MPL General Counsel Corner – Do you feel like your head is on a bit of a swivel?

A year ago, I can remember writing an update that said things were getting back to normal as we moved further away from the Covid related shutdowns.  Fast forward to today and businesses are fighting supply chain constraints, hyperinflation, rising interest rates and the impact of international strife.  Contracts keep changing, people don’t want to be in the office full time, vendors push deliveries out and so on.    Do you feel like your head is on a bit of a swivel?

So, what can you do?  How do you solidify your business foundation, keep moving forward, and possibly grow into new areas?  To help trigger some thought, how about considering the following questions:

  1. When do your vendor contracts renew?
  2. What are the options if your key supplier goes out of business?
  3. What is this whole “Force Majeure” thing and do I really have to worry about an “Act of God”?
  4. What’s the point of paying for business interruption insurance, it did not cover me with the pandemic shutdown?
  5. I would like to allow some of my staff to work virtually, but I am stuck in a long-term office lease with a lot of unneeded space.  What are my options?
  6. I have key client agreements coming up for renewal.  What should I be adding or modifying in the agreement in this new pandemic environment?
  7. With my employees working virtually all over the country (and even the world), what taxes am I responsible for?
  8. Do I have the right strategy in place for my business?

This list could go on and on.  What are you going to do with your business and how will you react?  Remember, you are not alone and stranded on an island.  It may be time to sit down with your team (mentors, professional advisors and senior leaders) and talk about these issues.  I think you will find that the issues become less of an “issue” and evolve into more of a “solution”.

Happy Memorial Day to everyone and a heartfelt thanks to all those who serve (both past and present) our country!
Here are a few other things that may be of interest:

Helpful Resource Pages

 

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com) or anyone in our office with questions or comments.  

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.  

MPL General Counsel – Oh Employees, Where Art Thou?

When I owned a business, not in the legal industry, one of the biggest challenges I faced was finding and keeping qualified employees.  Today, as many of you know, that challenge still exists and if anything has only amplified.  On the low end of the pay scale, you can lose an employee or candidate to as little as a few quarters per hour.  On the high end, you compete with not only higher salaries but more comprehensive benefit packages which can be offered by larger organizations.

However, putting all that aside, let’s say you are ready to extend an offer to the perfect candidate.  How do you hire them?  What is the difference between a W-2 employee and a 1099 contractor?  If you think you can onboard someone as a 1099 and they are really a W2 employee, you are putting your company at risk if an audit were to occur.  On the flip side, if you have a true 1099 contractor and you don’t memorialize that arrangement with certain contractual protections, you are also jeopardizing your firm as well.

I am not trying to dissuade you from bringing more staff on board.  Your employees are the lifeblood of your organization.  However, some due diligence and thought into your hiring process is needed to protect your company’s interests.  Below are some helpful tips to consider when you are on the hunt for additional staff.  Oh employees, where art thou?

Best of luck with this process and don’t forget that your professional advisors, business mentors and existing staff can be some of your best sources for advice.

Helpful Resource Pages

 

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com) or anyone in our office with questions or comments.  

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.  

MPL General Counsel – It Ain’t Over ‘til It’s Over

The big day is coming.  You have crossed all the T’s and dotted all the I’s, or have you?  There are a few crucial, yet often ignored items that you and your M&A team should make sure is finalized prior to at closing.

