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TATE

COMPENDIUM


VERSION

ADAM


-

i

-

Don't
rel y on thi s as a substi tute for l egal advi ce



ask your l awyer i f i t's ri ght for you.

Transacti on
Agreement
Templ ate Engi neeri ng


TATE

Compendium


community library

of
business contract clauses

D
evelopment
draft
ADAM
,
*

2009
-
0
9
-
24

www.TATECompendium.org



C
opyri ght ©
2009
D. C. Toedt III

Member of the Texas and Cal i forni a bars

dc@toedt.com

www.l i nkedi n.com/i n/dctoedt



* The current plan is to name successive TATE Compendium versions alphabetically, like hurricanes.


Comments and suggestions
for
revisions and
additional clauses
are welcome


please
email
them to the author at the address above
.

Contents

Introduction

................................
................................
................................
...............

1

Cl ause ti tl es are, i n essence, edi tabl e su
mmari es

................................
................................
.....

1

Curl y brackets i ndi cate vari abl e text that can be changed as needed

................................
...

1

Daggers i n a clause ti tl e are al erts for drafters

................................
................................
..........

1

Negoti ati on categori es i ndi cate how controversi al a clause mi ght be

................................
..

1

Tends
-
to
-
favor i ndi cators suggest what the name says

................................
...........................

1

Passi ve voice and other del i berate a
wkwardness

................................
................................
.....

1

ARB

Arbitration

................................
................................
................................
.....

2

ATT

Attorneys' fee
-
shifting to encourage settlement



................................
............

7

AUD

Audit rights

................................
................................
................................
....

9

BAC

Background checks

................................
................................
.......................

13

BRE

Breach

(see also Termination)

................................
................................
.......

14

COM

Compensation

................................
................................
..............................

16

CON

Confidential information

................................
................................
...............

18

DEF

Definitions & usages

................................
................................
.....................

27

DIS

Dispute management processes

................................
................................
....

32

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

ii

-

EXP

Export controls

................................
................................
.............................

33

FOR

Force majeure

................................
................................
..............................

35

GEN

General provisions

................................
................................
........................

37

GRA

Gramm
-
Leach
-
Bliley Act provisions

................................
................................

47

HIP

HIPAA business
-
associate provisions

................................
..............................

49

IND

Indemnity defense general provisions
................................
............................

50

INF

Infringement warranty

................................
................................
..................

53

INS

In
surance

................................
................................
................................
.....

57

INT

Intellectual property rights
................................
................................
............

60

LIM

Limitation of liability

................................
................................
.....................

65

PAY

Payments

................................
................................
................................
.....

68

PER

Personnel


certain matters

................................
................................
..........

72

PRI

Pricing adjustments


................................
................................
....................

75

REL

Relationship management

................................
................................
............

77

SER

Services
................................
................................
................................
........

78

SIT

Site visits

................................
................................
................................
......

83

STA

Staffing †
................................
................................
................................
......

84

SUB

Subcontractors

................................
................................
.............................

86

TAX

Taxes

................................
................................
................................
...........

89

TER

Termination

(see also Breach)

................................
................................
.......

91

UNI

Unilateral amendments



................................
................................
.............

95

WAD

Warranty against defects

................................
................................
..............

97

WAG

Warranties


general provisions & disclaimer

................................
.................

99

WAI

Warranty against infringement


see "Infringement indemnity"

....................

101

Revision history

................................
................................
................................
......

102

Versi on ADAM

................................
................................
................................
.............................

102

Versi on ABIGAIL

................................
................................
................................
..........................

103

Versi on AARON
................................
................................
................................
............................

103

Creative Commons license

................................
.............................

104


DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

1

-

Introduction

Clause t
itle
s are
, in essence,

editable summaries

M
ost provi si ons
i n thi s
Compendi um

take the form of:

(i )

a cl ause ti tl e
, general l y wri tten as a
compl ete sentence, so that i t can do doubl e duty as
a short
-
form cl ause
;

(i i )

l ong
-
form
l anguage
;
and

(i i i )

one or more commentary paragraphs,
with yellow background, as
explained below
.

Curly brackets indicate variable text that can be changed as needed

Many cl auses bel ow i ncl ude text i n
{
curl y brackets
}
, si gni fyi ng terms (for exampl e, names,
amounts, etc.) tha
t a drafter may wel l wi sh to edi t to fi t the si tuati on. In that case, the edi ted
text takes precedence over the curl y
-
bracketed text bel ow.

Daggers in a clause title

are alerts for drafters

Some cl auses bel ow are marked wi th daggers

† to i ndi cate that som
e drafters mi ght vi ew them
(i )

as entai l i ng potenti al l y
-
troublesome busi ness
-

or l egal commi tments, or (i i )

as otherwi se i na
p-
propri ate for thei r parti cul ar situati ons. NOTE: NOT ALL SUCH CLAUSES are necessari ly so
marked.


Negotiation categories

indicate

how controversial a clause might be

In thei r comments, s
ome
Compendi um

cl auses are tagged to i ndi cate how wel l they're
general l y
recei ved by negoti ators, at l east i n my experi ence



of course,
your mi l eage may vary
:

On the green

"No
-
brai ner" provi si ons, u
sually agreed to wi thout
seri ous

objecti on
.

On the fai rway

Often
agreed to, but someti mes a poi nt of contenti on i n negoti ati ons
.

In the rough

O
ften objected to, someti mes strenuousl y,
by one party

or another.

Tends
-
to
-
favor
indicators

suggest what the name says

In thei r comments, s
ome
Compendi um

cl auses i ndicate whi ch party the cl ause tends to favor.
Of
course, users and their lawyers should determine whether the clause is right for their particular
situation.

Passive voice and other
d
eliberate
awkward
ness

To make i t easy for a reader to qui ckl y see what a cl ause i s about, I've used passi ve voi ce i n
some
cl ause ti tl e
s
, a
s wel l as certai n
l anguage choi ces

that mi ght otherwi se be awkward
.

The rati onal e:
That way, the mai n subject of the

cl ause can be cl ose to the begi nni ng of the se
n-
tence (where I can bol d
-
face i t for easi er scanni ng).

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

2

-

ARB

Arbitration

ARB
-
1

All disputes
{
a
rising out of or relating to
}

this Agreement
{
or any transaction or
relationship resulting from it
}

will be resolved by binding arbitration.



(1)

Al l di sputes, cl ai ms, and controversi es (i )

arising out of thi s Agreement, i ncl udi ng for exampl e
concerni ng i ts i nterpretati on, performance, or breach



and i f so speci fi ed, al l di sputes, cl aims,
and

controversi es (i i )

rel ati ng to thi s Agreement, i ncl udi ng for exampl e any tort
-

or statutory
cl ai m, or (i i i )

arisi ng out of or rel ati ng to any transacti on or rel ati onship resul ti ng from thi s
Agreement



wi l l be resol ved by bi ndi ng arbi tration under the U.S
. Federal Arbi trati on Act and
the l aw governi ng thi s Agreement.

(2)

Any resul ti ng arbi tration award wi l l be enforceabl e i n any court of competent juri sdicti on
.

NEGOTIATION CATEGORY: On the fairway.

COMMENT:

See th
ese

notes
.

ARB
-
2

Other claims,

of whatever nature, that may arise between the parties

are also
covered by this
agreement to arbitrate.





In the i nterest of promoti ng consi stency i n thei r busi ness
rel ati onship, the parti es i ntend for thi s
agreement to arbi trate to encompass any other cl ai ms, of any nature, that may ari se between
them.

NEGOTIATION CATEGORY:
In the rough




s
ee this
note
.

ARB
-
3

The a
rbitration rules

will be
{
the Commercial Arbitration Rules of the American
Arbitration Association (AAA)
}
.



The arbi trati on wi l l be conducted i n accordance
wi th the speci fi ed rul es, to the extent not i nco
n-
si stent wi th thi s Agreement.

