Exhibit 10.11
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
CHAPTER I - GENERAL PRINCIPLE
1.1 China Card I.C. (Shanghai) Co., Ltd. (hereinafter as Party A) and the
American Pacific Aviation and Technology Corporation (hereinafter as
Party B), based on the principle of mutual benefits and through
negotiation, have entered the following contract for the purchase by
Party A from Party B the production equipment of contactless smart cards.
1.2 This contract contains the following appendixes:
Appendix 1: Detail Lists of the Production Equipment, Laboratory
Equipment, and Other Accessories
Appendix 2: Technical Services & Patent Technology Licensing Agreement
Appendix 3: Agreement of Supply of Raw Materials and Product Marketing
Appendix 4: Technical Support Agreement
CHAPTER II - PARTIES
2.1 Party A: China Card I.C. (Shanghai) Co., Ltd. is a registered corporation
in Pudong New Development District, Shanghai, the Peoples Republic of
China.
Legal Address: 230 Xin Qin Qiao Road, T17-5-1, Qin Qiao Export
Processing Region, Shanghai, the People's
Republic of China
Legal Representative: Lu Shou Shan
Title: Chairman
Nationality: Chinese
Telephone:
Fax:
Zip Code:
Bank:Account Number: US Dollars
RMB
2.2 Party B: American Pacific Aviation & Technology Corp.
Legal Address: 1 Sansome Street, 19th Floor, San Francisco, CA 94104,
USALegal Representative: Eric Gravell
Title: Chairman
Nationality: U.S.
Telephone: (415) 951-1078
Fax: (415) 951-1046
Zip Code: 550017
Bank:
Account Number:
CHAPTER III - NAME, SPECIFICATIONS, QUANTITY, PRICE AND DELIVERY OF EQUIPMENT
3.1 Party B shall provide Party A with two complete brand new production
lines of
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advanced international standards for the production of contactless smart
cards. Each of these production lines shall be able to produce 750 pieces
of smart cards per hour (6 million pieces per year x 2).
3.2 The total contractual price of which shall be US$[
] US Dollars), based on the CIF Shanghai
price, and shall include the following:
3.2.1 Production equipment, laboratory equipment, and other accessories (see
Appendix 1 - Detail List of Production Equipment, Laboratory Equipment
and Accessories for details);
3.2.2 Party B shall provide Party A the technical services and patent
technology licensing (see Appendix 2 - Technical Services and Patent
Technology Licensing for details);
3.2.3 Party B shall provide Party A the raw materials and marketing services
(see Appendix 3 - Agreement of Supply of Raw Materials and Production
Marketing for details);
3.2.4 Other services as specified in the Technical Agreement (See Appendix 4).
3.3 Before packaging the equipment for shipment, three technical staff
from Party a shall visit the United States to perform preliminary
inspection. Expenses for lodging, meal and transportation during the
visit of the personnel from Party A in the United States shall be covered
by Party B. The visit shall last two weeks.
3.4 Delivery of said equipment shall be concluded within six months when this
contract becomes effective.
CHAPTER IV - PAYMENT
4.1 Within 30 days when the contract becomes effective, Party A shall
pay Party B by T/T, [ ]% of the total amount for the purchase of said
production line and accessories, that is, US$[
] US Dollars).
4.2 One month before the equipment is delivered, Party A shall open a
L/C to Party B in the amount of US$[
] US Dollars), or [ ]% of the total price for the
purchase of said production line and accessories.
4.3 One month before the delivery of equipment, Party B shall issue a
three-year Revolving Letter of Credit to Party A for processing fee of 36
million pieces of contactless smart cards (starting from the date when
Party A begins production). The price for the first 10 million pieces
shall be FOB Shanghai US$[ ]/piece, and FOB Shanghai US$[ ]/piece for
the last 26 million pieces. The accumulative total amount of the L/C
shall be US$[ ].
4.4 After approved preliminary inspection but before packaging for
shipment, Party
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B shall, based on the signed approval, air waybill, invoice and quality
certificate issued by personnel of Party A, provide Party A with the L/C
specified in 4.2.
