Suggested Clauses and Provisions Archives

Key Man / Key Woman Clause – How to Protect Your Key Business Relations

Published on August 14th, 2018 by Alan L. Sklover

“A satisfied customer is the best business strategy of all.”

– Michael LeBoeuf

ACTUAL CASE HISTORIES: Rita was a highly regarded Senior Sales Account Manager for an industrial plumbing supplies company headquartered in Springfield, Illinois that catered to a handful of large construction firms in the Upper Midwest and Canada. Over 20 or so years, she had developed strong client relationships based in a deep trust for her good judgment and for her devotion to client interests. Her clients often said of her “If you need something, and need it ‘yesterday,’ you need to call Rita.” She had also built a small but effective support team around her.

Rita was recruited by a large competitor headquartered in Milwaukee, Wisconsin, to serve in a significant Business Development role, with the expectation that she would bring along her “Book of Business,” that is, her established network of clients and their business. While she was presented with a significant increase in compensation, she was not quite certain it was the right move for her clients, many of whom enjoyed “white glove,” personal treatment they had grown accustomed to over the years.

Wisely, Rita sought ways to protect her “Book of Business,” what some people refer to as her “B.O.B.” She sought one or more ways she could assure her clients and client referral sources that she would “be there for them” whenever and however they needed. She sought, too, a way she could always keep her support team with her.

Her primary concern was that she would join the new company and, in any agreements, somehow lose access to her critical business relations. What might happen if she left the new company, or was asked to leave, for any reason? Like most employers, her prospective employer required their employees sign to a non-compete agreement, prohibiting them from providing services to “the company clients,” which is precisely what “Rita’s clients” would become, if she let that happen.

Rita would also be required to sign a “non-solicit/non-hire” agreement, barring her from taking any members of her support team with her, in the event she left or was asked to leave.

We helped Rita solve these two problems with the use of “Key Man / Key Woman” clauses that her prospective employer reluctantly agreed to, in order to “acquire” Rita, her team, and most especially, her clients. So, if for any reason Rita left the new company, or if for any reason she was not in charge of her clients’ business, Rita’s clients could take their business – and take Rita and her team, too – to another company.

LESSON TO LEARN: As an employee, you are referred to as a “Human Resource.” I happen to deplore that term, as I find it to be a dehumanizing phrase. But, as a “Human Resource” you may be seen as a “source” of new, additional, and very valuable business from new, additional and very valuable clientele. This is precisely why we use “Key Man / Key Woman” clauses and agreements: to offer that to your employer, but to always maintain your access to your “B.O.B.,” and your “B.O.B.”‘s access to you.

Good relations with staff members, colleagues, vendors, customers and clients are of critical value in every business and profession. That is why employers try so hard in numerous ways to ensure that their employees do not “steal” them, even when it was the employee, himself or herself, who brought the client to the employer. It is beyond question that it is in your own best interests to try to keep those valuable business relations, to prevent their “theft” from you, no matter where you are, where you go, or what you do.

Having good, strong, close relations with clients and customers makes you the “rain-maker” that is one of the most important attributes of a successful business person. Having good, strong, close relations with colleagues makes you the “magnet” that can attract, maintain and take with you the best and brightest of talent. Having good, strong, close relations with support staff gives you the ability to move your business to its most fertile location and have intact, when you need it, reliable, trustworthy, confidence-enhancing support.

We see many Key Man / Key Woman clauses in contracts used by sport agents and agents for movie/TV talent. It is not common knowledge, but a good number of senior executives request in their own employment contracts that provide that, if the CEO should depart for any reason, be it voluntary, due to disability or death, or involuntary, due to misconduct reasons or otherwise, they have the option, but not the obligation, to depart free from further obligations and continuing restrictions to the employer.

“Key Man / Key Woman Clauses” are one of the best ways to protect your “key business relations.” And, if you may have the leverage to safeguard your own “key business relations,” why not at least try?

WHAT YOU CAN DO: If you have such key business relations – and so many people do – consider the use of Key Man / Key Woman clauses to protect them. Here are some very valuable pointers:
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Offer Letter or Company Plan – Which One Governs?

Published on October 10th, 2017 by Alan L. Sklover

“Whoever is careless with the truth in small matters
cannot be trusted with important matters.”

– Albert Einstein

ACTUAL CASE HISTORIES: Case History 1: Joseph signed an Offer Letter that said the following: “The Company will provide you and your family with health insurance coverage, subject to the terms provisions and conditions of the Company Health Insurance Plan.” Sounded good to Joseph.