NEGOTIATION CATEGORY: On the fairway.

COMMENT:

See this
note
.

ARB
-
4

The arbitration panel

will consist of
{
a single arbitrator
}
.



NEGOTIATION CATEGORY: On the
fairway
.

COMMENT:

See this
note
.

ARB
-
5

Disputes about arbitrability

are to be decided by
{
the arbitration panel
}{
, as well
as disputes

about
the enforceability of the agreement to arbitrat
e
}
.





NEGOTIATION CATEGORY: On the
fairway
.

COMMENT:

See this
note
.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

3

-

ARB
-
6

Arbitrator qualifications:

An arbitrator
must
{
be a member of the bar of any
jurisdiction who has experience in
the general field of the dispute
}
.


Any person servi ng as an arbi trator, i n addi ti on to meeti ng any rel evant requi rements of appl i c
a-
bl e arbi trati on rul es, must meet the speci fi ed qual i fications.

NEGOTIATION CATEGORY: On the green.

ARB
-
7

The place

of the arbitration

will be
{
as agreed by the parties, or if not agreed, as
determined by the AAA
}
.




NEGOTIATION CATEGORY: On the fairway.

ALERT
:

The place of arbitration can affect things like the law governing the arbitration procee
d-
ings and

the court(s) in which an award can be enforced


s
ee this
note
.

ARB
-
8

Administration:

Unless
otherwise agreed by the parties in a particular case, the
arbitration will be administered by
{
the parties themselves
}
.


NEGOTIATION CATEGORY: On the fairway.

COMMENT:

See this
note
.

ARB
-
9

Temporary relief:

A party may apply to any court of competent jurisdiction for
temporary, interim, or preliminary injunctive relief, without waiver of its right to
arbitration.





NEGOTIATION CATEGORY: On the green.

COMMENT:

See this
note
.

ARB
-
10

Standard of decision:

The arbitration panel shall decide the dispute in accor
d-
ance with this Agreement and applicable law
(including for example statutes of
limitation or
-
repose)
and not as

amiable compositeur

or

ex aequo et bono
.


NEGOTIATION CATEGORY: On the green.


COMMENT:

See this
note
.

ARB
-
11

Standard of decision:

The arbitration panel may apply the principles of

amiable
compositeur

and

ex aequo et
bono
.




NEGOTIATION CATEGORY:
In the rough.


COMMENT:

See this
note
.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

4

-

ARB
-
12

Streamlined proceedings:

The arbitration panel should streamline the procee
d-
ings to the extent reasonably possible.



(1)

The arbi trati on panel i s authorized and di rected to take reasonabl e measures to streaml i ne
and expedi te the arbi trati on proceedi ngs at al l stages.

(2)

For the avoi dance of doubt, the parti es, by agreement, may overrul e any parti cul ar procedu
r-
al deci si on of the arbi trati on panel.

NEGOTIATION CATEGORY: On the green.

ARB
-
13

The arbitration hearing

should be conducted on consecutive days.



In

the i nterest of reduci ng i neffi ci enci es and the attendant extra expense, the arbi trati on heari ng
shoul d
be conducted on consecuti ve days
i f at al l practicable
.

NEGOTIATION CATEGORY: On the fairway.

COMMENT:

See this
note
.

ARB
-
14

Multiple arbitrators shall stay together

until they render an award.



In any arbi trati on i nvolving a mul ti
-
arbitrator
panel, i n the i nterest of reduci ng potenti al del ays
and i neffi ci enci es and the attendant extra expense, after the concl usi on of the heari ng the panel
members are to remai n together, at the heari ng l ocati on or other agreed l ocati on, unti l they
have rendered

the award.

NEGOTIATION CATEGORY: On the fairway.

COMMENT:

See this
note
.

ARB
-
15

Enhanced appellate revi
ew

of the award is agreed to.




(1)

The arbi trati on panel's powers do not i ncl ude the power to render an award based:

(A)

on errors of l aw or l egal reasoni ng, nor

(
B
)

on fi ndi ngs of fact not supported by substanti al evi dence.

(2)

The parti es ag
ree that any award that i s so based, i n whol e or i n part, shal l be appeal abl e to a
court of competent juri sdicti on on grounds, that the arbi trati on panel thereby exceeded i ts
agreed powers.

NEGOTIATION CATEGORY: On the fairway.

ALERT
:

A clause like this

might not be enforceable


see
this
note
.

ARB
-
16

Findings of fact and conclusions of law

are to be included in the award.



Unl ess otherwi se agreed, the arbi trati on panel shall set forth wri tten fi ndi ngs of fact and concl
u-
si ons of l aw i n i ts award.

NEGOTIATION CATEGORY: On the fairway.

COMMENT:

Requiring the arbitration panel to pr
ovide findings of fact and conclusions of law and
a transcript may sound like it would increase the expense of the proceeding. As a practical ma
t-
ter, however, arbitration awards typically contain an explanation of the underlying reasoning a
n-
yway



if for n
o other reason than that the arbitrator(s) want the parties and their lawyers to
think well of them, so that they’ll have a shot at being hired again someday for another case.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

5

-

ARB
-
17

A transcript

of oral testimony is to be provided.


Unl ess otherw
i se agreed, the arbi trati on panel shall provi de the parti es wi th a court reporter's
transcri pt of al l oral testi mony.

NEGOTIATION CATEGORY: On the fairway.

COMMENT:

As a practical matter, in many arbitrations a court reporter will transcribe the hea
r-
ing
in any case, so the transcript will already be available..

ARB
-
18

Joint arbitration expenses

are to be shared equally unless the award specifies
otherwise.


Unl ess otherwi se agreed:


(1)

Each party wi l l bear i ts own expenses of the arbi trati on.


(
2)

Al l other expenses of the arbi trati on wi l l be borne equal l y by the parti es unl ess the arbi tr
a-
ti on panel dul y assesses some or al l of such expenses agai nst one or more speci fi ed parti es (for
the avoi dance of doubt, thi s cl ause does not i n i tsel f gi ve the

arbi trati on panel the power to do
so).

NEGOTIATION CATEGORY: On the green.

COMMENT:

The agreed The agreed arbitration rules may well contain similar expense
-
sharing
provisions. See, for example,
Rule R
-
5
0

of the AAA's Commercial Arbitration Rules, on which some
of the language in this clause is modeled..

ARB
-
19

Survival:

The arbitration provisions of this Agreement will survive any
termination or expiration of the Agreement in respect of any arbitrable matter
that arose before such event.


NEGOTIATION CATEGORY: On the green.

ARB
-
20

Arbitration proceedings are co
nfidential

except
for enforcement purposes.

ARB
-
2
1

Third
-
party participants

in transactions under this Agreement
{
may
}

enforce
these arbitration provisions against a party.




(1)

The parti es anti ci pate that one or more i ndi vi duals or org
ani zati ons i n additi on to the
m-
sel ves



that i s, non
-
parti es to thi s Agreement



may parti ci pate i n one or more transacti ons or
rel ati onshi ps arising out of thi s Agreement.

(2)

If so speci fi ed, e
ach such non
-
party wi l l have the ri ght to enforce the arbi tra
ti on provi sions
hereof, as a thi rd
-
party benefi ci ary of those provi si ons, agai nst any party to thi s Agreement.

NEGOTIATION CATEGORY:
In the rough.


COMMENT:

This clause allows a third party, finding itself in a dispute arising out of an agreement
containing an arbitration requirement, to force a signatory to the agreement to comply with the
arbitration requirement, even though the third party itself did not e
nter into the agreement.

In May 2009 the U.S. Supreme Court held that, as long as state law permits the third party to e
n-
force the requirement, doing so is permissible under the Federal Arbitration Act: "[A] litigant who
was not a party to the relevant a
rbitration agreement may invoke §3 [of the Act, permitting a
stay of litigation] if the relevant state contract law allows him to enforce the agreement."
Arthur
DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

6

-

Andersen LLP v. Carlisl
e
, No. 08
-
1
46, slip op. at

8 (U.S. May

9, 2009) (reversing and remanding
appellate court affirmance of denial of stay).

