Sample License Agreement Form
The Sample License Agreement is a form that serves as an agreement between the owner of a standard license and the user who would like to use that license.
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TERMS AND CONDI TIONS Section 1 – General 1.1 Customer ’s Repr esentations. Custom er represents and warrants th at ( i) Custo mer is an entity du ly o rganized, va lidly existing and in good standing in the jurisdiction of its or ganization and every other jurisdiction where an y Product is to be located; (ii) Custom er has obtained all ap provals, perm its or other authorizations required for Custom er to enter in to and perf orm its obligations under this A greem ent he reby; (iii) the purchase of any Product contem plated hereby does not violate or conflict with any law , regulation, decree, order , judgm ent, contract, agreement, or other docum ent applicable to Custom er or its propert ies; and (iv) all f inancia l statem ents and other inform ation provided by Custom er to V endor are true, accu rate and com plete in all m aterial respects. 1.2 Charges. Product char ges applicable to a transaction shall be as set forth in an order or other Ancillary Docum ent. In the absence of such a docum ent V endor ’s then current standard list of c harges shall apply . Unless otherwis e expressly provided by this Agreem ent, and regardless of the term s of any lease, licen se or Service arrangem ent pursuant here to, recurring char ges (su ch as monthly license or m aintenance char ges) m ay be increased at any tim e in V endor ’s sole discretion upon thirty (30) days prior written Notice to Custom er. Taxes and shipping char ges (as set forth below) are in addition to all other Product char ges. Comment : In or der to contr ol costs and avoid nasty surprises, clinics should insist that all pur chases and licenses ar e listed in an Appendix, along with corr esponding prices and discounts. T his Appendix should specify what items ar e being pur chased for a fixed amount or fee, and what services ar e char ged hourly . For hourly services, the clin ics may want to spec ify “not to exceed” ma ximums. 1.3 Payment. (a) One-tim e char ges are due and payable at th e time of delivery of the Product. A recurring char ge is due on the earlier of (i) the fifteenth day follo wing the date of the inv oice for such char ge, or (ii) the thirtieth day of the Period to which such char ge relates. Recurring char ges shall be prorated in resp ect of partial Pe rio ds. (b) Th e paym ent term s f or those item s set f orth in the attached Appendices shall be as follows: 50% upon Custom er’s execution of this Agreem ent and the balance upon the earlier to oc cur of (a) Software installation or (b) 3 m onths fro m Custom er’s execution of this Agreem ent. (c) All char ges are du e and payable as set forth above re gardless of whether or not V endor invoices Custom er for such ch arges. In the event of a delinquency in the paym ent when due of any am ount owing Vendor under this Agreem ent, so long as such delinquency rem ains outstanding in whole or in part, interest on the delinquent Comment : Many vendor agr eements specify tha t the clin ics shall pay 50% or mor e in advance befor e the vendor has done anything, and befor e the clinics can verify th at the so ftwa re even works pr operly! Just as it would not be wise to pay a construction contractor most or all of your money befor e he has even picked up a hamme r or driven a single nail, it is unwise to pay the softwar e vendor substantial amounts of money befor e the vendor has performed. Despite what softwar e vendors may say , installment payments trigger ed by the successful completio n of Minami, Lew & Tamaki LLP © 2005 2 am ount shall accrue at the rate of one and one-half percent (1.5%) per m onth ( or, if less, the highes t rate p erm itte d by applic able law). All accrued delinquency inte rest shall be due and payable on dem and, and in the absence of dem and, on the first day o f each calendar m onth. The accrual an d collection of delinquency interest sh all not constitute a cure of the contin uing breach of this Agreem ent constituted by such delinquency , nor a waiver of any other right o r rem edy in respect of such breach av ailab le to V endor under this Agreem ent, at law , or in equity . specified milestone tasks ar e th e norm, and clinics should insist upon them. Note that just as in a contract to construct a house, ther e should be a significant “withhold” to be paid only upon satis facto ry completion of the work. 1.4 T axes. All sales use or other taxes or governm ental fees or levies related to a transaction (other than taxes based upon V endor ’s incom e) shall be the sole responsib ility of Custom er. If advanced by V endor , such taxes shall be reim bursed by Custom er imm ediately upon delivery of th e Product in question. Such reim bursement shall be due an d payable as set forth above whether or not V endor invoices Cust om er for such taxes. If a certificate of exem ption or sim ilar do cum ent or proceeding is to be made in order to exe mpt the tra nsaction f rom any tax liability , Custom er shall obtain s uch certifi cate, docum ents, and/or initiate such proceeding at Custom er’s sole cost and expense. 1.5 T erm and Termination. This Agreem ent shall comm ence upon the Ef fectiv e Date and continue u ntil te rm inated a s prov ided below . This Agreem ent shall term inate upon the first to occur of the followin g: (1) in the case of a breach of this Agreem ent which rem ains unc ured thir ty (30) days after Notice of breach was given to the Party in breach, the non-br eaching Party m ay ter minate this Agreem ent imm ediately upon written Notice to the Party in breach ; (2 ) either party in its so le discretion (for any or no reason whatsoever) m ay term inate th is Ag reem ent upon ninety (90) days Notice of term ination to the other Party . Unless V endor otherwise elects in its sole disc retion, any term ination of this Agreem ent s hall not be ef fective as to a Product under an extended term transaction (such as leas e o r License where a sep arately stated term for such transactio n is set forth in an An cillary Docum ent) until the exp iration of su ch extended term . Comment : This clause allows the Vendor to terminate the Agr eement for no good r eason on 90 days notice. By the time a clinic enters into an agr eement with a Vendor , it w ill have spent a gr eat deal of time, money and r esour ces identify ing its softwar e n eeds, develop ing s pecifications (see Addendum for definition of Functional Specifications) , negotiating the business and legal terms of the contract with Vendor , and signing and commencing implementation. After these events occur , the clinic will wa nt the Agr eement to be binding on Vendor so it can’ t simply walk away fr om its obligations. See Addendum for pr oposed r evision. 