The American Bar Association
Young Lawyers Division
2012 Fall Conference
Charleston SC
Young Lawyers Division
Young Lawyers Division
October 18-20, 2012
Transactional Drafting Basics (CLE)
Francis Marion Hotel
Calhoun
Friday, October 19, 2012
11:15 a.m. – 12:15 a.m.
USING FORMS – Boilerplate Language; Common Mistakes; Practice Tips
By: Michael J. Hickerson, Esq.1
Smith Moore Leatherwood LLP
Tel.: 843-300-6637
Email: [email protected]
1 Michael Hickerson practices in the areas of financial services and general corporate practice. He is licensed to
practice law in South Carolina and Texas.
USING FORMS – Boilerplate Language; Common Mistakes; Practice Tips
I.
Using Forms – The Miscellaneous Boilerplate Provisions. Boilerplate provisions are
the laundry list of clauses common to all commercial agreements that do not relate directly to the
particular subject matter of the contract, but still set out some respective rights and duties of the
parties. Boilerplate provisions are designed to save lawyers drafting time by using commonly
accepted and understood clauses, but often are overlooked and glossed over without attention to
the details. Although these are common clauses, the failure to include appropriate boilerplate
clauses can negatively affect a party if there ultimately is a dispute over the contract; therefore,
these provisions should be included when appropriate, the purpose and effect of each clause
should be understood, and lawyers should take care to proofread and review each such clause in
contracts.
Below are some examples (and a non-exhaustive list) of commonly used boilerplate clauses.
Entire Agreement. This Agreement, including any schedules and exhibits hereto (which are
incorporated herein by reference), embodies the entire Agreement and understanding between
the parties hereto as to the matters addressed in this Agreement and supersedes all prior
agreements and understandings relating to the subject matter hereof.
Successors and Assigns.
This Agreement shall be binding upon the parties, and their
respective successors and assigns, and shall inure to the benefit of the parties and their respective
successors and permitted assigns. This Agreement is not assignable by any party without the
prior written consent of the other parties hereto.
Choice of Law. This Agreement shall be governed by and construed in accordance with the laws
of the State of South Carolina.
Choice of Forum; Consent to Jurisdiction. Any suit, action or proceeding against any party with
respect to this Agreement or any judgment entered by any court in respect thereof, may be
brought in the courts of the State of South Carolina, or in the United States Courts located in the
State of South Carolina, Charleston Division and each party hereby irrevocably submits to the
non-exclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding.
Each party hereby irrevocably waives any objections which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to this Agreement
brought in the courts located in the State of South Carolina, and hereby further irrevocably
waives any claim that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.
No Waiver. No failure to exercise, and no delay in exercising any right, power or remedy
hereunder or under any document delivered pursuant hereto shall impair any right, power or
remedy which the parties hereto may have, nor shall any such delay be construed to be a waiver
of any of such rights, powers or remedies, or an acquiescence in any breach or default under this
Agreement, nor shall any waiver of any breach or default of any party hereunder be deemed a
wavier of any default or breach subsequently occurring.
Amendments. No provision of this Agreement or any document or instrument relating to the
Agreement, may be amended, modified, supplemented, changed, waived, discharged, or
terminated, unless the parties hereto consent thereto in writing.
Notices. Any notice, demand, request or other communication which any party hereto may be
required or may desire to give hereunder shall be in writing and shall be deemed to be effective:
(a) if by hand delivery on the day and at the time on which delivered to such party at the address
on the signature page to this Agreement; (b) if by mail, on the day which it is received after
being deposited, postage prepaid, in the United States registered or certified mail, return receipt
requested, addressed to such party at the address on the signature page to this Agreement; or
(c) if by FedEx or other reputable express mail service, on the next business day following the
delivery to such express mail service, addressed to such party at the address on the signature
page to this Agreement. Any party may change its address for purposes of this Agreement by
giving notice of such change to the other parties pursuant to this paragraph.
No Partnership. Nothing in this Agreement shall be deemed to create any partnership or joint
venture between the parties. No party nor its employees or agents shall take any action
(including, without limitation, making any statements or representations, whether oral or written)
giving rise to the impression, or by its silence or failure to act contribute to the impression, that
such party is in a partnership with any other party. No party is granted any right or authority to
assume or to create any obligation or responsibility, express or implied, on behalf of or in the
name of any other party in any manner whatsoever.
Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future laws effective during the term of this Agreement, such
provision shall be fully severable and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of this Agreement shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance from this
Agreement, unless such continued effectiveness of this Agreement, as modified, would be
contrary to the basic understandings and intentions of the parties as expressed in this Agreement.
Attorneys' Fees. If a dispute arises between the parties with regard to this Agreement, the parties
agree that the non-prevailing party shall reimburse the prevailing party for all reasonable
attorneys' fees, costs and expenses, arising from and after the date of this Agreement, which are
incurred by the prevailing party in connection with the enforcement or interpretation of rights
under this Agreement.
Interpretation Presumption. This Agreement has been negotiated by the parties hereto. The
parties represent and warrant to one another that each has individually, or through legal counsel,
actively participated in the finalization of this Agreement, and in the event of a dispute
concerning the interpretation of this Agreement, each party hereby waives the doctrine that an
ambiguity should be interpreted against the party which has drafted the document.
Sufficiency of Consideration. Each of the Parties acknowledge they have received good and
satisfactory consideration for the agreements contained herein, and the Parties agree that the
consideration recited in this Agreement shall be a complete bar to any subsequent action or
proceeding to set aside or vacate this Agreement because of a mistake in fact or otherwise.
Survival. This Agreement shall survive the execution and consummation of this Agreement, and
shall continue in full force and effect.
No Third Party Beneficiaries. All obligations of the Parties hereunder are imposed solely and
exclusively for the benefit of the Parties, as applicable, and their successors and assigns and no
other person or entity shall have standing to require satisfaction of such conditions in accordance
with their terms and no other person or entity shall, under any circumstances, be deemed to be
the beneficiary of such conditions. The terms and provisions of this Agreement are for the
benefit of the Parties and, except as herein specifically provided, no other person or entity shall
have any right or cause of action on account thereof.
Representation of Authority. The Parties warrant and represent that they have the authority to
enter into this Agreement and that this Agreement is not prohibited or restricted by any contract
or other legally recognized arrangement applicable to them.
Counterparts. This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one Agreement, and any party hereto may execute this Agreement
by signing any such counterpart. The authorized attachment of counterpart signature pages shall
constitute execution by the parties. Any Party may rely on a facsimile or scanned copy of the
signed original received from another Party and may consider the facsimile or scanned copy as a
legal, binding, and enforceable document.
Headings. Section headings are for convenience of reference only and shall in no way affect
the interpretation of this Agreement.
Time of Essence. Time is of the essence with respect to the obligations of Obligors under this
Agreement.
Reviewed by Attorneys. Each party represents and warrants to the other party that it (a)
understands fully the terms of this Agreement and the consequences of the execution and delivery
of this Agreement, (b) has been afforded an opportunity to have this Agreement reviewed by, and
to discuss this Agreement and document executed in connection herewith with, such attorneys and
other persons as such party may wish, and (c) has entered into this Agreement and executed and
delivered all documents in connection herewith of its/his own free will and accord and without
threat, duress or other coercion of any kind by any person.
Waiver of Jury Trial. TO THE EXTENT ALLOWED BY LAW, THE PARTIES HERETO
WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING
BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT,
OR OTHERWISE BETWEEN LENDER AND ANY ONE OR MORE OF THE OBLIGORS
ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
RELATED THERETO.
Force Majeure. A party is not liable for failure to perform the party's obligations if such failure
is as a result of Acts of God (including fire, flood, earthquake, storm, hurricane or other natural
disaster), war, invasion, act of foreign enemies, hostilities (regardless of whether war is
declared), civil war, rebellion, revolution, insurrection, military or usurped power or
confiscation, terrorist activities, government sanction, blockage, embargo, labor dispute, strike,
lockout or interruption or failure of electricity or telephone service. No party is entitled to
terminate this Agreement in such circumstances. If a party asserts Force Majeure as an excuse
for failure to perform the party's obligation, then the nonperforming party must prove that the
party took reasonable steps to minimize delay or damages caused by foreseeable events, that the
party substantially fulfilled all non-excused obligations, and that the other party was timely
notified of the likelihood or actual occurrence of an event described in this paragraph.
Remedies. Upon any breach or other violation of this Agreement, the parties hereto shall be
entitled to exercise any and all rights and remedies contained herein or now or hereinafter
existing and available at law, in equity, by statute, or otherwise. No right or remedy herein
conferred upon a party is intended to be exclusive of any other right or remedy contained herein,
and every such right or remedy shall be cumulative and shall be in addition to every other right
or remedy contained herein or now or hereafter existing and available at law, in equity, by
statute, or otherwise.