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

7

-

ATT

Attorneys' fee
-
shifting to encourage settlement



ATT
-
1

Applicability:

This section
applies to written settlement offer
s

that conspi
cuously
invoke this section and
set forth

an acceptance deadline of at least
{
10 business
days
}
.




(1)

The
i ntent

of thi s secti on i s to
create

i ncenti ves for the parti es to make and to accept

(as the
case may be)

reasonabl e offers

to settl e any di sputes that may ari se between them
.


COMMENT: This entire section is adapted from
Rule 68

of the Federal Rules of Civil Procedure,
and from New Jersey
Court Rule 4.58
. See this
note

for additional discussion.


(2)

Thi s secti on appl i es to any wri tten offer, by a party to an adverse party, to sett
l e a di spute,
but onl y i f the offer:

(i )

i s made i n accordance wi th thi s Agreement’s noti ce provi si ons;

(i i ) expressl y and conspi cuously states that fai l ure to accept the offer by a stated dea
d-
l i ne coul d resul t i n an award of attorneys' fees and expenses

agai nst the adverse party
pursuant to thi s secti on; and

COMMENT: The "conspicuous statement" requirement in subclause (2)(ii) is intended to avoid
ambushes by a winning party, claiming that one of its previous communications was an una
c-
cepted 'settlement

offer' and that it therefore is entitled to its attorneys' fees.

(i i i )

i s not accepted by the adverse party by the stated deadl i ne.

ATT
-
2

The non
-
settling party is liable

for the offeror's post
-
offer expenses If the final
result of litigation and/or arbi
tration is
not more
favorable
to a non
-
settling pa
r-
ty
than
an
unaccepted settlement offe
r
.





(1)

Thi s cl ause appl ies i f:


(A)

a
di spute gi ves ri se to a fi nal judgment or arbi trati on award from whi ch no further
appeal i s taken or possi bl e
;

(B)

before the judgment or award became not further appeal able, a party made a se
t-
tl ement offer to an adverse party i n accordance wi th thi s secti on;

(C)

the adverse party di d not accept the settl ement offer; and

(D)

the judgment or award i s not more
fav
orabl e to the adverse party than the una
c-
cepted offer
.

(2)

In that case, the adverse party shal l rei mburse the offeror for any and al l of the fol l owi ng that
the offeror i ncurred after maki ng the offer:

(A)

costs; and

(B)

the offeror's reasonabl e expense
s of l i ti gati on, arbitrati on, and/or appel late pr
o-
cee
d
i ngs
ari sing out of
the di spute, i ncl udi ng but not l i mi ted to reasonabl e fees and e
x-
penses for attorneys and expert wi tnesses.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

8

-

(3)

For the avoi dance of doubt, such rei mbursement i s i n addi ti on to any o
ther rel i ef to whi ch the
offeror may be enti tl ed.

ATT
-
3

A judgment 'favorable' to the claimant

must be least
{
120%
}

of the defendant's
settlement offer.





For purposes of thi s secti on: IF: A judgment or arbi trati on award i ncludes an award of mon
etary
damages to the adverse party; AND: The offer to settl e provi ded for a monetary payment to the
adverse party; THEN: The judgment or award wi l l not be deemed more favorabl e to the adverse
party unl ess the monetary dam
a
ges, excl usi ve of al l owable prejud
gment i nterest and counsel
fees, i s at l east
the speci fi ed percentage
of offered monetary payment.

COMMENT:
This clause is based on New Jersey Court Rule 4:58; see

this article

for additional di
s-
cus
s
ion and a link.

ATT
-
4

A judgment 'favorable' to the defendant

must be less than
{
80%
}

of the
claimant's settlement offer.





For purposes of thi s secti on: IF: A judgmen
t or arbi trati on award i ncludes an award of monetary
damages to the offeror; AND: The offer to settl e provi ded for a monetary payment to the offeror;
THEN: The judgment or award wi l l not be deemed more favorabl e to the adverse party unl ess
the monetary dam
a
ges, excl usi ve of al l owabl e prejudgment i nterest and counsel fees, i s l ess
than
the speci fi ed percentage
of offered monetary payment.

COMMENT:
This clause is based on New Jersey Court Rule 4:58; see

this article

for additional di
s-
cus
s
ion and a link.

ATT
-
5

An offer not timely accepted

is deemed withdrawn
, but
a counter
-
offer is not a
rejection.



(1)

A settl ement offer, made under thi s secti on, that i
s not ti mel y accepted i n wri ti ng, i s consi
d-
ered wi thdrawn, but does not precl ude a l ater offer.

(2)

An adverse party's maki ng of a counter
-
offer shal l not be deemed a rejecti on of a pendi ng o
f-
fer, whi ch shal l remai n open unti l accepted or wi thdrawn as pro
vi ded herei n.

COMMENT: This clause is intended to negate the traditional rule in contract law that a counter
-
offer constitutes a rejection of the other party's previous offer.

ATT
-
6

Settlement offers are confidential

and inadmissible.



(1)

Each
party shal l preserve i n stri ct confi dence the exi stence and detai l s of (i ) any offer made by
ei ther party pursuant to thi s secti on and (i i ) any communi cati ons between the parti es regardi ng
the offer.

(2)

Evi dence of an unaccepted offer i s not admi ssible i
n any proceedi ng to adjudi cate or arbi trate
the di spute except to determi ne costs and expenses.


COMMENT: This clause makes it clear that the confidentiality rule in effect in most jurisdictions
(e.g., under
Rule

408

of the Federal Rules of Evidence) also applies here.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

9

-

AUD

Audit

rights

AUD
-
1

Customary recordkeeping:

{
Provider
}

will maintain complete and accurate
records, conforming at a minimum to customary standards,
{
for each
transaction
under this Agreement
}
.




NEGOTIATION CATEGORY:
On the fairway.

COMMENT: In many cases, a simple obligation to maintain 'customary' records might well su
f-
fice.

BUT: All parties should try to look into the future about the kinds

of records they might later
want for auditing purposes. And the recordkeeping party should think carefully about the admi
n-
istrative
-

and financial impact of the recordkeeping commitments it is making.

AUD

-
2

GAAP
recordkeeping:

{
Provider
}

will maintain c
omplete and accurate records,
conforming at a minimum to
{
generally
-
accepted accounting principles
}
,
{
for
each transaction under this Agreement
}
.




NEGOTIATION CATEGORY:
On the fairway.

AUD
-
3

Records
are to
comply with law
.


Al l
records requi red to be mai ntai ned pursuant to thi s Agreement are to conform to the rel evant
requi rements of appl i cable l aw, i f any, i n addi ti on to any other requi rements that may be stated
herei n.

NEGOTIATION CATEGORY:
On the green.

AUD
-
4

Record r
etention:

{
Provider
}

will retain required records
{
for at least one year
after completion of the relevant transaction
}
.




The speci fi ed party wi l l retai n al l records that i t must mai ntai n under thi s Agreement for the
speci fi ed peri od or as
requi red by l aw, whi chever i s l onger.

NEGOTIATION CATEGORY:
On the fairway.

AUD
-
5

{
Customer
}

may conduct reasonable audits,

in confidence, of
{
Provider
}
's
records required by this Agreement.


(1)

The speci fi ed audi ti ng party may conduct, i
n confi dence, reasonabl e audi ts of any records
that thi s Agreement requi res the speci fi ed recordkeepi ng party to keep.

(2)

Any such audi t i s to be conducted through representati ves and agents of the audi ti ng party
reasonabl y acceptabl e to the recordkeepi n
g party.

