limited liability company: Temmuz 2012

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A prior post discussed the concept that notwithstanding the fact that the governing law and forum selection clauses are usually at the end of a contract they should be reviewed and negotiated with the same emphasis as the business terms. In the same vein, there are several provisions that will often fall under the "Miscellaneous" section or article of a contract, and therefore you may (erroneously) believe they contain boiler plate language not requiring much attention.  To be clear, do not ignore or give little attention to these miscellaneous contractual provisions simply because they come at the end of the agreement.  This two-part discussion reviews the meaning and importance of the "Miscellaneous" sections of a contract. In this instalment, the (1) Severability, (2) Notice, (3) Amendments and Waiver and (4) Counterparts, and (5) Construction/Headings clauses are discussed, and the next installment reviews the (6) Remedies, (7) Third Party Beneficiaries, (8) Assignment, and (9) Integration provisions of an agreement.

1. Severability. What happens to the contract if the parties included a provision that is later found unenforceable or invalid under law? If the agreement includes a Severability clause, in most cases the remainder of the contract will be saved. The provision is important to prevent the entire contract from being rendered void or unenforceable. The Severability provision will state that the remainder of the contract and the application of the deficient provision to other persons or circumstances shall not be affected and shall be enforced to the extent permitted by law so long as the economic or legal substance of the transactions is not affected in any manner materially adverse to any party. Further, if a term or other provision is invalid or unenforceable, make sure the Severability clause states that the parties will negotiate in good faith to modify the agreement to cause the original intent of the contract is fulfilled to the greatest extent possible.

2. Notice. The Notice clause defines the method(s) for providing notice to the parties. OK, that is obvious, but what you include in that provision can actually avoid the failure to provide or receive timely notice under terms of a contract.

         Example: You enter into a contract with a printer for the printing a brochure. The contract includes a provision requiring you to give the printer ten days notice from the date of receipt of draft brochure of any defects. If you do not provide notice of any defects, the printer will then make 1000 copies. You receive the brochure by overnight delivery on December 12, 2011. You find a defect and send the printer an email on December 23, 2011. He calls and notifies you that it is too late, you need to take delivery of the 1000 brochures, and you owe the full fees under the contract. You call back and tell him you understood ten days to mean ten business days, and so your notice was timely.  Problem: the contract does not say business days, and so you made the wrong assumption.

Issues like the above regularly occur, and so here are good ideas for the Notice provision:

                 (a) all notices must be in writing (not oral);

                 (b) when referring to days, state whether this means business or calendar days;

                 (c) if time periods run from delivery of a product, service or notice, define the permissible delivery methods (i.e., regular mail, certified with return receipt, fax, email, overnight, personal delivery) and when delivery is deemed to have taken place (regular mail: "x" days after mailing in the US or "y" days outside the US; fax: upon confirmation of successful transmission; overnight mail: upon proof of delivery; and personal delivery: upon proof of personal delivery);

                 (d) as a precaution, require that copies of all notices to be sent to your attorney; and

                 (e) expressly state the addresses for delivery, and that if the address changes that the party must notify the other parties to the agreement.

3. Amendments and Waiver.  Contracts should include a provision addressing how (a) amendments to the contract can be made, and (b) provisions/rights in the agreement can be waived by a party.

                (a) Amendment -- The contract should state that any amendments must be in writing signed by all the parties.

                (b) Waiver -- The provision should state that that: No waiver by any party of any default, misrepresentation, or breach of warranty or covenant, whether intentional or not, shall extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant or affect any rights arising as a result of any prior or subsequent occurrence.

4. Counterparts. The section entitled "Counterparts" allows for the agreement to be signed separately by the parties on different copies of the signature page, and will generally include that delivery of the signature page can be accomplished by fax.

            Sample clause: "This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument."

5. Construction/Headings.

              (a) The "Construction" provision provides the rules of interpreting the contract in the event of the dispute, including an important concept that the parties have deemed the contract to have been jointly drafted and therefore no presumption or burden of proof should be deemed to arise favoring or disfavoring any party by reason of being labeled the drafter of the agreement. Why is this important? Without it, all the parties would either need to sit in a room and sign the document or the one, original signature page would need to be circulated to all parties, who would each be required to sign on the same page.
            (b) The "Headings" clause precludes any party from giving any meaning to the headings, and therefore the headings are simply to facilitate organization of the document.

