VIEWS: 23,545 PAGES: 17 CATEGORY: Product Development and Manufacturing POSTED ON: 11/20/2009
This Product Development Agreement is made between a client and a product developer to develop the client's product. This document sets forth the material terms and conditions of the agreement including the product specifications, non-disclosure provisions, the project phases, and compensation details. It contains numerous standard provisions that are commonly included in these types of agreements and may be customized to address the specific needs of the parties. This document should be used by product developers and their clients when retaining their services.
This Product Development Agreement is made between a client and a product developer to develop the client's product. This document sets forth the material terms and conditions of the agreement including the product specifications, non-disclosure provisions, the project phases, and compensation details. It contains numerous standard provisions that are commonly included in these types of agreements and may be customized to address the specific needs of the parties. This document should be used by product developers and their clients when retaining their services. PRODUCT DEVELOPMENT AGREEMENT This Product Development Agreement (the “Agreement”) is made on the _____ day of ___________20__ (the “Effective Date”) by and between _________________________ (“Client”) and ___________________________, (“Developer”). RECITALS: A. Client is engaged in the business of _________________________________; B. Upon and subject to the terms and conditions of this Agreement, Client has retained Developer’s services to provide development services for the development of ___________________ (“Products”) according to the Product Specifications specified in Exhibit A of this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. PRECEDENCE 1.1. This Agreement is intended by Client and Developer to operate as a basic set of operating conditions regarding their business relationship. Product specific requirements along with specific business terms and conditions will be mutually agreed to and documented by Exhibit A to this Agreement. 1.2. Parties have executed a Mutual Non Disclosure Agreement (“MNDA”) between them dated ______________. 1.3. This Agreement may be executed in one or more counterparts, each of which will be deemed the original, but all of which will constitute but one and the same document. The parties agree that this Agreement and its addenda may not be modified except in writing and signed by both parties. 2. ENGAGEMENT 2.1 Client hereby has engaged Developer for designing and prototyping the Product for mass production in accordance to the Product Specifications and Project Phases set forth in Exhibits A and B respectively of this Agreement. 3. DESIGN REVIEW AND SPECIFICATION CHANGES 3.1. Design Review. The parties agree to conduct regular program reviews as specified on the agreed Project Phases set forth on Exhibit B to this Agreement, to ensure their mutual satisfaction with the performance under the Agreement. Upon reasonable notice, the parties agree to meet at a mutually agreeable time and location to review and discuss the status of the development of the Product. The parties further agree to promptly meet at the request of either © Copyright 2013 Docstoc Inc. 2 party with respect to any material issues a party may have with the performance of the other party of its obligations under this Agreement. 3.2. Changes to the Specification. Each party may request modifications in writing to the other party in the form of changes or additions to the Specifications at any time during the term of this Agreement. Such requests shall not be deemed or considered binding unless accepted by the other party in writing. If any such modification of the Project Specifications is agreed, the parties will negotiate an equitable adjustment to the Agreement, including the apportionment of any additional development, testing or tooling costs. Upon mutual agreement to any change to the Project Specifications, both parties will proceed with the implementation of the prescribed changes, and the Project Specifications and other Exhibits to the Agreement shall be modified accordingly to reflect such agreed upon changes. Notwithstanding the foregoing, if the Client requested changes to the Project Specifications involve any change to the work performed by third parties contracted with Developer, Developer shall use reasonable efforts to effect such specification change provided that the same does not increase the cost of any functional component or adversely and materially affect the Project Phases or function of the specific component. In such event Client shall be responsible for the payment of all nonrecurring expenses involved in such change (or such pro rata portion thereof, in the further event Developer elects to incorporate the same in its version of the Product). Notwithstanding the foregoing, Client shall not be responsible for any such nonrecurring expenses if Client requested changes are necessary for the Product to achieve Product Acceptance or to meet the Product Specification as changed at the request of Developer. In the event such third party will not agree to such Product Specification change, Developer shall so notify Client and Developer shall have no other or further liability to Client as a result of such request. 