Exhibit 10.1
DESIGN AGREEMENT FOR
ULTRACARD WRITER/READER DEVICES
THIS DESIGN AGREEMENT FOR ULTRACARD WRITER/READER DEVICES (the "Agreement")
is made this 17th day of May, 2000, by and between UltraCard, Inc., a Nevada
corporation having a place of business at 1550 S. Bascom Avenue, Suite 100,
Campbell, California 95008 ("UltraCard") and PEMSTAR INC, a Minnesota
corporation, having a place of business at 2020 S. Tenth St, San Jose, Calif.
("Pemstar").
Recitals:
---------
A. UltraCard desires to enter into a design program to have an UltraCard
Writer/Reader Device designed for manufacturing for use with portable card
devices.
B. Pemstar offers design services generally and specifically, has the
capability of designing for manufacturing such an UltraCard Writer/Reader
Device.
C. UltraCard and Pemstar desire to enter in an Agreement to set forth the
terms and conditions under which Pemstar is to provide the design services to
UltraCard.
In consideration of the mutual premises set forth below between UltraCard
and Pemstar, the parties agree as follows:
1. Proposal/Project Parameters
---------------------------
(A) Pemstar, Inc. has submitted a proposal to UltraCard, Inc. dated April
14, 2000 and identified as Project No. 2000-0127, a copy of which is identified
as Schedule A and attached hereto.
(B) The Proposal of Schedule A sets forth the Project Parameters of the
Project for an UltraCard Writer/Reader Device including the Scope of Work,
Assumptions, Approach including Phase 1, Phase 2a, Phase 2b and Proposed Phase
3. The DELIVERABLE set forth shall be delivered at the end of each phase.
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Estimated
---------
Phase Time Period Comments
- ----- ----------- --------
Six (6) weeks to eight (8) (i) Need to revise estimates
1 weeks from date of this for Phase 2a; and
Agreement
(ii) Parties agree in writing
on costs and schedule
estimates before commencing
with Phase 2a.
2a Eleven (11) Weeks to Thirteen (i) Need to revise estimates
Weeks from Agreement on costs for Phase 2b; and
for Phase 2a
(ii) Parties agree in writing
on costs and schedule
estimates before commencing
with Phase 2b.
2b Fourteen Weeks to Sixteen (i) Need to revise estimates
Weeks from Agreement on costs for Phase 2b; and
for Phase 2b
(ii) Parties agree in writing
on costs and schedule
estimates before commencing
3 Parties to agree in writing to Parties agree in writing on
terms and conditions of Phase costs before commencing
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Current estimates set forth in the above tables may be revised
substantially as required definitions, technology and concepts on selection and
components with various lead times and tool needs are specified during the
course of the Phases. Pemstar will use its best efforts to keep UltraCard
advised of the same. UltraCard retains control over decisions on what schedules
would be traded off during the UltraCard Reader/Writer Project.
UltraCard desires to cooperate with Pemstar to reduce, if and where
possible, the above times for each Phase and to determine what steps could be
taken to reduce the above times and what costs Pemstar would require to
accomplish the above. The parties would mutually agree to any revision to the
above schedule and associated costs to effectuate the above.
(C) Parties are to agree in writing on cost estimates for each phase
before it begins. Billing reflects actual costs as incurred and invoicing is
monthly and at phase completions.
(D) Subject to the additional terms and conditions set forth below,
UltraCard and Pemstar agree that the Project Parameters set forth in Schedule A
shall be the applicable terms and conditions for the purpose of this Agreement
and the sections entitled Schedule and Cost are specifically replaced by the
terms and conditions set forth below.
2. Specifications
--------------
(A) As part of Phase 1, Pemstar shall assist UltraCard in establishing a
preliminary written product for the mechanics of the UltraCard Reader/Writer
including performance requirements, component specifications, electrical
interface, definitions and methods for test (the "Preliminary Writer/Reader
Specification"), it being understood that UltraCard shall be responsible for
verifying that the specification covers the desired Writer/Reader device.