The next installment discusses the meaning and importance of several other Miscellaneous contract provisions, including the Remedies, Third Party Beneficiaries, Assignment, and the Integration provisions.Disclaimer: The information in this blog is for discussion only and does not constitute legal advice nor create any attorney client relationship. You are urged to consult with an experienced lawyer concerning your business/corporate law matters.

The Miscellaneous Contract Terms: They Aren't Boiler Plate (Part II)

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The previous installment discussing the terms generally relegated to the "Miscellaneous" article of the contract reviewed the meaning and importance of the (1) Severability, (2) Notice, (3) Amendments and Waiver, (4) Counterparts and (5) Construction and Headings sections. See the prior Installment http://mybizlawyer.blogspot.com/2011/12/miscellaneous-contract-terms-they-arent.html.  This installment concludes the discussion of the common "Miscellaneous" provisions by reviewing the (6) Remedies, (7) Third Party Beneficiaries, (8) Assignment, and (9) Integration provisions of an agreement.

6. Remedies. Some contracts will include a separate section with respect to "Remedies" available to the parties in the event of a breach. The section requires particular attention because, to the extent not addressed elsewhere, it will set forth the remedies the parties can seek for breach and enforcement of the contract. The section may detail specific damages a party can seek in the event of a breach (for example, liquidated damages), but the other points to be on watch for include:

             a. Specific Performance: Does the clause provide the parties the right to seek specific performance of the agreement. In some circumstances, a party may be equally or even more concerned with the other party actually performing the services or obligations under the agreement and not just obtaining damages for a failure to perform (i.e., breach). An obvious example might be a contract to purchase a home. If actual performance is important to you, then make sure the contract includes specific performance as a right in the "Remedies" section, if not in another section Without the specific performance remedy, a court may only be able to award damages, which may not be satisfactory in the mind of the person seeking performance.

           b. Equitable Remedies: The contract may make reference to the right of the parties seek other equitable remedies, like an injunction, in the event of a breach. This is common, for example, in licensing agreements. In addition, the clause may state that the parties waive the obligation of posting a bond even if it would otherwise be required as a precondition to seeking the remedy. The bond provides security to the defendant and a means to obtain damages in the event of a false injunction. If you are the party against whom the remedy is more likely to be sought -- in the case of a licensing agreement that would be the licensee -- you may not want to agree to waive the necessity of posting the bond. Again, another reason why you need to read carefully all terms of the contract.

          c. Cumulative Remedies: Some contracts state that the remedies are cumulative and do not require a party to seek one type of remedy before seeking alternative remedy. You will often see this provision in a promissory note, giving the lender the right to enforce the note in any manner without any precondition that one remedy be sought before another type of remedy.

7. Third Party Beneficiaries. Often the agreement will expressly state that there are no third party beneficiaries. The section means that no one other than the actual parties to the agreement can claim any rights or seek to enforce any obligations under the agreement. it may seem an obvious point that only the parties have rights under an contract, but there can be circumstances where a contract may appear to confer a benefit on a third party. The inclusion of the clause will make clear that the contract should not be read to offer any benefits to anyone else. Less frequently, the clause can be included for the the opposite purpose and actually confer the benefits of the contract on a third party where the parties desire such an effect.

8. Assignment/Successors and Assigns.

          a. Assignment: There are some contracts that one or more of the parties may wish to be able to assign and there are others which may not be appropriate for assignment. If you are contracting for the services of a software developer, for example, you probably spent a great deal of time vetting the developer and therefore would be unhappy if the developer then assigned the contract to someone else. Thus, you can understand why it is important to set forth whether the contract is assignable or requires consent of the parties. Another context where assignment can be an issue is the event of a sale of the business where the absence of a right of an assignment can be an issue if the contract is important to the buyer: one typical example is a license. Bottom line: think about whether you would prefer to have a right to consent to the assignment of the contract.

         b. Successors and Assigns:   The "Successors and Assigns" clause determines whether the successors and assigns of a party or of the parties under the agreement are subject to the rights/benefits and obligations of the agreement. The clause may (i) bind the non-assigning party to perform the contractual obligations in the favor of the assignee, and (ii) bind the assignee to perform the contractual obligations in favor of the non-assigning party.

