Exhibit 10.9
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.
SINO FOREIGN JOINT VENTURE AGREEMENT
February 2000
FOREIGN JOINT VENTURE AGREEMENT
ARTICLE 1: GENERAL PRINCIPLES
This agreement is made between the Shandong Huang Tai Industrial Group of China
with the American Pacific Aviation Technology Company (AMPAC) of the United
States, according to the "People's Republic of China Sino-Foreign Joint Venture
Laws" and other related Chinese laws, and based on the principle of mutual
benefits and through friendly negotiations to establish in Shanghai, China, a
joint venture.
ARTICLE 2: PARTIES
Provision 1: Parties of this Agreement are:
The Shandong Huang Tai Industrial Group of China (hereinafter as Party A),
registered at Jinan, Shandong, China.
Address: 172 Industry Road North, Jinan, Shandong, China
Legal Representative: Lu Shou Shan
Title: General Manager
Nationality: The People's Republic of China
American Pacific Aviation Technology Company (hereinafter as Party B),
registered at California, the United States of America.
Address: 1 Sansome Street, 19th Floor, San Francisco, CA 94104, USA
Legal Representative: Eric Gravell
Title: Chairman
Nationality: US
ARTICLE 3: FORMATION OF THE JOINT VENTURE
Provision 2: According to the "People's Republic of China Sino-foreign Joint
Venture Laws" and other
related Chinese laws, both parties agree to establish in China the China
Card.Com, Limited (hereinafter as joint venture).
Provision 3: The name of the joint venture shall be: China Card.Com, Limited.
Name in English: China Card.Com, Limited
Address: 230, Xin Jin Qiao Road, T17-5-1, Jin Qiao Export Processing Industrial
Region, Shanghai
Provision 4: All activities conducted by the joint venture shall observe the
laws, rules and regulations of the People's Republic of China.
Provision 5: The joint venture shall be registered as a company of limited
liability. Both parties shall assume the debts of the joint venture based on the
ratio of investment contribution. Both parties shall distribute profits and
assume risk and loss based on the ratio of investment contribution.
ARTICLE 4: SCOPE OF PRODUCTION
Provision 6: The goal of the joint venture is, based on the enhancement of
economic cooperation and technology exchange, to adopt state-of-art technology
and scientific management to promote the quality of product, to develop new
products that are competitive in quality and price in the world market, thus to
generate economic gains to create profits for the investors.
Provision 7: Scope of Operation:
Production of contactless smartcards, double interface cards, counterfeit
protection cards and related products, reading and writing devices and system
integration, marketing of self-produced products, after-sale services, and
research and development of related new products.
Provision 8: Production Scope:
1. The joint venture shall be able to produce 1500 cards/hour after
production. Annual production shall be 8000 hours, which shall produce
12,000,000 cards.
2. With the growth the production, double interface cards, counterfeit
protection cards, three-in-one card and reader/writer shall also be
produced.
ARTICLE 5: THE INVESTMENT TOTAL AND REGISTERED CAPITAL
Provision 9: The total investment of the joint venture shall be RMB$[ ].
Provision 10: Each party shall contribute an investment amount of
RMB$[ ], which is 50% of
the total investment, for the registered capital of the joint venture. Each
shall contribute 50% of its investment.
Provision 11: The parties shall contribute their investment in the following
formats: Party A: Shall contribute RMB$[ ], in form of cash.
Party B: Shall contribute RMB$[ ], in form of equipment (if conversion to
US currency is needed, shall be based on the foreign exchange rate announced by
the Foreign Exchange Administration of the People's Republic of China of the
date when conversion is made).
Provision 12: The registered capital shall be contributed by both parties based
on their ratio of contribution, by two installments, at 50% of the contributed
amount per installment, that is, with Parties A and B each making a contribution
of RMB$[ ] per installment (Party B shall make its contribution in form of
equipment).
Provision 13: In the event any party assigns all or portions of its investment
to a third party, it shall obtain the agreement of the other party and shall be
submitted for approval by reviewing agency. In the event any party intends to
assign all or portions of its investment, the other party shall have the
priority to buy.
ARTICLE 6: RESPONSIBILITIES OF PARTIES
Provision 14: Parties A and B shall each fulfill the following responsibilities:
Party A Shall obtain approval by appropriate departments in China, registration,
and license for operation.
ARTICLE 7: MARKETING OF PRODUCTS
Provision 15: Products produced by the joint venture shall be marketed both at
home and abroad, 75% of which shall be sold abroad, and 25% shall be sold at
home.
The joint venture shall authorize Party B to market the products of the joint
venture outside China.
Provision 16: Marketing of the products of the joint venture in China can be
arranged with appropriate material departments or business departments in China
or can be done directly by the joint venture.
