Writing Delaware employment agreements

I recently wrote about new resources for identifying California Employment Agreements to use in your business, or for drafting documents for your clients.  The rationale is clear – negotiating effective employment agreements that are applicable to your jurisdiction is essential to enforcing your rights appropriately.  Additionally, the ability to leverage legal agreements drafted by top law firms enables business owners and lawyers alike to find new ways of constructing deal terms or simply getting documents turned around more quickly.

This of course applies to many state jurisdictions within the United States, not the least of which is the ability to quickly find and browse across thousands of Delaware employment agreements.  These documents are particularly likely to have been drafted by top law firms, as large corporations tend to be disproportionately organized under Delaware law. 

If you need to find Delaware employment agreements using full text search criteria or other tools, such as limiting searches to particular industries, you can do that as well using these employment agreement search tools.

Yahoo’s severance plan – protecting your business or playing dirty?

On Monday, June 2, a Delaware judge unsealed redacted portions of Yahoo’s Change of Control Employee Severance Plan originally filed with the SEC in February. 

For background, the plan was originally enacted in the midst of the Microsoft efforts to acquire Yahoo, which have recently geared up again.  Release of the confidential items shows that the plan, which would have come into play in the event of a qualifying event such as an acquisition by Microsoft, would have added between $500 million to $2.4 billion in acquisition costs to Microsoft.

In defense of Yahoo executives, they laid out a number of rational objectives for enacting the plan, not the least of which is that it would keep large numbers of employees from bailing out at the first opportunity given all the uncertainty around the company’s future.  Shareholders, many of which wanted to increase shareholder value or find an exit due to Yahoo’s struggles over the past several years, have filed suit, alleging among other things that this was an attempt to thwart the acquisition, rather than just protect the company from losing critical employees. 

In balancing these competing interests, it will ultimately come down to how reasonable the plan is.  An easy way to see this is to compare the plan to other Change of Control Agreements and Employee Severance Plans.  You can find thousands of these at www.RealDealDocs.com.

So what do you think – a righteous and reasonable effort to prevent defections, or a nefarious scheme to deter Microsoft and maintain control of the company?

Finding Legal Documents and Agreements from Top Law Firms

As I’ve written before, when you are negotiating a deal, it can be extremely helpful to find similar legal documents and agreements drafted by top law firms.  This allows you to:

1. Save time drafting the deal language by leveraging someone else’s ideas (estimates range up to 65% of the drafting time)
2. Learn new ways to structure deal terms, such as pricing arrangements, guarantees, termination clauses, etc.
3. Gain competitive intelligence by seeing how other companies in the industry have structured their deals
4. If you’re negotiating against a particular law firm, or you know of a law firm with a very strong practice area that relates to your deal, you can research that law firm’s deals as well.

The first challenge, once you’ve decided to find legal agreements from a specific law firm, is to find a resource that allows you to search for the firm’s documents.  Of course, you can always use Google (and that may be how you found this blog, so I’m not complaining!).  This can be useful if you are just looking for 1 or 2 examples of a firm’s documents, but not if you want to really be able to search across a large number of that firm’s documents – there are just too many search results that are not on point. 

Let’s use a search for “Simpson Thacher legal agreements” (without the quotes) to illustrate this.  Google, in about a billionth of a second, comes back with 348,000 results.  That’s great, but a quick scan of the first several pages reveals that most of these links are not to Simpson Thacher legal agreements, but instead they are point to Simpson that may or may not involve the word agreements.

By contrast, I’ve linked to a resource above, which contains millions of profiled legal agreements and clauses from top law firms.  You can use the advanced legal document search tools to search specifically for Simpson Thacher agreements, search for agreement clauses, or jump straight to browsing hundreds of Simpson Thacher legal agreements and documents.  This allows a deal attorney or other professional to very quickly drill down and find exactly what is needed to better negotiate and draft the deal.

Eight Tips for Negotiating an Office Lease Renewal

So I’m meeting with our landlord tomorrow to discuss a lease extension, and I’m in the process of pulling together my thoughts on the renewal.  Our office building is owned by a small group of investors, so we have a personal relationship with the owners/landlord.  I consulted with several colleagues of mine, and here are our top considerations for effectively negotiating a lease or extension:

1.  Be a good tenant

It’s so basic to sound business practices, but it bears repeating, particularly when you’re dealing with individuals and other small business owners.  Resolve issues along the way as amicably as possible – it all comes back to you in the end.

2.  Start early and understand your options

Particularly in a very tight commercial real estate market, you’ve got to allow at least 9-12 months for the process to play out.  It can take several months to research your alternatives, open up negotiations with prospective landlords (especially concerning tenant improvements), and then come back to your current landlord.  And you’ll want to allow 2-4 months if you have to plan a move (assuming you’re an SMBE like us).

3.  Understand your market, and particularly concessions that new tenants can extract.

 While market rental rates are important to understand, there are a number of other considerations new tenants may enjoy, including tenant improvements, rent holidays, and other benefits.  Understanding these will not only give you a sense for what you might expect if you go elsewhere, but it can also help you negotiate your current renewal.  Why shouldn’t you enjoy at least part of those benefits on the renewal?

4.  Consult with (if not retain) a broker.

I’m a big believer in at least talking to experts in a field, and I generally recommend using them to represent you in a lease negotiation.  Depending on the size of your business, this can represent anywhere from a $350k to a multi-million obligation over a 3-5 year period.  Brokers can give you a sense for the market, current conditions, and offer other valuable input.  Face it – while you may know your business better than anyone, you’re probably not an expert in commercial real estate.  If you are going to use a commercial real estate broker, I suggest using a tenant only representative, as they are less likely to be conflicted than brokers who may represent either side.  That being said, they are a lot like realtors in that they only get paid when a deal gets done.  The good news is they are frequently paid for by the lessor, but that may affect the terms of the deal.

5.  Depending on how much leverage you have, work to “share the savings”.

Just as you may want to avoid the headaches and costs associated with moving, your landlord may have the same interest.  If you’ve been a good tenant and are paying near market rents, the last thing your landlord wants to deal with is several months of vacancy, showing the space, negotiating and paying tenant improvements, and then having to deal with an unknown.  So work to value how much benefit each side is getting out of the renewal and see if you can’t find some common ground.

6.  Think outside the box and understand your landlord’s situation.

Your landlord is interested in three things – the underlying value of the property, current income/cash flow from the property, and avoiding headaches.  Understanding the relative importance of each can be very helpful in your negotiations.  For example, commercial property is essentially valued at a multiple of cash flow (it’s a cap rate if you want to be specific) over a period of time, with an emphasis on future cash flows.  If the landlord is thinking about re-financing or selling the property in 2-3 years, she will want to boost the cash flow in that later period.  This can provide you with a path to reducing your near term rental outlays in return for increasing the rent at a time when it particularly matters to the landlord.

7.  Put together a spreadsheet balancing overall costs for your various rental options

Feel free to let your landlord know you’re doing this, and make sure that you’re  getting all the information you need to make a balanced and informed decision.

8.  Get your hands on a bunch of actual lease agreements and extensions.

This can help give you ideas for different terms that you might want to incorporate into the lease agreement that you may not have thought of.  Of course, if you have representation, you should encourage them to do this – you’d be surprised how often this is overlooked.  There are lots of resources out there for looking at sample and (even more helpful) actual, negotiated lease agreements.