1.6 Confidentiality and Pr oprietary R ights. Except as provided in this Se ction, inf orm ation exchanged between th e Parties sh all not be considered confidential unless both Parties agree o ther wise in writing. Each Party sh all keep con fidential all term s, conditions or other provisions of this Ag reement. Custom er acknowledges and agrees as follow: Minami, Lew & Tamaki LLP © 2005 3 (1) The owner of each item of In tellectual Pro perty em bodied in any Product or Product com ponent sha ll possess and retain title in and to each Product and its com ponent parts, including without lim itation all Intellectual Propert y em bodied in (i ) all Software code and docum entation, (ii) all m anuals or user inform ation, (iii) the design and form at of the inpu t and output scr eens, graphical user interface, and printable fo rm s, reports and other hard copy output incorporated in or genera ted by the Pr oduct, and (iv) all additions, enhancem ents, revisions , updates or other m odifications to th e Produ ct or any part thereof, regardless of any fee or char ge paid by Custom er to V endor in respect of the Product or the design, creation or use thereo f. Custom er shall not cause or perm it rem oval or alteration in any way of any Notice, legend or sym bol denoting any copyright, tradem ark, pa tent or other proprietary right or in ter est of the In tellectu al Property owner appearing on any input or output screen or hard copy output incor porated in or generated by the Product, or any documentation, manuals, brochures, or other written or prin ted m aterials of any kind related to the Product. (2) Each item of Intellectual Pr operty em bodied in a Product or any com ponent thereof constitutes valu able proprietary inform ation and trade secr ets of t he owner of such Intellectual P roperty . Consum er shall not disclose (nor perm it any Custom er e mployee, independent contractor , agent, or other person under its authority or control, to disclose) to any Person, or allow any Person access to, any such proprietary infor mation or trade secrets in whole or in part; provided, however , use of th e Product in accordance with the term s and conditions of this Agreem ent shall be perm itted by em ployees of Custom er in the ordi nary course and scope of their em ploym ent by Customer . Customer shall not cause or perm it any Software Product to be reverse engineered, decom piled, or disassem bled in whole or in part. Custom er shall not cause or perm it the software, docum entation, or other inform ation related to the Product to be copied or reproduc ed in any form or m edium, in whole or in part. Custom er sha ll take such actions to preserve and protect V endor ’s proprietary rights and interest of confidentiality in and with respec t to the Products which are, at a minimum, c omm ensurate with those actions taken by Custom er to preserve and protect its m ost va luable trad e sec rets or other proprietary of conf idential inform ation. (3) Custom er’s conf iden tia lity ob lig ations h ereu nder do not apply to any inf orm ation which ( i) was lawf ully and r ightf ully in Custom er’s possession at the tim e of disclosure and was not acquired directly or indirectly fr om V endor , (ii) was lawfully and rightfully acquired by Custom er fr om others who acquired it by proper m eans and had no confidentiality obligation to V endor with Minami, Lew & Tamaki LLP © 2005 4 respect to sam e, or (iii) is now , or hereafter becom es, through no fault of Custom er, pa rt of the public dom ain by publication or otherwise. (4) Custom er has no right to use any Software Product or any part thereof except as spec ifically grante d under the license referred to in Section 3 hereof. (5) Neither party shall infringe upo n or otherwise m ake use of any tradem ark, s ervice m ark, trad enam e, or sim ilar right or interest of the other Party . 1.7 Installation . Except as otherwis e e xpressly provided in an Ancilla ry D ocum ent, the ins tallatio n and se t-up of all P rod ucts a t Custom er’s site shall be the so le responsibility of Custom er. Custom er i s solely responsible for providing an environm ent corresponding to the Product’ s Specif ications and that is otherwise suitable for the Product’ s insta llation and operation. W ithout lim iting the generality of the foregoing, the site for the Product selected by Custom er shall be su itable as to s pace, tem perature, hum idity , and the availability of electrical power , cabling, connectivity devices, and al Hard ware, Software and supplies not included with the Product but requi red for its installation operation or use. Where an Ancillary Do cum ent expressly requires V endor to install a Product, such Product shall be installed by V endor at Custom er’s site at a tim e that is mutually ag reeab le to the Parties. Comment : You will notic e that Vendor ’s sample License Agr eement says that installation of the softwar e is “the so le responsibility of Customer ,” and ther efo re, th ere is virtually no details as to how the installation and implementation will pr oceed. In short, this clause a llo ws the Vendor to dr op of f the softwar e and the r est is Customer ’s risk and responsibility . Fr om the clinics’ point of view , this is not acceptab le. The r eality is that a softwar e ins tallation pr oject tha t is not pr operly managed is likely to fail. Please see the Addendum to the License Agr eement, Section 1.7 et seq which sets forth an “Implementation Plan,” detailing some of the key elements to be mindful of in (1) identifying the tasks that have to be done; (2) determining the pr oper sequence for the p erfo rmance of th ose tasks ; (3) allocating whose r esponsibility it is to per form those tas ks; ( 4) verifying that those tasks have been pr operly performed befor e allowing the pr oject to m ove on to the next phase; and (5) developing the management plans to make sur e tha t th ese activities all occu r. As specified in the Addendum, the implementation tasks include design and configuration of the Softwar e, data conversion, creation of custom softw ar e, training clinic’ s staf f, conducting acceptance testing (ind ividual components, then conducting Minami, Lew & Tamaki LLP © 2005 5 end-to-end system) , pr eparation for “Go-Live,” etc. The Implementation Plan should include a series of “gr een light; red light system” which specifies that the Vendor cannot move on to the