(3)

The recordkeepi ng party wi l l provi de reasonabl e cooperati on i n any such audi t.

NEGOTIATION CATEGORY:
On the green.

COMMENT: This is a bare
-
bones provision that in some cases might be suitable for standalone
use. It can also be fleshe
d out with one or more of the other clauses below.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

10

-

AUD
-
6

Audits
must be
conducted

at reasonable times and places during normal
business hours.


Except as may be otherwi se agreed, each audi t wi l l be conducted (i )

duri ng normal busi ness
hours, (i i
)

at reasonabl e ti mes desi gnated by the audi ti ng party i n consul tati on wi th the recor
d-
keepi ng party, (
i i i )

where the records are kept i n the ordi nary course of busi ness, or other re
a-
sonabl e l ocati on desi gnated by the recordkeepi ng party i n consul tati on wi t
h the audi ti ng party.

NEGOTIATION CATEGORY:
On the fairway.

ALERT:


In a 'friendly' audit clause, the precise location of the audit should be worked out on a
case
-
by
-
case basis for the parties' mutual convenience. Depending on the circumstances, i
t might
make sense for the recordkeeping party to give the auditors a conference room and bring boxes
of documents to them (or to do the equivalent with electronic records). ON THE OTHER HAND, in
a 'mutually suspicious' audit clause, the parties might want

to specify either a particular location,
or a procedure for determining the location.

AUD
-
7

The recordkeeping party will provide reasonable access

to relevant documents
and personnel.


For each audi t, the recordkeepi ng party wi l l: (i )

provi de the
audi ti ng party wi th reasonabl e access
to i ts rel evant documents and records; and (i i )

at the audi ti ng party's request, di rect i ts rel evant
personnel to provi de reasonabl e i nformati on to the audi ti ng party about the records i n questi on
and the matters recor
ded therei n.

NEGOTIATION CATEGORY:
On the green.

AUD
-
8

The auditing party may
retain
copies

of relevant records, in strict confidence.





The audi ti ng party may make and keep copi es of the recordkeepi ng party's rel evant records; i f i t
does

so, i t wi l l (1)

preserve the copi es and thei r contents i n stri ct confi dence; (2)

not use or di
s-
cl ose them except to the mi ni mum extent necessary to protect i ts ri ghts under thi s Agreement;
(3)

i nstruct i ts rel evant empl oyees concerni ng i ts confi denti al ity

obl i gations; and (4)

contractual ly
obl i gate any outsi de audi ti ng personnel to abi de by such obl i gati ons.

NEGOTIATION CATEGORY:
On the fairway.

ALERT:


In some circumstances, the recordkeeping party might want to put limits on the types of
records that the auditing party can copy and take away.

AUD
-
9

The maximum a
udit

frequency
is

{
once in any 12 consecutive months
}

{
EXCEPT
for good reason clearly shown
}
.




NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Recordkeeping party.

AUD
-
10

The d
e
adline

for requesting an
audit of records for a given period
is
{
one year
after the end of the period
}

{
EXCEPT for good reason clearly shown
}
.





NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Recordkeeping party.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

11

-

AUD
-
11

One audit only

is permitted for

records for a given period
{
EXCEPT for good
reason clearly shown
}
.




NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Recordkeeping party.

AUD
-
12

Audit
purpose:

Audits are permitted only for the purpose of
{
confirming that
the recordkeeping party has fulfilled its obligations under this Agreement
}
.


NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Recordkeeping party.

AUD
-
13

Auditor qualifications:

All audits must be conducted by
{
independent certified
public accountants or other qualified independent professionals
}

unless
otherwise agreed.





NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Recordkeeping party.

AUD
-
14

Auditor acceptability:

The auditor(s) for each audit must be reasonably
acceptable to the recordkeeping party.




NEGOTIATION CATEGORY:
On the
fairway.


TENDS

TO FAVOR: Recordkeeping party.

AUD
-
15

Unrelated confidential information

need not be disclosed to the auditor(s).


For the avoi dance of doubt, the recordkeepi ng party need not provi de the audi ti ng party or i ts
agents wi th access to

propri etary or confi denti al i nformati on concerning the recordkeepi ng pa
r-
ty's other customers, cl i ents, or busi ness associates.

NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Recordkeeping party.

AUD
-
16

Overcharges

will bear interest
{
on t
he same terms as late payments under this
Agreement
}
.




IF: An audi t reveal s that i ncorrect bi l l ing by the recordkeepi ng party resul ted i n a net overpa
y-
ment to the recordkeepi ng party by the audi ti ng party;

THEN: the recordkeepi ng party wi l l pay

i nterest to the audi ti ng party on the overpayment, from
the date (over)pai d by the audi ti ng party unti l the date repai d by the recordkeepi ng party, on the
speci fi ed terms.

NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Auditing party.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

12

-

AUD
-
17

Expense
-
shifting:

The recordkeeping party will reimburse audit expenses if the
audit reveals either (1)

a disparity greater than
{
5%
}
, or (2)

a material breach of
this Agreement.





The recordkeepi ng party wi l l rei mburse the audi ti ng party fo
r reasonabl e audi t expenses actual l y
i ncurred i f the audi t reveal s ei ther: (1)

a net di sparity for the peri od bei ng audi ted, i n favor of the
recordkeepi ng party and resul ti ng from the recordkeepi ng party's error, of at l east the speci fi ed
amount; or (2)

a
materi al breach of thi s Agreement by the recordkeepi ng party.

NEGOTIA
TION
CATEGORY:
On the fairway.


TENDS

TO FAVOR: Depends on threshold numbers chosen.

COMMENT: The wording of this clause is fairly typical. The expense
-
shifting threshold often f
alls
in the range between 3% and 7%.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

13

-

BAC

Background checks

BAC
-
1

Background checks

are required, at
{
Customer's
}

expense, on
{
all Provider
employees and subcontractors who will work on
-
site at Customer's premises,
}

if
so requested by Customer.




(1)

If so requested i n wri ti ng by

Customer,

Provi der

wi l l cause reasonable, l egal ly
-
compl iant
background checks to be conducted on the stated personnel.


(2)

Provi der

wi l l compl y wi th rel evant pri vacy l aw i n respect of i nformati on l earned i n thi s
screeni ng
.

(3)

Unl ess otherwi se agreed, the speci fi ed party wi l l pay or rei mburse, as appl i cable, al l reason
a-
bl e out
-
of
-
pocket expenses i ncurred i n connecti on wi th any background check requi red by thi s
Agreement.

NEGOTIATION CATEGORY: On the fairway.

TENDS TO FAVO
R: Customer.

ALERT:


Any party doing background checks should keep applicable privacy laws in mind, inclu
d-
ing for example the employment
-
related provisions of the
(U.S.)
Fair Credit Reporting Act. The
Privacy Rights Clearinghouse maintains a

FAQ sheet

with general information that may be useful.

BAC
-
2

Drug testing is required

as part of a background check upon reasonable written
request by Customer.




NEGOTIATION C
ATEGORY: On the fairway.

TENDS TO FAVOR: Customer.

ALERT:


See the Alert for the basic background
-
check clause, above.

BAC
-
3

Personnel with adverse background information

must be specifically approved
by Customer.



Subject to any requi rements
of l aw (for exampl e, anti
-
di scrimi nation l aw), i n performi ng i ts obl
i -
gati ons under thi s Agreement,

Provi der

wi l l obtai n

Customer's pri or wri tten approval before ut
i -
l i zi ng any i ndi vidual for whom a background check reveal s materi al l y adverse i nformati on (fo
r
exampl e, an arrest or convi cti on of a fel ony or of a mi sdemeanor i nvol vi ng fraud or moral turp
i -
tude).

NEGOTIATION CATEGORY: On the fairway.

TENDS TO FAVOR: Customer.

ALERT:



Parties contemplating using this clause in a contract should be extremely ca
reful not to
run afoul of applicable anti
-
discrimination laws.

