Playbook - CORP-Procurement - Sep-15-2021 LIN MARTIN

PLAYBOOK FOR COMMONLY NEGOTIATED CLAUSES
PART 1 -- MSA
LEGEND
 Contract Language = Times New Roman 12 font

 Common Supplier Redlines = Blue
 Suggested Counter-Response Language to Supplier Redlines = Red
 Internal Issues and Other Notes = Aerial 10 font
 Suggested Rationale to Supplier (e.g bubble comments, verbal negotiation) = Italics, 11 font
Affiliates. Affiliates of Honeywell are beneficiaries of this Agreement and may purchase Services
under this Agreement and under any SOW issued hereunder from Supplier and/or Supplier’s
Affiliates by issuing purchase orders or executing SOWs referencing this Agreement. In such event,
(i) the Honeywell Affiliate issuing the purchase order or executing the SOW will, for the purposes of
such purchase order or SOW, be considered “Honeywell” as that term is used in this Agreement, (ii)
the Supplier Affiliate receiving such purchase order or executing such SOW, if applicable, will, for
purposes of such purchase order or SOW, be considered “Supplier” as that term is used in this
Agreement, and (iii) the purchase order or SOW will incorporate all the terms and conditions of this
Agreement and be deemed to be a two-party agreement between Supplier or Supplier Affiliate on the
one hand, and the applicable Honeywell Affiliate on the other hand. Each Party will cause its
Affiliates to comply with its obligations under this Agreement. “Affiliate(s)” means a Party’s wholly-
owned subsidiaries or a joint venture, partnership or corporation that directly or indirectly controls, is
controlled by or is under common control of or with said Party or the Party’s wholly-owned
subsidiary. The word “control” as used in this definition will mean ownership of, or the right to
acquire, not less than fifty percent (50%) of the stock of said corporation, the right to vote not less
than fifty percent (50%) of the stock of said corporation, or not less than fifty percent (50%)
ownership interest in a partnership or joint venture or corporation. Should Supplier question whether
an entity is a Honeywell Affiliate, Honeywell will confirm its status to Supplier.
Internal comment on Affiliates Clause: We insist on all Corp Indirect contracts being usable by any Affiliate who
wishes to sign a SOW or otherwise avail themselves of the Supplier’s services. Since Corp is not a “business” ( does
not make or sell anything), all of its contracting is done for the benefit of the whole corporate family and we expect
standardization across all businesses, and to the extent practical, standardization across all countries as well, plus we
want to leverage economies of scale and our collective buying power to obtain best pricing. Resist any language that
provides a “parent guarantee” of performance of Affiliates, although our language does say HII will “cause” its Affiliates
to comply. Also avoid language specifically representing that HII can enter into an Agreement on behalf of, or has
authority to bind its Affiliates with its signature because HII is not authorized to do so. Always avoid “joint and several
liability” between HII and any Affiliate. Okay to limit the binding of Affiliates only to signed SOWs where the Supplier
insists it will provide Services only pursuant to a SOW and will not be bound by merely a PO. Not okay to agree to
provide a list of all Affiliates because first, it’s confidential and Supplier does not have a need to know every Affiliate we
have, second, we have in excess of 800, most of which the Supplier will never deal with, and third, the list changes
every day as we create new companies, acquire entities, and dissolve entities constantly, so any list created would be
almost immediately outdated.
___________________________________________
Highly Confidential – Honeywell Internal Use Only

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Local Enabling Agreements: In the event that Honeywell reasonably determines it is necessary to
execute a local enabling agreement (or “LEA”) to implement this Agreement and/or any SOW issued
hereunder in a certain country, the Parties and/or their Affiliates, as applicable, will enter into such
LEA, which will incorporate all of the terms and conditions of this Agreement and/or any SOW
issued hereunder, subject only to the amendments required by applicable law.
LEA Issue 1: Supplier wants the right to renegotiate whenever an LEA is needed.
…the Parties and/or their Affiliates, as applicable, will may, at their discretion, enter into such
LEA…
Internal comment on LEAs: Recommendation is to push back and not to allow any discretion. It’s bad for Honeywell
when they say maybe we will, or maybe we won’t, sign an LEA. If we need a Supplier Affiliate to do something similar
in another country, we can’t guarantee we can leverage the MSA and might be forced to start over with a new master
agreement or terms so different it may as well be a new MSA. This defeats the purpose of a global agreement,
reduces our economies of scale, delays deployment of the Services in the new country, and creates inconsistencies in
receiving substantially the same services with the same Supplier family.
LEA Issue 2: Supplier refuses to limit LEA terms to only those required by local law.
…the Parties and/or their Affiliates, as applicable, will enter into such LEA, which will incorporate
all of the terms and conditions of this Agreement and/or any SOW issued hereunder, subject only to
the amendments required by applicable law.
Internal comment on LEAs: The wording “subject only to the amendments required by applicable law” cannot be
deleted. Similar to the problems presented above in Issue 1, whenever we need a LEA for local implementation of the
MSA between Affiliates, the last thing we want is to reopen negotiations on a local Affiliate level of commercial and
legal terms and conditions that, after long and hard negotiations, have been agreed in the MSA. The MSA is a
framework agreement which should have the same terms and conditions and be applied consistently whether it is by
the Parties or their Affiliates under a LEA. We do, of course, allow deviations where such deviations are required by
applicable law.
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Changes: The Honeywell Project Manager for a SOW may direct changes in the SOW using either
the form attached as an Exhibit ("Change Order") to this Agreement, or a change order issued
through Honeywell's purchasing system. If any change causes an increase or decrease in the cost of,
or the time required for, performing the SOW, an equitable adjustment will be made to the SOW
price, delivery dates, or both. Honeywell may deny any request for adjustment under this provision
unless it is asserted in writing (including the amount of the request and supporting documentation
substantiating the request) and delivered to Honeywell within 30 days from the date of Supplier's
receipt of the Honeywell-directed change to the SOW. Any adjustment must be mutually agreed by
the Parties in writing. Notwithstanding any disagreement between the Parties regarding the impact of
a change, Supplier will proceed diligently with its performance under the SOW as changed pending
resolution of the disagreement.
Common Supplier Change or Comment:

Notwithstanding any disagreement between the Parties regarding the impact of a change, Supplier
will proceed diligently with its performance under the SOW as originally agreed changed pending
resolution of the disagreement.
Recommended Alternative:
Any adjustment must be mutually agreed by the Parties in writing, and if not agreed prior to
commencement of the change, then as soon as reasonably practicable following the Change

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Order’s effective date. Notwithstanding any disagreement between the Parties regarding the impact
of a change, Supplier will proceed diligently with its performance under the SOW as changed
pending resolution of the disagreement, provided, however, that the Parties pursue agreement of
the equitable adjustment in good faith. Should the Parties fail to reach agreement on an
equitable adjustment after 30 days of negotiation, then Supplier may suspend performance of
the Services after first providing Honeywell with 15 calendar days’ written notice of its
intention to exercise such work suspension. Once the Parties reach agreement on the equitable
adjustment, Supplier will resume providing Services in accordance with the Change Order at
the agreed equitable adjustment to the fees, rates, and/or timelines, which will be retroactive to
the effective date of the Change Order. To the extent that Supplier can continue providing any
other Services unaffected by the Change Order, Supplier will do so, and may not suspend work
under this provision on any unaffected Services or Deliverable requirements.”
Issue to Be Addressed: Suppliers are concerned that Honeywell will push an unreasonable change on them and not
be willing to pay enough to cover the adjusted schedule or amount of work. Conversely, Honeywell is concerned that
the Supplier may take unfair advantage of knowing they are the only chance Honeywell has to meet the adjusted
schedule or newly revised work, the only supplier who can do it, and will hold Honeywell hostage until the Supplier
gets exactly the price increase they want. The recommended alternative language strikes a balance between the
concerns of both Parties. It gives the Supplier some leverage to stop work but does not allow them to refuse to
proceed with the change until they know what Honeywell will pay. It’s worth noting that this situation is rare.
Generally, the Parties have already discussed, “what would it cost of we decide to do it this way?” and it does not
come as a surprise request for a Change Order, nor is Honeywell usually blind to what the change should cost before
we ask for it.
Suggested comment to Supplier: Honeywell has provided for a negotiation period sufficient to allow the Parties to
reach an equitable adjustment, but generally price is agreed before the Change Order is even drafted. If not, and
things are not progressing satisfactorily in the Supplier’s view, Supplier may stop work (with notice) until we reach
agreement. Regardless, Supplier will be paid retroactively for the adjusted price, so nothing is lost by Supplier
proceeding with the work as changed.
___________________
Internal comment: Who can sign Change Orders? A frequently asked question is authorized to sign Change Orders
under the applicable Agreement. Change Orders must be signed by authorized signatory of the Honeywell legal entity
which signed the SOW under which the Change Order is issued. The “Changes” section refers to the “Change Order
Form” attached as an Exhibit to the Agreement. PART B of the Change Order Form states: “In Witness Whereof, the
Parties have caused this Change Order to the Statement of Work specified in this Change Order to be executed by the
signatures of their respective authorized representatives.”. The Change Order details can be completed by the SOW
Project Manager and, upon agreement of the change between the Parties, the Change Order will need to be signed by
an authorized signatory of each Party.
___________________
Supplier Personnel (MSA) / Conduct/Qualifications (MEPA):
Supplier will assign qualified personnel to perform the Services under this Agreement and each SOW
and will ensure that its personnel devote sufficient time and effort to performing the Services as
necessary to complete all Services in accordance with this Agreement and each SOW. Supplier will
bear all liability for the acts or omissions of the personnel assigned to perform the Services. If
Services will be performed by Supplier at any Honeywell site or Honeywell’s designated third party
site, Supplier’s personnel will observe and comply with Honeywell's security, safety, health, and
environmental procedures, rules, regulations, and policies; failures of Supplier’s personnel to comply
with security, safety, health, or environmental requirements may result in immediate dismissal from a
site at Honeywell’s sole discretion. If Services or Deliverables involve unescorted access to a site, or
access to Honeywell’s IT network, Supplier will at its cost (i) ensure that its personnel have
undergone legally permitted background investigations and drug screening similar to that required for

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Honeywell employees at the same location and (ii) contract with Honeywell’s designated external
vendor(s) as reasonably required by Honeywell to centrally document and track supplier compliance
with such requirements. Supplier will use its best efforts to ensure the continuity of Supplier's
personnel performing the Services. Supplier will exercise commercially reasonable efforts to
minimize any disruption to Honeywell's normal business operations. If any Supplier personnel
performing Services are unacceptable to Honeywell for any legally permitted reason, Honeywell will
notify Supplier and Supplier will take prompt, appropriate corrective action, which may include
replacing the personnel. Honeywell and Supplier must agree that the replacements have acquired
orientation and background substantially equal to that of the personnel being replaced and there will
be no charge to Honeywell for any replacement personnel assigned by Supplier unless otherwise
agreed.
Supplier Personnel, Issue 1: Supplier wants advance written copy of all such policies.
….If Services will be performed by Supplier at any Honeywell site or Honeywell’s designated third
party site, Supplier’s personnel will observe and comply with Honeywell's security, safety, health,
and environmental procedures, rules, regulations, and policies which are provided to Supplier in
writing in advance...
Internal comment, Providing All Security Policies: We cannot provide these policies and procedures in writing, but
we can provide them in ‘advance,’ although in some cases it may be verbal and it may only be a few seconds in
advance, such as the example below that may help explain it to the Supplier.
Suggested comment to Supplier: We cannot provide these in writing, they may be different from site to site, some
sites are FAA-certified, some just small offices, etc. If for example, a Security Guard says, “Do not exit through that
door,” those are security instructions not provided in writing, but they are provided in advance, and we still expect
Supplier personnel to comply.
Supplier’s personnel will observe and comply with Honeywell's security, safety, health, and
environmental procedures, rules, regulations, and policies of which Supplier personnel are made
aware; failures of Supplier’s personnel to comply with security, safety, health, or environmental
requirements may result in immediate dismissal from a site at Honeywell’s sole discretion.
Supplier Personnel, Issue 2: Supplier wants to negotiate our screening and background check requirements.
If Services or Deliverables involve unescorted access to a site, or access to Honeywell’s IT network,
Supplier will at its cost (i) ensure that its personnel have undergone legally permitted background
investigations and drug screening similar to that required for Honeywell employees at the same
location and (ii) contract with Honeywell’s designated external vendor(s) as reasonably required by
Honeywell to centrally document and track supplier compliance with such requirements.
Issue to Be Addressed: If a Supplier is in our system or connected to our system, we are only as secure as our
suppliers are, so we must insist on the same security we apply to ourselves.
Internal comment, Background Check Requirements: We cannot revise this language, this is policy set by HR and
Security, so we can’t change it for one supplier. This language is virtually non-negotiable. If we change it in one
contract, HR and Security will never know and have no way of knowing to do anything different, so it’s a failure mode -
we will violate the contract.
2nd Internal comment, Background Check Requirements : Almost 100% of the time, Suppliers misread this
provision and believe we are requiring it for all of their employees. Make sure, first, that the Supplier understands the
limitations on this clause arising at all. Suppliers also may think it is a pre-employment requirement we are imposing
on them before they hire their employees.

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3rd Internal comment, Background Check Requirements : We do not do the screening of Supplier personnel, we
should never use language such as, “Honeywell may screen…” We do not get in the middle of that, we are not their
personnel’s employer, and we don’t even want to know the results, that’s between the Supplier and its employee. The
Supplier enters this information for itself into the Fieldglass tool. We also do not obtain the consents from their
employees—the Supplier is responsible for all of this, for deciding which employee will need the access, for obtaining
consent from that employee to perform the checks, assuming the checks were not performed before their employee
was hired, for getting the employee checked (our background check vendors will usually offer Hon’s prices to our
Suppliers if they want to use our background check vendors), for paying for it, for entering their employee’s information
in Fieldglass, etc. We are not involved. When their employee’s name is in the data base with all the required check
marks, then our Security function can issue the access/badge.
4th Internal Comment, Background Check Requirements : Suppliers sometimes react saying this is not even legal
in some places. We know that, we have employees all over the globe. It’s just the same requirements we use for our
own employees in the same location. Point them to the language that says, “legally permitted.”
Suggested comment to Supplier: First word is “IF.” This ONLY APPLIES IF Supplier personnel need unescorted
access to Hon sites (a Honeywell badge) or direct access to Hon IT systems (a Honeywell password). Otherwise, this
never will arise, but if it does become necessary, there are no exceptions, Supplier personnel must undergo the same
checks a Hon employee would undergo at the same location. Alternatively, Supplier will have to decline the work,
these policies are set by Honeywell HR and Honeywell Cyber-Security, we cannot administer this differently for one
suppler.
Suggestion if Supplier misreads this as a pre-employment screening requirement: This has nothing to do with your
employment screening. This applies IF and ONLY IF you cannot perform the Services unless one or more of your
employees gets either (1) UNESCORTED access to a Hon site, meaning a Honeywell badge just like our employees at
that site have, or (2) direct ACCESS to Hon IT SYSTEMS, meaning a Honeywell password just like our employees who
access that same IT system. This may never happen, rarely does, but if your employee needs such access and it’s the
only proper way to provide the Services, then you would register that employee with our vendor who tracks that, and
when the data base indicates your employee has had the same checks as we require of our employee who has the same
type of access at the same location, then our Security function will issue the password or badge. You would not give a
Hon employee a password to your systems without appropriate checks, and this is the same thing.
Internal Comment for Extreme Circumstances: If a Supplier has a good deal of leverage and will not agree to this,
we can add a sentence that says if this situation arises, that is, they cannot continue their work properly without having
either a badge or a Hon password for one or more personnel, the alternatives are: (1) we stop work and the Supplier
can terminate the SOW, essentially decline the work, giving us all work in process and walk away, no liability on
Honeywell other than payment for Services completed and accepted, or (2) in extreme situations, remove the sentence
above that starts with “If” and insert a sentence that says Supplier’s personnel may never have unescorted access to a
Hon site or a password to Hon IT systems, and if we discover that has occurred, even if Hon issued the applicable
badge or password, it will constitute a material breach by Supplier and Hon may immediately terminate the contract for
cause. This places all the onus on the Supplier and is risky because we may never know this happened, but there are
some Suppliers where we must resort to last ditch efforts.
____________________________
Supplier Personnel, Issue 3. Suppliers often want to limit their liability for acts and omissions of personnel assigned
to perform the Services to the extent such acts and omissions were caused by “Supplier’s personnel” only. You would
typically see a proposed change like the following:
Supplier will bear all liability for the acts or omissions of the Supplier personnel that perform the
Services.
Supplier will bear all liability for the acts or omissions of the personnel assigned by Supplier to
perform the Services.

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Issue to Be Addressed: If Supplier assigned personnel that are not its employees, it does not relieve Supplier of
responsibility by saying they are not the direct employee of the Supplier. We can accept “assigned by Supplier” but not
“Supplier personnel.”
_________________________________
Relationship of Parties / Independent Contractor. Nothing in this Agreement will be construed to

place Supplier and Honeywell in an agency, employment, franchise, joint venture, or partnership
relationship. Neither Party has the authority to obligate or bind the other in any manner. Nothing
contained in this Agreement will give rise or is intended to give rise to rights of any kind to any third
parties, except as otherwise set forth in this Agreement. Neither Party will make any representation
to the contrary. The Parties agree that Supplier will perform its obligations under this Agreement as
an independent contractor. Except with respect to the processing of Personal Data (as defined
below), which is governed by Honeywell’s Data Privacy Obligations for Suppliers Exhibit attached to
this Agreement, Supplier will exercise its own judgment regarding all aspects of the Services,
including but not limited to the manner and means of achieving the results requested, and assumes
sole and full responsibility for its actions. Supplier retains the right to exercise full control of,
supervision over and responsibility for Supplier’s performance hereunder, including the employment,
direction, compensation and discharge of Supplier’s personnel, as well as compliance with workers’
compensation, unemployment, disability insurance, social security, withholding and all other laws,
rules, codes, regulations and ordinances governing such matters. Supplier has sole responsibility for
the payment of all payroll-related national, state, provincial, and local taxes (including income taxes,
social security insurance, and other employment-related and similar taxes) and by reason of
Supplier’s independent contractor status, Honeywell is not required to and will not withhold any
employment related federal, state or local income or any other similar tax from any payment to
Supplier under this Agreement and may file information returns with the United States Internal
Revenue Service or similar state or local agencies regarding such payment under conditions imposed
by applicable laws or regulations. Supplier will comply with all applicable laws and regulations.”