(B) Upon completion of Phase 1, UltraCard and Pemstar shall agree on the
Writer/Reader Design Specification which shall be used for the design effort in
Phase 2a, resulting in Writer/Reader Design Documentation.
(C) Upon completion of Phase 2a, UltraCard and Pemstar shall agree on the
Writer/Reader Design Documentation which shall be used for fabrication of
prototype Writer/Readers in Phase 2b.
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3. Costs
-----
(A) UltraCard and Pemstar agree to the following initial estimates and
targeted maximum costs. Pemstar will revise these estimates at the completion of
each Phase. UltraCard and Pemstar will re-negotiate the costs before commencing
the next Phase.
Phase Estimated Costs Targeted Maximum
- ----- --------------- ----------------
Costs
-----
1 $ 46,000.00 $ 75,000.00
2a $ 125,000.00 to $280,000.00
$ 220,000.00
2b $ 155,000.00 to $300,000.00
$ 240,000.00
Pemstar will use its best efforts to keep UltraCard advised, on a periodic
basis, of the actual costs verses Targeted Maximum Costs set forth above and
shall advise UltraCard in a written notice if Pemstar foresees or reasonably
becomes aware that the actual costs will exceed the Target Maximum Costs
resulting in excess costs. Such notice shall set forth the project amounts of
such excess costs and the reasons therefor. UltraCard retains control over
decisions on what excess costs, which exceed the Targeted Maximum Costs, should
be incurred by UltraCard during the UltraCard Reader/Writer Project.
(B) Changes in scope of any phase directed by UltraCard or suggested by Pemstar
and approved by UltraCard shall be considered as an addition to this contract
and subject to separate negotiations as to cost and schedule.
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(B) Pemstar will invoice UltraCard monthly and at the end of each Phase
for the actual costs incurred for the applicable Phase together with
sufficient detail of labor, travel, material costs and the 25% mark up
so as to enable UltraCard to verify the same.
(D) UltraCard shall pay net thirty (30) days from the date of invoice.
4. Freedom of PEMSTAR to Deal With Third Parties
---------------------------------------------
(A) UltraCard hereby acknowledges that the Services are being performed by
PEMSTAR in a non-exclusive basis and that PEMSTAR shall be free to offer its
services to others during or after the term of this Agreement, subject only to
PEMSTAR's obligations of confidentiality and restriction on use of UltraCard's
confidential Information as controlled by Non-Disclosure Agreement dated March
27, 2000.
5. Intellectual Property
---------------------
(A) UltraCard is to exclusively own all intellectual property rights in
and to all technology developed by Pemstar in connection with the UltraCard
Writer/Reader Device Project.
(B) In the event Pemstar incorporates any of Pemstar proprietary rights
into the UltraCard Writer/Reader Device (the "Pemstar Rights"), Pemstar hereby
grants to UltraCard a non-exclusive, royalty free right and license to use the
Pemstar Rights.
(C) UltraCard hereby acknowledges that PEMSTAR is in the business of
rendering, among other things, engineering services, and that PEMSTAR and its
employees possess a variety of methods, techniques and other strategies
collectively, "Know How" that were acquired or developed by PEMSTAR or its
employees prior to the commencement of the Services. "Know How" does not include
confidential or proprietary information outlined in Section 7.0. PEMSTAR shall
retain all rights, title and interest in such Know How and shall be free to use
same during or after the term of this Agreement. PEMSTAR shall be free to use,
in a manner that does not compete directly with UltraCard's Products,
information developed by PEMSTAR under this Agreement if the information was
developed without the use of UltraCard's Confidential Information, as defined
below in Section 7.0. Otherwise, any Trade Secrets, as defined by Minn. Stat
325C.01 et seq., and any
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patentable inventions developed by PEMSTAR for UltraCard under this Agreement
shall be UltraCard's property.