nex t step until the c linic has sign-of f to verify the su ccessfu l completion of prior steps. Comment : A softwar e implementation is loo sely analogous to building a house. The tasks fo r the success ful completion of both pr ojects r equir es that the tasks be done in pr oper sequence, each satisfa ctorily comp leted, befor e the next task is commenced. For example, just as you would not erec t the wa lls of a house befor e the foundation is pour ed and inspected, you would not schedule a “go-live date” befor e the softwar e has been configur ed to your satisfaction, and such tasks as data conversion, training, and testing have success fully been completed. Nevertheless, many softwar e ag reements r efer to “Go-Live Dates” as a date unilaterally set by the Vendor , as if such a date could be scheduled independent of other tasks that have to occu r befor e the Go-Live Date is se t. The defin ition of the “Go-Live Date” as set forth in the Addendum is intended to r equir e the Vendor to have satisfactorily completed k ey steps b efore th e Go-Live Date is se t. 1.8 Other Customer Responsibilities. Except as otherwise express ly pr ovided in an Ancillary Docum ent, Custom er is solely responsib le for each of the followi ng: (1) th e suitability of a Product for Custom er’s purposes and intended use, (2) the use and operation of a Product in accordance with the Specifications and the m anufa cturer ’s operational inst ructions, and applicable law; (3) the use of a Product’ s operational results; (4) all data input into any Product, and (5) conversion of data or other files produced by non-V endor products into a for m suitable for use by a Product. Section 2 – Hardw are and Supplies Minami, Lew & Tamaki LLP © 2005 6 2.1 Shipping and Delivery . All shipping or other transportation char ges related to a Product shall be the sole responsibility of Custom er. If advanced by V endor , such char ges shall be due and payable at the tim e of delivery whether or not V endor invoices Custom er for such char ges. In the absence sp ecific ins tructions from Custom er, V endor will select the carrier bu t shall no t th ereby assum e any liab ility in connectio n with shipm ent, nor sha ll th e carrier be construed to be the agent of Vendor . Comment : Assuming that the clinic will want to incorporate into th e system softwar e and har dwar e supplied or manufactur ed by a thir d party , clinic will want assurance fr om Vendor that the pr oposed co mponents will all be compatible with each other . See Addendum Section 2.5 for pr oposed clause r equiring Vendor to pr ovide such assurance. 2.2 Title and Risk of Loss. Title to Products so ld to Custom er and all risk of loss related to such Products passes to Custom er upon the delivery of the Products to either a carrier or Custom er, whichever com es first. 2.3 Security In ter est. Custom er hereby grants to V endor a first priority purchase m one y security in terest in each Product sold to Custom er until su ch time as all am ounts due and owing V endor by Custom er in respect of such Product have been paid in full. Custom er hereby constitutes and appoints V endor as Custom er’s agent and attorney in fact for th e pu rpose of executing, and filing with any appropriate authority , any and all docum ents (including without lim itation Unifor m Co mm ercial Code fi nancing statem ents) V endor reasonably deem s necessary or prudent in order to per fect its secu rity intere st in such Pro ducts. All f ilin g fees and other out-of-pocket costs or expenses rela ted to any such filings shall be re im bursed by Custom er immediately upon dem and. 2.4 Customer ’s Obligation s. So long as any a mount allocable to a given Product and owing hereunde r rem ains outstanding, custom er shall: (i) keep such Product in Custom er’s sole possession and contro l at th e site whe re origina lly d elive red to Custom er or such other site as V endor m ay consent to in writing ; (ii) preserve and protect V endor ’s security interest in such Product and keep such Product free of all other liens, secu rity interests and encum brances of any kind; (iii) keep such Product in good co ndition, rep air and working order in accordan ce with th e m anufacturer ’s recomm ended service and m aintenance pro cedu res; (iv) k eep such Product insured to the full insurabl e value thereof against loss due to fire, storm, theft and other cas ualties and hazards pursuant to a policy issued by an insurance com pany and otherwise be in for m and substance acceptable to V endor; (v) m aintain and operate such Product in strict confor mity wi th all applicable laws and regulations; and (vi) refrain from making alterations or modifications to such P roduct (i ncluding without lim itation adding accesso ries, attachm ents, or conne ctions) which deviate from or Minami, Lew & Tamaki LLP © 2005 7 otherwise f ail to com ply with the Spe cifications. Section 3 – Softw ar e 3.1 Licensing. All Softwa re m ade ava ilable to Custom er by V endor is licens ed, not sold. Software Products owned by a Person other than V endor and acquired by Custom er pursuant to this Agreem ent are licensed to Custom er under the owner ’s then current standard for m end-user licens e ag reem ent. Where a Software package not owned by V endor is required fo r the proper operation of any Product acquired by Custom er, Custom er is solely responsible for obtain ing the right to use such Software package. Adverse consequences, if any , to Cust om er or Product performance occasion ed by Custom er’s failure to lawfully obtain use rights to any such required Software is Custom er’s sole responsibility . Comment : This clause says that the clinic is solely r espo nsible for securing the licenses to use any softwar e fr om thir d parties. Assuming th at the c lin ic will want to incorpora te in to the s ystem softwar e and har dwar e supplied or manufactur ed by a thir d party , clinic will want assurance fr om Vendor that it has r eceived all of the necessar y licenses to incorporate these compo nents in to the system. Clinic should r equir e the Vendor to take on this responsibility as part of its installation obligations. 