501 - contracts: management & processwebcasts.acc.com/handouts/ppt_299_e499_302... · ......
TRANSCRIPT
ACC’s 2013 Corporate Counsel University® May 19-21, New Orleans
This material is protected by copyright. Copyright © 2013 various authors and the Association of Corporate Counsel (ACC).
Materials may not be reproduced without the consent of ACC. Reprint permission requests should be directed to ACC’s Legal Resources Department at ACC: 202.293.4103, ext. 338; [email protected]
Tuesday, May 21, 2013
9:00 AM – 10:30 AM
501 - Contracts: Management & Process
Pauline Arnakis
Vice President, Business & Legal Affairs
Universal Music Group
Susan Feingold
Editor
Practical Law Company, Inc.
James Raanan
General Counsel & EVP, Corporate
IDT Telecom Inc.
Faculty Biographies
Pauline Arnakis
Pauline Arnakis serves as vice president of business & legal affairs at Universal Music
Group, Inc. (UMG), the world’s leading recorded music company, with music publishing,
distribution and merchandising subsidiaries. Ms. Arnakis is a generalist attorney who
specializes in negotiating, drafting and overall contract management of complex
transactional, information technology and intellectual property agreements, including
software and content licensing, consulting agreements for website and systems
development, hosting and outsourcing services, and e-commerce and direct-to-consumer
services agreements. She also provides counsel on software and security audits, privacy
and data security matters, and information technology aspects of mergers and acquisitions
transactions. Her experience in these matters includes effective law firm and vendor
selection and management, and efficient resolution of any conflicts with suppliers and
service providers.
Prior to joining UMG, Ms. Arnakis worked for one year managing the technology
agreements for the group of companies at Vivendi S.A, a French international media
conglomerate with activities in music, television and film, publishing,
telecommunications, the internet, and video games. Previously, she worked in the legal
department at the New York Power Authority, the country's largest state-owned,
nonprofit power organization.
Ms. Arnakis holds a BA from New York University, a JD from Brooklyn Law School in
New York, and a Master’s from The George Washington University School of Business
and Public Policy in Washington, DC.
Susan Feingold
Susan Feingold is a commercial editor at Practical Law Company, where she writes and
edits practice-oriented articles and annotated form agreements for Practical Law's on-line
subscription service and companion print magazine. Her work focuses primarily on
general contract drafting and negotiation, product supply and distribution, e-commerce,
advertising and marketing, and confidentiality.
Prior to joining Practical Law, Ms. Feingold served for over 17 years in a series of senior
legal and business affairs positions at EMI Music North America, most recently as its
general counsel. She began her legal career as a corporate associate at Paul, Weiss,
Rifkind, Wharton & Garrison.
Ms. Feingold holds an AB from Vassar College (where she received multiple honors and
was elected to Phi Beta Kappa). She was awarded her JD from Columbia University.
James Raanan
James Raanan is executive vice president corporate & general counsel of IDT Telecom,
Inc. IDT is a publicly traded New Jersey based company, which is a leader in the field of
prepaid retail, and carrier grade wholesale telecommunications. IDT is also becoming
more active in consumer financial and payment services, owning a bank in Gibraltar, of
which Mr. Raanan is a director, and obtaining state money transmitter licenses in the US.
Due to the diverse activities of IDT, Mr. Raanan has been exposed to a large variety of
transactions and different types of contracts. As general counsel, he is responsible for
overseeing the contracting process for IDT activities throughout the world, as well as
regulatory issues, intellectual property matters, and litigation.
Mr. Raanan has over 15 years of international commercial and corporate law experience.
In his first position, he worked in Israel as an attorney in the international hi-tech practice
of Yigal Arnon & Co., a large Israeli law firm. While in private practice Mr. Raanan
gained considerable experience in venture capital financing and M&A, as that country
encountered a boom in the hi-tech industry.
Mr. Raanan went to law school at the University of Manchester, England.
CONTRACT MANAGEMENT &
PROCESS
Contracts• Have 2 important aspects:
a. A written document manifesting the agreement between two or more competent parties that creates an obligation to do or not do something, and
b. Relationship between the parties that forms the understanding when entering into agreements
• Contracts are:
a. Sources of Business for Sellers (supplier, vendor, contractor, subcontractor)
b. Sources of goods and Services for Buyers (principal, company, customer)c. Risk allocation and management for both partiesd. Projects that must be managed by both organizations
What is Contract Management?
• Managing the contractual agreement throughout theManaging the contractual agreement throughout the contracting process
• The Contract Management process has 3 phases: Planning, Negotiation and Formation/Drafting, and Administering (from execution though closure)
• This is a critical business function, with contract work breakdown between your org’s technical, business and y g ,legal resources, and administrative resources
Sourcing Planning
• The process of determining which products/services may be procured outside the company/ org.p y g
• Buyer must consider: a. whether to procure a specific product or service, b. how (contracting method), c. what to procure and how much (actual requirements),d. when to procure (service delivery)
• The Buyer’s sourcing or business staff may engage their Legal dept.l th t L l h t t d d t di fearly on so that Legal may have more context and understanding of
requirements for RFI/RFP process (if any), and contract negotiation and formation/drafting phases.
Planning Phase
• The Buyer identifies its needs for Product(s) and/or S i ( )Service(s)
• The Buyer may go through an RFI/RFP process to down-select the best Seller (this is a proactive competitive method, but many small organizations forego this)
• The Seller is the organization providing the Product or• The Seller is the organization providing the Product or Service The Buyer identifies its needs for Product(s) and/or Service(s)
Contracting Methods
• There are various contracting methods, but the most common are Competitive Proposals and Non-competitive negotiation with aCompetitive Proposals and Non-competitive negotiation with a single source.
• For Competitive method, the Buyer:a. must develop requirements, down-selection criteria and
process b. solicit proposals or bids from potential Sellers via RFI/RFP
processc. evaluate received proposalsd. determine short list of those Sellers that are a closer fit to
requirements (optional step)e. down-select the best sourcef. negotiate the agreement with the best source (optional step if
not satisfied that RFP response covers all business and legal terms)
Contracting Methods (cont)
• For Non-competitive method
a. The Buyer deals with a single source (several Sellers available to provide the product /service and one is picked for a long-term relationship), or sole source (only one Seller available to provide the sought product/service)
b. the Seller’s proposal is usually preceded by preliminary discussions with Buyer
c. the Seller’s proposal is followed by further requirements gathering by BBuyer
d. the parties negotiate a definitive agreement with all requirements
Award Phase
• Source selection may be based on evaluation criteria such as proposed price technical past performancesuch as proposed price, technical, past performance, quality, desired schedule, reputation, management, etc.
• The importance allotted to each evaluation criteria depends on Buyer’s needs
• A weighing system of attributes or rank of proposals may be developed by Buyer to be able to down-select the short list or selected Seller that can performthe short list or selected Seller that can perform minimum requirements of performance
• Independent estimates may be used to negotiate best pricing
Selecting the Right Contract Type
• There are 3 categories of pricing arrangements: Fixed Price, Cost Reimbursement and Time & Materials
• The contract types within each category offer more or less risks to the Buyer versus the Seller
• The financial risks for Buyer can be different since Seller does not normally reveal its Costs
• Buyer would need to monitor/oversee Seller’s costs and needs higher contractual performance measurements if it enters into Time & Materials or a Cost Reimbursement type of contract such as Cost-plus-incentive or Cost-plus-fi d ffixed fee.
• Business objectives for the correct contract type and price is to have the Seller assume a reasonable amount of risk with the greatest incentive for efficient and economical performance of its obligations
Contract Negotiation and Formation• Successful negotiators must:
a. be able to perceive and understand the business needs and factors shaping the negotiation
b. have analytical skills to diagnose problems and achieve win-win solutionsc. maintain ethics and values during negotiationd. know / understand the products and services being contracted, desired Ts
and Cs and pricing strategy• The Buyer’s negotiation objectives are to acquire the desired products and
services of the desired quality, on time and at the lowest reasonable price that will satisfy the end user’s needsThe Seller’s objectives are profitability (short or long term based on contract• The Seller’s objectives are profitability (short or long term based on contract term), market share and satisfying the customer / Buyer’s needs
• Pre-negotiation: Preparation for negotiation is key—team preparation, know the other party and both parties’ objectives, prioritize objectives, prepare options, examine alternatives, develop a negotiation plan with your team’s tactics and counter-tactics
Contract Negotiation and Formation (cont)
• Conducting the negotiation—know who has authority to agree on terms, use an agenda, introduce the team, set the right tone, , g , , g ,exchange relevant info, focus on objectives, use your strategy tactics and counter-tactics, be prepared to / make counter-offers for key objectives, document the agreement or know when to walk away
• Post-negotiation—prepare and send the negotiation memo to other party, take charge by offering to draft the contract, obtain required
l d i f t d d d ft d t t t th thapprovals and reviews of traded drafts, send contract to the other party for execution, send copies to affected parties, document lessons learned, prepare the contract administration plan
What is Different About Global and Domestic Negotiations
• Political and legal issuesg
• International monetary factors
• Foreign governments and their bureaucracies
• Potential instability and sudden change
C lt l di it• Cultural diversity
From Herberger and Graham 1983
Post Award Phase/Contracts Administration
• The goal of contracts administration is to ensure that all parties have met their contractual obligations (compliance)
• Use a contracts administration policy developed for your organization• Records and Files-- file official contract and correspondence, and
digitize/import executed and final versions of contract into a contracts management system that is securely accessible to specific groups or individuals in your org (those who have a need to know this contract)
• Contract analysis and planning • Schedule pre performance or project kick off conference between the• Schedule pre-performance or project kick-off conference between the
parties• Monitor, measure and report performance by the parties, provide
progress reports
• Establish a payment system—how is the Seller added to the system, how are PO’s and invoices created and payments made
Post Award Phase/Contracts Administration
how are PO s and invoices created, and payments made• Manage contract’s change control- maintain effective control of any
changes (who is authorized to negotiate, agree on and sign off on any changes during the contract term)
• Identify and analyze variances that may cause cost overruns may require an impact statement – early detection and documentation are key
• Manage and effectively resolve any claims or disputes arising under the contract—negotiate and compromise as this is a substitute for litigation (last resort)
• Close out contract at expiration or termination
Segments of this presentation are from ESI International, “Commercial Contract Management: Principles and Practices”
February 1997
Distributor Agreement For (Distributor Name)
CORPORATION, INC.