  1. Closing Process – How will closing be handled?  Will it be in person or virtual?  Who is holding any escrowed funds?  How will the money be transferred?
  2. Settlement Statement/Flow of funds – Just like buying/selling a house, the same holds true for a business.  I highly recommend that you have a settlement statement prepared which details the sources and uses of funds.
  3. Closing documents – Unless you are doing a “sign and close”, you should already have an executed purchase agreement.  In that purchase agreement, there are likely schedules which should be finalized and exhibits that need executed.  Examples of exhibits include a bill of sale, an assignment and assumption agreement, a seller creditor agreement, escrow agreement, and resolutions for the buyer and seller.
  4. Financing Documents – If the deal is being financed, have you gathered everything required by the financial partner.  Has your team reviewed all the financing documents as well?
  5. Miscellaneous – Closing checklists, employment agreements, leases, bulk sale notices and so on are also other items that should also be a part of the preparation for closing.
  6. Closing Binder – Please make sure that you or someone on our team compiles a complete package (i.e., a closing binder) of everything that was reviewed during due diligence and executed for closing.  If something comes up post-closing, this “closing binder” will be the focal point of any disagreements.

As Yogie Berra said – “It ain’t over ‘til it’s over.

Here are some other items of interest:

Helpful Resource Pages

Can you get a DUI in Pennsylvania on a bike or an e-scooter?

Under PA law, a vehicle is “Every device in, upon or by which any person or property is or may be transported or drawn upon a highway” with the exception of those used only on rails or tracks (like a train) and mobility scooters or electric wheelchairs.

Under that logic, almost anything else counts as a vehicle for the purposes of drunk driving charges. That includes bikes, e-scooters and even golf carts. If you are over the legal blood alcohol limit (BAC) of 0.08% or the officers decide that you are visibility impaired even with a lower BAC, you will end up charged.

The fact that the law uses the term “highway” isn’t a loophole, either. The same statute defines a highway as pretty much any publicly maintained road that is used for travel by vehicles, including those in universities and public parks.

Really, the most sensible thing to do if you’re going to be drinking is to arrange for a ride home. If you do make a mistake, however, don’t let it damage your entire future. If you’re facing drunk driving charges, find out about your defense options.

Learn More About DUI Charges:

Time to put the pen to paper (or just type it up)

As we have taken our M&A journey over the last few weeks, I hope that you have found the information provided useful.  Thus far, you have figured out what you want to buy (or sell), found the right candidate, executed a letter of intent and done your due diligence.  Now, it’s time to get serious and “put the pen to paper” (or for the rest of modern society, type it up).  Yes, I am talking about the purchase agreement.  However, what goes into this document?  First off, ask what you are buying.  Is it just the assets or the whole company?  Do you know the difference?

  • Asset Purchase Agreement – Simply put, the purchaser is only buying the assets of the company and the seller keeps everything else.  This transaction is more common of the two main types of purchase agreements as it provides the most legacy liability protection for the purchaser.
  • Stock Purchase Agreement – In this transaction, the purchaser is buying the whole company (both the assets and the liabilities).  This type of purchase is done typically when the target company has unique characteristics or customers that could be lost if only the assets are purchased.

Once you decide what you are buying (or selling), you next decide on what goes into the agreement.  Some of the key provisions include the following:

  • Preamble, Recitals, Definitions – Essentially who are the parties, what is being done and a definition of key terms;
  • Purchase and Sale – A description of what is being purchased, how it is transferred and what the allocation of the purchase price will be;
  • Purchase Price Adjustments and Earn Outs – A description of adjustments to the purchase price at or after closing (e.g., if the inventory amount is different than the amount agreed upon); any earn outs that the Seller may have for future business;
  • Escrow – Any amount of money held back by the Purchaser to ensure that the Seller follows through on post-closing conditions or to cover any post-closing issues (e.g., legacy tax liabilities) that may arise;
  • Closing Mechanics and Conditions – When and where the closing occurs, what needs to happen to go to closing, what needs to be done after the closing
  • Representation and Warranties – Statements of fact and assurances made between the purchaser and the seller;
  • Pre and Post Closing Covenants – Any promises by one party to another related to the transactions (e.g., operating the business as normal, not working with any other counterparties, non-compete, non-solicit, non-disparagement);
  • Termination – An outline of ways that the agreement could be terminated and what the consequences of the termination would be;
  • Indemnification – A post-closing process to remedy any losses incurred by either party related to promises made in the purchase agreement;
  • Miscellaneous – This is where the lawyer language comes in; it contains many of the boilerplate clauses (e.g. assignment, notice, dispute resolution, choice of law, etc.); and
  • Disclosure Schedules and Exhibits – This all-important section basically details what is and is not being purchased; it is also where the peripheral documents (e.g., bill of sale, assignment agreement, escrow agreement, etc) are attached.

