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Contract Analysis

Contract Analysis. Codex FutureLaw Stanford Law School. P ile of documents. How are they organized? What clauses do they contain? What is standard and alternate?. DECONSTRUCTION. 1. Decomposition into clauses. Employment Agreement. ORGANIZATION. Opening Text.  1. Definitions.

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Contract Analysis

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  1. Contract Analysis Codex FutureLaw Stanford Law School

  2. Pile of documents How are they organized? What clauses do they contain? What is standard and alternate?

  3. DECONSTRUCTION 1. Decomposition into clauses

  4. Employment Agreement ORGANIZATION Opening Text  1. Definitions  2. Terms of Employment  3. Compensation  3.1. Base Salary  3.2. Overtime Structural classification into a common outline  3.3. Signing Bonus  3.4. Annual Bonus  3.5. Incentive Compensation  3.6. Equity Awards  3.7. Options  3.8. Deferred Compensation  4. Expenses  5. Benefits  6. Representations and Warranties  7. Covenants

  5. Employment Agreement COMPOSITION Opening Text  1. Definitions  2. Terms of Employment Required and Optional Clauses  3. Compensation  3.1. Base Salary  3.2. Overtime 3. Frequency Analysis What clauses are required and what clauses are optional?  3.3. Signing Bonus  3.4. Annual Bonus  3.5. Incentive Compensation  3.6. Equity Awards  3.7. Options Measure: Commonality  3.8. Deferred Compensation  4. Expenses  5. Benefits  6. Representations and Warranties  7. Covenants

  6. Employment Agreement VARIATION 3.Compensation 3.1. Base Salary (a) Amount. The Company agrees to pay to Executive a base salary ("Base Salary") at the [weekly/monthly/annual] rate of $[BASE SALARY]. (b) Payment. Payments of the Base Salary shall be payable in equal installments in accordance with the Company's standard payroll practices. 3.2. Bonus (a) Eligibility. The Executive shall be eligible to receive, but shall not be required to receive, an annual bonus (the "Bonus") based upon extraordinary performance against a plan to be mutually agreed upon by the Executive Committee and the Executive from time to time. (b) Bonus Amount. The Executive Committee, in its discretion, shall determine the eligibility and amount of the Executive's Bonus, if any. (c) Bonus Payment. Each Bonus shall correspond to the calendar year and shall be paid to the Executive in one lump sum, subject to deductions and withholding, during the calendar year immediately following the calendar year to which the Bonus relates. 3.3. Vacation (a) Entitlement. The Executive shall be entitled to [VACATION 4. Consistency Analysis What clauses have standard and what clauses have alternate terms?

  7. Employment Agreement VARIATION 3.Compensation 3.1. Base Salary (a) Amount. The Company agrees to pay to Executive a base salary ("Base Salary") at the [weekly/monthly/annual] rate of $[BASE SALARY]. (b) Payment. Payments of the Base Salary shall be payable in equal installments in accordance with the Company's standard payroll practices. 3.2. Bonus (a) Eligibility. The Executive shall be eligible to receive, but shall not be required to receive, an annual bonus (the "Bonus") based upon 4. Consistency Analysis What clauses have standard and what clauses have alternate terms? Options | All Clauses Source: File 1 4. Base Salary.Executive shall be paid an annualized salary, ("Base Salary") payable in accordance with the regular payroll practices of the Company, of not less than $285,000, subject to review for increase at the discretion of the Compensation Committee (the "Committee") of the Company's Board of Directors (the "Board"). Less Conforming >> << More Divergent

  8. Employment Agreement VARIATION 3.Compensation 3.1. Base Salary (a) Amount. The Company agrees to pay to Executive a base salary ("Base Salary") at the [weekly/monthly/annual] rate of $[BASE SALARY]. (b) Payment. Payments of the Base Salary shall be payable in equal installments in accordance with the Company's standard payroll practices. 3.2. Bonus (a) Eligibility. The Executive shall be eligible to receive, but shall not be required to receive, an annual bonus (the "Bonus") based upon What clauses have standard and what clauses have alternate terms? Language variation Options | All Clauses Source: File 1 (a) During the Employment Period, Executive's base salary shall be not less than $180,000 per year ("Base Salary"), payable in regular installments in accordance with FGI's usual payroll practices and subject to review and increase consistent with practices of FGI in effect from time to time during the Employment Period, but shall not be reduced. Executive's Base Salary shall be reviewed annually by the Chief Executive Officer of FGI with the advice and consent of the compensation committee. Standard and alternative clauses Analysis: Consistency Less Conforming >> << More Divergent

  9. Employment Agreement ANALYSIS Opening Text  1. Definitions  2. Terms of Employment Frequency Common + Divergent = Negotiated Common + Consistent = Standard  3. Compensation  3.1. Base Salary  3.2. Overtime  3.3. Signing Bonus  3.4. Annual Bonus  3.5. Incentive Compensation Conformity  3.6. Equity Awards Uncommon + Divergent = Deal Uncommon + Consistent = Transaction  3.7. Options  3.8. Deferred Compensation  4. Expenses  5. Benefits  6. Representations and Warranties  7. Covenants

  10. Employment Agreement REVERSE ENGINEERINGLEGAL LOGIC Opening Text  1. Definitions  2. Terms of Employment Frequency  3. Compensation  3.1. Base Salary  3.2. Overtime We now know what is required and what is optional. We know what is standard and what is variant. Now, we can induce a term sheet of the configuration questions.  3.3. Signing Bonus  3.4. Annual Bonus  3.5. Incentive Compensation Conformity  3.6. Equity Awards  3.7. Options  3.8. Deferred Compensation  4. Expenses  5. Benefits  6. Representations and Warranties  7. Covenants