Further Instruments and Acts. From time to time at a party’s request, whether at or after Closing
and without further consideration, the other party(ies) shall execute and deliver such further
instruments of conveyance, transfer and assignment and upon reimbursement for actual
reasonable out-of-pocket expenses take such other action as the requesting party reasonably may
require to more effectively convey and transfer to the requesting party the properties to be
conveyed, transferred and assigned hereunder, and, if necessary, will assist the requesting party
in the collection or reduction to possession of such property. In addition, each party agrees to
provide reasonable access to records respecting the Business as are requested by the other
party(ies) for proper purpose with good cause shown (subject to appropriate confidentiality
agreements to be negotiated at such time) and agree to reasonably cooperate in resolving any
matters resulting from the transactions contemplated hereby.
Construction. Whenever the context so requires, the gender of all words used in this Agreement
includes the masculine, feminine, and neuter, and the singular shall include the plural, and
conversely.
II.
Using Forms – Carefully Drafting Recitals. Recitals refer to the "whereas" clauses that
precede the main text of a contract. In negotiating a contract, the parties often spend
disproportionately less time determining the appropriate language in the recitals. Most likely
caused by the hurry to get to the perceived more significant terms of the agreement, lawyers tend
to give the recitals less attention, however, recitals may be useful in determining the intent of
contracting parties, and care should be given when drafting recitals in case a dispute later arises
involving the intention of the parties. Recitals provide a background on the contract such as,
what the contract is about, who the parties are, and why they are signing a contract, and if proper
detail and accuracy is used when drafting, the parties can avoid some ambiguity. Also, once care
is given to draft appropriate recitals, then form contracts should incorporate the recitals with a
provision such as:
Recitals: The Parties warrant that the foregoing recitals are true and correct. The Parties further
agree that the foregoing recitals are an integral and material part of this Agreement, without
which each would not have signed this Agreement.
III.
Using Forms – Know Your Client; Make the Form Client Friendly. Every business
lawyer should continually upgrade and diversify his or her form library. For the majority of
business contracts, the lawyer should generate two separate forms depending on which side of
the transaction the lawyer is representing (i.e., landlord or tenant; buyer or seller; borrower or
lender; consultant or company). In an asset purchase for example, an effective business lawyer
will have a form asset purchase agreement which is seller “friendly” and a form asset purchase
agreement which is “buyer” friendly. The two provisions below illustrate the usefulness of a
“seller’s form” and a “buyer’s form”. Each provision relates to the representation and warranty
as to the status of the assets being purchased. The first provision is from a buyer friendly form
and the second provision is from a seller friendly form.
Status of Assets. The Assets sold hereunder constitute all of the assets of the Business (except
the Excluded Assets) and, include all property, rights, and intangibles necessary for Buyer to
operate after Closing a business similar to the Business as heretofore conducted. All systems,
machinery, equipment, and other tangible property which are portions of the Assets are
accurately described on the Schedules attached hereto, and are generally sound, in good repair,
may be safely operated within all applicable standards or regulations in their present conditions,
and are in merchantable condition. Selling Parties have not received any uncured citation,
variance, or other notice to the effect that their facilities do not comply with applicable OSHA or
other governmental laws or regulations. To the best of Selling Parties’ knowledge, there are no
material capital expenditures which Selling Parties now anticipate would be required to be made
in connection with the Business as now conducted in order to comply with any existing laws,
regulations or other governmental requirements applicable to the Business as it is presently
conducted, including, without limitation, requirements relating to occupational health and safety
and protection of the environment.
Status of Assets. Buyer is accepting the Business “AS IS”, “WHERE IS” and “WITH ALL
FAULTS”. Because of the due diligence performed by Buyer, Buyer is familiar with all aspects
of the Business, including but not limited to the following: the equipment, the inventory, the
supplies, the customers and vendors, and the books and records. Seller makes no representations
or warranties, express or implied, as to the condition and suitability of the Business, and the
Buyer recognizes that he is accepting the Business and all contents “as is”, “where is” and “with
all faults”.
Two forms of simple consulting letter agreements are attached hereto as Exhibit A. These forms
were generated for the same client who often hires consultants, but also often acts as a
consultant. The differences in the agreements are clear, and each is shaded to the benefit of the
client (in whichever role the client is engaged). Most transactions will end up somewhere in the
“middle ground” but an effective use of form agreements starts with choosing the right form,
appropriately slanted to the benefit of your client from which your client can begin negotiations.
In addition to crafting form agreements to appropriately fit the side of the transaction of your
client, business lawyers should understand the nature and structure of the transaction when
choosing the appropriate form. For example, many business clients enter into numerous
intercompany or affiliated transactions and require contracts to evidence those transactions.
These clients do not generally want or expect the world’s premier legal document or treatise on
the subject matter, rather the client wants a cost effective, legally binding and sufficient contract
that memorializes the intercompany “friendly” transaction. An effective business lawyer
continually upgrades and diversifies his or her form library to include these simple forms that are
appropriate under these circumstances.2 Two forms of promissory notes are attached hereto as
Exhibit B. The first form is a keep-it-simple note used to evidence intercompany, affiliate, or
shareholder loans, and the second form is the more complex secured promissory note more
appropriate for a commercial lender making a loan to an unrelated borrower.
Another integral factor in the use of form agreements to benefit clients and keep the client a
happy and paying customer is to make your form documents client friendly. There are many
situations where a client needs a form agreement drafted, but does not want to call the lawyer or
incur substantial legal fees every time the client needs to use the form. In this situation, the
business lawyer should craft a form that the client can easily change to fit each prospective deal.
The best way is to create a form agreement that is designed to keep the changing “business”
terms in a schedule, but to keep the body of the document the same with no changes, therefore,
the client only has to change the parties in the recitals and on the signature pages and update the
schedule for the deal specific business terms. In these situations, the lawyer should also counsel
the client to engage the lawyer if any unusual terms are being discussed, or if any negotiation
occurs within the body of the legal terms.3
IV.
Using Forms – Avoiding Common Mistakes. It may seem like such a simple
instruction or task, but the most common mistake of lawyers that use form agreements and
boilerplate provisions is that they do not read the whole agreement. The solution is pretty simple
… READ THE WHOLE AGREEMENT! EVERY TIME YOU USE THE FORM! Obviously
familiarity with the form will decrease the review time, but it is just good practice to read
through each provision to make sure that every provision should apply and to ensure that all of
the deal specific points have been integrated into the form. Another practice point is to use the
same placeholder throughout your form agreements for parts of the form that need input when
creating a new deal specific document. By using the same placeholder in every form, you can
effectively and confidently search the document to find each place that needs information.4 In
addition, lawyers should continually read and “scrub” their form agreements. As the form
2 One of the fastest and surefire ways to annoy a corporate client is to produce a 15-20 page agreement when the
client expected and asked for a simple 4-5 page agreement.
3 In addition to compliments from clients you will be sure to receive regarding keeping certain agreements short and
simple as referenced in the previous footnote, clients tend to be very appreciative of business lawyers that streamline
the client’s costs and efficiency. An overlooked role of the business lawyer is the necessity of the lawyer to
understand the business of the client, not just the legal issues in a vacuum.
4 I prefer to use [____] as my placeholder, but it is really lawyer preference.
evolves, section references and defined terms may change. A common mistake is simply the
failure to adequately proofread the form agreements to make sure that all section references are
correct, all capitalized terms are defined, and to remove remnants from past deals. Another
method to avoid mistakes is to keep control of your form – meaning that if the document
originated with you, then once comments or changes are made (especially if the opposing lawyer
uses track changes), you should make the changes within the document on your system and
distribute a redline showing the changes. Many forms have been inadvertently changed because
opposing lawyers made comments and the lawyer that originated the form simply “accepted all”
and proceeded forward.
Exhibit A – Consulting Letter Agreements
[Enter Name of Company Paying You]
[Enter Address of Company Paying You]
[Consultant]
Attn: [__________]
[__________]
[__________]
Re:
Letter Agreement (this “Agreement”)
Dear [__________]:
This Agreement is by and between [_____________________] (the “Company”) and
[__________] (“Consultant”; the Company and Consultant are each referred to herein as a
“Party” and are collectively referred to herein as the “Parties”), to be effective as of
[__________] (the “Start Date”). Now, therefore, for and in consideration of the promises,
covenants and other consideration of the Parties hereto set forth in this Agreement and other
valuable consideration, the receipt and sufficiency of which are acknowledged, the Company and
Consultant agree as follows:
1.
