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Interaction Between In House And Outside Counsel Moceyunas Jan 2010


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If you are an attorney working with start-ups or early stage companies, enhance the value of your legal services with these five tips from a lawyer/executive with over 25 years of experience. Includes useful sample forms.

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Interaction Between In House And Outside Counsel Moceyunas Jan 2010

  1. 1. Interaction Between In-house and Outside Counsel: Adding Value to the Attorney-Client Relationship By Ann K. Moceyunas Atlanta, Georgia Presented to ICLE in Georgia Start-ups & Early Stage Companies January 28, 2010
  2. 2. TABLE OF CONTENTS 1.   Introduction................................................................................................................ 1   2.   Define the Role of Outside Counsel.......................................................................... 2   2.1.   Tip – Define the Outside Counsel’s role at the outset and re-examine over time. 3   2.2.   Tip – Define the line of communications. ............................................................ 4   2.3.   Tip – Know Your Limits. ..................................................................................... 5   2.4.   Tip – Be available as the “Temp”......................................................................... 6   3.   Think Like the Client. ............................................................................................... 6   3.1.   Tip – Agree on rules for setting priorities............................................................. 6   3.2.   Tip – Learn the Client’s business. ........................................................................ 7   3.3.   Tip – Align your Services to Business Metrics. ................................................... 7   3.4.   Tip – Respect the Client’s Business Rhythms. ..................................................... 8   3.5.   Tip – Care for invoices as much as your other legal work. .................................. 8   4.   Think Like a Lawyer. ................................................................................................ 9   4.1.   Tip - Ask Questions and Respect Teachable Moments. ....................................... 9   4.2.   Tip – Ask about the other side’s lawyer. .............................................................. 9   4.3.   Tip – Establish your role in negotiations. ........................................................... 10   5.   Provide Process and Structure. .............................................................................. 10   5.1.   Tip – Improve Quality by Establishing Standards.............................................. 11   5.2.   Tip – Improve Delivery of Legal Services by Establishing Process. ................. 12   5.3.   Tip – Incorporate education and training into the Process. ................................ 12   Sample 1 - Contract Standards....................................................................................... 14   Sample 2 - Delegation of Authority................................................................................. 15   Sample 3 - Sales Contract Request.................................................................................. 17   Sample 4 - Contracting SOP............................................................................................ 19   Sample 5 - TopSheet ........................................................................................................ 20   Sample 6 – Training Materials........................................................................................ 23   i
  3. 3. Interaction Between In-house and Outside Counsel for Start-ups: Adding Value to the Attorney-Client Relationship By Ann K. Moceyunas1 1. Introduction I remember the feeling while opening a slim envelope containing one page of heavy paper with engraved letterhead, printed with the simple sentence “For services rendered in March, $210,000.” No backup. No detail. And when I ask, being told “we do not provide detailed billing.” Now it was my problem for having failed to establish at the beginning of the engagement what kind of invoice I would get from this very expensive international “if you have to ask, you can’t afford us” law firm, whom I engaged because my CFO had worked with them in the past. There was no “value-added”. It was more like being put under general anesthesia and being handed the bill upon discharge from the hospital. Since then, I learned to ask for the “value-add” and, now in my private law practice, do not wait to be asked. If you are outside counsel, you can add value to the attorney-client relationship by a) aligning the delivery of legal services to the start-up’s priorities; and b) providing 1 © 2010, Moceyunas, P.C. Ann K. Moceyunas is an attorney in Atlanta, Georgia, with extensive experience in technology law and business. She has been General Counsel for two technology companies, Derivion Corp. and MyBenefitSource, Inc., prior to which time she litigated commercial matters including intellectual property disputes. Ms. Moceyunas is an Assistant Professor for the Siegel Institute of Law, Ethics, and Character at Kennesaw State University. She earned her B.A. with honors from Binghamton University in 1981 and her J.D. from University of Buffalo School of Law in 1984. She serves on the board of Computers for Youth ( a nonprofit helping bring learning to the home by providing computers and training to children and families in lower income communities. Ann can be reached at and 404-252- 0598. 1