Except with respect to the processing of Personal Data (...), Supplier will exercise its own judgment
regarding all aspects of the Services, including but not limited to the manner and means of achieving
the results requested, and assumes sole and full responsibility for its actions, subject to the actions
resulting from Honeywell’s instructions.
Internal comment, Honeywell Instructions: Verbal instructions should never affect the Services. We should put all of
that in a SOW and it’s up to the Supplier to perform. Our employees should never contradict the scope with verbal
instructions or supervise their employees. The Supplier should ignore that and perform to the agreed, signed, scope.
If any instruction is important to us, we need to make it part of the SOW (either by including it in a SOW or by
executing a Change Order to an existing SOW), not by instructing their employees what to do.
Suggested comment to Supplier: The wording “subject to the actions resulting from Honeywell’s instructions” is
rejected. Honeywell is not the employer of the personnel assigned by the Supplier to perform the Services under the
Agreement. By making this section subject to Honeywell’s instructions, it basically shifts any problems to Honeywell
for not instructing Supplier’s personnel exactly what to do. We do not provide detailed instructions to your employees.
This section states that the Parties are independent, meaning Supplier instructs its personnel how to perform the SOW
and we instruct ours.
Internal Comment for Special Circumstances – Statutory Employer: If Honeywell is seeking the protection from
lawsuits by Supplier personnel who are assigned to a Honeywell project and may get injured (generally speaking, this
is used by HPS on its projects, and most commonly when those projects are in Louisiana), we will insert what we

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call the “Statutory Employer” clause. While this requires Honeywell to be liable for Supplier personnel under our
Workers Compensation Insurance, it has the beneficial effect of helping to protect Honeywell against independent
personal injury lawsuits from Supplier’s workers, without creating exposure for other employment obligations such as
withholding or payroll taxes. US Workers Compensation law structures in most states allow for this, protecting
Honeywell from claims by contractors for injuries (absent violations of law) by covering those contractors under
Honeywell’s Workers Comp policy, and designating Honeywell as the “statutory employer.”
Louisiana is one state out of 50 in the US that has very different state laws. This is because Louisiana was originally
settled by the French, so its laws derive a lot from French Provincial law. In Canada, the Province of Quebec is odd
for exactly the same reason. This peculiarity is in Louisiana law but may be in other states as well. Louisiana, Texas,
and other states along the Gulf of Mexico are rich with oil & gas reserves. Honeywell has large PMT installations
there. If a Supplier’s employee is injured on one of our PMT projects, they can sue Honeywell, whereas Honeywell’s
own employees usually cannot because they receive Workers Compensation insurance in trade for giving up their right
to sue their employer (Honeywell). By agreeing that Honeywell is the statutory employer of Supplier’s employees
working on site, the Supplier’s employees can claim against our Worker’s Compensation insurance policy, and in
return, we reduce direct lawsuits against Honeywell.
This is based on legal advice. We don’t freely offer this position up in negotiations.
Here is the Statutory Employer clause from Honeywell’s Purchase Order terms. It can be modified for use in the MSA:
Statutory employer:
For any Goods provided under this Purchase Order in jurisdictions with statutory employer
protections, Supplier and Honeywell stipulate that Honeywell is deemed to be the statutory employer
of Supplier's employees and all employees of any sub-tier contractor retained in any manner by
Supplier, who perform services or access Honeywell's property and such status is limited to the
period in which the preceding actions occur.
Termination for Convenience. Notwithstanding anything to the contrary contained in this

Agreement or an SOW, Honeywell may, at any time, terminate this Agreement or any SOW, in
whole or in part, with or without cause, without liability or obligation, for undelivered Deliverables
or unperformed Services, upon 30 days' prior written notice.
Issue 1, Termination for Convenience: Supplier sometimes deletes the Termination for Convenience section or
makes it subject to Honeywell’s liability to pay early termination fees, exit cost or penalties.
Internal comment, Deletion of T-for-C: The requested changes are generally not acceptable. Honeywell requires
flexibility to terminate the Agreement or any SOW thereunder without cause, without incurring liability, in various cases
(examples: market changes, change in control, assignment, etc.). Without such termination right, we would have no
flexibility to terminate the Agreement or any SOW under the Agreement. We can agree to a longer notice period to
mitigate risks on business disruption. In the end, removing Honeywell's rights to terminate the Agreement for
convenience (termination without cause or any reason) is a Procurement and Business decision (not a Legal one).
Issue 2, Termination for Convenience, Mutual: The Supplier sometimes allows termination for convenience but only
if the section is reciprocal, so that Supplier will also have the right to terminate for convenience.
Suggested comment to Supplier: Supplier termination for convenience when Honeywell is in compliance with its
obligations is too disruptive to Honeywell’s supply chain. We go to a great deal of trouble to select our suppliers and
negotiate contracts, we cannot have this upended for no cause.
Internal comment, Supplier T-for-C: It is a Procurement and Business decision, however, don’t ask Supplier why
they want this, they can always come up with a reason. Just say no, it’s too disruptive to the supply chain, and that’s
the end of it. This is the Supplier’s business, the reason they exist. Supplier should have no circumstances where we
are still in full compliance with our obligations, but they just wake up one day and decide they want to give notice to

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terminate. Make sure Procurement understands this is much more often used as leverage to get a rate increase from
Honeywell. Supplier comes to Honeywell a year from now and says they want more money, their margin is too slim.
We say, ‘your prices are firm, I can’t give you an increase,’ and their response is, ‘Well, my Management is pretty keen
on this, so if you can’t increase prices, my Management has instructed me to terminate for convenience.’ Then we
have to stop whatever we are doing and renegotiate the SOW or else lose the Supplier, which would require even
more effort because we’d have to conduct an RFP or other competition. In the end, it’s a Business decision whether to
allow Supplier termination for convenience depending upon how much tolerance they have for the disruption it would
cause if Supplier invokes it.
Internal comment, Supplier Termination for Honeywell’s Conduct. If the Supplier insists on termination rights for
reasons that it does not want to be associated with Honeywell, should Honeywell engage in conduct that may
negatively impact the Supplier’s business or reputation, we may be able to accommodate the request by adding the
following clause when appropriate:
Supplier Termination. In the event that Honeywell engages in conduct that is materially detrimental
to Supplier’s business or reputation, Supplier will provide Honeywell with notice specifying the issue
in sufficient detail, and the Parties will in good faith informally review those concerns. Examples of
Honeywell conduct might include violations of law or unethical business conduct, or receiving
substantial negative publicity unrelated to its business performance. If Honeywell does not
reasonably address a material detriment within 60 days after receipt of the notice, then Supplier may
terminate this Agreement and all SOWs with 120 days advance written notice to Honeywell.
Notwithstanding anything to the contrary in this Agreement or any SOW, all prepaid amounts,
advance payments, or deposits, including amounts designated as non-refundable or minimum
purchase commitments, if any, will be adjusted on a pro rata basis to the effective termination date
and Supplier will promptly refund any amounts due to Honeywell.
_______________
Termination for Cause. The non-breaching Party may terminate this Agreement or any SOW, in
whole or in part, if the other Party commits a material breach and fails to remedy the breach within
30 days following receipt of written notice specifying the grounds for the breach. A material breach
includes, but is not limited to, late delivery or delivery of nonconforming Deliverables or Services.
The solvent Party may terminate this Agreement or any SOW upon written notice if the other Party
becomes insolvent or if any petition is filed or proceedings commenced by or against that Party
relating to bankruptcy, receivership, reorganization, or assignment for the benefit of creditors.
Issue 1, Termination for Cause: Suppliers usually try to modify this section, in particular what qualifies as “material
breach”. A few examples:
(1) Deleting this sentence:
The non-breaching Party may terminate this Agreement or any SOW, in whole or in part, if the other
Party commits a material breach and fails to remedy the breach within 30 days following receipt of
written notice specifying the grounds for the breach. A material breach includes, but is not limited to,
late delivery or delivery of nonconforming Deliverables or Services,...”
(2) Adding to the sentence that Honeywell’s failure to pay timely constitutes material breach.
The non-breaching Party may terminate this Agreement or any SOW, in whole or in part, if the other
Party commits a material breach and fails to remedy the breach within 30 days following receipt of
written notice specifying the grounds for the breach. A material breach includes, but is not limited to,
late delivery or delivery of nonconforming Deliverables or Services, or late payment of an invoice
by Honeywell.

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Internal comment, Adding Late Payment as Material Breach: The wording “including but not limited to,” means it’s
not an exhaustive list, but just a few examples that we want to make clear are a material breach. Technically, a
Supplier is correct to state that if they are one day late delivering or Honeywell is one day late paying, neither of us
would argue that was a material breach. However, this assumes both Parties have the same understanding that
Honeywell in fact paid late, which is not always the case, especially if they do not correctly understand MPO. We
cannot have grounds for Supplier to claim material breach any time the Supplier believes we are late on a payment.
Better to strike the sentence in its entirety than try to specify what constitutes Honeywell’s material breach. The
Parties know they must separate trivial issues from material ones in order to terminate for cause, and the courts have
a good process for dealing with this.
Issue 2, Termination for Cause, Listing Non-Conforming Services: Another relevant issue occurs when a Supplier
wants to list everything that constitutes a “material breach” (i.e. create an exhaustive list, usually of what constitutes
“Non-Conforming Services”). Always reject such request. We list the Scope of Services, Supplier’s Responsibilities,
KPI’s / Service Levels and any other requirements in the SOW. Whatever does not conform to the SOW, which could
be a million things and could change constantly, is Non-Conformance. Whether a material Non-Conformance or
nothing anyone cares about is a different matter, and it’s up to Honeywell to justify that claim if we want to make it.
Example: Before the COVID-19 pandemic, nobody would have anticipated mask requirements during the pandemic,
but if we had a SOW from before the pandemic that did not list “Supplier personnel failing to wear a face mask at all
times is a Non-Conformance,” then it would not be a Non-Conformance today if Supplier’s employee did not wear a
face mask, even though today we clearly would insist that is Non-Conforming. Think about all the other things we
would have to list. Don’t let Procurement get sucked into trying to describe what is NOT compliant performance, only
describe what IS compliant performance in the SOW.
Effect of Termination: If Honeywell terminates this Agreement or any SOW, in whole or in part,
for either convenience or cause, Honeywell's sole liability to Supplier, and Supplier's sole and
exclusive remedy, is payment for Deliverables received and accepted and Services completed and
accepted by Honeywell before the date of termination. The payment can be set off against any
damages to Honeywell. Upon termination, Honeywell may require Supplier to transfer title and
deliver to Honeywell any completed Deliverables and Honeywell will pay the Agreement or SOW
price for those Deliverables subject to set off against any damages to Honeywell. Honeywell may
also require Supplier to transfer title and deliver to Honeywell any or all property produced or
procured by Supplier to perform this Agreement or any SOW. Honeywell will credit Supplier with
the reasonable value of the property, but not more that Supplier’s actual cost or the Agreement or
SOW value, whichever is less.
Issue 1, Effect of Termination, Misread: Suppliers often misread this provision and believe we are disclaiming
liability for our breach, so it’s important to point out that it only applies in either of two situations, Honeywell is
terminating either (1) for convenience, or (2) for cause. In either case, the Supplier is not terminating, and more
importantly, Honeywell has not breached.
Suggested comment to Supplier: These are qualified circumstances, only in the case that Honeywell, not the
Supplier, terminates for either convenience or cause. In either case, Honeywell has not breached, so our liability
should be only for what has been performed or completed and accepted through the termination date.
Issue 2, Effect of Termination, Property Transfer: Suppliers often misread this provision by thinking we can buy
any assets they are using.
Honeywell may also require Supplier to transfer title and deliver to Honeywell any or all property
produced or procured by Supplier to perform this Agreement or any SOW. Honeywell will credit
Supplier with the reasonable value of the property, but not more that Supplier’s actual cost or the
Agreement or SOW value, whichever is less.
Internal comment, Property Transfer. It’s important to note we are only interested in property purchased or
produced just for the Honeywell project. It’s okay to specify this is only that which was purchased or produced

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exclusively for Honeywell. In this situation, the contract has been terminated. The Supplier has no other customers
for whom to use it, so would the Supplier rather have useless property they must now find a buyer for, or would they
rather sell it to Honeywell for fair market value? The reason we want this is sometimes it might be better for us,
especially if we are taking the Services back in house (but it could apply even if we are changing suppliers), to have
this property to utilize, and could be inconvenient for us to acquire it elsewhere, but this provision is almost as
beneficial to the Supplier as it is to Honeywell, so usually if you just point this out, the Supplier will agree to leave it in.
Internal comment, Off-Set. Striking the language regarding Honeywell’s off-set is acceptable, but we strongly prefer
it be left in rather than us have to put good money after bad when we already believe the Supplier may owe us money.
Issue 3, Effect of Termination, Payment for IP: Suppliers sometime want to subject the transfer of title of
deliverables to Honeywell to the condition that Honeywell has “paid” the Supplier invoices first. If Supplier produces
Deliverable, then submits an invoice, then we approve it, then it ages 120 days, then a billing cycle passes, then
Supplier gets paid, this process takes several months. What happens in the meantime? We are waiting for them to
give us the Deliverable? We have it but we can’t use it? How does the project proceed in the meantime? This is
always unworkable.
Suggested comment to Supplier: We cannot accept proposals to make this subject to prior payment of the relevant
invoices. In case of termination we may need to use or receive said property / Deliverables before the invoice due date
or payment date. Reminder: this Effect of Termination clause is for convenience or cause, which means Honeywell has
not breached. We must have full rights to the Deliverable from the date it is created/delivered, so long as Supplier gets
paid according to this Agreement. If we don’t pay, then the rights will not be ours.
“subject to Honeywell paying Supplier in accordance with the payment terms of this
Agreement,” or “so long as the applicable invoice is paid in accordance with this Agreement.”
Internal comment, Payment for IP: The recommended alternative means: Supplier produces the Deliverable, they
give it to us, we use it, and the project proceeds as normal. They are still protected, because if they don’t get paid as
per the Agreement, they can take ownership back from us, and we are still protected, because they can’t hold it
hostage waiting for the payment to process or use it as an inducement for us to pay early so that we can start using it.
Substitute Performance
If Honeywell terminates this Agreement or any SOW, in whole or in part, for cause, Honeywell may,
without prejudice to any other rights or remedies it may have, provide or perform, or have a third
party provide or perform, all or any part of the Services or Deliverables which have not been
provided or performed at the time of termination, in accordance with the applicable SOW and this
Agreement. All additional costs incurred by Honeywell in providing the Deliverables or performing
the Services or having a third party do so, including reasonable overhead, incidental expenses and
reasonable attorney and professional fees, will be charged to Supplier or deducted from any sums
due or to become due to Supplier. “Additional costs,” as used in the foregoing sentence, means the
difference between the agreed amount that Honeywell would have paid Supplier for timely,
compliant Services and Deliverables, and what Honeywell pays for substitute performance from the
replacement supplier.
Issue 1, Substitute Performance: Suppliers often wish to remove the “Substitute Performance” section from the
Agreement. Suppliers may argue that Honeywell has other remedies (e.g. termination) at its disposal, or that
Honeywell can simply sue, or that substitute performance somehow conflicts with Honeywell’s right to terminate the
Agreement.
Suggested comment to Supplier: This section does not conflict with Honeywell’s termination rights. This is 100% in
Supplier’s control because it’s only “for cause,” meaning (1) material breach by Supplier, (2) written notice by
Honeywell pursuant to the applicable clause, (3) opportunity for Supplier to cure the breach pursuant to the

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applicable clause, and (4) Supplier’s continued material breach and failure to cure after such notice & opportunity.
Supplier can avoid this entirely by not breaching, and if it occurs, work with Honeywell to cure it within the
contractually agreed period. Note also that “additional costs” is only the “difference between” what we would have
paid Supplier for compliant Services, and what we have to pay a replacement supplier for replacement services. We
do not ask for the cost of the Services because we would have paid that either way. If the replacement supplier costs
less, the additional costs to Supplier are zero, even though Supplier’s material breach caused the termination.
Internal comment, Sole & Exclusive : Termination is not the only remedy against a material breach as Supplier's
performance could be so poor as to cause significant damages to Honeywell. In addition, Honeywell bears the burden
and business disruption in case of termination and we may be forced to seek substitute services to avoid further
damages and disruption. Honeywell should reserve all rights and remedies against such material breach, including but
not limited to, claiming damages and charging for substitute performance by a third party. It is important not to allow a
Supplier to make this our sole and exclusive remedy.

All additional reasonable costs incurred by Honeywell in providing the Deliverables or performing
the Services or having a third party do so, including reasonable overhead, incidental expenses and
reasonable attorney and professional fees, will be charged to Supplier or deducted from any sums due
or to become due to Supplier.
For a transitional period of ninety (90) days from the effective date of the aforementioned
termination (the “Transition Period”), Supplier agrees that 50% of all “additional costs” incurred
by Honeywell during the Transition Period in providing the Deliverables or performing the Services
or having a third party do so, including reasonable overhead and incidental expenses, will be charged
to Supplier or deducted from any sums due or to become due to Supplier.
Suggested comment to Supplier: Supplier can avoid this liability entirely by not breaching the contract, and if it
occurs, work with Honeywell to cure its breach within the contractually agreed period. If Supplier feels this is
overreaching, Supplier can prevent it from ever happening, but if it does happen despite good efforts, that is not the
time for Supplier to object to the cost, since these costs can be prevented entirely by the Supplier in the first place.
Nevertheless, we can accept the word, “reasonable” in front of “costs.” We can agree to limit “additional costs” to a
period of 90 days after termination, but not some percentage of additional costs. Limiting Honeywell from recovering
all the additional costs rewards the Supplier by limiting its losses caused by its own material breach, and conversely
punishes Honeywell by forcing us to absorb costs we would not have had to pay if Supplier had merely performed the
contract as agreed. Once again, this is 100% within Supplier’s control. It is illogical for Supplier to be protected
with a liability cap from the costs of its own continuing material breach.
_________________________
Continued Performance: To the extent that any portion of this Agreement or any SOW is not
terminated for convenience or cause, Supplier will continue performing that portion.
Internal comment, Self-Help. The importance of this clause is to separate any late payment or breach issues and
address them in the appropriate forum, rather than let the Supplier “self-help” by cutting off Services to get Honeywell’s
attention. Supplier has ways to exercise its remedies for any breach by Honeywell, not the least of which is to sue. If
Supplier is allowed to “self-help,” they will unilaterally be determining when they believe Honeywell has breached or is
behind on an invoice, and unilaterally be imposing partial “punishment” (stopping performance), whereas taking up
these issues in the court forum interposes an impartial third party (judge) to determine what appropriate remedies
should apply. This clause is extremely important in Business Critical versions of the template, and should not be
stricken or watered down.
If we agreed to allow self-help remedies, every Supplier who didn’t understand Honeywell’s monthly payment cycles,
or thought days out were measured by their invoice date instead of the date the invoice was received, or thought we

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received an invoice we did not receive, etc. would stop work and it would cause an enormous disruption in the supply
chain. If Supplier believes we are illegally or unfairly abusing them or breaching our payment obligations, they can get
temporary relief from any court, in the US it’s very quick (usually same day), called an “injunction” whereby if the court
agrees with them it issues an order taking immediate effect, and we will of course abide by that. But we do not allow
self-help remedies in our contracts, and we are very firm about it. Supplier may have years of history with us, and
since they are still fine doing business with us, that is evidence we do not take unfair advantage of them.
We may be able to add suspension of the Services to the Termination for Cause section, however, such suspension
would apply only to non-payment of “undisputed” invoices and requires a notice period of at least 30 days. Whether we
can include such a right would need to be assessed with Legal and the internal stakeholders on a case by case basis.
Pricing: Supplier will perform the Services and deliver the Deliverables at or below the prices stated
in the Standard Fees and Discounts Schedule or applicable SOW. Unless otherwise provided in this
Agreement, the prices include: (a) all packaging and freight to the specified delivery point; (b) all
applicable taxes and other government charges including but not limited to all sales, use, or excise
taxes; (c) all customs duties, fees, or charges; and (d) all items, intellectual property, and services
necessary or incidental to provide the Deliverables and perform the Services in accordance with this
Agreement and the applicable SOW. To the extent that value added tax (or any equivalent tax) is
properly chargeable on the supply to Honeywell of any Deliverables or Services, Honeywell will pay
the tax in addition to payments otherwise due Supplier under this Agreement, if Supplier provides to
Honeywell a value-added tax (or equivalent tax) invoice.
Internal comment Inclusive Prices: Please note that (a) through (d) are INCLUDED in our pricing. If Supplier adds
exclusions, Procurement needs to know what we’re paying for those exclusions and needs to make sure it is factored
in or out, not to get a surprise extra bill for it. ALL costs paid to Supplier will need to be specified in the SOW – this
must be clear.
Reimbursable Expenses
Each invoice will separately set forth expenses authorized in advance in writing by Honeywell for
reimbursement ("Reimbursable Expenses"). Honeywell will reimburse Supplier for reasonable,
necessary and pre-approved travel expenses incurred by Supplier in providing the Services or
Deliverables that are in accordance with the Honeywell Travel Guidelines for Service Providers
Exhibit attached to this Agreement. Invoices must enumerate expenses actually incurred and be
accompanied by documentation such as receipts, vouchers and invoices that are reasonably necessary
to verify the amount, date and nature of each Reimbursable Expense.
Internal comment, Not a Mandated Travel Policy: Suppliers often mis-read this as requiring that their personnel
must travel in accordance with our policy. It doesn’t say that, it says they will be reimbursed for what is in these
Guidelines, which are the same expenses a Honeywell employee would be reimbursed for. If their policy allows first
class travel, expensive wine, etc., that’s fine, but we won’t reimburse for those expenses.
Invoicing
Supplier will submit invoices describing the Services, Deliverables, and Reimbursable Expenses and
the payments due. Unless otherwise agreed in a SOW, payment will be monthly in arrears. Supplier
must provide invoices in no event more than 90 days after providing the Services or Deliverables to
Honeywell, otherwise Supplier waives its right to payment. Invoices for Services not compensated
on a fixed price basis will be itemized to reflect, as applicable, the number of hours or costs for which
Supplier seeks reimbursement, and will be supported by time sheets, receipts and other
documentation as Honeywell may reasonably require. The invoice must also include the following
information: (a) name and address of Supplier and the Honeywell entity purchasing the Services and

