JOINT DEVELOPMENT AND SUPPLY AGREEMENT
FOR CARD SUBSTRATES
THIS JOINT DEVELOPMENT AND SUPPLY AGREEMENT FOR CARD SUBSTRATES (the
"Agreement") is made this day of July, 2000, by and between UltraCard, Inc., a
---
Nevada corporation having a place of business at 16795 Lark Avenue, Suite 102,
Los Gatos, California 95008 ("UltraCard") and Colorado Plasticard, Inc., a
Colorado corporation, having a place of business at 10368 W. Centennial Road,
Littleton, Colorado 80127 and California Plasticard, Inc., a California
corporation having a place of business at 1380 W. Washington Boulevard, Los
Angeles, California 90007 (hereinafter referred to collectively as "CPI").
Recitals:
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(A) UltraCard desires to enter into a Joint Development and Supply
Agreement wherein CPI would design, develop and supply card bodies or card
substrates (the "Card Substrates") to receive and embed a magnetic media,
designated by UltraCard, and, upon successful qualification of the Card
Substrates, in UltraCard's sole discretion, to be a supplier of UltraCard's
needs thereafter.
(B) CPI offers development and supply services generally and
specifically, has the capability of jointly developing and manufacturing for
UltraCard such Card Substrates.
(C) UltraCard and CPI desire to enter into a Joint Development and
Supply Agreement for Card Substrates and to set forth the terms and conditions
under which CPI is to provide the design services to UltraCard.
In consideration of the mutual premises set forth below between UltraCard
and CPI, the parties agree as follows:
(1) CARD SUBSTRATE SPECIFICATIONS
(A) A Schedule labeled "Initial Card Substrate Specifications" is
identified as Exhibit A and attached hereto. Exhibit A represents UltraCard's
initial specifications, form, fit and function requirements for the UltraCard
Card Substrate.
(B) CPI shall assist UltraCard in establishing a Card Substrate
specification based on the Initial Card Specification of Exhibit A which are to
comprise various designs and are to be fabricated from various materials to be
specified by UltraCard.
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In addition, the card substrates are to meet certain specifications for
corrosion, reliability and mechanical functions as specified in ISO Standards
applicable to such card substrates and embedded magnetic media, all to be
specified by UltraCard in the Card Substrate Specifications. The parties are to
agree in writing on Card Substrate specifications (the "Card Substrate
Specification") for purposes of proceeding with the Design and Development of
Card Substrates set forth in Paragraph 2 set forth below.
(C) The parties are to mutually agree in writing to any revisions to Card
Substrate Specification.
(2) DESIGN AND DEVELOPMENT OF CARD SUBSTRATES
(A) During the term of the agreement, CPI agrees to assign to this card
substrate project an experienced card substrate engineer to assist UltraCard in
the design and development for UltraCard of various card substrates for
receiving and embedding a magnetic media meeting the Card Substrate
Specifications (the "UltraCard Card Substrate Project") and to deliver to
UltraCard a specified quantity of finished card substrates prototypes as
specified below in Paragraph (3).
(B) CPI will provide UltraCard access to its facilities, facilities'
resources, card processing equipment, and equipment operators for a period no
less than sixteen (16) hours per week and UltraCard shall have the right to
assign UltraCard and employees, consultants or agents, at UltraCard's discretion
and expense, as required to enable UltraCard to have such access to CPI during
the term of this Agreement.
(C) CPI is to agree to provide UltraCard with a biweekly written review
of all significant matters relating to the UltraCard Card Substrate Project.