  4. 4. structure and process to the delivery of legal services. Outside counsel that is pro-active on these two goals will immediately increase the confidence of the client that the legal services are worth what the client is paying. 2. Define the Role of Outside Counsel. A few years ago, I stumbled through an awkward meeting with outside counsel and the new chief financial officer of a company for which I had just been appointed general counsel. The outside counsel had worked with the CFO in another company and the relationship was good, but the outside counsel asked which of us would be the primary contact for the firm. I was taken off-guard. We worked through it and I, as general counsel, took on the role as the legal manager. The incident highlighted to me that roles should be discussed at the outset and not assumed. For example, in some start- ups, the in-house lawyer is the “general counsel” with responsibility for managing all the legal functions. However, in others, the in-house attorney is not the general counsel, but handles only some legal matters (contracts) while outside counsel handles others (board matters) and the CFO or CEO manages the outside counsel. You can add value to the relationship by understanding those dynamics, over time. The role of outside counsel is defined by the role of the person inside the start-up engaging the outside counsel. If that person is the in-house lawyer, the relationship is usually: a) to provide legal expertise in areas outside that of the in-house lawyer; b) to provide extra hands to handle workload that the in-house lawyer cannot; and c) to provide legal counsel when the in-house lawyer has an actual or potential conflict of interest. If 2
  5. 5. that person is not a lawyer, the relationship may impose a greater duty of legal counsel2 and a different opportunity to add value to legal services. 2.1. Tip – Define the Outside Counsel’s role at the outset and re-examine over time. The engagement for legal services should be in writing and describe the initial scope of services and a process for engagement for new matters as well as pricing and the identification of the lawyers working on the matter.3 You and the start-up client need to have a clear understanding of what you, the lawyer, will and will not do. If your law firm is the “general counsel”, you may be taking on ethical obligations that require you to ask a lot more questions and be pro-active about the start-up’s legal compliance. At least once a year, the lawyer should talk with the start-up client about what expectations the client has for the law firm relationship and whether the relationship moves toward more pro-active attention. Special Note – If your Primary Legal Contact (see below) is not a lawyer, take greater care to recognize the potential for a conflict of interest, particularly where your regular contact is the CEO. For example, when an issue arises with the Board of 2 See, e.g. Barnes v. Turner, 278 Ga. 788, 606 S.E.2d 849 (2004). An attorney’s failure to advise a corporate client about a UCC filing deadline five years after the sale of a business imposed an obligation upon the lawyer to renew the security interest himself. 3 See, e.g., Schluter v. Perrie, Buker, Stagg & Jones, P.C., 230 Ga.App. 776, 498 S.E.2d 543 (1998). The court denied recovery of hourly charges by an associate where the engagement letter, while on firm letterhead, referred in the body of the letter only to one of the partners of the firm. 3
  6. 6. Directors or an investor, the CEO may look to you for advice on issues that affect him or her individually.4 2.2. Tip – Define the line of communications. You have probably been here: as soon as the firm’s engagement letter is signed, you start getting emails from people in different departments of the start-up, each asking for work on a new matter. The start-up’s accounting department is surprised (and not in a good way) by your first invoice. The CFO is upset for a few reasons: (i) he or she did not know what you were working on (even though the work needed to be done); (ii) the work should not have been done (for example, a deal that has no chance of going through, but the sales person needed to show “progress”); or (iii) the work was an unnecessary 4 “In dealing with an organization's directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when it is apparent that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing.” Georgia Rules of Professional Conduct, Rule 1.3 (d). See also, Zielinski v. Clorox Co., 270 Ga. 38, 504 S.E.2d 683, 1998, in which the court held that there was no attorney-client privilege between corporate officer and corporation’s attorney: “[T]he corporate attorney-client privilege belongs to the corporation, not to an officer or employee of the corporation, and an officer or employee therefore has no power to assert the corporation's privilege or to prohibit the corporation from waiving it.” The court adopted the federal courts’ standard: Under the test, corporate