4.5 Three months upon receipt of equipment by Party A from Party B,
Party A shall pay Party B by T/T [ ]% of the total amount for the
purchase of said production line and accessories, that is, US$[
] US Dollars).
CHAPTER V - SPECIFICATIONS AND TECHNICAL CONDITIONS OF THE EQUIPMENT
5.1 The production lines supplied by Party B shall be brand new, complete and
shall correspond to the specifications of Appendix I - A Details of
Production Equipment, Laboratory Equipment and Other Accessories.
5.2 The performance and quality of the equipment shall meet the following
requirements:
5.2.1 Operation Capacity: Shall meet the requirements specified in the
equipment manual
5.2.2 Production Capacity: In normal production, each production line shall be
able to produce 750 pieces/hour, that is, 6,000,000 pieces/year
5.2.3 Product Specification: Shall meet the ISO/Mifare standards
5.2.4 Product Quality: The strength and durability of cards mechanically tested
shall meet the standards set by ISO and the electrically tested cards
shall meet the standards set by IEC
5.2.5 The reject rates during the processing shall be under 3%
5.3 The following accessories shall be accompanied when delivering the
production equipment by Party B:
5.3.1 Special operation tools, maintenance and repair tools and testing tools
5.3.2 Easily damaged parts of the equipment
5.3.3 Raw materials for test run production (chips used during the test run
production period are only for test run purpose only, they do not have
the reading/writing function.)
5.4 The following technical documents shall be accompanied by the equipment
when shipped by Party B:
5.4.1 Manual of the equipment (including such contents as the configuration,
performance, installation and test run, operation, inspection and
maintenance)
5.4.2 The packing list of the equipment
5.4.3 The quality assurance certificate and documentation, as specified in
Chapter VII
5.4.4 Drawings of the easily damaged parts and the list of accessories.
5.5 Within 10 days upon receipt of US$[
] US Dollars), or [ ]% of the total amount for the purchase of the
production line and accessories made by Party A through T/T, Party B
shall deliver the
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following information:
5.5.1 Provision of a technical layout drawing and power supply information by
mail to Party A to enable Party A to prepare the technical design and to
make purchase domestically;
5.5.2 The manual of the equipment;
5.5.3 Inspection and acceptance standards of the equipment.
5.6 Party B shall, two months before the installing and test running
of the equipment, provide the following documents by mail or having
technical staff on-site to provide guidance to Party A:
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, the technical information of power
supply and special shop requirements
5.7 The power utilization standards shall correspond to the power
standards of the People's Republic of China, that is, 380+-10 volts for
the transformer, and 50+-5% hertz for the frequency.
CHAPTER VI - INSTALLATION, TROUBLE-SHOOTING, TEST RUNNING AND RECEIPT AND
ACCEPTANCE
6.1 Party B shall install and test run the equipment, train staff of
Party A, and shall make sure that installation and test running be
completed within two weeks (when sufficiently accommodated by Party A)
after the equipment arrives the shop. Party A shall provide the needed
personnel, site and equipment to help accomplish the job.
6.2 The test run period shall be seven working days, eight hours per
day. The purpose of the test run is to test whether the production
equipment and the products meeting the requirements specified in
Provision 5.2. Upon satisfactory inspection and examination, the
equipment shall be received and accepted.
6.3 Besides test run, the receipt and acceptance process includes such
inspection as whether documents accompanied are complete, the quality and
quantity of raw materials accompanied meet the requirements, and the
conditions of the easily damaged parts.
6.4 In the event there is breakdown of the equipment during the test run
period, or the rate of product rejected falls under the level of 97%, a
second test run 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 begin only when the process of receipt
and acceptance is completed.
6.6 Party B shall cover the cost of its technical personnel working in the
factory. Party A shall provide food by the factory and transportation
within the city.
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CHAPTER VII - QUALITY INSPECTION
7.1 Party B shall guarantee that the equipment is made of top materials, in
top craftsmanship. 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 details and results of the inspection which
confirm that the quality and quantity of the equipment meeting the
requirements of this contract. When making delivery to Party A for
preliminary inspection, Party B shall provide Party A with a quality and
quantity certificate.
