Randy Brown - Real ROI: How to Turn a Single Contract into Multiple Sales/Projects

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SOLVING PROBLEMS OF GLOBAL IMPORTANCE

© 2015 Applied Research Associates, Inc. ARA Proprietary 1


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Real ROI: How to Turn a Single Contract into Multiple Sales/Projects

Randy BrownVP, Virtual Heroes Division Manager

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© 2015 Applied Research Associates, Inc. ARA Proprietary 2www.ara.com © 2015 Applied Research Associates, Inc. ARA Proprietary 2


Real ROI and How to Achieve it

• ARA/Virtual Heroes Intro• Master Services Agreements• Commercialization Agreements• Rights to Repurpose• IP Assertions• Maintenance/Support Agreements• Royalty Streams/Agreements• Questions

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About ARA

• Founded 1979, Albuquerque, New Mexico• 1,000+ Employee Owners in U.S. and Canada

Employee Profile

National SecurityARA is the recognized national leader for providing innovative solutions to deter, defeat, and respond to threats facing the warfighter and our homeland

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InfrastructureLeader in technologies and services to improve the performance and sustainability of infrastructure for transportation, buildings, and energy systems

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Energy & EnvironmentTo be a recognized, highly regarded provider of innovative engineering services and products to the power and utility services market

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Health SolutionsARA is a respected and sought after company providing specialized research and technology services, testing and product development in health science and engineering

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Business Areas

Virtual Heroes Division (VHD)

Raleigh, NC

Orlando, FL

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Virtual Heroes Division of ARAFounded January 2004 by veterans of the Research Triangle Institute, the U.S. military and the entertainment game industryAcquired by ARA in April 2009

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Gaming and Training Capabilities• We create targeted content in the following formats:

• Simulations for Learning• Serious Games• Virtual Worlds

• We deliver content on the following platforms:

• PC/Mac via download• Web via thin client• Mobile Devices • Game Consoles

• We provide:

• Individual, self-paced learning• Instructor-facilitated team training

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Congratulations, you got the… Contract/Grant/Award/Investment/Angel Funding/Friends and Family/Kickstarter!

• Not so fast though! As they say, hold your horses…

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Work Hard Up Front: It Pays Off

• Work to leave the door open for more follow-on’s• Look for options to repurpose content in the future• Consider growth opportunities past this one project

• Avoid turning this into a“one hit wonder”

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Master Services Agreements Provide Value

• Also called a Collaboration Agreement• This creates structure to generate Task Orders• Creates a plan/environment for on-going/future

tasks/project work, instead of a single contract• Makes it easier to add work later• Yes it is more work up front, but worth the time• Caveat: some grants/awards/etc can’t support

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Master Services Agreement ExampleMASTER AGREEMENT

Between XXXX

and Applied Research Associates, Inc.

This master agreement (hereinafter called “Master Agreement”) is effective the XXX day of XXX 20XX, by and between XXXX (hereinafter called "XXXX"), an institution having its principal office at XXX, and Applied Research Associates, Inc. with a principal place of business at 8537 Six Forks Rd, Ste 600, Raleigh, NC 27615 (hereinafter called “ARA”), where each are referred to as a “Party” and together as the “Parties.”

RECITALS

WHEREAS, the Parties will explore opportunities to fund, develop, market and sell for financial consideration, products resulting from projects, when feasible, under mutually agreeable terms;

WHEREAS, the Parties wish to establish a Master Agreement to set forth the broad terms and conditions applicable to the conduct of these projects of mutual interest, this Master Agreement;

WHEREAS, the Parties will enter into task-specific agreements (“Task Orders”) to identify, plan and execute projects of mutual interest between the Parties and specify resources to be made available between the Parties in support of each Task Order;

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Commercialization Agreements Address Revenue

• Reciprocal agreement to sell/generate revenue• Normally set with equal royalty payments• Adjust the split based on expected efforts/sales• Set frequency of payments (quarterly, annually)• Include allowance for audit of books

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Commercialization Agreement Example