employees may assert a personal privilege with respect to conversations with corporate counsel if the employees satisfy the following conditions: First, they must show they approached [counsel] for the purpose of seeking legal advice. Second, they must demonstrate that when they approached [counsel] they made it clear that they were seeking legal advice in their individual rather than in their representative capacities. Third, they must demonstrate that the [counsel] saw fit to communicate with them in their individual capacities, knowing that a possible conflict could arise. Fourth, they must prove that their conversations with [counsel] were confidential. And, fifth, they must show that the substance of their conversations with [counsel] did not concern matters within the company or the general affairs of the company [citation omitted]. Idem at 41. 4
  7. 7. duplicate (for example, they already had a form that would have been perfectly suitable for the deal). The value-add is to help the start-up client manage the legal work. Designate one person in the start-up to be the Primary Legal Contact – that person receives regular updates on the list of matters being handled and status code. Define the scope of matters that individuals in the start-up can send to outside counsel without going through the Primary Legal Contact (for example, NDA’s). Matters outside the pre-approved list must be sent back to the Primary Legal Contact to approve and assign. 2.3. Tip – Know Your Limits. Nobody knows it all, including you.5 Start-ups may need a variety of legal expertise. If you do not have that expertise, you can still add value to your legal services by being the resource for finding the expert. For clients with no in-house lawyer, the outside general counsel can serve the role of administering legal budgets for projects, reviewing invoices against budgets, and reporting. For clients with in-house counsel, you can be the trusted source of referrals. Keep your referral network up-to-date and make the first call to the other counsel to “pre-screen” availability and suitability. 5 “A lawyer shall provide competent representation to a client. Competent representation as used in this Rule means that a lawyer shall not handle a matter which the lawyer knows or should know to be beyond the lawyer's level of competence without associating another lawyer who the original lawyer reasonably believes to be competent to handle the matter in question. Competence requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” Georgia Rules of Professional Conduct, Rule 1.1. 5
  8. 8. 2.4. Tip – Be available as the “Temp”. If a start-up has an in-house lawyer, that person is just counting the days until his or her 12-hour workdays will be relieved for a well-earned vacation. You can provide an important service to the in-house lawyer by knowing enough about the business and processes to fill-in as the “temp”, with some preparation. Have a list of all on-going legal matters, the name of the internal client, status, and how to have access to pertinent documents. And, be especially polite to the admins – they will be your best friends. 3. Think Like the Client. As general counsel, I spent my first few weeks doing more observing than actual legal work. I “y’d in” to customer service calls (the “Y” refers to the shape of the telephone wires when an additional headset is added to the phone line). I learned to use the company’s software application. I even acted as a “secret shopper” (with the knowledge of the President) before I officially started so I could go through the sales experience from the customer’s perspective. Outside counsel can add value to legal services by understanding the client’s business and how legal services support the company’s goals. That understanding should extend to not only the substance of the work (for example, understanding the start-up’s operations and the intellectual property issues inherent in the start-up’s products), but the form of the work (for example, understanding that start-up executives have little patience for more than a one-page summary of issues). 3.1. Tip – Agree on rules for setting priorities. Every start-up cares about saving money. They also care about making money. Their impression is that lawyers do neither. You can coach your start-up client on 6
  9. 9. managing risks and how that relates to saving/making by talking through the five priorities that all start-ups have: 1. Protect life and limb. 2. Stay out of jail. 3. Generate profitable revenue. 4. Enhance the value of assets. 5. Prepare for the exit. Legal expenses, how much, when to take on, can be prioritized based on these five priorities. 3.2. Tip – Learn the Client’s business. Read all the sales and marketing materials; have a sales person give you a full sales presentation; interview the operations team about how the services or products are delivered; sit (or walk) with an operations person through the call-center or the warehouse or wherever the work is done; observe client training; talk with accounting to learn how the billing and collection process works; interview the other departments with whom you will be working to understand their internal processes; get an “org” chart with emails and phone numbers. And get the client’s commitment to “invest” in you by making people available, in exchange for your “investing” in the client by waiving your hourly fee for these activities. 3.3. Tip – Align your Services to Business Metrics. Your in-house legal contact (lawyer or executive) has business objectives that are impacted by your legal services, for example: a) legal fees and expenses; b) number of deals done; c) money saved in dispute resolution; d) enhancing the value of intellectual property assets. One of your most important value-adds is making it easy for your legal contact to appreciate your impact by reporting on metrics that support the business 7
