WHAT I WISH I KNEW BEFORE I SIGNED THAT

CONTRACTLINES OF RESPONSIBILITY AND COMMON PITFALLS

TODAY’S SPEAKERS

Gregory S. Weiss

CEO

GTW Management, LLC

Blake K. Holman

CIO / CSO

St. David’s Foundation

KEY ELEMENTS OF A CONTRACT

“Legal” “Both” “Business”

Indemnification Payment Terms / Milestones Term

Warranties / Representations Termination Price

IP Ownership / Residual rights Data Security / Security Compliance Scope of work / Services to be

rendered

Termination charges / fees

Auto-renewal

Marketing / Promotion rights

Exclusivity / Non-Compete

WHAT MAKES FOR A GOOD CONTRACT?

• COLLABORATION between Legal and Business

• READ what you’re agreeing to

• UNDERSTAND / CONFIRM what you’re agreeing to

• NEGOTIATE what you don’t like in what you READ / UNDERSTAND

• Be willing to WALK AWAY from the negotiations

• MAINTAIN your contract after it’s signed

FINER POINTS OF NEGOTIATION

• 2 Tools – Knowledge and Leverage

• You may not to be able to improve your leverage; but

• You can always improve your knowledge

• Believe it or not . . .

• Legal can (sometimes) help improve your knowledge!

ART OR SCIENCE?

DON’T FORGET THE MAINTENANCE

SAMPLE COLLABORATIVE CONTRACT PROCESS

• Business engages in initial negotiations

• Business seeks Legal support:

• After initial read of contract, while negotiations still ongoing

• Legal review focuses on “Legal” areas, but confirms mutual understanding of all points

• Legal can participate in negotiations, or simply review and confirm final draft of contract before

execution

• Consider bringing Legal in early if there are any disagreements or concerns after contract is signed

(ideally before work is complete)

• Could be informational only

• Could be to assist with resolution

EXAMPLES

• Enterprise-level HRIS – poor negotiation

• Enterprise Cloud Storage agreement – effective negotiation

• Services agreement for large financial institution – successful collaborative negotiation

• Acquisition TSA – effective collaborative process

• Enterprise-level ERP system – poor maintenance

ONE – POOR NEGOTIATION

• Business operated independently of legal in negotiations

• Scope of work was “understood”, but not clearly defined – very general

• Payment milestones equally vague

• Vendor failed to deliver what client expected – but, no clear breach of agreement

• Legal involved only after vendor and client reached standstill – end result:

• Led to over 12 months of frustration and rework

• Client didn’t receive effective solution, and had to spend substantially more time and effort in

implementation

• Vendor didn’t get paid for over a year

TWO – EFFECTIVE NEGOTIATION

• Started with standard language, pushed back on several points, prior to involving Legal

• Bandwidth restrictions

• Storage of data outside the United States at provider’s discretion

• No liability clause for deletion (related to recoverability)

• Unilateral ability to change vanity id on URL

• Ability to market using our name without any consent

• Clarity around service level (99.9%, on what basis) and Support hours (definition of local)

• Renewal term same as initial term, rather than month to month

• Successfully clarified / negotiated desired position on all but one point with Vendor

• Collaborated with Legal on final product to ensure both Legal and Business term requirements met

THREE – EFFECTIVE COLLABORATIVE NEGOTIATION

• Financial institution had many specific requirements, including robust data security

• Some “requirements” were unreasonable based on company’s technology configuration

• Business and Legal collaborated beginning early in negotiations – end result:

• They worked together to identify:

• Key contract requirements

• Capabilities of company

• Effective work-around solution

• Negotiations focused on making sure final agreement was consistent with the solution

FOUR – EFFECTIVE COLLABORATIVE PROCESS

• TSA can be a critical component of any acquisition

• Effective collaborative process – cross-functional collaboration across entire company

• Designated leads from each discipline (including from target company)

• Met regularly to identify and hone key dependencies

• Each iteration viewed in light of existing business operations to capture essential services and

appropriate pricing

• Final agreement subject to regular maintenance through integration process

• Regular, cross-functional meetings for extended period after closing

• Follow up negotiations with seller, as necessary

FIVE – POOR MAINTENANCE

• Business and Legal collaborated on contract negotiations

• Result was specific and detailed agreement, with appropriate concessions on both sides

• Payment milestones were specifically outlined and clear

• Problems arose in implementation – company requested substantial customization

• Vendor objected, declared milestone completed

• Business did not collaborate with Legal until after it (reluctantly) agreed milestone was complete

• Legal involved after payment dispute – end result:

• Implementation substantially delayed (vendor ceased work)

• Opportunity costs for both client and vendor were much higher

• Negotiated settlement ultimately led to delay in date milestone deemed complete, but payment still required

before solution was fully usable by client

Q&A

Gregory S. Weiss

CEO

GTW Management, LLC

Blake K. Holman

CIO / CSO

St. David’s Foundation