Week 8: Anatomy of a Transaction &The Discovery Phase: What Is It and What

You Do?

PART I: ANATOMY OF A TRANSACTION Professor Mitch Federer ‘09

PART II: THE DISCOVERY PHASE: WHAT IS IT AND WHAT YOU DO?

Professor Steve Byrne ’77 Professor Don Forgey ‘77 Professor Reagan Boyce ‘06

Anatomy of a Transaction

Mitchell Federer ‘09GRB Entertainment

What kinds of “transactional” tasks will you be asked

to perform?

a. Redline

b. Provide comments

c. Mark-up

What do these mean?

They all mean the same thing:

Read through the agreement and make the changes

you think are necessary to strengthen your position.

How will you know what comments to make?

• Read each line carefully and ask - “How does this affect my position? Does this help or hurt my client?”

• More about this to come…

Two settings in which you will experience “transactional” work:

Litigation & Transactional

• In Litigation, the primary area you will be asked to draft/redline/comment a transactional agreement will occur in the form of a Settlement Agreement.

• In a Transactional practice, every Contract you enter into will be a transaction.

Settlement Agreements

What are the main parts to a Settlement Agreement?

• Recitals – brief recitation of how we got here. Usually not in dispute, but check to make sure they are correct.

What are the main parts to a Settlement Agreement?

• Terms – amount of settlement. By the time the Settlement Agreement is drafted, the settlement amount should not be in dispute. What might be in dispute is the payment structure and payment terms. For example, whether the payment is a lump sum or in installments; the time frame in which payment is to be made.

What are the main parts to a Settlement Agreement?

• Release – in exchange for $, the Plaintiff releases Defendant of the claims.– Sample: In consideration of the waiver of any recoverable costs, PLAINTIFF hereby

completely releases, forever discharges and holds harmless DEFENDANT and its respective insurers, stockholders, agents, principals, owners, directors, officers, managers, partners, employees, attorneys, reinsurers, successors, predecessors, assigns, and all affiliated parent, subsidiary and sister corporations and business entities (hereinafter collectively “RELEASEES”) from or regarding any and all past, present or future claims, demands, obligations, actions, causes of action, rights, liens, damages, costs, losses of profit, expenses and/or compensation of any nature whatsoever, whether known or unknown, fixed or contingent, suspected or unsuspected, equitable or legal, whether based on a contract, negligence or other theory of recovery, which PLAINTIFF, ever had, now has, or hereafter may have against RELEASEES, in relation to the allegations contained in the ACTION, from the beginning of time to the date of the Effective Date of this AGREEMENT.

What are the main parts to a Settlement Agreement?

• Note: When defining the parties being released, be aware if you want the defined terms Plaintiff or Defendant to be defined as broad or narrow as possible: “…its respective insurers, stockholders, agents, principals, owners, directors, officers, managers, partners, employees, attorneys, reinsurers, successors, predecessors, assigns, and all affiliated parent, subsidiary and sister corporations and business entities”

What are the main parts to a Settlement Agreement?

Release: California Civil Code 1542• After explanation of the implications of such a waiver by

their attorney, PLAINTIFF and DEFENDANT hereby knowingly waive and relinquish any and all rights and benefits they may have based upon the provisions of California Civil Code section 1542, which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known to him or her must have materially affected his or her settlement with the debtor.”

What are the main parts to a settlement agreement?

• This language is extremely important and your partner will expect it to be included in every settlement agreement. Cal. Civil Code 1542 basically states that even though you are entering into a Settlement Agreement, the Plaintiff is still not releasing unknown claims which may arise. Your partner will expect a waiver of this provision to be included in every settlement agreement.

Interpretive Law

• This is the choice of law provision. In the event of a dispute or breach of this settlement agreement, which state’s laws will govern?

Transaction Agreements• Business Transactions, Licensing

Agreements, Lease Agreements

What are the main parts to a Transactional Agreement?

Assignment• Original Version: Company A shall have the right to assign

or sublicense this Agreement, in whole or in part, to any party whatsoever including, without limitation, its subsidiaries or affiliates, or to any successor entity or other party acquiring all or substantially all of the business or assets of Company A. In the event of such an assignment, Company A shall remain secondarily liable. Company B shall not assign or sublicense this Agreement, in whole or in part, without Company A’s prior written consent (except that Company B may assign its rights to receive moneys hereunder). Any assignment or delegation (or attempted assignment or delegation) in derogation of the foregoing shall be deemed null and void ab initio.

• Redline Version: Company A shall have the right to assign or sublicense this Agreement, in whole or in part, to any party whatsoever including, without limitation, its subsidiaries or affiliates, or to any successor entity or other party acquiring all or substantially all of the business or assets of Company A. In the event of such an assignment, and only upon written notice of any such assignment, Company A shall remain secondarily liable. Company B shall not assign or sublicense this Agreement, in whole or in part, without Company A’s prior written consent (except that Company B may assign this Agreement to a parent, subsidiary, affiliated entity, any entity in which Company B now has or may hereafter acquire a substantial interest, any entity acquiring all or a substantial portion of Company B’s assets, including key personnel, and/or its rights to receive moneys hereunder, without the prior consent of Company A). In the event of any such assignment, if at all, Company B shall remain secondarily liable. Any assignment or delegation (or attempted assignment or delegation) in derogation of the foregoing shall be deemed null and void ab initio.

