One of the trickier agreements that companies must deal with is the non-compete agreement, simply because the document needs to strike the right balance between protection and freedom. The non-compete agreement is a written understanding in which one party, usually a departing employee or partner, agrees not to compete in the same field or profession as the second party, usually a company or partnership, for a specified length of time and within a certain geographic area. Typically, a company will conclude a non-compete agreement between itself and one of its employees. This may occur upon hiring the employee (and the “agreement” may in fact be a clause in the employment contract); or it may occur at the employee’s termination with the company, either in a formal agreement or, again, as a clause in a separation contract.

Consideration plays an important but overlooked role in non-compete agreements. The employee, it must be remembered, is agreeing not to compete with his former employer in the field in which he ostensibly has certain valuable knowledge. For the employee to give up this right, even briefly, the company must offer something of worth in exchange. The promise of a job may suffice (for the new hire), as may continued employment or the prospect of a raise (for the existing employee).

Meanwhile, the company must also be protected. The point of the non-compete agreement is to safeguard a company’s sensitive business information or trade secrets. Courts have determined that a certain level of protection, albeit at the expense of terminated employees, is merited. The key is reasonableness. Companies may protect their legitimate business interests. Thus, a non-compete that is overbroad-denying the employee the right to work anywhere in the state or the country, or for a period of time going into the years-likely will be struck down. At the same time, it should not be forgotten that some companies have secrets that warrant very broad non-compete agreements.

Many states courts-and the law differs in this area of the law from state to state-will strike down overbroad non-compete agreements in their entirety. Others will “blue line” them-eliminating only the invalid parts. California leads the way in banning non-compete agreements altogether, except in the case of the sale of a business. In this instance, the new business owner should not be denied the company’s existing goodwill.

Another aspect to consider is how the employee left the company. If he was let go through no fault or design of his own, then a court may be less likely to enforce a non-compete agreement, especially a highly restrictive one. Conversely, if he quit or was terminated for cause, then the balance tips in favor of the company.

Sometimes, companies understand that the agreement they place before one of its employees is not likely to be enforced. For these organizations, it is enough to have the employee intimidated and wary about ever crossing the company.

All in all, the non-compete agreement is a valuable tool for companies. But for it to be most useful, its drafters must find that proper equilibrium between the company’s legitimate interests and the employee’s right to work.

Popularity: 8% [?]

An Assignment and Assumption Agreement is a relatively compact legal document, generally, whereby two parties agree that one party, the assignor, will assign another party, the assignee, all of its rights, obligations, interests, and responsibilities existing pursuant to another Agreement. By virtue of the Assignment and Assumption Agreement, the Assignee takes the place of the assignor and assumes all of its interests in the contract.

It is crucial for the agreement to state, at the outset in the recitals section, the underlying agreement. This underlying agreement is the Agreement under which the Assignor is assigning its rights, interests, and obligations to the Assignee. The recitals sections should also list the names of the companies involved. Following the recitals section, the key provisions of an Assignment and Assumption Agreement are as follows:

1. Assignment and Assumption. This provision lays out the basic assignment concepts described above. The agreement should read that as of the effective date, the Assignor assigns to assignee all of assignor’s rights, title, and interests under the agreement, and assignee assumes and agrees to perform all of the obligations and covenants in the Agreement. This provision may also include conditions that the assignor places on the assignment. Sometimes such conditions include a reservation of the right to approve certain transactions.

2. Indemnification. An indemnification provision is especially important in an Assignment Agreement. The Assignor will always want the assignee to agree to indemnify and hold assignor harmless from and against all liabilities, claims, damages, losses, (including attorney’s fees), and court costs, arising out of the obligation under the Agreement.

3. Termination. This provision may be included to read that this Assignment Agreement will automatically terminate when the underlying agreement ends or is terminated, and that all rights will transfer back to the assignor.

