Exhibit 10.23
Certain portions of this Exhibit have been omitted pursuant to a request for
"Confidential Treatment" under Rule 24b-2 of the Securities and Exchange
Commission. Such portions have been redacted and bracketed in the request and
appear as [ ] in the text of this Exhibit. The omitted confidential information
has been filed with the Securities and Exchange Commission.
AGREEMENT FOR PURCHASE OF EQUIPMENT
2001
CHAPTER I - GENERAL PRINCIPLE
1.1 This contract is made between the Hainan Pacific New High Tech Company
(hereinafter as Party A) and the American Pacific Aviation Technology
Company (hereinafter as Party B), based on the principle of mutual benefit
and through friendly negotiations, to purchase from Party B by Party A the
equipment for the production of the contactless smartcards.
1.2 It is agreed that Party B shall provide a full set, brand new, and
state-of-art production line and the complete production technology,
technical information and software for the production of contactless
smartcards, which shall ensure that the strength and durability of the
mechanically tested cards produced by Party A meet the standards of
ISO/Mifare, and that the electrically tested cards meet the standards of
the IEC.
1.3 According to the laws and rules and regulations of the People's Republic
of China and based on the principle of mutual benefits, the provisions of
this agreement shall become effective and shall be executed at the same
time with the "Agreement of Technical Services and Licensing" and the
"Agreement for the Purchase of Raw Materials and Sales of Products".
CHAPTER II - PARTIES
2.1 Party A: Hainan Pacific New High Tech Company Limited is a registered
corporation in the People's Republic of China.
Legal Address: The People's Republic of China
Legal Representative: Ying Xue Tian
Title: Chairman of the Board
Nationality: Chinese
Telephone:
Fax:
Zip Code:
Bank:
Account Number: US Dollars
RMB
1
2.2. Party B: American Pacific Aviation & Technology Corp.
Legal Address: 1 Sansome Street, 19th Street
San Francisco, CA 94104, USA
Legal Representative: Allen Yue
Title: V.P. Asian Pacific Region
Nationality: U.S.
Telephone: (415) 951-1078
Fax: (415) 951-1046
Zip Code:
Bank:
Account Number:
CHAPTER III - NAME, SPECIFICATIONS, QUANTITY, PRICE AND DELIVERY OF EQUIPMENT
3.1 Party B shall provide Party A with a complete brand new production line
with the state-of-art of the 2001 (see Appendix I - "Details of Equipment,
Moulds and Accessories") and accessories for the production of contactless
smart cards. Said production lines shall be able to produce 1500 pieces of
smart cards per hour. The total cost of the equipment shall be
US$[ ], based on the CIF Haikou Airport price, which shall cover the
equipment, moulds, technical service, patent and licensing, and
accessories.
3.2 Before packaging said production line for shipment, Party A shall send
three technical staff to come to the United States to conduct preliminary
inspection of the equipment. Party B shall pay for the expense of the
two-way air tickets, and provide lodging and transportation in the United
States for the visiting staff of Party A. Staff of Party A will stay in
the United States for two weeks.
3.3 Delivery Date of the Equipment: about August.
CHAPTER IV - PAYMENT
4.1 After signing this agreement, Party A shall, within ten working days,
issue a Letter of Bank Guarantee to Party B in the amount of US$[ ].
Upon receipt of Letter of Bank Guarantee from Party A, Party B shall,
within three working days, remit by T/T a deposit of US$
] US Dollars).
2
4.2 Party A shall, before May 26, issue a Letter of Credit in the amount of
US$[ ] US Dollars) to Party B for the purchase
of the equipment. On June 20, 2001, Party A shall issue a Letter of Credit
for the balance of the purchase of the equipment to Party B in the amount
of US$[ ] US
dollars).
4.3 Upon approval of the preliminary inspection by Party A, Party A shall
negotiate the full amount of US$[ ]
US dollars) of Letter of Credit, per Provision 4.2.
CHAPTER V - SPECIFICATIONS AND TECHNICAL CONDITIONS OF THE EQUIPMENT
5.1 The production line supplied by Party B must be brand new, complete and
shall correspond to the specifications of Appendix I - "Details of
Equipment, Moulds and Accessories".
5.2 The performance and quality of the equipment shall meet the following
requirements:
5.2.1 The operation capacity of the equipment shall meet the
specifications of the manual of the equipment
5.2.2 The production capacity of the equipment: 1500 pieces/hour
5.2.3 Product Specification: shall meet the ISO standards
5.2.4 Product Quality: the strength and durability of the cards, when
mechanically tested, shall meet the ISO standards, and when
electrically tested, shall meet the IEC standards
5.3 Party B shall deliver the following supplements along with the equipment
5.3.1 Special operation tools, maintenance and repair tools and
testing tools
5.3.2 Easily damaged parts of equipment (the quantity shall be enough
for one year normal consumption). See Attachment II.
5.3.3 Qualified raw materials for the 56-hour production test run
purpose (chips used in the test run period are fake).