7.3 When the equipment arrives at the destination, Party A shall, in
accordance to the laws and rules and regulations of the Peoples Republic
of China, apply that the equipment be inspected by the Import and Export
Inspection Bureau (hereinafter as Inspection Bureau). Parties A and B
shall be both present at said inspection. In the event Party B fails to
show up on time or fails to send a representative to participate in the
inspection, the Inspection Bureau shall continue inspection as scheduled.
Party A shall provide the inspection result to Party B and Party B shall
acknowledge the result accordingly.
7.4 In the event that any quality or quantity problem or any part
missing is found which do not correspond to the contract or in the event
of any damage due to packaging, Party B shall within six weeks upon
knowing this, make repair or replacement 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 assumed by
Party A.
7.5 In the event the any serious quality or quantity problem is found, Party
A shall, based on the provisions in Chapter IX, have the right to ask for
compensation, or to return the equipment and ask for compensation.
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 repair or replace the equipment
if breakdown of the equipment is due to its own defects. In the event
that any damage of the equipment or parts is caused by Party A, Party B
shall provide repair or replace services to Party A as soon as possible,
and the cost of which shall by assumed by Party A.
CHAPTER VIII - PACKAGING AND SHIPMENT
8.1 When packaging, Party B shall use a new and solid wood container which
shall meet the quarantine inspection requirements for imports, with
necessary measures taken to prevent moist, shock, rust and rough loading
and unloading of
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the equipment to ensure that the package is suitable for long distance
transportation.
8.2 Packaging and Delivery Marks
Party B shall mark with 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".
8.3 Shipment Information
8.3.1 Within 5 days after shipping the equipment, 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.
8.3.2 Within 2 days after shipping the equipment, Party B shall send Party A
via express mail the following information: A. Invoice and Shipment Slip,
specifying the name and the quantity of the merchandise; B. Packaging
Slip (2 copies) specifying the number, dimension, weight of the
container, the name, quantity, net weight of the merchandise, and the
date of shipment; C. The inspection certificate provided by the
manufacturer, as specified in Chapter VII, and the certificate of origin.
CHAPTER IX - COMPENSATION AND PENALTY
9.1 After arrival of shipment at the port of destination, in the event Party
A finds that the specification, quality and quantity of the equipment do
not meet the requirement of this contract, Party A shall have right to
request compensation from Party B by presenting the Inspection
Certificate issued by the Inspection Bureau. If it is confirmed that
Party B shall assume the responsibility, Party B shall pay all the
related direct loss and cost. If Party B has dispute over the inspection
certificate provided by Party A, Party B can request another inspection
made by a higher inspection authority (Beijing Inspection General
Bureau). The cost of which shall be assumed by Party B. Party A shall
have the right to attend the second inspection. If the result of the
second inspection is different from the original inspection, the result
of second inspection shall prevail.
9.2 In the event of any reason caused by Party A that delays the installation
and test run, Party A shall assume the actual cost of overtime for Party
B.
9.3 In the event Party B fails to respond within 30 days after Party A
formally makes a written request for compensation, it shall be considered
that Party B accept the claim. If Party B disputes the claim in writing
in a timely manner, the dispute shall then be settled by negotiation. If
negotiation fails to resolve the issue, either party can, based on
Provision 11, request for an arbitration.
9.4 Except for the reason of force majeure as specified in Provision
10.1, in the
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event Party B fails to comply to the contractual terms to deliver the
merchandise on time, Party A shall agree that Party B postpone the
delivery, provided that Party B shall pay a penalty at 0.5% of the total
cost for every delayed week. Nevertheless, this penalty shall not exceed
5% of the total cost. In the event the delay of delivery exceeds ten
weeks, Party A shall have the right to terminate the contract, and Party
B shall still have to pay the penalty for the actual delayed days and
shall refund Party A all the payment it has made.
9.5 Without a written agreement of Party B, Party A cannot transfer
the patent technology of the said equipment to a third party, nor can
Party A duplicate said equipment of Party B. In the event that Party A
allows a third party to use or to duplicate said technology, Party A
shall pay a sum of US$[ ] US Dollars)
to Party B as defaulting the contract. Payment made by Party A to Party B
for defaulting the contract does not preclude Party B the right to
prosecute infringement by the third party or Party A.