4. Successors. It is important to include a successors provision in the agreement, stating that the Assignment will be binding on and inure to the benefit of both parties and their respective successors and assigns.

5. Governing Law. The contract should include a provision laying out which state’

These are the most important provisions of an Assignment and Assumption Agreement. As you can see, it can be a very short document, but must be drafted clearly in order to avoid confusion and bind both parties.

Popularity: 10% [?]

An Indenture Agreement, also known simply as an Indenture, is a formal contract between a bond issuer and a bondholder that describes and defines in detail the bond and amount at issue and the legal obligations of the bond issuer and the rights of the bondholder, such as the time period before repayment, amount of interest paid, if the bond is convertible (and if so, at what price or what ratio), if the bond is callable, and the amount of money that is to be repaid. A typical indenture agreement should be structured to into articles, and each article should be broken into paragraphs addressing specific issues within the broader article.

For instance, the agreement should describe in detail the rules governing the issuance of the bond notes. What bond notes are at issue? Other sections should discuss Redemption and Offers to Purchase Notes, Covenants, Defaults and Remedies, and the Trustee. Note that an indenture is usually a long, complex agreement laying out in great detail the rights and duties of bond issuers and bond holders, and must always be drafted by an experiences securities attorney.

Popularity: 7% [?]

A waiver, also known as a liability waiver, release, or release and indemnity agreement is a signed agreement whereby a “releasor”, the undersigned, agrees to waive his or her right to sue or otherwise hold accountable another person or persons. There are innumerable situations where waivers are used, but we’re going to examine a typical waiver in the popular context of an inherently dangerous sporting event, where the promoters, lessees, and others involved with the event (hereinafter referred to as “releasees”) wish to secure a valid and enforceable waiver from ticket holders or other participants (”releasors”) in order to minimize, if not eliminate, their liability.First and foremost, the waiver agreement must include a clause alerting the releasors of the inherent danger in the activity. For instance, the paragraph could read something like: “Ticketholder acknowledges that the activities of the event(s) are dangerous and involve the risk of serious injury and/or death and/or property damage.” In addition, although its unlikely to occur, this clause should nevertheless also instruct the ticket holder to inspect all dangerous areas and alert officials of unsafe conditions on the premises.

Next, the agreement should address the specific release required of the ticket holder. This paragraph may read something like: “Releasors release from all liability for any and all loss or damage, and claim or demands therefore on account of injury to the person or property or resulting in death of the undersigned arising out of or related to the event whether caused by the negligence of the releasees or otherwise.” Notice that the releasees will also want to include a waiver that includes waiving the right to sue for negligent actions of promoters and third parties.

There must also be an Indemnity / Hold Harmless provision in the agreement. Indemnification means that one party agrees to cover the costs of another party if the other party is sued. Here the paragraph could read: “The undersigned agrees to indemnify and save and hold harmless the releasees and each of them from any loss, liability, damage or cost they may incur arising out of or related to the event(s), whether caused by the negligence of the releasees or otherwise.”

The drafter of the agreement should also address the issue of “Assuming Responsibility”. The key aspect to a waiver is that the participant is voluntarily accepting the specific risk involved in the activity. This paragraph could say: “Ticket holder assumes full responsibility for any risk of bodily injury, death or property damage arising out of or related to the event(s) whether caused by the negligence of releasees or otherwise.”

The agreement should also address rescue operations. The law of negligence is quirky in respect to rescue operations. As any good lawyer remembers from law school, once a person undertakes a rescue mission, he or she is required to act as a reasonably prudent rescuer would act. That means that even if a person has no legal obligation to begin a rescue, once he or she does, a legal obligation to act responsibly attaches. Thus, the drafter of a waiver agreement may want to require the event participants to extend the waiver to “all acts of negligence by the releasees, including negligent rescue operations and is intended to be as broad and inclusive as is permitted by the laws of the province or state in which the event(s) are conducted.” As this last part indicates, a drafter must research the law in the governing jurisdiction to determine if he or she is permitted to ask for a waiver of this sort.

