Finding clauses in agreements and contracts

There are a few thousand people, consisting primarily of attorneys but also some deal professionals, who know about a truly remarkable search feature.  This is the ability to search agreement clauses for deal provisions within specific types of agreements and contracts.  The provider of this clause search service is www.RealDealDocs.com, which also provides searchable access to millions of legal agreements and documents.  Even better, the clause search service is absolutely free.

To illustrate the value of clause search, which lets you search for deal clauses for specific types of agreements, let’s review a couple different types of termination provisions – one for executive employment agreements in which IRS Section 409a is discussed and accounted for, and the other is for termination provisions in merger agreements in which a superior proposal is received by the company to be acquired. 

Under the few search tools available, a lawyer or deal professional would need to construct a full text search which not only finds the type of agreement or contract needed, but that also drills into the termination clauses within the agreement to help you find exactly what you need.  Those tools simply don’t exist, except for www.RealDealDocs.com, so what happens is that you spend hours looking for a couple of agreement clauses, rather than finding hundreds of contract provisions in seconds and then picking the right one.  

Here are the links to the two examples mentioned above (from the Clause Search tool at www.RealDealDocs.com):

1)  To find termination provisions dealing with IRS Section 409a in employment agreements, click here, then:

a)  Select “Agreements” from the Deal/Documents pull down menu

b)  Select “Employment Agreements” from the Specific Document type pull down menu

c)  Enter “termination” (without the quotes) in the “Clause Heading” search box, and

d)  Enter “409a” (with or without the quotes) in the “Clause Text” search box, and then hit Search

2)  To find termination provisions dealing with superior proposals in merger agreements, click here, then:

a)  Select “Mergers and Acquisitions” from the Deal/Documents pull down menu

b)  Select “Agreement and Plan of Merger” from the Specific Document type pull down menu

c)  Enter “termination” (without the quotes) in the “Clause Heading” search box, and

d)  Enter “superior proposal” (with or without the quotes) in the “Clause Text” search box, and then hit Search

You’ll find hundreds of very specific agreement clauses and provisions in both cases, and these are just two of the thousands of search opportunities across the ten million+ clauses that www.RealDealDocs.com has already pulled and profiled from millions of top law firm agreements.

Bank of America and Merrill Lynch to merge?

What a dramatic day for the Fed and the investment banking community.  Now that both Bank of America and Barclays have bowed out of the running to serve as white knight for Lehman Brothers, which is announcing plans for a Chapter 11, it appears that Bank of America, which recently swallowed Countrywide, is finalizing talks around a potential merger agreement with Merrill Lynch. 

It’s hard to believe that the credit and real estate bubble from 2002-2006 could take down this many old line Wall Street firms (thank you Mr. Greenspan, along with your Greenspan put), but it appears that it’s finally time for the chickens to come home to roost.  For decades, the Fed and the US government have subsidized the risk for countless investors and corporate managers, going back to the S&L crisis and 1987 stock market crash, all the way through the bailout of Fannie Mae and Freddie Mac just last week.  As tough as it is, perhaps we can start encouraging personal and corporate fiscal responsiblity and end the cycle of passing along the costs of poor decision making to someone else, namely taxpayers who are in a position to help out by virtue of their own solvency.

Wow! Lehman Brothers to declare Chapter 11 bankruptcy

I just finished up a post on the UAL false bankruptcy news from last week, and here comes word from CNN that Lehman Brothers (see Lehman Brothers agreements) is going to file for Chapter 11 bankruptcy protection.  This is a very interesting development following weeks of speculation about a potential distressed sale of Lehman, including news today that Bank of America (see thousand of Bank of America agreements here) had the inside track in an acquisition agreement for Lehman Brothers shares.

Reuters is reporting speculation on what Lehman’s debt might go for in a Chapter 11 reorganization.  Here’s hoping that the potential fall of a financial player this big doesn’t have as severe an impact as their shareholders, all of which are hoping for yet another Fed bailout, have warned about.

What happened with my UAL shares last week and who can I sue?

Call me an optimist, but I recently purchased some shares in the major airlines (including American (see their parent company AMR legal agreements here), Southwest, and, of course, United Airlines and their agreementshere) as I saw oil prices falling in the past couple of months, figuring that their nickel and diming, combined with the drop in oil prices, would outweigh the impact of the sagging economy on their share prices.

Needless to say, I was stunned on Monday when I watched UAL share drop 75% only to recover to a paltry $9 share, down from the $12 opening price.  Of course, I was somewhat mollified that the shares largely recovered by the end of the week, but I couldn’t help wonder what might happen to all those who sold on the way down, only to discover it was all a mistake.