3.3. Modification to Project Specifications. Client and Developer agree that upon acceptance of each Deliverable pursuant to Section 4.2 (c) of this Agreement and upon Product Acceptance (pursuant to Clause 4.2 (c) the Project Specifications shall be modified as necessary to conform to the Deliverables and the Product, as applicable, as accepted, excepting mutually agreed (in writing) deviations from the Project Specification which require additional development work to achieve conformance to the Project Specification. After and upon acceptance of each Deliverable pursuant to Section 4.2 and after and upon Product Acceptance, the term "Project Specifications" as used herein shall refer in all cases to the Project Specifications as so modified. 4. DELIVERABLES AND DELIVERY; ACCEPTANCE; AND REJECTION 4.1. Deliverables. Developer agrees to use reasonable efforts to perform its services and deliver Deliverables in accordance with the Project Phases. All Deliverables shall be delivered by the times set forth in the Project Schedule and stated dates are date of delivery unless otherwise specified. The use of Deliverable is solely at the discretion of the Client without any liability or payment obligation to Developer. 4.2. Acceptance. © Copyright 2013 Docstoc Inc. 3 (a) Developer, with the reasonable assistance of the Client if requested, will examine and test each Deliverable (and/or item thereof as specified on the Project Phase) of the other party upon delivery. Client, as soon as reasonably practicable following the delivery of same, but in no event later than fifteen (15) business days after receipt of notice of delivery: (i) accept the Deliverable (or item thereof and so inform Developer in writing; or (ii) if the Deliverable (or item thereof contains material Errors, reject the Deliverable or item thereof and provide Developer with a written statement of such material Errors). The failure of Client to respond within the specified fifteen (15) day period shall be deemed acceptance of the Deliverable (or item thereof, but shall not limit the provisions of Section 4.4 hereof). Developer may request a reasonable extension in the time to complete such testing if the same is required under the circumstances, and both parties shall reasonably consider such requests, provided that no such extension shall be effective unless in writing and signed by a duly authorized representative of the party granting such extension. (b) The Developer will promptly correct the material Errors set forth in the statement of material Errors with respect to any Deliverable or item thereof and redeliver the Deliverable or item thereof to the receiving party within such reasonable period of time as may be agreed upon by Client and Developer with regard to all circumstances affecting the Product or the Deliverables. The Client shall, as soon as reasonably practicable after such redelivery but in no event later than fifteen (15) business days thereafter, accept or reject the redelivery in accordance with the procedure set forth in Section 4.2(a), which procedure shall be repeated until the Deliverables are accepted or Client invokes the provisions of Section 4.3 hereof. (c) “Product Acceptance” shall be deemed to occur upon the acceptance, pursuant to this Section 4.2, of all Client and Developer Deliverables and successful completion of the acceptance test procedures with regard to the Product as set forth in Exhibit A. (d) _________________________________________________________________ [Description of dispute resolution procedure regarding acceptability of Deliverables] 4.3. Rejection. Should any Deliverable fail to be accepted after the third delivery of that Deliverable pursuant to Section 4.2(b) then the parties shall promptly meet in accordance with Section 3.1 to resolve the problem. Any subsequent rejection of the same Deliverable (unless otherwise resolved pursuant to Section 4.2(d)) shall be deemed a breach of this Agreement by Developer, and the Client may elect to terminate this Agreement pursuant to Section 6 hereof, or may elect to accept further resubmission of the applicable Deliverable. 4.4 Correction of Errors. Developer shall at its expense, from the Effective Date until the date that is eighteen (18) months from the date of Product Acceptance, use its reasonable efforts promptly to correct documented and reproducible material Errors in the Product designs, function and such other features which have been detected after Product Acceptance and which are reported in writing by Client to Developer. Provided, however, that prior to Product Acceptance, this obligation shall apply only to Deliverables or items thereof that have been © Copyright 2013 Docstoc Inc. 4 delivered by Client in accordance with the Project Schedule. Developer shall provide such assistance in correction as Client may reasonably request. “Errors” shall mean: (i) reproducible defects in any Deliverable which causes it not to function in conformance with the Product Specifications, and (ii) defects in the documentation or materials for which render it inaccurate, erroneous or otherwise unreliable. [Describe conditions where Errors detected may