Exhibit 10.15
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 OF RAW MATERIALS AND SALES
The following agreement is made by China Card I.C. (Shanghai) Co., Ltd.
(hereinafter as Party A) and American Pacific Aviation & Technology Corporation
(hereinafter as Party B), based on the principle of mutual benefits and through
sincere friendly negotiations, for the purchase of raw materials for the
production of contactless smart cards by Party B on behalf of Party A and for
granting Party B the exclusive right for selling the contactless smart cards
produced by Party A.
I. PURCHASE OF RAW MATERIALS
1. Party B shall purchase on behalf of Party A all needed raw materials for
the production of contactless smart cards according to the specifications
of Party A. The quality of the raw materials must meet the inspection
standards (See Table 1: List of Raw Materials for Contactless Smartcards
and Standards of Inspection and Acceptance).
2. The price of all raw materials needed for the production of contactless
smartcards shall be set as follow: materials for the first 10,000,000
pieces, at CIF US$[ ]/piece, and for the remaining 26,000,000 pieces, at
CIF US$[ ]/piece.
3. Party A confirms Provision 3 of Article 2 that Party B provide a three-year
Revolving Letter of Credit to Party A and that Party B shall provide raw
materials to Party A based on Party A's specifications. Party A shall
provide the bank account designated by Party B a letter of guarantee
(standby letter of credit) for the purchase of raw materials, the amount of
which shall be US$[ ], as secured guarantee of product buyback.
4. Contactless smartcards produced by Party A using the above mentioned raw
materials shall meet the ISO/Mifare standards and IEC standards (See Table
2: Contactless Smartcard Products Quality Inspection and Acceptance
Standards for details). In the event the equipment provided by Party B
fails to produce the required quality causing economic loss of Party A,
Party B shall assume the responsibility.
5. Party A shall organize production based on the orders supplied by Party B.
In the event Party B fails to deliver the raw materials on time or fails to
place any order which causes Party A stop work, Party B shall compensate
Party A [ ]% of the profit made during normal production.
6. The quantity of the raw materials needed for each piece of contactless
smartcard shall be based on Provision 6 of the "Agreement for Purchase of
Equipment", according to the actual data obtained during the test run
period.
II. SALES OF PRODUCTS
1. Party B shall have the exclusive right to sell the contactless smartcards
produced by Party A. The price of which shall be negotiated every three
years. In the first three years, the sale price shall be US$[ ]/piece. In
the second three year period, the variation between the cost of raw
material and sale price shall be between US$[ ] (supply of raw
materials does not include PVC, see List of Contactless Smartcard Product
Raw Materials and Standards of Quality Inspection and Acceptance for
detail).
2. Party B shall place an order with Party A every year. The annual order
shall be 12,000,000 pieces. The cycle of delivery shall correspond to the
production capability of the equipment. Annual order must be confirmed by
Party A before it becomes valid. When changing the type of products
ordered, Party B shall provide new moulds to Party A at no charge.
3. Party B shall, based on the provisions of the Agreement for Purchase of
Equipment, provide a three year revolving Letter of Credit to Party A for
the purchase of products produced by Party A. Party A shall deliver the
products twice a month, at 500,000 pieces for each delivery. Based on the
quality inspection report, package slip and invoice, the amount of which
shall be US$[ ] or US$[ ] (the first 1,000,000 pieces shall be
calculated at US$[ ]/piece, and the remaining 26,000,000 pieces shall be
calculated at US$[ ]/piece). In the event of any emergency order placed
by Party B, additional charges shall be negotiated.
4. Party A shall, based on the confirmed annual order, produce and deliver the
products according to the types, specifications, quantity and shipment date
specified. In the event Party A has difficulties of delivery or producing
the products ordered, it shall notify Party B in a timely manner or Party A
shall assume the economic loss of Party B.
5. In the event Party B fails to sell the products as agreed, Party B shall
compensate the economic loss of Party A ([ ] of the normal gross profit).
III. FORCE MAJEURE
In the event during the execution of the agreement that either party experiences
force majeure which delays the execution of the agreement as in the cases of
earthquake, typhoon, flood, fire, war, government restraints or intervention,
industrial chaos, riots or other national disturbances, or other incidents that
both parties cannot control, the affected party shall send by express mail or by
fax a copy of the government issued certification to the other party and the
execution of the agreement shall be temporarily suspended. In the event the
suspension is over six months, both parties shall consider if they should
terminate the agreement.
IV. DEFAULT
Both parties shall execute the provisions of the agreement sincerely. In the
event any party fails to execute any of the above provisions which causes the
loss of the other party, the defaulting party shall compensate the economic loss
of the other party. In the event the defaulting party does not respond to the
claim made by the other party within 30 days after said claim is made, the
defaulting party shall be considered as accepting the claim.
V. SETTLEMENT OF DISPUTE
Any dispute over the execution of the agreement by Parties A and B shall be
settled if possible by friendly negotiations. In the event negotiations fail to
settle the issue, the dispute shall be brought to arbitration by the China
International Economic and Trade Committee Foreign Trade Committee, based on the
arbitration process set by said committee. The decision of the arbitration is
final and shall have binding effect on both parties. The cost of arbitration
shall be paid by the losing party.
VI. This agreement shall become effective on the date signed.
VII. This agreement, along with the Agreement for Purchase of Equipment and its
appendix, shall become effective at the same time.
VIII. This agreement shall contain four original copies, with each party holding
two copies, and six duplicates, with each party holding three copies. All copies
bear equal validity.
PARTY A: China Card I.C. (Shanghai) Co., Ltd.
Signature: (3/3/00)
PARTY B: American Pacific Aviation & Technology Corporation
Signature: (2/18/00)