(3) DELIVERY OF FINISHED CARD SUBSTRATES
PROTOTYPES/EXTENSION OF TERM
(A) As part of the UltraCard Card Substrate Project and for the
original term of the Agreement specified in Paragraph 8(A) below (the "Original
Term"), CPI and UltraCard are to agree as follows:
(i) CPI shall deliver to UltraCard per month, commencing the first
month of the Original Term, a minimum of five hundred (500) finished Card
Substrates prototypes in various
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designs and materials meeting the applicable Card Substrate Specifications, the
quantities of applicable designs and materials as set forth in a Schedule
labeled "Prototype Card Substrate Deliverables" and which is identified as
Exhibit A and attached hereto (the "Minimum Deliverable Card Substrates");
(ii) CPI shall deliver to UltraCard per month, commencing the first
month of the Original Term additional finished card Substrates prototypes, in
quantities designated by UltraCard, up to a maximum of an additional two
thousand (2000) per week of various designs and materials meeting the applicable
Card Substrate Specifications, the quantities of applicable designs and
materials as set forth in the Schedule labeled "Prototype Card Substrate
Deliverables" of Exhibit A (the "Additional Deliverable Card Substrates").
(iii) Commencing the second week of the Original Term, CPI shall
schedule at least one Card Substrate Fabrication Process per week based on: (a)
the Card Substrate Specifications; (b) the quantities of card substrate designs
and materials specified by UltraCard; (c) the Minimum Deliverable Card
Substrates and (d) the number of Additional Deliverable Card Substrates. CPI and
UltraCard shall mutually agree on the lead time required by CPI to meet the
UltraCard requirements for the weekly Minimum Deliverable Card Substrates and
the weekly number of Additional Deliverable Card Substrates.
(B) CPI and UltraCard shall meet, and in good faith, negotiate mutually
agreeable terms and conditions on a procedure, costs and services for enabling
UltraCard to have the right to extend the time for requesting CPI to deliver
finished card substrate prototypes for up to an additional two (2) month period
beyond the time specified as the Original Term in this Agreement
(the "Extended Term"). UltraCard is to have the right to extend the term for the
Extended Term by providing CPI not less that ten (10) days written notice to CPI
of UltraCard's election to extend the term as provided herein.
(4) DESIGN AND CARD SUBSTRATES PROJECT COSTS
(A) Subject to CPI performing under this Agreement, UltraCard agrees to
pay CPI the following amounts under the UltraCard Card Substrate Project:
(i) Ten Thousand and No/100 Dollars ($10,000.00) per month (the
"Monthly Service Fee") for a period of six (6) months of the Original Term for a
total of sixty thousand and No/100
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Dollars ($60,000) which fees are to cover the design and development services
and the Minimum Deliverable Card Substrates per week; and
(ii) An additional amount per card substrate to be mutually agreed upon
by CPI and UltraCard for the weekly number of Additional Deliverable Card
Substrates; and
(iii) If UltraCard extends the term to the Extended Term, such
additional amount as required for the additional services, any amounts for
Minimum Deliverable Card Substrates for and any amounts for the weekly number of
Additional Deliverable Card Substrates to be mutually agreed upon by CPI and
UltraCard.
(5) PAYMENT OF AMOUNTS DUE BY ULTRACARD
(A) UltraCard agrees to pay to CPI monthly the Monthly Service Fee
during the Original Term with the first Monthly Service Fee being due and
payable thirty (30) days from the date of the Definitive Agreement and three (3)
successive Monthly Service Fee payments to be payable monthly thereafter.
(B) CPI agrees to bill UltraCard monthly for any amounts due CPI for
the Additional Deliverable Card Substrates during the Original Term and any
amounts due for additional Services or Deliverable Card Substrates during the
Extended Term and UltraCard is to agree to pay the same within thirty (30) days
from receipt of the applicable billing.
(6) SUPPLY AGREEMENT
(A) UltraCard had advised CPI that the card substrate, subject of this
Agreement, is to be used for a United States Government special encoded card
(the "US Government Card"), and that it is the intent and desire to have CPI
become a qualified vendor of card substrates to UltraCard for the US Government
Card. Subject to CPI and UltraCard reaching mutually agreement on the
specifications applicable to the US Government Card, competitive unit pricing
per card substrate and agreed delivery and supply schedules therefor, UltraCard
agrees to use its best efforts to have CPI become a qualified vendor of card
substrates for the US Government Card.