not fall within the scope of this Agreement and how such Errors may be fixed, if charges will be extra, and how the procedures of acceptance shall be determined] 4.5. Support. Developer further acknowledges and agrees that, for a period of one (1) year following Product Acceptance and subject to the provisions of this Section 4.5, it shall provide Client with such reasonable support in the areas of ____________________ as Client shall reasonably request, necessary for the manufacture and field support of the Product. All travel, lodging and associated expenses (except salary and benefits of Developer employees) shall be borne by Client. In addition, after the one (1) year period following Product Acceptance, Client shall pay Developer the reasonable and customary personnel, service and related charges for any such support provided by Developer. 5. CONFIDENTIAL INFORMATION 5.1. “Confidential Information” means, without limitation, all information pertaining to the business of Client and Developer including, but not limited to, the Product invention, ideas, trade secrets, know-how, research and development, training, software, programs, hardware configuration information, price lists, data, manuals, handbooks, sponsors, investors, business strategies and plans, marketing, sales records, drawings, Project Specifications, designs, materials, parts lists, customer lists, consumer information, suppliers, contract terms, test criteria, vendor lists, financial information, intellectual property, and all other information or data of any kind or character relating to the business of Client or Developer , including but not limited to, any invention, writing, idea, discovery, or improvement made or conceived by Client or Developer directly or indirectly as a result of performing work for Client pursuant to this Agreement, whether or not reduced to writing, and which is not generally available to the public. 5.2. Confidential Information shall not include: (a) Information, which is or becomes generally available other than as a result of the breach of this Agreement by either Party; (b) Information, the release of which is expressly authorized in writing by the Party having the legal right to disclose such information; or (c) Information, which is already lawfully known to or independently developed by either Party without the use of any Confidential Information disclosed hereunder; or (d) Information, which is lawfully obtained from any third party. 5.3. Use of Confidential Information. Developer acknowledges that the Confidential Information is the sole, exclusive and extremely valuable property and of high importance to the © Copyright 2013 Docstoc Inc. 5 Client. Accordingly, Developer agrees to segregate all Confidential Information from information of other companies and agrees not to reproduce any of the Confidential Information without Client’s prior written consent, not to use the Confidential Information except in the performance of this Agreement, and not to divulge all or any part of the Confidential Information in any form to any third party, either during or after the term of this Agreement. 5.4. Return of Confidential Information. Upon termination of this Agreement for any reason including expiration of term, Developer agrees to cease using and to return to Client all whole and partial copies and derivatives of Client’s Confidential Information, whether in Developer’s possession or under Developer’s direct or indirect control. 5.5. Prior to execution of this Agreement, the parties have executed the Mutual Nondisclosure Agreement on _______. In the event there is a conflict between the terms of the Mutual Nondisclosure Agreement and this Agreement, this Agreement shall govern. 6. TERM AND TERMINATION; FORCE MAJEURE: 6.1. Initial Term. Unless terminated sooner pursuant to the further provisions of this Clause 6.1., this Agreement shall expire ________ (__) years from the Effective date hereof. 6.2. Extensions. Client has three successive options to extend the term of Agreement for a period of one (1) additional year (an “Extension Period”). Client’s right to exercise each option to extend the Agreement for another year is expressly conditioned upon Client not being in default under this Agreement at the time the option is exercised and not being in default between the time the option is exercised and the start of the Extension Period. 6.3. Termination By Client. Client shall have the right to terminate this Agreement if Developer fails to perform in accordance with this Agreement and its appendices and fails to cure such default within sixty (60) days of written notice. 