For those who aren’t familiar with the background, it appears that the South Florida Sun-Sentinel newspaper posted a story from 2002 on the UAL bankruptcy from 6 years ago on their website as if it had just happened, and then promoted it to their most actively viewed portion of its website.  Google News’ spiders picked it up (see Google legal agreements, followed by a Bloomberg analyst.  From there, the news was broke and chaos followed, and it was probably compounded by all those handy tools like “stop loss” orders which work well in orderly market environments but can horribly accelerate fast moving negative trends.

Karim Bardeesy had a nice discussionabout the potential legal liability for the various parties, including NASDAQ, which refused to reverse trades from that difficult morning.  The author’s conclusion – fat chance.  For me, I was a bit late picking up on the news, but I had faith that the market had fairly priced in UAL’s chances, so that once the news shook out, the UAL price would/should return to the prior levels, absent any other changes.  I think the events of the week largely bore that out.

Earn out provisions in merger agreements

I met with a corporate partner from an AmLaw 200 law firm a couple of days ago to discuss the firm adopting our www.RealDealDocs.com product across the firm’s entire transactional practice as a resource for the attorneys to find and leverage legal agreements in their research and drafting.  I mentioned that, in addition to providing access to millions of profiled legal documents, they could also find specific deal clauses and provisions within specific types of agreements, and he nearly came out of his chair (in a good way).

It turns out that his team had spent several hours looking for earn out provisions in a merger agreement to help them draft a term for a deal they were working on.  Eventually they found a couple of examples, but it took an entire afternoon to do so.  We spent 30 seconds searching for those types of clauses and found about 200.  The point was taken – he wanted to spend his time finding the best terms, not just digging around to find a couple of terms.

Here’s a link and how to find those merger agreement earn-out provisions, which you can review for free (it’s easier than it seems – I have to walk you through to find the page, but you can click on the link in Step 3 to get to the clause search page):

1)  Go to www.RealDealDocs.com

2)  Click on the Search Now tab

3)  Click on the “Search for Clauses” tab

4)  Select “Mergers and Acquisitions” from the Deal/Documents pull down menu

5)  Select “Agreement and Plan of Merger” from the Specific Document type pull down menu

6)  Enter “earn out” (without the quotes) in the “Clause Heading” search box, and then Search

Again, you can view all these provisions, and over 10 million other clauses, for free.  To view the entire agreement the clause came from, you need to be a member, but there are a range of very affordable membership options which pay for themselves in time saved and value added the first time you use it.

He (and his firm) are already busy using RealDealDocs.com to leverage the work of hundreds of thousands of leading corporate practitioners.  Are you?

More on the lowly Registration Rights Agreement

So I received a call from our corporate attorney yesterday about my post on the overblown status of registration rights agreements.  I don’t think he was defensive (we’ve drafted 3 with them in conjunction with our various fundraising rounds), but we laughed about how rarely these are actually invoked relative to the amount of time spent negotiating and drafting them.  He’s a great guy and passed along a couple of war stories that were fun to listen to but probably boring as heck to read, so I’ll save you the time.

Fortunately, we have partnered with institutional investors who understand how registration rights agreements fit into the overall scheme so we didn’t burn a lot of cycles on this.  However, for those of you looking to shortcut the process or see how they are used by top law firms and companies, I suggest you pop over to this agreements preview site, where you can search and preview thousands of these and other types of legal documents for free.

Drafting Stock Purchase Agreements

A Stock Purchase Agreement is a legal contract in which a seller transfers ownership of stock in a corporation to the purchaser.  Stock purchase agreements are used in a variety of situations, but they are most commonly drafted in conjunction with the sale of stock by a Company to an investor as part of a financing event as opposed to the sale of stock between two investors. 

 

The stock purchase agreement (also know as a share purchase agreement) sets forth the terms of the purchase and sale of the stock to the investors, including but not limited to:

Ø      Pricing and the number of shares to be purchased,

Ø      Closing date,

Ø      The Representations of both the Seller (usually the Company) and Buyer,

Ø      Conditions to closing, and

Ø      Other miscellaneous provisions, including the stock purchase agreement governing law clause

 

In cases where the stock purchase agreement is used in a funding event, the agreement will also identify other documents and agreements associated with the financing.  These include:

 

Ø      The Articles or Certificate of Incorporation, which sets forth the characteristics of the stock being sold, along with the other equity of the company,

Ø      Registration Rights Agreements, Rights of First Refusal and Co-Sale, Voting Agreements, and other Investor Rights Agreements, etc. which define the relationship of the parties following the closing of the stock purchase

 

A service provided by www.RealDealDocs.com provides easy access to millions of these types of legal agreements and clauses from top law firms and public companies.  For lawyers and other business professionals who work with and draft these types of agreements, it is extremely useful to be able to quickly find these types of legal documents to gain competitive intelligence while saving time and money in the research and drafting process.