Services; Compensation; Expenses. The Parties acknowledge and agree that
Consultant is qualified and willing to provide the services to the Company more particularly
described on Exhibit A attached hereto and incorporated herein by reference and the Company
desires to obtain the services of Consultant as an independent contractor based on Consultant’s
career background and pursuant to the terms set forth in this Agreement. In exchange for
providing such services to the Company, Consultant shall be paid according the fee schedule set
forth on Exhibit B attached hereto and incorporated herein by reference. Consultant shall be
responsible for the payment of all taxes owing in connection with any amounts paid hereunder
including, without limitation, all federal and state income taxes and social security taxes. The
Company shall be entitled to withhold any taxes which it is required to withhold by applicable
law.
2.
Term and Termination. the term of this Agreement (the “Term”) shall begin on
the Start Date and end on the earlier of: (a) [__________], (b) fifteen (15) days after written
notice is given by Consultant to the Company of Consultant’s intention to terminate this
Agreement, or (c) one hundred eighty (180) days after written notice is given by the Company to
Consultant of the Company’s intention to terminate this Agreement.
3.
Rights of Consultant. Consultant has created, acquired or otherwise has rights
in, and may employ, provide, modify, create, acquire or otherwise obtain rights in, various
concepts, ideas, methods, methodologies, procedures, processes, know-how, techniques, client
lists, templates, and systems of operation (collectively, the “Consultant Intellectual Property”).
To the extent that Consultant utilizes any of its property, including, without limitation, the
Consultant Intellectual Property, in connection with providing the services, or originating or
generating any Financing, such property shall remain the property of Consultant and the
Company shall acquire no right or interest in such property. Consultant does not agree to any
terms that may be construed as precluding or limiting in any way its right to: (a) provide services
of any kind or nature whatsoever to any Person, or (b) develop for itself, or for others, materials
that are competitive with those produced by the Company. As used in this Agreement, “Person”
means an individual, partnership, limited partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint venture or any nation
or government, any state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any corporation or
other entity owned or controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
4.
Limitation of Liability. The Company acknowledges and agrees that any
services provided by Consultant shall not be construed as usurping or assuming the responsibility
or duty customarily undertaken by the owner or manager of a business. The Company assumes
full responsibility for achieving the Company’s purposes and goals and for evaluating and
determining whether any opinions or statements provided by Consultant should be used or
implemented. CONSULTANT HAS NOT ASSUMED ANY RESPONSIBILITY FOR THE
GENERAL OR ANY SPECIFIC SUCCESS OR OUTCOME OF THE BUSINESS OF
THE COMPANY AND MAKES NO WARRANTY OR REPRESENTATION
CONCERNING THE SAME, AND CONSULTANT SPECIFICALLY DOES NOT
GUARANTEE, WARRANT, OR OTHERWISE UNDERWRITE THE VIABILITY OF
ANY UNDERTAKING BY THE COMPANY BASED ON ANY RESULTS OR
SERVICES PROVIDED BY CONSULTANT.
5.
Independent Contractor Status; No Partnership. Consultant acknowledges,
recognizes and defines itself as being an independent contractor of the Company and not an
employee of the Company or its affiliates, and further acknowledges, agrees, and defines any
Person employed or otherwise retained by it to be employed or otherwise retained by it in its
capacity as an independent contractor to the Company and acknowledges and agrees that each
such Person is not an employee of the Company or its affiliates. Consultant agrees that it alone
has the responsibility of paying any such Person employed or retained by it, making deductions
required by law, reporting compensation of such employees as required by law and generally
determining any and all appropriate forms of compensation and fringe benefits for them.
Consultant has no authority to enter into contracts or agreements on behalf of the Company
except as expressly authorized by the Company in writing. Nothing in this Agreement shall be
deemed to create any partnership or joint venture between the Parties. No Party nor its
employees or agents shall take any action (including, without limitation, making any statements
or representations, whether oral or written) giving rise to the impression, or by its silence or
failure to act contribute to the impression, that such Party is in a partnership with the other Party.
No Party is granted any right or authority to assume or to create any obligation or responsibility,
express or implied, on behalf of or in the name of the other Party in any manner whatsoever.
6.
Indemnification of Consultant. The Company agrees to indemnify Consultant
and its respective directors, officers, employees and agents from, and hold each of them harmless
against, any and all Losses incurred by Consultant to the extent and degree such Losses are
caused by the negligent act or omission or willful misconduct of the Company. As used in this
Agreement, “Losses” means any claims, demands, suits, losses, damages, costs, and expenses,
including attorneys' fees.
7.
Entire Agreement. This Agreement, including any schedules and exhibits hereto
(which are incorporated herein by reference), embodies the entire Agreement and understanding
between the Parties as to the matters addressed in this Agreement and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements of the Parties. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8.
Choice of Law; Choice of Forum; Consent to Service of Process and
Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws
of the State of South Carolina. Any suit, action or proceeding against any Party with respect to
this Agreement or any judgment entered by any court in respect thereof, may be brought in the
courts of the State of South Carolina, or in the United States Courts located in the State of South
Carolina, Charleston Division and each Party irrevocably submits to the non-exclusive
jurisdiction of such courts for the purpose of any such suit, action or proceeding. Each Party
irrevocably consents to the service of process in any suit, action or proceeding in said court by
the mailing thereof by registered or certified mail, postage prepaid, to the applicable address set
forth for such Party on the first page to this Agreement. Each Party irrevocably waives any
objections which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement brought in the courts located in the State
of South Carolina, and further irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
9.
No Waiver; Amendments. No failure to exercise, and no delay in exercising any
right, power or remedy hereunder or under any document delivered pursuant hereto shall impair
any right, power or remedy which the Parties may have, nor shall any such delay be construed to
be a waiver of any of such rights, powers or remedies, or an acquiescence in any breach or
default under this Agreement, nor shall any waiver of any breach or default of any Party be
deemed a wavier of any default or breach subsequently occurring. No provision of this
Agreement or any document or instrument relating to the Agreement, may be amended,
modified, supplemented, changed, waived, discharged, or terminated, unless the Parties consent
thereto in writing.
10.
Notices. Any notice, demand, request or other communication which any Party
may be required or may desire to give hereunder shall be in writing and shall be deemed to be
effective: (a) if by hand delivery on the day and at the time on which delivered to such Party at
the address on the first page to this Agreement; (b) if by mail, on the day which it is received
after being deposited, postage prepaid, in the United States registered or certified mail, return
receipt requested, addressed to such Party at the address on the first page to this Agreement; or
(c) if by FedEx or other reputable express mail service, on the next business day following the
delivery to such express mail service, addressed to such Party at the address on the first page to
this Agreement. Any Party may change its address for purposes of this Agreement by giving
notice of such change to the other Party pursuant to this paragraph 10.
11.
Invalid Provisions. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective during the Term of this
Agreement, such provision shall be fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or by its severance
from this Agreement, unless such continued effectiveness of this Agreement, as modified, would
be contrary to the basic understandings and intentions of the Parties as expressed in this
Agreement.
12.
Successors and Assigns. This Agreement shall be binding upon the Parties, and
their respective successors and assigns, and shall inure to the benefit of the Parties and their
respective successors and permitted assigns. This Agreement is not assignable by any Party
without the prior written consent of the other Parties.
13.
Attorneys' Fees. If a dispute arises between the Parties with regard to this
Agreement, the Parties agree that the non-prevailing Party shall reimburse the prevailing Party
for all reasonable attorneys' fees, costs and expenses, arising from and after the date of this
Agreement, which are incurred by the prevailing Party in connection with the enforcement or
interpretation of rights under this Agreement.
14.
Interpretation Presumption. This Agreement has been negotiated by the
Parties. The Parties represent and warrant to one another that each has individually, or through
legal counsel, actively participated in the finalization of this Agreement, and in the event of a
dispute concerning the interpretation of this Agreement, each Party waives the doctrine that an
ambiguity should be interpreted against the Party which has drafted the document.
15.
Counterparts; Headings. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one Agreement, and any Party may
execute this Agreement by signing any such counterpart. The authorized attachment of
counterpart signature pages shall constitute execution by the Parties. Section headings are for
convenience of reference only and shall in no way affect the interpretation of this Agreement.
Very truly yours,
[INSERT THE NAME OF THE COMPANY]
By:_________________________________
Name:
Title:
Acknowledged and Agreed:
[CONSULTANT]
By:_________________________________
Name:
Title:
Exhibit A – Consulting Letter Agreements
[__________]
[__________]
[__________]
[__________]
Re:
Letter Agreement (this “Agreement”)
Dear [__________]:
This Agreement is by and between [__________], an individual residing in South
Carolina (“Consultant”) and [__________], a South Carolina limited liability company (the
“Company”). Now, therefore, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Consultant and the Company agree as follows:
1.