3.2 Vendor License Grant. V endor hereby grants Custom er a non-exclusive non-transferable ri ght to use each V endor -owned Software Product acquired by Custom er in accordance with this Agreem ent for the period endin g on the earlier of (i) th e term ination of this A greem ent, or ( ii) the e xpira tion of any extended term applicable to such Software Product pursuant to an Ancilla ry d ocum ent. Custom er’s use righ ts pursuant to this licen se a re subjec t to the f ollowin g lim itation s and Custom er obliga tions : (1) Custom er has a rig ht to th e program portion of each V endor Software Product only in object code for mat. (2) In the case of a single-user license, Customer m ay install and use a V endor Software P roduct only on one central processing unit (“CPU”) at a tim e. In the c ase of a m ulti-use r lic ense Custom er may si multaneously install and us e a V endor Software Product on that num ber of si multaneous users specified in the Product order or other Ancillary Docum ent. Comment : Vendors naturally will try to maximize r evenues by limiting the number of work stations or the number of medical pr oviders that can access the Softwar e. In this r egar d, if a clin ic des ires to exc eed the arbitrary thr esholds that the vendor has set for purposes of pricing, the clinic is r equir ed to pay mor e money . Ther efor e, the clinics should think thr ough how many work stations it r equir es to have acces s to the So ftw ar e, how many of its pr oviders (both full-time and part-time) that will need access, and how to account for such things as personnel Minami, Lew & Tamaki LLP © 2005 8 turnover or incr eases in staf f and negotiate accor dingly . See Addendum for one example of how a clinic might r espond to this pr o-V endor clause.. (3) Each V endor Software Product shall only be in stalled on a CPU located at the Custom er facility identified in the Product order or other Ancillary Docum ent. (4) Customer m ay us e a V endor Software Product licensed hereunder only for Custom er’s own internal purposes to manipulate Custom er’s own data. Customer shall not use a Vendor Software Product to perform any data or inform ation processing services for any third pa rty in retu rn for a fee or other pecuniary benefit of any kind. (5) In addition to the licensed num ber of CPU installations of a Vendor Software Product, Custom er m ay keep one back-up copy on arch ival m edia. Otherwise, Custom er shall not copy and Vendor Software Product for any reason. (6) Custom er sha ll not re-license, sublicense, or otherwise transfer or distribute to any other Person all or any part of any V endor Software Product, or any right, title or interest therein of any kind. (7) Custom er agrees not to m odi fy, reverse engineer , disassemble, or decom pile any Vendor Software Product, or any portion thereof. (8) Upon term ination of its li cense of any V endor Software Product, Custom er shall immediatel y erase all installed copies of such Software from all or Customer ’s Hardware, and Custom er shall erase or return to V endor all copies of such Software on magnetic media. Upo n such te rmination Custom er shall a lso destroy or return to V endor all user m anuals or other docum entation in respect of such Soft ware. (9) Customer shall rep roduce and include in all copies of any Vendor Software P roduct prepar ed by Custom er (and in all derivative w orks thereof ) the copyright Notice(s) and proprietary legend(s) of V endor and V endor ’s lice nsors/vendors (if any) as they appear in the V endor Softwa re Products and on the m edia containing the Vendor Software Products supplied hereunder . (10) Custom er acknowledges that it obtains no right, title, or interest in or to any V endor copyr ight, tradem ark, patent, or other proprietary right relating to the Products, and agrees not to remove, alter , cover or obscure any copyr ight, patent, tradem ark or other Minami, Lew & Tamaki LLP © 2005 9 proprietary rights Notice on any Pr oducts or any portion thereof. (11) Custom er shall: (i) No tify V endor immediately of the unauthorized possession, use or knowledge of any V endor Software Products, m aterials, other items or confidential inform ation or trad e secrets sup plied or m ade availab le to Custom er under th is A greem ent, by a person or or ganization not authorized by this Agreem ent to have such possession, use, or knowledge; (ii) assist in corr ecting any such unauthorized possession, use, or knowledge; and (iii) cooperate with V endor in any litigation against third partie s deem ed necessary by V endor to protect its proprietary rights. (12) T o Assist V endor in the pr otection of its property rights, Custom er shall p erm it re asonable in spections by representatives of Vendor to review Custom er’s confidentiality policies and procedures relating to the safegua rd or V endor ’s Software Products and proprietary m aterial, as well as the accounting inform ation regard ing th e sam e. Addition ally , Custom er shall allow V endor to exam ine the contents of Custom er’s hard drives and other storage media to confirm that Custom er’s use of V endor Software Products com plies with this Agree ment. 3.3 Derivative W orks. Custom er hereby assigns and conveys to Vendor any and all right, title or interest of any kind Custom er may have or acquire to derivative w orks of any V endor Software Product, an d all such d erivative wo rks shall co nstitu te works for hire such that title ther eto shall vest in Vendor . Section 4 – W arrantie s and Liabilit y 4.1 W arranty of Noninfringement. V endor warrants that, at the tim e of delivery , a Prod uct sha ll no t inf ringe th e paten t rights or copyrights of any other Person. Th is warranty shall not apply to any infringem ent resulting from either: (1) operation or use of the Product with Hardware, Software or equipm ent not provided by Vendor; (2) operation or use of the Product other than in accordan ce with the Sp ecifications th erefore; o r (3) alteration or modification of the P roduct by Cust om er or any other Person other than V endor . Comment : The only warranty that Vendor pr ovides is that the Softwar e will not infringe patent or copyrights. Please note that the Vendor pr ovides no warranty whatsoever for defective softwar e, or other malfunction. Would you pur chase a new car or other “big ticket item” without a w arranty? Pr obably not. Similarly , why should clinics pay literally hundr eds of thousands of dollars (or mor e) for complex, p otentially pr oblematic softwar e which has no warranty? They should not. Nevertheless , it is very common for vendor license agr eements to disclaim all warranties, and to state that th e softwar e is licen sed “as-is,” meaning that all risk of Minami, Lew & Tamaki LLP © 2005 10 softwar e failing to meet the clin ics ’ expecta tions (or even failing complete ly) rests with th e clin ics. In short, clinics should insist upon adequate warranties as specified in the Addendum. W arranty Disclaimer . Except as provided in Section 4.1 above, or except to the extent a warranty of a manufacturer other than V endor m ay apply , ALL PRODUC TS AR E P ROVIDE D “ AS IS ” W ITHOUT WARRANT Y OF ANY KIND, WHETHER E XPRESS OR IMPLIED. W ITHOUT LIMITING THE GENERA LITY OF THE FOREGOING , VENDOR EXPR ES SL Y DISC LAIMS ANY W ARRANTY OF MERCHANT ABILITY , FITNESS FO R A P ARTICULAR PURP OSE, DA TA I NTEGRITY , ERROR- FREE OPERA TION, OR UNINTE RRUPTED SE RVICE. Comment: This claus e expr ess ly disclaims any warranty coverage, specifying th at the So ftw ar e is pr ovided “as-is,” whether defective or not. As stated above, the clinics should insist that (1) Vendor pr ovide a warranty (e.g. 1 year) that the Softwar e will meet the r equir ements of “the Specifications” (a defined term which inclu des the c lin ics’ “mission-critical, must have” performance r equir ements, and (2) if it fa ils to d o so, to r epa ir or replace at Vendor ’s sole cost, and failing that, r equir es Vendor to pr ovide a full r efund of the clinic’ s payments. 