Lastly, the agreement should include a severability provision, which means that if one clause or portion of the agreement is held to be invalid by a Court, the rest of the valid provisions will still apply. In other words, there will be no “throwing out the baby with the bath water.” This is important since it is very possible that some provisions of a waiver may extend beyond the scope permissible by the law of the jurisdiction. This provision could read: “If any portion of the waiver is held invalid, it is agreed that the balance shall, notwithstanding, continue in full legal force and effect.”

Overall, a drafter of a waiver agreement must do substantial research before commencing his or her work. Once the research is done, the rest falls into place, and the drafter will want to ask for a waiver of liability to the greatest and broadest extent possible under the law of the governing jurisdiction.

¼/p>

Popularity: 6% [?]

A franchise agreement memorializes the contractual relationship between a franchisee and a franchisor. It is a document laying out the rights and obligations of both parties, and if properly executed, is legally binding on both parties. A typical franchise agreement will at a bare minimum contain the following provisions:

(1) Obligations/Rights: The agreement must explicitly lay out the rights and obligations of the franchisee and franchiser regarding the operation of the business. The main reason an individual or business will want to become a franchise is to utilize and benefit from the expertise, business processes, experience, and goodwill of the existing franchise. Thus, a franchisee must make sure they are entitled to use said trademarks, expertise, goodwill, and experience to his or their advantage.

(2) Support: Accordingly, the agreement should explicitly state the support the franchiser will provide. Usually, a franchisor will provide formal training to a new franchisee. This is for the benefit of both parties, and the franchisee will want to make sure they are doing things correctly, which in turn will reflect positively on the franchisor, as well.

(3) Geographical Scope: The agreement must address the geographical scope (i.e. territory) that the franchise license will cover and any exclusivity involved. Often, a franchisee will want the exclusive license to run their particular franchise in a particular territory. For valuable consideration, the franchisor may be inclined to grant such exclusivity, especially if he or she thinks the particular franchisee will operate effectively. Territory may be described as a particular county, neighborhood, state, or any other geographically definable area.

(4) Duration/Renewal Rights: The agreement must state the duration of the franchise and address the franchisee’s right to renew. Every franchise agreement will have a duration that the agreement is in effect, for instance, one year, three years, or five years. It is also typical to address both parties’ respective right to renew the agreement. Quite often this will be a mutual right, meaning both parties must agree to renew, and either party will have the option to terminate the franchise relationship once the original duration of the agreement has come to pass. However, it is possible to draft an agreement to state that the franchisor can only refuse to renew a franchisee’s license under certain conditions, such as poor performance or for violating the agreement.

(5) Capital Invesment: The agreement should state the amount of the franchisee’s initial investment. Generally, a franchisor will require an initial investment from a potential franchisee. This investment is in consideration for the expertise, trademarks, exclusive license, training and support previously discussed. Any well-drafted franchise agreement should address this issue early on.

(6) Intellectual Property: The agreement must address issues involving the license and/or transfer of intellectual property rights. The franchisor will want to make it known that they are granting the franchisee a license to use the franchise’s copyrights, trademarks, and/or patented processes for a specified amount of time. This does not constitute an outright transfer, and the agreement should clearly explain that.

(7) Royalties: The agreement must describe in detail any applicable royalties and service fees. If royalties and/or service fees are part of the arrangement between the franchisee and franchisor, the agreement must address this issue in an explicit way. Royalties especially are common in franchise arrangements. For instance, the owner of a subway restaurant will be obligated to pay a certain percentage of income, as defined in the agreement, to Subway, Inc. Often these royalty structures can be quite complex, making it even more important to carefully draft this provision.

(8) Tax issues: Who is responsible for paying the franchisee’s taxes should be addressed, and varies depending on the circumstances of the business.

