We get a ton of visitors to our sites looking for templates for manufacturing contracts and agreements, as well as supply agreements.  The reason is pretty straight-forward – we have thousands of these agreements that are categorized and easily searchable among the millions of searchable legal agreements and contracts at RealDealDocs.com.  But what are they, and why is it so important for lawyers and top management to find and leverage these types of legal documents?

Manufacturing contracts involve the outsourcing of the creation of tangible products by one company to another.  This of course really means that one company is hiring another to manufacture products for it, but my 5th grade English teacher taught me that a definition can’t include the word to be defined, so I had to mix it up a bit.  In any event, the ability to successfully utilize outsourced manufacturing capacity is a critical component of a company’s competitive advantages, and the components of these successful relationships are imbedded in the manufacturing agreement itself.

Key business or term sheet elements of a manufacturing contract include:

1. Pricing terms, including base pricing, volume-based adjustments, forecasting issues, and other pricing factors
2. Volume production / purchase commitments, including whether there are any manufacturing minimums
3. Payment terms
4. The contract length
5. Any intellectual property / technology development issues, such as technology transfer or ownership issues
6. Exclusivity or non-exclusive production, both of which are loaded issues for the parties
7. Quality assurance, including the potential impact of recall issues, which have hit the headlines in the past 12 months, particularly with regard to children’s toys

Once the business terms are established as a baseline for the negotiation and drafting of the manufacturing contract, the lawyers can take over on the legalese.  That being said, it’s always helpful to consult other manufacturing contracts as a reference point, and as I mentioned previously, you can find thousands of manufacturing contracts at RealDealDocs.com.

At our business (Practice Technologies Inc, a technology and content provider for law firms and business professionals), we’ve recently updated our consulting services agreements in conjunction with kicking off two new consulting engagements.  One of the consulting engagements will be with an individual, the other is likely to be a search engine optimization project with a company specializing in those activities.  I thought I’d share some of the key issues in retaining both individuals and companies in consulting agreements and contracts.

In any consulting agreement, basic terms include:

• A description of the services to be provided by the consultant 
• Compensation terms, including timing of payments
• Some type of performance metrics or specific deliverables are very desirable, although I’ve frequently seen them left out of far too many consulting agreements
• The usual representations and warranties of both the company and the consultant
• A clear statement that the engagement is on an independent contractor basis (not as an employer-employee relationship)
• Termination provisions, including a discussion of how disputes are to be resolved
• Liability limitations (usually to the benefit of the consultant)

Depending on the work to be performed, it can be essential that the Company also obtain specific assignments of any intellectual property that is created by the consultant which would otherwise belong to the consultant under intellectual property law.  This can be done either within the body of the Consulting Services Agreement itself, or in a separate Intellectual Property Assignment Agreement.

When working with a company as the service provider, or even with an individual, it is my experience that the consulting agreement should be carefully negotiated to make sure that the termination provisions, particularly the notice period, appropriately reflect how the end game should be played out.  That seems rather self-evident, but I’ve seen that provision overlooked in the drafting phase, usually resulting in the service provider being paid for too long a period following the realization that the engagement is not working out for the client company.

For those of you who follow my blog posts, you’ll note that I’m a big advocate of leveraging the legal drafting work of others, particularly when it comes to drafting legal agreements and contracts.  I’ve provided some links to literally thousands of consulting agreements that have been drafted by large law firms for big and small companies alike.

 We’re in the process of adding another web developer to our talented team, and we thought it made sense to update our employment agreements.  Of course, in doing this we have an advantage since one of our web properties has over twenty thousand employment contracts among the millions of legal agreements and clauses from the top law firms and companies in the world.  The property, RealDealDocs.com, is used by tens of thousands of legal and business professionals to find legal documents to use in their research and drafting.

We’ve previously discussed employment agreements on our legal agreements blog, so let me just briefly review some of the key elements before talking about how we’re looking to tailor our employment contracts.  These key elements of employment agreements include:

1. Term. First, this provision should list the employee’s annual salary. Also, any agreement regarding the option to renew the agreement, either on the executive’s side, the company’s side, or both, should be addressed.
2. Duties of Employee. If the precise services of the employee may be extended or curtailed by mutual agreement, this should be listed as well.
3. Duties of Employer. The employer should promise to pay all compensation, benefits, and allowances as set forth in the agreement.
4. Confidential Information. The employee must promise to keep all secret information confidential.
5. Termination. The relevant termination provisions should be carefully spelled out.  If the employer may only terminate the employee for cause, then cause must be defined.  In at will states, such as for California employment agreements, this should be delineated.

Other elements include appropriate non-competition / non-disclosure agreements, intellectual property transfers, etc.  I’ll review those in a separate post shortly.

We’ve had most of the issues well covered, so the primary employment agreement related issue we’re working on is to better tie performance to compensation.  Additionally, for this hire in particular, we’re looking to defer some portion of the compensation to the end of the year in the form of a retention bonus.  The reason for this is that  we are looking to hire a rather junior level position and we want to make sure we realize our investment in his development.