(B) Upon successful completion of the specifications for the card
substrate and US Government Card and CPI successfully manufacturing and
delivering acceptable Card Substrates and subject to CPI providing competitive
unit pricing per card
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substrate and agreed delivery and supply schedules therefor, it is UltraCard's
desire to have CPI deliver to UltraCard sufficient quantities of card substrates
to meet UltraCard's, needs for its card substrate deliveries of US Government
Cards. However, the above shall be non-binding on the parties and the parties
shall be bound by only upon executing a mutually acceptable written definitive
Government Supply Agreement and which is acceptable, as required, to the United
States Government.
(7) INTELLECTUAL PROPERTY
(A) UltraCard is to exclusively own all intellectual property rights to
the Card Substrate and to all technology developed by CPI in connection with the
UltraCard Card Substrate Project (the "UltraCard Proprietary Rights").
(B) To the extent that inventions, ideas, concepts, software
modifications, or computer programs are developed by CPI either alone or jointly
with employees or representatives of UltraCard relating to UltraCard Proprietary
Rights, and whether or not patentable or copyrightable, CPI agrees that all such
rights thereto shall be assigned to and vested in UltraCard. CPI further agrees
that all original works of authorship which are made by CPI (solely or jointly
with others) within the scope of or relating to UltraCard Proprietary Rights and
which are protectable by copyright are "works made for hire" as that term is
defined in the United States Copyright Act. CPI agrees to execute, without
additional compensation, patent applications, copyright applications, copyright
assignments, patent assignments, trademark assignments and such other documents
reasonably required by Counsel for UltraCard to effectuate the purposes of this
paragraph.
(C) CPI further agrees to assist UltraCard, or its designees, at
UltraCard's expense, in every proper way to secure UltraCard's rights in the
inventions and any copyrights, patents, mask work rights or other intellectual
property rights relating thereto in any and all countries, including the
disclosure to UltraCard of all pertinent information and data with respect to
UltraCard Proprietary Rights, the execution of all applications, specifications,
oaths, assignments and all other instruments which UltraCard shall deem
necessary in order to apply for and obtain such rights and in order to assign
and convey to UltraCard, its successors, assigns and nominees the sole and
exclusive rights, title and interest in and to such inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. CPI, also, further agrees that its obligation to execute or
cause to be executed, when it is in its power to do so, any such instrument or
papers shall continue after the termination of this Agreement.
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(D) It is understood that during the performance under this Agreement,
there will be a technical exchange between UltraCard, its employees and agents,
and CPI. Confidential and proprietary information will be disclosed to and/or
developed by UltraCard, its employees and by CPI (the "Confidential Business
Information"). It is expressly understood and agreed, as part of this Agreement,
UltraCard shall own all of such Confidential Business Information, and that CPI
agrees that the same shall be, and is, confidential and proprietary information
of UltraCard. It is expressly understood and agreed that CPI shall not have the
right to use the Confidential Business Information for CPI's own benefit nor to
use the same for the benefit of any third party.
(E) In the event CPI incorporates any of CPI proprietary rights into
the UltraCard Writer/Reader Device or the Card Substrate (the "CPI Rights"), CPI
hereby grants to UltraCard a non-exclusive, royalty free right and license to
use the CPI Rights.
(8) TERM/TERMINATION RIGHTS
(A) The Original Term of the Definitive Agreement is to be for six (6)
months, which can be extended as provided in Paragraph 3(B), with reasonable
rights of cancellation by either party for non-performance or breach of terms by
a party providing written notice thereof to the other party, provided,
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however, that the party exercising its rights hereunder shall first provide the
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other party with thirty (30) days prior written notice of the non-performance or
breach and the other party shall have failed to cure the same within the thirty
(30) day period.