DISTRIBUTOR AGREEMENT
THIS AGREEMENT IS made effective _______________ (the "Effective Date") by
and between _________________________________ with offices located
______________________________ ("Corporation"), and
_______________________________, a ________________ corporation with offices
located at ________________________________ ("Distributor").
WHEREAS Distributor is in the business of selling computer software and/or services to
itscustomers, (the "Customers"); and the parties wish to specify herein the terms and
conditionsby which Distributor may market the Products (defined at § 1 herein) to
Customers:
NOW,THEREFORE, the parties hereby agree as follows:
1. Products Covered. This Agreement covers the purchase, resale, and support of
licensesfor Corporation computer software program(s) listed in Addendum A and the
related butunspecified enhancements, releases, updates, or other modifications thereto
thatCorporationmay release when and if available while this Agreement is in force,
together with theassociated documentation (collectively, the "Product(s)").
2. Appointment, Distribution Rights.
2.1. Subject to the requirements listed in Addendum A, Corporation hereby
grantsDistributor a non-exclusive and non-transferable right to promote, advertise,
marketand distribute the Product to:
a. Customers that are end-users of Product, and
b. through a systems integrator or value-added reseller ("VAR") provided
suchsystems integrator or VAR is bound in writing to the terms of this Agreement
oris bound in writing to substantially similar terms and conditions and Distributor
inboth cases agrees to (i) defend indemnify Corporation in relation to any claim
orcause of action arising from the action or inaction of such systems integrator
orVAR, and (ii) use its best efforts to enforce the terms and condition of this
Agreement against such systems integrator or VAR.
2.2. Only sales in the geographical areas listed in Addendum A (the "Territory")
shallbe applied to Distributor's sales target. Distributor agrees that the annual sales target
isto purchase that amount listed in Addendum A from Corporation. Corporation
maysuspend such authorization during any period in which Distributor is past due on
anyamounts owing to Corporation.
2.3. Use of Trademarks and Tradenames. Corporation grants to Distributor
thenon-exclusive terminable right to use its name and marks in the Territory during
theterm of this Agreement solely with respect to Distributor's marketing, licensing
andsupport of the Products in accordance with the terms of this Agreement.
Distributor'sright created herein shall continue only as long as Distributor's marketing and
licensingrights under this Agreement remain in force. Upon termination of this
Agreement,Distributor will purge such name or marks from all materials, letterheads,
signs and anyother media in which Distributor displayed such names or marks, and
thereafter,neither Distributor nor any parent, subsidiary or affiliate shall use either the
name orlike sounding or appearing names or marks in any fashion, anywhere. Distributor
shallmaintain and allow Corporation to monitor the quality of workmanship associated
withits marks, and Corporation may terminate the use of its marks if such quality
fallsbelow Corporation's own levels. Corporation makes no representation or warranties
asto the registration status of its tradenames or trademarks. Distributor shall
notifyCorporation of any infringement or appropriation of Corporation's names or marks
inthe Territory during the term of this Agreement.
3. Duties of Distributor.
3.1. Staffing. Distributor shall maintain sufficiently trained staff to provide sales
andtechnical support for the Products.
3.2. Product Representations. Distributor shall deliver Product to Customers
withCorporation's then current license agreement generally accompanying the Product as
itmay be amended by Corporation (the "License Agreement"). Distributor shall make
no,and shall indemnify Corporation for any claims arising out of, representations
orwarranties concerning quality, performance or other characteristics of the Productother
than those which are consistent in all respects with, and do not expand the scopeof, the
warranties contained in the License Agreement.
4. Duties of Corporation.
4.1. Orders. Corporation shall supply Distributor with saleable units of the
Product,F.O.B. Corporation, upon receipt of authorized written or faxed purchase orders
issuedby Distributor. Each order placed by Distributor for the Product shall be deemed
toincorporate all of the terms and conditions hereof, and any terms and conditions ofsuch
order other than name of product, quantity, price, shipment date and destinationshall be
null and void.
4.2. Marketing Literature. Corporation will provide Distributor with
reasonablequantities of catalogs, product brochures, manuals and other publications to
assistDistributor in Distributor's sale of Product. Corporation may charge
DistributorCorporation's standard fee for particular promotional items or quantities of
literature,for use by Distributor in promoting the Product to its Customers.
5. Training and Support.
5.1. Training. Distributor agrees to provide access by Corporation to members of
itssupport staff chosen by Distributor for the purpose of providing training in
theinstallation and operation of Product. All such training shall occur at times
andlocations mutually agreed to by Distributor and Corporation.
5.2. Support.
a. Distributor shall provide technical support on Product to its Customers,
whoobtain Product from Distributor and shall maintain sufficiently trained staff
toprovide this support.
b. Corporation shall provide second level technical support only to
Distributor'ssupport staff via telephone and/or electronic mail during the hours
between 9:00a.m. and 6:00 p.m., Eastern Standard Time excluding holidays.
Distributor willdesignate one individual who will be the authorized point of
contact for alltechnical support communications between Corporation and
Distributor at alltimes. This backup support will include unspecified Product
Updates and bugfixes as deemed necessary by Corporation that will be provided
only when and ifavailable. "Update" means a change to the data file or an editing
process becauseof design faults, discrepancies or defects ("bugs") in the Product.
6. Term & Termination.
6.1 The term of this Agreement shall commence as of the effective date of
thisAgreement and shall terminate twelve months from the effective date (the
"InitialPeriod"). If, after the Initial Period, the Distributor (i) is not in violation of
anycovenants in this Agreement, and (ii) has not received a cancellation notice
fromCorporation at least thirty (30) days prior to the expiration of the Initial Period,
thisAgreement shall continue for additional annual terms under the terms of the
precedingsentence.
6.2. Either party may terminate this Agreement at any time, with or without
anyreason, upon 60 days prior written notice to the other party. In addition,
Corporationmay terminate this Agreement immediately upon the occurrence of the
followingevents:
a. Distributor is declared or acknowledges that it is insolvent or otherwise
unableto pay its debts as they become due or upon the filing of any
proceeding(whether voluntary or involuntary) for bankruptcy, insolvency or relief
from itscreditors; or
b. Distributor violates any of the material provisions of this Agreement.
6.3. Actions Following Termination.
a. Upon the termination of this Agreement, the parties agree to cooperate
witheach other to conclude an orderly termination of their relationship.
Aftertermination, Distributor shall no longer have any right or ability to market
orlicense any of the Products, to provide Support related to the Products or to use
Corporation trademarks and tradenames, including the name
"Corporation".Distributor agrees upon the effective date of such termination to
pay all sums due Corporation, return all proprietary information and provide
Corporation withall outstanding reports, including lists of prospects, lists of
licensees of Product,copies and/or originals of License Agreements and details of
any agreements orarrangements under which Support has been subscribed for by
licensees ofProduct for a period beyond the effective date of termination.
In the event of a termination of this Agreement for any reason, Distributor
agreesto disclose to Corporation any and all accounts of the Distributor that
havelicensed any Corporation Products or are evaluating Corporation Products. At
aminimum, account name, address, telephone number, contact person
andpertinent Product information must be provided Corporation upon or
promptlyfollowing the effective termination date.
b. Maintenance Rights. Unless otherwise agreed to by the parties in
writing,Distributor may not represent itself as a provider of Support for Products
orretain payment for same beyond the effective termination date. Such
paymentsand any pre-payments for Support not yet performed shall be returned
orforwarded to Corporation within ten days of termination or receipt. In the
eventthat a termination has occurred or will occur, Distributor will not enter
intomaintenance agreements or arrangements that extend past the
effectivetermination date. Any exceptions to this must be coordinated and
approved inwriting by Corporation on a case by case basis.