Provision 17: For the purpose of marketing the products at home and abroad, and
for the provision of after sales service, the joint venture, with the approval
by appropriate Chinese department, shall establish service divisions both inside
and outside China.
Provision 18: The trademark used for the products of the joint venture shall
be ______.
ARTICLE 8: BOARD OF DIRECTORS
Provision 19: The date the joint venture is registered shall be the date the
Board of Directors of the joint venture established.
Provision 20: The Board of Directors shall be composed of five members, with
Party A appointing three members and Party B appointing two members. The
chairman of the Board shall be appointed by Party A. The term of the Board
member and the chairman of the Board shall be four years and can be reappointed
to serve.
Provision 21: The Board of Directors shall be the ultimate authority of the
joint venture to decide all important matters of the joint venture. Unanimous
approval is required to decide on the following issues:
1. Amendment of the Bylaws of the joint venture;
2. Discontinuation or liquidation of the joint venture;
3. Increase or transfer of the registered capital of the joint venture;
4. Merge with other economic organizations;
5. The hiring of the General Manager.
Approval of other important matters shall require 2/3 of the votes from the
Board.
Provision 22: The chairman of the Board is the legal representative of the joint
venture. In the event the chairman cannot perform his/her duties, s/he can
authorize other board member to act on his/her behalf.
Provision 23: The Board of Directors shall meet at least once a year, to be
called by the chairman of the board. At the proposal of one third of the Board,
the chairman of the Board can call on an ad hoc meeting. Minutes of meeting must
be recorded and kept in file.
ARTICLE 9: THE ADMINISTRATION OF THE OPERATION
Provision 24: The administration of the joint venture shall oversee the daily
operation of the joint venture. The post of General Manager shall be created.
The General Manager shall be hired by the Board of Directors, for a term of four
years.
Provision 25: The General Manager shall execute all decisions of the Board of
Directors and shall manage the daily operation of the joint venture. Within the
scope of authorization, the General Manager shall represent the joint venture
and shall have the authority to hire and terminate staff and to exercise other
authorities granted by the Board of Directors.
Departmental managers can be created to lead different divisions of the
operation, to implement the directives of the General Manager and shall be
accountable to the General Manager.
Provision 26: In the event that the General Manager is found engaging in
malpractice for selfish ends, or not doing the job properly, the Board can, by
adopting a resolution, terminate the employment of the General Manager at any
time.
ARTICLE 10: PURHCASE OF EQUIPMENT
Provision 27: Raw materials, accessories, transportation tools and office
supplies shall be purchased in China if conditions are the same.
ARTICLE 11: LABOR MANAGEMENT
Provision 28: Labor related issues such as recruitment, hiring, termination,
compensation, insurance, social benefits, merit award and discipline shall be
handled according to the "Rules and Regulations of Sino-Foreign Joint Venture
Labor Management of the People's Republic of China" and policy shall be set up
by the Board of Directors to draft a labor contract.
When the labor contract is drafted, it shall be filed with the local labor
management department.
Provision 29: Compensation, insurance, benefits, business expense for General
Manager shall be determined by the Board of Directors.
ARTICLE 12: TAX, FINANCIAL MATTERS, AND AUDITING
Provision 30: The joint venture shall pay all the taxes required by the Chinese
laws and rules and regulations.
Provision 31: Employees of the joint venture shall pay individual income tax
based on the "People's Republic of China Individual Income Tax Laws".
Provision 32: The joint venture shall, based on the "People's Republic of China
Sino-Foreign Joint Venture Laws", set aside certain amount each year for General
Reserve, Enterprise Development Fund and Employee Benefit and Merit Fund. The
amount of which shall be determined by the Board of Directors based on the
operation conditions.
Provision 33: The fiscal year of the joint venture shall begin on January 1 of
each year, through December 31. All vouchers, bills, statements, bookkeeping
records shall be written in Chinese.
Provision 34: Auditing of the finance of the joint venture shall be performed by
registered accountant in China. The result shall be reported to the Board of
Directors and General Manager.
In the event Party B believes it is necessary to hire auditor from other country
to perform auditing, the joint venture shall agree to such request. All expense
shall be paid by Party B.
Provision 35: Within the first three months of each fiscal year, the General
Manager shall organize to prepare the General Ledger, Statement of Profit and
Loss and Profit Distribution Plan of the fiscal year to be submitted for
approval by the Board of Directors.
ARTICLE 13: TERM OF THE JOINT VENTURE
Provision 36: The term of the joint venture shall be 12 years. The founding date
of the joint venture shall be the date when the business license is issued.
At the suggestion of either party, and with the approval of the Board of
Directors, the term of the joint venture can be extended by submitting extension
to the Ministry of Foreign Economic Relations and Trade (or its authorized
reviewing agency), six months before the term expires.