BAC
-
4

Provider will
defend and
indemnify Customer

against any claims arising from
the conduct of Provider's background checks.



Provi der

wi l l defend and i ndemni fy

Customer

and
i ts

protected persons

agai nst any thi rd
-
party
cl ai m (i ncl uding for exampl e cl ai ms by government agenci es and pri vate i ndi vi duals) arising from
the conduct of any background check pursuant to thi s Agreement.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

14

-

BRE

Breach

(see also Termination)

BRE
-
1

Notice of
breach

should be seasonably given by the nonbreaching party.

(1)

For the avoi dance of doubt, the nonbreachi ng party wi l l not be l i abl e, for breach of contract
or otherwi se, for any fai l ure to gi ve seasonabl e noti ce of breach.

(2)

IF: A nonbreachi n
g party unreasonabl y del ays gi ving noti ce of breach to the breachi ng party;
BUT: Under the ci rcumstances, the del ay does not amount to a wai ver of the breach; THEN: The
del ay may be taken i nto account, and gi ven due wei ght, i n determi ni ng the rel i ef (i f
any) to whi ch
the nonbreachi ng party i s enti tl ed.

NEGOTIATION CATEGORY: On the green.

TENDS TO FAVOR: N/A.

BRE
-
2

Breaches are waived

if notice is not given within
{
30 days
}

after discovery.



IF: In case of an al l eged breach of thi s Agreement, the nonbreachi ng party does not gi ve noti ce of
the breach wi thi n [the speci fi ed ti me] after i t knows or, i n the exerci se of reasonabl e di l i gence,
shoul d have known of the breach;

THEN; The nonbreachi ng p
arty wi l l be deemed to have wai ved that breach.

NEGOTIATION CATEGORY:
In the rough.

TENDS TO FAVOR: Breaching party.

ALERT:

For obvious reasons, drafters will want to think carefully before including this clause.

BRE
-
3

Cure periods

for breaches
, beginni
ng upon notice of breach,

are:
{
five business
days
}

for nonpayment of an amount due;
{
five business days
}

for failure to meet
an agreed deadline;
{
one business day
}

for a curable breach of a confidentiality
obligation;
{
30 days
}

for other curable breaches;

{
None
}

for noncurable
breaches.




A breachi ng party wi l l have the speci fi ed peri od, begi nni ng upon the effecti ve date of noti ce of
breach, i n whi ch to cure the breach.

NEGOTIATION CATEGORY: On the fairway.

TENDS TO FAVOR: Depends on how the c
lause is edited.

ALERT:

The parties, and especially their lawyers, should carefully consider the various cure per
i-
ods listed here. With 20
-
20 hindsight, a non
-
breaching party's business people might be furious at
their lawyer for agreeing to (what they n
ow scorn as) 'such a long cure period,' or vice versa.

BRE
-
4

The breaching party will provide status reports

concerning its curative efforts (if
any) upon reasonable request.



At the nonbreachi ng party's reasonabl e request from ti me to ti me, a
party i n breach of thi s
Agreement wi l l provi de the nonbreachi ng party wi th reasonabl e i nformati on about i ts curati ve
efforts, i f any, i ncl udi ng (where appl i cable) progress, probl ems, pl ans, and assumpti ons.

NEGOTIATION CATEGORY: On the fairway.

TENDS TO F
AVOR: Nonbreaching party.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

15

-

COMMENT: This clause is intended to help keep the parties' working relationship as intact as po
s-
sible



which of course may be a challenge, given that (by hypothesis) one party has breached
the contract.

ALERT:

A breaching party

could end up spending a lot of valuable time making status reports, e
s-
pecially if it has a lot of customers with the same contract language and the same breach. On the
other hand, email
-

and Web
-
site updates are often a manageable way of providing such u
pdates.

BRE
-
5

Multiple
-

or repeated breaches

may be collectively deemed a material breach.



In appropri ate ci rcumstances, mul ti pl e
-

or repeated non
-
materi al breaches, even though cured,
may i n the aggregate consti tute a materi al breach.

NEGOTIAT
ION CATEGORY: On the fairway.

TENDS TO FAVOR: Nonbreaching party.

COMMENT: This clause anticipates the times when a non
-
breaching party decides, enough is
enough.

BRE
-
6

The nonbreaching party may suspend its performance

in cases of material
breach.



In cases of materi al breach, the nonbreachi ng party may i n i ts di screti on suspend performance of
i ts own obl i gati ons under thi s Agreement unti l the breach i s substanti al ly cured.

NEGOTIATION CATEGORY: On the fairway

TENDS TO FAVOR: Nonbreaching
party.

COMMENT: In many jurisdictions, this clause might not be strictly necessary
The FindLaw legal
dictionary

notes that

"Under the Restatement (Second) of Contracts, a material breach gives rise
to the right to suspend performance but not to cancel the contract until there is a total breach."

Moreover,
under

UCC §

2
-
609
, either party to a contract for sale of

goods

has certain rights to
suspend its performance (if commercially reasonable) if the party has reasonable grounds for

i
n-
security about the other party’s performance and it makes a written demand for adequate assu
r-
ance of due performance. In addition, under

UCC §


703(2)
, a

provider

of g
oods has certain rights
to suspend performance if the buyer is in breach.

COMMENT: Just what constitutes a material breach will often be open to dispute. The Restat
e-
ment (Second) of the Law of Contracts offers

suggestions

about circumstances that can be “signi
f-
icant” in assessing materiality.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

16

-

CO
M

Co
mpensation

COM
-
1

Provider's sole compensation
for
{
services
}

will be
{
(its regular billing rate(s) for
time
actually worked, plus no
-
mark
-
up reimbursement of reasonable and nece
s-
sary expenses actually incurred
}
, unless otherwise agreed.

Except as may be otherwi se agreed, for exampl e i n a statement of work, Provi der's sol e compe
n-
sati on and expense rei mbur
sement for provi di ng servi ces pursuant to thi s Agreement wi l l be as
stated.

NEGOTIATION CATEGORY: On the green.

TENDS TO FAVOR: Customer.

COM
-
2

Provider
{
will
}

bill for travel time

{
at 100% of its regular rates
}

unless otherwise
agreed.

NEGOTIATI
ON CATEGORY: On the fairway.

TENDS TO FAVOR: To be determined.

COMMENT: Billing for travel time is is sometimes a negotiated point.
From the provider's pe
r-
spective,

the traveler is not fully available for other work, so the customer should pay for that

o
p-
portunity cost.
From the customer's perspective,

such opportunity costs are something the pr
o-
vider should absorb in its internal cost structure, especially if the traveler might be doing work for
other customers during the travel.
A possible compromise

might be for the customer to pay a
stated percentage of the regular billing rate for travel time.

COM
-
3

{
C
ustomer
}

will reimburse

{
Provider's
}

reasonable,

actual, out
-
of
-
pocket expen
-
ses
of performance

{
incurred with Customer's prior authorization
}

unless
othe
r-
wise agreed
.





NEGOTIATION CATEGORY:
On the fairway.

COM
-
4

Expenses may not be marked up,

in any submission for reimbursement, unless
otherwise agreed.

Except as may be otherwi se agreed, a party requesti ng rei mbursement of
expenses under thi s
Agreement wi l l submi t such expenses on a strai ght pass
-
through basi s, that i s, wi thout marki ng
them up. (NOTE: Thi s cl ause does not i n i tsel f obl i gate any party to rei mburse another party's e
x-
penses.)

NEGOTIATION CATEGORY:
On t
he green.

COM
-
5

Expense
-
reimbursement requests

will conform

to the payor's reasonable,
seasonably
-
provided written policies.

Al l requests (i f any) for rei mbursement of expenses under thi s Agreement are to compl y wi th
such reasonabl e wri tten rei mbursement pol i ci es as the payor may seasonabl y provi de to the r
e-
questi ng party. (Thi s cl ause does not i n i tsel f obl i gate any party to re
i mburse another party's e
x-
penses.)

