Chapter 1: The Vendor License

In this chapter we introduce the form vendor oriented license agreement we will be working with for the remainder of the book. The agreement contains terms and conditions common to almost every type of software license. While relatively short in length, this type of license is used by vendors in transactions that range from a few thousand dollars to many millions of dollars, involving software applications from those that are merely incidental to the overall operation of the licensee's business to those that are business critical. Developing an understanding of each of the provisions in the form license will provide the means for assessing the legal and business risks of most common licenses in use by vendors today. We urge you to become familiar with the content of the form license agreement before proceeding to the discussion in the remainder of the book.

Generally, licensors like to create multiple contracts to govern their relationships with customers. For example, they may ask the licensee to sign a master services agreement, license agreement, and maintenance and support agreement. This practice should be avoided. It is in both parties' best interest to clearly define the entire relationship between them in a single agreement. A single agreement is not only easier to refer to, but also (i) avoids inconsistencies in the use of defined terms, (ii) assures that the remedies are coordinated, and (iii) makes it easier for the licensee to manage the fees and costs owed to the licensor. The single agreement approach is used in the form vendor agreement we will be discussing in this book.

Licensors will likely resist the concept of a single agreement by arguing the single agreement approach makes their administration of the agreement extremely complicated because different individuals or departments are involved with different aspects of the agreement. Whether this is true or not, it is not a sufficient reason for the licensee to approach contracting in a way which could lead to inconsistencies and surprises. If the licensee stands firm on the single agreement approach, the licensor will generally back down.

If the licensor refuses to utilize a single agreement, it becomes even more critical to ensure that (i) defined terms are used consistently across the various agreements; (ii) the remedies and damage limits are consistent; and (iii) protections obtained in one agreement are not eliminated or weakened in other agreements. Another important point is to include a "precedence provision" in each of the agreements. Such a provision provides that in the event of a conflict between the license agreement and any of the other documents, the terms of the license agreement will govern (e.g., "In the event of a conflict between the License Agreement, Support Agreement and Service Agreement, the Licensee Agreement shall take precedence.").

SOFTWARE LICENSE, SUPPORT, AND MAINTENANCE AGREEMENT

This Software License, Support, and Maintenance Agreement ("Agreement") is made and entered into as of ________________, 200_ ("Reference Date"), by and between ________________ ("Vendor"), and ________________ ("Customer").

In consideration of valuable consideration and the mutual promises herein contained, the parties agree as follows:

AGREEMENT

1. Definitions.

   The following terms, when used in this Agreement, shall have the following meanings:

   • 1.1 "Server" shall mean the CPU, whether in a PC, server, or other device, configured to run the Licensed Software and process transactions.

   • 1.2 "Equipment" shall mean the computer and telecommunications hardware listed in Attachment "A" (Equipment and Licensed Software Listing and Fee/Payment Schedule).

   • 1.3 "Licensed Software" shall mean the object code version of the computer programs to be provided by Vendor to Customer, as listed in Attachment "A" (Equipment and Licensed Software Listing and Fee/Payment Schedule).

   • 1.4 "Documentation" shall mean Vendor's then current documentation for the Licensed Software.

2. Software License.

   • 2.1 License Grant. Subject to the terms and conditions of this Agreement, Vendor grants to Customer a non-exclusive, non-transferable, limited license to use the Licensed Software solely for Customer's internal business purposes, subject to the number of licensed concurrent users. Customer may make one copy of the Licensed Software in machine-readable form for back-up and archival purposes only. Customer shall reproduce and include the copyright, trade secret, or other restrictive and proprietary notices and markings from the original on all copies. All copies will be subject to the terms of this Agreement.

   • 2.2 License Software Use Restrictions. Customer's use of the Licensed Software shall be subject to the following restrictions:

     1. The Licensed Software shall be used solely for Customer's internal business purposes and only by authorized concurrent users;

     2. Customer shall not cause the Licensed Software in any way to be disassembled, decompiled or reverse engineered, nor shall any attempt to do so be undertaken or permitted;

     3. Customer shall not make the Licensed Software available for access or use by any person or entity other than Customer's employees, including, but not limited to, acting as a service bureau;