Choice of Law• Original Version: This Agreement shall be

construed in accordance with the laws of the State of New York applicable to contracts made and fully performed therein. Any legal action arising out of or in connection with this Agreement shall be brought exclusively in the State or Federal Courts located in the State of New York, County of New York and the parties each hereby consent to the jurisdiction and venue of such Court(s).

• Redline Version 1: This Agreement shall be construed in accordance with the laws of the State of New YorkCalifornia (but not its conflict of law principles) applicable to contracts made and fully performed therein. Any legal action arising out of or in connection with this Agreement shall be brought exclusively in the State or Federal Courts located in the State of New YorkCalifornia, County of New YorkLos Angeles and the parties each hereby consent to the jurisdiction and venue of such Court(s).

• Redline Version 2: Consider if arbitration provision is preferable?

Representations, Warranties & Indemnification• Original Version: Company B warrants and represents that it has the right

and power to enter into and fully perform this Agreement. Company B shall indemnify and hold harmless Company A from and against any claims, damages, liabilities, costs and expenses, including but not limited to any attorneys’ fees and disbursements arising from any breach of any warranty or representation or obligation contained herein or any acts done or words spoken by Company B unless such acts or words have been requested or supplied by Company A. Company B further warrants and represents that it (1) will comply in all respects with applicable federal, state and local laws (including, but not limited to, laws prohibiting discrimination, harassment or retaliation, and/or laws requiring supervisory training and other measures to prevent or remedy harassment); (2) provides a workplace free of discrimination or harassment on any basis prohibited by law; (3) provides avenues for affected or concerned employees (including, as required by law, service providers who are independent contractors, and not employees) to report suspected discrimination or harassment and to remedy same; and (4) takes reasonable steps to prevent discrimination, harassment or retaliation in its workplace.

• Redline Version: Company B warrants and represents that it has the right and power to enter into and fully perform this Agreement. Company B shall indemnify and hold harmless Company A from and against any claims, damages, liabilities, costs and expenses, including but not limited to any reasonable outside attorneys’ fees and disbursements arising from any breach of any warranty or representation or obligation contained herein or any acts done or words spoken by Company B unless such acts or words have been requested or supplied by Company A. Company B further warrants and represents that it (1) will comply in all respects with applicable federal, state and local laws (including, but not limited to, laws prohibiting discrimination, harassment or retaliation, and/or laws requiring supervisory training and other measures to prevent or remedy harassment); (2) provides a workplace free of discrimination or harassment on any basis prohibited by law; (3) provides avenues for affected or concerned employees (including, as required by law, service providers who are independent contractors, and not employees) to report suspected discrimination or harassment and to remedy same; and (4) takes reasonable steps to prevent discrimination, harassment or retaliation in its workplace. Company A shall defend, indemnify and hold harmless Company B from and against any claims, damages, liabilities, costs and expenses, including but not limited to any reasonable outside attorneys’ fees and disbursements arising from any breach of any warranty or representation or obligation contained herein. Company A warrants and represents that it has the capacity, authority, right and power to enter into this Agreement, to grant all rights granted by it herein, and to perform all of its obligations hereunder. Company A shall defend, indemnify and hold harmless Company B from and against any claims, damages, liabilities, costs and expenses, including but not limited to any reasonable outside attorneys’ fees and disbursements arising from (i) any breach of any warranty or representation or obligation contained herein; (ii) any material furnished by Company A; and (iii) any edits or alterations made by Company A or by Company B at the instruction of Company A.

Breach• Original Version: If Company B at any time breaches

any provision of this Agreement or at any time is unable, fails, neglects or refuses to perform fully any one or more of Company B’s obligations hereunder, Company A may, at its sole option, terminate this Agreement at any time during the continuance of such breach, at any time during the continuance of such period or at any time thereafter and reduce Company B’s compensation hereunder on a pro rata basis.

• Redline Version: If Company B at any time materially breaches any provision of this Agreement or at any time is unable, fails, neglects or refuses to perform fully any one or more of Company B’s material obligations hereunder, Company A may, at its sole option, and only upon providing Company B with written notice of such material breach and Company B fails to cure or is incapable of curing such material breach within fifteen (15) business days, terminate this Agreement at any time during the continuance of such uncured material breach or at a reasonable time thereafter, at any time during the continuance of such period or at any time thereafter and reduce Company B’s compensation hereunder on a pro rata basis.

Confidentiality

• Original Version: Company B shall not divulge to any third party any of the terms or conditions of this Agreement without the express written consent of an officer of Company A or the officer’s designee.

• Redline Version: Except as required by applicable law, government order or regulation, or by order or decree of any court of competent jurisdiction or as necessary to perform its obligations hereunder, Company B shall not divulge to any third party (other than its employees, agents, representatives, attorney(s), investors or shareholders on a need-to-know basis) any of the terms or conditions of this Agreement without the express written consent of an officer of Company A or the officer’s designee.

Keep in Mind: • Precedents; when do use them and when to go

outside the lines

• Check any relevant code sections and case law

• Proofread! Double Check and triple check your work, especially when copying and pasting portions from template forms.

a. Make sure defined terms matchb. Make sure numbering is correctc. Make sure tense is consistent

Final Thoughts:• Transactional law is not a substitute for being

an advocate.

• Understand what each line means and don’t be afraid to ask questions if you need an explanation.

• Don’t re-invent the wheel.