(9) Assignment: Issues relating to the transfer or assignment of the franchise must be addressed in the agreement. A transfer is when a party to an agreement transfers, or assigns, all of his or her rights in a contract to a third party. The franchisor may want to make it clear that the agreement is non-transferable and non-assignable, or subject to their permission. In the alternative, the franchisor may want to make it clear that if the franchise is transferred to a third-party franchisee, the original franchisee remains liable for upholding their end of the agreement

Popularity: 8% [?]

A severance agreement is a formal written agreement between a company and one of its executives to compensate the executive for relinquishing certain of his rights in the event that his employment is terminated by the company.

Two common scenarios in which the severance agreement is present are 1) when a company lays off a number of employees, including the executive, and 2) when a company desires to let go of a liability in the person of a specific executive. In these cases, the company will entice the executive, prior to his termination, to sign a severance agreement in exchange for giving up certain of his rights. Primarily, these rights are claims that the executive might bring against the company for disputed wages, discrimination, or wrongful termination.

Severance agreements are not compulsory. But they are a form of goodwill, for the terminated executive can be mollified and the remaining executives can be comforted through their use. No law obligates a company to provide severance agreements. However, if a company uses them, the company and the agreement must conform to certain legal strictures. For one, the agreement must be in writing. For another, the company must allow the executive a reasonable period of time to consider the agreement and to consult a lawyer. Additionally, the executive is afforded a statutory period of time in which he may revoke his acceptance of the agreement.

Importantly, despite the fact that the severance agreement has been labeled a legal bribe, the existence of severance agreements does not give companies carte blanche to intimidate their executives. That is, a severance agreement must offer the executive an additional incentive to what he is already due. The company may neither offer to pay the executive what he has already earned (salary, bonuses, benefits), nor threaten to withhold the same. The severance agreement is meant to be an additional carrot.

It may happen that a company will have a de facto severance agreement, whereby executives are compensated in the event of termination, but no written company guidelines exist to govern the process. This can be tricky for both sides, but if the executive can establish company patterns that support a de facto severance system then he will likely prevail.

An executive may reject the agreement and perhaps should if he believes he has a legitimate grievance against the company that may entitle him to greater compensation than what the severance agreement offers. Alternatively, he may also counter the company’s offer with a more favorable one. There is, however, a caveat. The executive’s counteroffer is effectively a rejection of the company’s offer, and the company is not obliged to maintain its offer after the executive has put forward a counteroffer. That most companies do just this in the normal course of business should not overshadow the fact that a counteroffer could theoretically leave the executive empty handed after his termination.

Severance agreements consist of compensation elements (base pay for a year or several; bonuses; stock options; health benefits perhaps); restrictive covenants (declarations not to bring claims against the company; turning over of proprietary company material); and other agreements (the company’s agreement to provide letters of recommendation or to help finding the executive another job). Many agreements also contain confidentiality and non-compete clauses that limit the executive’s ability to hurt the company after his termination. These clauses must protect the company’s legitimate business interests without impinging on the executive’s ability to work. It happens, of course, that companies overzealously protect themselves and try to hold their executives to unreasonable confidentiality and non-compete clauses.

Popularity: 5% [?]

This document is something that not many companies will ever need to draft themselves, as it is a pretty unique circumstance. But nevertheless it’s an interesting thing to see. The bulk of the document can be found here. Most SEC documents are very technical this one included, and rarely include any sense of emotion, but this document demonstrates Halliburton’s urgency to separate as evidenced by this quote:

“We intend to completely separate KBR, Inc. from Halliburton as expeditiously as possible through a tax-free dividend distribution of KBR, Inc. stock to Halliburton stockholders…. We do not intend to delay the complete separation of KBR to wait on favorable conditions for an IPO of KBR, Inc.”

This separation came after a period where KBR appeared as a drain on Halliburton, and both companies realized they could benefit by being lighter and more specialized.

Popularity: 1% [?]