NEGOTIATION CATEGORY:
On the fairway.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

17

-

COMMENT:
Customers' various expense
-
reimbursement policies are sometimes an administrative
pain for providers. This clause recognizes that they're often a practical necessity
, and requires o
n-
ly that the policies be reasonable and that the customer not ambush the provider with a policy a
f-
ter the fact.

COM
-
6

{
Customer's
}

current expense
-
reimbursement policy

is attached as
{
Appendix

X
}
.




NEGOTIATION CATEGORY:
On the fairwway.

COM
-
7

Provider personnel are not eligible

for Customer employee benefits.

For the avoi dance of doubt, Provi der and i ts empl oyees and subcontractors (i f any) are not ent
i -
tl ed to parti ci pate i n any benefi t program of Customer,

i ncl udi ng, for exampl e, Customer's r
e-
ti rement
-

and stock
-
opti on programs, i f any.

NEGOTIATION CATEGORY: On the green.

TENDS TO FAVOR: Customer.

COMMENT:
Some servi ces agreements and consul ti ng agreements contai n cl auses l ike thi s one,
probabl y as a reac
ti on to the di ffi cul ties Mi crosoft had wi th i ts so
-
cal l ed i ndependent contra
c-
tors, who successful ly sued to be recl assified as empl oyees even though some worked for temp
agenci es. Merel y i ncl udi ng thi s ki nd of cl ause, however, may not be enough to keep a s
i mi l ar r
e-
sul t from happeni ng. See general l y

Is Your Independent Contractor Real l y Your Empl oyee?
, by
Jeremy R. Sayre (2007; accessed Oct.

3, 2008);

Empl oyee or Independent Contractor? The Impl
i -
cati ons of Mi crosoft III
, by Denni s D. Grant of Arter & Hadden LLP (2000; accessed Oct.

3, 2008).

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

18

-

CON

Confidential
information

Confidentiality provisions are used in many agreements, including standalone nondisclosure
agreements. For an excellent overview of nondisclosure agreements,
see the article

What is i
m-
portant in a confidentiality agreement or non
-
disclosure agreement (NDA)?, by Wilson Sonsini
partner Yoichiro (”Yokum”) Taku.

CON
-
1

{
Each party's
}

confidential information is protect
ed

under this Agreement.





Any access to a di scl osing party's confi denti al i nformati on by a recei vi ng party pursuant to thi s
Agreement i s governed by the terms and condi ti ons of thi s Agreement.



NEGOTIATION CATEGORY:
On the green.

TENDS

TO FAV
OR: Disclosing party.

ALERT:
A prospective receiving party should not automatically assume that it

will never want the
Agreement to protect it
s own informa
tion; moreover, two
-
way confidentiality provisions are ge
n-
erally more likely to be "fair and
balanced" (pardon the expression) than one
-
way provisions. S
ee
also
this

note
.

CON
-
2

Confidentiality is presum
ed

until proved otherwise.






For the avoi dance of doubt, a party asserti ng that parti cul ar i nformation of a di scl osing party,
subject to thi s Agreement, i s not confi denti al, must come forward wi th evi dence of the same.

NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Disclosing party.

ALERT:


This clause might, in effect, reverse the usual burden of proof at trial


see
this

note
.


CON
-
3

The

Purpose

of any d
isclosure(s)

under this Agreement is
{
to facilitate a potential
transaction between the parties
}
.

NEGOTIATION CATEGORY:
On the green.

COMMENT: The definition of "Purpose" comes into play in determining what the receiving party is
permitted to do with confidential information.

CON
-
4

Marking
of confidential information

{
is
}

required and
must be completed no
later than
{
five business days
after the information's initial disclosure
}
.




Unl ess otherwi se agreed, no i tem of the di scl osing party's i nformati on wi l l be deemed confi de
n-
ti al, even i f otherwi se el i gi bl e, unl ess a copy, cl earl y marked as confi denti al, i s provi ded to the r
e-
cei v
i ng party, preferabl y at the ti me the i nformati on i s i ni tially made avai lable to the recei vi ng
party, and i n any case no l ater than the speci fi ed ti me (i f any).

NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Receiving party.

COMMENT:


See this
note
.

CON
-
5

Cat
ch
-
up marking
requires notice to the receiving party.






In the i nterest of reduci ng possi bl e confusion, i f a requi red marked copy of confi denti al i nfo
r-
mati on i s not provi ded as part of (or at the same ti me as) i ni ti all y maki ng the i nformati on av
ai l
a-
DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

19

-

bl e to the recei vi ng party, then the di scl osing party must al so gi ve noti ce to the recei vi ng party,
i n accordance wi th the noti ce provi si ons of thi s Agreement, that the i nformati on i s confi denti al.

NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR
: Receiving party.

CON
-
6

Marking exception:

Information clearly recognizable as confidential need not be
marked as such.






IF: Thi s Agreement requi res confi denti al i nformation to be marked as such;

THEN: That requi rement does not appl y to
i nformati on that woul d cl earl y be recogni zabl e as co
n-
fi denti al by a reasonabl e person i n the posi ti on of the recei vi ng party.

NEGOTIATION CATEGORY:
In the rough

TENDS

TO FAVOR: Disclosing party.

COMMENT: This clause has the potential to create disputes a
bout what information is "clearly
recognizable as confidential."

CON
-
7

The

d
isclosure period

is

{
t
he one
-
year period following the effective date of this
Agreement
}
.





IF: Thi s Agreement l i mi ts protecti on to i nformati on di sclosed duri ng a
disclosure period
; THEN:

(1) Unl ess expressl y agreed otherwi se, the term "confi denti al i nformati on" i n thi s Agreement a
p-
pl i es onl y to otherwi se
-
el i gi bl e i nformati on to whi ch the recei vi ng party i ni ti ally gai ns access from
the di scl osing party (di rectl y or

i ndi rectl y) duri ng the speci fi ed di scl osure peri od.

(2)

The di scl osure peri od may be extended by wri tten agreement.

NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Receiving party.

COMMENT:


See this

note
.

CON
-
8

{
Either party
}

may terminate

the disclosure period by

giving at least
{
five
business days'
}

notice.


(1)

The speci fi ed party or parti es may termi nate the di scl osure peri od at any ti me, for any reason
or no reason, by gi vi ng the speci fi ed noti ce to the other party.

(2)

For the avoi dance of doubt, earl y termi nati on of the di scl osure peri od wi l l not end any

exi s
t-
i ng confi denti al i ty obl i gati ons for i nformati on di sclosed before termi nati on.

NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Disclosing party.

COMMENT:


Se
e this

no
te
.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

20

-

CON
-
9

The rec
eiving party's notes, etc.,
will likewise be treated as disclosing
-
party
confidential information.


For the avoi dance of doubt, the recei vi ng party's notes and other documents are to be treated as
confi denti al i nformati on of the di scl osing party
to the extent they contai n such i nformati on.

NEGOTIATION CATEGORY:
On the green.

TENDS

TO FAVOR: Disclosing party.

CON
-
10

Affiliate confidential information

is protected if conspicuously identified as
such.




Confi denti al i nformati on of the di scl
osing party's affi liate(s), conspi cuously i denti fied as such, i s
subject to thi s Agreement i n the same manner as that of the di scl osing party.

NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Disclosing party.

COMMENT:


See this

not
e
.

CON
-
11

Exclusions from confidentiality:

The "standard five" exclusions apply.