Description of Services and Term. Consultant agrees to use his best efforts and
provide the services to the Company described on Exhibit A attached hereto and incorporated
herein by reference (collectively, the “Services”). During the Term, Consultant shall be
available at the Company’s office or other reasonably designated location or by telephone or
other remote communication, as mutually agreed by Consultant and the Company; provided
however that the Company will not unreasonably deny or condition requests by Consultant for
personal leave time, including without limitation, sick and vacation periods; provided further
however that Consultant shall give the Company at least two (2) weeks notice prior to taking
such vacation and shall attempt to schedule such vacation in coordination with the Company’s
needs. The Company will use reasonableness in determining whether the physical presence of
Consultant is necessary or whether long distance communications will suffice to address the
Company’s needs from time to time and at any particular time.
2.
Compensation; Expenses. In consideration for the Services, the Company shall
pay Consultant during the Term the fees described on Exhibit B attached hereto and incorporated
herein by reference. Consultant shall be responsible for the payment of all taxes owing in
connection with any amounts paid hereunder including, without limitation, all federal and state
income taxes and social security taxes. In addition, the Company shall be entitled to withhold
any taxes which it is required to withhold by applicable law. Upon termination of this
Agreement pursuant to paragraph 3 hereof, payments under this paragraph 2 shall cease and
Consultant shall be entitled only to payments for periods or partial periods that occurred prior to
the date of termination and for which Consultant has not yet been paid.
3.
Term and Termination. The term of this Agreement (the “Term”) shall begin
on [__________] (the “Start Date”) and end on [__________] (the “End Date”), unless sooner
terminated as provided in this paragraph 3; provided however that if the project on which
Consultant is working as of the End Date is not sufficiently completed, the Company may, in its
sole discretion, extend the Term for an additional period in which it deems necessary to complete
the Services; provided further however that notwithstanding the foregoing, the restrictive
covenants and confidentiality provisions in paragraphs 6, 7, 8, 9, 10, and 11 hereof, shall
continue until their applicable time limits expire. This Agreement will terminate upon the earlier
of any of the following events:
(a)
the End Date;
(b)
upon either party giving the other thirty (30) days prior written notice of
their intention to terminate this Agreement;
(c)
by the Company immediately for Cause, without prior notice, and without
further obligation on the part of the Company. As used in this Agreement,
“Cause” includes, but is not limited to: (i) Consultant’s dishonesty,
embezzlement, or fraud committed in connection with the Company or its
affiliates or in connection with any other business of Consultant, (ii) any
negligence or willful misconduct by Consultant directly related to the Company
or its affiliates or otherwise in the performance of his duties, (iii) any material
breach by Consultant of his obligations in this Agreement; (iv) acts of violence or
discriminatory harassment against any employee, contractor, client (or their
employees), or supplier (or their employees) of the Company or its affiliates, (v)
refusal to perform the Services or other duties requested by the Company or its
affiliates; (vi) falsification of records or any loan documents or applications, or
(vii) unauthorized use or disclosure of any client information; and
(d)
upon the death of Consultant. If Consultant dies during the Term, the
Company shall be obligated to pay the monthly fee due Consultant pursuant to
paragraph 2 hereof only up to and including the month in which Consultant dies
and any preceding months for which Consultant has not yet received the monthly
fee he is entitled to pursuant to paragraph 2 hereof.
4.
Independent Contractor Status. Consultant acknowledges, recognizes and
defines himself as being an independent contractor of the Company and not an employee of the
Company or its affiliates, and further acknowledges, agrees, and defines any Person employed or
otherwise retained by him to be employed or otherwise retained by him in his capacity as an
independent contractor to the Company and acknowledges and agrees that such Person are not
employees of the Company or its affiliates. Consultant agrees that he alone has the responsibility
of paying such Person employed or retained by him, making deductions required by law,
reporting compensation of such employees as required by law and generally determining any and
all appropriate forms of compensation and fringe benefits for them. Consultant, individually and
as an independent contractor, hereby specifically waives any claim of rights or benefits, whether
present or future, under the retirement plans of the Company or its affiliates, fringe benefits
afforded employees of the Company or its affiliates, or the payment of social security taxes by
the Company or its affiliates, workmen's compensation or unemployment compensation or like
benefits normally afforded employees of the Company or its affiliates; provided further that
Consultant, in his capacity as independent contractor, shall obtain and give to the Company and
its affiliates waivers from each Person employed or otherwise retained by him individually
acknowledging that they are not employees of the Company or its affiliates and acknowledging
further that they waive any claim of rights or benefits normally afforded employees of the
Company or its affiliates. Consultant hereby agrees to indemnify and hold the Company and its
affiliates harmless from such claims by any such employees or any such Person otherwise
retained. Consultant has no authority to enter into contracts or agreements on behalf of the
Company except as expressly authorized by the Company in writing. Any such contracts or
agreements not so authorized by the Company shall be null and void.
As used in this Agreement, “Person” means an individual, partnership, limited partnership,
corporation, limited liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or any nation or government, any state or other political subdivision
thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.
5.
Indemnification of the Company. Consultant hereby agrees to indemnify the
Company and its respective directors, officers, employees and agents from, and hold each of
them harmless against, any and all Losses incurred by the Company to the extent and degree
such Losses are caused by the negligent act or omission or willful misconduct of Consultant. In
addition, Consultant shall indemnify the Company and its respective directors, officers,
employees and agents from, and hold each of them harmless against, any and all Losses arising
from or relating to any misrepresentation in or breach of the representations and warranties or
from the performance or nonperformance by Consultant of the Services or of the covenants or
agreements of Consultant contained in this Agreement or other instrument or document furnished
or to be furnished by Consultant in connection with the transactions contemplated by this
Agreement. As used in this Agreement, “Losses” means any claims, demands, suits, losses,
damages, costs, and expenses of a party hereto, including attorneys' fees.
6.
Disclosure of Trade Secrets or Confidential Information Covenant.
Consultant acknowledges that as an independent contractor of the Company, Consultant will
from time to time come into contact with and have access to Trade Secrets and Confidential
Information of the Company and/or its affiliates. Consultant expressly covenants and agrees that
Consultant will not, during his relationship with the Company or following termination of
Consultant’ relationship with the Company, whether by Consultant or the Company for any
reason (with our without cause): (a) use any Trade Secrets or Confidential Information except as
necessary in the performance of the Services for the Company or its affiliates, (b) reveal or
disclose or allow to be revealed or disclosed any Trade Secrets or Confidential Information to
any Person outside the Company or its affiliates except as authorized in Consultant’s
performance of the Services, or (c) remove or aid in the removal from the premises of the
Company, or from any other location where Trade Secrets or Confidential Information are
maintained or stored by the Company or its affiliates, any such Trade Secrets or Confidential
Information or any materials which relate thereto.
As used in this Agreement, “Trade Secret” means all formulas, techniques, inventions, methods
of doing business and procedures used by the Company or its affiliates in their business which
are not generally known or used in the industry; lists of current and prospective clients of the
Company or its affiliates and associated client information (including client contacts, client data,
preferences, and requirements); computer programs developed by the Company or the
Company’s agents or for use solely by the Company or its affiliates; and any other information
or data which meets the definition of trade secrets under the South Carolina Trade Secrets Act.
As used in this Agreement, “Confidential Information” means data or information, whether
constituting a Trade Secret or not, which is of value to the Company or its affiliates and not
generally known to any Person outside of the Company or its affiliates, including but not limited
to the following: (a) historical sales information about clients, clients’ business procedures or
processes, and any other information which Consultant learns about the Company’ or its
affiliates’ current and potential clients or suppliers, through Consultant’s relationship with the
Company or its affiliates, (b) supplier, distributor, or vendor lists, data, and information, (c)
purchasing and materials information, (d) training manuals, (e) information about the financial
aspects of the Company’s business (or that of its affiliates) such as costs, financial statements,
fees and prices, pricing policies, discounts, quoting procedures, sales, financial projections, and
other financial information, (f) business opportunities for new or developing businesses for, and
business and marketing plans, techniques, and strategies of, the Company or its affiliates
(including plans for new products or services), (g) private personnel information (such as social
security numbers and medical information), (h) any information received by the Company or its
affiliates from third parties in confidence (or subject to non-disclosure or similar covenants) and
the terms and conditions of negotiations or confidential contracts between the Company or its
affiliates and third parties, (i) product information, (j) process and technical information, (k)
inventions, (l) codes, formulas and similar data, and (m) any documents, designs, files or other
information marked “Confidential”.
7.