Convertible promissory notes and the new business venture

When we launched Practice Technologies in 2000, we faced some common challenges for new business ventures.  The most fundamental of these was having a clear vision, and then being able to raise enough funds along the way to realize some progress against that vision.  At the time, the dot-com bubble had burst, but it was not clear whether this was a temporary hiccup or a fundamental re-shaping of the market.

As a result, we adopted a common yet somewhat unconventional fundraising mechanism for a first funding round, which was using a Convertible Promissory Note structure.  We found this much easier to manage with individual investors, rather than negotiating a series of individual stock purchase agreements.  In fact, we closed the first round of convertible note financing on December 31, 2000 into a Series A stock at a set price, and after September 11, 2001 we were able to raise money under a second convertible promissory note instrument, with slightly different terms.  For our investors and for the Company, it was critical that the convertible promissory notes contain the following terms:

1)  Principal amount and interest rate calculations – obvious, but worthy of mention.  The period of time over which the interest is calculated is important, and is generally the date from which the investment was made (not the closing of the round)

2)  A prepayment option – this came into play with a couple of investors that, frankly, we wanted to take out prior to closing a venture capital round

3)  Conversion provisions – almost by definition, this is one of the critical features of the convertible promissory note.  We provided a conversion option for our investors at their choice of a relatively plain-vanilla Preferred Series A instrument, or whatever the price (and terms) of a Series B investment led by two large venture capital firms, which ended up being at a higher price.  This presented our note investors with an interesting choice – take the better pricing (and hence, more shares) or the somewhat more attractive terms and preferences provided to the Series B holders.  For what it’s worth, 85% of our note investors chose the more attractive pricing.

4)  Warrant coverage – we added in

5)  Default provisions were also provided, along with a variety of representations and warranties of both the Company and the investors.  One important consideration is that the investors all qualify as accredited investors, which substantially reduces the Company’s documentation requirements and essentially shifts the burden of due diligence further towards the investor.

6)  Other miscellaneous provisions, including governing law clause – Here’s another helpful link to be able to browse Convertible Promissory Notes by state governing law provisions. 

I’ve linked to a number of pages containing hundreds of samples of convertible promissory notes prepared by top law firms.  If you want to search for these types of documents directly, you can do so for free at www.RealDealDocs.com.

Is the Merger Mania back?

Actually, no.  But we are seing some indications that strategic buyers are at least tip-toeing back into the mergers and acquisitions market.

For several years, the access to cheap credit provided the liquidity and leverage to fuel the largest acquisitions boom in the past 20 years.  Private equity firms were increasingly able to bid up prices using cheap capital and aggressive capital structures, sidelining many strategic acquirers who needed to justify acquisitions using more traditional models.  With the credit markets drying up in the past 18 months, private equity firms have been forced out of the game, and there is little indication that we’ll see any return of the mania until the credit markets at least return to normal.

However, there are some indications that strategic buyers are gradually stepping up efforts to take out rivals and expand market share, even as share prices have fallen in the past eight months.  Foreign companies are taking advantage of the cheap dollar to acquire US-based rivals, most prominently InBev’s acquisition of Anheuser-Busch – see agreements involving Anheuser-Busch here.  And some US-based companies are also making noise:

• Skechers USA bid on Heelys for less than 15% of what it was priced for just 2 years ago (see many Skechers agreements here), and
• CVS Caremark Corp made an unsolicited bid for Longs Drugs for $3+ billion last week as well.

We’ll be posting these merger agreements alongside our library of millions of legal agreements and clauses from top law firms and the largest companies in the world over the coming weeks.  Of course, we’ll be keeping an eye on the overall market trends on not just the mergers and acquisitions space but also across the many other practice areas we cover.

Searching for Legal Agreement Templates?

Need to quickly find sample language for certain types of agreements?  Or do you already have a template or form agreement, and you need to look across millions of legal documents to find specific language to make the form fit the deal you’re working on?

It may be helpful to check out RealDealDocs.com, which recently added another feature to its legal agreements and contracts preview site.  This feature allows you to quickly browse through, by company name, tens of thousands of agreements and contracts that were drafted by top law firms for some of the largest companies in the world.  Being able to browse and Search Company Agreements enables legal and deal professionals to:

• Dramatically cut research and drafting time
• Gain competitive intelligence about the types of agreements leading companies in particular industries have entered into
• See how these deals are negotiated and drafted, usually by top law firms
• Find out which law firms are working with specific companies

The preview site is helpful because it allows you to kick the tires and see at least partial views for specific agreements.  More powerful free search tools, including the ability to find specific provisions from different types of agreements, are available at the main site, www.RealDealDocs.com.  Bottom line – sites like this give you the ability to save time and money while constructing better deals because you can leverage the work from top law firms across the country and around the world.