6.4. Termination By Developer. Developer shall have the optional right to terminate this Agreement on written notice to Client if Client (a) has failed to make any payments required by this Agreement in the time provided therefore and (b) following sixty (60) days notice of such failure from Developer, Client does not pay all delinquent sums in full. 6.5. Termination By Either Party. In addition to their respective rights set forth in paragraphs 6.3 and 6.4, either party shall have the right to terminate this Agreement on written notice to the other party under the following circumstances: (a) by mutual Agreement; (b) if the other party materially defaults in the performance of any material obligation hereunder, and such default continues for more than thirty (30) business days after receiving written notice from the other party of such default; provided, however, there shall be no default under this provision if the defaulting party has cured the default within sixty (60) business days after the giving of notice; © Copyright 2013 Docstoc Inc. 6 (c) in the event that the other party is declared insolvent, or bankrupt by a court of competent jurisdiction, or a voluntary petition of bankruptcy is filed in any court of competent jurisdiction by such other party, or such other party shall make or execute an assignment for the benefit of creditors, or a receiver is appointed by a court of competent jurisdiction over all or a substantial portion of the other party’s assets and such receivership is not dismissed within 30 days of appointment, or (d) in the event of the issuance of a final order, decree or other action by any competent judicial authority or governmental agency which restrains, enjoins or prohibits the sale or introduction into interstate commerce of the System and such restraint, injunction or prohibition is not vacated within 30 days thereafter. 6.6. Survival. The termination or expiration of this Agreement shall be without prejudice (a) to the rights of any party to receive upon its request all payments accrued and unpaid, or all documents, data and deliverables not delivered, as of the date of such expiration or termination; (b) the rights and remedies of either party with respect to any previous breach or default under any representation, warranty or covenant herein contained; (c) rights under any other provision of this Agreement which expressly and necessarily calls for performance after expiration or termination, and (d) Developer shall not produce, nor allow to be produced, the Product. 6.7. Effect Of Termination. In the event of the termination or expiration of Agreement, Developer shall cease to perform Services for Client, and must return all Confidential Information in possession of Developer. 6.8. Force Majeure. If the performance of this Agreement or of any obligation hereunder is prevented, or restricted or interfered with by reason of any event of Force Majeure, the Party so affected, upon prompt notice to the other Party, shall be excused from performance, but only for the duration of such inability, provided that the Party so affected shall use its best effort to avoid or remove such causes of nonperformance, and shall continue performance hereunder with the utmost dispatch whenever such causes are removed. 7. COMPENSATION FOR PRODUCT DEVELOPMENT 7.1. In consideration for the services rendered by Developer for Product Development, Client shall pay to Developer compensation as defined in Exhibit C. Developer should provide cost estimate during evaluation phase and must ensure that the final product falls within the budget as set in the Exhibit A and Exhibit C respectively. Developer must submit Deliverable in full according to Project Phases milestone for any payments to be made by Client according to the respective milestone. 8. INDEMNITY. 8.1. Developer Indemnity. Developer agrees to indemnify, defend and hold harmless Client or any of their respective customers, against any claim arising out of or relating to any loss or damage, including bodily injury or death, incurred by reason of or resulting from a defect in © Copyright 2013 Docstoc Inc. 7 the product caused by Developer’s design, engineering, fabrication, manufacture, packaging or labeling thereof; provided that the Product is used for its intended purpose. Developer shall not be required to pay any compensation for damages, loss or cost, which are due to loss of sales opportunity. Developer shall not be responsible for the loss of recorded data unless due to Product defect which was made intentionally or due to gross negligence by Developer. 8.2. Client’s Indemnity. Client agrees to indemnify, defend and hold Developer harmless against any claim arising out of or relating to any loss or damage, including bodily injury or death, incurred by reason or resulting from any defect in the Product, which is not caused by reason of or resulting from a defect in the Product proximately caused by Developer’s design, engineering, fabrication, manufacture, packaging or labeling thereof, provided that the Product is used for its intended purpose. 9. OWNERSHIP. 9.1. Technology Ownership. The parties agree as follows: (a) Client shall own all “Project Technology” which shall be defined as: all inventions, improvements, discoveries, designs, data, prototypes, mold s, concepts, ideas, processes, methods, techniques, know-how, and information, including schematics, software source code, images, and engineering drawings respecting the Products conceived, made or produced by Developer during the course of performing design, prototyping, engineering, fabrication or manufacturing services under this Agreement, or made or produced as the result of the joint efforts of Developer and Client pursuant to this Agreement. The term “Project Technology” shall exclude any of Developer’s or Client’s proprietary processes used in the manufacture of the Product, as defined in the attached summary of Developer or Client patents (“Core