After starting the job, though, Joseph found out that the terms of the Company Health Insurance Plan provided that “New employees and their families are not eligible for paid health insurance coverage until the employee has been on the job for six months.” So, the “terms and provisions” of the Plan essentially took away what the Offer Letter had seemed to provide Joseph and his family. Big disappointment, to say the least. In this case history, the Plan “overcame” or “superseded” what was in Joseph’s Offer Letter, or at least modified it to his and his family’s significant detriment. Ouch!

Case History 2: When Lemuel started his job, he was very interested in the company’s willingness to offer stock options to its employees. For this reason, he carefully reviewed the terms of his employer’s Stock Option Plan. It said quite clearly that “Company employees will receive a minimum of 1,000 stock options for each twelve months on the job, unless agreed otherwise.” Sounded great to Lemuel.

After a year on the job, Lemuel asked his Human Resources representative if he could get a written statement of how many stock options he had been awarded. To his surprise, he was told “You don’t have any.” When Lemuel insisted on an explanation, she responded, “Your Offer Letter stated clearly ‘Your compensation consists of a base salary, an annual bonus and health care coverage. No other compensation is being offered to you. To receive any additional form of compensation, you and an authorized representative of the Company and you must sign another document that provides that to you.”

So, the “terms and provisions” of Lemuel’s Offer Letter essentially took away what the Stock Option Plan had seemed to provide Lemuel and his family. In this case history, the Offer Letter “overcame” or “superseded” the Company’s Stock Option Plan. Ouch! Big disappointment, to say the least. Seems that the Offer Letter took away what the Stock Option Plan seemed to provide, by “overcoming” or “superseding” what was in the company’s Stock Option Plan.

Does your Offer Letter (or employment agreement) overcome everything that is said in any of the employer’s compensation and benefit Plans? Or do your employer’s compensation and benefit Plans overcome your Offer Letter (or employment agreement)? How can you tell? Perhaps, more importantly, what can you do?

LESSON TO LEARN: If they differ, which one – your offer letter or your employer’s plans – “govern and control?” It all depends, of course, on the wording of the documents – both offer letter and plan – and your willingness to take the time and effort to (a) read them carefully, and (b) ask for clarification, either on your own or, perhaps, with the guidance of an experienced employment attorney.

These days, with employers trying their very best to lower their “employment-related overhead costs,” we are seeing more and more of these issues, and sadly, most often only after someone has lost out on what they deserve.

But you can protect yourself, if only you are willing to try to do so by (i) reading carefully, (ii) thinking carefully and (iii) requesting clarification that even a 10-year old could understand.

That’s what we call wise “navigation and negotiation” of your employment relation, to ensure you get all you deserve, and don’t miss out on anything you do deserve.

Take it from me: unless you act to protect yourself, no one else will, especially your employer.

WHAT YOU CAN DO: Have you received an offer letter, or are you expecting to receive one soon? Do you believe you are entitled to any compensation or benefit that is provided under a company Plan, such as stock, stock options, severance, health care, disability insurance, life insurance, educational benefits, or otherwise? To avoid being deeply disappointed, here are seven things you can – and should – do to protect yourself:
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“In-The-Meantime” Clause – This is One to Remember, and Request

Published on November 8th, 2013 by Alan L Sklover

You can’t do better than to expect the unexpected.

“Nothing is so certain as the unexpected.” 

-       English Proverb

TWO ACTUAL “CASE HISTORIES”: Melinda was a 32-year-old family practice physician recruited to leave her home and practice in the suburbs of Boston to join a large family-medicine practice in southern Maine. As is so often the custom, she was told that after two years of practice, provided her skills and demeanor were found to meet the practice’s standards, she would become a Partner in the practice, with a 15% ownership stake.

Melinda had no qualms about the deal. First, she was entirely confident she would meet all criteria for becoming a Partner in the practice. Second, it was spelled out entirely clearly in her contract, and her brother – an experienced attorney – said “It could not be clearer.” Third, the practice was a growing one, and her 15% ownership would surely “set her up for life.”

Then, 18 months after Melinda joined the medical practice, something entirely unexpected happened: a corporate health service headquartered in Boston made a very significant offer to purchase the family medical practice in order to merge it into their growing network of family medical service centers throughout the northeast U.S. The physician-partners all sold their shares in the medical practice for a handsome price, and were offered long-term jobs afterwards.

Melinda? Because she had not been a physician in the practice for two full years, she got nothing. She was not even offered a job by the corporate health service. It all came to be a very large loss to her – and a serious setback in her life plans.

Something very different happened to Howard, a 31-year-old hedge fund trader at a small hedge fund in St. Louis. After leaving a large Wall Street firm, he joined the hedge fund in large part because he was offered ten percent (10%) of the firm stock if he remained with the firm for two full years. Like Melinda, Howard saw it as an opportunity to become an “owner,” and to establish himself for the long term.