  10. 10. objectives. While you need to discuss with your Primary Legal Contact which metrics are best and cost-effective to produce, there are some fairly standard reports that will help them: (a) set up your billing entries to reflect the way the client manages legal expenses (for example, by project, by department, by budget) and run reports that summarize and compare actual to budget; and (b) track when legal projects come in and how may days/months before they are finished. 3.4. Tip – Respect the Client’s Business Rhythms. Being pro-active about legal services means understanding the client’s cycles within its business. For example, many start-ups pay their commissioned sales representatives on a quarterly basis, making the end of the quarter very busy as deals get pushed to close. You can add value to your legal services by providing reports that support those cycles. For example, your legal project status report may be needed only monthly during month 1 of the quarter, but every week or even daily at the end of the quarter. 3.5. Tip – Care for invoices as much as your other legal work. Law firm invoices can be the bane of the in-house lawyer’s existence, the reason for baldness, migraines, and hives. But they do not have to be that way. I beg, I plead, no I implore you: 1. Send invoices within 10 days of the close of the month; 2. Write meaningful billing descriptions; 3. Track, sort and subtotal by client-meaningful categories (for example, phase, project, deal). 8
  11. 11. 4. Proof for mistakes, especially including another client’s charges on my invoice. 5. Did I mention, send them by the 10th of the month. 4. Think Like a Lawyer. Executives at start-ups have all worked with lawyers, some good and some not so good. If you have not worked with the client before, do not assume they understand your ethical obligations. 4.1. Tip - Ask Questions and Respect Teachable Moments. The client sends you a contract with an email that simply says “for your review”. If this is not a deal with which you are already familiar, your automatic response should typically be, “let’s schedule time to discuss so I can understand what you think the deal is”. You may be surprised to learn that the form the client sent to you has nothing to do with the contract they need. Depending on the client and whether the question is likely to arise in similar deals, explain to the client why you are asking the question. These are “teachable moments” that can empower your client. You might learn something you did not think to ask. 4.2. Tip – Ask about the other side’s lawyer. Clients do not know or forget that you have an ethical obligation to refrain from participating in negotiations or discussions with other parties that are represented by counsel.6 You can avoid wasting a conference call by explaining this to your client and 6 “A lawyer who is representing a client in a matter shall not communicate about the subject of the representation with a person the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the consent of the other lawyer or is 9
  12. 12. telling them that you will have to leave a call or meeting if the other side has counsel who is not present. 4.3. Tip – Establish your role in negotiations. Discuss with your client what role you, the lawyer, will play in contract negotiations. You should suggest ways to make your involvement more efficient. For routine contracts (for example customer contracts), the businessperson is usually the better person to manage the contract negotiations, communications, and drafts. However, the businessperson can appreciate that the lawyer can be the “bad guy”, called in for phone or meeting negotiations only when there is a complete impasse. On the other hand, with significant deals with many documents or third-party approvals (for example acquisition), the lawyer is probably the better person to play an active role in managing the communications, drafts, and negotiations once the main deal points are struck. When that happens, the lawyer moves from “lawyer” to “lawyer and project manager”. You can increase your value-add by using online project management tools (that fit the size of the project). 5. Provide Process and Structure. Let’s go back to the healthcare analogy. I went to an orthopedist a few years ago for diagnosis and treatment of a “frozen shoulder”. Sure the MRI kind of creeped me out, authorized to do so by constitutional law or statute.” Georgia Rules of Professional Conduct, Rule 4.1 (a). “In dealing on behalf of a client with a person who is not represented by counsel, a lawyer shall not: (a) state or imply that the lawyer is disinterested; when the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer's role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding; (b) give advice other than the advice to secure counsel…” Georgia Rules of Professional Conduct, Rule 4.3. 10