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Deliverables; (b) name of shipper (if different from Supplier); and (c) Honeywell's purchase order
number(s). Payment of an invoice does not constitute acceptance of the Services, Deliverables or
Reimbursable Expenses and such payment is subject to appropriate adjustment should Supplier fail to
meet the requirements of this Agreement. Payment terms are net 120 days from receipt of a correct
invoice and conforming Services and Deliverables. Payment will be scheduled for the first monthly
payment cycle following expiration of the net terms period.
Issue 1, Paper Invoicing: Supplier wants to issue manual/paper invoices. We should reject this. If Supplier can’t do
EDI, we can discuss another automated way for them to submit them. We must be firm here. Data is important and it
must be digital, not manual.
Issue 2, Subcontractor Invoicing: If the Supplier wants an Affiliate/subcontractor to do the invoicing and receive the
payments from Honeywell, it is okay to let a Subcontractor of a Supplier invoice us on behalf of the Supplier, however,
we cannot assign a SOW because it would have no terms and conditions, it’s not a stand-alone contract. Make sure
the MSA has the clause in Subcontracting and Assignment or somewhere that says the Supplier is liable for the acts
and omissions of the sub as if the Supplier performed (or didn’t perform) them itself. Stick to your guns in not allowing
a release of the one who did not actually do the work, it is always, better to have 2 suppliers liable to us than to novate
one of them. There’s a place in the SOW, if they used the template SOW, for listing “Approved Subcontractors.” Make
sure the Sub is Approved, and then if Tax and Finance are okay with paying the Sub directly, suggest a Change Order
saying we will accept invoices from, and pay the Sub directly, however, payment to the Sub is payment to the Supplier,
and the Supplier hereby authorizes us to do so, and waives and releases any claim for mis-payment or non-payment
to Supplier for reasons that relate to Supplier’s non-receipt of payment, so long as Honeywell can show we paid the
Sub in accordance with the terms of the Agreement. You can agree that it doesn’t change any payment obligations
Honeywell has, it only substitutes the Sub for the Supplier for purposes of invoicing and payment, nor does it change
any obligations the Supplier has, merely the method of performance being by and through the Sub for invoicing and
payment purposes. Tax and Finance should be included in the Attach A as Functional Approvers of this arrangement.
Service Levels and Service Credits:

If any SOW contains Service levels (“Service Levels”) whether specified generally in the SOW or in
a Service Level Agreement (“SLA”) contained or referenced in the SOW, then, in addition to any
other remedies available to Honeywell at law, in equity or otherwise, Supplier will pay to Honeywell
the amount, if any, identified as the Service credit or fees at risk for each failure (the foregoing
credits/ refundable fees referred to as “Service Level Credits” or “Service Credits”). Supplier will
provide its SLA reports at the frequency specified in the applicable SOW, or if no report frequency is
specified, then quarterly within 30 days after the end of each calendar quarter, and Supplier’s Service
Credits will accompany the reports. Supplier’s reports will provide sufficient detail (such as the
Service Level not met, the due date or milestone missed, actual versus required time elapsed, etc.) to
reasonably facilitate Honeywell’s determination of the correctness of Supplier’s Service Credits or
payments, as applicable. Honeywell’s acceptance of any report or payment will not be deemed
Honeywell’s agreement that the computation is accurate. Should Honeywell dispute Supplier’s
report and/or computations, the Parties will promptly work in good faith to reconcile and, if
necessary, adjust the payment or credit. After the Parties’ good faith reconciliation attempts, should
any disagreement still remain, it may be resolved in accordance with the dispute resolution
procedures in this Agreement, either separately, or aggregated with other unresolved discrepancies
over the Term of this Agreement or the applicable SOW.
Supplier acknowledges that its failure to meet the Service Levels, if any, established in the applicable
SOW or SLA may result in delayed performance and a reduced level of Services to Honeywell.
Honeywell and Supplier agree that the Service Level Credits are a price adjustment for the relevant
period to reflect the reduced level of Service performed by Supplier and (a) reflect a reasonable
financial remedy for failure to meet a Service Level in the normal course of business, provided
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Supplier is otherwise using reasonable effort to perform consistent with the Service Levels and in
compliance with this Agreement, and do not constitute a penalty, and (b) do not preclude additional
remedies by Honeywell at law or in equity. Additionally, if Supplier fails to meet a Service Level,
Supplier will (i) investigate and assemble pertinent information with respect to, and report on the root
causes of, the problem; (ii) advise Honeywell of the status of remedial efforts being undertaken with
respect to such problem; (iii) minimize the impact of and correct the problem and begin meeting the
Service Level; and (iv) take appropriate preventive measures so that the problem does not recur.
Internal comment, Deleting Reference to SLAs: Suppliers often strike both clauses on grounds, “We never give
Service Credits,” or “We have our own SLA,” or “We do not agree to SLAs.” None of these arguments justify striking
these clauses because the first word is “If.” These ONLY apply IF the Parties have agreed to an SLA in the SOW, or a
separate SLA. Because both Parties must sign a SOW, this means the Supplier can always refuse to agree to Service
Credits and this clause does nothing to change that. It only describes how the process will work for submitting reports
and credits IF there is an SLA and IF the SLA provides for Service Credits. And, if the Parties want to specify different
timing on the reports, this clause does not change that because it only applies, “if no report frequency is specified.”
Internal comment, Service Credits NOT Penalties: Be sure to maintain the language specifying that Service Credits
are not a penalty, and are not liquidated damages. The reason for this is to reserve Honeywell’s option to seek
actual damages for breach, and avoid the Supplier attempting to stop this by claiming that we have instead agreed on
liquidated damages. For the same reason, we should not allow the Supplier to insert a clause saying the Service
Credits are Honeywell’s “sole and exclusive remedy” for sub-standard or poor performance from the Supplier.
Additionally, if the Services are consistently poor and we must eventually terminate, we do not want the Supplier to
have the argument that Service Credits are sole remedy, that termination is not available to us. Even if the Supplier
wants to add that Service Credits and termination are our sole and exclusive remedy, we should not agree to this. If
they are vehemently committed to the position that Honeywell cannot recover actual damages if Honeywell receives
Service Credits, let them argue that in court, and if they turn out to be right, they win, but leave the language the way it
is.
Penalties are inherently difficult if not impossible to enforce, so we need a specific statement that Service Credits do
not constitute a penalty. Also, watch carefully to ensure Procurement does not mistakenly identify Service Credits in
the SOW as “penalties.” It is advisable for Procurement to search the SOW for “penal” which will pick up “penalty,
penalties, or penalize” if it has inadvertently been inserted into the SOW.
Productivity: For each contract year following the initial year of this Agreement or each applicable
SOW, Supplier will achieve and pass through to Honeywell net productivity gains of not less than net
10% (“Productivity Target”) computed on the volume and amounts invoiced for the prior contract
year, while continuing to meet all requirements under this Agreement and without degrading quality.
If the Productivity Target is not achieved, then within 30 days of the end of each contract year,
Supplier will issue to Honeywell a credit equal to the difference between the actual productivity
achieved and the Productivity Target. Productivity may include, but is not limited to, Supplier
changing its internal requirements to reduce cost (Value Engineering) or reducing Honeywell’s
consumption (Consumption Reduction), but at all times meeting the requirements of this Agreement
without quality degradation. Supplier will document productivity ideas and actual gains achieved in
a progress report form agreed by the Parties, and will submit such reports monthly to Honeywell.
Internal comment, Productivity is Commercial: Productivity is not a Legal issue and is subject to Procurement
management approval per HPPOL 3012 which requires certain approvals for striking the Productivity clause. Striking it
from a Direct contract requires SBG CPO Approval with 3 exceptions. Productivity is a mandatory requirement from
our Procurement Leadership. Even with the supplying of labor, Supplier should be getting more efficient with the
Service, particularly for repetitive work. A portion of that efficiency should be passed along to Honeywell. Even though
only a commercial decision, Legal should always review they language when asked and offer our comments as a
“second set of eyes.” Productivity targets should be specific and objectively measurable.

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Issue 1, Productivity: Often Suppliers will remove the entire clause, remove the Productivity Target and Credits /
Productivity and water it down to "commercially reasonable efforts" or add wording to state the productivity plans will
be identified in a SOW. If you are assisting Procurement in keeping this clause intact, find reasons why Supplier
should accept it: For example, they can achieve economies of scale. What they do for us gives them greater margin
with other customers that don't require the Productivity savings to be returned to those other customers. Procurement
can be flexible with the percentage and with the ways of achieving it. Keep in mind we are not asking for price
reductions. But, the wording “commercially reasonable efforts”, in practice, means no productivity savings at all. It
removes the Supplier’s obligation. Therefore, we recommend to push back and negotiate (e.g. Supplier may be willing
to agree to a lower Productivity Target and Credits spread over the duration of the Agreement).
If Procurement cannot get the Supplier to agree on a firm obligation, they can decide to agree to "commercially
reasonable efforts," but this watered-down language will need the Procurement Professional’s manager’s approval.
Some suppliers also add wording stating that not meeting the Target will not constitute a material breach of the
Agreement. In this case, it is acceptable to state something similar to: Not meeting the Productivity Target,
referenced here above, does not constitute a material breach of Supplier's obligation to pass through
to Honeywell net productivity gains, to the extent Supplier nevertheless made commercially
reasonable efforts to do so.
Productivity plans should not be in the SOW. Moving this to the SOW is a failure mode – Procurement will not
remember each time, and this can be a process that avoids the Procurement Professional getting his/her manager’s
approval for removing this clause. If Procurement wants to measure Supplier’s Productivity in a different way, they can
decide to do so, but they will need to agree on an objective formula for computing it that each side can easily measure.
Records:
Supplier will retain and preserve all records and materials, including invoice records, pertaining to
the Services and Deliverables provided under this Agreement for a period of 7 years after expiration
or termination of this Agreement or for the period prescribed by applicable law, whichever period is
longer. Thereafter, Supplier will not destroy or dispose of or allow the destruction or disposition of
such records and materials without first offering, in writing, to deliver such records and materials or
copies thereof to Honeywell at Honeywell’s expense. If Honeywell fails to request such records and
materials within 90 days after receipt of the written offer, Supplier may destroy or dispose of such
records and materials.
Internal comment, Records: If Supplier wishes to reduce the retention period to a period shorter than 7 years, there
is no across-the-board requirement, it depends upon the type of record. Generally, if Honeywell will have the same
records as the Supplier, we can shorten this, but if the Supplier has records that could be important to us that we will
not have copies of, we might need more.
Audit. For a period of 7 years after termination or expiration of this Agreement or for the period
prescribed by applicable law, whichever period is longer, Honeywell will have the right in connection
with an examination of Honeywell or to ensure compliance with the terms of this Agreement to
conduct an audit If any invoice submitted by Supplier is found to be in error, an appropriate
adjustment will be made to the invoice or the next succeeding invoice following discovery of the
error and the resulting payment or credit will be issued promptly. Supplier will promptly correct any
deficiencies discovered as a result of the audit.

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Common Supplier Change or Comment: Supplier wants to limit Honeywell’s right to audit to once annually.
This is okay except if a non-compliance has been found, in which case we might want to do a follow-up once the
Supplier has corrected the non-compliance.
Audit. During the Term of this Agreement or for the period prescribed by applicable law, whichever
period is longer, Honeywell will have the right in connection with an examination of Honeywell or to
ensure compliance with the terms of this Agreement, to conduct an audit, no more than once
annually, unless a non-compliance was previously discovered, relating to the Services performed
under this Agreement.
Internal comment, Audit Scope. Suppliers often want to limit Honeywell’s right to audit only invoices and payments.
Not acceptable. First, we already have their invoices and our payments, that is seldom a reason we audit. It must be
any records pertaining to their compliance with the terms of this Agreement. One example is that we may have
loaned or licensed IP to the Supplier, and we need to ensure they are using it within the terms of that license. Another
is that we may need to ensure they are employing the required restrictions on disclosure of Confidential Info. Another
is that we may need to audit their cloud security. The Security function should be consulted with respect to narrowing
what we can audit for, but all effort should be made to keep it to “compliance with this Agreement.”
If the Supplier is concerned about revealing other information we should not see, recommend language such
as, “Supplier may redact the records for costs, profits, competitively sensitive information,
customers, suppliers, and other similar information, so long as the purposes of the audit can
still be accomplished.” It is also of course okay to abide by their security requirements, give reasonable
advance notice, conduct the audit during normal business hours and in a manner not disruptive to business,
etc.
Internal comment, Audit Costs. Supplier may want to explicitly say the costs of the audit will be borne by Honeywell.
While the general notion is acceptable, be careful that the Supplier does not invoice its internal costs for its own
personnel to collect and prepare the documents we need. This is a cost we expect them to absorb. Recommend
clarifying we will bear “the cost of a third party auditor, if used, and any reasonable out-of-pocket costs
required by Supplier to prepare for the audit.” Make sure you include “reasonable” in case they want to
charge for nonsense like copying expenses and also “ required” by Supplier so they don’t hire outside personnel and
pass that on because it was technically “out-of-pocket.”
Internal comment, Auditor NDAs. This is more common in the Compensation & Benefits area but does arise
elsewhere. Supplier wants our third party Auditor to sign their form of NDA before they will let them audit. Not
acceptable. The Supplier’s Confidential Info Exhibit of the MSA already says we are liable to the Supplier for any
misuse or unauthorized disclosure by any third party to whom we disclose Supplier Confidential Info. Would the
Supplier rather have Honeywell, a deep pocket, to seek recourse against (and the MSA leaves our exposure unlimited,
both in terms of amount, as well as for indirect damages), or would the Supplier rather go after our Auditor? They can
have one, but not both. If the Supplier wants to hold the Auditor liable, they must fully release Honeywell from any
liability whatsoever for the Auditor’s wrongful use or disclosure of their Confidential Info.
Recommended Language to avoid separate NDAs:

In accordance with the foregoing sentence, Supplier will not require a separate non-disclosure
agreement with the Auditor or other designee. If Supplier insists on a non -disclosure
agreement with any Auditor other designee, then Honeywell will automatically and without
further action whatsoever be released from any liability for the Auditor’s or designee’s misuse
of any Confidential Information and Supplier will look solely to the Auditor or designee
signatory to the non-disclosure agreement. The foregoing does not release Honeywell from any
liability for misuse of Confidential Information or Supplier IP that Honeywell discloses directly
to the Auditor or designee.

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Otherwise, we remain liable for any use by the Auditor that does not comport with our obligations under the Supplier
Confidential Info Exhibit, but we will not negotiate, or make our Auditor negotiate, another NDA, not even a 3-way. We
already have a contract with our Auditor that holds them responsible to the same obligations as we have with any
supplier -- that they must have a need-to-know, may not use it for any purpose other than in furtherance of the
Services, etc. Once the Supplier starts making demands of the Auditor, then the Auditor usually comes back to
Honeywell and wants to renegotiate our terms, asks for indemnity if the Supplier sues them, maybe wants to increase
their rates, etc., and it becomes a vicious cycle, not to mention delaying the audit. And what if the Supplier and Auditor
cannot agree on an NDA? Accordingly, resist this whole notion with vigor. It is okay to clarify that Confidential Info
received by the Auditor during the course of the audit will be deemed to have been given to the Auditor by Honeywell
for purposes of Honeywell’s duties of confidentiality, okay to agree to notify the Supplier of who that Auditor will be,
and that we will not use an Auditor we know is a competitor of the Supplier, maybe even okay to agree to let them
have a reasonable right to refuse that particular Auditor after we disclose its name, but try not to get dragged into an
NDA process with the Supplier once we need to audit. If you must agree because the Supplier has immense leverage,
then agree to the terms of a reasonable form of Audit NDA in advance, insert a blank one as an Exhibit to the contract,
and agree that form of NDA will be used, just don’t give the Supplier the opportunity to create the terms of the NDA
once they know we are going to audit.
Acceptance. Supplier will notify Honeywell’s Project Manager in writing when Deliverables have
been delivered or the Services have been completed and are ready for final inspection and
acceptance. If Honeywell determines that the Deliverables or Services are defective or otherwise not
in conformity with this Agreement, then Honeywell will, by written notice to Supplier: (a) terminate
this Agreement or any SOW, in whole or in part, for cause under the Termination for Cause clause;
(b) accept the Deliverables or Services, in whole or in part, at an equitable reduction in price; or (c)
reject the Deliverables or Services, in whole or in part. If Honeywell rejects the Deliverables or
Services under subsection (c), then Supplier will, at Supplier’s expense and in a timely manner, at
Honeywell’s option, re-perform, correct, repair or replace the defective or non-conforming
Deliverables or Services so that they conform to the requirements of this Agreement. If Supplier is
unable or unwilling to fulfill this obligation within a reasonable time, then Honeywell may fulfill or
have a third party fulfill Supplier’s obligation at Supplier’s expense.
Internal comment 1, Acceptance Removed. IF Procurement has drafted a good SLA, Acceptance becomes less
critical because if the Services or Deliverables do not meet the Service Levels or KPIs in the SLA, then the Supplier
will be willing to correct them in order to avoid Service Credits. If not, Acceptance should be intact enough to ensure
that, if there is a disconnect and the Supplier delivers non-conforming Services or Deliverables, the Supplier cannot
say, “If that’s what you wanted instead of this, we will have to charge you again to re-deliver .” Well written acceptance
criteria and an intact Acceptance clause keeps us from paying twice. Also, Warranty should not be confused with
Acceptance. Warranty can be invoked after Acceptance has occurred and we have begun using the Deliverables.
Internal comment 2, Deeming Acceptance. It is very common for the Supplier to limit the period in which Honeywell
must accept or else the Services or Deliverables will be “ deemed accepted.” This is due to their revenue recognition
requirements, and they generally want a very short period, such as 7 to 10 days, but often will go to 30 days.
Procurement must ensure the Business can do its diligence within the agreed period so we are not cut off from
objecting to unacceptable Services merely because too much time lapsed before we reviewed them for conformance.
Internal comment, Acceptance for Time & Materials Billings. Suppliers sometimes believe the Acceptance clause
is not applicable if they bill Service on time and material basis. The Acceptance clause is always applicable. Whatever
is a Deliverable, no matter how it was billed, T&M, flat fee, or otherwise, that Deliverable or Service is subject to
Acceptance when we first receive it. If we reject it, Supplier must correct it without charging us again.