Fortunately for Howard, we assisted him with his contract of employment that provided him with his ten percent (10%) ownership interest. We insisted on what we call an “in-the-meantime” clause that provided that, if anything happened “in the meantime” to prevent his receipt of fully vested stock due to no fault of his own, in all events Howard would receive the stock or its equivalent in value in cash.

Sure enough, when Howard’s small hedge fund merged with a large hedge fund headquartered in Chicago, the owners received a hefty purchase price. Howard’s stock did not get a chance to vest, so he would likely lose out completely, as Melinda did. In Howard’s contract, though, his “in-the-meantime clause” saved the day. Because it was there, Howard received the same purchase price as if he had owned the stock.

LESSON TO LEARN: An ounce of “in-the-meantime” forethought is surely worth more than a pound of “I wish I had thought of that,” or even a ton of “I can’t believe what just happened.”

If, in your employment negotiations, you are being offered a “thing of value,” but must wait to receive it – whether it is elevation to a partnership, an annual bonus, vested stock or stock options, a promotion, or a coveted sales territory, just to name a few – insist on an ‘in-the-meantime” clause to provide that, if for any reason other than your own misconduct you don’t receive it, you will be given either its monetary value or an alternative, but no less valuable “thing of value.”

Chances are you will never need it. But, if you do, you sure will be glad you have it.

WHAT YOU CAN DO: So many of our clients have requested, and received, “in-the-meantime” clauses in their offer letters, employment agreements, relocation agreements, retention agreements, and other work-related contracts. While few have ended up needing to exercise their rights under their “in-the-meantime” clauses, those who have done so have been just thrilled to have the “safety net” they provide. Here are five things you can do to help yourself in this regard: Read the rest of this blog post »

“Repayment Obligations When Leaving a Job – How to Get Them Waived”

Published on July 30th, 2013 by Alan L Sklover

Here are 10 Ideas to Guide You

“To achieve anything, you must be prepared
to dabble on the boundary of disaster.”   

–       Stirling Moss

ACTUAL “CASE HISTORIES”: Bernie was both proud and pleased when, after 24 months of extra effort, he obtained his Executive MBA in Finance. Though it was 24 months of both full-time work and part-time study, requiring time away from his family and hobbies, he was certain it would be worth it in the long run. And, too, he was fortunate that his employer covered two-thirds of the costs of tuition and books, which came to their contributing almost $70,000. 

To take advantage of his employer’s MBA Assistance Plan, Bernie had to sign a simple “Reimbursement Agreement” that required him to remain with the company for three years, so that the company would see a “return” on its “investment” in him. If he did not remain there for three years, he had to repay the $70,000. 

Bernie’s Repayment Agreement was rather standard, and read something like this: 

“(1) As a material condition to your eligibility for MBA Assistance Plan benefits  (hereafter called “Plan Benefits”), you promise that you will immediately repay to the Company all Plan Benefits you have received, or that have been paid on your behalf, if you should depart from the Company’s employment for any reason whatsoever, other than due to (a) death, (b) medically certified disability lasting more than twelve months, or (c) retirement under the Company’s Retirement Plan (which three events shall be called “Waiver Events”) within three (3) years from the last date you received Plan Benefits or Plan Benefits were paid on your behalf. 

(2) In the event of your failure to immediately repay the Company the Plan Benefits as required, other than in a Waiver Event, you will be liable for, and promise to repay, the Company for all of its reasonable legal expense incurred in its collection efforts.”

All Bernie had to do was remain with the company for three years, and the $70,000 repayment obligation would be entirely forgiven. He gladly signed, because he saw an Executive MBA in Finance, substantially financed by his employer, as entirely in his interests, and a mutual expression of confidence in his future. And his employer saw it in its interests, as well.

Fourteen months later, it didn’t seem so simple. Bernie was notified that his division was being relocated from Connecticut to Texas to consolidate operations and reduce overall costs. He was asked to relocate from Connecticut to Texas with the division. However, with two children in high school, and one in middle school, he was not keen on making the move. His wife, too, was strongly against it, as her mother was in a nursing home a few blocks away from their home, and she visited with her mother on a daily basis.

Through discussions with Human Resources, Bernie learned that, if he decided not to make the move to Texas with his division, he would be entitled to six weeks of severance. Though it seemed meager, it was, at least, something. However, he also learned that his failure to relocate would also entail his having to repay the company the $70,000 MBA assistance it had invested in him. How’s that for an unexpected “bump in the road?”

Bernie consulted us about his dilemma. His initial question was “Does my repayment duty really take effect in this situation? I mean, I’m not resigning to go work for another employer.” As is our usual role, we sought ways to assist in solving his problem. We read his Reimbursement Agreement, and found some of its wording helpful. We considered, too, other facts, events and circumstances which would be helpful in Bernie requesting a waiver of his reimbursement obligations.