6. Term/Termination
----------------
(A) Subject to Paragraph 6(B), the maximum term of this Agreement shall be
for twelve (12) months with reasonable rights of cancellation by either party
for non-performance Or breach of terms by such party providing written notice
thereof to the other party, provided, however, that the party exercising its
-----------------
rights hereunder shall first provide the other party with ten (10) business days
prior written notice of the non-performance or breach and the other party shall
have failed to cure the same within the ten (10) business day period.
(B) Notwithstanding any other provision of this Agreement, UltraCard has
the right to terminate and/or cancel this Agreement at any time by providing and
delivering to Pemstar a Written Notice of Termination, which termination shall
be effective upon receipt of the same by Pemstar (the" Effective Date of
Termination").
(C) In the event that UltraCard exercises its rights set forth in
Paragraph 6(B) above, UltraCard's obligation shall be to pay to Pemstar the
actual costs incurred, including any expenses for tooling, parts or the like to
the extent that Pemstar is obligated to pay the same, to the Effective Date of
Termination.
7. Independent Contractor Status; Limitation of Responsibilities
-------------------------------------------------------------
(A) In rendering the Services, PEMSTAR shall be acting as an independent
contractor and not as an employee or agent of UltraCard. PEMSTAR shall have the
sole discretion to determine the most appropriate means and methods to perform
the Services. Nothing contained in this Agreement shall be construed or applied
to create a partnership.
(B) PEMSTAR shall be solely responsible for the payment of all federal,
state or local taxes with respect to all amounts paid to PEMSTAR under the
Agreement.
8. Indemnification
---------------
(A) Either party hereby agrees to indemnify and hold harmless the other
party from and against any liability, costs and expenses (including, but not
limited to, reasonable costs of
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defense) that are incurred by a party resulting from or arising out of any
claim, including property damage or death or personal injury, due to the
negligence or willful misconduct of the other party and that are not caused by
any contributory negligence or willful misconduct of the other party. If a party
claims such indemnification, it shall give prompt written notice to the other
party of the nature and extent of any such claim, and shall render such
cooperation as is reasonably requested by the other party in the defense or
resolution of such claim or dispute.
(B) In the event of any product liability claim and excepting any claim
---------
against Pemstar relating to the design of the UltraCard Reader/Writer Device
arising from a claim of negligence or otherwise, UltraCard hereby agrees to
indemnify and hold harmless Pemstar from and against any liability, costs and
expenses (including, but not limited to, reasonable costs of defense) that are
incurred Pemstar resulting from or arising out of any product liability claim,
it being understood that UltraCard shall have the sole discretion as to the
obtaining of or not obtaining of product liability insurance covering the
UltraCard Reader/Writer Device.
(C) UltraCard recognizes that PEMSTAR is solely providing UltraCard with
information and advice. Subject to the provisions of Paragraphs 11.1 and 11.3
and to the provisions of this agreement, UltraCard also recognizes that PEMSTAR
has no control over what UltraCard does with such information and advice. As
such, UltraCard hereby agrees to indemnify and hold harmless PEMSTAR from and
against any liability, costs and expenses (including, but not limited to,
reasonable costs of defense) that are incurred by PEMSTAR resulting from or
arising out of any use by UltraCard of this information.
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(D) Without limiting the generality of the foregoing, this indemnification
provision includes claims for copyright, patent, trademark and other
infringements if statutory or common law rights which protect intellectual
property rights. PEMSTAR makes no representations that the Services provided
will not infringe such intellectual property rights. However, PEMSTAR states
that, to its actual knowledge, without conducting any investigation, the
Services provided are not known by PEMSTAR at the time of provision to violate
such intellectual property rights.
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.
8. 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: May 19, 2000 By /s/ Don Mann
-----------------------------------
Don Mann,
Chief Technical Officer
PEMSTAR INC,
a Minnesota corporation
Date: May ___, 2000 By /s/ Gary Lingbeck
-----------------------------------
Gary Lingbeck,
Executive Vice President
261 ucipemstarrev4
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SCHEDULE A
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Henry Perez
Director of Engineering, UltraCard Inc.