4.2 Custom er represen ts and warran ts that it is a soph isticated purchaser and acknowledge and agree that the allocations of risks in th is Agr eem ent is r eflected in th e Software licen se fees, that Vendor is unable to test th e Software under all possible circum stances, and that the allocation of risks under this Agreem ent is reasonab le and appropriate und er th e circum stances. Comment: The purpose of this clause is to pr otect the Vendor in a dispute. By this clause, the clinic agr ees that it is “sophisticated,” meaning that it has expertise and experience in softwar e transactions, knows what it is doing, is capable of pr otecting itself, and fully understands the risks o f th is ver y unfair agr eement, and accepts such risks. In short, this c lause a ttempts to r emove from the clin ic the a rgum ent tha t it was misled by the Vendor . Obviously , a clinic should delete this type of pr ovision. 4.3 Limitation of Remedies. Notwith standing an y other provisions of this Agreem ent, Custom er’s ex clusive rem edy in respect of or related (directly or indirec tly) in any way to any P roduct (including without lim itation th e design, use, suitability , perform ance, features, characteri stics or oth er aspects th ereof, whether or not covered by any warranty) shall be for V endor , at its option, to either: (1) repair or co rrect the non-confor mity within a reasonab le tim e; (2) replace th e Product in question with an Comment : As a mater of standar d practice, a Vendor will a ttempt to limit its liability fr om any and all causes whatsoever , usua lly to the cost of r epairing or r eplacing the Softwar e, or r efunding monies. However , the clinic should exclude from this limitation damages arising fr om (1) thir d party claims that th e Softwar e infr ing es the Minami, Lew & Tamaki LLP © 2005 11 identical but operational product; (3) replace the Product in question with a dif ferent Prod uct whose functionality is substantially the sam e as the Produc t being replaced; or (4) refund to Custom er all char ges in respec t of the Product pr eviously paid by Custom er to Vendor . intellectual pr operty rights of others, or (2) claims for personal injury . See Addendum for an example of exclusions to damages limita tions. 4.4 Limitation of Damages. If, notwithstanding the provisions of this Agreem ent to the c ontrary , a c ourt of competent ju risd iction determ ines that Custom er is en titled to dam ages in resp ect of any claim by Custom er arising under th is Agreem ent, the total amount of such damages shall b e lim ited as follows: (1) if such dam ages are in respect of the perfor mance or nonperform ance of any Product, the am ount of such dam ages shall not exceed the aggregate amount of all char ges in respect of such Product that (prio r to the date as of which the dam ages are determ ined) were paid by Custom er to V endor; or (2) if such damages are in respect of any other breach of this Agreem ent by V endor (other than a breach of the warranty of noninfringem ent set forth in Section 4.1), the am ount of such dam ages shall not exceed the aggregate am ount of all char ges which, prior to the date as of which such dam ages are determ ined, were paid by Custom er to V endor in respect of this Agreem ent. IN NO EVENT AND UNDER NO CIRCUMST ANCE S SHALL VE NDOR HA VE ANY LIABILITY FOR C ONS EQUE NTIAL DAMAGES (INCLUDING W ITHOUT LIMIT ATION DAMAGES F OR L OST PR OF ITS), PUNI TIVE DAMAGES , EXEMPL AR Y DAMAGES, OR OTHE R SP ECIAL DAMAGES OF ANY KIND. 4.5 Indemnification of V endor . Except as expressly provided by Section 4.1 hereof, Custom er agrees to indem nify , defend and hold harm less V endor and its Af filiates, and their res pectiv e sharehold ers, directo rs, of ficers, employees, agents and other representatives from a nd agains t any dam age , loss, expense or other liability arising, di rectly or indirectly , out of either: (1) any claim by any Person other than Cu stom er involving or related to any developm ent or use of any Pr oduct by Custom er (regardless of any flaw or defect of any kind in the Product, and regardless of any wrongful act or om ission or othe r fault attributable to any of the above nam ed inde mnities ), or (2) any b reach of any of Custom er’s obligations under this Agreem ent. Comment : You will notic e that this is a one-sided indemnity , r equiring the clinic to indemnify the Vendor , but ther e is no r equir ement that the Vendor indemnify the clinic. See Addendum for an example of one type of a lte rnative mo re fair to the clin ic. Inde mnifica tion pr ovis ions ar e powerfu l in that if the event requiring indemnity occurs, it is usually very expensive to the party pr oviding the indemnity , and ther efo re the y ar e ho tly n egotia ted. Indemnity pr ovisions usually requir e the indemnifying party to hir e lawyers and to pay damages to pr otect the indemnified party against claims made by thir d parties. E ven a frivolous lawsuit by a thir d party can be very expensive to defend against. Among the bigger risk for clinics is that the so ftwar e infr inges the Minami, Lew & Tamaki LLP © 2005 12 intellectual pr operty rights of others, or that the softwar e (or its malfunction) causes a patient to suf fer injury . V endor will strive to limit its indemnity obligations by limiting its obligation to the amount of money it ha s r eceived from the clinic, or by r efusing to pr ovide any indemnity at all. Clinics sh ou ld try to nar row their indemnity obligations to specific events su ch as in the event that they b reach their ob liga tions under the Agreement. They should try to avoid extending br oad, open-ended indemnity obligations. Prior to signing an agr eement w ith ind emnity pr ovisions, they should discuss the same with th eir insu