LIST OF CHAPTERS Chapter 1 INTRODUCTION TO CONTRACT DRAFTING... 1 Chapter 2 OVERVIEW OF BUSINESS ENTITIES... 15 Chapter 3 FINANCING THE BUSINESS... 291 Chapter 4 SALE AND PURCHASE OF GOODS AND SERVICES... 395 Chapter 5 COPYRIGHT ASSIGNMENTS... 483 Chapter 6 LABOR AND EMPLOYMENT ISSUES... 497 Chapter 7 OVERVIEW OF MERGERS AND ACQUISITIONS... 555 Chapter 8 OVERVIEW OF OPINION LETTERS... 795 Chapter 9 SPONSORSHIP AGREEMENTS: EVENTS, PERSONAL ENDORSEMENTS AND CONTESTS... 861 ix
TABLE OF CONTENTS CHAPTER 1. INTRODUCTION TO CONTRACT DRAFTING... 1 1.1 Overview... 1 1.2 Clarity Is Key... 2 1.3 What To Include... 3 1.3.1 Preamble... 4 1.3.2 Recitals... 4 1.3.3 Boilerplate... 5 1.3.4 Definitions... 6 1.3.5 Exhibits, Attachments, And Schedules... 6 1.3.6 Extrinsic Documents... 7 1.4 Changing The Document... 8 1.5 Standardization... 9 1.6 Style And Form... 9 FORM 1A: Standard Contract Provisions... 10 CHAPTER 2. OVERVIEW OF BUSINESS ENTITIES... 15 2.1 Selecting The Appropriate Business Entity... 15 2.1.1 Sole Proprietorship... 16 2.1.2 General Partnership... 17 2.1.3 Limited Partnership... 19 2.1.4 Limited Liability Company... 22 2.1.5 Corporation... 24 2.1.6 B Corporations... 27 2.2 Matrix For Choice Of Entity: Which Entity Is Right For You?... 30 2.3 Organizational Grid... 38 FORM 2A: Checklist For Creating A Corporation... 42 FORM 2B: Articles Of Incorporation... 47 FORM 2C: Bylaws... 60 FORM 2D: Written Consent In Lieu Of First Meeting Of The Board Of Directors Of... 82 FORM 2E: Shareholders Agreement... 85 FORM 2F: Letter Doing Business As An S Corporation... 112 FORM 2G: Checklist For Use In Creating A Limited Liability Company... 120 xi
Business Contracts FORM 2H: Articles Of Organization... 124 FORM 2I: Simple LLC Operating Agreement... 126 FORM 2J: Partnership Checklist LLP... 166 FORM 2K: Family LLLP Partnership Agreement (For Use With Managing Family Assets And Related Estate Planning)... 171 FORM 2L: Limited Liability Limited Partnership Agreement... 212 FORM 2M: Professional Corporation Bylaws... 238 FORM 2N: Formation Questionnaire... 257 FORM 2O: Articles Of Incorporation [Colorado Nonprofit Corporation]... 260 FORM 2P: Nonprofit Corporation Bylaws... 263 FORM 2Q: Questionnaire Regarding 501(c)(3) Application Information... 277 FORM 2R: Charitable Trust... 286 CHAPTER 3. FINANCING THE BUSINESS... 291 3.1 Introduction... 292 3.2 Funding Considerations... 292 3.3 Debt vs. Equity... 293 3.3.1 Equity Securities And Debt Securities... 293 3.3.2 Advantages And Disadvantages Of Equity... 293 3.3.3 Advantages And Disadvantages Of Debt... 294 3.3.4 Preferred Securities... 294 3.4 Sources Of Capital... 295 3.4.1 Existing Owners And Managers... 296 3.4.2 Friends And Family... 296 3.4.3 Angel Investors... 296 3.4.4 Strategic Investors... 296 3.4.5 Venture Capital Funds... 297 3.4.6 Private Placement To Multiple Outside Investors... 297 3.4.7 Banks And Financial Institutions... 298 3.5 Compliance With Federal And State Securities Laws... 298 3.5.1 Registration And Exemptions Under Federal Law... 299 3.5.2 Scope Of Exemptions... 301 3.5.3 Registration And Exemptions Under The Blue Sky Laws... 302 3.6 Forms... 302 3.6.1 Private Placement Memorandum... 302 3.6.2 Subscription Agreement, Investor Questionnaire And Instructions... 302 xii