     4. Customer shall not upload, post, publish or create derivative works of the Licensed software; and

     5. Copy, translate, port, modify, or make derivative works of the Licensed Software.

   • 2.5 Ownership. This Agreement does not grant to Customer any ownership interest in the Licensed Software. Rather, Customer has a license to use the Licensed Software as provided in this Agreement. Customer hereby agrees and acknowledges that Vendor owns all right, title, and interest in the Licensed Software and Customer will not contest those rights or engage in any conduct contrary to those rights. Any copy, modification, revision, enhancement, adaptation, translation, or derivative work of or created from the Software made by or at the direction of Customer shall be owned solely and exclusively by Vendor, as shall all patent rights, copyrights, trade secret rights, trademark rights, and all other proprietary rights, worldwide (all of the foregoing rights taken together being referred to collectively herein as "Intellectual Property Rights") therein and thereto.

   • 2.6 Copyright. The Licensed Software contains material that is protected by United States copyright law and trade secret law, and by international treaty provisions. All rights not granted to Vendor by this Agreement are expressly reserved by Vendor. Customer shall not remove any proprietary notice of Vendor from any copy of the Licensed Software.

   • 2.7 Delivery. Vendor will deliver the object code version of the Licensed Software to Customer within five (5) days of the Reference Date. Customer will be deemed to have accepted the Licensed Software on delivery.

3. Support and Maintenance.

   • 3.1 General Obligations. Subject to Customer's payment of the annual support fees set forth in Exhibit A, Vendor will provide Customer with reasonable telephone support regarding use and operation of the Licensed Software during Vendor's normal hours of support. Only the current version of the software will be supported. Customer must install all new versions of the Licensed Software within thirty (30) days of receipt. Vendor reserves the right to charge Customer for support issues that could have been resolved by reference to the Documentation or arise from the Customer's negligence, misuse of the Licensed Software, and issues relating to third party equipment and software. Vendor will provide Customer with any new versions of the Licensed Software that Vendor in its sole discretion makes available to its other licensees at no charge.

   • 3.2 Support Term and Fees. Maintenance and support will automatically renew for additional one (1) year periods unless either party gives the other party written notice of its intent to not renew at least thirty (30) days prior to the expiration of the then current term. Vendor may increase support fees at any time on thirty (30) days prior notice to Customer.

4. Term. This Agreement shall be effective as of the Reference Date and shall continue in effect unless terminated earlier in accordance with this Agreement.

5. Fees and Payment.

   • 5.1 License and Support Fees. Customer shall pay the license, support, and other fees set forth in Exhibit A. All fees paid hereunder are nonrefundable.

   • 5.2 Taxes; Telecommunications Charges. Customer shall pay all federal, state, and local taxes, government fees, and other similar amounts that are levied or imposed on the Charges, this Agreement, or the transactions hereunder, including sales, use, excise, and value added taxes. Customer shall pay for all telecommunication and carrier charges arising from its use of the Services or the transmittal of information to or from Vendor.

   • 5.3 Travel and Other Expenses. Customer shall reimburse Vendor for all reasonable travel, living, and other out-of-pocket expenses incurred by Vendor personnel in connection with this Agreement.

   • 5.4 Payment. Unless provided otherwise herein, Customer agrees to pay all amounts due under this Agreement within thirty (30) days after the date of invoice. Past due amounts will bear interest of one and one-half percent (1 1/2%) per month from the due date or the highest rate permitted by law if less. All payments made under this Agreement shall be nonrefundable, except as specifically provided otherwise in this Agreement.

6. Confidentiality. Customer shall treat the Licensed Software, related documentation, and all other information provided by Vendor in the strictest confidence and shall not reveal such information to anyone other than Customer's own employees.

7. Limited Warranty.

   • 7.1 Licensed Software. Vendor warrants that the Licensed Software shall perform substantially in accordance with the documentation for a period of ninety (90) days after the Reference Date (the "Initial Warranty Period"). Customer shall provide written notice of any warranty failure to Vendor not less than five (5) days prior to the end of the Initial Warranty Period. Such notice shall specify with particularity the nature of any such failure. Vendor shall not be responsible for any errors or nonconformities in the Licensed Software resulting from Customer's misuse, negligence, or modification of the Licensed Software.

   • 7.2 Services. Vendor warrants that all services provided by Vendor to Customer under this Agreement shall be performed in a workmanlike manner.