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Warranties and Remedies
General Warranties. Supplier warrants each of its personnel has the proper skill, training and
background necessary to accomplish his or her assigned tasks; all Services will be performed in a
competent and professional manner, by qualified personnel under the direction and control of
Supplier, and in accordance with the highest standards in the industry provided by reputable service
providers performing services of a similar nature; all software Deliverables provided to Honeywell
will be free of code capable of disrupting, disabling, damaging, or shutting down a computer system
or software or hardware component thereof or other items that may interfere with Honeywell's use of
any software; and Honeywell has the right to use for any purpose any ideas, methods, techniques,
materials and information provided to it or otherwise obtained by Honeywell as a result of this
Agreement or any SOW without restriction, liability or obligations, except as may be specified in this
Agreement or any SOW.
Common Supplier Change or Comment: Supplier wants to change "highest standards" in the industry to read
"generally accepted standards." Ask the Business or Procurement, are we okay with Supplier being “just
average”? If so, we can accept the change.
Service and Deliverable Warranties. Supplier warrants that for a period of two (2) years, or such
longer period of time as is set forth in the applicable SOW, from the date of acceptance by Honeywell
("Warranty Period"), the Services and Deliverables (including all replacement or corrected Services
and Deliverables or components) will be free from defects in material, workmanship, and design, even if
the design has been approved by Honeywell; conform to applicable drawings, designs, quality control
plans, specifications and samples and other descriptions furnished or specified by Honeywell; be
merchantable; be fit for the intended purpose and operate as intended; comply with all laws; be free and
clear of any and all liens or other encumbrances; not infringe any patent, published patent application, or
other intellectual property rights of any third party; and not utilize misappropriated third party trade
secret information.
Common Supplier Change or Comment: Supplier wants to remove the Warranty because Supplier performs on
a T&M basis. Reject this. No matter what we pay for or how, Services, Deliverables, by the hour, T&M, flat rate,
whatever, we still want to know that it conforms to what we asked for. We may not need 2 years of warranty period,
but a reasonable amount of time to determine it’s what we paid for, what we asked them to produce, and that it’s
working properly. If not, they need to make it right and this clause ensures we don’t pay for it a second time.
Common Supplier Change or Comment: Supplier wants to shorten the Warranty Period. Procurement can
approve whatever length of Warranty Period is appropriate for the Business needs.
Common Supplier Change or Comment: After “comply with all laws,” Supplier wants to add, as far as Supplier
is aware.” Reject this. Supplier is responsible for knowing what laws apply to their work just as we are responsible
for knowing what laws apply to us, and we are liable if we break a law of which we are not aware also. So should the
Supplier. Ignorance of the law is no excuse for failing to comply.
__________________________
Remedies. Supplier will correct and repair any defect, malfunction, deficiency, error or non-
conformance (collectively, "Non-Conformance") in a Service or Deliverable which prevents the
Service or Deliverable from conforming to the requirements of this Agreement or any SOW and
performing as warranted, at no cost to Honeywell. If Supplier is unable or unwilling to correct or repair a
Non-Conformance within the time specified by Honeywell, Honeywell may, in addition to any other
rights or remedies it may have at law or in equity, by itself or through a third party correct or repair the
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Non-Conformance, re-perform the non-conforming Services at Supplier's expense, or require Supplier to
provide Honeywell with a refund for all Services and Deliverables which do not conform and perform as
warranted. Supplier is responsible for the costs of repairing, replacing or correcting non-conforming
Services or Deliverables, and for all related costs, expenses and damages including, but not limited to,
the costs of removal, disassembly, failure analysis, fault isolation, reinstallation, re-inspection, and
retrofit of the non-conforming Services or Deliverables or of Honeywell's affected end-product; all
freight charges; all customer charges; and all other corrective action costs (including costs of additional
inspection or quality-control systems). Unless set off by Honeywell, Supplier will reimburse Honeywell
for all such costs upon receipt of Honeywell's invoice.
Common Supplier Change or Comment: Supplier wants to limit Honeywell’s remedies to those expressly set
forth in the Agreement. Reject this. Honeywell reserves all rights or remedies it may have at law or in equity which are
always “in addition to” or “cumulative to” the remedies provided in the Agreement. Since Honeywell cannot know the
extent of potential damages or of unforeseen events, much less the best way to remedy them, Honeywell requires the
right to pursue all available remedies at the time of occurrence of the loss. Point the Supplier to the clause at the end
of the Indemnities section that expressly states Honeywell is entitled to be made whole only once, regardless of the
remedies sought. This clause merely states the law and should not be necessary, but it helps allay the unfounded
fears of many suppliers who believe that if Honeywell exercises more than one remedy, we somehow multiply our
losses. A court will only allow a Party to recover the direct damages that Party can prove it lost. Having more than one
remedy available does not change this legal concept, though suppliers often wrongly assume it does. It shouldn’t
matter if Honeywell exercises 10 different remedies, as long as they all add up to what makes Honeywell whole and no
more.
________________________
Conditions Applicable to All Warranties. The warranties survive delivery, inspection, acceptance or
payment by Honeywell for the entire Warranty Period. Claims for breach of warranty do not accrue
until discovery of Non-Conformance, even if the Services or Deliverables were previously inspected.
The warranties and rights provided are cumulative and in addition to any warranty and right provided at
law or in equity. Any applicable statute of limitation runs from the date of discovery.
Common Supplier Change or Comment: Supplier wants to strike that breach of warranty does not accrue until
discovery, or that the statute of limitations runs from the date of discovery. This is due to revenue recognition issues
for the Supplier. Recommended compromise:
The warranties survive delivery, inspection, acceptance or payment by Honeywell for the entire Warranty
Period. Claims for breach of warranty do not accrue until discovery of Non-Conformance, even if the
Services or Deliverables were previously inspected. The warranties and rights provided are cumulative
and in addition to any warranty and right provided at law or in equity. Any applicable statute of
limitation runs from the earlier of the date of discovery, or when the Non-Conformance reasonably
should have been discovered, given the ordinary intended use of the Services or Deliverables in
question.
IP OWNERSHIP
Ownership of Work Product The exclusive right, title and interest in and to all works performed
under this Agreement, and all materials, source code, information, know-how and Deliverables
prepared or developed as a result of Services performed, both as individual items or a combination of
components and whether or not the Services are completed, including, without limitation, any
Disclosed Subject ("Work Product") will vest in Honeywell. The Work Product will be deemed to

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be work-made-for-hire and made in the course of Services rendered and will belong exclusively to
Honeywell, with Honeywell having the sole right to obtain, hold and renew, in its own name or for its
own benefit, patents, copyrights, registrations or other appropriate protection. To the extent that
exclusive right, title or interest in the Work Product may not originally vest in Honeywell as
contemplated in this Agreement (e.g., the Work Product does not constitute work- made-for-hire),
Supplier hereby irrevocably assigns, transfers and conveys to Honeywell all right, title and interest to
the Work Product. Supplier and its personnel will give Honeywell or any Honeywell designee all
reasonable assistance and execute all documents necessary to assist or enable Honeywell to perfect,
preserve, register or record its rights in any Work Product. If for some reason the right, title and
interest to Work Product is not assignable to Honeywell, then Supplier hereby grants to Honeywell an
exclusive (even as to Supplier), world-wide, assignable, paid-up, royalty-free, irrevocable, perpetual
license to: (a) use, execute, reproduce, display, perform, maintain, distribute (internally and
externally) copies of and prepare derivative works of the Work Product; (b) use, make, have made,
sell, offer to sell, import and export the Work Product; and (c) authorize or sublicense others to do
any, some or all of the foregoing without accounting to Supplier. Supplier will, immediately upon
request of Honeywell, or upon termination, cancellation or expiration of the applicable SOW or this
Agreement, turn over to Honeywell all Work Product and any Honeywell documents or other
materials held by or on behalf of Supplier, together with all copies thereof.
Internal comment 1, IP Ownership By Supplier Only. Suppliers usually strike the requirement that Honeywell will
own what is developed for Honeywell during the course of providing the Services. If their argument is that “ we never
do that,” then put the language back in, with leading language saying something like, “In the unlikely event that
the Parties agree, in a SOW, that Supplier will develop intellectual property for Honeywell’s exclusive
use…” If they “never do that,” then there is no risk of the Parties ever agreeing to that in a SOW, but if it ever does
happen, we have that clause agreed. If the Supplier does admit it will create IP during the course of the Services, but
doesn’t want Honeywell to own it because the Supplier wants to use it for its other clients, then investigate the
possibilities that this is the case, and whether there is a business reason why Honeywell does not need or want
exclusive ownership in the IP. Even if we do not, then you can narrow the clause as shown above, so we do not own it
unless the Parties have agreed in a SOW (okay to say, “in writing,” but it’s redundant because the SOW must be
signed by both Parties) that it will be exclusively owned by Honeywell.
Do not let the Supplier strike this language:

If for some reason the right, title and interest to Work Product is not assignable to Honeywell, then
Supplier hereby grants to Honeywell an exclusive (even as to Supplier), world-wide, assignable,
paid-up, royalty-free, irrevocable, perpetual license…
It is required because some countries (many in Europe) vest ownership in the individual who created the IP and it
cannot be assigned, only licensed. In those instances, we must have a license as close to exclusive ownership as is
possible. Many American companies are not familiar with this but will be okay with it once you explain it.
Internal comment 2, IP Ownership After Payment. Suppliers often change the language to say that Honeywell does
not own the Work Product until Supplier is paid or that Honeywell owns it upon payment to Supplier. This is
unworkable because, for example, if pay terms are N120 + MPO, then it could be several months before the Supplier
is “paid,” and therefore several months before Honeywell owns it. Change upon payment to “subject to payment
in accordance with this Agreement.” If Honeywell does not pay, Supplier still has the same recourse, it can sever
Honeywell’s ownership on grounds we did not pay as agreed, but Honeywell still has ownership from the time the
Deliverable or Work Product containing the IP is delivered, our ownership merely has a condition subsequent tied to it.
We should own it from the minute they create it, subject to us paying “as agreed,” even if those payments are not due
for 180 days +MPO.
Supplier Pre-Existing Works and Third Party IP. Nothing contained in this Agreement will be
construed to restrict, impair or deprive Supplier of any of its rights or proprietary interest in

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technology or products which existed prior to and independent of the performance of Services under
this Agreement ("Supplier Pre-Existing Works"). No Work Product will include any Supplier Pre-
Existing Works or works of authorship of a third party. To the extent that any Supplier Pre-Existing
Works or other materials owned by any third party are contained in a Deliverable, those materials
will be specifically identified in the applicable SOW. With respect to Supplier Pre-Existing Works or
other material owned by Supplier or any third party incorporated into the Deliverables or Services,
Supplier hereby grants to Honeywell an irrevocable, perpetual, non-exclusive, worldwide, royalty-
free, paid-up, assignable license to: (a) use, execute, reproduce, display, perform, maintain, distribute
(internally and externally) copies of and prepare derivative works thereof; (b) use, make, have made,
sell, offer to sell, import and export the Supplier Pre-Existing Works or other material; and (c)
authorize or sublicense others to do any, some, or all of the foregoing without accounting to Supplier.
Internal comment 3, IP Ownership Subject to Licenses. Honeywell must have those license rights in any
Deliverable that the Supplier provides, even if the Deliverable contains Supplier IP and/or Third Party IP. Honeywell
owns the final Deliverable, full stop. We must be free to use it for our business purposes. The Supplier controls
what goes into the Deliverable, and if they choose to embed their own IP or a Third Party’s IP into it, then they must
provide those license rights so that we can use the Deliverable as we see fit without additional fees or being subject to
additional licenses. This does not mean that we own the Supplier’s IP, nor does it mean we have the right to use the
Supplier IP other than the way it was incorporated into or embedded into the Deliverable, nor can we extract it or
separate it from the Deliverable, it merely means we can use the final Deliverable, as it was delivered to us, for our
business purposes. If the Supplier does not want to grant those rights, or cannot ensure those Third Party IP rights
are sufficient for it to pass them through to us, then the Supplier should not put its IP or the Third Party IP into the
Deliverable. We should also not agree to read and comply with the Third Party IP owner’s license, even if the Supplier
passes it through to us. We hired the Supplier, and the Supplier is responsible for obtaining license rights from the
Third Party sufficient to pass through to the Supplier’s customers.
Internal comment 4, IP Ownership of What Supplier Uses. Some suppliers may misread this clause in the way that
Honeywell will own IP or be granted licenses to use IP in software the Supplier uses in conjunction with providing the
Services. For the sake of clarity, Supplier’s use of software to further its efficiency in providing the Services is not the
target of this clause. This clause only applies if the Supplier provides a Service or Deliverable that has its IP
incorporated into it, or IP of a third party from whom Supplier has licensed it. This says we would use the Deliverable
irrespective of what the Supplier incorporated into it, and we have a license for whatever the Supplier incorporated into
it, not what they happened to use while creating it.
Internal comment with regard to Honeywell “Feedback” or “Input” after using Supplier tools/software . If, for
example, Honeywell uses a source-to-settle procurement platform. Supplier has IP ownership in the platform,
Honeywell uses the platform for, among other things, to provide feedback. Often the Supplier gives us free trial use in
exchange for getting our Feedback. Supplier wants sole ownership of Honeywell’s Feedback. Reject this, and give
Supplier a license to use the Feedback for its platform, but not to own it even if Supplier offers to license it back to
Honeywell for free. Honeywell’s ideas will always be Honeywell’s ideas, even if we give the Supplier free use of those
ideas. Additionally, we might want to provide the same Feedback to another supplier in another situation, but if the
first Supplier took sole ownership of that Feedback, we would be violating their IP rights by providing it to the second
supplier. We must own our Feedback, full stop. It doesn’t mean we own the Supplier’s IP, but we must own our
Feedback. If we can’t get the Supplier to agree to that, we might be forced to stop the negotiations. If anybody could
access Honeywell’s bright minds, get our great ideas and take them away from us and own them exclusively for free,
companies would be lining up around the world to give us free demos to improve their products.
Remedies. Supplier acknowledges and agrees that, in the event of a breach or threatened breach of
this Intellectual Property Ownership Section, Honeywell will have no adequate remedy at law and,
accordingly, will be entitled to an injunction against a breach or threatened breach.

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Supplier acknowledges and agrees that, in the event of a breach or threatened breach of this
Intellectual Property Ownership Section, Honeywell will may have no adequate remedy at law and,
accordingly, will may be entitled to an injunction against a breach or threatened breach.
This change is not acceptable. First, the Parties would not need to contractually agree on “may,” that is the only reality
that exists – we may or may not. The reason it must say “will” is that, US law requires a Party to show “irreparable
harm” before the court will grant “equitable relief,” which includes an injunction. When a Party needs an injunction,
they are always in a huge hurry to stop the other Party’s behavior, usually to stop continuing infringement. Having the
Parties’ agreement in a contract that a violation of this IP ownership rights section will cause irreparable harm, often
gets us over the threshold requirement to show the judge we are suffering irreparable harm. This is not a guarantee,
some judges will nevertheless insist on a showing of irreparable harm regardless of what the contract says, but many
will consider this sufficient. Note that this clause does not mean the Parties are attempting to agree that a judge will
issue the injunction, of course it is impossible for Parties to a contract to require a judge to do anything. They are
merely agreeing that irreparable harm has and is occurring if this clause is breached. It is okay to make this clause
mutual, but it is not okay to let the Supplier change this to “may.”
Caution: This is not the GPT clause!

General Indemnification: Supplier will, at its expense, defend, hold harmless and indemnify
Honeywell and its subsidiaries, affiliates, and agents, and their respective officers, directors,
shareholders, and employees, and Honeywell's customers (collectively "Indemnitees") from and
against any and all third party claims and related loss, cost, expense, damage, claim, demand, or
liability, including reasonable attorney and professional fees and costs, and the cost of settlement,
compromise, judgment, or verdict incurred by or demanded of an Indemnitee (“Loss”) arising out of,
resulting from or occurring in connection with negligent acts or omissions or willful misconduct of
Supplier or its personnel, Supplier’s breach of the terms of this Agreement or any applicable law or
regulation, any employment law or benefit related claim in relation to Supplier’s provision of
Services under this Agreement, or any theft or other misappropriation of Honeywell’s or its
personnel’s information, property or funds by Supplier or its personnel. For the purposes of this entire
Section titled “Indemnification and Remedies,” “third party” includes, but is not limited to, any
employee of a Party and any governmental, regulatory, judicial, administrative, or other agency or
similar body having authority over an Indemnitee, and “claim” includes, but is not limited to, a fine,
penalty, settlement, sanction, or similar assessment made on or against an Indemnitee.
Internal comment 1, General Indemnification For Third Party Claims. The GPT does not expressly align with the
clause above. It is okay to revise the GPT clause to remove reference to party-to-party claims and specify that the
indemnity only applies to third party claims. Occasionally, Supplier’s counsel will assert that an indemnity is always a
third party indemnity, whether worded that way or not. However, NY courts do recognize, and will enforce, a party-to-
party, or “direct” indemnity, but only if it is “unmistakably clear” that was the Parties’ intent. If the indemnification does
not mention party-to-party claims or third party claims, then the courts will interpret it to be an indemnity for third party
claims. Indemnities are always narrowly construed. Attorneys who say there is no such thing as a party-to-party
indemnity are probably wrong, at least under NY law.
Internal comment 2, General Indemnification is Already Limited. Depending on the stage of negotiations and
concessions already made, the General Indemnity might also be limited by the mutual bar on Indirect Damages and/or
a cap on the amount of damages, but be careful not to make this argument with the unmodified template because
indemnities for Honeywell’s benefit are Excluded from this limitation as a going-in position.
Suggested comment to Supplier: If the Supplier makes the General Indemnification mutual, reverse the changes
initially. Honeywell is not performing, the Supplier is. The engagement is not a trade of performance for performance,
our only material obligation is to pay. We don’t indemnify suppliers.
Internal comment 3, General Indemnification is For Supplier-Caused Claims. One compromise that can be made
here is to carve out for any cause of the third party’s claim by Honeywell, like so:

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Except to the extent caused by Honeywell, Supplier will, at its expense, defend, hold harmless and
indemnify Honeywell and its subsidiaries, affiliates, and agents, and their respective officers,
directors, shareholders, and employees, and Honeywell's customers (collectively "Indemnitees")
from and against…
You can point out that this is a very generous carve out because Honeywell’s conduct does not have to be negligent to
be carved out of Supplier’s liability (i.e., it does not say, “Except to the extent caused by Honeywell’s negligence…”),
it means that any contribution of cause by Honeywell, regardless how trivial (such as Honeywell innocently providing
inaccurate information), is not part of Supplier’s responsibility.
Internal comment 4, General Indemnification Need Not Cover Customers. It is generally okay for the Supplier to
strike “customers” and “shareholders” from the list of Indemnitees. We would make those parties whole through our
being indemnified.
Internal comment 5, General Indemnification, Supplier Will Only Cover “Final Judgments.” Suppliers often want
to limit indemnification to final judgments assessed against Honeywell. We should reject this position. The edits mean
that Honeywell would have to conduct all defense and pay for all proceedings, including appeals, until final judgment is
rendered. Additionally, the Supplier should have the higher interest in defending its own actions. Also, language
referring to “final judgments assessed” discourages settlement and sometimes forces the Parties to litigate because
judgments are indemnified whereas settlements are not. Most claims are resolved through settlement. An
indemnification that only covers final judgment or final damages awarded is of little to no value to Honeywell. Be sure
to leave the pro-active obligation to “defend” in the indemnification.
Internal comment 6, General Indemnification Avoids Hon Defending Supplier Negligence. Another common
Supplier argument is that Honeywell does not need to be indemnified, Honeywell can always sue. However, if we are
sued by a third party for the Supplier’s negligence, we are then in a position of defending the Supplier’s negligence, not
Honeywell’s. In addition to this being objectionable on its face, we do not possess the relevant facts, nor what
defenses are available, etc., the Supplier possesses all this information. Additionally, this could greatly exacerbate the
Supplier’s liability, due to the following scenario:
Suppose the third party sues Honeywell for the Supplier’s negligence, and may likely sue the Supplier as well. If Honeywell is not
indemnified, then Honeywell pays attorneys to defend the claim that the Supplier was negligent. Given that, as mentioned above,
Honeywell is not in possession of all the facts and available defenses, it is more likely Honeywell will lose the suit against the third
party, or settle it for more than the Supplier thinks it is worth. Additionally, Supplier will not control Honeywell’s attorney selection,
strategy, discovery, costs, any settlement -- none of it, because the Supplier is not indemnifying. Honeywell might make admissions
the Supplier would not agree with, risking a greater likelihood of the Supplier losing its direct litigation against that same third party.
Also, if the Supplier is sued, the Supplier will incur its own attorney’s fees to defend the case against the third party on the same set of
facts. Whether Honeywell wins, loses, or settles the case against the third party, Honeywell could then sue the Supplier. The Supplier
then has to pay attorneys again to defend the suit by Honeywell on the same set of facts. Now the Supplier will have paid attorney’s
fees twice, once to defend against the third party directly, then a second time to defend against Honeywell. If Honeywell prevails
against the Supplier, Honeywell’s damages will include the attorney’s fees (for attorneys the Supplier did not get to select) Honeywell
incurred to defend against the third party’s claim that the Supplier caused. That circumstance would mean the Supplier pays attorney’s
fees a third time ((1) defense of its suit by the third party directly, (2) defense of Honeywell’s suit against the Supplier, and (3)
reimbursing Honeywell’s attorney’s fees incurred by Honeywell defending against the third party) to defend the same set of facts. If
the Supplier loses its case against the third party, it could end up paying the third party’s attorney’s fees as well, which would mean
paying attorneys 4 times to defend one set of facts. But by indemnifying Honeywell, the Supplier hires attorneys ( of its own choosing)
that defend both Honeywell and the Supplier, and Supplier controls the strategy, discovery, settlement, etc., and receives Honeywell’s
complete cooperation, and increases its chance of prevailing. This makes far more sense than the Supplier having to defend against 2
plaintiffs instead of one.
Internal comment 7, General Indemnification Should Not Be Mutual. In special situations, Honeywell has a
genuine likelihood to get the Supplier sued due to something Honeywell might easily do wrong. An example is US
health care and other ERISA Qualified Plans where Participants under the Plan could sue the Supplier as an
administrator because of flaws or illegalities in Honeywell’s Plan, Honeywell’s decisions and choices about coverage,
or in setting up the Plan, etc. These exceptions, where justified, should be considered on a case-by-case basis, but
even when a Supplier can conceive of a possible scenario where it might be sued because of Honeywell, that does
not justify an indemnity flowing from Honeywell to the Supplier, and where we give it, we should very specifically tailor
it to the likely risk and not simply give a mutual version of the General Indemnification or a general negligence
indemnity.

