Indemnification and Insurance Indemnification by State Law, Charter and Contract
January 01, 2004
In addition to exculpating directors from personal liability in some cases, state corporation statutes authorize the use of corporate funds under certain circumstances to indemnify directors and officers for personal losses incurred by them in their official capacities. To varying extents, depending on the particular nature of the claim, the kinds of claims that a director may be indemnified with respect to include breach of fiduciary duty, violation of securities laws, or personal injury (<i>eg</i>, employment discrimination). Generally, the statutes require a corporation to indemnify a director for expenses incurred in the successful defense of a claim.
Selected Pitfalls to Avoid in the Sale of Refranchised Units
December 01, 2003
The sale of company units to franchisees ("refranchising") differs from a traditional asset sale because the transaction contemplates a continuous business relationship between the parties. The basic terms of this relationship should be outlined in a letter of intent and will be contained in the provisions of the various transaction documents, including the Asset Sale Agreement (ASA), related transfer documents, such as deeds, leases, subleases, assignments, bills of sale, etc., one or more franchise agreements and, if the obligation to develop additional units is part of the transaction, a development agreement. This article continues the discussion of refranchising in last month's issue by reviewing some of the issues that the parties should consider carefully as they document their on-going relationship post closing.
News Briefs
December 01, 2003
Highlights of the latest franchising news from around the country.
Cameo Clips
December 01, 2003
Recent cases in entertainment law.
New Release from Time Matters
December 01, 2003
Time Matters Version 5, the latest iteration of the popular law practice management program, was released in May, 2003, and Service Release 1, which added more features, such as linking to HotDocs v. 6, was released in August.
Containing Health Insurance Cost Increases
December 01, 2003
There's no relief in sight from rising health-care costs. Hewitt Associates, of Lincolnshire, IL, projects that health care costs will increase 15.4% this year, following an average rate hike last year of 13.7%. If this trend continues, Hewitt estimates, health coverage cost will double over the next 5 years. Law firms coast-to-coast therefore continue to search for their own magic bullets. While doing so, however, they're being careful not to shoot themselves in the foot. Firms see a strong benefits package as critical to retaining and recruiting employees, and therefore take a largely conservative approach to managing health-care costs - trying to maintain generous levels of coverage while minimizing the financial blow to employees.
New In-House Counsel Duties Under SAS 99
December 01, 2003
In its continuing effort to respond to high profile fraudulent financial reporting and to strengthen safeguards against fraud and the misappropriation of funds, the American Institute of Certified Public Accountants (AICPA) has issued Statement on Auditing Standards 99: Consideration of Fraud in a Financial Statement. Generally known as SAS 99, the new standard imposes additional requirements on the audit process and applies to audits of 2003 financial statements for both public and private companies. As in-house corporate counsel, you can be affected by this new measure in several ways, most notably in the information you may be required to gather and the questions you may be expected to answer. In addition, certain information gathered under SAS 99 can help public companies meet requirements imposed by the Sarbanes-Oxley Act.
Board Protection: Individual Liability Insurance for Independent Directors
December 01, 2003
In the wake of recent corporate governance scandals, independent directors of public companies face increased levels of scrutiny and heightened prospects for the risk of personal liability. Recent court decisions have criticized directors of public and private companies for insufficient attention to their duties. The Sarbanes-Oxley Act of 2002 (S-O) and the proposed corporate governance reforms of the New York Stock Exchange (NYSE) and the Nasdaq Stock Market (Nasdaq) call for decisions about critical matters such as accounting policies and executive compensation to be made solely by directors who meet rigorous independence standards. In response to the ongoing tide of corporate governance reforms as well as the rising numbers of shareholder lawsuits and escalating settlement costs, insurance companies have sharply increased premiums for traditional directors' and officers' liability insurance (D&O insurance), which typically insures officers and directors as well as the company itself. At the same time, insurers have narrowed the scope of coverage of D&O insurance policies in terms of both dollar limits and the types of insured events.
Advice on Avoiding Misunderstandings in Premises Measurement
December 01, 2003
What could be simpler, more mundane, and less worthy of a lawyer's attention than lease provisions dealing with a business term — the square footage of the premises? However, a lawyer's failure to define the agreed-upon method of its measurement properly in the lease can lead to headaches and even litigation as the lease term progresses. Because measurement standards are not mandatory or legislated, the parties are free, depending on their relative market positions, to agree upon the method to be used in the lease. Often the measurement of square footage is referred to in terms that are imprecise and have no legal definition. Depending on the area where the building is located, measurement methods may vary and a landlord may have its own method that is a modified form of a particular standard of measurement. Without a specified measurement standard and the right to confirm a landlord's measurement, a tenant could end up paying more for its space than it intended (or budgeted); and may later find itself unable as a practical matter to contest a landlord's measurement of an expansion space.