9. Integration/Entire Agreement.
The "Entire Agreement" or "Integration" clause essentially provides that unless set forth in the contract an obligation, right, or term is not considered part of the agreement. The clause incorporates the concept found in the parol evidence rule that the final agreement as made by the parties supercedes any terms that may have been discussed in prior negotiations. A party cannot make an argument that it negotiated for a right if it is not included in the contract because the parties (and courts) must look to the "four corners" of the contract -- of course there are exceptions to this rule but the Integration concept incorporates the parties' intention that the contract is the final expression of the terms agreed to by the parties.

While you should at least generally understand the meaning of these Miscelleaneous provisions, if there is just one take away it should be that they are not simply boiler plate just because they are found at the end of the contract. As with any section of a contract, the ultimate meaning and effect of each of these sections depends on how they are drafted, and therefore each clause should be read with the same scrutiny applied to the other terms of the agreement.

Disclaimer: This Article is intended for informational purposes and does not constitute legal advice nor create any attorney-client relationship.

The Independent Contractor Trap: Don't Misclassify Your Employees

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Many start-up and expanding companies prefer to engage the services of a independent contractor rather than hire an employee because of the high costs relating to employment taxes, health insurance and other benefits. Recognizing the cost savings of hiring a contractor, businesses will often seek to classify a new hire as a independent contractor believing all that is needed is a few revisions to their standard contract that identifies the person as an "independent contractor" and just like that the company has saved thousands of dollars. In reality, the company may have created a huge red flag for a potential audit that could result in the obligation to pay susbtantial taxes plus penalties. To avoid the Employee/Independent Contractor trap, consider the below guidelines for determining whether in fact you have hired an employee rather than engaged an independent contractor.

I. Why do Businesses Often Prefer to Classify a Person as an Independent Contractor?

Whether because a company may be a start-up or an emerging or larger company is concerned about the difficult economic environment, businesses often prefer to classify a person as an independent contractor for the simple reason of cost. Hiring an “employee” means the company has to withhold taxes and pay social security, and will have to offer health insurance and possibly other benefits (i.e., vacation/maturity leave, etc.)

II. Can't I Just Label the Person an Independent Contractor?

No, it is a common misconception that employees/companies can avoid the "employee" label by simply stating the person is an independent contractor in a services agreement between the parties. Moreover, the fact that the person waived any rights as an employee, signed a statement asserting he/she is an independent contractor or is issued a 1099 instead of a W-2 does not give the employer any cover. The tax authorities (and courts) examine the nature of the relationship between the person and the company, look at the facts as to how the person provides the services, and does not care about labels or other efforts made to classify an employee as an independent consultant.

III. What Distinguishes an Employee from an Independent Contractor?

There is no single factor distinguishing an employee from an independent contractor. Instead, courts examine all the facts to determine the degree of supervision, direction and control the company exercises over the services. If the company controls the manner and means by which the person provides the services, the worker is likely an employee rather than an independent contractor.

      A. An Employer-Employee Relationship May Exist if the Employer:

            1. Controls when, where and how the services are to be performed

            2. Provides the tools to perform the services (facilities, equipment, tools, supplies)

            3. Engages and requires the person to work exclusively for the employer

            4. Exercises supervision over the person, requiring reports, setting the work schedule, establishing the pay rate, retaining the right to review and approve the work product and/or evaluate the person's performance

            5. Offers compensation in the form of a salary or an hourly rate, and/or reimburses expenses

            6. Engages the persons who are unskilled or casual workers (therefore requiring supervision).

    B. Independent Contractors Generally Supervise, Direct and Control the Performance of their Duties.

            1. When performing the services, the independent contractor is not supervised or subject to the direction of the company, instead controlling its performance of the services.

            2. The independent contractor generally offers his/her services to the public, operating their own business separate from the company engaging the services.

            3. Indicia of independence include:

                  (a) Using own tools, equipment and supplies
                  (b)  Operating under a business entity (has a business) that assumes risks
                  (c) Seting fees, project schedule, paying own expenses
                  (d) Offering services to other companies
                  (e)  Marketing the services
                  (f)   Engaging own employees or third parties to assist

For additional guidance, see the following IRS publications: http://www.irs.gov/pub/irs-pdf/fss8.pdf http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

IV. What if a Company Misclassified an Employee as an Independent Contractor?

If the IRS determines that your company has misclassified en employee as an independent contractor you need to be prepared to pay substantial taxes and potentially interest and penalties, especially if it was not an honest mistake.

