ACC’s 2013 Corporate Counsel University® May 19-21, New Orleans

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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].

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