With our assistance, Bernie “presented his case” to Senior Management regarding why his Reimbursement Agreement obligations should be waived. After a few weeks, and two meetings with Human Resources, Senior Management finally agreed; his repayment was waived. That $70,000 savings was surely worth the effort.

LESSON TO LEARN: It is a very good thing for everyone that employers invest in their employees. It may be by means of educational assistance, relocation assistance, loans to enable purchases of the employer’s stock, retention bonuses, emergency advances of salary or commissions, or even sign-on bonuses. And it is entirely appropriate for employers to want – and expect – to get a “return” on their “investment,” and for this reason to require written agreements that give both employer and employee a clear understanding of the terms of the employer’s “investment” and the employee’s obligations regarding it.  

But, in life, “stuff happens.” That is, unforeseen events unfold that bring about changes in circumstances that we were unable to predict, but must nevertheless respond to. That ability to predict what might take place “up the road, around the curve, and over the horizon” is not without its limits. As the old proverb goes, “Man plans, God laughs.”

Chances are you may one day sign a Repayment Obligation of one sort or another, and then be faced with a good reason to ask that your repayment be waived. If so, you owe it to yourself and your family to make that request. 

There are many good reasons upon which to support a request for a waiver of a Repayment Obligation. In fact the list is nearly limitless. And, too, there are better ways to request waiver of a Repayment Obligation. The important lesson is “If you don’t ask, you surely won’t receive.”      

WHAT YOU CAN DO: Many of our clients have been successful in getting Repayment Obligations of all kinds – including assistance for education, relocation, loans and sign-on bonuses – waived when they depart from their employers. Here are ten thoughts to guide you, as well, to that goal:   

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“No Less Favorable” Clause – Helpful, Especially at Negotiation Impasse

Published on May 25th, 2005 by Alan L Sklover

“No Less Favorable”
– A Powerful Negotiating Concept

ACTUAL CASE HISTORY: In 1995, Petra joined a small St. Louis-based software development company as its 10th employee. She was hired to assist one of the three partners in his dealings with prospective customers. Over the next seven years, Petra worked hard, and grew in responsibility as the company grew in revenues. Seven years later, in 2002, there were 185 employees, with offices in four cities. While rising to the position of Senior Vice President of Business Development, Petra had helped build the customer base from 38 to 174. Unfortunately, her compensation hadn’t grown nearly as much.

Petra experienced first-hand what few people realize: rapidly growing companies struggle increasingly to pay bills, to balance cashflow, and to maintain sufficient working capital. As is common in growing companies, cashflow always seemed tight. Every equipment purchase, every marketing campaign, and every new office seemed to devour available company resources. For Petra, this meant her raises had been minimal, her bonuses had been negligible, and her benefits remained limited. Petra’s boss knew her value, and prized her contributions, but felt he couldn’t afford to do much better. When Petra asked that her compensation be raised to what she thought was “market” for her skills, her boss shrugged, and said, “maybe next year,” or “possibly, if we go public.” Petra even asked about the possibility of “becoming a partner,” but was told, “We’re not ready to do anything like that.”

In January, 2002, just before Petra’s scheduled annual performance review, she consulted us. She didn’t want to leave the company; in many ways it was like her “home.” At the same time, she felt she wasn’t earning enough for her family, her retirement, and her kids’ education. And given the poor state of the economy in 2002, there didn’t seem to be many jobs available in software sales. One suggestion we made was that in her negotiations she request “no less favorable” treatment. In other words, if the company ever decided it could provide its executives compensation, benefits and equity at a level closer to “market,” then Petra, too, would be entitled to that same — or better — treatment. In international trade and diplomacy, this is sometimes referred to as “most favored nation” status.

At her annual review, Petra raised the issue with her boss. “You know, Jim, if and when the company finally does have the revenues to give market-rate compensation and benefits, I’d like to know that I’ll be first in line.” “Sure,” he responded, “Isn’t that what I’ve always told you? . . . when we have the money.” In fact, that was exactly what he’d told her for years. In his memo to HR confirming Petra’s two percent raise, Petra had her boss insert a notation that “Petra has expressed disappointment with her raise this year, and in prior years. When the company elevates its executive compensation in the future, Petra should be treated no less favorably than other executives at her level.” It wasn’t money in her pocket, but it was potential advantage, which is better than no advantage at all.

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Alan L. Sklover

Alan L. Sklover

Employment Attorney
and Career Strategist
for over 35 years

Job Security and Career Success now depend on knowing how to navigate and negotiate to gain the most for your skills, time and efforts. Learn the trade secrets and 'uncommon common sense' of Attorney Alan L. Sklover, the leading authority on "Negotiating for Yourself at Work™".

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