6.4. Surviving Sections. The provisions of Sections 6, 7 & 9 through 12 hereof
shallsurvive any termination hereof for any reason.
7. Pricing, Payments and Reporting
7.1. Product Pricing. The discount for each unit of the Product supplied to
Distributorshall be determined in accordance with Addendum A hereto. Corporation may
amendCorporation's pricing from time to time with thirty (30) days prior notice to
Distributor.
7.2. Distributor represents that these goods are being purchased for resale and
agreesthat in addition to payment of the invoices, Distributor shall also pay all
governmenttaxes and assessments related to the Product and their shipments (exclusive of
taxesbased on Corporation income), including any taxes on sales or services provided
byCorporation. Any payment not paid when due shall bear interest at the rate of
1.25percent per month (subject to local law) until paid. Invoices for shipments made
oncredit shall be rendered to Distributor at the time of shipment, and be payable no
laterthan thirty (30) days thereafter. All payments are to be made in United States
dollars.All shipments are FOB Corporation.
7.3. Distributor shall be liable to pay for all Products shipped prior to any
terminationor expiration of this Agreement.
7.4. Product may be resold only in Distributor's normal course of business;
however,Distributor shall not pledge or otherwise encumber the Product until paid in full.
7.5 Distributor agrees to immediately report to Corporation (a) any seizure
orattachment of the Product by Distributor's creditors, (b) any petition in
bankruptcy,insolvency receivership or similar proceeding filed by, or against, Distributor
or (c) anyarrangements, composition or similar agreement for benefit of Distributor's
creditor's.
7.6 Distributor will prepare and submit to Corporation reports that Corporation
mayreasonably request from time to time. In addition to requiring monthly sales reports
andforecasts, Corporation may request reports on such subjects as Distributor's
financialcondition, market plans, sales strategies, monthly sales activity, and point of
sale.
8. Advertising and Promotion.
8.1. Corporation shall provide Distributor with copies of all major advertisements
andall press releases sent out by Corporation. Similarly, Distributor shall
provideCorporation with copies of all its advertising related to Product.
9. General Export/ Import
9.1. Product contains encryption technology that is subject to import and
exportcontrols. Distributor agrees to take any and all actions necessary to comply
withapplicable US export laws and regulations and other applicable foreign laws in
itsperformance of this Agreement, including making determinations of final destination
ofProducts licensed to Licensees if any copies may be re-exported or transferred to
alocation outside of the United States. Distributor agrees that any export or re-export
ofProduct shall be done in accordance with the United States Export
AdministrationRegulations. Diversion contrary to U.S. Law is prohibited. Product is
prohibited forexport or re-export to Cuba, Iran, Iraq, Libya, North Korea, Sudan and
Syria or to anyperson or entity on the U.S. Department of Commerce Denied Persons List
or on theU.S. Department of Treasury's lists of Specially Designated Nationals,
SpeciallyDesignated Narcotics Traffickers or Specially Designated Terrorists. Distributor
agreesto report exports of Product from the U.S. on a bi-annual basis to the U.S. Bureau
ofExport Affairs (BXA) in accordance with BXA regulations.
10. Confidentiality and Protection of the Products and Documentation
10.1. Confidentiality. Neither party shall disclose to third parties any business
and/ortechnical information of the other designated orally or in writing
as"CONFIDENTIAL" or "PROPRIETARY" without the prior written consent of theother
party. Product shall at all times be treated as Confidential whether marked assuch or not.
Such restrictions do not extend to any item of information which (a) is nowor later
becomes available in the public domain without the fault of the receiving party;(b) is
disclosed or made available to the receiving party by a third party withoutrestrictions and
without breach of any relationship or confidentiality; or (c) isindependently developed by
the receiving party without access to the disclosing party'sConfidential or Proprietary
information. The terms and conditions of this Agreementare hereby designated
"CONFIDENTIAL." It is agreed and understood that in theevent of a breach of this
Section, damages may not be an adequate remedy and thedisclosing party shall be
entitled to injunctive relief to restrain any such breach,threatened or actual.
10.2. Proprietary Rights. This Agreement does NOT transfer title of any
ofCorporation's intellectual property rights to Distributor. Corporation shall remain
theexclusive owner of all of its intellectual property rights (including, without
limitation,any patent, trademark or copyright) in and to its Products, any other
softwareapplication of Corporation and any documentation or training materials provided
byCorporation to Distributor. Distributor shall not manufacture, duplicate,
reverseengineer, or decompile the Product or information relating thereto.
10.3. No Modifications. In no event shall Distributor copy or modify, or aid a
thirdparty in copying or modifying, the source code, object code, or any part of the
Productwithout the express written permission of Corporation. Distributor agrees to abide
byall the terms and conditions of Corporation's License Agreement. Distributor
shalldeliver the Product components and License Agreement to its Customers in the
sameunopened package(s) as received by Distributor from Corporation.
10.4. Documentation. Distributor may not write or otherwise create any
additionalProduct documentation or authorize the creation thereof without Corporation's
expresswritten consent. The only Product documentation that Distributor is authorized to
sellor distribute is official Corporation Product documentation that shall have
beenproduced by Corporation and sold to Distributor. Distributor may directly
translatedocumentation into the native language, of the territory to assist in the sale of
theProduct, by obtaining written consent from Corporation and providing
Corporationwith a copy of such translation for Corporation's approval prior to
distribution. In nocase shall the translated documentation differ, alter or change the
meaning, intent fromits original purpose. Distributor grants Corporation title to any such
translations.
11. Warranties and Indemnification.
11.1. Product Warranty, Disclaimer, and Limitation of Liability. Except for
thosecontained in section 11.2 below, Corporation makes no representations or warranties
inrelation to Product of any kind to Distributor. All warranties and
representationsregarding Product are listed in the License Agreement and are for the
benefit of theCustomer. Corporation shall indemnify and hold Distributor harmless for
any claimsarising out of the breach by Corporation of the License Agreement subject to
thosesame limitations within the License Agreement. IN NO EVENT
SHALLCORPORATION BE LIABLE, DIRECTLY OR INDIRECTLY TO
DISTRIBUTOR,ANY PROSPECT OR ANY CUSTOMER, FOR ANY SPECIAL,
EXEMPLARY,INCIDENTAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR
SIMILARDAMAGES, FOR LEGAL FEES, LOSS OF DATA OR LOST PROFITS OR
FORANY AMOUNT BEYOND THE AMOUNT ACTUALLY RECEIVED
BYCORPORATION FROM DISTRIBUTOR WITH RESPECT TO THE
SPECIFICLICENSE AGREEMENT FROM WHICH THE CLAIM ARISES.
SOMEJURISDICTIONS DO NOT ALLOW THE LIMITATION OR EXCLUSION
OFLIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES SO
THEABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO
DISTRIBUTOR.CORPORATION'S AGGREGATE LIABILITY FOR ANY AND ALL
CLAIMSBROUGHT BY DISTRIBUTOR SHALL NOT EXCEED THE TOTAL
AMOUNTPAID BY DISTRIBUTOR TO CORPORATION UNDER THIS
AGREEMENT.CORPORATION SHALL NOT BE LIABLE FOR ANY CLAIMS,
WARRANTIESOR REPRESENTATIONS MADE BY DISTRIBUTOR THAT ARE
NOTCONTAINED IN THE LICENSE AGREEMENT.
11.2. Intellectual Property Indemnification. Corporation shall defend or, at its
option,settle, any claim, action or proceeding brought against Distributor alleging that
aProduct infringes a United States patent, copyright or trade secret, and shall
indemnifyDistributor against all damages and costs finally awarded against Distributor in
anyaction or proceeding which results from any such claim. Corporation shall have
noliability under this section unless Distributor (a) promptly notifies Corporation
inwriting of the claim, (b) gives Corporation full authority, information and assistance
todefend such claim, and (c) gives Corporation sole control of the defense of such claim.
12. General.
12.1. Assignment. This Agreement may not be assigned or otherwise transferred,
andthe duties hereunder may not be delegated by Distributor unless Distributor
hasreceived prior written consent from Corporation. To the extent Distributor is
permittedby Corporation or by operation of law to assign this Agreement or any part of it,
allprovisions hereof shall be binding upon Distributor's successors or assigns.
12.2. Notices. Any notice hereunder shall be deemed to be sufficiently given and
anydelivery hereunder deemed made when delivered in person or sent by registered
orcertified mail or courier addressed to Corporation and to Distributor at the
addressesstated above, or at such changed address as either party shall have specified by
writtennotice.
12.3. Modifications. This Agreement may not be modified except by an
agreement inwriting duly executed by representatives of both Distributor and
Corporation.
12.4. Headings. Paragraph headings are shown herein for convenience only, and
shallnot affect the meaning or interpretation hereof.
