Exhibit 10.16
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.
TECHNICAL SUPPORT AGREEMENT
February 22, 2000
TECHNOLOGY AGREEMENT
The China Card IC (Shanghai) Company, based on the research of market demand of
smartcards and survey of equipment vendors, has decided to purchase from
American Pacific Aviation Technology Company the full set of equipment and
technology for the production of smartcards. Based on the principle of mutual
benefits, both parties have signed the "Agreement for Purchase of Equipment",
the "Technical Services and Patent Technology Licensing Agreement" (Appendix
II), and the "Agreement of Supply of Raw Materials and Product Marketing"
(Appendix III). After several negotiations over the issues of technology, the
following agreement is made between the two parties:
I. GENERAL PRINCIPLES
1.1 It is confirmed that the American Pacific Aviation Technology Company
(hereinafter as Party B) shall provide a complete brand new and state-of-art
line production line and quality control equipment for the production of
smartcards to the China Card I.C. (Shanghai) Company Limited (hereinafter as
Party A).
1.2 Party B shall provide Party A at the same time with a full set of
production technology, technical information, management information and all the
software to ensure that the strength and durability of the cards produced by
Party A, mechanically tested, shall meet the ISO/Mifare standards, and
electrically tested, shall meet the standards of IEC.
1.3 Party B shall also provide Party A at the same time with a full set of
state-of-art manufacturing technology for the production of contactless
smartcards. These cards can be used in such areas as paying public transit fees,
toll fees, or for identification purpose.
2. Major Performance Indices:
2.1 For production of smartcards:
a. MIFARE STANDARD
b. MIFARE LIGHT
c. MIFARE PRO
d. I-CODE CARD
2.2 Specified Production Capacity: 1500 pieces/hour, that is, 12,000,000
pieces/year (four-layer PVC chips, antenna coil based on four coils).
2.3 Reject rates: should not exceed 3%
2.4 Annual utilization limit of the equipment: 8000 hours (based on 350 days
per year).
3. Production Equipment and Technology
3.1 The processing procedures of this production line include hole punching
- -- module picking/placing -- antenna embedding -- welding -- spot welding --
card punching.
3.2 Should be able to use [ ], ABS and PC texture chips
to complete auto package of the MIFARE series of standard, light, pro and I-code
cards.
3.3 Should meet all the INLAYS specifications within the [ ] range.
3.4 The hole puncher should be able to complete the hole punching operating
for the [ ] thick PVB, ABS and PC texture material. The life of the
mould used should not be less than three years (repair six times).
3.5 The pick/place should be able to perform such operations as punching the
module, distinguishing the good and bad modules, applying glues, adhering and
picking and placing materials by vacuum automatically. The precision level of
the high precision auto SONY robot is set at [ ].
3.6 The wire embedder will adopt the [ ] high frequency
shocking embedding wire which allows any change of the wire style and INLAYS
specifications. The parallel level of the embedded wire is within [ ], the
pressures is [ ].
3.7 The welder will use the vacuum absorber to pick and place material (same
as the pick/place machine). The hot welding method will be applied. The welding
strength should not be less than [ ] (the diameter of the cooper wire
is [ ].
3.8 The welding machine will use eight temperature adjustable [ ]
thermal heads to thermal press the layers making up the INLAY or BOOK. It will
also guarantee the module will embed into the pre-punched hole precisely. The
dynamic pressure is [ ].
3.9 The laminator will adopt the layer thermal pressing technology, the time
is [ ]. Adoption of different laminated blocks can allow laminating
shining and less shining cards.
3.10 The card puncher has the functions of cutting white cards and printing
cards. The pressure is [ ].
3.11 Equipment listed from 3.4-3.10 are all controlled by process, with
adjustable parameters and auto memory functions. Preset performance parameters
(100 sets or more) can be restored any time. The time for adjusting parameters
will not exceed four hours. The time for recovery will not exceed 15 minutes.
3.12 Facility Requirement in the Factory:
3.12.1 Air purity: inside the laminating room it should be [ ] (the
US federal standard is [ ];
3.12.2 Temperature: [ ]
3.12.3 Humidity: [ ]
3.12.4 The factory should have ventilation system, air filter system, and
ventilation outlet reserved for the welding machine.
3.12.5 The dynamic compressed air is [ ], the pressure is
[ ], and the quality should reach the ISO8573.1: class1.-.1 standard.
3.12.6 Power load for production system is about [ ] (based on 1500
pieces/hour).
3.12.7 People entering the factory must wear electrostatic prevention
clothing.
3.12.8 The height of the factory should be [ ]
3.12.9 The loading strength of the ground should not be less than
[ ]
3.12.10 Should equip with voltage regulators for pick/place, welder
and wire embedder.
3.12.11 Sealing for doors and windows must be good. Suggest spray
painting the ceiling and the walls and installing terrazzo floor.
3.12.12 Voltage for the elevator of the laminator, welder and some
of the testing equipment should be [ ]
4. Technology Information Provided by Party B
4.1 Detail list of the equipment of the production line, including the name
of the equipment, quantity, component number, power, production capacity, outer
dimension, weight, unit price, name of the producer, etc.
4.2 Detail list of the equipment in the laboratory, including the name,
quantity, component number, major performance index, name of producer and price,
etc.
4.3 Detail list of the accessories, including the name, quantity, accessory
number, name of producer and price, etc.
4.4 List of free consumption material supplied by Party B during the
exclusive dealership period, including the name, quantity, specification number,
name of producer and price, etc.
4.5 List of supplementary equipment to be purchased by Party A, including
the name, quantity, specification number, name of producer and price, etc.
4.6 List of raw materials for standard Mifare cards and standards of
inspection.
4.7 Operation manuals of all equipment, quality certifications, packaging
slips, lists of accessories and illustrations of easily damaged parts.
4.8 Operation software CD, including operation software for laminator.
4.9 Inspection standards of all equipment.
4.10 The flow chart of production and inspection of contactless smartcards.
4.11 Working drawings for production site (within one month after the agreement
is signed).
4.12 Quality confirmation by Philipps (within one month after production
begins).
V. TRAINING
5.1 Technical staff will go to the United States to receive 2 week training.
5.2 Party B shall provide one week training to staff of Party A before
installing and test running the equipment. Installation and test running shall
be performed by Party B but actual operation shall be performed by staff of
Party A.
5.3 During the trial production period (two to three months), Party B shall
guide the production personnel of Party A to master the production technology to
make sure they can operate independently.
VI. This agreement shall become effective at the same time with "Agreement for
Purchase of Equipment".
VII. 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
economic loss of the other party, the defaulting party shall compensate the
loss. Claims and penalties shall be executed according to provisions of Chapter
IX of the greement for Purchase of Equipment.
VIII. Settlement of Dispute
Any dispute over the agreement by Parties A and B shall be settled through
friendly
negotiation. In the event negotiation fails to settle the dispute,
it shall be heard in Beijing, by the China International Economic and Trade
Arbitration Committee. Fee for arbitration shall be paid by the losing party.
IX. This agreement contains four copies of the original with each party
holding two copies, and six copies of the duplicates, with each party holding
three copies. All copies have the same validity.
(no provision in this page)
Party A: China Card I.C. (Shanghai) Company Limited
Representative:
Party B: American Pacific Aviation Technology Company Limited
Representative:
February 18, 2000