  13. 13. but I was happy to learn there was nothing seriously wrong that required surgery. But my frozen shoulder was not helped by the MRI. I started physical therapy and was amazed that 3 months later I had full range of motion in the shoulder, but it resulted from the physical therapist working with me at weekly sessions, training me to use hand weights, and measuring my progress. Outside legal counsel can provide value-added services, particularly in the area of contract management, by not only providing legal expertise (the “diagnosis”), but also demonstrating, teaching, and measuring progress on internal contract processes. Clients respond well to statements such as “I can save you money” by working with you on building and improving contract processes. 5.1. Tip – Improve Quality by Establishing Standards. For many start-ups, getting the “form” customer agreement is a one-time event. And for some businesses, that may be sufficient for a few years. However, most start-ups will have to negotiate their contract forms or forms provided by the other side. You can add value to drafting a form by providing working with the Primary Legal Contact to establish contract parameters, for example: 1. Contract Standards – a matrix of acceptable legal terms with alternatives, annotated, and with a decision-tree for deviations (see, Sample 1, attached). 2. Contract Templates - drafted to be “self-serve” by business people; or drafted to be customized for each deal; may or may not have alternative suggested language, depending on who is authorized to use. 11
  14. 14. 5.2. Tip – Improve Delivery of Legal Services by Establishing Process. Start-ups usually approach legal projects as “one-off’s”: just get it done as quickly as possible for as little as possible. That approach works the first time, but just creates more work and more legal expenses for those projects that are repeated (such as negotiating customer contracts). You can improve the delivery of your legal services by helping the client establish contracting processes early in the start-up life. For example, start-up that will negotiate many contracts (for example, sales, marketing, business development), would benefit from some simple standard operating procedures (“SOP”): 1. Contract SOP – describes types of contracts, who has authority to request legal services, and describes legal services support (with turn-around goals) (see Sample 2). 2. Contract Request Form and SOP - (especially good for sales) checklist of typical business terms; aligns with templates; the process clearly states who can initiate legal work (see, Sample 3). 3. Delegation of Contract Authority – states which positions in the start-up have authority to bind the company, usually stated in dollar limits and types of deals (see, Sample 4). 4. Deal Cover Sheet – used to present a final contract to the signing executive; calls out contract deviations and explains reason for use by person signing or authorizing (“Audit; don’t review”) (see, Sample 5). 5.3. Tip – Incorporate education and training into the Process. Go beyond providing the template. Provide the client with creative educational and training opportunities. For example, draft explanations in laymen’s terms about 12
  15. 15. points of law that a particular department is likely to encounter in every-day tasks in FAQ (“frequently asked questions”) pages for the company’s intranet. Get thirty minutes (better yet, sixty) with the sales team to play “The Contract Challenge” game (see, Sample 7). Hold twenty minute web-facilitated conference calls with presentations (for example, using “WebEx”) on a quarterly basis to go over a new contract term or the preferred legal response to a particularly troublesome customer complaint. The key is to (i) make it focused, (ii) make it short, and (iii) make it engaging (fun helps too). 13
  16. 16. Sample 1 - Contract Standards CONTRACT PROVISION ALTERNATIVE 1 ALTERNATIVE 2 ESCA- LATE TO AMENDMENTS. All amendments None. None. must be in writing and signed by both parties. ARBITRATION. Do not agree to [if required] must have ability None. G.C. language committing to arbitration. to seek injunctive relief outside ADR. ASSIGNMENT BY COMPANY. Permit assignment by None. Permit assignment by Company Company only in the event of without consent of the other party. a merger or similar transaction without the consent of the other party. ASSIGNMENT BY OTHER PARTY. Permit assignment by the Permit assignment by No assignment by other party. other party with Company’s other party only in the prior written consent. event of a merger or similar transaction as long as assignee is not a competitor of Company. CHOICE OF LAW. Georgia Delaware New York G.C. CONFIDENTIAL INFO. The duty to Length of time for protection N/A protect confidential information must of confidential business extend at least 3 years from the information must be termination or expiration date of the reasonably related to the agreement; obligation with respect type of information and its to trade secrets subject to trade value to the disclosing party. secret law (see below); obligation with respect to personally identifiable customer data subject to privacy policy (see below). FAILURE SHALL BE A MATERIAL BREACH. HUMAN RIGHTS. In manufacturing N/A N/A Sr VP Ops contracts ONLY, require foreign seller to provide Company with its program for compliance with human rights standards of best practice in its industry and shall maintain same to Company’s satisfaction. INVOICES. Invoices must be Payable net 30 days. N/A Controller detailed, may require supporting documentation (eg expenses), list taxes as separate line item, in US$, and mailed to specific Company address, payable net 45 days. 14