Where the IRS finds that the misclassification was an honest mistake on the part of the employer, and the employer filed proper returns, the employer will be liable for (a) the employer FICA obligation that should have been paid in the first instance, (b) 20% of the employees FICA that should have been withheld, (c) 1.5% of the total compensation paid to the person, (d) any amounts due for unemployment tax, and (e) possibly interest and penalties.

If the employer fails to file proper returns and cannot demonstrate reasonable cause, the liability can be doubled.

But, if the misclassification is found to have been intentional, then look out because the above limits do not apply, and the exposure can run to the individual officers/directors of the company.

Now, on top this, add your state tax liability, and the fact that there may have been obligations under other laws (including relating to health care benefits) that the company violated by misclassifying the employee as an independent consultant.

The classification of an employee as independent contractor is carefully scrutinized by Federal and State tax authorities and is a common red flag giving rise to an audit. Do not let the potential savings lead you into the independent contractor trap as your company will pay dearly for misclassifying its employees.

Disclaimer: The discussions in this blog do not constitute legal advise nor create any attorney-client relationship. You are urged to seek the advice of an experienced lawyer who can provide counsel with respect to your corporate/business law matters.

A Word to Small Business Owners: Don't Be Afraid to Negotiate Contracts

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All too often small business owners readily accept the terms of a contract or are concerned about pushing back on both economic and legal terms because either they fear losing the deal or simply don't fully understand the terms. As a business owner, you need to recognize that in most circumstances there is an opportunity to negotiate terms of an agreement, and therefore you should not be afraid to seek the best deal possible even if the other party initially seems unwilling to consider your position on key aspects of the contract. So, here is the advice, Don't Be Afraid to Negotiate.

Negotiation skills are one of the most important tools a business owner should have in its toolbox. Therefore, if you receive a contract from a party, read it carefully, and then proactively respond in writing with your comments.  One negotiating trick that vendors often try is to provide a form contract, creating the impression that the terms are non-negotiable -- indeed, if I am representing the vendor, I will often suggest creating a form agreement. Any contract, even a form, can be revised by an amendment, so do not automatically assume the agreement must be accepted "as is". The following are among the material terms that business owners should not only fully understand, but seek to negotiate.

1.  Term.   If you want a longer or shorter contact term, then ask for it. One alternative is to get an option to renew, which should be exercised within a certain number of days prior to expiration of the contract.  The mechanics of the option and financial terms should be clearly spelled out as well.

2. Fees.  There are many different ways to skin this cat, and you should consider what best works for your business over the term of the agreement.  The financial terms can be based on (a) a set periodic payment, (b) an up front payment and then installments, (c) fees that scale up or even down over the life of the contract, (c) revenues, (d) milestones, or (e) a combination of several different fee structures.  If the payments are based on revenues, then it is essential that the parties clearly define not just the percentage by the term "Revenue."   For example, is it based on Gross or Net, and what is to be included in the Gross and what can be deducted as a legitimate expense when determining Net Revenues?  A Net Revenue contract may refer to overhead expenses, like a businesses' borrowing costs, which can be a killer for a party who is being paid based on Net. Make sure you understand the definition, and if you don't ask for professional advice rather than assume the definitions are fair or standard.

3. Financial Reports/Audit. If the consideration under the contract is based on revenues or certain milestones, require periodic financial reports. In addition, you should have the opportunity to review and audit (i.e., challenge) such reports rather than simply accepting the information provided by the other contracting party. In addition, provide a dispute mechanism in the event of a challenge, such as CFO's meet and try to resolve, appointing independent third party, or even arbitration -- and if the audit reveals you were in the right, include a requirement that the other party pays your costs.

4. Termination of the Contract/Suspension. Of course the contract will expire at the end of its term, but include other events that will result in termination: (a) non-payment, (b) material breach, (c) bankruptcy, (d) failure to achieve defined milestones, including financial ones, (e) assignment/sale of the business (see below), (f) departure of personnel if the business relies on certain key employees, or (g) force majeure. Termination clauses will often allow the breaching party an opportunity to cure a default, provided it is one that can be cured. In the case of a force majeure event, the contract can be suspended pending passage of the event or terminated if the contract becomes impossible to continue due to the event.