(B) Notwithstanding any other provision of this Agreement, UltraCard is
to have the right to terminate and/or cancel this Agreement at any time by
providing and delivering to CPI a Written Notice of Termination, which
termination shall be effective upon receipt of the same by CPI (the" Effective
Date of Termination").
(C) In the event that UltraCard exercises its rights set forth in
Paragraph 8(B) above, UltraCard's obligation shall be to pay the actual costs
incurred by CPI to the Effective Date of Termination.
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(9) INTERPRETATION
(A) The parties agree that all provisions of this Agreement, and any
questions concerning its construction and interpretation, shall be governed by
the laws of the State of California.
(B) This Agreement supersedes any and all previous agreements, written
or oral, between the parties relating to the subject matter hereof.
(C) No amendment or modification of the terms of this Agreement shall
be binding upon either party unless reduced to writing and signed by the
parties.
(D) In the event any provision hereof is deemed null and void or
unenforceable, the remaining provisions thereof shall remain in full force and
effect.
(10) NOTICES
All notices, reports and payments made pursuant to this Agreement shall be
in writing and addressed to the parties at the address set forth in the first
paragraph of this Agreement unless notice of a different address is supplied by
either party to the other.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the day and year set forth below adjacent to their respective signatures, but
effective as of the day and year first set forth above.
UltraCard, Inc.,
a Nevada corporation
Date: July, __ 2000 By____________________________
Don Mann,
Chief Technical Officer
CPI INC,
a California corporation
Date: July, __ 2000 By____________________________
Leidy Fogle,
Vice President Manufacturing
CPI INC,
a Colorado corporation
Date: July, __ 2000 By____________________________
Print_________________________
Title_________________________
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EXHIBIT A
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INITIAL CARD SUBSTRATE SPECIFICATIONS
-------------------------------------
DESIGN SPECIFICATION, A1
ULTRACARD MAGNETIC
INSERT/CARD
[LOGO]
ULTRACARD INC.
Magnetic Insert/Card
Design Specification
DRAFT
REVISION HISTORY:
Revision Date Change Description Author
A 6-9-00 Original Draft S.
Kincannon
B 7-6-00 Add card materials and options S.
Kincannon
TABLE OF CONTENTS
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1.0 SCOPE
This document describes the requirements for the design of the UltraCard
Magnetic Insert/Card containing 5 Mbytes of magnetic data on the insert.
2.0 APPLICABLE DOCUMENTS
2.1 UCxxxx, Design Specification of Reader/Writer.
2.2 ISO/IEC 7810: 1995, Identification cards - Physical characteristics.
2.3 ISO/IEC 7811-1: 1995, Identification cards - Recording technique
Part 1: Embossing.
Part 2: Magnetic stripe.
Part 3: Location of embossed characters on ID-7 cards ----
Part 4: Location of read only magnetic tracks -Tracks 1 and 2.
Part 5: Location of read-write magnetic track -Track 3.
2.4 ISO/IEC 7811-2: 1995, Identification cards - Recording technique
-ISO/IEC 7811-6: 1996, Identification cards Recording technique - Part
6: Magnetic stripe - High coercivity.
2.5 ISO/IEC 7812, Identification cards - Numbering system and registration
procedure for issuer identifiers,
2.6 ISO/IEC 7813: 1995, Identification cards - Financial transaction
cards.
2.7 ISO/IEC 7816: 1991, Identification cards - Integrated circuit cards.
2.8 ISO/IEC 14443-1: 2000, Identification cards -Integrated circuit cards
- Contactless integrated circuit (s) cards.
3.0 PHYSICAL CHARACTERISTICS
The following physical characteristics describe the card after insertion of the
magnetic insert into an ID-1 card type meeting the requirements of ISO 7810, ISO
7811, ISO 7812, ISO 7813, ISO 7816, and ISO 14443.