ARTICLE 14: DISPOSITION OF PROPERTY WHEN JOINT VENTURE TERM EXPIRES
Provision 37: When the joint venture term expires or when the joint venture
liquidated before the term expires, clearance must be performed to determine the
distribution of property between parties based on the ratio of investment
contribution.
ARTICLE 15: INSURANCE
Provision 38: All required insurances should be purchased with the China
People's Insurance Company. The type, value, and term of the insurance shall be
based on rules and regulations of the China People's
Insurance Company, and discussed and decided by the Board of Directors.
ARTICLE 16: AMENDMENT, CHANGES AND TERMINATION OF THE CONTRACT
Provision 39: Any change of this contract and its appendix must be done by
having both parties sign a written agreement which shall be submitted to the
original approving department for approval.
Provision 40: In the event of failure to execute the contract due to force
majeure or due to continued loss suffered by the joint venture resulting in
inability to continue operation, at the unanimous approval of the Board of
Directors, it shall be reported to the original approval agency to apply for
termination of the contract and dissolution of the joint venture.
Provision 41: In the event of failure to execute the contract, the duties
specified in the Bylaws, or seriously defaulting the terms of the contract or
the Bylaws by either party that results in the inability of the joint venture to
continue operation or to accomplish the operation goal, said party shall be
considered as terminating the contract. The other party, in addition to the
right to ask for compensation, shall also have the right to terminate the
contract by reporting to the original approving agency. In the event both
parties agree to continue operation, the default party shall compensate the
economic loss to the joint venture.
ARTICLE 17: DEFAULT
Provision 42: When either party fails to comply with Article 5 of this contract
to make the required contribution on time, said party shall pay a penalty to the
other party, beginning from the first month when the amount is overdue, at 1% of
the said contribution for each month. In the event said party fails to make
contribution more than three months, the other party, in addition to the right
of receiving the 3% required penalty, shall also have the right, based on
Provision 41 of this contract, to terminate this contract, and to ask for
compensation from the defaulting party.
Provision 43: In the event of any mistakes caused by any party resulting in
failure to execute this contract and its appendix, said party shall assume the
responsibility of default. In the event the mistake is caused by both parties,
both party shall assume their shares of responsibilities based on the actual
situations.
ARTICLE 18: FORCE MAJEURE
Provision 44: Due to earthquake, typhoon, flood, fire, war or any other
unpredictable event, the cause and consequence of which cannot be prevented or
avoided, which results in directly affecting the execution
of the contract or the provisions, the party experiencing said force majeure
shall notify the other party by telegram immediately, and shall provide, with 15
days the occurrence of force majeure, valid documentation to prove that the
contract, or portion of the contract cannot be executed, or the execution of the
contract shall be postponed. This documentation shall be issued by the
government agency in the area where force majeure occurs. Depending on the
degree of effect, both parties shall negotiate whether to terminate the
contract, or to waive the obligation of executing certain provisions, or to
postpone executing the contract.
ARTICLE 19: GOVERNING LAWS
Provision 45: The making, validation, interpretation, execution, and settlement
of disputes of this contract shall be governed by the laws of People's Republic
of China.
ARTICLE 20: SETTLEMENT OF DISPUTES
Provision 46: Any dispute of the contract or over the contract while executing
the contract shall be negotiated in a friendly manner. In the event negotiation
fails to settle the dispute, it shall be brought to arbitration by the
Arbitration Commission of the Ministry of Foreign Economic Relations and Trade,
based on the arbitration procedures of said commission. The decision of the
arbitration shall be final and shall have binding effect upon both all parties.
Provision 47: During the process of arbitration, except for the disputed
provision(s), other provisions shall be executed as usual.
ARTICLE 21: EFFECTIVENESS AND OTHERS
Provision 48: Appendix made according to provisions of this contract include:
Equipment Purchase Agreement, Technology Service and Patent Technology
Utilization Agreement, Raw Material Supply and Product Marketing Agreement, and
Technology Agreement. They all constitute part of this contract.
Provision 49: This contract and its appendix shall be approved by the People's
Republic of China Ministry of Foreign Economic Relations and Trade (or its
authorized agency) and shall become effective the date it is approved.
Provision 50: When notices sent to the other party by telegram or fax involving
rights and duties, these notices must be followed by a written format and sent
by mail. The legal address of each party listed in this contract shall be the
mailing address of the respective party.
Provision 51: This contract is signed in Shanghai, China, on February 18, 2000,
by authorized representative of Parties A and B.
Representative of Shandong Huang Tai Industrial Group, China
(Signature)
Representative of American Pacific Aviation Technology Company, the United
States
(Signature) (2/18/00)