Table of Contents 3.6.3 Series A Term Sheet And Certificate Of Incorporation... 303 3.6.4 Investor Rights Agreement... 303 3.6.5 Convertible Debt Term Sheet And Note... 303 FORM 3A: Private Placement Memorandum... 304 FORM 3B: Instructions To Subscribers... 328 FORM 3C: Investor Questionnaire... 329 FORM 3D: Subscription Agreement... 332 FORM 3E: Series A Preferred Stock Term Sheet... 337 FORM 3F: Investor Rights Agreement... 344 FORM 3G: Debt Investment Term Sheet... 367 FORM 3H: Borrower s Certificates... 369 FORM 3I: Convertible Subordinated Promissory Note... 370 FORM 3J: Amendment And Restatement Of Certificate Of Incorporation... 380 CHAPTER 4. SALE AND PURCHASE OF GOODS AND SERVICES... 395 4.1 Sales Of Goods... 395 4.1.1 U.S. Transactions Uniform Commercial Code... 395 4.1.2 International Transactions For The Sale Of Goods... 398 4.2 Service Agreements... 400 4.2.1 Independent Contractor Relationship... 400 4.2.2 Intellectual Property Rights And Ownership... 402 4.3 Electronic Contracting... 402 4.3.1 E-SIGN And UETA... 403 4.3.2 Elements Of Electronic Contracts... 404 4.4 Drafting Tips A Checklist... 404 4.5 Using The Sales And Purchasing Forms... 405 FORM 4A: Purchase Order Clauses... 406 FORM 4B: Sales Invoice Clauses... 414 FORM 4C: Mutual Non-Disclosure Agreement... 418 FORM 4D: Request For Proposal / Request For Quotation... 421 FORM 4E: Master Supply Agreement... 429 FORM 4F: Distributor Agreement... 441 FORM 4G: Sales Representative Agreement... 448 FORM 4H: Services Agreement... 457 xiii
Business Contracts FORM 4I: Electronic Commerce Agreement... 475 FORM 4J: Services Agreement Clause Electronic Contracting Legend... 482 CHAPTER 5. COPYRIGHT ASSIGNMENTS... 483 5.1 Why Businesses Must Care About Copyright Assignments... 483 5.2 What Is A Copyright?... 484 5.2.1 Works... 484 5.2.2 Author... 485 5.2.3 Copyrights... 485 5.3 Special Considerations... 486 5.3.1 Is The Work A Work Made For Hire By An Employee?... 486 5.3.2 Is The Work A Work Made For Hire By A Non-Employee?... 487 5.3.3 Who Is The Author Or Other Copyright Claimants?... 487 5.3.4 Does The Transferor Own The Rights Being Conveyed?... 488 5.3.5 What Copyrights Are Being Conveyed?... 488 5.3.6 What Copyrights Are Being Reserved?... 488 FORM 5A: Assignment Of Rights... 489 FORM 5B: License Agreement... 493 CHAPTER 6. LABOR AND EMPLOYMENT ISSUES... 497 6.1 Colorado Personnel Policies... 497 6.2 Employee Information... 499 6.3 Employee Records... 500 6.4 Wages And Overtime... 501 6.5 Colorado Employment Taxes And Regulatory Issues... 503 6.6 What Is Not Required... 503 6.7 Employment Relationship... 504 6.8 Employment Forms... 506 FORM 6A: Employment Contract And Information Sheet... 507 FORM 6B: Consulting Services/Independent Contractor Agreement... 520 FORM 6C: Confidentiality And Non-Compete Agreement... 525 FORM 6D: Sample Employee Handbook Table Of Contents... 531 FORM 6E: Reference Release... 533 FORM 6F: Release Agreement (Employee Under Age 40)... 534 FORM 6G: Release Agreement (40 Or Over)... 541 xiv