We were contemplating acquiring a small legal content provider in our space with an unusual set of circumstances surrounding its capital structure.  As we were working through fit and valuation issues, it became apparent that the structure of the deal would be even more important than usual.

There are many ways to structure the acquisition of a corporation, but in any event they can be boiled down to two simple forms:  asset purchase agreements or stock purchase agreements. 

Asset purchase agreements (more links to real transactions from top law firms and public companies provided) are used to acquire the existing assets of a company, rather than the entire ownership interest in the company.  As such, they are generally preferred by the buyer for several reasons:

1. Most importantly, they limit exposure to buyers from any known or unknown liabilities relating to the target company
2. The buyer can choose to acquire only certain assets
3. The buyer can avoid unfavorable obligations such as pension liabilities, collective bargaining agreements, etc.
4. Asset purchase agreements can also result in potentially favorable tax treatment

Of course, from the seller’s perspective, many of these issues are the inverse of what the seller may want, such as the complete sale of the company including any liabilities.  That’s why sellers tend to prefer stock purchase agreements when they enter into a company sale.

In our case, we are in the process of winding down our discussions and it seems unlikely there will be  a deal here.  I’ll update this post if anything changes.

Sorry for being away for the past few weeks – some personal family matters (which worked out great!) and, more importantly as far as you’re concerned, the release of a great new product for litigators, paralegals, and other professionals have kept me tied up.  And sorry about the “press release” you’re about to read, but we’re really excited about the general release of SmartRules.com.

What is SmartRules.com?  Well, it solves the problem of keeping track of how all the different sources of court rules and procedures affect the way litigators need to draft and file litigation documents with courts across the country.  SmartRules does this by providing step-by-step instructions for handling procedures in state and federal courts across the country, including state or federal rules of civil procedure, evidence codes, state-wide court rules, etc. all the way down to local court rules.

Basically, SmartRules.com takes all the hassle out of complying with all of the various rules that apply to drafting and filing legal documents with courts across the country.  It’s been used by 40 of the top 200 law firms in the country for the past 7 years, and now it’s available for online purchase by small firms or individual practitioners, paralegals, and other legal professionals.

Let me give you a quick example:

Figuring out which rules apply to a given scenario such as filing a motion to dismiss often requires consulting multiple sources – civil procedure, rules of evidence, standing orders, local rules, etc. – some of which may conflict with each other or even be out of date.

SmartRules.com eliminates the need to make sense of all these rules sources individually. Instead, just enter your jurisdiction and what you’re working on. SmartRules.com then provides you with a SmartRules Guide—a step-by-step checklist for that particular task, including up-to-date drafting and filing requirements from all applicable rules sources.  Here are a couple of links to popular SmartRules modules for your review (with free previews available):

Ø      Answer in Los Angeles Superior Court

Ø      Motion to Dismiss in the Central District Court of California

Ø      Answer in Cook County Superior Court

Ø      Application for a Temporary Restraining Order in the Eastern District Court of New York

We keep working on killer new applications, and we have another one coming out in after the first of the year.  I’ll keep you posted as I get back into the blogging mode.  Happy Thanksgiving!

Last month the Federal Reserve loaned AIG $85 billion for two years in return for a hefty interest rate and a warrant agreements to purchase 80% of AIG.  The objective was to give AIG enough breathing room to have an orderly disposition of its assets without a fire sale bringing the global financial system to its knees.  Now we know that the fire has spread far beyond AIG, even while it still burns within AIG’s walls.

It turns out that the price tag, for now, isn’t an $85 billion loan for which the federal government (and taxpayers) might stand a chance to at least cover the loan, let alone make a profit.  Tack on another $37.8 billion extended by the Federal Reserve Bank of New York to provide badly needed liquidity.  In exchange, AIG is giving the New York Fed investment-grade, fixed-income securities that it had previously lent out to other institutions for a fee. Those institutions are now returning these securities and want their money back, further accelerating the liquidity crunch at AIG.

AIG has already drawn down some $60+ billion of the credit line in the past two weeks to cover its cash requirements.  Let’s all hope that enough stability returns to the financial markets over the next several months to alllow an orderly disposition of its assets.

Eli Lilly & Co. has agreed to buy ImClone Systems Inc. in an agreement and plan of merger (link is to sample merger agreements, as the Eli Lilly – ImClone merger agreement hasn’t been made public yet) for more than $6 billion.  The merger would broaden Eli Lilly’s pipeline of cancer treatments and represents a blow to Bristol-Myers Squibb, which had marketed ImClone’s cancer drug Erbitux under a Development, Promotion and Marketing Agreement.

The deal prices ImClone at $70 per share in cash, more than 50% higher than its price in July before Bristol-Myers made its first bid.  Both boards have approved and recommended that ImClone stockholders tender their shares.  ImClone’s chairman, Carl Icahn, who owns about 14% of ImClone stock, has agreed to vote in favor of the Lilly deal.  Icahn had taken over the position back in 2006, at which time the stock was trading in the mid-$30/share range.