1550 S. Bascom Ave., Ste 100
Campbell, CA 95008
Tel: (408) 558-7000
Fax: (408) 558-6999
Dear Henry,
PEMSTAR is pleased to propose for UltraCard a program to define, design for
manufacturability, and build UltraCard Writer/Reader Devices. PEMSTAR is also
capable of providing concurrent manufacturing and test equipment and process
design, and other support beyond the scope of this proposal.
This proposal is based on the three phase approach Pemstar uses for product
development projects:
Phase 1: Product Definition and Concept Development
Phase 2: System Design, Prototype Build and Validation
Phase 3: Replication
In this case, Phase 3 is not addressed--it can be started any time in the future
from the completely documented design resulting from Phases 1 and 2. Phase 2
will be subdivided into 2a) System Design and 2b) Prototype and Refine for the
purposes of better isolating the activities for stepwise estimating and better
UltraCard program control.
At the end of Phase 1, an improved estimate for Phase 2 will be made for your
consideration before continuing. At this time, we have significant uncertainty
in the estimate for Phase 2, as it highly depends both on the definition details
and the concept UltraCard will prefer to pursue. Nevertheless, we are including
an indication of a range of possible costs based on experience in disk drive
development.
Scope of Work:
- --------------
This proposal covers the effort to define the product requirements, generate
design concepts and design verification test requirements, complete the
detailed system design, prototype build and test, deliver and demonstrate, and
support you with problem solving after delivery.
I have attached for reference a New Product Introduction checklist. With it,
notice that a number of items from the Engineering section are not included in
this scope, such as localization requirements, serial number and configuration
planning, and packing design. At this time, it is not clear to what extent
these items are covered by the participation of other elements of the
UltraCard engineering team. This will be determined during the definition
phase work.
The other sections of the NPI Checklist are included because they may be
useful in assessing other work that still needs to be addressed, but is
outside the scope of this letter. PEMSTAR is also qualified to assist in
working with you in most of those areas should you require.
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Assumptions:
- ------------
. UltraCard will own the design and all documentation for the UltraCard
Writer/Reader.
. UltraCard will provide input consultation to facilitate drafting of
requirements specification.
. UltraCard will provide PCB outline and height map input for mechanical
packaging.
. Pemstar will provide engineering and technician support in UltraCard's
Campbell facility after delivery to assist in issue resolution.
. Testing will consist of functional performance verification of each mechanism
for which PEMSTAR is responsible.
. PEMSTAR will welcome any visits by UltraCard to the PEMSTAR facility during
any phase of work, though no visits are required for this plan--all Design
Reviews will be at the UltraCard site.
. Product cost is to be one of the driving factors in the design.
. Selected MTBF target will be used for design purposes and supported by design
calculations for the portion of the mechanism in PEMSTAR's scope of work.
Testing actual MTBF will be beyond the scope of Phase 2.
. UltraCard will participate in selection and approval of major component
suppliers.
Approach:
- ---------
Phase 1 -- Product definition and Concept Development
-----------------------------------------------------
Begin by consulting with UltraCard representatives to refine and complete the
input requirements specification. Next, prepare concept alternatives, analyze
each to determine expected performance, and make cost comparisons. Then review
and select best concept with UltraCard. After selecting best path, prepare
detailed design specification for the product and prepare a design
verification test plan. Review and modify both with UltraCard representatives.
Update proposal for Phase 2 with any improved accuracy possible from Phase 1
work.
Phase 2a - Design
-----------------
Design and select all system components for the major subsystems of X- and Y-
Positioning, Card Handling, Media Extraction, Frame with mechanism and PCB
mounting, and packaging. Selection (with UltraCard's qualification) of major
component suppliers. Definition of control requirements for each operating
mechanism, to be used by UltraCard as Software Requirements and Electronics
Requirements inputs. Detailed part and assembly drawings suitable for
fabrication, assembly, and quality control. Stereolithographic or fast shop
prototypes of any parts necessary to make design decisions. Close
communications will be maintained during design work to ensure continuing
UltraCard visibility and influence. This sub-Phase will end with a complete
Design Review with UltraCard and incorporation of any modifications resulting
from that review.