5. Assignment/Sale of the Business. Do you want the contract to be assignable to a third party, including in the event of the sale of the business. This is an important issue for many types of agreements, such as licensing agreements or service contracts. You can require consent for the assignment, but if you want the contract to be assignable, as an alternative you can propose that it is assignable to an assignee with financial ability to meet the contractual obligations.

6. Warranties/Limitations on Liability.   Suppliers/service providers will often provide a lengthy provisions denying all warranties and limiting their liability -- and if you are the vendor, you generally want to push for these provisions. If you are purchasing the the services of a large company, there may be no room to push back on any of the limitations, but whether the other contracting party is a small or large company, there is no harm in trying -- even if they send you the form or the "Master Service Agreement."  For either party, it is all about the bargaining power, and how much the other party wants your business versus how much you need the agreement. Even if you cannot get the other party to budge, ask at least for an exception for gross negligence, and regardless a court may negate the limitation based on intentional misconduct or even gross negligence.

7. Dispute Resolution.   Avoid an issues as to how disputes are to be resolved by negotiating the applicable (a) governing law, (b) venue for the dispute (meaning both the tribunal that will handle the matter, such as a court or arbitration/mediation, and the geographic location), (c) if there is to be mediation or arbitration, the procedures, and (d) will the parties impose legal fees and costs on the losing party.

8. Remedies. Among the remedies you can include are (a) specific performance, which is important if money cannot cure a default, (b) liquidated damages, if you prefer to define the damages to avoid disputes as to proof the proper compensation for a breach, and (c) equitable remedies (other than specific performance), like an injunction.

9. Non-Compete/Non-Solicitation. Simple vendor/supplier agreements generally won't include these terms, but many other contracts will, including licensing agreements, consulting/employment, certain service agreements, or more major transactions (like sale of a business) to name a few. Enforcement, especially as to non-competes, is a key legal issue, and it is highly advisable to have the provisions reviewed by counsel that understands the law in the applicable jurisdiction as it can vary greatly from state-to-state.

10. Other Terms/Conclusion.   If there are other terms included or, for that matter, missing from the agreement, then make these part of the punch list of issues to be addressed with the other party. The reality is that the worse response you can receive is "no", and then you can decide how important the provision is from your perspective. A bad contract is NOT better than no contract. In a competitive economy, even larger/established businesses are often willing to negotiate and "the last and final", "take it or leave it" or "as is" response may be just a bargaining tactic.

The Lesson: Read the Contract, Understand Each Provisions and Don't Be Afraid to Negotiate the Terms.

Disclaimer: The discussions in this blog do not constitute legal advise nor create any attorney-client relationship. You are urged to seek the advice of an experienced lawyer who can provide counsel with respect to your corporate/business law matters.

Legal Issues When Buying a Business: Don't Overlook These Provisions in the Purchase Agreement.

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As discussed in prior installments of this series on buying a business, there are a number important legal issues you need to consider before signing the purchase agreement. The first installment discussed the role of the Exclusivity Agreement, the second installment examined the differences between structuring the transaction as stock purchase as opposed to a purchase of assets, the third examined the importance of escrowing a portion of the purchase price to cover any issues that may arise post closing, and the fourth discussed important aspects of due diligence and how to address legal or financial issues in the purchase agreement.  This fifth installment examines several key provisions that should be incorporated in the purchase agreement but are otherwise often overlooked.

The Purchase Agreement is a very flexible instrument giving the parties substantial flexibility not only as to the structure the transaction but with respect to the representations, warranties, disclosures and covenants that the parties can negotiate to include (or for that matter exclude) from the Agreement. There are a number of standard provisions relating to such matters as legal ownership of/title to the assets, representations as to the corporate status and authority, disclosures as to litigation, financial and tax related representations, environmental issues and post closing obligations. First, while these provisions may be part of a standard purchase agreement they by no means should be viewed as boilerplate. Even a slight variation in language can alter the meaning and scope of these sections, and thus all representations, warranties and covenants, no matter how standard, need to be reviewed carefully. Second, below are a number of provisions which are often overlooked but you should consider incorporating in the Purchase Agreement.