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Internal comment 8, General Indemnification Should Cover Government Fines. If modifying the GPT language to
remove party-to-party claims and apply it only to “third party” claims against Honeywell, it is important to insert the
language at the bottom of the old clause shown above, expanding the definition of the term, “third party” so that if, for
example, Honeywell is fined by a government agency, the Supplier is liable for that and cannot say it is not a third
party law suit. Similarly, an employee might sue us because of the Supplier’s negligence, and we want to avoid the
Supplier’s argument that an employee of either Party is not a third party.
Internal comment 9, General Indemnification is Not a Substitute for Liability. Some Suppliers wish to add
wording to state that one Party is liable to the other, such as: Each Party has liability to the other for breach of this
Agreement. Notwithstanding the foregoing, except to the extent caused by Honeywell, (…). A contract never has to
state that one Party is liable to the other, it’s one of the principal reasons Parties enter into the Agreement. It is also
important to point out that indemnity and liability are not the same thing. A Party has liability for breaching its
obligations or otherwise failing to fulfill them, whether that is stated in the contract or not, but a Party never is obligated
to indemnify except by the express terms of a contract. Nevertheless, if we have already tried adding “Except to the
extent caused by Honeywell” as noted above in Internal comment 3, and Supplier still insists to state liability, we
prefer not to state the obvious, but may use the following: Each Party has liability to the other for breach of
this Agreement. Notwithstanding the foregoing, except to the extent caused by Honeywell, (…standard
wording)
Internal comment 10, General Indemnification, Supplier Strikes “Breach of Agreement.” If the clause is limited to
third party claims, and both Parties are honoring their confidentiality obligations, it is very unlikely that a third party will
even know the MSA exists (though it is a logical assumption), much less would have a claim arising from the Supplier’s
breach of a term contained in it, so this strike is negotiable and depending whether we need a party-to-party indemnity
or are just seeking a third party indemnity, but recommend that it be “traded” whenever prudent, that is, ‘we will allow
you to strike breach of this Agreement if you will allow us to retain …..’
Internal comment 11, General Indemnification, Insurance. Suppliers sometimes claim they do not want to take on
indemnity obligations because they are not covered by insurance. Most commonly these are lobbyists/law firms who
claim their malpractice insurance does not cover indemnification of their clients. Not every liability can be insured, but
insurance coverage is irrelevant regardless. Do not confuse insurance coverage with liability, they are different
concepts.
Security Breach Indemnification Supplier will defend, hold harmless and indemnify the
Indemnitees from and against, and reimburse the Indemnitees for, any and all Security Breach Losses
(as defined below) suffered or incurred by, awarded against or agreed to be paid by, any of the
Indemnitees relating to, resulting from, or in connection with (a) any Supplier Security Breach (as
defined below) and/or Supplier’s breach of any applicable data protection, privacy, breach notification,
or data security law or regulation or (b) any of the terms and conditions or obligations relating to
information and data protection, privacy, breach notification, data security, or Personal Data set out in
the Section of this Agreement titled “Confidential Information, Security and Data Privacy.” “Security
Breach Losses” means, except to the extent prohibited by applicable law, all liabilities, costs, losses,
material and non-material damages, claims, actions, and expenses incurred by Honeywell in connection
with a Security Breach including, but not limited to, the cost of legal fees; fines, penalties, settlements,
sanctions and similar assessments imposed by, and the reasonable costs of compliance with
investigations conducted by, any data protection authority or other governmental, regulatory,
administrative, judicial or other agency or similar body having authority over an Indemnitee; loss or
damage to reputation, brand, or goodwill; compensation or other amounts paid to a data subject; and
Security Breach investigation and response costs and expenses (including, but not limited to, the cost of
call center support services, public relations and other crisis management services, and consulting,
forensic, accounting, and auditing services). “Security Breach” means any event involving any actual,
suspected, potential, or threatened compromise of the confidentiality, integrity, or availability of data

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and/or the networks, systems or databases on which the data is stored, transmitted or otherwise
processed, including, but not limited to, any accidental, unlawful, or unauthorized disclosure, use,
viewing, destruction, loss, alteration, or acquisition of, or access to, any data including Personal Data.
Internal comment 1, Security Breach Indemnification Not Covered By General Indemnification. This is not as
imperative as the General Indemnification, and if the General Indemnification remains intact in original form, there is an
argument to be made that if a person sues Honeywell for unauthorized disclosure of their Personal Data, it would fall
within the scope of the General Indemnification. However, this indemnity is not triggered by a third-party claim and
should be retained as an independent indemnification if at all possible. With respect to Personal Data disclosure, we
want to be proactive to prevent exacerbation of the problems, such as purchasing identity theft insurance for the Data
Subjects whose Personal Data was disclosed, rather than wait until they sue or have actual damages. The Supplier
should not be allowed to sit back and wait until people actually suffer harm or sue Honeywell before the Supplier steps
up for these costs. Proactive measures prevent the Supplier’s liability from being greater anyway, so it makes sense
for the Supplier to cover them. Also, we do not want the Supplier to argue that Honeywell “volunteered” or “chose to
incur” these expenses and did not suffer them as damages.
Internal comment 2, Security Breach Indemnification Should Not Be Limited to Supplier Causes . Suppliers
often try to narrow this to breaches “caused by Supplier,” but this is unacceptable. Suppliers almost never cause
them, they are usually the result of a hack or intrusion by a bad actor. Supplier should nevertheless be responsible for
safekeeping of the Honeywell data that Supplier possesses in the course of providing Services, so even if the Supplier
is hacked, this indemnity applies.
Internal comment 3, Security Breach Indemnification Can Be Limited to “Actual.” It is generally acceptable for
the Supplier to strike “suspected, potential or threatened” compromise, leaving only “actual compromise.”
Internal comment 4, Security Breach Indemnification in Data Privacy Exhibit. The Data Privacy Exhibit usually
contains an indemnity that is similar to this one. If this one is intact, it is acceptable to just substitute language in the
Data Privacy Exhibit stating that the Security Breach Indemnification clause in the Agreement applies. The reverse
should be applicable as well, if this Security Breach Indemnification clause is substantially reduced during negotiations,
try to keep the Data Privacy Breach Indemnification in the Exhibit intact. The premise there is based on a tenet of US
law that says, “the specific controls the general,” so even if there is a Security Breach indemnity that arguably applies,
the more specific Data Privacy Breach language would in that case apply to a breach of that Exhibit.
_________________________
Intellectual Property Infringement Supplier will, at its expense, defend, hold harmless and
indemnify the Indemnitees from and against any and all Loss arising out of, resulting from, or
occurring in connection with any alleged: (a) patent, copyright or trademark infringement; (b)
unlawful disclosure, use or misappropriation of trade secrets; or (c) any other violation of any third
party intellectual property right. If any injunction or restraining order is issued, Supplier will, at its
expense, obtain for Indemnitee either the right to continue to use and commercialize the Services and
Deliverables and the allegedly misappropriated trade secrets, or replace or modify the Services and
Deliverables to make them non-infringing.
Internal comment 1, IP Infringement Indemnification Can Never Be Stricken. This should never be negotiated out
of the MSA, even if there is no likelihood the Supplier will provide IP in conjunction with its Services. If that is true,
there is no exposure to the Supplier anyway. There is no circumstance whatsoever in which Honeywell should spend
even $1 defending whether the Supplier is the rightful owner of its IP. Moreover, the language should remain
essentially intact as in the template. It’s important to understand that infringement can occur merely by “using” the
materials. If a Supplier provides something for Honeywell to use, and we use it in full compliance with the Supplier’s
license to us, we can still be sued for infringement by a third party who claims to own the IP instead of the Supplier
merely because we “used” it. This is why we insist on being indemnified (without limit) by Suppliers for any claims of
infringement made against us.

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Supplier will have no liability for this indemnity if Honeywell (a) combines Supplier’s materials
with an item not provided by Supplier, (b) uses the materials in a manner not authorized by
this Agreement, or (c) modifies Supplier’s materials.
Recommended Response:
Supplier will have no liability for this indemnity if Honeywell (a) combines Supplier’s materials
with an item not provided by Supplier or its agent, (b) uses the materials in a manner which
could not have been anticipated authorized by this Agreement, or (c) modifies Supplier’s
materials such that, but for Honeywell’s combination pursuant to (a), unanticipated use
pursuant to (b), or modification pursuant to (c), the infringement would not have occurred.
Internal Comment 2, Drafting IP Indemnification:
(1) Use the “but for” test. Suppliers don’t want to be liable if Honeywell created the problem by modifying or
combining the materials with something on our own, and this is acceptable, but the drafting is tricky and
you must ensure it is worded in such a way that the Supplier is off the hook only if Honeywell caused the
infringement with the combination or modification or unanticipated use. This can be done using the “but-
for” language in the example. If the infringement would have occurred anyway, whether or not Honeywell
made the combination or modification, then the Supplier should be liable for the alleged infringement.
Using the Supplier’s original suggested language, if Honeywell combined the materials with an item not
provided by the Supplier, but that combination had absolutely nothing to do with the infringement claim,
the Supplier could refuse to indemnify even though our combination did not cause the infringement, it
would have infringed anyway. Using the but-for test, the Supplier could not avoid indemnifying. You can
also negotiate language that says “only to the extent Honeywell’s modification or combination caused the
infringement” the Supplier will not be liable, but it must be tightly tied to “cause” of the infringement. Also,
do not accept “in a manner not authorized by this Agreement” because neither an MSA nor a SOW
typically specify exactly what Honeywell can do with the materials. The license grant is usually just
something like, “Honeywell has a worldwide, non-transferable, paid up license to use the materials…”
While the foregoing is an acceptable license grant, this does not specify a manner or an explicit way the
materials are to be used. It is, however, reasonable for the Supplier to not be liable if we surprise them
and use the materials in a way that nobody could have anticipated. Do not make it subjective, such as, in
a manner the Supplier could not have anticipated, make that an objective or reasonable test so as not to
allow the Supplier to claim surprise just to avoid indemnifying.
(2) “Published” or “filed” patents unacceptable. Do not let the Supplier narrow the indemnity only for
patents that have been published or the applications filed at any given point in time (or in a given territory,
such as “US patents,” see next point). Suppliers argue this is the only way to research whether their
patent infringes another. While this is true, applications and filings are made every day, and even if there
was a way to research every patent in the world on one day, their research would be outdated the next
day, and the Agreement will run for years, so any decent protection we would receive would be quickly
outdated as more patents are applied for or issued. The reality is, as between Honeywell and the
Supplier, the Supplier is in the better position to prove that it indeed created or purchased that IP, not
Honeywell.
(3) “US” patents unacceptable. We could draw a law suit for infringement from anywhere, especially since
we are a global company, so the indemnity cannot be narrowed only to one country or even one region,
even if the Supplier never does business outside the US and never researches patents or files for patents
anywhere except the US.
(4) “Knowing” infringements unacceptable. Virtually every infringement comes as a surprise, it is rare that
any supplier would knowingly infringe any IP, or if they would, then we should not do business with them.
(5) “Sole and exclusive remedy” should be avoided . If Honeywell has been sued by the third party or has
had to pay license fees to the third party, the indemnity may or may not be sufficient to make Honeywell
whole. Accordingly, make sure all possibilities for Honeywell’s losses are covered within the indemnity
language before agreeing to the indemnity being Honeywell’s sole and exclusive remedy for alleged
infringement.
(6) Honeywell’s “approval” does not alleviate Supplier’s duty to indemnify. Honeywell’s “approval” of a
design does not get Supplier off the hook for obligations related to design, including infringement of the
design. We do not agree to strike “even if Honeywell approved the design.” Approving a design is for our

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purposes (suitability for our use, etc.), it is not a substitute for the diligence the Supplier must go through
whenever it creates IP to avoid infringing the IP of another party.
Internal comment 3, IP Infringement Indemnification Should Not Be Limited to Final Awards. Not always
confined to IP Indemnification, but Suppliers often want to limit the indemnification to final judgments assessed against
Honeywell. We should reject this position. IP infringement risk belongs to Supplier. We should not be dealing with IP
claims. Honeywell has no idea where the Supplier acquired the IP or whether and how the Supplier developed the IP
and could not begin to defend this type of claim. The edits mean that Honeywell would have to conduct all defense
and pay for all proceedings, including appeals, until final judgment is rendered. Additionally, the Supplier should have
the higher interest in defending whether it owns the IP. What if Honeywell defended the claim and lost? That could
mean the Supplier loses the right to its IP! Why entrust something that important to your customer ( who is less
invested in winning since we will be reimbursed win or lose) instead of defending it yourself? Finally, language
referring to “final judgments assessed” discourage settlement and sometimes force the Parties to litigate because
judgments are indemnified whereas settlements are not. Most infringement claims are resolved through negotiation,
cross-licenses, and settlement before trial even begins, much less before a court renders a final judgment. Therefore,
an indemnification that is effective only upon a final judgment would be of little to no value to Honeywell.
Right to Defend. Supplier will have the right to conduct the defense and settlement of any claim or
action described in this Indemnification and Remedies Section if it acknowledges in writing its
responsibility for such claim, but in no event will Supplier enter into any settlement without
Honeywell’s prior written consent. Honeywell may participate in the defense or negotiations to
protect its interests. If Supplier fails to defend or settle any Loss (including a Security Breach Loss)
in a prompt and competent manner, then Honeywell, at its option, has the right to take over the
defense and settlement of the Loss (including a Security Breach Loss) at Supplier’s expense. Supplier
will pay all costs, expenses (including reasonable attorney and professional fees and costs), awards,
judgments and settlements promptly as they become due, and Supplier will give Honeywell all
information, assistance and authority to enable Honeywell to defend and settle the claim or action.
Internal comment, Right to Defend Only Given When Supplier Acts Promptly. Honeywell will cooperate with the
Supplier if the Supplier steps up to the defense and does not force a dispute over whether the Supplier is liable to
indemnify. If Honeywell has to hire lawyers, pay a retainer, file an Answer to the Complaint, or conduct any part of the
litigation while the Supplier drags its feet, we need to be clear that we are entitled to demand that the Supplier pay
these expenses as they come due. Even if the Supplier is stepping up to its indemnity obligations, Honeywell wants
the right to approve settlements and we want the Supplier to allow for our input, but it is acceptable to insert that our
approval of settlements “will not be unreasonably withheld or delayed.” If for any reason Honeywell has agreed to
indemnify the Supplier, make sure this clause is made mutual.

Honeywell may participate in the defense or negotiations to protect its interests, but that shall be
done in close cooperation with Supplier’s counsel.
Reject the above Supplier addition because if Honeywell hires our own lawyers to represent us, we will not
necessarily be fully aligned with Supplier. The most likely reason Honeywell would hire its own counsel is
because we anticipate our interests are diverging from the Supplier’s.

Honeywell’s prior written consent...
Reverse the above strike and restore the original language. This wording means the Supplier can’t sit on the
fence and defend the claim on one hand, but not agree it is indemnifying on the other hand. Either the
Supplier is indemnifying and will accordingly receive Honeywell’s full cooperation, or the Supplier can refuse to

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indemnify, at its own peril, in which case Honeywell will take all appropriate action against the Supplier for
failure to indemnify, breach of contract, etc.

Honeywell’s prior written consent. Honeywell may participate in the defense or negotiations to
protect its interests. If Supplier fails to defend or settle any Loss (including a Security Breach Loss)
in a prompt and competent manner, then Honeywell, at its option….
Supplier may question how “prompt and competent manner” might be determined. While people can differ
about promptness, it is not entirely subjective. Due dates are specified in statutes that govern notices to the
government as well as data subjects, and due dates in litigation matters are in the Rules of Civil Procedure.

action described in this Indemnification and Remedies Section if Honeywell sets forth in written
notice to Supplier the facts underlying its claim, and Supplier shall have fifteen (15) days from receipt of
such notice to address the concern described in such notice. If after the notice period, Honeywell is not
reasonably satisfied with Supplier’s response to the concern described in the notice, Honeywell, at its
option, may take over the defense and settlement of any Loss (including a Security Breach Loss) at
Supplier’s expense….
Strike this language. These timelines do not work. Indemnities are for third party claims, meaning the
Supplier and Honeywell are not suing each other, and they have little to no control over the suit in question. If
we are in the middle of litigation, motions, and discovery, all kinds of things are due on strict deadlines, usually
on much shorter timelines than this would allow. Additionally, in the US, the court has to be notified, and
usually has to approve, change of counsel for a litigant, and those times are also prescribed in the Rules of
Civil Procedure.