12.5 Advertising. The parties grant to each other the right to use their respective
namesin advertising or in any other appropriate public message.
12.6. Force Majeure. Neither party shall be liable for the failure to perform
itsobligations under this Agreement due to events beyond such party's reasonable
controlincluding, but not limited to, strikes, riots, wars, fire, acts of God or acts in
compliancewith any applicable law, regulation or order (whether valid or invalid) of any
court orgovernmental body.
12.7. Legality and Severability. If any portion of this Agreement is determined to
beillegal or unenforceable under the law, then that portion shall be stricken from
theAgreement without effect to that remainder of the Agreement that can be given
effectindependently of such invalid terms.
12.8 No Agency. Each of the parties will be deemed to be an independent
contractorand not an agent, joint venturer, or representative of the other, and neither may
createany obligations or responsibilities on behalf of or in the name of the other. Under
nocircumstances may Distributor hold itself out to be a partner, employee,
franchisee,representative, servant, or agent of Corporation.
12.9 Government Licensee. The U.S. Government's use of any Product shall be
subjectto "restricted rights" as such are defined in FAR and DFAR clauses. For sales
wherethe US Government is the ultimate end user, (a) the US Government contract
numbermust be specified on Distributor's purchase order to us, and (b) Distributor's
purchaseorder must specifically reference all those clauses of the applicable Federal
AcquisitionRegulations which are intended to flow down to Corporation, and (c)
Corporation mustprovide Distributor written acceptance of those specific clauses which
Corporationdoes accept. Otherwise, no government regulations or contract provisions
will governthis Agreement.
12.10. Arbitration. Unless solved by mutual efforts of the parties hereto, and
except forany actions for amounts already established to be due and owing, or for
differences, disputes or claims that may arise out of or in connection with this Agreement
for whichCorporation shall seek equitable relief, all differences, disputes or claims
arising inconnection with this Agreement or any transaction or occurrence contemplated
herebyshall be finally settled under the Commercial Rules of the American
ArbitrationAssociation in Boston, Massachusetts, by one or more arbitrators appointed
inaccordance with such Rules except that no punitive damages may be awarded.
Sucharbitration shall be conducted in the English language. It is understood that the
decisionin such arbitration shall be binding on both parties and that a judgment upon any
awardrendered may be entered in any court having jurisdiction.
12.11. Governing Law. This Agreement shall be governed by, construed and
enforcedin accordance with, the laws of the Commonwealth of Massachusetts without
givingeffect to its principles of conflicts of laws and without giving effect to the
UnitedNations Convention on the International Sale of Goods. Both parties agree to
andaccept the exclusive jurisdiction of the courts of Massachusetts and consent to
theCommonwealth of Massachusetts as the forum for any claim brought hereunder.
IN WITNESS WHEREOF each of the undersigned acknowledges as an officer of
theirrespective corporation that they have read this Agreement along with its Addendum
A whichis incorporated into the Agreement, understands them and agrees to be bound by
their terms,and further acknowledges that this is the complete and exclusive statement of
agreement forthe distribution of the Product between the parties and supersedes all prior
agreements,whether written or oral.
Accepted and agreed on behalf of:
_________________________
_________________________
Authorized Signature
Printed Name
Title
Date
_________________________(Corporation)
_________________________
Authorized Signature
Printed Name
Title
Date
ADDENDUM A
1. Discounts:
Discount Software
30%
Annual Support/Subscription
Purchased With Product Order
30%
2. Products & Price List - See attached
3. Territory:
4. Sales Target:
Distributor Agreement For (Distributor Name)
CORPORATION, INC.
DISTRIBUTOR AGREEMENT
THIS AGREEMENT IS made effective _______________ (the "Effective Date") by
andbetween _________________________________ with offices
located______________________________ ("Corporation"), and
_______________________________, a ________________ corporation with offices
located at ________________________________ ("Distributor").
WHEREAS Distributor is in the business of selling computer software and/or services to
its customers, (the "Customers"); and the parties wish to specify herein the terms and
conditions by which Distributor may market the Products (defined at § 1 herein) to
Customers:
NOW, THEREFORE, the parties hereby agree as follows:
1. Products Covered. This Agreement covers the purchase, resale, and support of
licensesfor Corporation computer software program(s) listed in Addendum A and the
related butunspecified enhancements, releases, updates, or other modifications thereto
that Corporation may release when and if available while this Agreement is in force,
together with the associated documentation (collectively, the "Product(s)").
2. Appointment, Distribution Rights.
2.1. Subject to the requirements listed in Addendum A, Corporation hereby
grantsDistributor (including its parent, subsidiaries and affiliates)a non-exclusive and
non-transferable right to promote, advertise, marketand distribute the Product to:
a. Customers that are end-users of Product, and
b. through a systems integrator or value-added reseller ("VAR") provided
such systems integrator or VAR is bound in writing to the terms of this
Agreement or is bound in writing to substantially similar terms and conditions and
Distributor in both cases agrees to (i) defend and indemnify Corporation in
relation to any claim or cause of action arising from the action or inaction of such
systems integrator or VAR, and (ii) use its best efforts to enforce the terms and
condition of this Agreement against such systems integrator or VAR.Corporation
shall have the right, in its sole discretion, to veto and/or terminate Distributor’s
continued use of any specific VAR from reselling the Products, that, (i)
Corporation can demonstrate is a party to a prior distribution agreement with
Corporation with respect to the Products, (ii) Corporation deems the VAR to be a
direct competitor of Corporation’s business, (iii) Corporation determines that
theVAR is not credit-worthy, or (iv) that Corporation can demonstrateis engaged
in any activity in the course of its business that Corporation reasonably and in
Comment [AP1]: Or manufacturer
Comment [Editor2]: Italicized language ensures the distributor that new product releases will be included in the definition of Products.
Comment [Editor3]: The grant language here is written correctly. Beware of “passive language”, eg. “Corporation agrees to grant….” (this is particularly important in license agreements).
Comment [AP4]: In this agreement, the Distributor’s rights are non-exclusive but other agreements provide for exclusive distribution of certain products (usually for higher rev share/proceeds to the manufacturer Corporation).
Comment [AP5]: The Distributor will not have the ability to transfer its rights to any affiliated or third parties. Sometimes, rights are reserved to transfer or assign to an affiliate or a merging or acquiring corporation of all or a substantial portion of Corporations assets.
Comment [Editor6]: “Manufacturer” may want to reserve for itself the right to terminate or block potentially problematic resellers and sub-distributors.
good faith believes would tarnish, diminish or otherwise harm the image, value or
marketability of the Products or otherwise harm Corporation’s business
reputation.
2.2. Only sales in the geographical areas listed in Addendum A (the "Territory")
shallbe applied to Distributor's sales target. Distributor agrees that the annual sales target
isto purchase that amount listed in Addendum A from Corporation. Corporation
maysuspend Distributor’s rights under section 2.1 above, during any period in which
Distributor is past due on anyamounts owing to Corporation.
2.3. Use of Trademarks and Tradenames. Corporation grants to Distributor
thenon-exclusive terminable right to use its name and marks in the Territory during
theTerm of this Agreement solely with respect to Distributor's marketing, licensing
andsupport of the Products in accordance with the terms of this Agreement.
Distributor'sright created herein shall continue only as long as Distributor's marketing and
licensingrights under this Agreement remain in force. Upon termination of this
Agreement,Distributor will purge such name or marks from all materials, letterheads,
signs and anyother media in which Distributor displayed such names or marks, and
thereafter,neither Distributor nor any parent, subsidiary or affiliate shall use either the
name orlike sounding or appearing names or marks in any fashion, anywhere. Distributor
shallmaintain and allow Corporation to monitor the quality of workmanship associated
withits marks, and Corporation may terminate the use of its marks if such quality
fallsbelow Corporation's own levels; provided, however, that Corporation’s approval of
any of Distributor’s written materials containing such marks shall constitute
Corporation’s approval of the quality of workmanship associated with such marks.
Without derogating from its indemnification obligations under Section 11.1 below,
Corporation makes no representation or warranties asto the registration status of its
tradenames or trademarks. During the term of this Agreement, upon becoming aware of
any infringement or appropriation of Corporation's names or marks inthe Territory,
Distributor shall notify the Corporation.
3. Duties of Distributor.
3.1. Staffing. Distributor shall maintain sufficiently skilled and trained staff to
provide sales andtechnical support for the Products. Distributor shall at all times be
responsible and liable for the acts and services of such staff as if Distributor were
performing them.
3.2. Product Representations. Distributor shall deliver Product to Customers
withCorporation's then current license agreement generally accompanying the Product as
itmay be amended by Corporation (the "License Agreement"). Distributor shall make
no,and shall indemnify Corporation for any claims arising out of, representations
orwarranties concerning quality, performance or other characteristics of the Productother
than those which are consistent in all respects with, and do not expand the scopeof, the
warranties contained in the License Agreement, or other written materials provided to
Distributor by Corporation.