rance carriers to determine what indemnity obligations will be co ver ed, and what ar e not cover ed. Section 5 – Disputes 5.1 Arbitration . Except as otherwis e e xpressly provided in this Agreem ent, all claim s, controversie s or disputes arising out of or related to th is Agreem ent, or any breach thereof, shall be resolved by binding arbitration in the c ity of ABC, state of XYZ a s provided herein and otherwise in accordance with the Commercial Ar bitration rul es of the Ame rican Ar bitration As sociation. Where the am ount in controversy is less than $100,000.00, the dispute shall b e sub mitted to a single arbitr ator . Othe rwise the d ispute shall b e s ubm itted to a pane l of three arbitra tors . The arbitra tor( s) shall str ictly enf orce all provisions of this Agreem ent except to the extent applicab le law requires otherwise. The arbitra tor( s) shall hav e no authority to grant eith er Party pun itiv e, exem plary , consequential or ot her special dam ages of any kind. Judgm ent upon the award of the arbi trator(s) m ay be entered in any court of com petent jurisdiction. Comment : Some litiga tors will ar gue that arbitration clauses favor the Vendor; e.g. ther e is no chance for “ a runaway jury ,” damages tend to be much smaller , and it is sometimes (but not always) che aper than court trials. All will agr ee that the pa rties will have sign ific antly less r ights in arbitration as compar ed to court pr oceed ings, and that th e pr oceed ings will be faster than in court. Clinics should discuss with the ir co unsel wheth er to reject an arbitration clause, but on balance, the issue is generally not a “deal-br eaker .” 5.2 Jurisdiction and Venue. The Parties ag ree that any action or proceed ing aris ing out of or related to this A greem ent shall be instituted only in the federal district court in (o r closes t to) the city of ABC, state of XYZ. Each Party consents and subm its to the jurisd iction of such cou rt and ag ree s tha t venu e ther ein sha ll b e proper and convenient. In any such action or proceed ing in such court, each Party waiv es any ri ght to raise any objection b ased upon im proper venue, lack of jurisdiction, or inconvenient forum. In connection with an y such action or pr oceeding, each Party Comment: The last sentence of this clause specifies that a court pr oceed ing will only occ ur if th e arbitration clause is thr own out as invalid. See comment above. This pr oposed r evision to Vendor ’s form is in ten ded to pr ovide some balance by stating that the party that brings the lawsuit, has to do it in the other party’ s neighbor hood. It is a b etter alterna tiv e for the Minami, Lew & Tamaki LLP © 2005 13 consents to personal ju risdic tion of such court and agrees s ervice of process m ay be ef fected by United S tates m ail. Notwithstanding the foregoing, the Part ies agree to re sort to such an action or proceeding only if (1) the arbitration provision of Section 5.1 is held to be invalid or unavailable, or (2) to enforce such an arb itration award . clinics than Vendor ’s form agr eement w hich states that all litigation will be hear d wher e the Vendor is headquarter ed. 5.3 Attorneys Fees. In any actio n, proceeding, or arbitration pursuant to Sections 5.1 or 5.2, the court or the arbitration panel, as applicable (the “tribunal”), sh all award to th e prevailing Party all of such Party’ s co sts relate d to the controversy (including without limitation attorneys’ f ees and out-of-pocket expenses). Where each Party p revails in part , th e tribunal sh all award to each Party that part of its costs whic h the tribunal deem s allocable to those is sues as to which such Party p revailed. Comment : Please note that in most litigation, each side usually is requir ed to bear its own costs, including attorneys’ fees. Generally speaking, ther e ar e only two instances entitling the winning side to r eco ver the cos ts of its lawyers fr om the losing side: ( 1) if ther e is a s tatute (written law) expr essly r equiring the losing side to pay for the winning side’ s attorneys (e.g. laws pr ohibiting discrimination and other civil rights laws) , or (2) if the parties by agr eement s pecify that the pr evailing party shal l be entitled to attorneys’ fees and costs in addition to its damages. Thus, this pr ovision is a “double-edged swor d;” if a clinic has been victimized by a Vendor ’s br each, this clause can “level th e playing field” by r equiring the Vendor to pay for th e c linic’ s lawye rs in addition to paying damages. However , if the clin ic is the party in br each, it can be r equir ed to pay damages plus the Vendor ’s legal fees. As a general pr oposition, some litigators will a rgue that such attorneys’ fees pr ovision often pr ote cts the smaller par ty with le ss resour ces. Whether to include such a pr ovision or not is a business risk dec ision for the clin ic to consider . 5.4 Limitation of Actions. Except as set f orth b elow , neithe r Party shall bring any action or institu te an y proceedin g related, directly or indirec tly , to this Agre em ent m ore than two yea rs af ter the P arty initiating th e action or proceed ing knew (or reasonab ly should have known) of the essential f acts giving rise to the underlying cause of action. Comment : This is another clause that has been inserted to pr otect the Vendor . The statute of limita tions in Californ ia to sue for br each o f a written contract is four (4) years. This clause attempts to shorten (by agr eement) such period to 2 years. Clinics should object. Minami, Lew & Tamaki LLP © 2005 14 5.5 Governing Law . This Agreem ent shall be g overned by and construed in accordan ce with th e laws of the S tate of XYZ. Comment : While it wou ld be pr eferable for a clinic to have disputes governed by the law of wher e the clinic is loca ted because it will be easier and cheaper to access local counsel familiar with the law , the issue of whose state governs the interp retatio n of the contract is rar ely a deal-br eaker . Section 6 – Other Services Vendor m ay, in its sole discretion a nd at Custom er’s request, perform training, co nsulting, programm ing or ot her Services for Cu stom er from tim e to tim e. The nature and scope of such Services (and a non-binging estim ate of the total proj ect cots) shall be set forth in reasonab le detail in an Ancillary Docum ent. Except as otherwise provided in an Ancillary Docum ent, the following shall apply: 6.1 All work perform ed in rendering the Services (including without lim itation tim e reasonably spent by V endor personnel in for mulating the scope docum ent referred to above) shall be char ged in accordance with V endor ’s then current hourly labor rate schedule. Billab le tim e shall be rounded up to the neares t half hour and shall include portal to portal travel tim e of V endor personnel providing the Services. In addition, V endor shall be reim bursed by Customer for the co st of all parts, m aterials, supplies, and other consum ables rela ted to the Se rvices, a s well as all other out-of-pocket expenses re lated to the Services su ch as travel expenses. Comment : In or der to contr ol costs and avoid nasty surprises, clinics should insist that all pur chases and licenses ar e listed in an Appendix, along with corr esponding prices and discounts. 