  17. 17. Sample 2 - Delegation of Authority Accounting Process A-32 Delegation of Authority Last updated: June 9, 2008 (akm) Summary: This Delegation of Authority sets out the different levels of authority that internal COMPANY team members have for purchases and other contracts on behalf of COMPANY and the contract process for approval of contracts. Background: Contracts and purchases of goods or services on behalf of COMPANY can commit COMPANY to many different types of obligations, not just financial obligations. Furthermore, contracts can be made orally as well as by informal writings (such as email). To limit the risk to COMPANY of undertaking unnecessary or overly risky obligations and for certain tax reasons, we need a careful review of all contracts and purchases, according to this policy. Delegation of Authority, Generally: 1. CEO has authority to sign checks for all transactions, approve and sign contracts, initiate credit card charges and payments, and banking for all transactions; and any other actions necessary for operations and compliance. 2. CFO & General Counsel and above have authority to: a. Approve payroll, tax, and related expenses, based on annual budget (including delegating initiation of payment to accounting department staff). b. Sign checks for all transactions, subject to annual budget, client-approved budgets, and CEO direction. c. Approve and sign applications, tax returns, filings, responses, and other necessary documentation related to legal compliance and insurance matters. 3. Senior Vice President & General Manager and above have authority to: a. Approve and sign contracts related to client promotions (after review of written contract terms by either CEO or legal counsel); b. Approve and sign contracts related to day-to-day operations, within annual budget (after review of any written contract terms by either CEO or legal counsel). c. Initiate purchases by credit card, that do not require written contract, for promotional expenses pursuant to a client-approved budget, of no more than $50,000 in a month (must check with Dan as to which credit card to use for purchase over $10,000 or for airfare/hotel purchases). 4. Vice President and above have authority to: a. Approve and sign contracts for Radio Promotion Letters of Agreements based on forms approved by CEO or legal counsel (and with client’s approval of deal with radio station). b. Initiate purchases by credit card, that do not require written contract, for promotional expenses pursuant to a client-approved budget, of no more than $25,000 in a month (must check with CFO as to which credit card to use for purchase over $10,000 or for airfare/hotel purchases). c. Initiate purchases by credit card or otherwise, that do not require written contract, for expenses related to Sales & Marketing, pursuant to a travel-budget approved by CEO. 5. Director and above have authority to: a. Initiate purchases by credit card, that do not require written contract, for promotional expenses pursuant to a client-approved budget, of less than $10,000 per month (must check with CFO as to which credit card to use for airfare/hotel purchases). 15
  18. 18. b. Approve purchases by credit card, that do not require written contract, for day-to-day business expenses, such as office supplies, pursuant to annual budget, of no more than $1,000 per month. 6. Coordinator and above have authority to: a. Initiate purchases by credit card, that do not require written contract, for day-to-day business expenses, such as office supplies, pursuant to the annual budget, of no more than $100 per month; however, you are requested to coordinate office supply purchases with Office Manager. b. Initiate purchases by credit card, that do not require written contract, for day-to-day business expenses, such as office supplies, that have been approved in writing (email ok) by Director or above. c. Initiate purchases by credit card for client project expenses, with a prior email approval by a Director or above. Specific Types of Contracts. There are many types of contracts that arise in the course of our work at COMPANY This list below addresses only some of the types. If you have any question about whether you have authority to make or approve a purchase or whether a particular transaction constitutes a “contract”, you should ask your direct supervisor. 