§ 127.4. General contract requirements.
(a) Contracts shall be fair and equitable and shall be the result of an arm’s length negotiation between the licensee and the company.
(b) The effect of a contract may not be to delegate virtually complete supervision and control over functions of the company to the licensee, thereby effectively substituting the licensee for the board of directors of the company.
(c) Contract provisions shall be consistent with the articles of incorporation and bylaws of the company.
(d) The rights, obligations and duties of the parties to the contract shall be specifically and clearly set forth.
(e) Contracts shall avoid conflict of interests between the company, the licensee and officers or directors of the company.
(f) Contracts shall also contain the following:
(1) Clear and precise termination provisions, specifying a termination date not later than 5 years after the date of execution, and may not provide for automatic renewal.
(2) A provision stating that duties not specifically delegated to the licensee are retained by the company.
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