Tien-yo Chao                                    Tien-yo Chao
Duly authorised attorney                        Duly authorised attorney
for and on behalf                               for and on behalf
of Glory Mansion Limited                        of Wardley China Investment Trust



/s/ Yasushi Okahisa                             /s/ Tien-yo Chao
------------------------------------            ----------------------------------------
Mr. Yasushi Okahisa                             Tien-yo Chao
for and on behalf                               Duly authorised attorney
of MC Private Equity Partners                   for and on behalf
Asia Limited                                    of Chine Investissement 2000
</TABLE>
<PAGE>

We hereby acknowledge and
agree to the above terms.



/s/ Nikelars F. Schalbame
-------------------------------
For and on behalf of
Jenkens & Gilchrist

Date:
<PAGE>

                                  ANNEXURE 2
                                  ----------

                              FORM OF THE CONSENT
                              -------------------
<PAGE>

                                    CONSENT
                                    -------


THIS CONSENT (the "Consent") dated as of 1/st/ March, 2000 is delivered pursuant
                   -------
to that certain Stock Purchase Agreement (the "Stock Purchase Agreement"), dated
                                               ------------------------
January 31, 2000, by and among SMITH ACQUISITION COMPANY D/B/A SOUTHWEST
PRODUCTS COMPANY, INC., (the "Company"), SAMUEL T. MOK, as voting trustee,
                              -------
SUNBASE ASIA, INC., and WILLIAM MCKAY ("Buyer"), as such agreement may be
                                        -----
amended.

     Subject to (i) the Supplemental Agreement dated 1st March, 2000 entered
into among, inter alia, China Bearing Holdings Limited and several other parties
            ----------
with respect to certain supplemental repayment arrangements and (ii) our receipt
of an aggregate sum of U.S. Two Million Six Hundred Thousand Dollars (U.S.
$2,600,000) pursuant to an escrow letter signed between ourselves and Jenkens &
Gilchrist in connection with the above matter, the signatories hereto consent to
the sale of the Company to the Buyer, for a purchase price of not less than U.S.
Three Million Five Hundred Thousand Dollars (U.S. $3,500,000).

     IN WITNESS WHEREOF, this Consent has been duly executed under seal by the
parties hereto effective as of the date first above written.


                                             GLORY MANSION LIMITED


                                             /s/ Tien-yo Chao
                                             ---------------------------------
                                             By: Tien-yo Chao
                                                 Duly authorised attorney
                                                 for an on behalf of
                                                 GLORY MANSION LIMITED




                                             WARDLEY CHINA INVESTMENT TRUST


                                             /s/ Tien-yo Chao
                                             ----------------------------------
                                             By: Tien-yo Chao
                                                 Duly authorised attorney
                                                 for an on behalf of
                                                 WARDLEY CHINA INVESTMENT TRUST
<PAGE>

                                        MC PRIVATE EQUITY PARTNERS ASIA LIMITED


                                        /s/ Yasushi Okahisa
                                        ---------------------------------------
                                        By: Mr. Yasushi Okahisa
                                            Duly authorised
                                            for an on behalf of
                                            MC PRIVATE EQUITY PARTNERS ASIA
                                            LIMITED



                                        CHINE INVESTISSEMENT 2000


                                        /s/ Tien-yo Chao
                                        ---------------------------------------
                                        By: Tien-yo Chao
                                            Duly authorised attorney
                                            for an on behalf of
                                            CHINE INVESTISSEMENT 2000