Supplier adds the following: Supplier’s preceding payment obligation is limited to the initial trial
and does not extend to any appeals.
Strike this language. If the Supplier is entitled to “conduct the defense and settlement,” then the Supplier
decides if there will be an appeal. If Honeywell has taken over because we disagree whether defense is
adequate, Honeywell decides whether to appeal. Either Party can raise a dispute any time about anything,
and nothing stops the Supplier from objecting to the costs of counsel if Honeywell is claiming reimbursement
for them, but it does not make sense to agree in advance to what extent attorney’s fees are capped, it is too
dependent on later developing facts.
Remedies. Unless expressly provided otherwise, all Honeywell remedies set forth in this Agreement
are in addition to, and will in no way limit, any other rights and remedies that may be available to
Honeywell at law or in equity. For clarity, Honeywell may only be made whole once for its losses
regardless of the remedies sought.
Suppliers frequently strike our assertion to seek multiple remedies because they falsely assume that more than one
remedy will allow Honeywell to collect more than it lost, so we specify in this Section that Honeywell can only be “made
whole once.” A US court (and most foreign courts) will allow a party to recover (direct damages for) what the party can
prove it lost, not more. If it takes Honeywell 2 or 3 different remedies to recover whatever we can prove we lost, it
should not matter because the Supplier’s liability will not be expanded regardless. This clause merely states the law

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and should not be necessary, but it helps allay the unfounded fears of many suppliers who believe that if Honeywell
exercises more than one remedy, we somehow multiply our losses. This is not true. Honeywell should be free to seek
more than one avenue to be made whole for our losses if the indemnity does not cover them.
Limitation of Liability
Internal comment 1, LOL for Indirect Damages is Standard. It goes without saying that Honeywell does not want
the Supplier to limit the amount of damages that can be recovered by Honeywell, but in Corp Indirect, we do insert a
limit on the type of damages to be recovered by either Party, those being indirect, consequential, special, punitive, etc.
Limit on Types of Damages Recoverable. EXCEPT AS SPECIFICALLY SET FORTH IN THIS

AGREEMENT, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY
FOR INDIRECT, INCIDENTAL, EXEMPLARY, PUNITIVE, SPECIAL OR CONSEQUENTIAL
DAMAGES, INCLUDING WITHOUT LIMITATION DAMAGES FOR LOST PROFITS,
REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT OR
OTHERWISE AND EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
Internal comment 2, LOL for Amount of Damages, If Approved. Only if circumstances warrant imposing a cap on
the amount of damages, the following clauses can be used:
If measured over entire contract – Aggregate liability capped to the greater of X million USD or total amounts
paid/payable.
Limit on Amount of Damages Recoverable. EXCEPT AS SPECIFICALLY SET FORTH IN THIS
AGREEMENT, EACH PARTY’S CUMULATIVE AGGREGATE LIABILITY TO THE OTHER,
WHETHER IN CONTRACT, TORT, OR OTHERWISE, FOR ALL DAMAGES ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND ALL SOWS HEREUNDER WILL BE LIMITED TO
AN AMOUNT EQUAL TO THE GREATER OF (A) USD _______ OR (B) ____ TIMES (__x) THE
TOTAL AMOUNTS PAID OR PAYABLE UNDER THIS AGREEMENT, INCLUDING ALL SOWS
AND PURCHASE ORDERS ISSUED PURSUANT TO THIS AGREEMENT.
If measured over a year of spend – Aggregate liability capped to the greater of X million USD or X times the total
amounts paid/payable in the year preceding the event giving rise to the claim.
AGREEMENT, EACH PARTY’S CUMULATIVE AGGREGATE LIABILITY TO THE OTHER,
WHETHER IN CONTRACT, TORT OR OTHERWISE, FOR ALL DAMAGES ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND ALL SOWS HEREUNDER WILL BE LIMITED TO
AN AMOUNT EQUAL TO THE GREATER OF (A) USD _______ OR (B) ____ TIMES (__x) THE
TOTAL AMOUNTS PAID OR PAYABLE UNDER THIS AGREEMENT, INCLUDING ALL SOWS
AND PURCHASE ORDERS ISSUED PURSUANT TO THIS AGREEMENT, IN THE TWELVE
(12) MONTHS PRECEDING THE EVENT GIVING RISE TO THE CLAIM
A rolling annual cap –
AGREEMENT, EACH PARTY’S LIABILITY TO THE OTHER, IN EACH CONTRACT YEAR (A
“CONTRACT YEAR” BEING DEFINED AS ONE YEAR FROM THE EFFECTIVE DATE, AND
EACH ANNIVERSARY THEREAFTER), WHETHER IN CONTRACT, TORT, OR OTHERWISE,
FOR ALL DAMAGES ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ALL
SOWS HEREUNDER WILL BE LIMITED TO AN AMOUNT EQUAL TO THE GREATER OF (A)

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USD _______ OR (B) ____ TIMES (__x) THE TOTAL AMOUNTS PAID OR PAYABLE UNDER
THIS AGREEMENT, INCLUDING ALL SOWS AND PURCHASE ORDERS ISSUED PURSUANT
TO THIS AGREEMENT.
A per-occurrence cap –
AGREEMENT, EACH PARTY’S LIABILITY TO THE OTHER PER OCCURRENCE, WHETHER
IN CONTRACT, TORT, OR OTHERWISE, FOR ALL DAMAGES ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND ALL SOWS HEREUNDER WILL BE LIMITED TO AN
AMOUNT EQUAL TO THE GREATER OF (A) USD _______ OR (B) ____ TIMES (__x) THE
TOTAL AMOUNTS PAID OR PAYABLE UNDER THIS AGREEMENT. INCLUDING UNDER
ALL SOWS AND PURCHASE ORDERS ISSUED PURSUANT TO THIS AGREEMENT.
Internal comment 3, LOLs Require Business Approval. The amount of a cap to be granted is always a Business
decision. L&C is responsible for approving the wording, and for negotiating the highest cap that can reasonably be
obtained, but L&C never approves the amount of the cap, and should ensure that Procurement does not indicate in
any approval documents that L&C did so. That said, the Business usually wants Legal’s opinion, so it is useful to
attend a meeting whereby Procurement and the Business discuss the range of acceptable amounts. Procurement is
responsible for creating the “4-Up” that provides the Business Approver a snapshot of the Risks, Mitigations, and a
suggested range of “Going In” (first offer), “Target” (where we expect to end up), and BAFO (Best and Final Offer
approved by the Business, and if we must go lower, we must go back to the Business for further approval ). The
Business Approver can agree to any cap or no cap, it is not confined to the recommendations in the 4-Up. Any
Procurement Professional whose Supplier demands (and has the clout to insist on) a cap should first review the LMS
Training provided specifically for how they should handle negotiation and approval of the Limitation of Liability clause.
Internal Comment 4, LOL Drafting Notes and Rules:

(1) LOLs Must Be Mutual. Do not give the Supplier a cap that Honeywell does not have.
(2) Never Use Amounts “Paid” Without Including “or Payable .” If Honeywell’s pay terms are, for
example, N120 plus MPO, and a liability occurs in the 3 rd month, how much has Honeywell “paid”? Zero.
The amounts we pay the Supplier will continue to increase over the term of the SOW, but we never know
when the liability will arise. Never let the cap be measured solely on what was “paid,” always include “or
payable.” Also fine to add, “assuming no early termination,” which allows us to estimate the amount we
would have paid for a fully performed contract for the entire term. The same problem can occur in the
“Contract Year” or “year of spend” cap language. Make sure to account for the maximum cap even if the
liability occurs in the first weeks or months of the first Contract Year, before an entire Contract Year has
passed.
(3) Do Not Limit the Cap to “ Fees” Paid. This allows the Supplier to slice up the total amounts paid by
Honeywell to ONLY those “fees” paid to the Supplier, and not include everything else we have paid under
all invoices for other Deliverables, Services, equipment, etc.
(4) Do Not Limit the Cap to the Amounts Paid/Payable For the Services Giving Rise to the Liability .
We might have a SOW for a million dollars in spend, but the actual issue that caused the liability might be
something minor, like envelope stuffing that caused a Security Breach, for which Honeywell was invoiced
one line item of $5,000, and that, the Supplier will argue, is Honeywell’s liability cap for the amount paid
“for the Services that gave rise to the liability.”
(5) Beware the Variable Spend SOW. If we have a SOW without a fixed fee, without a “not-to-exceed”
amount, or measured solely on what Honeywell requests as we go along (such as a rate card or time &
materials SOW), then we cannot easily estimate the amounts payable because we cannot know our
consumption until the SOW expires or is terminated. In these cases, use a hard cap amount to avoid this
problem.
(6) Do Not Let the Supplier “Divide and Conquer .” Aggregate all the spend under all SOWs. Suppliers like
to separate the cap so it applies to each SOW according to its spend. They will suggest language
measuring the cap by the spend “under the SOW that gave rise to the liability.” This allows the Supplier to
protect itself from having potentially more liability under one SOW than it receives in gross sales under that
SOW, however, the Supplier should understand that the Master contract governs an entire relationship,
and just as they benefit more each time we award them with another SOW, we should be entitled to

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benefit from giving return business to that Supplier by increasing our overall cap protection. Otherwise,
the Master contract loses significant benefit to us and we have little to no incentive to return to the same
supplier.
(7) Watch for “Greater” and “Lesser.” Use the term, “greater of” because it means Honeywell has a
minimum it can count on. If “lesser” is used, you may not know what the cap will be when you are
negotiating, and it could easily be lower than the Business has approved. The term “lesser” also
incentivizes the Supplier to find ways to construe the spend to be as little as possible to lower its cap,
whereas we want to take advantage of all our spend with the Supplier.
(8) Avoid the Phrase, “Payable to the Supplier.” While it is most common that only the Supplier will be
paid the invoices under a given SOW, it is possible we might direct payments to subcontractors or other
vendors of the Supplier, which allows the Supplier to argue that the amounts “paid/payable to the Supplier”
are only a sub-set of all that Honeywell paid under a given SOW. To avoid that failure mode, use the
language as written above, “paid or payable under this Agreement…”
(9) Do Not Let the Supplier Include “Any Third Party .” Supplier sometimes wants language saying it will
not be liable to Honeywell “or any third party…” for the amount above the cap. No third party is bound by
the MSA, it binds only those who sign it, so do not allow this. Supplier might try to twist such language into
an implied indemnity (e.g. Honeywell agreed we would not have liability to any third party in excess of the
cap, therefore, Honeywell must indemnify us for this claim from a third party that exceeds the cap).
(10)For Cases Where Supplier Wants to Prevent Hon from Claiming our Invoice Payments Accrue to
Satisfy our Liability Cap. In cases where the Supplier wants to ensure Honeywell does not claim that its
liability for paying ordinary invoices is limited by any such cap, the concept is okay. Suggest this at the
end of the Section entitled Limit on Amount of Damages Recoverable:
For clarity, Honeywell’s payment of invoices due in the ordinary course of Supplier’s performance
hereunder do not count toward Honeywell’s liability limit in this Section, nor is Honeywell’s liability
for such invoices limited by the amount of this liability cap.
Security Breach “SuperCap”
Internal comment 1, SuperCap for Security Breach. Whether or not a cap on the amount of damages is agreed,
the Supplier often wants a separate cap on Data Privacy and/or Security Breaches. This is referred to as a
“SuperCap” because it is higher than (usually a multiple of) an already agreed cap on direct damages. Be careful not
to use the below language unless there is already an agreed general cap on damages, otherwise, it gives the Supplier
an opening to ask for a general cap. If the Supplier has not asked for a general cap, then simply insert a dollar amount
for the cap and do not reference a multiple of the general cap.
Limitation of Liability for Security Breach. SUPPLIER’S MAXIMUM AGGREGATE LIABILITY TO

HONEYWELL AND ITS AFFILIATES IN THE CASE OF LOSSES ARISING FROM BREACH OF THE
SECURITY TERMS OR DATA PRIVACY OBLIGATIONS SET FORTH IN SECTION ____ (SECURITY
TERMS AND CONDITIONS) AND ____ (DATA PRIVACY OBLIGATIONS FOR SUPPLIERS) OR UNDER
SECTION ____ (SECURITY BREACH INDEMNIFICATION) WILL BE LIMITED TO ______ TIMES
(___X) THE CAP AGREED TO IN SECTION _____ (Limitation of Amount of Damages Recoverable). FOR
CLARITY, THE CAP SET FORTH IN THIS SECTION _____ SHALL BE DEEMED A SEPARATE CAP
AND APPLY INDEPENDENTLY FROM THE CAP AGREED TO IN SECTION _____.
Be sure a SuperCap only applies to breaches of Data Privacy and/or Security, and does not limit damages for breach
of Confidential Information, since we might disclose highly valuable Confidential Info to the Supplier (about new
products, IP, etc.) for which wrongful disclosures should not be capped and the losses could be enormous.
Internal comment 2, SuperCaps Require Business Approval. Just as the amount of a general cap to be granted is
always a Business decision, so is the decision about the amount of a SuperCap. L&C is responsible for the wording,
and for negotiating the highest cap that can reasonably be obtained, but L&C never approves the amount of the
SuperCap.

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Exclusions to Liability Cap(s)
Exclusions. Any limitations or exclusions of liability set forth in this Agreement will not apply with
respect to: (a) claims for either Party’s breach of its obligations under the Section entitled “Confidential
Information, Security and Data Privacy,” (b) Security Breach Losses or any indemnity for the benefit of
Honeywell under this Agreement, (c) claims for bodily injury or death or physical damage to tangible
property resulting from either Party’s negligence or willful misconduct, (d) any claims resulting from
either Party’s gross negligence, or fraudulent or willful misconduct, or (e) claims, losses, damages,
costs, fines, penalties or expenses resulting from either Party’s violation of any applicable law or
regulation.
Internal comment 1, Exclusions Are Always Warranted. There is always conduct or some circumstance that
warrants unlimited liability. The Exclusions “carve out” those circumstances from any caps and thereby mean that
liability for those circumstances, if they arise, will be unlimited, not only by the amount that can be recovered, but also
by the type of damages that can be recovered. The most negotiated of the Exclusions is the carve out for any
indemnity in favor of Honeywell (because the rest are mutual). Where we must accept a cap on the General
Indemnities, ensure that when you remove this Exclusion, you restore the Exclusion for indemnity for intellectual
property infringement. The Exclusion for disclosure of Confidential Information (by either Party) must always remain,
even if a SuperCap is granted for Security Breach and/or Data Privacy breach, and the Exclusions that are not
enforceable under governing law should always remain anyway (i.e. negligently caused bodily harm or death, gross
negligence, willful misconduct, and fraud).
Internal comment 2, Exclusions Drafting Note. When a SuperCap has been inserted, the Exclusion for disclosure
of Confidential Info and Indemnification should be re-worded as follows:
Exclusions. Any limitations or exclusions of liability set forth in this Agreement will not apply with
respect to: (a) subject only to Section ____, claims for either Party’s breach of its obligations under the
Section entitled “Confidential Information, Security and Data Privacy,” (b) subject only to Section
____, Security Breach Losses or any indemnity for the benefit of Honeywell under this Agreement,….
Internal comment 3, Exclusions Should Apply to Any Limitation. When referring to the Exclusions, do not let the
Supplier use: “Any limitations or exclusions of liability except as set forth in Clause XX below…” Always use
“set forth in this Agreement” to give the Exclusions the widest applicability possible, regardless where a liability limit
might be found. We may, for example, have a mistake, an oversight left in the SOW that limits the Supplier’s liability,
and we would want these Exclusions to apply to that liability limit in the SOW.
Common Supplier Change or Comment: Supplier wants the Exclusion for gross negligence and willful
misconduct only if a “ judge/court has finally determined the Party was grossly negligent .” This kind of
restriction should always be rejected because it discourages settlements, encourages maximum litigation, and protects
the Party who may have acted willfully, fraudulently, or with gross negligence. Sometimes suppliers assume that the
Party invoking any of the Exclusions has no duty to even substantiate whether the circumstances qualify to invoke the
Exclusion. This is not true. A Party cannot merely “claim” the other was grossly negligent and get around the cap, any
more than a Party can merely “claim” any clause can be invoked, the burden of proof still applies to any element of
breach of the contract, and this clause does nothing to change that.
Example of Problem with Supplier Suggested Change: If Honeywell were to be grossly negligent and create a liability
for Supplier that far exceeded the liability cap, and Supplier asserted that Honeywell is not protected by the cap due to
its gross negligence, with the Supplier’s suggested language in the contract, Honeywell could determine it is a better
risk to force the Supplier to take up or defend appeals than to pay the full amount of the liability, taking the chance the
Supplier would give up before getting to that point, or that a court would not say in its opinion what Supplier hoped it
would say. Supplier would have to continue to pay for, or defend, appeals in the face of uncertainty whether it could
force a court to declare Honeywell’s conduct grossly negligent. Contrast that with the absence of this language, where
Supplier would only have to show, by a preponderance of evidence (under US law), that Honeywell’s conduct was
grossly negligent, then Honeywell’s refusal to pay its full liability could risk not only breach of contract but possibly bad
faith or other consequences. Our template language does not remove a Party’s right to appeal, but it does not force

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that to happen in order to lift the cap, or facilitate a way for a seriously culpable Party to play appeal games and delay
a rightful recovery by months or years.
Internal comment 4, Exclusions as Applied to Confidential Info. It is not acceptable to bar indirect damages for
wrongful disclosure of Confidential Information, because generally those are the ONLY damages flowing from wrongful
disclosure. For example, if one Party negligently, but not willfully, disclosed another Party’s Confidential Info, causing
that Party millions in lost revenue, cancelled contracts, lost IP protection, lost market share, damage to reputation, and
that Party could absolutely prove beyond any doubt that the other Party’s negligent disclosure caused all of it, the
Party’s recoverable damages would be zero, because all of the foregoing are indirect damages. Even if that is
acceptable to the Supplier, it is unacceptable to Honeywell.
_____________________________
Confidential Information, Security and Data Privacy
Internal comment 1, No Mutuality: This clause should not be made mutual. Supplier must disclose only what is
ABSOLUTELY NECESSARY for Honeywell to receive the Services, and nothing more. Honeywell’s obligations are in
the Supplier Confidential Info Exhibit. If the Supplier is not okay with Honeywell’s obligations in the Exhibit, it can be
reasonably edited. We do not want everything a Supplier wishes to provide to us, no matter how helpful the Supplier
may think it is, only such Supplier Confidential Info that Honeywell cannot do without. Supplier is to list the
Confidential Info that it must disclose on the Supplier Exhibit. It can be a categorical list, such as, “Supplier’s XXX
software and related documentation,” etc. It need not be a list of every item, but we need to be made specifically
aware of what we have and must protect. Our rationale for the differing treatment is that we are, in a sense, “inviting
the Supplier into our business” and there will be far greater likelihood of the Supplier hearing things and learning
secrets than the other way around. The Supplier comes to us, in a sense, and sometimes literally, and they control
what they bring with them. Beware the Supplier who tries to accomplish the same thing as mutuality by merely
creating a “list” on the Exhibit that generally scoops up everything with a broad definition of Confidential Information
and uses “including but not limited to.” Usually, this is a knee-jerk reaction by a Supplier who is simply annoyed that
we are resisting mutuality. Push back and tell the Supplier it is too broad, and ask them to be more definitive about
what they must give to Honeywell that we are to keep confidential. If they really reflect on it, there is usually far less
they must give us than they originally thought. Their “prices” are arguably “our” prices and “our” Confidential Info, but it
is acceptable to insert “Honeywell’s pricing.”
Internal comment 2, Written Obligations of Confidentiality from Employees: It is rare, though sometimes
possible, such as with bank employees, that a Supplier does not require its employees to sign confidentiality
agreements which cover proper treatment of customer confidential information. If a Supplier strikes this requirement
that their employees’ obligations of confidentiality be in writing, we should explore what methods the Supplier uses to
keep Honeywell Confidential Information from being disclosed by its employees. If their answer is weak (e.g. we will
just fire them if they do), perhaps Honeywell should reconsider doing business with that Supplier.
Internal comment 3, Refusal to “Accept” Personal Data. It is shockingly common that a Supplier believes Personal
Data is only sensitive info, such as Social Security numbers. Personal Data includes name and business contact info,
so it is never acceptable for a Supplier to say they “will not receive” PD in the course of performing. This is impossible,
because if we are dealing with the Supplier, such as by email, they already have names and business contact info,
which is PD. Almost 100% of the time, the Supplier means they will not need sensitive PD. This does not justify
striking any of the clauses pertaining to PD, nor does it justify removing the Data Privacy Exhibit.
Internal comment 4, Insisting that Honeywell Obtain Approval to Transfer Sensitive Personal Data. Suppliers
occasionally try to insist that we get their approval in writing before we send them sensitive PD. Strike this, we cannot
administer it. First, Honeywell has a practice of sending only the minimum info required for the Supplier to perform the
Services. However, if the Supplier needs it, the Supplier will receive it. We have no mechanism or process by which
any employees at Honeywell will know to interrupt the flow of necessary information to a Supplier who needs it. We
would violate such a provision, it’s a failure mode. Ensure that the confidentiality and data privacy provisions align with
our practice which is as follows: (1) the Honeywell employee asks himself, Does the Supplier need to know this? If
yes, (2) Does Honeywell have the appropriate contractual protections with this Supplier to ensure it is kept
confidential? If yes, (3) Am I disclosing only so much as the Supplier needs, and nothing more? If all of these
questions are answered yes, the Supplier will get the Confidential Info or PD. It is our responsibility to align the
contract to this process and never agree to something different for one supplier.