Intellectual Property. Consultant will make full and prompt disclosure to the
Company of all inventions, improvements, modifications, discoveries, creations, methods,
processes and developments (collectively, the “Developments”) which arise out of or relate to
the Services, and which are made or conceived by Consultant alone or with others during the
Term, whether or not such Developments are patentable or protected as Confidential
Information. The Company shall retain all title, interests and rights, including intellectual
property rights, in and to any and all Developments made by Consultant alone or with others
during the Term which arise out of or relate to the Services provided to the Company, and shall
retain any patents or patent applications arising from such Developments. All works of
authorship and all mask works which are made or conceived during the Term which arise out of
or relate to the Services shall be owned by the Company. Consultant acknowledges that any
copyrightable or patentable works produced by Consultant which arise out of or relate to the
Services shall be considered “works made for hire”, it being the intent of this Agreement to vest
full and exclusive ownership in such works in the Company, including but not limited to the
exclusive right to copy and prepare derivative works. Consultant hereby conveys and
irrevocably assigns to the Company all remaining rights and any sole and exclusive right, title
and interest in the ownership to all such works and all copies of any of them, without further
consideration. Consultant agrees to assist the Company, or any Person designated by the
Company, as necessary in perfecting and/or registering these rights, to obtaining extensions and
renewals thereof, and enforcing all rights and protections relating to the works in any and all
states, countries, and territories. Consultant agrees to execute any documents reasonably
requested by the Company to carry out any of the foregoing. Consultant agrees that during the
Term and at anytime thereafter, he will not copy and use for his own benefit, for the benefit of
someone else, or in competition with the Company, the name, look, feel, design or other
designating characteristics of any and all of the Company’s internet websites.
8.
Non-Competition Covenant. Consultant acknowledges that in the course of
performance of duties and services as an independent contractor of the Company, he will come
into possession of the Company’s proprietary and Confidential Information, and that the
Company is doing business in a highly competitive industry. Consultant acknowledges that this
covenant is necessary for the protection of the legitimate interests of the Company, that this
covenant is reasonably limited with respect to time and place, that this covenant is not unduly
harsh and oppressive in curtailing legitimate efforts of Consultant to earn a livelihood, and that
this covenant is reasonable from the standpoint of sound public policy. Accordingly, in further
consideration for this Agreement by the Company, Consultant agrees that, from the Start Date
and for a period of twelve (12) months following the termination of this Agreement for any
reason, Consultant (and his affiliates) will not, without the prior written consent of the
Company, within the zip code of 29464 or within a one-hundred (100) mile radius of the
Company’s Mount Pleasant, South Carolina office, directly or indirectly, personally or as a
principal, agent, stockholder, director, officer, investor, employee, or Consultant or in any other
capacity in any entity whatsoever and without regard to compensation (or the lack thereof)
participate in the sale, marketing, or advertising of any programs or products related to the
Services.
9.
Non-Solicitation of Clients Covenant. Consultant acknowledges that in the
course of performance of duties and services as an independent contractor of the Company,
Consultant will come into possession of the Company’s proprietary and Confidential
Information, including client lists, and that the Company is doing business in a highly
competitive industry. Consultant acknowledges that this covenant is necessary for the protection
of the legitimate interests of the Company, that this covenant is reasonably limited with respect
to time and place, that this covenant is not unduly harsh and oppressive in curtailing legitimate
efforts of Consultant to earn a livelihood and that this covenant is reasonable from the standpoint
of sound public policy. Accordingly, in further consideration for this Agreement by the
Company, Consultant agrees that, from the Start Date and for a period of twelve (12) months
following the termination of this Agreement for any reason, Consultant (and his affiliates) will
not, directly or indirectly, personally or as a principal, agent, stockholder, director, officer,
investor, employee, or Consultant or in any other capacity in any entity whatsoever and without
regard to compensation (or the lack thereof), without the prior written consent of the Company,
sell or solicit the sale of any programs or products related to the Services to any Person that has
purchased a product or program from the Company within the twelve (12) months preceding the
date of Consultant’s termination.
10.
Non-Solicitation of Employees/Independent Contractors Covenant.
Consultant acknowledges that in the course of performance of duties and services as an
independent contractor of the Company, Consultant will develop relationships with employees of
the Company, as well as independent contractors working with the Company, and that the
Company is doing business in a highly competitive industry. Consultant acknowledges that this
covenant is necessary for the protection of the legitimate interests of the Company, that this
covenant is reasonably limited with respect to time and place, that this covenant is not unduly
harsh and oppressive in curtailing legitimate efforts of Consultant to earn a livelihood, and that
this covenant is reasonable from the standpoint of sound public policy. Accordingly, in further
consideration for this Agreement by the Company, Consultant agrees that, from the Start Date
and for a period of twelve (12) months following the termination of this Agreement for any
reason, Consultant (and his affiliates) will not, directly or indirectly, personally or as a principal,
agent, stockholder, director, officer, investor, employee, or Consultant or in any other capacity in
any entity whatsoever and without regard to compensation (or the lack thereof), without the prior
written consent of the Company, hire, attempt to hire, or assist any other Person in hiring or
attempting to hire (a) any employee of the Company as of the date of termination, or (b) an
independent contractor of the Company that sells, markets, or arranges products or programs
related to the Services as of the date of termination of this Agreement.
11.
Non Disparagement Covenant. Consultant shall at all times during the Term
promote the Company in a positive manner. Any detrimental conduct exhibited by Consultant
against the Company, whether oral, written or otherwise, during the Term shall be a breach of
this Agreement.
12.
Enforcement. Consultant agrees that a breach by him of the provisions of this
Agreement, including but not limited to any breach of the provisions of paragraphs 6, 7, 8, 9,
10, and 11 hereof, will cause irreparable damage to the Company or its affiliates incapable of
measurement and for which money damages alone would be an insufficient remedy. Therefore,
in the event of such breach, the Company and its affiliates, in addition to any other remedies
available at law or in equity, shall be entitled to a temporary restraining order and preliminary
and permanent injunctions from a court of competent jurisdiction restraining Consultant from
breaching or continuing any breach of any of the provisions of this Agreement. If Consultant
breaches any of the provisions of this Agreement and the Company must enforce any of the
rights granted in this Agreement through an attorney, the Company and its affiliates shall be
entitled to receive from Consultant all attorneys’ fees, expenses, and court costs incurred in
connection with the enforcement of the rights of the Company and its affiliates under this
Agreement.
13.
Reasonableness of Restrictions. Consultant has carefully considered the nature
and extent of the restrictions upon him and the rights and remedies conferred upon the Company
and its affiliates under paragraphs 6, 7, 8, 9, 10, and 11 hereof, and hereby acknowledges and
agrees that the same are reasonable in time, territory and scope, are designed to eliminate
competition which would otherwise be unfair to the Company and its affiliates, do not stifle the
inherent skill and experience of Consultant, would not operate as a bar to Consultant’s sole
means of support, are fully required to protect the legitimate interests of the Company and its
affiliates and do not confer a benefit upon the Company and its affiliates disproportionate to the
detriment to Consultant. Notwithstanding anything to the contrary contained in this Agreement,
in the event that a court determine any aspect of these restrictions are unreasonable and
unenforceable, the parties agree that these restrictions shall nevertheless remain enforceable to
the fullest extent deemed reasonable by such court and that the offending aspects shall be
reformed and enforced accordingly.
14.
Other Legal Rights. Nothing contained in this Agreement shall limit, abridge, or
modify the rights of the Company and its affiliates under any statutes, including but not limited
to applicable trade secret law or common law, including but not limited to the laws of unfair
competition.
15.
Return of Records. Consultant agrees that immediately upon termination, he
will return to the Company at its address set forth on the first page of this Agreement or to such
other place or Person as instructed by the Company, all documents, materials and supplies,
including but not limited to all Confidential Information, Trade Secrets, notes, data, tapes, lists,
reference items, files, records, documents, memoranda, sketches, drawings, models, materials,
software, product samples, rolodex cards, forms, manuals, keys, badges, access cards and
equipment, without retaining any copies or summaries of such property, obtained from or
through the Company or its affiliates or clients during or in connection with the Services or its
affiliates or clients.
16.
Entire Agreement. This Agreement, including any schedules and exhibits hereto
(which are incorporated herein by reference), embodies the entire Agreement and understanding
between the parties hereto as to the matters addressed in this Agreement and supersedes all prior
agreements and understandings relating to the subject matter hereof.
17.
Choice of Law; Choice of Forum; Consent to Service of Process and
Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws
of the State of South Carolina. Any suit, action or proceeding against any party with respect to
this Agreement or any judgment entered by any court in respect thereof, may be brought in the
courts of the State of South Carolina, or in the United States Courts located in the State of South
Carolina, Charleston Division and each party hereby irrevocably submits to the non-exclusive
jurisdiction of such courts for the purpose of any such suit, action or proceeding. Each party
hereby irrevocably consents to the service of process in any suit, action or proceeding in said
court by the mailing thereof by registered or certified mail, postage prepaid, to the applicable
address set forth for such party on the first page to this Agreement. Each party hereby
irrevocably waives any objections which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement brought in the courts
located in the State of South Carolina, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an inconvenient
forum.
18.