(1)

Confi denti al i nformati on does not i ncl ude i nformati on shown to be or to have been:

(A)

publ i shed or otherwi se general l y known by rel evant segments of the publ i c; or

(B)

known by the recei vi ng party before obtai ni ng access to i t under thi s Agreement; or

(C) provi ded to the recei vi ng party by a thi rd party not under an obl i gati on of conf
i dence
benefi ti ng the di scl osing party; or

(D) i ndependentl y devel oped by the recei vi ng party wi thout use of the di scl osing party's co
n-
fi denti al i nformati on; or

(E) di scl osed by the di scl osing party to a thi rd party wi thout confi denti al i ty obl igati ons co
m-
parabl e to those of thi s Agreement.

(2)

For the avoi dance of doubt, a speci fi c sel ecti on or combi nati on of i nformati on wi l l
NOT
be
deemed excl uded from confi denti al
-
informati on status, even i f some or al l of i ts component
parts are i ndi vi dually wi thi n o
ne of the foregoi ng excl usi ons,
UNLESS
the sel ecti on or combi n
a-
ti on i tsel f and i ts economi c val ue and pri nci ples of operati on are themsel ves wi thi n such an e
x-
cl usi on.

NEGOTIATION CATEGORY:

On the green.


TENDS

TO FAVOR:
Clause 1

favors the r
eceiving party
; clause 2 favors the d
isclosing party.

COMMENT:


See this

not
e
.

CON
-
12

Exclusions must be proved
b
y either documentary evidence or clear and
convincing evidence.






A party wi shi ng to show that parti cul ar i nformati on fal ls wi thi n an excl usion from confi denti al i
n-
formati on status must do so (1)

by documentary evi dence that amounts to a prepon
derance of
the evi dence, or fai l ing that, (2)

by cl ear and convi nci ng evi dence.

NEGOTIATION CATEGORY:
In the rough.

TENDS

TO FAVOR: Disclosing party.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

21

-

ALERT:


The receiving party might not want to agree to a burden of proof higher
than it might
otherwise have under applicable law


see
this
note
.


CON
-
13

Unauthorized uses or disclosures

are prohibited.



Except as otherwi se authori zed by the di scl osing party, the recei vi ng party wi l l not (1)


use conf
i -
denti al i nformati on e
xcept for the Purpose, nor (2) di scl ose confi denti al i nformation except to i ts
empl oyees, offi cers, and di rectors, on a need
-
to
-
know basi s, for the Purpose.


NEGOTIATION CATEGORY:
On the green.

TENDS

TO FAVOR: Disclosing party.

CON
-
14

Unauthorized access
attempts

are prohibited.


The recei vi ng party wi l l not attempt to access confi denti al i nformation mai ntained by the di scl o
s-
i ng party other than as authori zed by thi s Agreement or by the di scl osi ng party.

NEGOTIATION CATEGORY:
On the fairway.


TEN
DS

TO FAVOR: Disclosing party.

CON
-
15


Confirmation
of confidential information to others

is prohibited.


Unl ess the di scl osing party consents i n advance, the recei vi ng party may not di scl ose or confi rm,
to any thi rd party, any correl ati on or si mi
larity between confi denti al i nformation and i nformation
from any other source.

NEGOTIATION CATEGORY:
On the fairway.


TENDS

TO FAVOR: Disclosing party.

CON
-
16

Reporting obligation:

The receiving party will promptly report (1)

unauthorized
access or use, and (2)

demands for, or attempts at, the same.





(1)

To the extent not prohi bi ted by l aw, the recei vi ng party wi l l promptl y advi se the di scl osing
party i f i t l earns of (or

reasonabl y suspects) actual or attempted access to or use of confi denti al
i nformati on that i s not authori zed by the di scl osing party.

(2)

Some illustrative examples:

Actual or attempted mi sappropri ati on by a thi rd party; i ssuance of
a subpoena seeki ng di
scl osure of confi denti al i nformation; servi ce of a search warrant resul ti ng
i n di scl osure of confi denti al i nformati on.

TENDS TO FAVOR: Disclosing party.

COMMENT:


See this

note
.

CON
-
17

Disclosures to wholly
-
owned subsidiaries

are permitted, subject to confidentia
l-
ity obligations, on a need
-
to
-
know basis for the Purpose.






(1)

Subject to any appl i cabl e l egal
restricti ons (for exampl e, i n the export
-
control l aws), the r
e-
cei vi ng party may di scl ose confi denti al i nformation, on a need
-
to
-
know basi s, to any of i ts who
l -
l y
-
owned subsi di aries (owned di rectl y or i ndi rectl y) i n connecti on wi th the Purpose.

(2)

For the a
voi dance of doubt, thi s provi si on does not authori ze the recei vi ng party to use su
b-
contractors other than such subsi diari es.

NEGOTIATION CATEGORY: On the fairway.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

22

-

TENDS

TO FAVOR: Receiving party.

CON
-
18

Subpoenas, etc.,
by third parties:

The receiving par
ty must promptly advise, and
provide reasonable cooperation with, the disclosing party.




It wi l l not be a breach of thi s Agreement for the recei vi ng party to di scl ose confi denti al i nfo
r-
mati on to the mi ni mum extent requi red by l aw (for exampl e, i
n response to a subpoena, or i n a
securi ti es fi l ing), provi ded that the recei vi ng party
:

(1)

advi ses the di scl osing party as far i n advance of such a di scl osure as practi cable, and

(2)

takes reasonabl e steps, and provi des reasonabl e cooperati on wi th any
efforts by the
di scl osing party, to l i mi t the di scl osure or obtai n l egal protecti on for the i nformati on to
be di scl osed.

NEGOTIATION CATEGORY: On the green.

TENDS

TO FAVOR: Both parties.

COMMENT:


See this

not
e
.

CON
-
19

Expiration


confidentia
lity obligations expire
{
five years after the effective date
of this Agreement
}
, EXCEPT FOR (a)

trade secrets, or (b)

as required by law.






Except as otherwi se agreed:

(1)

The recei vi ng party's confi denti al ity obl i gations under thi s Agreement
wi l l expi re automati ca
l -
l y as speci fi ed.

(2)

Such obl i gati ons wi l l not expi re automati cal l y:

(A) for any i tem or combi nati on of i tems of confi denti al i nformati on that, at the ti me i n
questi on, qual i fies as a trade secret as defi ned i n appl i cable l aw, nor

(B)

where appl i cable l aw requi res conti nued confi denti al ity of the i nformati on i n que
s-
ti on.

NEGOTIATION CATEGORY:
In the rough
.


TENDS

TO FAVOR: Receiving party.

ALERT:


Automatic expiration of

confidentiality status, in some circumstances, might jeopardize
the disclosing party's trade secret rights


see
this
note
.

CON
-
20

Expiration exception



information timely designated remains subject to
confidentiality obligations.


IF: Thi s Ag
reement provi des for confi denti al i ty obl igations to expi re automati cal l y at a certai n
ti me; THEN: Such obl i gati ons wi l l not expi re for any i tem or combi nati on of i tems of confi denti al
i nformati on that i s speci fi cally so desi gnated by the di scl osi ng party.
Any such desi gnati on must
be (1)

reasonabl y detai l ed, and (2)

set forth i n a wri tten noti ce del i vered to the recei vi ng party
before the confi denti al i ty obl igati on woul d otherwi se automati cal ly expi re.

NEGOTIATION CATEGORY: On the fairway.

TENDS

TO FAVOR: Disclosing party.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

23

-

CON
-
21

Return or destruction

of confidential information must be completed and
certified
{
a reasonable time after expiration of the disclosure period or
termination of this Agreement, whichever comes first
}
.






Excep
t as otherwi se agreed:

(1)

The recei vi ng party wi l l seasonably cause ei ther (i )

the return to the di scl osing party, or (i i )

the
destructi on, of al l copi es of the di scl osing party's confi denti al i nformation



i ncl uding for exa
m-
pl e copi es i n the recei vi ng p
arty's notes, etc.



that are i n the possessi on, custody, or control of
(x)

the recei vi ng party, and (y)

any i ndi vi dual or enti ty that obtai ned confi denti al i nformati on
from the recei vi ng party.

