Affiliates

Affiliates

In certain circumstances, the contracting parties may desire to allow related entities, or “affiliates,” to obtain the rights and benefits of a contracting party. This may include situations where a party is a large corporation that operates through corporate groups comprised of a parent company, sister companies, subsidiaries, and other associated entities. Adding affiliates to a contract may provide a more efficient alternative to having separate standalone contracts with each related entity. The issue of adding affiliates in the context of NDAs is also addressed at length in the NDA section entitled “Affiliates”.

Whether an entity can be considered an “affiliate” typically depends on “control,” i.e., whether a party has control over another (subsidiary), is under control by another (parent), or is under the common control of another (sister entity):

Exemplar C3-1

For purposes of this Agreement, an "Affiliate" shall mean an entity controlled by, controlling or under common control with Supplier or Company, as applicable, but only so long as such control exists. The cessation of such control shall not release an Affiliate of its obligation to comply with the terms and conditions of this Agreement.

But what constitutes “control” for such definitional purposes? In the following exemplars, “control” is measured by the ability of a party to direct or govern another party via voting rights:

Exemplar C3-2

For the purpose of this Agreement an "Affiliate" of a party shall mean any entity which now are hereafter, directly or indirectly, controls, is controlled by, or is under common control with, that party, where “control” means ownership of at least fifty per cent (50%) of the outstanding shares or securities (representing the right to vote for the election of directors or other managing authority).

Exemplar C3-3

Affiliate means, at any time, and with respect to any corporation, person or other entity (a) any other corporation that at such time, directly or indirectly through one or more intermediaries, controls, or is controlled by, or under common control with, such first corporation, person, or other entity; or (b) any other corporation, person, or other entity beneficially owning or holding, directly or indirectly, 20% or more of any class of voting or equity interests of the first corporation or subsidiary or any corporation of which the first corporation and its subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 20% or more of any class of voting or equity interests; and/or (c) any corporation, person or other entity specifically listed on Exhibit A, which may be changed by Customer upon written notice. As used in this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a corporation, person or other entity whether through the ownership of voting securities, or by contract or otherwise.

Exemplar C3-4

For the purposes of this Agreement, “Affiliate” shall mean any corporation, partnership, or other entity that, directly or indirectly, owns, is owned by, or is under common ownership with, such party hereto, for so long as such ownership exists. For the purposes of the foregoing, "own," "owned," or "ownership" shall mean ownership of more than fifty percent (50%) of the stock or other equity interests entitled to vote for the election of directors or an equivalent governing body.

Exemplar C3-5

For the purpose of this Agreement, "Affiliate" shall mean any company, which, as long as at least fifty percent (50%) of operational control or voting rights are, now or hereafter, directly or indirectly owned by a Party.

Exemplar C3-6

For purposes of this Agreement, an “Affiliate” of Buyers means any business entity that is, either directly or indirectly: (i) is controlled by; (ii) is under common voting control with: or (iii) has control over such business entity, as the case may be, where “control” means the ability to vote greater than fifty percent (50%) of the outstanding voting securities in such company.

Exemplar C3-7

For the purpose of this Agreement “Affiliate” shall mean, with respect to a Party, either of the following: (i) any company, person or entity which directly or indirectly holds more than fifty percent (50%) of the voting securities, income interest, or a comparable equity interest of such Party or which is directly or indirectly controlled by or under common control with such Party; or (ii) any company, person or entity with respect to which such Party directly or indirectly holds more than fifty percent (50%) of the voting securities, income interest, or comparable equity interest.

The following exemplar takes a different and arguably more direct approach, by purporting to have a contracting party “bind” its affiliates as parties to the contract:

Exemplar C3-8

Licensee represents and warrants that it has legal authority to bind itself and its Affiliates to the terms and conditions of this Agreement to the same extent as if each such Affiliate had executed this Agreement individually.