No Waiver. No failure to exercise, and no delay in exercising any right, power
or remedy hereunder or under any document delivered pursuant hereto shall impair any right,
power or remedy which the parties hereto may have, nor shall any such delay be construed to be
a waiver of any of such rights, powers or remedies, or an acquiescence in any breach or default
under this Agreement, nor shall any waiver of any breach or default of any party hereunder be
deemed a wavier of any default or breach subsequently occurring.
19.
Amendments. No provision of this Agreement or any document or instrument
relating to the Agreement, may be amended, modified, supplemented, changed, waived,
discharged, or terminated, unless the parties hereto consent thereto in writing.
20.
Notices. Any notice, demand, request or other communication which any party
hereto may be required or may desire to give hereunder shall be in writing and shall be deemed
to be effective: (a) if by hand delivery on the day and at the time on which delivered to such
party at the address on the first page to this Agreement; (b) if by mail, on the day which it is
received after being deposited, postage prepaid, in the United States registered or certified mail,
return receipt requested, addressed to such party at the address on the first page to this
Agreement; or (c) if by FedEx or other reputable express mail service, on the next business day
following the delivery to such express mail service, addressed to such party at the address on the
first page to this Agreement. Any party may change its address for purposes of this Agreement
by giving notice of such change to the other parties pursuant to this paragraph 20.
21.
No Partnership. Nothing in this Agreement shall be deemed to create any
partnership or joint venture between the parties. No party nor its employees or agents shall take
any action (including, without limitation, making any statements or representations, whether oral
or written) giving rise to the impression, or by its silence or failure to act contribute to the
impression, that such party is in a partnership with any other party. No party is granted any right
or authority to assume or to create any obligation or responsibility, express or implied, on behalf
of or in the name of any other party in any manner whatsoever.
22.
Invalid Provisions. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term of this
Agreement, such provision shall be fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid or unenforceable provision or by its severance
from this Agreement, unless such continued effectiveness of this Agreement, as modified, would
be contrary to the basic understandings and intentions of the parties as expressed in this
Agreement.
23.
Successors and Assigns. This Agreement shall be binding upon the parties, and
their respective successors and assigns, and shall inure to the benefit of the parties and their
respective successors and permitted assigns. This Agreement is not assignable by any party
without the prior written consent of the other parties hereto.
24.
Attorneys' Fees. If a dispute arises between the parties with regard to this
Agreement, the parties agree that the non-prevailing party shall reimburse the prevailing party
for all reasonable attorneys' fees, costs and expenses, arising from and after the date of this
Agreement, which are incurred by the prevailing party in connection with the enforcement or
interpretation of rights under this Agreement.
25.
Interpretation Presumption. This Agreement has been negotiated by the parties
hereto. The parties represent and warrant to one another that each has individually, or through
legal counsel, actively participated in the finalization of this Agreement, and in the event of a
dispute concerning the interpretation of this Agreement, each party hereby waives the doctrine
that an ambiguity should be interpreted against the party which has drafted the document.
26.
Counterparts. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one Agreement, and any party hereto may execute
this Agreement by signing any such counterpart. The authorized attachment of counterpart
signature pages shall constitute execution by the parties.
27.
Headings. Section headings are for convenience of reference only and shall in no
way affect the interpretation of this Agreement.
[Remainder of Page Intentionally Left Blank – Signature Page Follows]
Please acknowledge receipt of and agreement with the terms of this Letter Agreement by signing
in the space provided below.
[__________]
________________________
___________ (Date)
[__________]
By:_____________________________
___________ (Date)
Exhibit B – Form Promissory Notes
PROMISSORY NOTE
$[__________]
[__________]
FOR VALUE RECEIVED, [__________] (the “Maker”) promises to pay to the order of
[__________] (the “Holder”) at Charleston, South Carolina, in lawful money of the United States
of America, the principal sum of [__________] DOLLARS ($[__________]) plus simple interest
from day to day outstanding from the date hereof until this promissory note is paid in full at the
rate of [__________] percent per annum ([__________]%). The outstanding principal balance
and accrued but unpaid interest of this promissory note shall be due as follows: a payment of
principal and interest of $[__________] due on [__________],[__________], and [__________],
and a final payment of all accrued and unpaid interest and outstanding principal is due on
[__________].
Provided, however, that the Maker shall have the right to prepay the within obligation in
whole or in part at any time or times without penalty.
All payments made under this promissory note shall be applied, to the extent thereof, first
to the costs and expenses of collection if applicable, second to accrued but unpaid interest, and
third to unpaid principal. Acceptance by the Holder of any payment in an amount less than the
amount then due on any indebtedness shall be deemed an acceptance on account only,
notwithstanding any notation on or accompanying such partial payment to the contrary, and shall
not in any way (a) waive or excuse the existence of any default hereunder, (b) waive, impair or
extinguish any right or remedy available to the Holder hereunder, (c) waive the requirement of
punctual payment and performance in full of this promissory note, or (d) constitute a novation in
any respect.
Upon the occurrence of a default hereunder which is not cured within ten (10) days after
notice thereof, Holder may at any time thereafter exercise any one or more of the following
rights, powers and remedies: (a) Holder may accelerate the maturity date of this promissory note
and declare the unpaid principal balance and accrued but unpaid interest on this promissory note,
and all other amounts payable hereunder, at once due and payable, and upon such declaration the
same shall at once be due and payable, and (b) Holder may exercise any of its other rights,
powers and remedies under this promissory note or at law or in equity.
Maker and any and all sureties, guarantors and endorsers of this promissory note and all
other parties now or hereafter liable hereon, severally waive grace, demand, presentment for
payment, protest, notice of any kind (including, but not limited to, notice of dishonor, notice of
protest, notice of intention to accelerate and notice of acceleration) and diligence in collecting
and bringing suit against any party hereto and agree (a) to all extensions and partial payments,
with or without notice, before or after maturity, (b) to any substitution, exchange or release of
any security now or hereafter given for this promissory note, (c) to the release of any party
primarily or secondarily liable hereon, and (d) that it will not be necessary for Holder, in order to
enforce payment of this promissory note, to first institute or exhaust Holder’s remedies against
Maker or any other party liable therefor or against any security for this promissory note.
All of the rights and remedies of Holder under this promissory note are cumulative of
each other and of any and all other rights at law or in equity, and the exercise by Holder of any
one or more of such rights and remedies shall not preclude the simultaneous or later exercise by
Holder of any or all such other rights and remedies. No single or partial exercise of any right or
remedy shall exhaust it or preclude any other or further exercise thereof, and every right and
remedy may be exercised at any time and from time to time. No failure by Holder to exercise, or
delay in exercising, any right or remedy shall operate as a waiver of such right or remedy or as a
waiver of any default hereunder.
If this promissory note be placed in the hands of an attorney for collection after the same
shall for any reason become due, or if collected by legal proceedings or through the probate or
bankruptcy courts, then all costs of collection, including a reasonable sum for attorney's fees shall
be added hereto as attorney's fees secured and collectible as the principal hereof.
To the extent that any performance of or payments on this promissory note are
subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be
repaid to a trustee, debtor in possession, receiver or other person or entity under any bankruptcy
law, common law or equitable cause, then to such extent this promissory note so satisfied shall
be revived and continue as if such performance had not occurred or such payment had not been
received by Holder, and Holder’s rights, powers and remedies hereunder shall continue in full
force and effect. In such event, this promissory note shall be automatically reinstated if it shall
theretofore have been terminated.
Witness the hand and seal of each of the signers hereof.
WITNESS:
MAKER:
By:
Its:
Exhibit B – Form Promissory Notes
SECURED PROMISSORY NOTE
$[__________]
Charleston, South Carolina
[__________]
FOR VALUE RECEIVED, the undersigned, [__________], a South Carolina limited
liability company (hereinafter referred to as “Borrower”), promises to pay to the order of
[__________] (hereinafter, together with any subsequent holder(s) hereof, being referred to
collectively as “Lender”), at the office of Lender at [__________], or at such other place as
Lender may designate to Borrower in writing from time to time, the principal sum of
[__________], together with interest thereon or on so much thereof as is from time to time
outstanding and unpaid, at the rate hereinafter set forth, in lawful money of the United States of
America which shall, at the time of payment, be legal tender for the payment of all debts and
dues, public and private (hereinafter referred to as the “Loan”), such principal and interest to be
paid in the following manner, to-wit:
From and after the date of this Secured Promissory Note (hereinafter referred to
as this “Note”) and continuing thereafter until the Maturity Date (as such term is
hereinafter used and defined), the amount of interest which is and shall be payable
hereunder shall be charged at a variable rate of interest which is equal to the then
regularly announced prime rate of Lender (referred to herein as the “Note Rate”).