1. Intellectual Property.

Of course it is standard to include representations regarding the seller's title and ownership of the intellectual property, but make sure the Agreement:

              (a)  Covers licensed rights as well as often the seller does not own but licenses key IP. In the same vein, confirm the licenses are assignable and if consent of the licensor is required that the Seller obtain the consent as a condition of closing.

              (b) Addresses rights to the domain names and company websites and requires transfer of these rights to the buyer as a condition of closing.  It is not unusual for the buyer to forgot about the transfer of the domain and then have to coax the seller into compliance after the sale.

             (c) IP rights should include not only registered marks or issued patents, but pending applications, unregistered rights, royalties, licenses and, significantly, awards, damages or pending claims and litigation.

             (d) Incorporates provisions relating to software, requires the turn over of source code, manuals, passwords, license keys and all other documentation.

2.  Litigation

Representations relating to pending or threatened litigation are typical in a Purchase Agreement, but be sure:

            (a) There are sufficient disclosures about pending and threatened litigation, including the status of such matters.

            (b) Decide how litigation is to be handled post-closing. Will your lawyer take over the matter or will the Seller's lawyer continue to handle it; who will be responsible for the legal fees and costs; include a right to periodic updates as to the status of any legal matters; and set forth any rights as to damages, awards, insurance proceeds and to settle the matter and any indemnification in the event of an unfavorable outcome.

3. Financial/Tax Matters

In addition to the typical representations and warranties concerning financial and tax issues, include:

          (a) Financial

                  (i) Require that the seller update the financial statements on or prior to Closing;

                  (ii) Include a formula for adjusting the purchase price if there are material changes to the financial statement;

                  (iii) Although often used, try to avoid using an earn-out (post-closing payment contingent on certain financial milestones) as they are difficult to negotiate, document and manage once the buyer assumes the reins of the business, and as a result they are a major source of post-closing disputes. If an earn-out cannot be avoided, make sure you have counsel who has experience negotiating and drafting earn-outs.

         (b) Taxes

                (i) The representations and warranties should not only cover federal and state taxes, but sales and any other applicable taxes for all relevant jurisdictions.

                (ii) The seller should provide all filings and disclose any past, pending or threatened audits/assessments.

                (iii) Require the seller provide post-closing assistance for any filings relating to periods of time the seller controlled the business.

                (iv) Include appropriate indemnifications for tax liabilities.

4. Transition

Is there a switch in your house that you have no idea what it does, and since the seller is long gone you have no way of finding out? Well, think how that issue is magnified exponentially if you purchase a business and don't have the seller to assist with the transition. The assistance is important not only as to obvious issues, like computer systems, financial records, and where the keys to the third floor supply closet are located, but making a smooth transition as far as clients/customers, introduction to vendors/suppliers, establishing a good relationship with employees/consultants, ensuring an understanding of business processes and procedures that are essential for operation of the business. Therefore, the Purchase Agreement can require the meaningful assistance of the seller or even include compensation to the seller for post-closing assistance and continued employment with the company for a reasonable period of time.

5. Material Adverse Change

Undoubtedly the Purchase Agreement will include a Material Adverse Change clause essentially providing the buyer with certain rights and remedies (including possibly termination of the transaction) in the event of a material adverse change with respect to the business. The clause is one of those tricky provisions which, if not properly drafted, can result in substantial disputes. The key is to avoid ambiguity by incorporating specific criteria as to when the Material Adverse Change clause is implicated, such as decline in sales, the loss of certain amount of or even specifically named customers, a decrease in EBITDA or termination of a manufacturing or supplier relationship.

6. Employment/Labor Matters

Provisions relating to Employment and Labor matters are standard, but also make sure the representations and warranties include:

         (a) Existence of confidentiality, invention assignment and non-competes, and get copies for each employee and consultant.

         (b) Confirmation that consultants are truly consultants and not employees (which can give rise to substantial tax liabilities).

         (c) Details and disclosures regarding any employee plans (stock, pension, etc.) and vesting status f each employee.

         (d) Disclosures with respect to any collective bargaining any other labor matters.

7.  Operations in Foreign Countries

Establishing the right of the company to operate in any foreign jurisdictions where it does business should be obvious, but compliance with the Foreign Corrupt Practices Act is far less familiar to most people. The FCPA prohibits various behavior relating to operating in foreign jurisdictions, including paying bribes to obtain contracts, business, etc. Violation of the FCPA carries substantial civil and criminal liability. As a buyer, you might not think much about the FCPA, but if you manufacture in China, for example, you better pay attention and therefore incorporate a representation that no unlawful payments have been made by seller or its agents.