6.2 Where the estim ated pro ject co sts exceed $5,00 0.00, prior to the commence ment of work Custom er shall pay V endor on account twenty perc ent (20%) o f the estim ated project cost as a security deposit (the “Security Funds”). Vendor shall not be obligated to credit Security Funds agains t p roject billin gs until the final invoice. A ny Security Funds bala nce rem aining at the end of the project shall be rebated to Custom er without intere st. All project related char ges shall be invoiced m onthly . Vendor shall have the right, in its sole discretion, to credit Custom er Security Funds against delinquencies. If V endor uses Security Funds to cover delinquencies, V endor shall have th e right to cease all work until any rem aining delinquencies have b een satisfied and the Security funds accou nt balance is rep lenish ed to equ al the orig inal am ount thereof. Comment : Clinics should delete this pr ovision. Many vendor agr eements specify tha t the clin ics shall pay 50% or mor e in advance befor e the vendor has done anything, and befor e the clinics can verify th at the so ftwa re ev en works pr operly! Just as it would not be wise to pay a construction contractor most or all of your money befor e he has even picked up a hamme r or driven a single nail, it is unwise to pay the softwar e vendor substantial amounts of money befor e the vendor has performed. Ther efor e, please see the Addendum as one example of pr oposed installment payments payable upon the success ful completion o f specified Minami, Lew & Tamaki LLP © 2005 15 milestones. Note that just as in a contract to construct a house, ther e should be a significant “withhold” to be paid only upon satis facto ry completion of the work. Despite what softwar e vendors may say , insta llment or milestone payments ar e the norm, and clinics should insist upon them. Like virtually all of the terms in the maintenance agr eement a nd licen se a greement, the timing of when payments ar e due will be the subjec t of negotiation, and the amount of concession s that th e clinics will receive will depend upon their economic leverage and the level of their reso lve. 6.3 W ith respec t to thos e S ervic es th at are p erformed at Custo mer’s site, during the period of such perform ance Cus tom er shall m ake available to V endor ’s personnel pr oviding such Services suitable office, work, and sto rage sp ace, and app ropriate wo rking environm ent, acces s to Hardware as necess ary, and reason able use of telephones and other s tandard of fice am enities . 6.4 Either Party shall have the righ t to term inate a p roject at any tim e upon ten (10) days Notice to the other Party . In such event Custom er s hall rem ain obligated to pay all amounts outstanding with respe ct to char ges incurred in c onnection w ith the p roje ct on or before the term ination date. Comment : Like th e claus e in Section 1.5 above, this clause allows the Vendor to terminate the Agr eement for no good r eason after delivering notice of termination. By the time a clinic enters into an agr eement with a Vendor , it w ill have spent a gr eat deal of time, money and r esour ces identify ing its softwar e n eeds, develop ing s pecifications (see Addendum for definition of Functional Specifications) , negotiating the business and legal terms of the contract with Vendor , and signing and commencing implementation. After these events occur , the clinic will wa nt the Agr eement to be binding on Vendor so it can’ t simply walk away fr om its obligations. See Addendum for pr oposed r evision. Minami, Lew & Tamaki LLP © 2005 16 Section 7 – Miscellaneo us 7.1 Document Pr ecedence. In the ev ent of a conf lict be tween the Term s and Conditions and an Anci llary Docum ent, or between two more Ancillary Docum ents, that provision V endor determ ines in its sole dis cretion bes t ref lec ts th e intent of the Pa rties shall control. 7.2 Acceptance. A docum ent otherwise constituting an Ancillary Docum ent becom es ef fective as su ch when (and only when) it is provided by one Party to the o the r and Accepted by the recipien t. Such a docu ment is conclusiv ely deem ed Accepted by Custom er upon (and only upon) the first to occu r of the following: (1) such docum ent is signed by Custom er a nd returned to V endor; (2) after receiving such docum ent Custom er m akes a paym ent or takes any other action that is consis tent with the term s of such docum ent; or (3) Custo mer f ails to provide V endor written Notice of non-acceptance of su ch docum ent within ten (10) calendar days after Custo mer’s initial rec eipt of such docum ent. A doc um ent otherwise c onstitu ting an Ancilla ry Docum ent and provided by Custom er to V endor is conclusi vely deem ed Acc epted by V endor upon (and only upon) such document (or an unam biguous and written conf irm ation thereof) be ing signed by V endor and returned to Custom er. Comment : Clinic should r eject this clause as it would permit the Vendor to unilaterally change the terms of th e Agr eement. Any pr oposed change to the Agr eement should r equir e the clinic’ s prior written cons ent as ev ide nced by the signing of a writing by a person authorized to appr ove such change. 7.3 For ces Majeur e. All periods of tim e specified for perfor mance of obligatio ns (other tha n m oneta ry paym ent obl igations) by either party hereunder shall be subject to an extension for a period of tim e equal to any delay caused by Forces Majeure. Following the occurrence of any Force Maje ure, the perfor mance ef fected thereby sha ll be extend ed to a num ber of days equa l to th e period of such delay . 7.4 Notices. All Notices, requests, dem ands, or other communications directed to a Part y shall be in writing, and shall be personally delivered or sent by certified (return re ceipt requested) or registered m ail, pos tage prepaid, to such Party’ s address specified below such Part y’s signature hereon, or to such other address as such Party m ay he reafter specify in a Notice to the other Party . 