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Internal comment 5, Insisting that Honeywell Identify Personal Data or Provide Data Classifications. This is
impossible to administer. As an obvious example, our names are PD, but we do not state in our email that we are
providing our name and that Supplier should be on notice that it is PD.
Internal comment 6, Personal Data and Trade Secrets Being Held in Confidence Perpetually. The law generally
does not permit a Party to disclose Personal Data, even after 10 years. This requirement should not be stricken.
Trade Secrets are generally agreed in writing to be held in confidence perpetually also, but even if not, Trade Secrets
are too critical to be at risk of disclosure merely because a Supplier thinks “perpetually” is inappropriate. Worst case,
determine if the Supplier needs trade secrets to perform, and if not, change that to read that if the Parties determine
that they need to disclose trade secrets, they will agree in writing before disclosure on the period of confidentiality.
Internal comment 7, Supplier Wants to Use Anonymized Honeywell Data. Big Data is very valuable. Honeywell is
a big company with lots of employees, so suppliers benefit greatly by including Honeywell data with its other data
gleaned from other customers. The more data the Supplier acquires, the more valuable its data bases are to all its
customers because it represents a bigger and bigger sample each time. While the Business seldom cares much about
this (so long as the data is anonymized), they should not wave it off and may be missing a big opportunity to obtain
something for nothing. Since it has such value to the Supplier, we should try to get something in trade for granting the
Supplier this right to use it. Supplier wants it, and if we are willing to give it, why for free? For example, we could ask
for a commercial concession in exchange for granting it. Supplier will say, “we are just including your data
anonymously with all our other data from our other customers, nobody else objects to this.” But that’s not the point.
The Supplier wants it, so we should ask for something we want in return. It is surprising how far a Supplier will go to
obtain the right to use Honeywell data.
Related Confidentiality Issues -- NDAs
Internal comment 1, NDA Term + Protection Period Honeywell’s policy is to protect confidential information for 10
years. Other companies may have other policies – shorter or longer durations. Unless a Supplier has a reasonable,
substantive (as opposed to policy-based), and persuasive argument supporting a shorter or longer protection period,
Honeywell should require the 10 year (total) protection period. Procurement can make the Term of the NDA and the
tail period total 10 years, but those two periods cannot exceed 10 years unless it gets approval from Chief IP Counsel,
per Policy. Our typical standard is a 3-year Term plus a 7-year tail period, but we can go 4+6, 5+5, etc., just so the
total does not exceed 10 years. Watch carefully, this is a common mistake for Procurement to propose 3+7, then the
Supplier changes the tail period to 10 years, but Procurement doesn’t catch it and we inadvertently violate Policy with
3+10. Do not let the tail period expire merely because the Supplier returns Honeywell’s Confidential Info, because the
Supplier still knows a lot of Confidential Info even if they have returned the underlying documents. The Supplier
should not be free to publicly disclose the Confidential Info they have come to know, just because the documents were
returned.
Internal comment 2, NDA Auto-Retention of Data Honeywell has an interest in ensuring that our Confidential
Information is safeguarded once the relationship ends or the information is no longer needed to fulfill the defined
Purpose. It is incumbent on us to ensure the proper return or destruction of Honeywell Confidential Information by/from
a Supplier when the Supplier no longer needs the information. This applies in particular when closing out RFP
activities with non-selected bidders. Suppliers often request the right to retain copies in their automated systems. If
Procurement and the Business have a reasonable expectation that the evidentiary copy could not be misused or
inappropriately disclosed, we may be able to accommodate their request by adding the following wording:
Recipient may retain (but not actively use) one evidentiary copy of Confidential Information
after expiration or termination of this Agreement if automatically saved or backed up by
Recipient pursuant to its document retention policies. The confidentiality obligations of this
Agreement will continue to apply to the saved Confidential Information.
Internal comment 3, NDA, Use of Supplier Paper. It is rare for a Supplier to thumb its nose at Honeywell and boldly
say they will not “consider” reviewing our NDA. This tells us that, when it comes to a final contract, they will do the
same or even be more aggressive. This means a couple of things, first, the process ends up being long and
protracted to get a contract in place, which means everyone will have to account for the length of time it takes to get to
that point. Second, there likely will be a need for extensive approvals of risks this Supplier will not take. Nevertheless,

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for Suppliers who wield this kind of power, we do review Supplier NDAs and align the language as close to
Honeywell’s as we can reasonably achieve.
Internal comment 4, NDA, Supplier Wants Mutuality. For an RFP, this is not justified. Honeywell is disclosing our
consumption within a category, possibly our estimated spend, other history with this commodity, and other potential
Confidential Information, so we need protection, but we do not solicit any Confidential Info of the Supplier, there should
be nothing of the Supplier’s to protect. The Supplier often argues that its prices are Confidential Info, but that’s a slight
technicality, because once the Supplier quotes rates specifically tailored to our solicitation, we consider those prices to
be Honeywell Confidential Info, and part of our bid and response, total RFP package. Procurement should ask the
question, “Can I accomplish what I need to do (conduct an RFP, whatever) without any Supplier Confidential Info?” If
the answer is yes, then they should not use a Mutual NDA. If the answer is no, that Procurement must have Supplier
Confidential Info or they cannot accomplish the Purpose, then a Mutual NDA may be appropriate. However, do not let
the Supplier make the 1-way-out, or RFP NDA, into a mutual NDA, use the Mutual NDA template instead, they are
different for a reason. Most of the time the Supplier wants mutual protection so it can pitch some fancy tech that is not
public. If that is the Supplier’s reason, Procurement should tell the Supplier, “Find a non-confidential way to explain
your value proposition, and if it is intriguing enough to my business customer that they tell me they do not want to
make a decision until they know more, then we will enter into a Mutual NDA and you (Supplier) can go into confidential
detail.”
_____________________________
MISCELLANEOUS
Entire Agreement
Internal comment, Superseding Known Contracts. Sometimes SBGs have similar contracts with the same Supplier
for substantially the same Services, and for various reasons, we may want to leave those in place while also executing
a new MSA. If those SBGs signed under the same Honeywell entity, then we would have more than one contract
between exactly the same Parties overlapping the same period of time, for very similar Services, so if someone were
trying to unravel this (like in court), it would be confusing at best. If you know you have similar Services being provided
under differing contracts, then best to identify it (in the Entire Agreement clause), call out the other contracts and
expressly say we are not superseding these. This is prudent even if the Honeywell entity is different and/or the
Supplier entity is different. Better to make it clear while you have the perfect opportunity.
Additional note here is, if we intentionally state that the other known contracts are not superseded, the argument could
be made that we are ratifying the other contracts, so if they contain glaring defects, Procurement should not turn a
blind eye, Procurement should either fix those defective contracts, or supersede them with the new one. Down the
road after a problem occurs, we may have to answer the question, why didn’t you fix or supersede that defective
contract when you had the opportunity, and instead you did the opposite and ratified it as valid the way it was? Nobody
wants to hear, “It wasn’t my contract, I didn’t sign it that way, all I did was acknowledge its existence.” Not a good look.
Assignment and Subcontracting.

Issue to be Addressed. Under US law, a contract is generally assignable unless the parties agree otherwise.
However, we do not want to go through all the vetting and negotiation process with a given supplier, only to have that
Supplier, at its discretion, assign the contract or any part of it, to a different party. This is why we restrict assignment
by the Supplier unless we consent.
Internal comment 1, Assignment, Supplier Wants Mutuality. Typically, we would reject this. Honeywell is merely
paying, Supplier is providing Services. The Supplier may argue that it needs to know if a different Honeywell entity is
its customer, in which case we can insert a sentence stating that we will notify the Supplier if we do assign. For a
SOW, that can be done with a Change Order. The Supplier may also argue that it should have the right to determine
the creditworthiness of its new customer in its direction. That doesn’t really work with Honeywell anyway because we
file consolidated financial statements. Honeywell Affiliates do not have their own independent financial statements.
Internal comment 2, Assignment vs Release or Novation. Under US law, there is a difference between an
Assignment and a Novation, the latter being a release of liability that requires the other party to consent to that release.

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This is why the language of this clause makes clear that the right to assign does not grant a Novation to the Assignor.
Under US law, a party can freely assign its rights because those are its own benefits. However, its obligations are
owed to a different party, in this case, Honeywell, so we have to consent. There is absolutely no advantage to
releasing Supplier/Transferor/Assignor, because if a liability is discovered later (such as misuse of our Confidential
Info, misuse of IP, breach of data privacy, etc.), Supplier/Transferor/Assignor would say it transferred its liabilities to
the Third Party/Transferee, and the Transferee would try to avoid liability by claiming it has no liability to Honeywell for
anything that occurred before the date of assignment. Therefore, we have to make clear that
Supplier/Transferor/Assignor is not released. If they object to this, then the other choice is to have the Third
Party/Transferee indemnify us for anything that happened before the Third Party/Transferee took over. While ordinarily
it would be very unlikely that one company would indemnify for the actions of another, in the case of a divestiture, we
know that, behind the scenes of a sale transaction, there are cross-indemnities between and amongst those
companies for actions arising pre-sale or pre-split that have ramifications post-sale or post-split, so the Third
Party/Transferee most likely would have an indemnity from Supplier/Transferor/Assignor if we went after the Third
Party/Transferee for something that occurred under Supplier's/Transferor’s/Assignor's watch. Supplier may also claim
that refusing to release the Transferor is of no benefit because the Transferor company will be, or has been, dissolved.
Our response should be, that’s Honeywell’s problem, not the Supplier’s. Also, and we need not say this to the Supplier,
but most states in the US require reserves for contingent liabilities before it will fully dissolve the company requesting
dissolution.
Internal comment 3, Assignments Require 3 Signatures. The Transferor/Assignor, the Party with whom Honeywell
has a contract, must sign, the Transferee/Assignee must sign to accept the going forward obligations, and of course
Honeywell must sign.
Internal comment 4, Subcontracting, Supplier Must Be Fully Liable. If there is a default or other problem with
performance, we do not want to allow finger-pointing by the Supplier at a third party, even if it is their subcontractor, so
this sentence should always remain intact: “Supplier will be responsible for all its subcontractors and any act or
omission of the subcontractor will be deemed an action or omission from Supplier for the purpose of this Agreement.”
Internal comment 5, Approval to Assign Receivables. Occasionally, a Supplier factors its receivables to a third
party financier such as a bank, and technically it can be read as a violation of our non-assignment clause without our
consent. If Honeywell is to pay the third party, then for our own protection we recommend requiring some written
acknowledgement that Supplier is authorizing Honeywell to pay a different entity than the Supplier, and at the same
time provides our consent to the Supplier as well. Example of wording we may insert:
Supplier may freely assign its receivables to a financial institution, but in the event it does so,
Supplier will provide Honeywell prior written notice to allow Honeywell to implement the
payment mechanism for the assigned Honeywell payables. If Supplier wishes to later cancel the
assignment of its receivables or notifies Honeywell that Supplier is no longer assigning its
receivables to the third party, Honeywell and Supplier will work in good faith to promptly
reassign payments directly to Supplier.
___________________
Notices.
Internal comment 1, Termination Notice, Signatory & Method. Termination Notices should be treated the same as
the contract being terminated – meaning the legal entity terminating should be the Party to the contract and the person
signing for that entity should be an Authorized Signatory. Notice must be sent as strictly required per the Notice
section. If a Supplier’s representative specifically asks for the Notice to be sent to him/her, then do that in addition to
strict compliance with the Notice section, but always comply in strict detail with the Notice clause, even if we have
reason to believe the addresses are outdated.
Procurement must read the Termination clause and the Notice clause carefully and start with the Form of Termination
Letter on the SharePoint. Note that often Notice must be given by specific means, and we cannot substitute an email
method, even with the Notice attached. Sometimes it also requires a copy to Supplier’s Legal Dept. If the Notice
section says Notices must be by regular mail or overnight courier and does not say email is okay, then a copy must go
by whatever means complies with the MSA even if it is additionally emailed. Sending it twice is better than not sending
one compliant Notice.

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Suppliers generally are unhappy to receive a termination Notice, and claiming Honeywell gave improper or inadequate
Notice is one thing it can use to keep us bound to the contract. It’s easy to take that option away merely by checking
the Notice section of the contract and ensuring we comply with it. If there is an active SOW at the time an MSA is
being terminated, Procurement should mention the status of the SOW in the Notice, being mindful that terminating an
MSA does not terminate an active SOW.
If the Notice Section states “Registered” or “Certified” mail, the following is the process meant by those terms: US Mail
has a service called “Certified” mail, “Return Receipt Requested,” whereby a sticky card is self-addressed back to the
Honeywell sender, and then adhered to the back of the envelope containing the Notice being sent to Supplier. That
card is torn off by the US Mail carrier when the envelope is delivered to the Supplier, and the separated card (sticky
part is left on the Supplier’s envelope) is then mailed back to Honeywell as a “Receipt” and proof of delivery.
Procurement should have any Notice (termination Notice or not), reviewed by Legal because ineffective Notice can be
costly, especially if the contract otherwise renews while Honeywell is attempting to terminate. To speed up Legal’s
review of the Notice, Procurement should send the relevant contract (including any amendments), and the
approximate annual spend, along with the draft Notice.
Publicity/Advertising.
It is common for the Supplier to ask for the right to use Honeywell’s name, or even to post on its web site, that
Honeywell is a customer. We do not allow this. Any use of Honeywell’s name or mark is subject to a Trademark
License which is negotiated with Chief Trademark Counsel, but we typically do not allow our name to be used for
marketing purposes. Suppliers also will often ask if we will agree to a publicity release, or even just to review and
approve one that the Supplier proposes. While we must be tactful in declining this, the reality is that if our Corporate
Communications group agreed to review every proposed press release that every supplier wanted to publish
(especially small suppliers), they would be doing nothing but reviewing those. We must decline. Our Corp Comm group
will very carefully select only announcements which benefit Honeywell or are significant enough that the public should
be informed.
________________
Trademark Usage.
As a general rule, if the Supplier only needs to affix our trademark for limited purposes, then we can put language in
the contract that we will provide the Mark in our format and Supplier will use it strictly for the intended purposes to
provide the Services, no other purposes whatsoever, and will not make any changes to it. That much does not need
Trademark Counsel’s approval. Honeywell should be the one submitting info about our Products (such as for a
catalog), not the Supplier. If Supplier is making any choices about how or where to locate the Mark, or other decisions
that have to do with usage of the Mark, it should receive Trademark Counsel’s approval.
We do not allow a supplier to use our Mark in furtherance of their advertising or promotion of their business or any
other business. We are very careful about who we let use our name to their benefit.
________________
Data Rights
Internal comment 1, Data Rights, Supplier Adds Disclaimer. It is generally acceptable for the Supplier to disclaim
the accuracy, usefulness, etc. of the Goods Data that is generated by any goods, products, or Services provided by
the Supplier.
Internal comment 2, Data Rights, Not a Supplier IP License. Many suppliers mistakenly read this as a license to
use their IP. It is merely a right to use the data generated by something they provide to us (goods, products) or
generated in the process of them providing the Services. The premise behind this is that the Supplier would not have
had this data if not for the relationship with Honeywell, so we want to use it, too.
___________________
Force Majeure

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Internal comment 1, Supplier Wants to Exclude Ability to Pay from Force Majeure Event. While it is uncommon
for a Force Majeure Event to prevent money from moving, it certainly has happened. One example was Hurricane
Maria where power was out for an extended period in Puerto Rico and banks were closed, Honeywell could not run
automated payroll or electronic deposit. The premise behind Force Majeure is that it is outside of a Party’s reasonable
control, so it should not matter what the performance is, the only question is whether that Party is prevented from
performing through no fault of its own. There is no reasonable basis to exclude Honeywell’s obligation to pay from
Force Majeure.
Internal comment 2, COVID-19 Concerns. Some suppliers want the freedom to adjust price or other terms due to
COVID-19 changing conditions. Beware this is a license to claim everything is COVID-related. Such a clause should
be rejected, however, where justified, and where the Supplier is not critical, we can offer a mutual right to terminate
without liability. Suggested language:
As of the Effective Date, both Parties are aware of the COVID 19 pandemic, the effects of
which may impact either Party’s ability to perform its respective obligations under this
Agreement on the agreed terms. In the event the COVID-19 pandemic prevents a Party from
performing any of its obligations under this Agreement, which obligation(s) cannot be
overcome and is outside the control of such Party, then such Party may terminate the
applicable SOW(s) and neither Party shall be held liable for its non-performance following the
date of termination, including but not limited to any payment obligations in relation for
Services not performed or Deliverables not delivered, termination fees, or exit cost after
termination, even if previously agreed in this Agreement or the applicable SOW.
__________________________
Integrity and Compliance

Internal comment 1, Anti-Corruption Policy 2066. Be aware, Anti-Corruption Corporate Policy 2066 applies to
Procurement contracts. We must obtain the Supplier’s commitment to comply with these principles. This entire clause
may not be stricken. If the Supplier requests to use its own policy, Procurement should first obtain a copy of the
Supplier’s code for review, and ensure it is as robust as Honeywell’s.
Governing Law and Forum

Internal comment 1, for EMEA. We have a strong preference for English law and the courts of England. We can also
agree to the laws of Switzerland. We should not agree to a choice of law in France. Also, we consider BREXIT
irrelevant to choosing English law. We are moving away from “the laws of England and Wales” to just “English” law,
because as the Welsh legislature promulgates more regulations, there is potential for a conflict in the future.
Arbitration is acceptable in most of EMEA.
Internal comment 2, for the US. We have a strong preference for NY law, not for any “home field” advantage
because we actually do not have a large presence in NY, but because NY has a well-developed body of law which
allows the litigants to fairly evaluate the likelihood of success in court. We can also agree to Delaware law, or Arizona,
but we should not agree to California law or Louisiana law. We also should avoid agreeing to arbitration. Many
suppliers believe arbitration is cheaper and quicker, but that is not borne out by the facts. If the Supplier is adamant
about arbitration, check with Litigation.
Internal comment 3, Align Signing Entity to Choice of Law. If we use English law, we should use our UK entity as
the signatory, and if we agree to switch to another choice of law, Germany, for example, we should strongly consider
using a local German Affiliate to sign that contract instead of our UK entity. This way, we are not a foreign entity if we
are in court on an enforcement action. Because we might have different Affiliates signing SOWs, we are not
necessarily able to predict what entities might have the most spend or might take up a dispute with the Supplier or vice
versa, so reasonable compromises can be made on a case-by-case basis. Swiss law is often a good compromise, but
again, consider changing the signing Honeywell entity to a SwissCo.
Internal comment 4, English Law, But Both Parties are French. If both entities signing a SOW are French, and the
Services under a SOW are to be provided solely in France, but the Choice of Law is not France, we can agree that the