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 a certificate issued by a
government agency (confirming said force majeure) to Party A via air
mail.
CHAPTER XI - ARBITRATION
11.1 All disputes caused by executing this contract or over this
contract shall be resolved through friendly negotiation. In the event
friendly negotiation fails to settle the dispute, it shall be arbitrated
by the China International Economic and Trade Arbitration Committee based
by the judicial procedures of said Committee and the hearing shall be
heard in Beijing.
11.2 During the period of arbitration, other non-disputed provisions of the
contract shall remain legally valid.
11.3 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.
CHAPTER XII - GOVERNING LAWS AND VALIDITY
12.1 When executing this agreement, both Parties A and B shall comply with the
laws and rules and regulations of the Peoples Republic of China.
12.2 This agreement shall be signed by representative of each party. Party A
shall, in compliance with the related laws, submit the agreement for
approval. The date
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when the agreement is approved shall be the effective date of this
agreement.
12.3 Party A shall fax the government approved notice to Party B, followed by
a confirmation letter. In the event that Party A fails to obtain
government approval after six months starting the date when the agreement
is signed by the last party, Party B has the right to cancel this
agreement.
12.4 After this agreement becomes effective, both Parties A and B shall, if
needed, make revisions to accommodate the practicalities in executing the
agreement. The revisions shall become effective when both parties sign
the amendment. Neither party can amend the agreement individually.
CHAPTER XIII - DOCUMENTS
13.1 This agreement shall be written in Chinese.
13.2 This agreement contains four original copies with each party holding two
copies, and six duplicated copies, with each party holding three copies..
PARTY A: China Card I.C. (Shanghai) Co., Ltd.
Company Representative:
Signature: (3/3/00)
PARTY B: The American Pacific Aviation & Technology Corporation
Company Representative:
Signature: (2/18/00)
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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.
APPENDIX 1
Appendix 1: Details of Production Equipment, Laboratory Equipment
and Spare Parts
1. List of Production Equipment
----------------------------
Watt, Estimated
- ---------------------------------------------------------------------------------------------------------------
No. Equipment Name Quantity Part No. Production Rate Manufacturer and Price
- ---------------------------------------------------------------------------------------------------------------
1 Punch Hole 1 CICC-1 6kw, 3000 pcs/h [ ]
- ---------------------------------------------------------------------------------------------------------------
2 Pick/Place 2 CICC-18 2*3.5kw, 1540 pcs/h [ ]
- ---------------------------------------------------------------------------------------------------------------
3 Wire Embedder 2 CICC-13 2*7kw, floor level +- 1/16" [ ]
80-100psi, 1500 pcs/h
- ---------------------------------------------------------------------------------------------------------------
4 Welder 2 CICC-20 2*4.4kw, 1660 pcs/h [ ]
- ---------------------------------------------------------------------------------------------------------------
5 Laminator 1 CICC-9 76kw, 1920 pcs/h [ ]
- ---------------------------------------------------------------------------------------------------------------
6 Lam Control 1 CICC-3 [ ]
- ---------------------------------------------------------------------------------------------------------------
7 Computer Controller for 1 [ ]
Laminator
- ---------------------------------------------------------------------------------------------------------------
8 Lam Cool Tank 1 CICC-4 [ ]
- ---------------------------------------------------------------------------------------------------------------
9 Water Chiller 1 CM004/CH [ ]
- ---------------------------------------------------------------------------------------------------------------
10 Lam Loader 1 CICC-5 0.5kw [ ]
- ---------------------------------------------------------------------------------------------------------------
11 Tacker 1 CICC-16 2.2kw,3000pcs/h,60psi [ ]
- ---------------------------------------------------------------------------------------------------------------
12 Refrigeration Unit 1 CICC-18 [ ]
- ---------------------------------------------------------------------------------------------------------------
13 Card-Punch 1 CICC-CP-001 6kw, 3000 pcs/h, 80psi [ ]
- ---------------------------------------------------------------------------------------------------------------
Total: [ ]