Technology”) (Exhibit D). (b) Developer shall own all of its “Technology and Manufacturing Processes” which shall be defined as follows: its proprietary electronic technology and processes and know-how and assembly and manufacturing processes and technology and know-how, including such technology and know-how concerning (i) developed or acquired by Developer prior to the exercise of this Agreement. (c) This Agreement does not prevent Developer from engaging in the design, engineering, fabrication or manufacture of products embodying or using Developer’s Technology and Manufacturing Processes; provided that such products do not embody or use any of Client ’s confidential information or Project Technology. Developer shall not produce, or allow to be produced Product with the scope of Developer’s Core Technology, without Client’s prior approval, and if approved, the payment of a patent fee or royalty fee shall be payable to Client, as defined by Client. Developer shall put the production of the Product out to subcontractors as needed, as pre-approved by Client. If joint patents are filed in the future, Client and Developer shall share the costs of filing these patents equally. © Copyright 2013 Docstoc Inc. 8 (d) The final Products, prototypes, samples, designs and software resulted from the work governed by this Agreement are owned by Client. Developer shall refrain from using, altering, assembling, dissembling, licensing and selling the foregoing. 10. REPRESENTATIONS AND WARRANTIES: 10.1. Developer warrants and represents that it has the requisite and necessary experience, all necessary licenses and permits, equipment, facilities and personnel to properly perform the manufacturing services in accordance with the Product specifications, and further warrants and represents that it is not a party to any other Agreement that would in any way conflict with, or restrict, its ability to perform the development services. 10.2. Developer agrees that Client has sent it the Product device's features and specifications outline including general view, desired features, and uses. All features and specifications are tentative, negotiable and given AS-IS without any guarantee to be correct or applicable. Developer must ensure their applicability, reliability, safety and legality before including them in the final design. Developer is encouraged to discuss with Client any enhancement, suggestion or modification as required. 10.3. Developer shall use quality off-the-shelf components in final designs for the purpose of cost reduction. 10.4. Developer agrees to provide Client with full, correct and detailed designs and tools of the final Product that would allow Client to manufacture (mass produce) the Product in their facility or in the facility of any competent manufacturer. These designs and tools include, but not limited to, schematics, computer graphics, and software source code, compilers, molds, and manuals, parts sources for the device, controller and mass storage. 10.5. Plastic molds resulted from the development of the Product are properties of Client and should be sent to Client free of charge any time Client asks for them. 10.6. Developer warrants for a period of one (1) year from the date of completing development and prototyping of the Product, that (i) the Product will conform to the specifications applicable to such Product at the time of its development, which are furnished in writing by Client and accepted by Developer; (ii) Developer shall fix any design flaw or bug that may appear in prototypes or final products for one (1) year after the end of this Agreement. In the event that any Product manufactured shall not be in conformity with the foregoing warranties, Developer shall, at Developer's option, either credit Client for any such nonconformity (not to exceed the purchase price paid by Client for such Product) or, at Developer's expense, replace, repair or correct such Product. The foregoing constitutes Client’s sole remedies against Developer for breach of warranty claims. 11. REGULATORY RESPONSIBILITY (OPTIONAL) 11.1 All devices designed by Developer must be compliant with international health and safety standards, including but not limited to the _______________________ [Describe any © Copyright 2013 Docstoc Inc. 9 such regulation or laws applicable for the Product specifically]. Developer is fully responsible for any violation of this Clause internationally. 12. RELATIONSHIP BETWEEN CLIENT AND THE DEVELOPER 12.1 Developer is an independent contractor, is not an agent or employee of Client and is not authorized to act on behalf of Client. While Client is entitled to provide Developer with general guidance to assist Developer in completing the scope of work to Client's satisfaction, nevertheless Developer is ultimately responsible for directing and controlling the performance of the task comprising the scope of work, in accordance with the terms and conditions of this Agreement. 