8. Disclaimer of Warranties. VENDOR EXPRESSLY DISCLAIMS ALL WARRANTIES, EXPRESS AND IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. VENDOR DOES NOT WARRANT THAT THE PRODUCTS WILL MEET CUSTOMER'S REQUIREMENTS, THAT THE LICENSED SOFTWARE IS COMPATIBLE WITH ANY PARTICULAR HARDWARE OR SOFTWARE PLATFORM, OR THAT THE OPERATION OF THE LICENSED SOFTWARE WILL BE UNINTERRUPTED OR ERROR-FREE, OR THAT DEFECTS IN THE LICENSED SOFTWARE WILL BE CORRECTED. THE ENTIRE RISK AS TO THE RESULTS AND PERFORMANCE OF THE LICENSED SOFTWARE IS ASSUMED BY CUSTOMER. FURTHERMORE, VENDOR DOES NOT WARRANT OR MAKE ANY REPRESENTATION REGARDING THE USE OR THE RESULTS OF THE USE OF THE LICENSED SOFTWARE OR RELATED DOCUMENTATION IN TERMS OF THEIR CORRECTNESS, ACCURACY, QUALITY, RELIABILITY, APPROPRIATENESS FOR A PARTICULAR TASK OR APPLICATION, CURRENTNESS, OR OTHERWISE. NO ORAL OR WRITTEN INFORMATION OR ADVICE GIVEN BY VENDOR OR VENDOR'S AUTHORIZED REPRESENTATIVES SHALL CREATE A WARRANTY OR IN ANY WAY INCREASE THE SCOPE OF WARRANTIES PROVIDED IN THIS AGREEMENT.

9. Limitation of Liability. IN NO EVENT SHALL VENDOR BE LIABLE TO CUSTOMER OR ANY THIRD PARTY FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, INDIRECT, SPECIAL, PUNITIVE, OR EXEMPLARY DAMAGES FOR LOSS OF BUSINESS, LOSS OF PROFITS, BUSINESS INTERRUPTION, LOSS OF DATA, OR LOSS OF BUSINESS INFORMATION) ARISING OUT OF OR CONNECTED IN ANY WAY WITH USE OF OR INABILITY TO USE THE LICENSED SOFTWARE, OR FOR ANY CLAIM BY ANY OTHER PARTY, EVEN IF VENDOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. VENDOR'S TOTAL LIABILITY TO CUSTOMER FOR ALL DAMAGES, LOSSES, AND CAUSES OF ACTION (WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE) SHALL NOT EXCEED THE PURCHASE PRICE. THE LIMITATIONS PROVIDED IN THIS SECTION SHALL APPLY EVEN IF ANY OTHER REMEDIES FAIL OF THEIR ESSENTIAL PURPOSE.

10. Indemnification. Customer shall defend, indemnify, and hold Vendor and its directors, officers, agents, employees, members, subsidiaries, and affiliates from and against any claim, action, proceeding, liability, loss, damage, cost, or expense (including, without limitation, attorneys' fees), arising out of or in connection with Customer's use of the Licensed Software.

11. Default; Termination.

    • 11.1 Termination Upon Event of Default. If any party:

      1. Breaches any covenant, obligation, representation, or warranty under this Agreement (other than those described in paragraph B below, and fails to cure such breach: (1) within seven (7) days after its receipt of written notice thereof from the other party for any such breach involving a failure to pay any amounts due hereunder, it being agreed that any such breach shall be a material breach hereof, or (2) within thirty (30) days after its receipt of written notice thereof from the other party of any other such breach; or

      2. Breaches any covenant, obligation, representation, or warranty under this Agreement relating to confidentiality, scope of use, use restrictions, or proprietary rights (including Intellectual Property Rights), it being agreed that any such breach shall be a material breach hereof; or

      3. Voluntarily or involuntarily suspends, terminates, winds-up, or liquidates its business, becomes subject to any bankruptcy or insolvency proceeding under applicable law; or becomes insolvent or subject to direct control by a trustee, receiver, or similar authority, then, upon the occurrence of such event (each, an "Event of Default"), the other party may terminate this Agreement by giving notice of such termination to the defaulting party and/or may exercise any and all other rights and remedies under this Agreement, at law, or in equity.

    • 11.2 Effect of Termination. On and after the effective date of any termination of this Agreement, Customer shall cease all use of the Software. Within ten (10) days of the effective date of termination of this Agreement by either party, Customer shall, at its own expense, return to Vendor (or destroy) all documentation and other tangible materials provided by Vendor hereunder in connection with the Licensed Software, together with a certificate signed by one of Customer's officers attesting to such return or destruction. Each party shall remain liable to the other party for all charges, obligations, and liabilities that accrue or arise under this Agreement from any event, occurrence, act, omission, or condition transpiring or existing prior to the effective date of such termination.