The Note Rate may change as frequently as daily based on any change in the
prime rate. The Note Rate chargeable hereunder shall be redetermined and
adjusted based on any change in the prime rate on the date of any such
adjustment. Notwithstanding the foregoing, however, and notwithstanding
anything contained in this Note or in any of the other Loan Documents (as such
term is hereinafter defined) to the contrary, the interest rate chargeable under this
Note shall in no event and under no circumstances be adjusted during the term of
this Note to a rate which is greater than five percent (5.00%) per annum.
Borrower understands and acknowledges that the prime rate used in determining
the Note Rate merely serves as a basis for calculating rates of interest, that Lender
from time to time advances credit and makes loans at rates both higher and lower
than the rate of interest provided for in this Note, and that the interest rate as
computed hereunder based upon the prime rate is not necessarily the lowest or
most favorable rate charged by Lender.
Interest under this Note shall be computed with respect to each day during the
term of this Note by multiplying the outstanding principal balance at the close of
business on each such day by a daily interest factor, which shall be calculated by
dividing the interest rate applicable at such time by 360. Interest so computed
shall accrue for each and every day (365 days per year, and 366 days per leap
year) on which any indebtedness remains outstanding hereunder, including the
day on which funds are initially advanced and regardless of the time of day such
advance is made, and including the day on which funds are repaid unless
repayment is credited prior to the close of business. Payments made in federal
funds in the place designated for payment and received by Lender prior to 2:00
P.M. local time at said place of payment shall be credited prior to the close of
business.
During the term of this Note, commencing on [__________] and continuing
thereafter until the Maturity Date (as such term is hereinbelow defined), principal
payments in the amount of [__________] plus accrued interest at the Note Rate
shall be payable by Borrower monthly, in arrears. The first such payment of
principal and interest shall be due and payable on the [__________], and such
payments of principal and interest shall continue on the fifteenth (15th) day of
each month until [__________] (herein referred to as the “Maturity Date”).
Notwithstanding anything to the contrary herein, the entire outstanding principal
balance of the indebtedness evidenced by this Note, together with any and all
accrued and unpaid interest thereon, shall be immediately due and payable by
Borrower in full on the Maturity Date.
Each such monthly installment of principal and interest shall be applied first to
the payment of accrued and unpaid interest and the remainder to principal;
provided that, at Lender’s sole option, any such payments may be applied first to
the payment of any accrued and unpaid late charges prior to application of such
amounts to interest and principal as hereinabove provided; and further provided,
that in the event of any Default under the Loan Documents (as such terms are
hereinafter defined), at Lender’s sole option, any such payments may be applied
to amounts due and unpaid under the Loan Documents in such order of priority as
Lender determines to be appropriate. Prepayment of outstanding amounts of the
principal balance of this Note shall not reduce or postpone any regular
installments of principal and interest which are thereafter due, but shall instead be
applied against the outstanding principal balance of this Note in the inverse order
of its maturity.
Borrower hereby agrees to pay, immediately upon demand by Lender, a late charge equal
to five percent (5.00%) of any payment due hereunder if such payment is not made on or before
the tenth (10th) day following the due date applicable to such payment, whether or not such tenth
(10th) day falls on a day other than a business day; provided that, notwithstanding the amount of
any late charge calculated in accordance with the formula set forth in this paragraph, late charges
shall in each case where chargeable hereunder, be a minimum of $100.00 and a maximum of
$1,000.00.
In no event shall the amount of interest due or payable hereunder exceed the maximum
rate of interest allowed by applicable law, and in the event any such payment is inadvertently
paid by Borrower or inadvertently received by Lender, then such excess sum shall be credited as
payment of principal, unless Borrower shall notify Lender, in writing, that Borrower elects to
have such excess sum returned to it forthwith. It is the express intent hereof that Borrower not
pay and Lender not receive, directly or indirectly in any manner whatsoever, interest in excess of
that which may be legally paid by Borrower under applicable law.
All or any portion of the unpaid principal balance of this Note may be prepaid at any time
without the payment of any penalty, premium or unearned interest, provided that, all accrued and
unpaid interest on the unpaid principal balance of the Note up to and including the date of any
prepayment shall be paid by Borrower with such prepayment.
Representations and Warranties. In order to induce Lender to provide the Loan,
Borrower represents and warrants to Lender that:
(a)
Borrower is a limited liability company, duly organized under the laws of
the State of South Carolina and has the power to own its property and to carry on its business in
each jurisdiction in which Borrower operates;
(b)
Borrower has full power and authority to enter into this Note, to make the
borrowing hereunder, to execute and deliver the Loan Documents and to incur the obligations
provided for in this Note and the other Loan Documents, all of which have been duly authorized
by all necessary company action;
(c)
The Loan Documents to which Borrower is a party are the legal and
binding obligations of Borrower, enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency or other laws of general application relating to the
enforcement of creditors’ rights;
(d)
All financial statements delivered by Borrower to Lender prior to the date
hereof are true and correct, fairly present the financial condition of Borrower and have been
prepared in accordance with generally accepted accounting principles, consistently applied; as of
the date hereof, there are no obligations, liabilities or indebtedness (including contingent and in
direct liabilities) which are material to Borrower and not reflected in such financial statements;
and no material adverse changes have occurred in the financial condition or business of
Borrower since the date of the most recent financial statements which Borrower has delivered to
Lender;
(e)
There is no specific fact known to Borrower that Borrower has not
disclosed to Lender in writing which may result in any material adverse change in Borrower’s
business, properties or operations; and
(f)
All advances evidenced by the Note are and shall be for business,
commercial, investment or other similar purposes and not primarily for personal, family,
household or agricultural use.
Affirmative Covenants. Until payment in full of the Note and all other obligations and
liabilities of Borrower hereunder and under the Loan Documents, Borrower agrees and
covenants that (unless Lender shall otherwise consent in writing):
(a)
Borrower shall furnish to Lender as soon as available, and in any event: (i)
within sixty (60) days from the end of each fiscal year, current year-end compiled financial
statements of Borrower; (ii) on or before June 30 of each calendar year, company prepared
financial statements of Borrower; (iii) copies of Borrower's and each guarantor’s federal tax
returns not later than thirty (30) days from the filing date, (iv) current personal financial
statements of each guarantor not later than September 30 of each year, and (v) a current rent roll
for the property secured by the Security Instrument (as hereinafter defined) on or before June 30
and December 31 of each calendar year. All financial statements must be in accordance with
generally accepted accounting principles consistently applied and must include balance sheets,
income information and a list of contingent liabilities and must otherwise be in form and content
acceptable to the Lender.
(b)
Promptly after the receipt by Borrower, or by any guarantor of which
Borrower has knowledge, of notice or complaint of any action, suit, and proceeding before any
court or administrative agency of any type which, if determined adversely, could have a material
adverse effect on the financial condition, properties, or operations of Borrower or any guarantor,
as appropriate.
(c)
Borrower shall promptly furnish to Lender, at Lender’s request, such
additional financial or other information concerning assets, liabilities, operations and transactions
of Borrower as Lender may from time to time reasonably request.
Negative Covenants. Borrower covenants and agrees that from the date hereof and until
payment in full of all indebtedness and performance of all obligations under this Note and the
Loan Documents, Borrower shall not, without the prior written consent of Lender:
(a)
Change Borrower’s name or the legal form of Borrower’s business as shown
above, whether by merger, consolidation, conversion or otherwise, and Borrower shall not
purchase all or substantially all of the assets or business of any person or entity; or
(b)
Sell, lease, or otherwise dispose of any of its assets or properties except in the
ordinary and usual course of its business; or
(c)
Issue, transfer or sell any new class of stock, or issue, transfer or sell, in the
aggregate, from its treasury stock and/or currently authorized but unissued shares of any class of
stock, more than 10% of the total number of all such issued and outstanding shares as of the date
of this Note, or merge into or acquire the capital stock of any entity.
Financial Covenants. Borrower covenants and agrees that from the date hereof until
payment in full of all indebtedness and the performance of all obligations under this Note and the
Loan Documents, Borrower shall at all times maintain the following financial covenants and
ratios all in accordance with GAAP unless otherwise specified, and report quarterly on each of
the following financial covenants and ratios:
[__________]
It is hereby expressly agreed that should any default be made in the payment of principal
or interest as stipulated herein, or should any default be made in the performance of any of the
covenants or conditions contained in this Note, the Security Instrument, or in any of the other
Loan Documents (as such terms are herein used and defined), or any representation or warranty
made in this Note, the Security Instrument, or in any of the other Loan Documents shall prove to
be untrue or inaccurate in any material respect as of the date on which such representation or
warranty is made (any such default being referred to herein and in the other Loan Documents as
a “Default” or “Event of Default”) then, in such event, the principal indebtedness evidenced
hereby, and any other sums advanced hereunder or under the Loan Documents, or any of them,
together with all unpaid interest accrued thereon, shall, at the option of Lender and without
notice to Borrower, become immediately due and payable in full and may be collected forthwith,
regardless of the stipulated date of maturity. In the event of a Default, interest shall accrue on
the outstanding principal balance of this Note from the date of any such Default hereunder and
continuing until the Default is cured, at the rate per annum that is five percent (5.00%) in excess
of the rate that would have accrued hereunder had such Default not occurred (the “Default
Rate”). All such interest shall be paid at the time of and as a condition precedent to the curing of
any such Default.