5.4 Party B shall deliver the following technical documents when packaging and
shipping the equipment:
5.4.1 The quality approval certificate and the manual of the
equipment
3
5.4.2 The packaging list of the equipment
5.4.3 Manuals of installation, testing, operation and maintenance
5.4.4 The quality assurance certificate and documentation, as
specified in Chapter VII
5.4.5 Drawings of easily damaged parts and the list of accessories.
5.5 Upon effective of the contract, Party B shall, within forty days, mail a
technical layout drawing and power supply information to Party A for the
technical design purpose.
5.6 Party B shall, two months before the installation and test running of the
equipment, mail the following documents to Party A or have staff work at
Party A's place to provide instructions:
5.6.1 The installation diagram and the foundation diagram
5.6.2 The power parameters (including electrical power, compressed
air, water and stream) of the equipment, and the technical
information of power supply and special shop requirements
5.7 The power utilization standards shall correspond to those of the People's
Republic of China, that is, 380(+ or -)10 volts for the transformer,
and 50(+ or -)5% hertz for the frequency.
CHAPTER VI - INSTALLATION, TROUBLE-SHOOTING, TEST RUNNING AND RECEIPT AND
ACCEPTANCE
6.1 Party B shall be responsible for installing and trouble-shooting the
equipment, and training the staff of Party A, ensuring that the
installation and trouble shooting of the equipment be completed within two
weeks after the arrival of the equipment in the shop. Party A shall
provide the necessary technical staff, workers and other necessities to
accommodate the project.
6.2 The test run period shall be seven working days, at eight hours per day.
The purpose of the test run is to inspect the production equipment, and to
examine whether the products produced meet the requirements specified in
Provision 5.2. After satisfactory inspection and examination, the
equipment shall be received and accepted.
4
6.3 The process of receipt and acceptance includes, in addition to test run,
inspection of whether documentations accompanied are complete and whether
the quality and quantity of the raw materials accompanied meet the
requirements, and whether the consumable parts are included.
6.4 No breakdown of the equipment is allowed during the test run period. In
the event the breakdown rate or the rate of the rejected products falls
under the level of 97%, a second testing shall be made to test the
equipment for another six working days until the equipment meets the
receipt and acceptance standards. After receipt and acceptance, both
parties shall sign the "Certificate of Receipt and Acceptance".
6.5 Large volume of production shall not begin until receipt and acceptance is
completed.
6.6 Party B shall assume the cost of its staff during their period of working
in the factory. Party A shall provide food by the factory and
transportation within the city.
CHAPTER VII - QUALITY INSPECTION
7.1 Party B shall guarantee that the equipment is made by top craftsmanship
and of top materials. The quality, specification and performance of the
equipment shall meet the requirements specified in this contract.
7.2 Before delivery, Party B shall conduct a thorough and full inspection of
the quality, specification and performance, as well as the quantity/weight
of the equipment, and shall provide a certificate of inspection, along
with the details and results of the inspection confirming that the quality
and quantity of the equipment meets the requirements of this contract. A
quality and quantity inspection certificate shall be provided by Party B
when the equipment is delivered to Party A.
7.3 Upon arrival of the equipment at the destination, Party A shall, in
accordance to the laws and rules and regulations of the People's Republic
of China, request that the Import and Export Inspection Bureau
(hereinafter as Inspection Bureau) to conduct an inspection. Parties A and
B shall both be present at said inspection. Party A shall notify Party B
thirty days in advance about the inspection date and
5
representative from Party B shall arrive at the inspection site of A on
said inspection date. In the event Party B fails to show up on time or
fails to send any representative to participate in the inspection, the
Inspection Bureau shall continue inspection as scheduled and the result of
which shall be notified by Party A to Party B and Party B shall
acknowledge the result accordingly.
7.4 In the event the inspection finds any quality or quantity error, or any
missing part that does not meet the requirements of this agreement, or any
damage due to packaging, Party B shall within six weeks make compensation,
or shall make repairs at its own cost. In the event that any damage is
caused by Party A, Party B shall replace the damaged item as soon as
possible, and the cost of replacement shall be paid by Party A.
7.5 In the event the inspection finds any serious quality or quantity problem
of the equipment, Party A shall have the right to return the equipment or
request compensation based on the provisions of Chapter IX.
7.6 The warranty period of the equipment shall be 12 months, commencing the
date when the equipment is received and accepted. During the warranty
period Party B shall be responsible for repairing the equipment if the
damage of the equipment is caused by the defects of the equipment.
7.7 After the warranty period, in the event of any damage to the parts of the
equipment or the product backups (easily consumed items) that Party A
needs to purchase from Party B, Party B shall only charge these items at
cost.
CHAPTER VIII - PACKAGING AND SHIPMENT
8.1 When packaging, Party B shall use a new and solid wood container with
necessary measures taken to prevent moist, shock, rust and rough loading
and unloading of the equipment to ensure that the package is suitable for
long distance transportation.
8.2 Packaging and Delivery Marks
Party B shall mark with non-erasable paint at the four sides of the
container such information as the number of the container, the size,
weight, net weight, destination, receipt code, "face up", "handle with
care", "no moist", "hoisting point" and "gravity point".
