A partner at your law firm, USC Law LLP, has informed you that the letter of intent between your client, Red & Gold Capital Partners, LLC, a Delaware limited liability company (the “Client”), has been executed with Winning Widgets, Inc., a Delaware corporation (the “Company”). A letter of intent has also been executed. Definitive documentation, including the Asset Purchase Agreement (the “Purchase Agreement”), is well under way.
The partner you are working for has asked you to prepare two documents, a Legal Due Diligence Memorandum and Disclosure Schedules, each as described in further detail below. She has also made clear that you should be checking the data room (the “Data Room”) every week to make sure you stay on top of any updates that may be uploaded prior to closing. Please be sure to check all of the folders in the Data Room.
In the case of both assignments, the partner has provided two precedent forms that you should use
– these are also included in the Data Room under the “Project Trojan Horse” folder. She has reminded you to remove all brackets and replace such bracketed blanks with the information relevant to your transaction. Also, be sure to (i) delete anything that may not be relevant (e.g., the reference to the Management Call in the Legal Due Diligence Memorandum precedent), and (ii) use your “Proper Drafting” handout while you work on your assignment. Because the Client is sensitive to timing, no late assignments will be accepted past the hard
deadline.
Legal Due Diligence Memorandum
The Client has asked us for a summary of the material terms of EVERY document (agreements/contracts) uploaded to the Virtual Data Room for Project Trojan Horse. Use your judgment and what we cover in class to briefly summarize the most material points of each agreement from a legal perspective (e.g., don’t focus on business points unless they are very significant, e.g., large milestone payments), and use the rest of these instructions as a guideline.
The partner is busy drafting changes to the Asset Purchase Agreement, so she is relying on you to use your best judgment – remember, the partner is looking for concise and brief, but useful, information. The partner you are working with has emphasized that formatting is important, and the Client won’t tolerate sloppiness.
For each agreement you review, please identify and briefly summarize the categories set forth below. If a particular agreement does not include one of the requested categories, please state in your memorandum something to that effect, but please stay consistent in your approach across all categories.
If no information in the Data Room for a particular category is included on the precedent form of the Legal Due Diligence Memorandum exists, please state in your memorandum something to that effect, but please stay consistent in your approach across all categories. The legal precedent memo is only a form to guide you. Not everything on the form applies to the information in the data room. Said another way, the agreements in the data room may not address all of the information on the form. If that is the case, simply delete the applicable provisions from
your legal memo. Finally, if you identify anything interesting that merits further attention, please be sure to point it
out in a brief supplemental legal due diligence request list (no more than five items) at the end of your memorandum. The Client will be extra happy (and perhaps give you extra points) if you identify areas for review that they have not already considered. For every agreement, to the extent applicable, provide: (i) the name of and parties to the agreement,
(ii) any anti-assignment or change in control provisions that may be relevant with respect to the Client’s acquisition of the Company (for purposes of our transaction, we are not concerned with the ability of third parties to assign under the contracts we review), (iii) the term of the agreements you review as well as any related renewal provisions, and (iv) the information referenced below specific to the category.
For Employment Agreement Documentation:
• Please briefly summarize the employee’s title and role.
• Please briefly summarize all elements of the employee’s compensation, including a summary of any equity grant to such employee, bonuses, benefits and perks.
• Please briefly describe how the situations where the employee may be terminated – please be concise in your summary, for example, you do not need to list all circumstances where an employee may be terminated by the Company for “Cause” or where the employee may terminate for “Good Reason.”
For Customer/Supplier Documentation:
• Please briefly summarize what product, purpose and/or service is involved.
• Please briefly summarize any provisions related to exclusivity and/or any restriction on the Company’s ability to compete in any manner.
• Please briefly summarize any license grant (inbound and outbound) and the inbound and outbound intellectual property subject to such grant.
• Please identify any territories applicable to the agreements you review.
For License Documentation:
• Please briefly summarize the license grant (inbound and outbound) and the inbound and outbound intellectual property subject to such grant.
• Please briefly summarize any provisions related to exclusivity and/or any restriction on the Company’s ability to compete in any manner.
• Please identify any territories applicable to the agreements you review.
For Financing Documentation:
• Please note the purpose of the financing.
• Please briefly summarize any provisions related to interest, repayment and term.
• Please identify any restrictions on the use of the proceeds.
For Real Property Documentation:
Leased Property
• Please identify the address/location and square footage of the facility.
• Please explain the rent provisions.
• Please summarize the assignment provisions.
To be Purchased Property
• Please identify the property.
• Please explain the material terms such as purchase price, closing date and relevant closing conditions. Please also explain if the Seller disclosed any other relevant due diligence material related to the purchase.
• Please include any relevant detail for assignment provisions so the Client knows what to expect.
Please limit your memo to no more than 14 pages, including the cover page, table of contents and any appendix. You do not need all 14 pages to draft a great memo