The agreement and plan of merger has not yet been made publicly available, but if you need to find other merger agreements or marketing agreements drafted by top law firms, you can find them at www.RealDealDocs.com.

There were some major developments over the weekend in the attempted Citigroup acquisition of Wachovia’s banking operations.  Wells Fargo stepped in on Thursday with what many consider to be a superior proposal (search through merger agreements clauses for superior proposals here) for all of Wachovia’s assets, only to have Citigroup claim that it has an exclusivity agreement with Wachovia (see the alleged citigroup-wachovia-exclusivity-agreement here).  This copy of the exclusivity agreement was faxed out of the New York office of Davis Polk according to the fax number at the top of the document – I’ll leave that for someone else to chase down.

Citigroup was able to obtain a preliminary injunction halting the Wells Fargo acquistion from a New York state court judge late Saturday night, although this ruling was temporarily blocked by a federal district court on Sunday, with a hearing scheduled for Tuesday.

Exclusivity agreements (also known as no shop agreements) are commonly entered into in conjunction with merger agreements, and as the name suggests they are generally used to provide a buyer with protections that the potential seller won’t be able to continue to shop around for a better deal.  The strength of the protections is a matter for negotiation, but it’s generally agreed that there are certain “fiduciary outs” for the seller in the event that the company to be acquired receives a superior proposal. 

The Citigroup-Wachovia exclusivity agreement, assuming it is valid, bars Wachovia from seeking out another buyer, providing information to another buyer, or entering into talks that might enable another buyer to make a bid.  Wells Fargo has claimed that it did not receive any new information from Wachovia and that it had simply continued its analysis from previously received information, so there was no violation by Wachovia of the exclusivity agreement.  Wells Fargo had reportedly passed on the Wachovia deal in late September based on concerns about Wachovia’s troubled loan portfolio.

A potentially major reason for Wells Fargo’s change of heart – the IRS changed a regulation which may make it increasingly likely that stronger banks will continue to snap up troubled smaller institutions.  Under the change, banks may take tax deductions on loan losses recorded as a result of a takeover.  Assuming this applies to the estimated $74 billion in loan costs that Wells anticipates, this could have a favorable tax impact running into the tens of billions of dollars for Well.s

I had to re-read this alert twice, it was so surprising. 

Citigroup is pushing hard, with the support of regulators, to finalize its $2.2 billion asset purchase agreement (samples linked, actual agreement not available yet) for the banking operations of Wachovia, but it seems that Wachovia’s board has now thrown its support to what it considers a superior proposal from Wells Fargo.

Under the new deal, Wells Fargo would acquire all of Wachovia’s assets including its vast deposit network, its huge brokerage business and its investment management division for a reported $15 billion.  Wells Fargo had walked from the discussions late Sunday night after it uncovered issues around part of Wachovia’s loan portfolio, but it is back with the support of Wachovia’s board.

Citigroup is working to enforce what it claims is are exclusivity or no shop agreements with Wachovia (also links to samples), while Wachovia is publicly embracing the Wells deal.  The Fed, meanwhile, is in a tough position, as it continues to back the Citigroup deal, in spite of the fact that the Citigroup requires loan guaranties from the Fed, while the Wells Fargo deal does not.  In any event, both Citigroup and Wells Fargo are raising capital to cover their own portfolio losses while fighting over the Wachovia assets.

A Wells Fargo – Wachovia combination would once again dramatically alter the landscape, returning Citigroup to a second tier retail banking player and giving Wells Fargo enormous access to retail and brokerage branches on the East coast in particular.  Interestingly, Wells Fargo had indicated as late as early September that it preferred to do a small deal, if any, but the buying opportunities have simply been too good.  I recall that Wells Fargo’s Chairman and former CEO Dick Kovacevich said he felt “like a kid in a candy store” 2 weeks ago.  More undoubtedly to come.

In the wake of Hurricanes Gustav and Ike, gasoline supplies have been incredibly tight in the American Southeast because refineries throughout the Gulf region were shut down due to a combination of evacuations and damage.  Even as prices eased nationally alongside the general decline in oil prices, gas stations in the Southeast regularly report shortages and even the complete lack of gasoline.

According to a number of published reports, gasoline shortages will be eliminated in the next 10 days as the refineries have come back on line and gasoline shipments resume up the main pipelines, and (hopefully) drivers ease off of the natural tendency to hoard, which throws everything askew. 

For those of you in the gasoline, oil, or fuel supply business, I thought it would be helpful to link to a number of different types of sample agreements and contracts from top law firms, including:

• general supply agreements – a listing of thousands of supply agreements of all types from top law firms
• oil and gas supply agreements - links to specific agreements dealing with oil and gas suppliers
• fuel supply agreement - a sample fuel supply agreement

If you’re looking for other types of legal agreements or contracts, or the ability to find specific deal clauses or provisions by type of agreement, go to www.RealDealDocs.com – it’s the best source for documents for legal and business professionals I’ve seen.