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Phase 2b - Build, Test, and Install
-----------------------------------
Fabricate and procure all parts, then integrate them at our San Jose facility.
Perform all functional testing and ensure fit of parts, setup, and proper
throughput capability. Test to Design Specification requirements, workmanship
and safety standards, and document results. Modify anything not meeting
specifications or intended function, and update documentation. Deliver to
UltraCard Campbell site for mating with electronics and operationally testing.
Participate in UltraCard acceptance testing, and support design changes as
necessary.
Deliverables:
- -------------
Phase 1 -- Product definition and Concept Development
-----------------------------------------------------
. Initial review of product definition and requirements input document.
. Refinement of same to specifically address choices and alternatives in
requirements.
. Concept descriptions and sketches of two or three candidates.
. Cost and performance analyses of each concept.
. Concept Review with UltraCard.
. Design Specification
. Design Verification Test plan.
. Critical Success Factors identification.
. Updated Proposal for Phase 2.
. Weekly activity and progress reports.
Phase 2a - Design
-----------------
. Documented design of all fabricated components.
. Selection of all purchased components.
. Selection of suppliers for major components.
. Full system assembly drawings and BOM.
. Interface requirements for electronics and software.
. System Design Review at UltraCard Campbell site.
. Incorporation of Design Review output requirements.
. Weekly activity and progress reports.
Phase 2b - Build, Test, and Deliver
-----------------------------------
. Procurement of all prototype parts.
. Critical parts receiving and inspection.
. Integration of full system at Pemstar site.
. Pre-delivery de-bugging and design modifications.
. Verification test per plan from Phase 1.
. Test report.
. Delivery of 3 to 5 prototypes to UltraCard Campbell site.
. UltraCard location follow-up and problem solving, design tweaks, EC
processing.
. Weekly activity and progress reports.
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Schedule:
- ---------
The schedule shown in Figure 1 arbitrarily assumes a start date of May 1, 2000
and culminates with prototype delivery October 6, 2000. All progress estimates
are with respect to the actual start date.
Cost:
- -----
The cost and duration values given are estimates. They reflect the development
plan and our assessment of the personnel resources needed to implement it. The
cost and duration estimates for each phase will be reevaluated and updated
upon completion of the preceding phase. Travel is not expected to be a
significant factor in this project, except as UltraCard may choose to pursue
evaluation of remote suppliers for major components. Most materials will be
marked up 25%, but some higher priced items may be marked up significantly
less, depending on PEMSTAR's effort in the procurement. Some items such as
tooling may be recommended for direct purchase by UltraCard for this reason.
The actual cost of the program will only be billed as time and materials are
applied.
Our labor rates are shown here:
--------------------------------------------
$/Hr
--------------------------------------------
Program Manager 125
--------------------------------------------
Engineer 110
--------------------------------------------
Designer 75
--------------------------------------------
Technician 60
--------------------------------------------
The estimated program costs are shown here:
-----------------------------------------------------------------------
Labor Travel Material Total
-----------------------------------------------------------------------
PHASE $46k 0 0 $ 46k
1
-----------------------------------------------------------------------
PHASE $120k- 200k $2k-8k $3k-12k $125k-220k
2a
-----------------------------------------------------------------------
PHASE $100k-$140k $5k-$10k $50k-90k $155k-$240k
2b
-----------------------------------------------------------------------
Terms: The cost will be invoiced net 30 days. FOB San Jose, CA.
Proposal is valid for 30 days.
Conclusion:
- -----------
This proposal is based on the estimated costs shown. Invoices will reflect
actual costs. Pemstar will make every effort to minimize schedule, labor, and
material costs for the benefit of its customer, while delivering quality
product and service.