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performance of such SOW will be governed by the laws of France without regard to or application of its principles or
laws regarding conflicts of laws, and that courts in Paris, France will have exclusive jurisdiction of any Dispute.
Internal comment 5, English Law, But Both Parties are Italian. If we anticipate, when signing an MSA, that we may
have, for example, two Italian entities signing a SOW under that MSA, the Services under that SOW are to be provided
solely in Italy, but the Choice of Law is not Italy, and we wish to change choice of law only for those SOWs but not the
whole MSA, language similar to this can be used:
If Parties to a SOW agreed under this Agreement are both Italian entities, and such SOW is
agreed for Services to be performed solely in Italy, then the performance of such SOW shall be
governed by the laws of Italy without regard to or application of its principles or laws
regarding conflicts of laws, and courts in Rome, Italy will have exclusive jurisdiction of any
Dispute.
Internal comment 6, for APAC. We should utilize the guidance in the GPT as well as our PO Terms, which specify
choice of law, arbitration, and venue. These are approved by APAC Region’s General Counsel.
_________________________
Divested Business / Acquired Business

Issue 1 to be Addressed, Divested Entity. If Honeywell divests itself of a business, we want the ongoing business of
the Divested Entity to be attractive to a buyer, so we want to avoid having to negotiate new contracts. Also, we are
prohibited from disclosing to any third party that the divestiture is being considered, so we would be unable to
negotiate the new contract until the divestiture had been announced. Accordingly, we ask the Supplier to agree, in
advance, to continue providing its Services and Deliverables at the same rates and terms, for at least one year after
the divestiture date. This is beneficial to the Supplier. It continues to give them business from a company we would no
longer own and instead of cutting off that amount of business from them, their business goes with the Divested Entity
and they continue to service that divested business. Additionally, the new entity will need services of this sort, and the
Supplier would already be the incumbent with a contract for which the Supplier did not need to compete. The Supplier
is “gifted” a new customer who will likely leave them in place for a period of time while the Divested Entity tends to
more pressing matters than negotiating a new contract with that Supplier.
Issue 2 to be Addressed, Divested Entity. Sometimes the Supplier wants the freedom to decide if the Divested
Entity will meet the Supplier’s creditworthiness standards. While this is not really objectionable, query how the
Supplier will do that, since the Divested Entity was part of the Honeywell consolidated financial statement and will not
have a financial history the Supplier can review. Additionally, depending on the structure ( the Spin-Offs in 2017, for
example), it is possible Honeywell will be paying the Divested Entity’s invoices for a few months and charging back the
Divested Entity, making invoice payment less worrisome to the Supplier. Nevertheless, this kind of edit can be
handled by adding this phrase to the beginning of the clause:
Subject to Supplier’s reasonable determination of the divested entity’s creditworthiness, in the
event Honeywell divests a subsidiary, division or business unit….
Issue 3 to be Addressed, Acquired Entity. If Honeywell acquires a new business, we want to integrate the new
business quickly into our existing business. Accordingly, we ask that, if the Supplier has a similar contract with the
Acquired Entity, the Supplier will release the Acquired Entity from that contract (assuming it does not have a
termination for convenience clause) so we can integrate the Acquired Entity under our existing contract with the
Supplier. Theoretically, the Supplier does not lose any business, it merely moves from a separate contract to the
Honeywell contract, and this is how we should try to persuade the Supplier to agree. Additionally, it is difficult for us to
manage 2 very similar contracts with the same Supplier that have different terms. However, suppliers commonly resist
this clause thinking it is likely Honeywell is a bigger customer than the Acquired Entity was, so they assume prices and
pay terms, among other things, will be less advantageous after the business moves to the Honeywell contract. The
Supplier also may commonly negotiate termination penalties or minimum commitments, etc. with its other customers
that Honeywell did not agree to, so they object to language requesting the Acquired Entity be released “without
liability.” Of the two clauses, the Acquired Entity clause is more important to Honeywell because we will own the
Acquired Entity into the future, whereas the Divested Entity will be gone after a short time. In the end, these clauses
are mostly, if not entirely, commercial, so Procurement should be coached how to negotiate these for the best result to
Honeywell.

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OTHER NOTABLE INFO
Specialty MSAs for Compensation & Benefits Category. When procuring Services for health care, dental care,
pharmacy benefit managers, etc., we begin with the Business-Critical version of the MSA, but there are some
mandatory additional clauses that we require (best to do this at the RFP stage when we have the greatest leverage,
using a Term Sheet). Those clauses have to do with the “Standard of Care” we expect from the Supplier, the fiduciary
liability we expect, and disclosures we want them to make to our auditors when we need audits performed. We rely on
Benefits Counsel to assist in negotiating those key clauses, but what is important to remember is that, there is a big
difference between a “Named Fiduciary” of our ERISA-qualified Plans (this is usually the VP of the Comp & Ben
function), and performing a fiduciary function. Suppliers go to great lengths and argue vehemently that they are not a
fiduciary no matter what, but that is not our position. We may or may not expressly agree they are a fiduciary for
purposes of the contract (the MSA may say, for example, they are a “Claims Fiduciary,” meaning they adjudicate the
medical claims), but additionally, legal precedent has held that if someone performs a fiduciary function, whether or not
they are appointed a fiduciary, they still have liability for those actions. We have to fight to get across the point that our
clause must stay intact that says if the Supplier performs a fiduciary act (according to the fact finder, whether a court or
an administrative law judge), even if prohibited from doing so, the Supplier will be liable for it. This is one of the most
hotly contested clauses, but must remain intact and not be watered down by any other provision stating that the
Supplier is not and will not be deemed a fiduciary at all. This concept also applies to fiduciary acts taken by a supplier
such as our 401k Record Keeper, whose personnel might say something to a participant that amounts to investment
advice they are not authorized to give, so this clause also appears in those kinds of contracts.
Compliance with laws – Throughout the MSA, there are clauses requiring compliance with laws and regulations in
different contexts. Suppliers often insert conditions such as, “laws of which Supplier is aware,” or if Supplier
“knowingly” fails to comply, “knowingly infringes,” etc. Suppliers rarely “knowingly” violate the law. It’s nearly always
an accident, so this kind of condition should not be allowed. Additionally, every company is responsible for becoming
informed as to what laws and regulations apply to it, and if that company violates one of them, it should be liable for
the consequences, just as Honeywell is liable in all its lines of business, even if we did not intend to violate the law, or
were even aware that we may not be in compliance. Ignorance of the law is never an excuse so these kinds of
modifications should always be rejected. Last but not least, there are proof issues with “knowing,” such as, who has to
“know”? One manager? The one who had the biggest role in the violation? What if a low level manager had
“knowledge” of the law, but the high level manager who was instrumental did not? What if the Supplier’s Sales
Manager “knew” about the law but the Project Manager did not?
Best efforts vs commercially reasonable efforts (from Practical Law) If a party successfully includes a best efforts
clause thinking it will create a more rigorous obligation than other efforts clauses, but it fails to define what "best
efforts" entail, it may ultimately discover that its jurisdiction considers "best efforts" indistinguishable from "reasonable
efforts."
In New York, for example, federal courts interpreting New York law have held that best efforts and reasonable efforts
are interchangeable terms that impose an obligation to act with good faith in light of one's own capabilities ( Soroof
Trading Dev. Co. v. GE Fuel Cell Sys. LLC, 842 F. Supp. 2d 502, 511 (S.D.N.Y. 2012) and Scott-Macon Sec., Inc. v.
Zoltek Co., Nos. 04 Civ. 2124 (MBM), 04 Civ. 4896 (MBM), 2005 WL 1138476, at *14 (S.D.N.Y. May 12, 2005)).
At least one California court has similarly held that when a contract does not define the phrase "best efforts," the
promisor must use the diligence of a reasonable person under comparable circumstances (California Pines Prop.
Owners Ass'n v. Pedotti, 206 Cal. App. 4th 384, 394-95 (Cal. Ct. App. 2012)).
For more information on how courts and the Uniform Commercial Code have interpreted efforts provisions, see
Practice Note, Efforts Provisions in Commercial Contracts: Best Efforts, Reasonable Efforts and Commercially
Reasonable Efforts
Non-Solicitation Clauses – We have removed our old Non-Solicitation Clause from our template MSA, but it may
linger in some old versions and should be deleted at the first opportunity. First, these clauses are now thought to be
generally unenforceable and may be illegal, depending how they are worded. In recent instances, the Dept of Justice
is taking criminal action against those who illegally enforce these. Some Suppliers insist on these, but our response
should be that we cannot comply. We employ nearly 100k people and there is no possible way an HR manager or
recruiter can know that they may not hire someone whose resume has a certain employer’s name on it, must less if it
was a year or two since the contract with that supplier expired (some of these clauses say we may not hire their

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employee for up to a year or two after the contract expires). This is flatly non-negotiable, we cannot comply and these
clauses must be stricken.
Watch Words – Words that have temporal meaning should be avoided. It may be tempting to say, “currently…” or
“previously….” or use similar words that refer to a single point in time, but remember that the contract may run for
several years, and if you are reading it 3 years from the Effective Date, will “currently” still mean the same thing as it
did when drafted? Instead, use references such as, “as of the Effective Date.”

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PLAYBOOK FOR COMMONLY NEGOTIATED CLAUSES
PART 2 – TRANSPORTATION & LOGISTICS
Part 2 addresses Purchase Modules for different modes of transporting and storing goods;
only those highly negotiated clauses not found in the MSA (Part 1) are discussed here.
OCEAN MODE
“Contract,” not Agreement. The Ocean template is referred to as the “Contract,” not “Agreement” because each
vessel must have a “Service Contract” on file with the Federal Maritime Commission for each cargo owner who has
goods on that vessel. The entire contract does not get filed, just the first page which is signed by both Honeywell and
the Carrier.
VOCC & NVOCC. The Vessel Operating Common Carrier, or VOCC, is the ship operator or shipping line that owns
and/or operates the cargo ship. The NVOCC is the non-operator. The NVOCC might be a recognized carrier in other
modes, such as UPS or DHL, but they don’t operate the ship, they merely buy or reserve space (containers) from the
VOCC and then attempt to fill those containers at a profit from shippers such as Honeywell who need to ship
something by sea but cannot fill an entire container. If we have a full container load, it is usually more economical to
deal with the VOCC directly. We use the same Purchase Module template for VOCCs and NVOCCs, since there are
only a couple of provisions that do not apply or apply differently to one and not the other. VOCCs are generally much
tougher to negotiate with.
As with most T&L templates, the majority of the clauses are commercial, but there are a few key legal clauses we want
to preserve as close to the template version as possible:
Safe Carriage – Loss or damage to cargo is controlled by the Hague-Visby Rules. They are more favorable to us than
COGSA, but if you are forced to accept COGSA, it is an okay second best alternative.
Supply Chain Security – This clause is written in such a way that every carrier in the world, no matter where they
operate, can comply with at least one of the 3 categories. There is no excuse for it to be stricken, everyone can
comply. If a carrier is stubborn, any changes to this must be approved by the Security function.
Hazardous Materials/Dangerous Goods – We want each carrier who handles our goods to represent that its
personnel are trained in how to handle the type of materials we ship. Where certification is required for its personnel
who handle it, we want a representation that they are so certified. It is acceptable to provide reasonable notice of the
type of Dangerous Goods, or DG, that we will be shipping with them provided that HSEPS and Logistics approve that
they have a governance plan in place to ensure we are giving the carrier the required advance notice.
Indemnification – Although similar to the indemnification found in the MSA, our indemnification here asks specifically
for coverage for DG spills and other environmental contamination. Removal of this clause will need HSEPS Counsel’s
approval, but we should avoid striking it if at all possible. If the carrier insists that they do not carry DG, then add the
lead phrase, “if applicable,” or “if Dangerous Goods are transported,” or even, “In the unlikely event that Dangerous
Goods are transported,” so we recognize it is unlikely, but things change over time, even some goods become
regulated that were not when the contract was signed, so it should be left in even if it is unlikely to apply. If the carrier
insists on an indemnification from Honeywell, we can provide a narrowly tailored indemnity that we will properly contain
and label all DG in full compliance with applicable laws and regulations, and to the extent we fail to do so, we will
indemnify them for the Loss.
No Bill of Lading Terms! Do not let the carrier’s Bill of Lading terms have effect, even if only to the extent they do not
conflict, or are in the lowest order of precedence. Read just one carrier’s terms and you will realize why. There are
many, many clauses placing all kinds of liability and indemnities on the shipper, and our contract would never conflict
with most of those onerous clauses, they are additional. They can issue a BoL, just ensure the terms and conditions
do not bind us in any way.

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TRUCKING MODE
Safety Related – There are several clauses pertaining to safe maintenance of the trucks as well as driver safety,
alcohol testing and the like. There should be no basis by which the carrier objects to these requirements, so they
should remain intact. If you get a particularly difficult carrier, involve HSEPS to help decide whether, and how much,
we should compromise.
No Statutory Contract Carriage – The North American version of the Purchase Module expressly says this is not a
contract of carriage within the meaning of 49 U.S.C. § 13102 but many carriers try to insist that it is. Reject such
changes. Obviously, that statutory structure is more favorable to the trucker, but parties can elect differently, and we
do.
Supply Chain Security – Same as above for Ocean, reverse any strikes, everyone can comply with it.
Cargo Liability – Our Purchase Module has industry-standard limits on cargo loss or damage. There is no reason to
negotiate them lower, it is market for this type of transport.
Indemnifications are similar to Ocean above, a general indemnity and one for DG spills or releases.
Bill of Lading Terms, as with Ocean above, BoL terms should be rejected and of no force or effect.
HEAVYWEIGHT AIR
The heavily negotiated clauses in this Purchase Module are covered above. Indemnifications are the same, and cargo
loss limits are industry-standard.
SMALL PARCEL
Here we are dealing with the oligopoly of UPS, FedEx, and to a lesser extent, DHL. These heavy hitters have all the
leverage and they know it. Additionally, they are very large customers of Honeywell because of our Aero offerings and
our hand-held scanners, printers, and similar products. Accordingly, we usually have to deal with supplier-paper, but
the most frustrating part is that we must agree to be bound to their “tariff terms,” “service guide,” or other online terms
and conditions that, of course, impose liability on the shipper for everything and call for indemnities and very numerous
accessorial charges. These terms and conditions are not only onerous, but they are typically more than 100 pages of
small print.
We do usually manage to negotiate a mutual indemnity for negligence or bodily harm, and we are trying to standardize
the reps, warranties, and indemnities for HazMat handling around the world. As with other T&L carriers, we will rep
and warrant that we will properly package, identify, and label all HazMat/DG, and that our personnel are qualified to
handle it, but we want a reciprocal rep and warranty that their personnel are properly trained and certified how to
handle it, and each party should indemnify the other for its failure to do so. One note in this regard: lithium batteries in
“bulk,” meaning a box or more, are regulated when shipped by air and cannot go in the belly space of a passenger
airliner, they must go on a cargo aircraft only, this is called “CAO.” We should ensure that if the small parcel carrier
mistakenly sends it by air in the wrong type of aircraft (it’s unlikely it would make it all the way on board given the CAO
label and markings, but it could happen), the carrier is liable to us. The law will hold us accountable because we are
the shipper, so we need recourse against the carrier in the contract. Bulk lithium batteries are not restricted when
shipped by ground, it is the pressure of flight that causes them to be restricted when shipped by air ( they sometimes
self-ignite). We use lots of lithium batteries in products such as Vocollect, so this must be covered in all T&L contracts.
WAREHOUSING
In addition to the clauses covered in the mode types above, Warehousing sometimes involves the Supplier having
Honeywell Equipment in its possession (such as forklifts), so we need to (1) retain the protections that they will keep
it in good repair and return it in good condition when the contract expires, and (2) we need to be indemnified if they

Page | 44
cause harm while using our Equipment. For example, if their forklift driver runs over someone’s foot with our forklift
and we are sued, the Supplier should indemnify us.
Loss or Damage to Goods – Unlike our carrier contracts, the Supplier is fully liable for loss of, or damage to, our
goods. The reason is that we entrust them with our goods, and they are completely in control of the security of the
building, who enters, how those people conduct themselves when inside, how and where our goods are stored, etc.
Accordingly, other than a small allowance for shrinkage (losing track of a small amount of inventory), they must be
liable for all loss of our goods at our Replacement Value, which includes what we paid to ship it to the warehouse. Do
not let the Supplier require fault or negligence in the loss of our goods. We have no idea what goes on inside the
warehouse, we could never prove negligence or fault. It must be presumed that if the goods went into the warehouse,
those same goods should be there when we need to pull them out, and whatever issue happened in the meantime was
within the full control of the Supplier who is therefore liable for the loss. Also, do not let the Supplier invoke
warehouseman’s laws, those are highly favorable to them.
Honeywell Premises – Occasionally, we insource a warehouse provider to operate from a Honeywell facility. We
may have to compromise somewhat where we control security, such as who enters the building. If the Supplier has a
segregated area where the goods are kept, the Supplier should still be liable for what goes on within that allotted
space, recognizing that our own personnel may have keys or card access to the area, thus security is not completely
within the Supplier’s control in those instances.
CUSTOMS BROKERAGE
In addition to the clauses mentioned above for carriage modes, the Broker’s strict compliance with the law is critical,
and if they violate it, they must indemnify us for fines and penalties imposed on us by the authorities. We are, of
course, responsible for properly identifying the contents of the packages and answering their questions timely, and we
want our goods to move as quickly through customs as is possible. The Trade Compliance function is generally quite
helpful in negotiating any tough clauses with the Broker.

Page | 45

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PLAYBOOK FOR COMMONLY NEGOTIATED CLAUSES

 Contract Language = Times New Roman 12 font

Highly Confidential – Honeywell Internal Use Only

Common Supplier Change or Comment:

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Relationship of Parties / Independent Contractor. Nothing in this Agreement will be construed to

Common Supplier Change or Comment:

Highly Confidential – Honeywell Internal Use Only

Termination for Convenience. Notwithstanding anything to the contrary contained in this

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Common Supplier Change or Comment:

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Service Levels and Service Credits:

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Recommended Language to avoid separate NDAs:

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Do not let the Supplier strike this language:

Highly Confidential – Honeywell Internal Use Only

Common Supplier Change or Comment:

Highly Confidential – Honeywell Internal Use Only

Caution: This is not the GPT clause!

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Common Supplier Change or Comment:

Common Supplier Change or Comment:

Highly Confidential – Honeywell Internal Use Only

Common Supplier Change or Comment:

Common Supplier Change or Comment:

Common Supplier Change or Comment:

Highly Confidential – Honeywell Internal Use Only

Limit on Types of Damages Recoverable. EXCEPT AS SPECIFICALLY SET FORTH IN THIS

Highly Confidential – Honeywell Internal Use Only

Internal Comment 4, LOL Drafting Notes and Rules:

Highly Confidential – Honeywell Internal Use Only

Security Breach “SuperCap”

Limitation of Liability for Security Breach. SUPPLIER’S MAXIMUM AGGREGATE LIABILITY TO

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Confidential Information, Security and Data Privacy

Highly Confidential – Honeywell Internal Use Only

Related Confidentiality Issues -- NDAs

Highly Confidential – Honeywell Internal Use Only

Assignment and Subcontracting.

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Highly Confidential – Honeywell Internal Use Only

Integrity and Compliance

Governing Law and Forum

Highly Confidential – Honeywell Internal Use Only