13. NON-COMPETITION 13.1 Developer hereby agrees that he will not, during the term of this Agreement, and for a period of two (2) years following termination hereof, (a) directly or indirectly engage in any Competitive Business (as defined below), whether such engagement shall be as an employer, officer, director, owner, employee, partner or in any other capacity, (b) assist others in engaging in any Competitive Business or (c) develop, enhance, produce, market, promote or support, or render consulting or other services to a third party with respect to, a Similar Application (as defined below). As used in this Clause 13, "Competitive Business" shall mean a business providing products or services similar to, or competitive with, those provided by Client during the term of this Agreement, and "Similar Application" shall mean a product having substantially similar functionality to the Product. 14. INJUNCTIVE RELIEF 14.1 Developer acknowledges and agrees that the obligations and promises of Developer under this Agreement are of a unique, intellectual nature giving them particular value. Developer further acknowledges and agrees that Developer 's breach of any of the promises or agreements contained in this Agreement, including but not limited to, i) non-disclosure of necessary and requisite information to Client regarding manufacturing and enhancement of PRODUCT and ii) failure of responding to Client’s communication and queries regarding Product development for thirty (30) calendar days, will result in irreparable and continuing damage to Client for which there will be no adequate remedy at law and, in the event of such breach, Client, in addition to its rights of termination set forth herein, will be entitled to seek injunctive relief, or a decree of specific performance, or both, and such other and further relief as may be proper including monetary damages if appropriate. 15. MISCELLANEOUS 15.1. Amendments. No amendment, modification or supplement to this contract shall be binding unless it is in writing, signed by a corporate officer or his authorized representative of both parties. 15.2. Notices. Any notices required or permitted to be given to a Party hereunder: © Copyright 2013 Docstoc Inc. 10 (a) shall be in writing; (b) shall be delivered or sent to such Party at its address given below: Developer: ____________________ ____________________ ____________________ Client: ____________________ ____________________ ____________________ or such other address as such Party may hereafter specify; and (c) shall be deemed given (i) when personally delivered to such Party; (ii) when transmitted by facsimile and receipt of such transmission is confirmed by facsimile; (iii) after air courier service confirm the receipt via an established air courier service; or (iv) if mailing via certified airmail, after receipt is confirmed. 15.3. No Publicity. Developer will not release information about the existence of this Agreement, including its value, or its terms and conditions, through any media including but not limited to, the issuance of any news release, announcement, denial, or confirmation. Developer must obtain prior written authorization from Client for any exceptions to this subsection. Nothing in this Agreement implies that Client will agree to any publicity. 15.4. Attorneys’ Fees. In the event of any litigation, arbitration, judicial reference or other legal proceeding involving the Parties to this Agreement to enforce any provision of this Agreement, to enforce any remedy available upon default under this Agreement, or seeking a declaration of the rights of either Party under this Agreement, the prevailing Party shall be entitled to recover from the other such attorneys’ fees and costs as may be reasonably incurred, including the costs of reasonable investigation, preparation and professional or expert consultation incurred by reason of such litigation, arbitration, judicial reference, or other legal proceeding. 15.5. Governing Law. The provisions of this Agreement shall be governed by the laws of the State of _____________, regardless of conflict of laws. The parties agree that any dispute arising under this Agreement will be resolved solely through confidential binding arbitration in __________________ before one arbitrator selected by the American Arbitration Association in accordance with its rules. In the event of any dispute, each party shall bear its own attorneys fees, expert witness fees, and ½ of the arbitrator fees. © Copyright 2013 Docstoc Inc. 11 15.6. Waiver Of Breach. No waiver by either party of any breach of any of the covenants or conditions herein contained, performed by the other party, shall be construed as a waiver of any succeeding breach of the same or of any other covenant or condition. 15.7. Assignment. Neither party shall delegate, assign or transfer its rights or obligations under this Agreement, whether in whole or part, without the written consent of the other party provided, however, upon prior written notice to Developer, Client may assign or transfer its rights to those parties they shall notify in advance. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. __________________ (“Client”) _____________ (the “Developer”) By: _______________________ By: ______________________ © Copyright 2013 Docstoc Inc. 12 Exhibit A PRODUCT SPECIFICATIONS © Copyright 2013 Docstoc Inc. 13 Exhibit B PROJECT PHASES © Copyright 2013 Docstoc Inc. 14 Exhibit C DEVELOPMENT CHARGE INCENTIVE and PENALTIES: FREIGHT CHARGES (if any) © Copyright 2013 Docstoc Inc. 15 Exhibit D CORE TECHNOLOGY © Copyright 2013 Docstoc Inc. 16
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