8.   Covenants

The Purchase Agreement should contain covenants relating to:

        (a) Non-solicitation of employees, customers and clients and non-interference with existing vendor/supplier relationships.

        (b) In certain circumstances, a Non-Compete that complies with the narrow limitations imposed by applicable state law.

        (c) As discussed in prior posts, clear indemnification and escrow terms to address post-closing liabilities.

        (d) Confidentiality.

        (e) Obligation of the Seller to notify the buyer upon the occurrence of material events arising at any time prior to closing.

        (f) Resignations of officers, directors, responsibility of the seller as to termination of some or all employees/consultants.

9. Termination

There will be grounds for either party to terminate the Agreement prior to closing. The termination provisions should not only provide specifics as to when the right can be invoked by a party, but also the liabilities, if any, resulting from termination and the effect of termination.

10. Survival

Give careful consideration to how long any of the representations, warranties and covenants will survive avter closing. The seller will push for no or a very short period while the buyer will want them to survive until the chance of any liability no longer exists.  A compromise will almost always be necessary, and remember not all of the provisions need to survive for the same period of time

The above are by no means an exhaustive list of key provisions in a purchase agreement, and they will certainly vary depending on the nature of the business involved -- for example, if you are buying a gas station the environmental disclosures, reps and warranties will be substantial. What is obvious that you cannot accept a boilerplate purchase agreement and instead the provisions need to be tailored to the particular transaction.

Disclaimer: The discussions in this blog do not constitute legal advice nor create any attorney-client relationship. You are urged to seek the advice of an experienced lawyer who can provide counsel with respect to your corporate/business law matters

8 Temmuz 2012 Pazar

Common Social Marketing Mistakes and Solutions

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"Unfortunately, the whole B2B/social media relationship isn’t without its own set of growing pains as well. Which is, naturally, to be expected; as exemplified by the aforementioned cat videos and pop stars, figuring out exactly how your business ought to engage on these platforms isn’t perfectly intuitive, nor have these channels been around quite long enough for their to be a widespread, well-established protocol. As a result, a great many businesses are not only failing to maximize the benefit of being present on social media, but they might also be hurting themselves."Here are a few common mistakes in B2B social marketing and how you can avoid them:B2B Social Marketing Mistakes You're Probably Making

Time Management Tips

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"Time is a resource that must be utilized wisely in order for professional and personal goals to be achieved. Goal setting is one of the best ways to make sure time is managed in a manner designed to reach success. A recent video article posted on the online source inc.com highlighted five great time management techniques that are easily understood and employed. The video was created by Scott Gerber. Leadership development within an organization must account for time management work with all leaders. Again, goal setting is the key to effective time management for any successful leader." Time Management: 5 Useful Tips

The Small Business Advocate. July 2012

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Vol: 31, No: 5

The July edition of The Small Business Advocate focuses on research. The Office of Advocacy’s 2012 round of economic research RFQs are announced in its pages, and Chief Counsel Winslow Sargeant discusses the history and successful record of the 30-year-old Small Business Innovation Research (SBIR) program. Also includes are news about a new online information series, Small Business Facts, developments surrounding the complex issue of “Incorporation by Reference” of industry standards

Government Benefits, Grants, and Financial Aid

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Benefits.gov can help you identify grants, loans, financial aid, and other benefits from the U.S. government for which you may be eligible and tell you how and where to apply.

When looking for financial assistance, remember that there are differences between grants and loans. You are required to pay back a loan, often with interest. You are not required to pay back a grant, but there are very few grants available to individuals. Most grants are awarded to universities, researchers, cities, states, counties, and non-profit organizations. You can search for these type of grants on Grants.gov.

Email, Phone and Social Media Monitoring in the Workplace – Know Your Rights as an Employer

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Do you know how much privacy your employees are entitled to? For example, if you feel employees are abusing their work privileges, is it legal to intercept emails or phone conversations to find out what they’re up to and confirm your suspicions? Can you ask potential job candidates for their Facebook profile log-on information?

Here are some general guidelines that can help.

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