PRODUCT DEVELOPMENT AGREEMENT
THIS AGREEMENT is made this 28th day of March 2003 by and between
XXXXXXXX SYSTEMS INTERNATIONAL, INC., a North Carolina corporation ("SSI")
and ENVIROKARE TECH INC., a Nevada corporation ("ENVIROKARE") and
ENVIROKARE COMPOSITE CORP., ("ECC") a Delaware Corporation and wholly owned
subsidiary of ENVIROKARE, registered in, and doing business in the State of
Florida, "ENVIROKARE" and "ECC" together ("ENVK"), having a business address of
0000 X.X. Xxx Xxxxxxxxx, Xxxxxxx Xxxxxxx 00000 XXX.
BACKGROUND
1. It is the intention of SSI to contract with ENVK for the
development of proprietary products, the designs of which being specific to
the use of the Thermoplastic Flowforming technology ("TPF") under
Envirokare's exclusive license; and
2. It is the intention of ENVK to carry out the product development
to completion on behalf of SSI.
AGREEMENT
This Agreement will serve as the framework for the development of all
product concepts for SSI by ENVK. In consideration of the mutual promises
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each of the
parties, the parties hereby agree as follows:
1. Definitions
1.1 "Product" shall mean a product, which applies to the industries
in which SSI conducts business, including the waste industry, material
handling industry, shelving industry and automation/systems industry.
1.2 "Development": the translation of specific performance,
mechanical, physical, structural specifications into process and successful
production parts.
1.3 "Appendix/Appendices": Material added to the end of the agreement
containing information specific to a given Product possibly including:
performance criteria, dimensional criteria, key characteristics, processing
targets, time durations for various stages of process.
1.4 "Development Contract Fee": The fees payable to ENVK pursuant to
Section 3.2 and applicable Appendix of this Agreement for:
(a) Professional fees associated with the know-how and
intellectual property development and protection; and
(b) Capital costs associated with pattern, fixture, mold
production or acquisition, and system operating costs associated with
process trials and prototyping of the Product.
1.5 "Development Completion": means the delivery by ENVK to SSI of
ten (10) units of Product manufactured on production equipment and molds
within itemized time-spans specified in applicable Appendix of the
commencement of this agreement, meeting the specifications of applicable
Appendix, and accepted by SSI for market sale and distribution.
1.6 "Manufacturing Package": the specifics of the SSI application and
adaptation of the TPF process, including but not limited to machinery and
software and design, to produce the Product.
1.7 "Year": a period of twelve months from (i) the date of
commencement by ENVK of production of Product or (ii) any anniversary
thereof.
2. Term. This Agreement becomes effective upon execution by SSI and
ENVK and shall continue in effect until terminated in accordance with the
provisions hereof.
3. Development Phase.
3.1 Responsibilities of ENVK. ENVK agrees to design and develop the
Product to meet or exceed the performance requirements and key
characteristics set forth in the applicable Appendix. The contents of said
Appendix may be modified before "Development Completion" (as defined above)
subject to the agreement of both SSI and ENVK, with the understanding that
SSI-initiated changes to said Appendix that impact the design of the
Product after the design freeze may result in both an equitable adjustment
of fees for SSI and an appropriate adjustment to the schedule.
3.2 Development Fees.
(a) Upon execution of this Agreement, SSI shall advance to ENVK
a deposit of 33% of the Development Contract Fee.
(b) The balance of the Development Contract Fee becomes
payable:
(1) 47% upon completion of the first-off parts of the
Product, verification by ENVK that the Product's performance
meets the specifications in applicable Appendix, notification
to SSI by ENVK that first-off parts are ready for delivery to
SSI, and verification by SSI, in its reasonable judgment, of
satisfactory progress of ENVK's manufacturing facility
arrangements to meet SSI's production schedule and longterm
expectation for continuous supply; and
(2) 20% within 30 days after Development Completion, but
not later than 60 days after acceptance of the Product by SSI
unless there is: 1) a deficiency recorded in a written notice
by SSI and acknowledged by ENVK; or 2) a delay in production
manufacturing recorded in a written notice by the intended
manufacturer and acknowledged by SSI and/or ENVK.