6
8.3 Shipment Information
8.3.1 Within three days after shipping, Party B shall fax Party A the
following information: A. Date of Shipment, B. Port of
Shipment, C. Port of Destination, D. Number, Name, Quantity,
Weight, Total Weight and Size of the Container.
(2) Within five days after shipping, Party B shall send the
following information to Party A via express mail:
A. Shipment Slip, with specification of the name and the
quantity of the merchandize;
B. Packaging Slip (2 copies) which specifies the number,
size, weight of the container, and the name, quantity,
net weight of the merchandize, and the date of shipment;
C. The inspection certificate provided by the manufacturer,
as specified in Chapter VII.
CHAPTER IX - COMPENSATION AND PENALTY
9.1 In the event Party A, within three days upon the arrival of the equipment
at the destination port, finds any disagreement of the specifications,
quality and quantity of the equipment as specified in this contract, Party
A shall, by presenting the inspection certificate of the Inspection
Bureau, request compensation from Party B. In the event Party B has any
dispute over the inspection certificate, Party B shall ask any other
inspection agencies in China to make another inspection, the cost of which
shall be assumed by Party A. Party A shall have the right to participate
in the second inspection. In the event the result of the second inspection
differs from the original inspection, the result of the second inspection
shall prevail.
9.2 Party A shall assume the cost of overtime due to any delay of installation
and testing of the equipment caused by Party A.
9.3 In the event Party B fails to respond within 30 days after Party A makes
its claim for compensation, it shall be considered that Party B accept the
claim. In the event Party B present a timely written dispute, both parties
shall try to settle the dispute by negotiation. In the event the
negotiation fails to settle the dispute, either party shall have the
right, according to Article XI, request for an
7
arbitration.
9.4 Except for force majeure as specified in Provision 10.1, in the event the
seller fails to deliver the merchandize on time according to the contract,
Party A shall agree that Party B postpone delivery provided that Party B
shall pay a penalty at 0.5% of the total cost for every delayed week but
this penalty shall not exceed 5% of the total cost. In the event the delay
of delivery exceeds ten weeks of the scheduled date, Party A shall have
the right to terminate the contract and Party B shall still pay for the
penalty for the actual delayed days.
9.5 Without written agreement of Party B, Party A cannot transfer the patent
technology and licensing to any third party, nor Party A can duplicate the
equipment of Party B. In the event Party A allows any third party to use
aid technology at its discretion, Party A shall pay Party B an amount of
US$[ ] for violation of the contract. Payment of this amount does not
waive the right of Party B to prosecute against any third party or Party A
for violation of rights.
CHAPTER X - FORCE MAJEURE
10.1 During the time of manufacturing or in the process of shipping, in the
event of war, fire, flood, typhoon, earthquake or other force majeure
acknowledged by both parties that causes Party B fail or delay to execute
the provisions of this contract as schedule, Party B shall assume no
liability. In the event of force majeure, Party B shall notify Party A
immediately and shall within two weeks, send, via air mail, a government
issued certificate to Party A confirming said force majeure.
10.2 When the force majeure vanishes, both parties shall negotiate whether to
continue executing the contract.
CHAPTER XI - ARBITRATION
11.1 In the event there arises any dispute during the execution of this
agreement or over this agreement and when both sides fail to settle the
dispute by friendly negotiation, said dispute shall be brought for
arbitration. The dispute shall be heard by the China International
Economic and Foreign Trade Arbitration Committee, in Beijing, according to
the procedures set by said committee.
8
11.2 The decision of the Arbitration Committee shall be final and shall have
binding effect upon both parties. Arbitration fee shall be paid by the
losing party.
11.3 During the period of arbitration, both parties shall continue to execute
other non-disputed terms of the contract.
CHAPTER XII - GOVERNING LAWS AND VALIDATY
12.1 When executing this agreement, both Parties A and B shall comply with the
laws and rules and regulations of the People's Republic of China.
12.2 This agreement shall be signed by representative of both parties and shall
apply for official approval by respective government. The date of approval
obtained by either Party A or B, whichever is later, shall be considered
as the effective date of this agreement.
12.3 Both parties shall fax the government approval to the other party and
shall be followed with a letter of confirmation. In the event any party
fails to obtain the government approval after six months the contract is
signed, the other party shall have the right to terminate the agreement.
12.4 After this agreement becomes effective, both Parties A and B shall, if
needed, discuss revisions to accommodate the practicalities of executing
this agreement. These revisions shall become effective when signed by both
parties. Neither party can amend the agreement individually.
CHAPTER XIII - DOCUMENTS
13.1 This agreement shall be written in Chinese.
13.2 This agreement is signed on May 8, 2001.
13.3 This agreement contains four original copies, with each party holding two
copies.
PARTY A:
Company Representative: Ying Xue Tian
Signature: (signature)
9
May 8, 2001
PARTY B: The American Pacific Aviation & Technology Corporation
Company Representative: Allen Yue
Signature: (signature)
May 08, 2001
10