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It is PEMSTAR's policy, and our personal commitment, to treat UltraCard and
all our customers fairly and openly. We will not low-ball bid. This should be
considered when evaluating our estimates if they appear higher than expected.
We believe you will be pleased with this way of doing business, and we believe
the amount you would spend with PEMSTAR will be spent with any supplier, even
if their initial estimate is lower. By working on a time-and-materials basis,
we do not have to charge you for the uncertainty, and we are continually
flexible to your directions.
In the disk drive industry, a team of engineers typically spends 6-9 months
designing a product, and that is usually similar to a previous design. While
zero-based budgeting for the tasks recognized at the beginning of the project
predict less effort, the technical content and innovation involved always
produces schedule overruns if the schedule is not designed to include the
unexpected. The UltraCard Writer/Reader is a new product with many
similarities to disk drives, and may be expected to experience a similar
birth. Therefore, the zero-based budgeting used to generate the estimates here
are conservatively adjusted to reflect this industry experience.
We at PEMSTAR will treat your proprietary information with care. We respect
your need for confidentiality and will act to protect it with privacy screens,
document shredding, and avoidance of conflicting application of resources, as
required.
Thank you for the opportunity to bid on this engineering project for UltraCard,
Inc. Please let me know if you have any questions regarding this proposal.
Sincerely,
Jim Starr
Project Manager
(408) 918-5303
jim.starr@pemstar.co
--------------------
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Figure 1 Schedule
UltraCard Reader/Writer Development
# Task Name Qtr2, 2000 Qtr 3, 2000 Qtr4, 2000
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
10 Phase 1-Spec and Concept
- --------------------------------------------------
1 Program Management
- --------------------------------------------------
2 Requirements Specification
- --------------------------------------------------
3 Concept Generation [Bar chart data]
- --------------------------------------------------
4 Concept Analysis
- --------------------------------------------------
5 Concept Design Review
- --------------------------------------------------
6 Design Specification
- --------------------------------------------------
7 Design Verification Test Spec
- --------------------------------------------------
8 Spec Review w/cust and modify
- --------------------------------------------------
9 Phase 2 Plan Update
- --------------------------------------------------
11 Phase 2a--Design
- --------------------------------------------------
12 Program Management
- --------------------------------------------------
13 X-positioner
- --------------------------------------------------
14 Y-positioner
- --------------------------------------------------
15 Card handling mechanism
- --------------------------------------------------
16 Strip Extraction mechanism
- --------------------------------------------------
17 Interconnecting pieces
- --------------------------------------------------
18 Frame and structure
- --------------------------------------------------
19 Packaging
- --------------------------------------------------
20 Electrical interfaces
- --------------------------------------------------
21 Software Requirements Spec
- --------------------------------------------------
22 Stereolithographic models
- --------------------------------------------------
23 Major Design Review
- --------------------------------------------------
24 Design Review Changes
- --------------------------------------------------
25 Phase 2b--Proto and Mod
- --------------------------------------------------
26 Program Management
- --------------------------------------------------
27 Procurement
- --------------------------------------------------
28 Build and test X-Y positioners
- --------------------------------------------------
29 Improve design
- --------------------------------------------------
30 Re-build X-Y positioners
- --------------------------------------------------
31 Test again
- --------------------------------------------------
32 Build and test Card handler
- --------------------------------------------------
33 Improve design
- --------------------------------------------------
34 Build and test balance of box
- --------------------------------------------------
35 Modifications and Rebuilds
- --------------------------------------------------
36 Demo, review
- --------------------------------------------------
37 Final modifications, delivery
- --------------------------------------------------
38 Finalize Documentation
- --------------------------------------------------
39 After delivery support
- --------------------------------------------------
40 UltraCard Prod Orders Placed
- --------------------------------------------------
40 UltraCard Prod Orders
- -----------------------------------------------------------------------------------------------------------------------------------
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