It is further hereby expressly agreed that in the event of any Default by Borrower, Lender
shall have, in addition to any other remedies available to Lender under any of the other Loan
Documents or at law or in equity, the right to set-off such amounts as may be owed under this
Note against any deposit accounts of Borrower held by Lender and against any other amounts
held by Lender for the benefit of Borrower, except such accounts as are held only in a
representative capacity by Borrower, or Individual Retirement Accounts or other tax deferred
retirement accounts, or as otherwise prohibited by applicable law.
TIME IS OF THE ESSENCE OF THIS NOTE. In the event this Note, or any part
thereof, is collected by or through an attorney at law, Borrower agrees to pay all costs of
collection, including reasonable attorneys’ fees and expenses incurred by Lender.
Presentment for payment, demand, protest, and notice of demand, protest and nonpayment, and all other notices are hereby waived by Borrower. No failure to accelerate the debt
evidenced hereby by reason of Default hereunder, acceptance of a past due installment, or
indulgences granted from time to time shall be construed (i) as a novation of this Note or as a
reinstatement of the indebtedness evidenced hereby or as a waiver of such right of acceleration
or of the right of Lender thereafter to insist upon strict compliance with the terms of this Note, or
(ii) to prevent the exercise of such right of acceleration or any other right granted hereunder or
by the laws of the State of South Carolina; and Borrower hereby expressly waives the benefit of
any statute or rule of law or equity now provided, or which may hereafter be provided, which
would produce a result contrary to, or in conflict with, the foregoing. No extension of the time
for the payment of this Note or any installment due hereunder, made by agreement with any
person now or hereafter liable for the payment of this Note, shall operate to release, discharge,
modify, change or affect the original liability of Borrower under this Note, either in whole or in
part, unless Lender agrees otherwise in writing. This Note may not be changed orally, but only
by an agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, or discharge is sought.
To the fullest extent permitted by applicable law, Borrower hereby waives and renounces
for itself, its successors and assigns, all rights to the benefits of any statute of limitations, any
moratorium, reinstatement, marshaling, forbearance, valuation, stay, extension, redemption,
appraisement, exemption and homestead now provided, or which may hereafter be provided, by
the Constitution and laws of the United States of America and of any State thereof, both as to
itself and in and to all its property, real and personal, against the enforcement and collection of
the obligations evidenced by this Note or the other Loan Documents. Borrower hereby transfers,
conveys and assigns to Lender a sufficient amount of such homestead or exemption as may be
set apart in bankruptcy, to pay this Note in full, with all costs of collection, and does hereby
direct any trustee in bankruptcy having possession of such homestead or exemption to deliver to
Lender a sufficient amount of property or money set apart as exempt to pay the indebtedness
evidenced hereby, or any renewal thereof, and does hereby appoint Lender the attorney-in-fact
for Borrower to claim any and all homestead exemptions allowed by law.
To the extent that any performance of or payments on this Note are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a
trustee, debtor in possession, receiver or other person or entity under any bankruptcy law,
common law or equitable cause, then to such extent this Note so satisfied shall be revived and
continue as if such performance had not occurred or such payment had not been received by
Lender, and Lender’s rights, powers and remedies hereunder shall continue in full force and
effect. In such event, this Note shall be automatically reinstated if it shall theretofore have been
terminated.
To the fullest extent permitted by law, Borrower hereby waives any right Borrower may
have under any applicable law to a trial by jury with respect to any suit or legal action which
may be commenced by or against Lender concerning the interpretation, construction, validity,
enforcement or performance of this Note or any other agreement or instrument executed in
connection herewith. In the event any such suit or legal action is commenced by Lender,
Borrower hereby expressly agrees, consents and submits to the personal jurisdiction of any state
or federal court sitting in Charleston County, South Carolina, with respect to such suit or legal
action, and Borrower also expressly consents and submits to and agrees that venue in any such
suit or legal action is proper in said courts and county and Borrower hereby expressly waives any
and all personal rights under applicable law or in equity to object to the jurisdiction and venue in
said courts and county. The jurisdiction and venue of the courts consented and submitted to and
agreed upon in this paragraph are not exclusive but are cumulative and in addition to the
jurisdiction and venue of any other court under any applicable laws or in equity.
All notices, demands or requests provided for or permitted to be given pursuant to this
Note must be in writing and shall be deemed to have been properly given and to be effective: (i)
immediately, when personally delivered to the intended recipient or when delivered in person to
the address of the intended recipient as specified below; (ii) three (3) business days after having
been sent, by certified or registered mail, return receipt requested, addressed to the intended
recipient at the address specified below; or (iii) at noon of the business day next following after
the date of deposit into the custody of a nationally recognized overnight delivery service,
addressed to such party at the address specified below. The time period in which a response to
any notice, demand or request must be given or cure effected, if any, shall commence to run from
the effective date of receipt of any such notice, demand or request, as set forth above. Rejection
or other refusal to accept or the inability to deliver because of changed address of which no
notice was given shall be deemed to be receipt of the notice, demand or request sent. By giving
at least thirty (30) days’ written notice hereof, Lender and/or Borrower shall have the right from
time to time and at any time during the term of this Note to change its respective address, and
shall have the right to specify as its address any other address within the United States of
America. For the purposes of this Note, the initial notice address of:
Borrower is:
[__________]
with a copy to:
[__________]
Lender is:
[__________]
with copy to:
[__________]
If any provision of this Note or the application thereof to any person or circumstance
shall be invalid or unenforceable to any extent, the remainder of this Note and the application of
such provisions to other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law or in equity.
The indebtedness evidenced by this Note and the obligations created hereby are secured
by that certain Mortgage, Assignment of Rents, Security Agreement and Financing Statement (as
amended from time to time, hereinafter referred to as the “Security Instrument”) from
Borrower to Lender dated of even date herewith with respect to certain property located in
Charleston County, South Carolina. The term “Loan Documents” as used herein shall be
deemed to mean and include this Note, the Security Instrument, and any and all other documents
and instruments at any time evidencing, securing or otherwise relating to the indebtedness
evidenced by this Note, as each may amended from time to time.
This Note is intended as a contract under, and shall be construed and enforceable in
accordance with, the laws of the State of South Carolina.
This Note and the other Loan Documents are freely assignable by Lender, and any
assignment thereof by Lender shall operate to vest in the assignee all rights and powers herein
conferred upon and granted to Lender under this Note and the other Loan Documents.
As used herein, the terms “Borrower” and “Lender” shall be deemed to include their
respective heirs, successors, legal representatives, and assigns, whether by voluntary action of
the parties or by operation of law. Except as otherwise expressly set forth herein to the contrary,
all defined and capitalized terms in this Note shall have the meaning and definition as set forth
and provided for in the Loan Documents.
IN WITNESS WHEREOF, Borrower has caused this Secured Promissory Note to be
executed under seal by its duly authorized representative as of the date first above written.
BORROWER:
[__________]
(SEAL)
By: ___________________________
Name:
Title:
Mark Nichols
Mark D. Nichols is an associate with Polenberg Cooper, P.A. in Fort Lauderdale, Florida. He
focuses his practice on business litigation and arbitration. Before joining the firm, Mark worked
at a plaintiff’s personal injury boutique firm in Venice, FL, and a business litigation and
securities arbitration boutique firm in West Palm Beach, FL. Mark received his J.D. from
University of Florida Levin College of Law in 2008 (cum laude). Additionally, Mark clerked for
the Honorable James Whatley, Second District Court of Appeal. Prior to law school, he received
a B.S. degree from the University of Florida majoring in business administration with a focus in
finance. Mark remains incredibly active with several bar associations, including serving on the
Florida Bar Business Law Section’s LLC Drafting Task Force and chair of its Business
Litigation Committee, and also serves as the ABA Young Lawyers’ Division Business Law
Committee Chair.
Michael Hickerson
Michael Hickerson practices in the areas of financial services and general corporate practice
work. He has advised borrowers and lenders in complex financial transactions involving
syndications and participations, real estate lending, asset-based lending, and debt restructuring.
He has also advised businesses and their ownership groups in structuring and negotiating stock
and asset sales and acquisitions, and in a variety of corporate matters, including reorganization,
shareholder and operating agreements, joint ventures, and general contractual matters.