3.1 General
The physical characteristics specified for all types of identification
cards in ISO 7810 shall apply to magnetic insert cards with the
exception of Resistance to chemicals (see sub-clause 8.1.4). The card
body shall not exhibit any adverse effects in flexure, lamination or
physical dimensions when partially submerged into separate solutions,
as described in ISO/IEC10373. Information contained on the magnetic
stripe, integrated circuit or magnetic insert may be rendered
ineffective as the result of contamination.
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3.2 Card Material
If laminated the card will be PVC, PET or Polycarbon. If injection
molded the material will be ABS. The card will be 30 to 33 mils thick.
The final card will be a hybrid of materials.
3.3 Surface Quality
The final surface of the card may be matte, silk or high gloss. Print
quality will be high and may be offset, UV, or silk screen. Printing
will be overlaid with a protective layer.
[diagram]
FIGURE 1. CARD BODY WITH INTERNAL POCKET
[diagram]
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FIGURE 2.
MAGNETIC INSERT
3.4 Physical Description of the Magnetic Insert
The strip will be a 0.010 inch thick piece of beryllium copper,
inconel or other nonmagnetic substrate that will be sputtered with a
magnetic layer and protective overcoats. The insert will contain a data
area that will hold 5 Mbytes of data.
3.5 Additional characteristics
3.5.1 Mechanical strength
The card shall resist damage to its surface and to any components
contained in it and shall remain intact during normal use, storage and
handling.
3.5.2 Electromagnetic interference (between magnetic stripe and
magnetic insert)
If the card carries a magnetic stripe, the magnetic insert shall not
be damaged, malfunction or be altered after reading, writing or
erasing of the magnetic stripe. Conversely, the writing and reading of
the magnetic insert shall not cause a malfunction of the magnetic
stripe or its associated reading, writing or handling mechanisms.
3.5.3 Electromagnetic fields
The exposure of the card to a ???? A*r/m (???? Oe) magnetic field
shall not cause malfunction of the magnetic insert. The test shall be
affected with a static magnetic field of the indicated value.
WARNING - THIS MAGNETIC FIELD WILL ERASE THE CONTENTS OF THE MAGNETIC
STRIPE (IF USED).
3.3.4 Do not perform "Peel Strength" test (see ISO10373, subsection
5.3) through the pocket area of the card body.
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3.6 Interchangeability
All magnetic strips can be read or written by any Ultracard reader/writer.
3.7 Options
Holograms: Optional
Signature Panel: Yes
Punch of Plug: No
Personalization:
Thermal Printing: Optional
D2T2: Optional
Laser Engraving: Optional
Laser Photo: Optional
Embossing: Yes
Ink Jet: Optional
4.0 RELIABILITY REQUIREMENTS
4.1 Insertions
The card and insert can be inserted, read and written 20,000 times.
4.2 Flexibility
The card body with no integrated circuits or magnetic insert will
withstand 20,000 flexures; with an integrated circuit 1000 flexures;
and with the magnetic insert 250 flexures.
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PROTOTYPE CARD SUBSTRATE DELIVERABLES
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<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
Contracted 500 cards/ 500 cards/ 500 cards/ 500 cards/ 500 cards/ 500 cards/
Mininum month month month month month month
Delivery
Contracted Up to 2000 Up to 2000 Up to 2000 Up to 2000 Up to 2000 Up to 2000
Additional cards/month cards/month cards / month cards / month cards / month cards / month
Delivery
<FN>
_______________
1 Price for Additional Deliverable Card Substrates to be negotiated (See 4 (A)
(ii)
</TABLE>
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IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the day and year set forth below adjacent to their respective signatures, but
effective as of the day and year first set forth above.
UltraCard, Inc.,
a Nevada corporation
Date: July 14, 2000 By /s/ Don Mann
--- --------------------------------
Don Mann,
Chief Technical Officer
CPI INC,
a California corporation
Date: July 14, 2000 By /s/ Leidy Fogle
--- ---------------------------------
Leidy Fogle,
Vice President Manufacturing
CPI INC,
a Colorado corporation
Date: July, 2000 By_________________________________
Print______________________________
Title______________________________
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