Comment [Editor7]: DEFINITION OF TERRITORY: This definition is very important, particularly, if the “manufacturer” Corporation has granted exclusivity or other preferential rights to a third party.
Comment [Editor8]: TERRITORY: This form appears to impose a sales target on Distributor, in the Territory, in order to maintain its right to distribute. This is a very one sided clause in favor of the “manufacturer”. Typically, the imposition of a sales target, or the requirement to purchase minimums, will afford the distributor some type of exclusivity, or most favored nation (preferred) pricing.
Deleted: such authorization
Comment [Editor9]: Language unclear.
Deleted: t
Comment [AP10]: This is the first instance, in relation to cessation of rights at termination, where the agreement states that Distributor’s parent, subsidiary and affiliates also had the right to use Corporation’s trademarks and tradenames of distributed Products. These rights should be defined in Sect 2.1 as marked.
Comment [Editor11]: DESTRUCTION OF MATERIAL: See comment [XX] below. It is not a trivial undertaking to destroy all of these items. Additionally, as referenced in comment [XX] below, during any transitional period, the Distributor will need to use these materials to sell through any remaining inventory.
Comment [Editor12]: It is always safer to have the “manufacturer” approve of any written materials.
Comment [Editor13]: TRADEMARK DISCLAIMER. Typically, when representing the distributors, this disclaimer should be deleted. In this case compromise language is added, such that while the disclaimer applies, in the event of a trademark claim against the Distributor for in respect of Corporation’s marks, the Distributor will be indemnified.
Deleted: Distributor shall notifyCorporation of
Deleted: during the term of this Agreement
PROVISIONS CONTAINING THE FOLLOWING MIGHT BE ADDED,
DEPENDING ON THE NATURE OF THE TRANSACTION. IF THE DISTRIBUTOR
HAS EXCLUSIVE RIGHTS OR MOST FAVORED NATION STATUS, THESE
OBLIGATIONS ARE LIKELY TO BE MORE ONEROUS ON THE DISTRIBUTOR.
Distributor agrees to use [BEST/REASONABLE/COMMERCIALLY
REASONABLE] efforts to promote and market the Products in the Territory.
Distributor will seek Corporation’s prior written approval, with respect to the use
of any written material in conjunction with the Products.
Distributor shall keep and maintain complete and accurate records at its principal
place of business in connection with each of the transactions relating to this
Agreement, and pertaining to Distributor’s compliance with the terms hereof.
Distributor shall not sell any products that compete with the Products during the
term of this Agreement.
Distributor shall conduct its business in compliance with all applicable laws and
regulations (including, without limitation, consumer protection and antitrust
statutes and regulations).
4. Duties of Corporation.
4.1. Orders. Corporation shall supply Distributor with saleable units of the
Product,F.O.B. Corporation, upon receipt of authorized written or faxed purchase orders
issuedby Distributor. Each order placed by Distributor for the Product shall be deemed
toincorporate all of the terms and conditions hereof; and, any terms and conditions
ofsuch order other than name of product, quantity, price, shipment date and
destinationshall be null and void.
4.2. Marketing Literature. Corporation will provide Distributor with
reasonablequantities of catalogs, product brochures, manuals and other publications to
assistDistributor in Distributor's sale of Product. Corporation may charge
DistributorCorporation's standard fee for particular promotional items or quantities of
literature,for use by Distributor in promoting the Product to its Customers.
4.3 MFN Clause. Corporation will provide Distributor with Most Favored Nations
pricing meaning that the [discount/priceand other commercially favorable terms] offered
to Distributor for the Products shall be no less than the discount/ price and other
favorable terms offered to any other distributor of the Products.
5. Training and Support.
Comment [Editor14]: More typical where the distributor has exclusive distribution rights.
Deleted: ¶
Comment [Editor15]: INCOTERMS. Much less common in modern agreements, especially where intangible good are concerned. Where tangible goods are being sold be sure to look up the definition of any INCOTERMS, as these terms are often used out of context.
Deleted: ,
Comment [Editor16]: PURCHASE ORDERS. The italicized language is very important and, if not used, can catch one of the parties unaware. Often parties will continue to use purchase orders for purchased under an agreement. As such, if the parties are not careful, the purchase order may contain terms which conflict with and override the terms of the main agreement.
Comment [JR17]: MFN Clause. This is important where the distributor maybe agreeing to offer the products exclusively, or investing in sales and marketing resources. This clause can be modified by territory, price level (eg. Deviation from the price offered may be allowed upto a certain level), or by type of distributor.
5.1. Training. Distributor agrees to provide access by Corporation to members of
itssupport staff chosen by Distributor for the purpose of providing training in
theinstallation and operation of Product. All such training shall occur at times
andlocations mutually agreed to by Distributor and Corporation.
5.2. Support.
a. Distributor shall provide technical support on Product to its Customers,
whoobtain Product from Distributor and shall maintain sufficiently trained staff
toprovide this support.
b. Corporation shall provide second level technical support only to
Distributor'ssupport staff via telephone and/or electronic mail during the hours
between 9:00a.m. and 6:00 p.m., Eastern Standard Time,excluding holidays.
Distributor willdesignate one individual who will be the authorized point of
contact for alltechnical support communications between Corporation and
Distributor at alltimes. This backup support will include unspecified Product
Updates and bugfixes as deemed necessary by Corporation that will be provided
to Distributor only when and ifavailable. "Update" means a change to the data file
or an editing process becauseof design faults, discrepancies or defects ("bugs") in
the Product.
6. Term & Termination.
6.1 The term of this Agreement shall commence as of the Effective Date and shall
terminate twelve months from the Effective Date (the "InitialPeriod"). If, after the Initial
Period, the Distributor (i) is not in violation of anycovenants in this Agreement, and (ii)
has not received a cancellation notice fromCorporation at least thirty (30) days prior to
the expiration of the Initial Period, thisAgreement shall continue for additional annual
terms under the terms of the precedingsentence.
6.2. Either party may terminate this Agreement at any time, with or without
anyreason, upon 60 days prior written notice to the other party. In addition,
Corporationmay terminate this Agreement immediately upon the occurrence of the
followingevents:
a. Distributor is declared or acknowledges that it is insolvent or otherwise
unableto pay its debts as they become due or upon the filing of any
proceeding(whether voluntary or involuntary) for bankruptcy, insolvency or relief
from itscreditors; or
b. Distributor violates any of the material provisions of this Agreement,
including, without limitation:
Breach of payment terms
Breach of confidentiality
Comment [JR18]: This clause is sometimes drafted in the reverse. The distributor will often want the corporation to provide training, and the parties will negotiate the cost and other terms relating to such training.
Comment [JR19]: “Technical support”. As drafted this term is somewhat vague. Support is often divided into first level, second level or third level which carry different definitions of responsibility for support tasks. While these terms are well understood, particularly in the software industry, the best practice is to define the scope of support more clearly.
Comment [AP20]: If this is an agreement between a corporation/ manufacturer and distributor in different countries, local “holidays” must be defined for clarity since usually excluded from support coverage other than if support is 24x7.
Comment [JR21]: Response times. Depending on the nature of the product and the value of the transaction, it may be important to determine certain service levels. How quickly should CSR’s respond? How quickly should bugs be fixed?
Deleted: effective
Deleted: date
Deleted: of thisAgreement
Deleted: effective
Deleted: date
Comment [JR22]: TERM. This provision should be reviewed very carefully. When representing the distributor, you should try and understand the investment it plans to make, and its expected ROI. If that ROI is longer than 1 year, then the fixed term should be more than 1 year.
Comment [JR23]: AUTOMATIC RENEWALS. Consider carefully.
(A)If it is an agreement with minimum purchase commitments, then from the distributor’s side, ensure that the notice period is sufficiently long, and sometimes, require that affirmative notice is required to renew. (B)If the agreement contains exclusivity granted by the manufacturer, you may wish to require affirmative notice to renew. (C)As a contract management point, it is important to have a good calendaring system for contract renewals.
Comment [AP24]: TERMINATION FOR CONVENIENCE. Consider carefully if the service provider should be able to terminate with short notice since you may not have sufficient time to seek and contract with an alternate service provider with similar leverage on the pricing and terms. If ...
Comment [JR25]: IPSO FACTO CLAUSE. This clause unenforceable in many jurisdictions.
Comment [JR26]: TERMINATION FOR MATERIAL BREACH. ...
Deleted: .
Breach of Proprietary Rights (Section 10.2) and other intellectual
property rights of Corporation
6.3. Actions Following Termination.
a. Upon the termination of this Agreement, the parties agree to cooperate
witheach other to conclude an orderly termination of their relationship.