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3.3 Termination of Development Phase. If, after 26 weeks from the
effective date of this Agreement (or an extended timeframe agreed to by
both parties prior to the end of the 26 weeks), ENVK is unable to
successfully achieve Development Completion, all payments made to ENVK by
SSI shall be immediately refunded in full to SSI. In such event, any
further obligations delineated in this Product Development Agreement will
be voided, and this Agreement shall terminate.
4. Purchase of Molds Upon Development Completion.
4.1 SSI will purchase and own the molds for the Product contingent
upon the successful compliance of ENVK with the Specifications
and Performance Requirements set forth in the applicable
Appendix and satisfaction of the conditions established for
Development Completion.
4.2 The parties agree that the total cost of the molds for the
Product will be as set forth in the applicable Appendix.
4.3 Upon purchase of and full payment for the molds by SSI, ENVK
agrees to have the molds identified as property of SSI and to
sign such financing statements and other documents as may be
necessary to preserve SSI's rights to the molds.
5. Miscellaneous Provisions.
5.1 This Agreement shall be binding upon the parties' respective
successors and permitted assigns.
5.2 This Agreement shall be governed by and construed in accordance
with the laws of the State of North Carolina. Disputes shall be
settled by binding arbitration in accordance with the Commercial
Rules of the American Arbitration Association, and any award of the
arbitrator(s) shall be enforceable by any court having jurisdiction
over the parties.
5.3 Neither party shall without the prior written consent of the
other party assign, transfer, change or deal in any other manner with
this Agreement or its rights under it or part of it, which consent
shall not be unreasonably withheld - except that no such consent
shall be required in the event of the sale of ENVK provided that the
party acquiring ENVK shall agree to be bound by the terms of this
Contract.
5.4 No amendment or modification of this Agreement shall be effective
unless in writing and signed by a duly authorized representative of
each of the parties to it.
5.5 This Agreement constitutes the entire understanding between the
parties with respect to the subject matter of this Agreement and
supersedes all prior agreements, negotiations and discussions between
the parties relating to it, specifically with the inclusion of the
Product Development and Purchase Agreement dated August 6, 2002 and
with the exception of the ENVK Non-Disclosure Agreement signed on
behalf of SSI which shall continue in full force and effect.
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5.6 The invalidity, illegality or unenforceability of any provision
of this Agreement shall in no way affect or impair the validity,
legality or enforceability of the remaining provisions hereof, which
shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
XXXXXXXX SYSTEMS INTERNATIONAL, INC.
By: /s/ Xxxxxx Heuzer
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Name: Xxxxxx Heuzer
-----------------------------------
Title: President
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ENVIROKARE TECH INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
-----------------------------------
Title: President
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ENVIROKARE COMPOSITES CORP.
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
-----------------------------------
Title: President
----------------------------------
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Appendix AP1-A: Costs and Timing
Costs and Timing: Development, Design and Tooling (DDT)
Development Phase:
Definition: DDT - Mold design, Material determination, Mold fabrication,
First off production samples, Verification of Performance
Phase 1
Proprietary Product 1: - Basic Mold.
Proprietary Product 2: - Basic Mold, variable.
Phase 2 (if development is ordered by SSI)
Proprietary Product 3:
Proprietary Product 4:
Development Costs:
Item* DDT FEE DDT Timing to Production Readiness
----- ------- ----------------------------------
Proprietary Product 1: $103,000 To be agreed
Proprietary Product 2: $ 82,500 To be agreed
Proprietary Product 3: $168,000 To be agreed
Proprietary Product 4: $128,000 To be agreed
Phase 1: $185,500 to be paid towards Proprietary Products 1 and 2.
Initial payment of $61,215.00 was made on 8/23/2002.
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* The "Development Contract Fee" equals the DDT Cost payable for
Proprietary Product 1 and Proprietary Product 2 ($185,500); if development
of Proprietary Product 3 and Proprietary Product 4 is ordered by SSI, the
DDT Cost payment schedule and timing to production readiness shall be
subject to mutual agreement.