    • 11.3 Limitation of Actions. Customer shall not bring any action against Vendor arising out of or related to this Agreement or the subject matter hereof more than one (1) year after the occurrence of the event which gave rise to such action.

12. Equitable Relief. Customer acknowledges and agrees that Vendor will be irreparably injured if the provisions of Sections 3 (Software License) and 7 (Confidentiality) are not capable of being specifically enforced, and agree that Vendor shall be entitled to equitable remedies for any breach of Sections 3 and 7, in addition to, and cumulative with, any legal rights or remedies, including the right to damages.

13. Independent Contractor. Vendor acknowledges that it is at all times acting as an independent contractor under this Agreement and except as specifically provided herein, not as an agent, employee, joint venturer, or partner of Customer.

14. Notices. Any notices required or permitted to be given hereunder by either party to the other shall be in writing and shall be deemed duly given or made if delivered: (1) by personal delivery; (2) by electronic facsimile with confirmation sent by United States first class registered or certified mail, postage prepaid, return receipt requested; (3) by bonded courier or by a nationally recognized overnight delivery company; or (4) by United States first class registered or certified mail, postage prepaid, return receipt requested, in each case, addressed to the parties as follows (or to such other addresses as the parties may request in writing by notice given pursuant to this Section):

    • If to Vendor:

      __________________________

      __________________________

    • If to Customer:

      __________________________

      __________________________

    Notices shall be deemed received on the earliest of personal delivery; twenty-four (24) hours following deposit with a bonded courier or overnight delivery company; or seventy-two (72) hours following deposit in the U.S. Mail as required herein.

15. Force Majeure. Vendor shall not be responsible for failures of its obligations under this Agreement to the extent that such failure is due to causes beyond Vendor's control including, but not limited to, acts of God, war, acts of any government or agency thereof, fire, explosions, epidemics, quarantine restrictions, strikes, delivery services, telecommunication providers, strikes, labor difficulties, lockouts, embargoes, severe weather conditions, delay in transportation, or delay of suppliers or subcontractors.

16. Choice of Law. This Agreement shall be construed and enforced in accordance with the laws of the state of Florida.

17. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, and supersedes all other prior and contemporary agreements, understandings, and commitments between the parties regarding the subject matter of this Agreement. This Agreement may not be modified or amended except by a written instrument executed by the parties. In particular, any provisions, terms, or conditions contained in Customer's Purchase Orders or other similar forms that are in any way inconsistent with or in addition to the terms and conditions of this Agreement shall not be binding upon Vendor.

18. Severability. If any provision of this Agreement is found to be invalid or unenforceable by any court, such provision shall be ineffective only to the extent that it is in contravention of applicable laws without invalidating the remaining provisions of the Agreement.

19. Assignment. Neither this Agreement nor any interest in this Agreement may be assigned by Customer without the prior express written approval of Vendor. Vendor may assign, pledge, mortgage, sell to a third party, or otherwise dispose of all or any portion of this Agreement, provided that such action shall not relieve Vendor of its obligations to Customer under this Agreement or reduce Customer's rights hereunder.

20. Waiver. All waivers under this Agreement shall be in writing to be effective. No failure or delay by a party to exercise any right it may have by reason of the default of the other party shall operate as a waiver of default or as a modification of this Agreement or shall prevent the exercise of any right of the non-defaulting party under this Agreement.

21. Headings. Headings used in this Agreement are provided for convenience only and shall not be used to construe meaning or intent.

22. Agreement Drafted by Both Parties. This Agreement is the result of arm's length negotiations between the parties and shall be construed to have been drafted by all parties such that any ambiguities in this Agreement shall not be construed against either party.

23. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and will become effective and binding upon the parties as of the Reference Date at such time as all the signatories hereto have signed a counterpart of this Agreement.

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

    • Accepted by:

    • [Vendor]_________________

      ________________________

    • Authorized Signature

      ________________________

    • Print Name

      ________________________

    • Title

    • Accepted by:

    • [Customer]______________________

      _______________________________

    • Authorized Signature

      _______________________________

    • Print Name

      _______________________________

    • Title