Aftertermination, Distributor shall no longer have any right or ability to market
orlicense any of the Products, to provide Support related to the Products or to
useCorporation’s trademarks and tradenames, including the name of
"Corporation".Distributor agrees upon the effective date of such termination to
pay all sums due Corporation, return all proprietary information and provide
Corporation withall outstanding reports, including lists of prospects, lists of
licensees of Product,copies and/or originals of License Agreements and details of
any agreements orarrangements under which Support has been subscribed for by
licensees ofProduct for a period beyond the effective date of termination.
b. Support Rights. Unless otherwise agreed to by the parties in
writing,Distributor may not represent itself as a provider of Support for Products
orretain payment for same beyond the effective termination date. Such
paymentsand any pre-payments for Support not yet performed shall be returned
orforwarded to Corporation within ten days of termination or receipt. In the
eventthat a termination has occurred or will occur, Distributor will not enter
intomaintenance agreements or arrangements that extend past the
effectivetermination date. Any exceptions to this must be coordinated and
approved inwriting by Corporation on a case by case basis.
6.4. Surviving Sections. The provisions of Sections 6, 7 & 9 through 12 hereof
shallsurvive any termination hereof for any reason.[sometimes add: “and any clause
which by its nature should survive termination.]
7. Pricing, Payments and Reporting
7.1. Product Pricing. The discount for each unit of the Product supplied to
Distributorshall be determined in accordance with Addendum A hereto. Corporation may
amendCorporation's pricing from time to time with thirty (30) days prior notice to
Distributor by not more than X% each time, and not more than X times during each year
of the Term of this Agreement.
7.2. Distributor represents that these goods are being purchased for resale and
agreesthat in addition to payment of the invoices, Distributor shall also pay all
government, state and localtaxes and assessments related to the Product and their
shipments (exclusive of taxesbased on Corporation income), including any taxes on sales
Comment [JR27]: INVENTORY. From distributor perspective, it may be important to sell off existing inventory—so this should be provided for explicitly.
Deleted: In
Comment [JR28]: If representing the distributor this clause should be deleted. It is a “big give” in this contract, because the distributor has built a customer base, and is not handing it over for nothing. However, the parties may agree on this if manufacturer is paying a fee or other compensation(such as within the agreed discount or rev share) in exchange for a copy of the distributor’s client list as pertains to the sold Products.
Deleted: the event of a termination of this
Agreement for any reason, Distributor agreesto disclose to Corporation any and all accounts of
the Distributor that havelicensed any Corporation
Products or are evaluating Corporation Products.
At aminimum, account name, address, telephone
number, contact person andpertinent Product
information must be provided Corporation upon
or promptlyfollowing the effective termination
date.
Deleted: Maintenance
Comment [AP29]: Be consistent with defined terms.
Comment [JR30]: This may need to be extended if distributor is allowed to sell out its inventory.
Comment [JR31]: Review carefully. Errors often occur here due to careless proof reading. Leave this provision for final review since Section numbering may change in traded drafts during contract negotiation and formation.
or services provided byCorporation. Any payment not paid when due shall bear simple
non-compounding interest at the rate of 1.25percent per month (subject to local law) until
paid. Invoices for shipments made oncredit shall be rendered to Distributor at the time of
shipment, and be payable no laterthan thirty (30) days thereafter. All payments are to be
made in United States dollars.All shipments are FOB Corporation.
7.3. Distributor shall be liable to pay for all Products shipped prior to any
terminationor expiration of this Agreement, in accordance with the payment terms set
forth under Section 6.1.
7.4. Product may be resold only in Distributor's normal course of business;
however,Distributor shall not pledge or otherwise encumber the Product until paid in full.
7.5 Distributor agrees to immediately report to Corporation (a) any seizure
orattachment of the Product by Distributor's creditors, (b) any petition in
bankruptcy,insolvency receivership or similar proceeding filed by, or against, Distributor,
or (c) anyarrangements, composition or similar agreement for benefit of Distributor's
creditor's.
7.6 Distributor will prepare and submit to Corporation reports that Corporation
mayreasonably request from time to time, and which are produced by Distributor in the
ordinary course of its business. In addition to requiring monthly sales reports
andforecasts, Corporation may request reports on such subjects as Distributor's
financialcondition, market plans, sales strategies, monthly sales activity, and point of
sale.
8. Advertising and Promotion.
8.1. Corporation shall provide Distributor with copies of all major advertisements
andall press releases sent out by Corporation. Similarly, Distributor shall
provideCorporation with copies of all its advertising related to Product.
9. General Export/ Import
9.1. Product contains encryption technology that is subject to import and
exportcontrols. Distributor agrees to take any and all actions necessary to comply
withapplicable US export laws and regulations and other applicable foreign laws in
itsperformance of this Agreement, including making determinations of final destination
ofProducts licensed to Licensees if any copies may be re-exported or transferred to
alocation outside of the United States. Distributor agrees that any export or re-export
ofProduct shall be done in accordance with the United States Export
AdministrationRegulations. Diversion contrary to U.S. Law is prohibited. Product is
prohibited forexport or re-export to Cuba, Iran, Iraq, Libya, North Korea, Sudan and
Syria or to anyperson or entity on the U.S. Department of Commerce Denied Persons List
or on theU.S. Department of Treasury's lists of Specially Designated Nationals,
SpeciallyDesignated Narcotics Traffickers or Specially Designated Terrorists. Distributor
Comment [JR32]: Negotiable.
Comment [JR33]: See comment in section 4.1.
Comment [JR34]: Ordinarily, the payment terms should not be accelerated due to a termination. However, if there is termination due to a material breach, it would be fair to demand that all outstanding amounts become immediately due and payable.
Comment [JR35]: As a distributor, you may wish to limit this right. However, as part of a distribution deal, certain manufacturers request reports in specific format to account for sales on their books of record.
Comment [AP36]: Sometimes, the manufacturer demands oversight over the distributor’s advertising PRIOR TO publication and distribution thereof – so that it does not harm manufacturer’s reputation or misrepresent anything about the products or services.
agreesto report exports of Product from the U.S. on a bi-annual basis to the U.S. Bureau
ofExport Affairs (BXA) in accordance with BXA regulations.
10. Confidentiality and Protection of the Products and Documentation
10.1. Confidentiality. Neither party shall disclose to third parties any business
and/ortechnical information of the other designated orally or in writing
as"CONFIDENTIAL" or "PROPRIETARY" without the prior written consent of theother
party. Product shall at all times be treated as Confidential whether marked assuch or not.
Such restrictions do not extend to any item of information which (a) is nowor later
becomes available in the public domain without the fault of the receiving party;(b) is
disclosed or made available to the receiving party by a third party withoutrestrictions and
without breach of any relationship or confidentiality; or (c) isindependently developed by
the receiving party without access to the disclosing party'sConfidential or Proprietary
information. The terms and conditions of this Agreementare hereby designated
"CONFIDENTIAL." It is agreed and understood that in theevent of a breach of this
Section, damages may not be an adequate remedy and thedisclosing party shall be
entitled to injunctive relief to restrain any such breach,threatened or actual.
10.2. Proprietary Rights. This Agreement does NOT transfer title of any
ofCorporation's intellectual property rights to Distributor. Corporation shall remain
theexclusive owner of all of its intellectual property rights (including, without
limitation,any patent, trademark or copyright) in and to its Products, any other
softwareapplication of Corporation and any documentation or training materials provided
byCorporation to Distributor. Distributor shall not manufacture, duplicate,
reverseengineer, or decompile the Product or information relating thereto.
10.3. No Modifications. In no event shall Distributor copy or modify, or aid a
thirdparty in copying or modifying, the source code, object code, or any part of the
Productwithout the express written permission of Corporation. Distributor agrees to abide
byall the terms and conditions of Corporation's License Agreement. Distributor
shalldeliver the Product components and License Agreement to its Customers in the
sameunopened package(s) as received by Distributor from Corporation.
10.4. Documentation. Distributor may not write or otherwise create any
additionalProduct documentation or authorize the creation thereof without Corporation's
expresswritten consent. The only Product documentation that Distributor is authorized to
sellor distribute is official Corporation Product documentation that shall have
beenproduced by Corporation and sold to Distributor. Distributor may directly
translatedocumentation into the native language, of the territory to assist in the sale of
theProduct, by obtaining written consent from Corporation and providing
Corporationwith a copy of such translation for Corporation's approval prior to
distribution. In nocase shall the translated documentation differ, alter or change the
meaning, intent fromits original purpose. Distributor grants Corporation title to any such
translations.
11. Warranties and Indemnification.
Comment [JR37]: Add an exclusion or exemption for information required to be disclosed by a regulator or pursuant to a court order.
Comment [AP38]: Add exception that a party may share the terms of this agreement with its legal counsel, auditors and advisors subject to their signing an NDA or confidentiality agreement.
Comment [AP39]: In Corporation, should ask that this flow to Distributor’s subcontractors or affiliates who may have distribution rights too.