Table of Contents FORM 6H: Exit Checklist... 551 CHAPTER 7. OVERVIEW OF MERGERS AND ACQUISITIONS... 555 7.1 Introduction... 555 7.2 Due Diligence... 556 7.2.1 Nondisclosure Agreement... 557 7.2.2 Letter Of Intent... 557 7.2.3 Taxes... 559 7.3 Regulatory Considerations... 560 7.3.1 State And Local Laws And Ordinances... 560 7.3.2 Federal Antitrust Laws... 560 7.3.3 Federal Securities Laws... 562 7.4 The Definitive Agreement... 563 7.4.1 Asset Purchase Agreement... 564 7.4.2 Stock Purchase Agreement... 565 7.4.3 Merger Agreement... 565 7.4.4 General Considerations... 566 7.5 Closing The Deal... 570 7.6 Client Implementation And Post-Closing Deliveries... 570 FORM 7A: Non-Disclosure Agreement Unilateral... 571 FORM 7B: Non-Disclosure Agreement Reciprocal... 574 FORM 7C: Letter Of Intent Asset Purchase... 578 FORM 7D: Letter Of Intent Stock Purchase... 585 FORM 7E: Acquisition Checklist... 592 FORM 7F: Due Diligence Document Request List... 599 FORM 7G: Due Diligence Checklist... 616 FORM 7H: Asset Purchase Agreement... 636 FORM 7I: Stock Purchase Agreement... 725 FORM 7J: Agreement And Plan Of Merger... 760 FORM 7K: Board Consent... 786 FORM 7L: Shareholder Notice... 788 FORM 7M: Closing Checklist Purchase Of Stock... 790 CHAPTER 8. OVERVIEW OF OPINION LETTERS... 795 8.1 Contents Of An Opinion Letter... 795 xv
Business Contracts 8.2 Due Diligence Generally... 798 8.3 Types Of Opinions And More Specific Diligence Requirements... 799 8.3.1 Duly Incorporated... 799 8.3.2 Due Organization... 800 8.3.3 Validly Existing... 800 8.3.4 Good Standing... 801 8.3.5 Duly Qualified... 801 8.3.6 Power And Authority... 801 8.3.7 Validly Issued... 802 8.3.8 Fully Paid... 802 8.3.9 Nonassessable... 803 8.3.10 Corporate Action... 803 8.3.11 Legal, Valid, Binding And Enforceable... 803 8.3.12 No Conflict, Breach, Or Default... 803 8.3.13 Absence Of Litigation... 804 8.3.14 Security Interests... 804 8.3.15 Bankruptcy... 806 8.4 Attorney Liability For Reliance By A Third Party On A Legal Opinion Letter... 807 FORM 8A: Stock Purchase Transaction Opinion Letter... 813 FORM 8B: Opinion Of Borrower s Counsel... 826 FORM 8C: Form Opinion Letter To Lender s Counsel... 847 CHAPTER 9. SPONSORSHIP AGREEMENTS: EVENTS, PERSONAL ENDORSEMENTS AND CONTESTS... 861 9.1 What Are Event Sponsorship Agreements?... 861 9.2 Essential Elements Of Event Sponsorship Agreements... 862 9.3 Personal Endorsement Agreements And Conduct Concerns... 863 9.4 Conducting Promotional Prize Giveaways, Contests Or Sweepstakes... 864 Sample Morals Clauses... 867 FORM 9A: Event Sponsorship Agreement... 869 INDEX... 873 xvi