COMMERCIALIZATION AGREEMENT

THIS AGREEMENT, including all Exhibits attached hereto (the “Agreement”) is made and entered into this XX day of XXX, 20XX (the “Effective Date”) by and between XXX (“XXX”), a XXX corporation with offices located at XXX and Applied Research Associates, Inc. (“ARA”), a New Mexico corporation with offices located at 4300 San Mateo Blvd., N.E., Suite A-220, Albuquerque, New Mexico 87110 and 8537 Six Forks Road, Suite 600, Raleigh, North Carolina 27615. XXX and ARA are sometimes referred to collectively herein as the “Parties” and individually as a “Party.” WHEREAS, ARA has developed a technology platform composed of numerous software libraries, capabilities, and other digital assets known as the YYY (defined below) and uses the YYY to develop software that it licenses for education, training, assessment, and learning software applications;

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Rights to Repurpose Protect Future Value

• Avoid work-for-hire at all costs• Include wording allowing rights to repurpose• Add wording protecting non-joint IP reuse• Leverage your existing assets offered “in-kind” to

win rights• Consider discount if required to win rights

• Define each sides Pre-Existing IP along with Joint IP

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IP Assertions Clarify Ownership

• Often required by the government• Many organizations leave blank• Don’t miss opportunity to declare your IP• Be as restrictive as you can• Be as exhaustive as you can

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IP Assertions (Govt Example)The Offeror’s assertions, including the assertions of its subcontractors or suppliers or potential subcontractors or suppliers, shall be submitted as an attachment to its offer in the following format, dated and signed by an official authorized to contractually obligate the Offeror:

1) Identification and Assertion of Restrictions on the Government’s Use, Release, or Disclosure of Technical Data Computer Software.

2) The Offeror asserts for itself, or the persons identified below, that the Government’s rights to use, release, or disclose the following technical data or computer software should be restricted

Technical Data Computer Software to be Furnished With Restrictions*

Basis for Assertion** Asserted Rights Category***

Name of Person Asserting Restrictions****

VH ALT Platform VH GO Platform

development exclusively at private expense

Restricted (commercial)

XXXXXXXXX

Third-party integrations (e.g., Unreal Engine)

development exclusively at private expense

Restricted (commercial)

XXXXXXXXX

*** Enter asserted rights category (e.g., government purpose license rights from a prior contract, rights in SBIR data generated under another contract, limited, restricted, or government purpose rights under this or a prior contract, or specially negotiated licenses).

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Software Maintenance Agreements Create Potential• Describe:

• Duration• Services (email, phone)• Support levels (response times, definitions)• Definitions of bug fixes versus enhancements

• Potential for:• Hosting fees• Additional on-site support• Unspent maintenance fees• Follow-on work from enhancement requests

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Software Maintenance Agreement Example

SOFTWARE MAINTENANCE AGREEMENT

This Agreement ("Agreement") is made and entered into and effective this ___ day of ___, 20XX by and between Applied Research Associates, Inc. having its principal place of business at 8537 Six Forks Road, Suite 600, Raleigh, NC 27615 ("ARA") and XXX, having its principal place of business XXX ("Client").

WHEREAS, ARA has provided to Client certain software as specified in Exhibit A of this Agreement ("Covered Software") pursuant to a software license agreement between the parties (the "License Agreement"); and

WHEREAS, Client wishes to have ARA provide maintenance and support services pursuant to the terms and conditions of this Agreement;

NOW, THEREFORE, the parties agree as follows:

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Software Maintenance Agreements for Cloud

• SaaS/Cloud Technologies:• Host it yourself, or • Sub work out to cloud providers as part of your

service fees

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Royalty Streams/Agreements

• Negotiate for sales royalties and service royalties• Consider investment of your own IRAD or Fee to

gain royalty agreement. Example: • $500K contract, 8% fee = $40K• Invest $20K in return for 5% royalty• Requires $400K sales to recoup• All sales past that equals new fee

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Real ROI and How to Achieve it

• ARA/Virtual Heroes Intro• Master Services Agreements• Commercialization Agreements• Rights to Repurpose• IP Assertions• Maintenance/Support Agreements• Royalty Streams/Agreements• Questions? @VirtualHeroes

M: 919.593.0928 [email protected]