(2)

The recei vi ng party wi l l seasonably provi de the di scl osi
ng party wi th a wri tten certi fi cati on of
return or destructi on.

(A)

The certi fi cati on i s to be si gned by an offi cer or other i ndi vi dual authorized to bi nd
the recei vi ng party.

(B)

The certi fi cati on shall note any known excepti on cases of copi es of confi d
enti al i
n-
formati on that are nei ther returned nor destroyed, and for each case, whether or not
the excepti on i s authori zed by thi s Agreement.

NEGOTIATION CATEGORY: On the fairway.

TENDS

TO FAVOR: Disclosing party.

ALERT:

A return
-
or
-
destruction requirement
could cause trouble for one or both parties


s
ee this
note
.

CON
-
22

Backup tapes, etc.,
are exempt from any return
-
or
-
destruction requirement
(with restrictions).




IF: Thi s Agreement requi res confi denti al i nformation to be returned or destroyed; THEN: "Re
m-
nant" confi denti al i nformati on stored i n system
-
type medi a, such as for examp
l e system caches
and emai l backup tapes, need not be returned or destroyed, so l ong as

the medi a (1)

are mai
n-
tai ned i n confi dence, (2)

are not readi l y accessi ble to users, and (3)

are peri odi cally overwri tten
or otherwi se destroyed i n the ordi nary course o
f busi ness.

NEGOTIATION CATEGORY: On the green.

TENDS

TO FAVOR: Receiving party.

COM
MENT:

See this

note
.

CON
-
23

Backup tapes, etc.
, must be overwritten or destroyed within
{
three years
}
.





Any system
-
type medi a contai ni ng confi denti al i nformati on of the di scl osing party (for exampl e,
emai l backup tapes) that are not
returned or destroyed must be overwri tten or otherwi se d
e-
stroyed no l ater than the speci fi ed ti me after the recei vi ng party becomes obl i gated to return or
destroy confi denti al i nformati on.

NEGOTIATION CATEGORY: On the fairway.

TENDS

TO FAVOR: Disclosing pa
rty.

COMMENT:


See this

not
e
.

DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

24

-

CON
-
24

An outside
-
counsel archival copy

may be ma
intained
{
indefinitely
}
.




For the speci fi ed ti me after the recei vi ng party i s requi red to return or destroy confi denti al i
n-
formati on, i ts outsi de counsel may mai ntai n, under counsel's di rect
-

or i ndi rect control, a set of
archi ve
-
onl y,
outsi de
-
counsel
-
only copi es of the confi denti al i nformati on.

NEGOTIATION CATEGORY: On the fairway.

TENDS

TO FAVOR: Receiving party.

COMMENT:


See this

note
.

CON
-
25

Retention required by law
is permitted
{
indefinitely
}
.




IF: Thi s Agreement requi res confi denti al i nformation to be returned or destroyed;

THEN: The r
e-
cei vi ng party need not do so to the extent that appl i cable l aw requi res i ts retenti on.

NEGOTIATION CATEGORY: On the fairway.

TENDS

TO FAVOR: Receiving party.

CON
-
26

Retention advised by counsel

is permitted
{
indefinitely
}
.




IF: Thi s
Agreement requi res confi denti al i nformation to be returned or destroyed; THEN:

(1)

The recei vi ng party need not do so to the extent that the recei vi ng party's outsi de
-

or i n
-
house counsel advi ses that i t be retai ned for possi bl e use i n l egal or admi ni strat
ive proceedi ngs
i nvol vi ng the recei vi ng party.

(2)

Nei ther the recei vi ng party nor i ts counsel has any obl i gati on to provi de the di scl osing party
wi th i nformati on about the content of such advi ce, other than the fact that recei vi ng party i s r
e-
tai ni ng i nfo
rmati on on that basi s.

NEGOTIATION CATEGORY:
In the rough.

TENDS

TO FAVOR: Receiving party.

CON
-
27

Any copies
not returned or destroyed
remain subject to this Agreement's
c
onfidentiality
obligations.


For the avoi dance of doubt:

(1)

IF: The
recei vi ng party, for any reason, does not return or destroy parti cul ar copies of conf
i -
denti al i nformati on; THEN: The recei vi ng party's use and/or di scl osure of such i nformati on co
n-
ti nues to be governed by the terms and condi ti ons of thi s Agreement, notwi th
standi ng any te
r-
mi nati on or expi rati on of the Agreement.

(2)

T
hi s cl au
se does not negate any obl i gati on of the recei vi ng party to return or destroy conf
i -
denti al i nformati on.

NEGOTIATION CATEGORY:
On the green.

TENDS

TO FAVOR: Disclosing party.

CON
-
28

Th
e receiving party's fr
eedom of action
is not impaired except for the specific
obligations of this Agreement.






For the avoi dance of doubt, thi s Agreement does not restri ct the recei vi ng party's ri ght to
(i )

devel op, acqui re, market, and/or sel l

technol ogi es, products, or servi ces si mi lar to or compet
i -
DON'T
RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE



ASK YOUR LAWYER IF IT'
S RIGHT FOR YOU.

TATE

COMPENDIUM


VERSION

ADAM


-

25

-

ti ve wi th those of the di scl osing party, and/or (i i )

to have one or more such thi ngs done for i t by
thi rd parti es, unl ess doi ng so woul d vi ol ate one or more speci fi c obl igations of thi s Agreement.

N
EGOTIATION CATEGORY: On the fairway.

TENDS

TO FAVOR: Receiving party.

CON
-
29

Receiving
-
party personnel assignments
are not restricted except for the
specific

obligations of this Agreement.


For the avoi dance of doubt, apart from the speci fi c
obl igations hereof, thi s Agreement does not
requi re a recei vi ng party to l i mi t the duti es of any of i ts personnel who gai n access to confi dential
i nformati on of the di scl osing party.

NEGOTIATION CATEGORY: On the fairway.

TENDS

TO FAVOR: Receiving party.

C
ON
-
30

Residuals

may be freely used by receiving
-
party personnel.






Subject to any appl i cable patent ri ghts, copyri ghts, or mask work ri ghts, a recei vi ng party i s free
to use any confi denti al i nformati on of a di sclosing party that may be retai ne
d i n the unai ded
memory of i ts personnel, so l ong as the personnel (1)

do not refer to any wi thout reference to
any wri tten, el ectroni c, or other fi xed form of the i nformati on and (2)

do not i ntenti onal l y r
e-
member the i nformati on for that purpose.

NEGOTIAT
ION CATEGORY:
In the rough.

TENDS

TO FAVOR: Receiving party.

ALERT:

"Residuals" clauses have the potential to give t
he receiving party carte blanche to use co
n-
fidential information outside the scope of the agreement


see
this

note
.

CON
-
31

General knowledge
may be freely used by receiving
-
party personnel.






Subject to any appl i cable patent ri ghts,
copyri ghts, or mask work ri ghts, a recei vi ng party i s free
to use and/or di scl ose any general i zed i deas, concepts, know
-
how, processes, or techni ques (r
e-
ferred to as

general knowledge
) that i ts personnel may l earn by vi rtue of thei r access to conf
i -
denti al
i nformati on of the di scl osing party.

NEGOTIATION CATEGORY:
In the rough.

TENDS

TO FAVOR: Receiving party.

ALERT:

See

the alert about residuals information, above.


CON
-
32

The receiving party's information
is not protected under this Agreement.






For the avoi dance of doubt, the di scl osing party i s under no obl i gati on of confi dence wi th respect
to any
i nformati on of the recei vi ng party or i ts affi l iates except (1)

i f and as expressl y agreed ot
h-
erwi se, or (2)

i f and as provi ded by l aw.

NEGOTIATION CATEGORY: On the fairway.

TENDS

TO FAVOR: Disclosing party.

ALERT:

A receiving party should make sure it won't need to have its own confidential informa
tion
protected at some point