1. Radio Promotions a. Offer Letters and Proposals: Vice President or higher must approve the form of the offer letter and attached Proposal and get approval of the Proposal from the CEO or legal counsel before it is sent out to the potential participating radio stations. The letter itself may bear the signature of the Manager who is coordinating the promotion, so long as the VP (or higher) and CEO or legal counsel have approved. The Proposal is not intended to be a binding contract until BOTH the radio station and COMPANY sign. If the radio station returns the Proposal signed with no changes, then a Director (or higher) may sign to accept the Proposal (after getting client’s verbal or written approval). b. Proposals with Changes made by Radio Station: if the radio station proposes changes only to the business terms in the Proposal that COMPANY sent (for example, number of days of the promotion or spots), then the Director (or higher) can approve and accept/sign the Proposal as changed (after getting client’s verbal or written approval). However, if the “boilerplate” or other terms of the Proposal are changed or the radio station sends its own form, it must be approved by the CEO or legal counsel before the COMPANY Director (or higher) can sign the counter- proposal or new form. 2. Client Engagements. See Contracting Process SOP for special instructions. 3. Client Invoices. CFO must approve all client invoices. 4. Engagement of Persons. a. Independent Contractors – CFO must approve and sign written contract before work can commence. This is important for several reasons, which may include: tax consequences, ownership of intellectual property, and protection of client or COMPANY confidential information. b. Employees – 1. CFO must approve all offer letters. 2. Senior VP & General Manager may sign offer letters for operations positions. 16
  19. 19. Sample 3 - Sales Contract Request How to Use this Form. 1. Client Executive uses this form to request a Client Master Agreement. Fill in the spaces below that are highlighted. Submit your Worksheet to Legal via Email. If you have questions, contact [Name]. 2. Legal will prepare a Master Agreement based on this Worksheet and contact you if there are questions. Legal will forward the draft to Finance for initial review. Plan on this initial turn-around taking 2 business days (we will work faster if we can). 3. All drafts that go to the Client must be reviewed and approved by Finance and Legal before signature by your Executive. 4. Check Back on the Sales Department Wiki for the most current form. Sales Executive requesting this contract: Your Email: Your Phone: Date requested: Your contract can usually be turned around in 2 business days; if the matter is urgent, please indicate reason for urgency and time requested-by: . CLIENT DATA Client Name (full legal name): Client Business Type (check one): Corporation Partnership Sole Proprietorship LLC Other (describe): State of incorporation (or formation): Client Mailing Address (street / city/ state / Addressee and Address for legal notices: zip): Addressee: Street: Street: Suite: Suite: City: City: State and Zip: State and Zip: If notices go to additional addresses, write here: Contract Signer: Name of Person who will be signing contract for Client: Title of Person who will be signing contract for Client: DATES OF CONTRACT Effective Date of Contract : Upon date of last signature (default); or date certain (write): 17
  20. 20. Term of Contract: One Year from Effective Date with automatic renewal (default); or specify (You must get Email Authorization from EVP to change): LICENSED PRODUCTS Module 3rd License Metric Number Party Perpetual Licensed Products Company Software Desks Oracle Standard Edition * Processors Oracle Personal Edition * Named Users Crystal Reports Runtime * Enterprise Crystal Reports Professional * Named Users Third Party Interfaces Kronos Inbound Interface Enterprise Charge Outbound Interface Enterprise Subscription-based Licensed Products Company Interface to Third Party DataBase * Connections FEES AND PAYMENT 1. Software License Fees. (%) Amount Due 50% $ Upon Execution of Agreement 25% $ Within ninety (90) days of Effective Date of Agreement. 25% $ Within one hundred eighty (180) days of Effective Date of Agreement. TOTAL: $ 2. Subscription Terms – (if applicable): Amount Company Interface to Third Party DataBase $ License Fees less than List Price – explain: ________ Payment terms nonstandard – explain: ____________ SPECIAL TERMS – ATTACH EXPLANATION Software Support Commitment – for more than 1 year, if so, how many years: _______ Special Implementation Terms (eg., more than 8 week implementation plan). Special Training Services (in addition to 4 weeks training for 2 people). 18
  21. 21. Sample 4 - Contracting SOP Legal Process L-2 Contracting Process Last updated: June 9, 2008 (akm) Summary: This Contracting Process SOP sets out the contract process for approval of contracts. Background: To limit the risk to COMPANY of undertaking unnecessary or overly risky obligations and for certain tax reasons, we need a careful review of all contracts and purchases, according to this policy. Contracts Generally: 1. Legal Review – all contracts that must be reviewed by legal counsel. Exception – customer orders using the Customer Order Form without any changes to the standard language of the form; contracts approved by CEO. 2. Document in Electronic Format. If you receive a proposed written contract, let the other side know that the contract will need to be reviewed internally at COMPANY before it can be signed and that there may be changes. Please obtain the contract in Microsoft Word format (for example “.doc”); if you cannot, scan it in (but it will take longer to get reviewed/change if we do not have an electronic version). 