11.1. Product Warranty, Disclaimer, and Limitation of Liability. Except for
thosecontained in section 11.2 below, Corporation makes no representations or warranties
inrelation to Product of any kind to Distributor. All warranties and
representationsregarding Product are listed in the License Agreement and are for the
benefit of theCustomer. Corporation shall indemnify and hold Distributor harmless for
any claimsarising out of the breach by Corporation of the License Agreement subject to
thosesame limitations within the License Agreement. IN NO EVENT
SHALLCORPORATION BE LIABLE, DIRECTLY OR INDIRECTLY TO
DISTRIBUTOR,ANY PROSPECT OR ANY CUSTOMER, FOR ANY SPECIAL,
EXEMPLARY,INCIDENTAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR
SIMILARDAMAGES, FOR LEGAL FEES, LOSS OF DATA OR LOST PROFITS OR
FORANY AMOUNT BEYOND THE AMOUNT ACTUALLY RECEIVED
BYCORPORATION FROM DISTRIBUTOR WITH RESPECT TO THE
SPECIFICLICENSE AGREEMENT FROM WHICH THE CLAIM ARISES.
SOMEJURISDICTIONS DO NOT ALLOW THE LIMITATION OR EXCLUSION
OFLIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES SO
THEABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO
DISTRIBUTOR.CORPORATION'S AGGREGATE LIABILITY FOR ANY AND ALL
CLAIMSBROUGHT BY DISTRIBUTOR SHALL NOT EXCEED THE TOTAL
AMOUNTPAID BY DISTRIBUTOR TO CORPORATION UNDER THIS
AGREEMENT.CORPORATION SHALL NOT BE LIABLE FOR ANY CLAIMS,
WARRANTIESOR REPRESENTATIONS MADE BY DISTRIBUTOR THAT ARE
NOTCONTAINED IN THE LICENSE AGREEMENT.
11.2. Intellectual Property Indemnification. Corporation shall defend or, at its
option,settle, any claim, action or proceeding brought against Distributor alleging that
aProduct infringes a United States or foreign patent, copyright, trademark or trade secret,
and shall indemnifyDistributor against all damages and costs finally awarded against
Distributor in anyaction or proceeding which results from any such claim. Corporation
shall have noliability under this section unless Distributor (a) promptly notifies
Corporation inwriting of the claim, (b) gives Corporation full authority, information and
assistance todefend such claim, and (c) gives Corporation sole control of the defense of
such claim.
12. General.
12.1. Assignment. This Agreement may not be assigned or otherwise transferred,
andthe duties hereunder may not be delegated by Distributor unless Distributor
hasreceived prior written consent from Corporation. To the extent Distributor is
permittedby Corporation or by operation of law to assign this Agreement or any part of it,
allprovisions hereof shall be binding upon Distributor's successors or assigns.
12.2. Notices. Any notice hereunder shall be deemed to be sufficiently given and
anydelivery hereunder deemed made when delivered in person or sent by registered
orcertified mail or courier addressed to Corporation and to Distributor at the
Comment [JR40]: MAKE MUTUAL IF ON DISTRIBUTOR SIDE
Comment [JR41]: EXCLUDE FROM THE LIMITATION:
Willful misconduct
Gross negligence
Payment for products provided
Abandonment of contract (especially if exclusive distributor rights)
Comment [JR42]: Limitations: Settlement right limited to payment of money Right to participate in defense at own expense Right to raise a reasonable objection to choice of counsel
Comment [JR43]: Assignment to Affiliates. In large companies it is important to allow flexibility for facilitating a restructuring. In smaller, less well capitalized companies, be more wary of allowing assignment to an affiliate.
addressesstated above, or at such changed address as either party shall have specified by
writtennotice.
12.3. Modifications. This Agreement may not be modified except by an
agreement inwriting duly executed by representatives of both Distributor and
Corporation.
12.4. Headings. Paragraph headings are shown herein for convenience only, and
shallnot affect the meaning or interpretation hereof.
12.5 Advertising. The parties grant to each other the right to use their respective
namesin advertising or in any other appropriate public message.
12.6. Force Majeure. Neither party shall be liable for the failure to perform
itsobligations under this Agreement due to events beyond such party's reasonable
controlincluding, but not limited to, strikes, riots, wars, fire, acts of God or acts in
compliancewith any applicable law, regulation or order (whether valid or invalid) of any
court orgovernmental body.
12.7. Legality and Severability. If any portion of this Agreement is determined to
beillegal or unenforceable under the law, then that portion shall be stricken from
theAgreement without effect to that remainder of the Agreement that can be given
effectindependently of such invalid terms.
12.8 No Agency. Each of the parties will be deemed to be an independent
contractorand not an agent, joint venturer, or representative of the other, and neither may
createany obligations or responsibilities on behalf of or in the name of the other. Under
nocircumstances may Distributor hold itself out to be a partner, employee,
franchisee,representative, servant, or agent of Corporation.
12.9 Government Licensee. The U.S. Government's use of any Product shall be
subjectto "restricted rights" as such are defined in FAR and DFAR clauses. For sales
wherethe US Government is the ultimate end user, (a) the US Government contract
numbermust be specified on Distributor's purchase order to us, and (b) Distributor's
purchaseorder must specifically reference all those clauses of the applicable Federal
AcquisitionRegulations which are intended to flow down to Corporation, and (c)
Corporation mustprovide Distributor written acceptance of those specific clauses which
Corporationdoes accept. Otherwise, no government regulations or contract provisions
will governthis Agreement.
12.10. Arbitration. Unless solved by mutual efforts of the parties hereto, and
except forany actions for amounts already established to be due and owing, or for
differences, disputes or claims that may arise out of or in connection with this Agreement
for whichCorporation shall seek equitable relief, all differences, disputes or claims
arising inconnection with this Agreement or any transaction or occurrence contemplated
herebyshall be finally settled under the Commercial Rules of the American
Comment [JR44]: Common provisions: Consider if your company is against Arbitration provisions and instead prefers some Dispute resolution process, then ability to proceed to legal action if the parties cannot resolve through escalation. Winner pays fees? 1 or 3 arbitrators? How are they chosen? Place of arbitration? Certain places very expensive. Language of arbitration? Arbitral body (very significant in international contracts).
ArbitrationAssociation in Boston, Massachusetts, by one or more arbitrators appointed
inaccordance with such Rules except that no punitive damages may be awarded.
Sucharbitration shall be conducted in the English language. It is understood that the
decisionin such arbitration shall be binding on both parties and that a judgment upon any
awardrendered may be entered in any court having jurisdiction.
12.11. Governing Law. This Agreement shall be governed by, construed and
enforcedin accordance with, the laws of the Commonwealth of Massachusetts without
givingeffect to its principles of conflicts of laws and without giving effect to the
UnitedNations Convention on the International Sale of Goods. Both parties agree to
andaccept the exclusive jurisdiction of the courts of Massachusetts and consent to
theCommonwealth of Massachusetts as the forum for any claim brought hereunder.
IN WITNESS WHEREOF each of the undersigned acknowledges as an officer of
theirrespective corporation that they have read this Agreement along with its Addendum
A whichis incorporated into the Agreement, understands them and agrees to be bound by
their terms,and further acknowledges that this is the complete and exclusive statement of
agreement forthe distribution of the Product between the parties and supersedes all prior
agreements,whether written or oral.
Accepted and agreed on behalf of:
_________________________
_________________________
Authorized Signature
Printed Name
Title
Date
_________________________(Corporation)
_________________________
Authorized Signature
Printed Name
Title
Date
Comment [AP45]: If both parties are not in this state, the party from another state would spend a lot of T&E funds trying to close this. Should suggest in the state of the Plaintiff bringing the cause of action.
Comment [JR46]: Governing law. This is a highly negotiated provision. Be wary of having a governing law which is different to the jurisdiction choice.
Comment [JR47]: Is the jurisdiction MA courts or arbitration, or both?
ADDENDUM A[This is the most important document. Make sure you understand it
well.]
1. Discounts:
Discount Software
30%
Annual Support/Subscription
Purchased With Product Order
30%
2. Products & Price List - See attached
3. Territory:
4. Sales Target:
Copyright © 2013 Practical Law Publishing Limited and Practical Law Company, Inc. All Rights Reserved.
This is just one example of the many online resources Practical Law Company offers.
.
�� Is there any other party that is key to the deal? If so, consider whether it should be made a party to the contract so it is also bound by the terms of the contract.
Is the Identity of the Other Party Important to the Performance of the Contract?�� In a contract for services, who will actually be performing
the work?
�� Is it important for the company to have specific individuals or entities perform the services or provide the goods specified in the contract?
�� Should the company allow the other party to sub-contract some or all of the work or pass on the benefits of the contract to others? If not, the prohibition on assignment and delegation must be made clear in the contract.
�� What is the impact on the company if the ownership or structure of the other party changes, either through a sale of all or a majority of stock or assets? Consider ways to handle a situation where there is a change in control (particularly if a competitor takes control of the other party to the contract), such as the right to terminate the contract immediately.
What is the Company Buying or Selling?�� A great number of contractual disputes relate to what services
are to be performed or goods are to be delivered.
�� Describe the goods and services as clearly and accurately as possible to avoid risk of disputes.