7.5 No W aivers. The failure of either Party hereto to insist upon strict perform ance of any of the term s or condition of this Agreem ent shall no t be deem ed to be a waiver of any rights or rem edies of such Party in respec t of any other provision hereof or in respect of any subsequent breach or default under such term or condition. Minami, Lew & Tamaki LLP © 2005 17 7.6 Effect of Agr eement. This Agreem ent shall be binding upon, and inure to the benefit of, the Pa rties hereto an d their su cc essors and perm itte d assigns. 7.7 Entir e Agr eement. This Agreem ent (including without lim itation su bsequently e ffective Anc illary Docu ments) constitutes the en tire Agreem ent between th e Parties with respect to the subject m atter hereof, and supersed es and rep laces any an d all prior agreem ents or arrangem ents between the Parties, w hether oral or written. Comment : This innocent-looking clause is quite powerful. In short, it means tha t if the c lin ic’s rights ar e not specified in writing as part of this Agr eement, the clinics don’ t have such rights. In practice, this means that whatever the Vendor salespersons have pr omised th e clin ic, unless it ha s been r educed to writing and expr essly m ade a part of this Agr eement, such pr omises ar e not enfor ceable as they ar e not a part of this Ag reement. Lesso n: get a ll pr omises in writing and incorporate them into th e Agr eement! 7.8 Assignment. A Party m ay assign its rights and benefits under this Agreem ent to any other Person upon thirty (30) days prior written Notice to th e o ther Party if (and only if ) the ass igno r rem ains liable in respect of a ll its obligations outstanding under this Agreem ent as of the date of such assignm ent, including without lim itation obligations in respect of extended term Pr oduct transa ctions with ter ms rem aining af ter the date of such assignm ent. 7.9 Amendments. V endor m ay unilaterally am end any and all provisions of this Agreem ent e ffect ive as of a day not earlier than one hundred twenty (120) days after Notice of such am endm ent i s given to Custom er. Otherwise, all am endments m ust be in writing and duly executed by both Parties to be ef fective. Comment : Outrageous! This is one the mor e unfair clauses of an alr eady gr ossly unfair agr eement. It permits the Vendor to unilaterally change the Agr eement without the consent of the clinic. Obviously , this should be a deal-br eaker as clinics should not sign any agr eement which permits the Vendor to unilaterally change the te rms later . 7.10 Relationship of Parties. The Parties agree that, in perf orm ing any and all Services, V endor is acting as an independent contractor . V endor assum es no liability or responsib ility for obligations of Custom er in respec t of its custom ers or any other Person. Nothing in this Agreem ent shall be construed to m ake Vendor a partner , joint venturer or em ployee of the other Party . Nothing in this Agreem ent sha ll be construed to m ake V endor responsible for com plying with an y disclosure, reporting or other Minami, Lew & Tamaki LLP © 2005 18 requirem ent of the other Pa rty’ s business or operations. 7.11 Nonsolicitation. Durin g the te rm of this Agreem ent Custom er shall not solicit any V endor em ployee to leave the em ploy of Vendor for any reason. 7.12 Definitions. All cap italiz ed term s in this Ag reem ent ha ve the following meanings: “Acceptance” has the m eaning set forth in Section 7.2 hereof. A Person is an “Affiliate” of a second Person if , di rec tly o r indir ectly (whether through a chain of owners hip or otherwise), either (i) the first Person owns or controls a m ajority of the equity or voting intere sts in the second P erson, (ii) the second Person owns or controls a m ajority of the equity or voting interests in the fi rst Person, or (iii) a m ajority of the equity or voting interests in both th e first Person and the second Person are owned or controlled by the sam e Person(s). “Ancillary Document” m eans any docum ent involving a Product transaction between V endor and Cust om er that becom es ef fective in accordan ce with Sectio n 7.2 hereo f. Such docum ents m ay include Product orders, invoices, confirm ations, exhibits, schedules, addendas or sim ilar docum ents confirm ing supplem entary inform ation (e.g., Product identification; quantity; pr icing; shipm ent infor mation; installation, training or other pr oject scheduling information; etc.) concerning any such transaction. “Effective Date” m eans the date immediately preceding the Parties ’ signature above. “For ce Majeur e” m eans any cause or circ um stance beyond the parties’ control, (such as, but not lim ited to, acts of God, changes in governm ent regulations, acts of governm ental bodies or their em ployees or agents, weather , strikes, lockouts, boycotts, a nd inability to secure labor or any material specified or reasonably ne cessary in connection with property through ordinary busin ess channels, fire, unusual delays in transportation, unavoidabl e casu alties, etc.). “Hardw ar e” m eans computer -related ta ngible personal property such as com puters, m onitors, term inals, storage devices, connectivity devices, printers, etc. “Notice” means a notice given in accord ance with Section 7.4 of thi s Agreem ent. “Operational” m eans the function of a Product without m aterial deviation from its Specifications or the m anuf acturer ’s m ost rec ently Minami, Lew & Tamaki LLP © 2005 19 published user docum entation for such Product. “Party” m eans either Vendor or Custom er. “Period” means the calendar period (m onthly , quarterly or annually) corresponding to the frequency of pa ym ents in respect of a recurring char ge. “Person” means a natural person, or a priv ate or governm ental entity of any kind. “Pr oduct” m eans any Hardware, Software or Service provided by Vendor to Custom er. “Service” means any service, as sis tance, or us e of a resou rce p rovided by Vendor to Custom er. “Softw ar e” m eans eith er: (1 ) a set of m achine-readable instruction s designed to perform a task or accom plish a purpose; (2) a set of machine-rea dable da ta; (3) a se t of m achine-re adable ins tructions for for matting data; or (4) text or graphi c m aterial in any form de scribing or otherwise related to any of the foregoing item s, or the use th ereof, such as program listings, flow charts, m anuals or other docum entation. “Specifications” m eans the specifications fo r a Product as published by its m anufacturer from tim e to ti me. [END OF TERMS AND CONDITIONS] Minami, Lew & Tamaki LLP © 2005 20
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