3. Submit for Review. If you know you want to recommend changes to the contract, forward two versions to the person who needs to approve/review it (see the Delegation of Authority SOP): a. The original version that the other side sent; and b. A version with changes that you are proposing made with the “redlining” feature turned “on” in Word (that makes it easy to track what you have changed). 4. Turn-around. If the contract has to go to legal counsel, please allow 5 business days for turn-around. Be prepared to answer questions from CFO about the details of the transaction; you may also need to help negotiate back-and-forth with the other party on particular terms. If you don’t know what the changes mean that we have proposed, ask. 5. Getting Signature. Submit all contracts to CEO for signature, and include a Top Sheet with required approvals. 6. Signed Contracts. All signed contracts have to be forwarded to CFO for the legal and accounting files (as well as to comply with certain insurance requirements). Client Contracts: 1. Master Services Agreements. CEO must approve and sign contracts with clients that describe terms and conditions for on-going projects or single projects. 2. Statement of Work. CEO must approve and sign statement of work for client (which must reference a master services agreement). 3. Acceptance of Client Order. We allow some clients to initiate fax / email broadcast projects on their own using the COMPANY fax and email broadcast system. For other clients, the client contacts COMPANY to initiate the broadcast. a. For existing clients as of 5/1/08: A Master Services Agreement is not required. A job where the fees are expected to be greater than $10,000 will require a master services agreement and statement of work. b. For new clients after 5/1/08: COMPANY must have a Master Services Agreement in place before the initiation of the first job. A job where the fees are expected to be greater than $8,000 will require a statement of work. 19
  22. 22. Sample 5 - TopSheet Purpose: for non-customer contracts, to summarize contract terms, identify non-standard terms, and highlight terms that impact other contractual or operational obligations, for use by Executive Team in connection with signing the contract and for use after as a summary of legal terms. See Contract Summary – Finance for detailed analysis of financial impact. Prepared by: Legal counsel. Document Retention: retain with original or copy of actual contract. Contracting Parties Company US or Other Party 1: Other Party 2: Company India Full Legal Name: Full Legal Name: Address: Address: Agreement Type License for Software or Data OEM or Distribution Agreement Other [describe]: Non-standard Terms for Special Consideration Describe: Term and Territory Effective Date: Initial Term: Renewal: Auto-renews. Details: No auto renewal. Terminates on date certain: Termination for Cause • by Company – describe: • by Other Party – describe: Post-termination Provision: Territory – describe: Other Party Obligations Describe: Payment Terms Summarize Payment Obligations: Company pays: Other Party pays: Audit Rights. Describe: Impact on Other Contracts or Operations rd Requires 3 party license terms to Customer Contract. Requires changes or additions to other contracts – describe: Privacy Protected Healthcare Information Contract requires other party to handle patient data. Contract requires Company to handle patient data. Customer Data Contract allows Other Party access to Company Customer Data; if so, describe restrictions: 20
  23. 23. Contract allows Company access to Other Party Customer Data; if so, describe restrictions: Intellectual Property Rights Mutual Nondisclosure of trade Secret and confidential information. Note special terms: Trademark License by Company. Describe: Trademark License by Other Party. Describe: Restriction on public announcements about contract or relationship without prior written permission. Software Escrow for Company Software – describe: Software Escrow for Other Party software – describe: Warranties and Disclaimers By Other Party: Corporate Authority – describe any limitations: Other – describe: By Company: Corporate Authority – describe any limitations: Other – describe: Indemnification, Liability and Insurance Indemnification by Company. Describe types of claims: • • Indemnification by Other Party. Describe types of claims: • • Process for Indemnification provided. Limitation on indemnification for comparative negligence provided. Limitation of Liability: • no consequential damages, lost profits, special damages, punitive damages. • Cap on damages payable by Company • Cap on damages payable by Other Party • Exclusions from cap: o Breach of Confidentiality o Indemnification • Fees payable by Company Abatement of obligations during event of Force Majeure. Insurance Required – describe: Other Legal Stuff Assignment of contract limited – describe: Process for sending Notices under Contract Choice of Law – Georgia (preferred); or other (describe): Alternative Dispute Resolution provided – describe: Venue for legal disputes – describe: Other documents not attached to contract are part of overall transaction- describe: Integration Clause. All amendments in writing. No waiver, except in writing. Severability if court invalidates a provision. Legal Review 21
  24. 24. Final Contract reviewed by legal - Date: ; By: 22
  25. 25. Sample 6 – Training Materials 23
  26. 26. 24