�� If the company is buying goods or services, make sure it is very clear what the company is receiving under the contract. The seller may not be obligated to highlight deficiencies or oversights.
Failure to consider key issues and avoid common pitfalls during contract negotiations may result in unforeseen obligations, unintended breaches or financial consequences under a contract. This is a checklist of issues to consider when negotiating contracts on behalf of the company. It is divided into two main sections:
�� Key issues.
�� Negotiating pitfalls.
Please always consult the legal department when [negotiating a large or unusual contract/[OTHER CRITERIA]]. [CROSS-REFER TO ANY STANDARD BUSINESS PROTOCOLS IF THEY EXIST.]
KEY ISSUES
Who is the Other Party to the Contract?�� What is the reputation of the other party? Has the company
done business with the other party before? If not, should the company do research on or get references for the other company?
�� Consider doing a credit check if relevant. A party’s creditworthiness may impact both its ability to pay amounts owed and perform its non-monetary obligations under the contract.
�� If the other party is based overseas, speak to the legal department to ensure that the company is complying with relevant laws (such as the [UK Bribery Act of 2010/[OTHER LAWS RELEVANT TO YOUR INDUSTRY SECTOR]]) and will be properly protected if things go wrong.
�� If the other party is part of a group of companies, is it the right member of that group to be a party to the contract? Only parties to a contract are bound by its terms, so a party’s affiliates will not be bound by the terms of a contract unless they are also parties to the contract.
Contract Negotiations: Business Briefing
PLC Commercial
A template briefing for in-house counsel to give business executives on key points to consider during contract
negotiations.
Copyright © 2013 Practical Law Publishing Limited and Practical Law Company, Inc. All Rights Reserved.
Contract Negotiations: Business Briefing
�� All important issues and assumptions should be confirmed in the written contract. It is best not to rely on verbal assurances or points agreed during negotiations.
�� List what the other party should and should not be doing regarding the services or goods being sold under the contract.
What is the Price and How is Payment to be Made?�� How is the price determined? Is it a fixed or variable sum?
�� If the price is linked to variable factors, what are the mechanics for determining price and at what points during the term of the contract will the price be determined?
�� In what currency is payment to be made? Is there an exchange rate risk? If so, can it be limited in any way?
�� Is tax included in the price (notably sales tax)? Tax advice must always be sought if goods or services are being delivered or performed in a foreign country to ensure there is no unexpected tax liability. [For advice on tax issues, contact [NAME AND CONTACT DETAILS OF TAX CONTACT].]
�� What are the delivery terms? Are delivery costs included in the price?
�� How is payment to be made (for example, cash, electronic bank transfer or bank draft)?
�� When is payment due? Is it a single lump sum or by installments? Is there a retention of payments to be held as security?
Is the Contract Contingent on Anything Else Happening? �� Is performance of the contract conditional on any event such
as regulatory approval or any other party doing something?
�� Are there any circumstances in which the company would wish to be released from its obligation to perform the contract?
What Happens if Things Go Wrong?�� What could go wrong with the deal, and what loss could
the company suffer as a result? Consider all the possible consequences. For example, could the company be prevented from fulfilling obligations to a third party and suffer financial losses as a result?
�� If the company is buying goods and services under the contract, try to ensure that:
�� the seller is responsible for all possible losses (including consequential losses); and
�� liability is not limited in any way.
�� If the company is selling goods and services, try to limit liability to a fixed sum. Resist any responsibility for consequential losses as these may be far greater than the contract amount and impossible to quantify.
�� Speak to the legal department before agreeing on any clause that seeks to limit liability under a contract.
Is the Deal Time Critical?�� When does the company want the work done or
goods delivered?
�� A clear timetable is essential, especially if price is tied to delivery or performance dates.
�� Does the company want to be able to end the contract or to impose pre-determined damages if work or goods that it is buying are delivered late?
In What Circumstances Could the Company Pull Out of the Contract?�� How long does the company want to be tied in to the deal?
�� Are there any factors which might affect how long the company wants to be tied in to the transaction? For example, is the deal linked to another deal which may end or could costs increase so as to make the deal unprofitable?
�� Should the contract be for a fixed period of time or does the company need to include a right to terminate by giving notice to the other party?
�� Are there any circumstances in which the company would wish to terminate the contract immediately, such as if the other party damages the company’s reputation or goes out of business?
�� Should there be a fee for early termination?
Are There Any Brand, Copyright or Other Intellectual Property Issues? �� Is the other party creating something specifically for the
company (for example, an advertisement or custom made computer software)?
�� Is the company going to use the other party’s brand, or will the other party use the company’s brand?
�� If any modifications or improvements to a product are made, determine who owns the modifications.
�� If a product is jointly developed with the other party, determine which party owns the intellectual property rights to the products.
�� Speak to the legal department to ensure that the correct formalities are followed, otherwise valuable intellectual property assets may be lost or infringed.
Are There Competition Issues?�� Is there a possibility that the other party may start to
compete with the company? If so, speak to the legal department because it may be possible for the contract to prevent this through non-competition provisions and other similar measures.
Consider Insurance�� In addition to contractual protections, always consider whether
insurance can cover potential risks and liabilities. [For more information, contact [NAME AND CONTACT DETAILS OF CONTACT FOR INSURANCE ISSUES.]]
Is There a Payment, Performance or Enforcement Risk?�� Remember that if anything goes wrong, the protections in a
contract are only as good as the party giving them. It will be
very difficult to get any compensation if the other party has no money.
�� Consider requiring security to secure performance or payment under the contract. Examples of security include:
�� retention, where a buyer may require a retention to hold back part of a purchase price as security for potential breaches of contract by a seller; and
�� guarantee, where a seller may require a guarantee from a third party in case a buyer fails to make payment under a contract.
Is the Company Dealing on Standard Terms?�� Most companies have standard terms of business drafted in
their favor. If the company’s terms conflict with the other party’s terms, it can be difficult to determine which prevail.
�� Be wary of documents such as purchase orders, acknowledgements and delivery notes. These can have a party’s standard terms of business included on them. For example, by signing a delivery note, the company may inadvertently commit itself to the seller’s terms.
�� Always be clear about the terms on which the company is dealing. If in doubt, speak to the legal department.
NEGOTIATING PITFALLS
Who is Negotiating for the Other Party?�� Does the person representing the other party have authority to
negotiate for that party?
Should Negotiations be Kept Confidential?�� If negotiations should be kept confidential, get the other party
to sign a confidentiality agreement (also called a non-disclosure agreement or NDA) before starting negotiations. The legal department can give you an appropriate form.
Is the Company Sharing Business Sensitive Information with Third Parties?�� Speak to the legal department before sharing any
business sensitive information. It can be illegal to disclose certain types of information, such as personal data about customers or employees.
�� A confidentiality agreement may give some protection but it must be signed before any information is disclosed between parties.
�� Consider whether the other party actually needs the information or whether it is simply on a fishing expedition.
Do not Exaggerate or Mislead the Other Party�� If you exaggerate or mislead the other party during
negotiations, the contract may be dismissed and compensation may be payable to the other party.
Do not Offer or Accept Bribes or Inducements�� This is unethical and could lead to criminal liability under
a variety of laws, such as the US Foreign Corrupt Practices Act and the UK Bribery Act of 2010. [CROSS-REFER TO THE COMPANY’S ANTI-BRIBERY POLICY OR MANUAL IF ONE EXISTS.]
Prevent the Other Party from Poaching Employees or Customers�� If the other party has access to the company’s customers
or employees, consider asking the other party to sign a non-solicitation agreement. Speak to the legal department for an appropriate form.
Take Care Before Signing Any Pre-contractual Agreements�� When negotiating a big or complex deal, the company may be
asked to sign a summary of the main terms before the main contract is agreed. This document can be called a term sheet, letter of intent or memorandum of understanding.
�� Speak to the legal department before signing a term sheet. Even if the term sheet is not meant to be legally binding, it may create legal obligations. In any event, it can create strong moral obligations which can weaken the company’s negotiating position.
Do not Enter into a Contract by Mistake�� A contract does not have to be signed and in writing to be
binding. For example, one can enter into a binding contract over the phone or by e-mail provided the key terms are agreed. Be clear in communications that no contract is being entered by means of that communication.
�� To help clarify that the parties are still in negotiations, mark all correspondence “subject to contract” or “not legally binding.”
If you have any questions relating to this checklist, please contact [NAME OF LAW DEPARTMENT CONTACT].
Copyright © 2013 Practical Law Publishing Limited and Practical Law Company, Inc. All Rights Reserved.
Practical Law Company provides practical legal know-how for law firms, law departments and law schools. Our online resources help lawyers practice efficiently, get up to speed quickly and spend more time on the work that matters most. This resource is just one example of the many resources Practical Law Company offers. Discover for yourself what the world’s leading law firms and law departments use to enhance their practices.
To request a complimentary trial of Practical Law Company’s online services, visit practicallaw.com or call 646.562.3405.