  11. Employment Agreement TERM SHEET Employee Name: _____________ Employee Address: ___________ Employer Name: _____________ Employer Address: ___________ Position: ____________________ Starting Salary: _______________ Bonus: ______________________ Term: _______________________ Grounds for Termination: _______ Opening Text  1. Definitions  2. Terms of Employment  3. Compensation  3.1. Base Salary  3.2. Overtime  3.3. Signing Bonus  3.4. Annual Bonus  3.5. Incentive Compensation  3.6. Equity Awards  3.7. Options  3.8. Deferred Compensation  4. Expenses  5. Benefits  6. Representations and Warranties  7. Covenants

  12. NEXT… Merger Agreement ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Section 3.1 Organization. (a) Each of the Company and its Subsidiaries is a corporation, partnership or other entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization and has all requisite corporate or other power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure (i) other than in the case of the Company, to be so organized, existing and in good standing or (ii) to have such power, authority and governmental approvals, has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. (b) The Company and each of its Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Company does not own any equity interests in any corporation or other entity, except for its Subsidiaries. OPTIMIZATION What are the required and optional elements of a clause? What is the “best” way to draft each element?

  13. NEXT… Merger Agreement ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted. The Company is duly qualified and in good standing as a foreign corporation authorized to do business in each of the jurisdictions in which the character of the properties owned or held under lease by it or the nature of the business transacted by it makes such qualification necessary. The Company has made available to Parent true, correct and complete copies of the Certificate of Incorporation and Bylaws (or similar governing documents) as currently in effect for the Company and each of its Subsidiaries. OPTIMIZATION What are the required and optional elements of a clause? What is the “best” way to draft each element?

  14. Employment Agreement DATA EXTRACTION THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of [EFFECTIVE DATE] (the "Effective Date") by and between [EXECUTIVE NAME], with principal place of residence at [EXECUTIVE ADDRESS] ("Executive"), and [COMPANY NAME], with its principal place of business at [COMPANY ADDRESS] ("Employer"), (sometimes collectively referred to as the "Parties"). 1.Terms of Employment. 1.1. Employment. Employer hereby employs the Executive and the Executive accepts such employment with Employer subject to the terms and conditions of this Agreement. 1.2. Duties. During the term of this Agreement, the Executive shall serve as [POSITION OR TITLE] and perform such other duties as the Employer shall from time to time direct. 2.Compensation 2.1. Base Salary (a) Amount. The Company agrees to pay to Executive a base salary ("Base Salary") at the [weekly/monthly/annual] rate of $[BASE SALARY]. (b) Payment. Payments of the Base Salary shall be payable in Does the agreement secure favorable terms?

  15. Employment Agreement COMPLIANCE 11. Non-Competition 11.1. Restrictions. During the term of this Agreement and for a period of [NON COMPETITION PERIOD] immediately following the termination of this Agreement, Executive shall not, directly or indirectly, without the prior written consent Employer, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, or consultant of any Entity engaged in the Restricted Business. 11.2. Exceptions. Executive shall not be deemed to be in contravention of the foregoing if Employee participates as a passive investor holding up to 1% of the equity securities of an Entity engaged in the Restricted Business, which securities are publicly traded. 12. Non-Solicitation During the term of this Agreement and for a period of [NON SOLICITATION PERIOD] immediately following the termination of this Agreement, the Executive shall not, either directly or indirectly, on [EXECUTIVE GENDER] own behalf or in the service or on behalf of others, solicit or recruit (or Does the agreement comply with legal requirements? Alignment with statutory and case law

  16. Employment Agreement VALIDATION THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of [EFFECTIVE DATE] (the "Effective Date") by and between [EXECUTIVE NAME], with principal place of residence at [EXECUTIVE ADDRESS] ("Executive"), and [COMPANY NAME], with its principal place of business at [COMPANY ADDRESS] ("Employer"), (sometimes collectively referred to as the "Parties"). 1.Terms of Employment. 1.1. Employment. Employer hereby employs the Executive and the Executive accepts such employment with Employer subject to the terms and conditions of this Agreement. 1.2. Duties. During the term of this Agreement, the Executive shall serve as [POSITION OR TITLE] and perform such other duties as the Employer shall from time to time direct. 2.Compensation 2.1. Base Salary (a) Amount. The Company agrees to pay to Executive a base salary ("Base Salary") at the [weekly/monthly/annual] rate of $[BASE SALARY]. (b) Payment. Payments of the Base Salary shall be payable in

  17. Employment Agreement VALIDATION THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of [EFFECTIVE DATE] (the "Effective Date") by and between [EXECUTIVE NAME], with principal place of residence at [EXECUTIVE ADDRESS] ("Executive"), and [COMPANY NAME], with its principal place of business at [COMPANY ADDRESS] ("Employer"), (sometimes collectively referred to as the "Parties"). 1.Terms of Employment. 1.1. Employment. Employer hereby employs the Executive and the Executive accepts such employment with Employer subject to the terms and conditions of this Agreement. 1.2. Duties. During the term of this Agreement, the Executive shall serve as [POSITION OR TITLE] and perform such other duties as the Employer shall from time to time direct. 2.Compensation 2.1. Base Salary (a) Amount. The Company agrees to pay to Executive a base salary ("Base Salary") at the [weekly/monthly/annual] rate of $[BASE SALARY]. (b) Payment. Payments of the Base Salary shall be payable in  Agreement complies with legal requirements Agreement secures favorable terms

  18. kingsley.martin@kmstandards.com www.contractstandards.com www.kmstandards.com

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