As always, I don’t recommend you drafting these documents on your own.  Your business attorney, business accountant or any other key business advisors can be very useful resources to help you navigate this part of the M&A process. Below are some good M&A links for you to review:

Helpful Resource Pages

 

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com) or anyone in our office with questions or comments.  

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here.  

A Second Look at What We Are Digging Into

a shovel breaking ground for land development

Everyone’s favorite part of the land development process, third-party approvals. A developer can control and work through most of the land development checklist items together with the Township at their own pace, but third-party approvals are a different animal. Two of the most common third-party approvals needed for land development approvals are PennDOT’s Highway Occupancy permits and the Pennsylvania Department of Environmental Protection’s (“DEP”) National Pollutant Discharge Elimination System (“NPDES”) Erosion and Sediment Control permit. Both can be difficult and time-consuming approvals. Additionally, some Townships are weary to grant a conditional final approval with these third-party approvals outstanding. Understanding that these approvals may be a developer’s final hurdle, it makes sense to stay up to date with third-party approval checklist items. The NPDES permit may be adding a new checklist item.

Proposal No. 012-0700-001 (the “Proposal”) was advertised in December of 2020 but has not been adopted yet. The Proposal’s Comment Period is over, and the comments can be found here. In general, the Proposal seeks to include a Pennsylvania Historical and Museum Commission (“PHMC”) checklist item on the General NPDES permit for Construction activities. This checklist item assesses potential cultural resource impacts. Currently, this PHMC checklist item is only triggered on the Individual NPDES permit for Construction activities with land disturbance over 10 acres. Unless listed as an exemption in the Proposal’s Appendix A (bottom of the Proposal), a permit applicant will need to submit a State Historic Preservation Office (“SHPO”) Project Review Form to the PHMC for a review of historic properties (such as architecturally significant buildings and significant archaeological sites). A permit applicant will need to receive this PHMC review prior to submitting a General NPDES permit application. This increases the lead time for a General NPDES permit even more.

A permit applicant may be exempt from this PHMC checklist item if they meet one of the ten activities and corresponding conditions listed on the Proposal’s Appendix A. At a quick glance, it seems that a solar developer may be able to meet one of the activity exemptions, “Permits or approvals where proposed activity will not affect above ground historic resources or archaeological resources 50 years of age or older.” Of course, this will be site specific. Do you think a typical solar development could meet any of these other exemptions?

ACTIVITY CONDITIONS
1. Permits or approvals where no earth disturbance or alterations to above ground historic resources (including buildings, structures, and landscapes) is planned.
2. Permits or approvals where the proposed ground disturbance activity is in areas that can be documented as having been previously disturbed. The extent of new ground disturbance will not extend beyond that of the previous disturbance.

New small flow sewage treatment systems that replace existing failing systems on residential lots are exempt.

3. Permits or approvals where proposed activity will not affect above ground historic resources or archaeological resources 50 years of age or older.
4. Permit or approval renewals with no significant physical changes to previously authorized activities. Changes do not involve additional earth disturbances or alterations to building, structures, and landscapes other than what was approved in previous permit.
5. Permits or approvals for replacements of existing facilities. And meet criteria in listed Activities 1 and 3.
6. Expansions that do not extend beyond the previously approved footprint or height. Structure or operational expansion that will occur within the original approved site.
7. Construction and maintenance of temporary road crossings, or crossings over or through regulated waters of the Commonwealth including wetlands. Replacement of 50-year old bridges are not exempt from this policy. Temporary crossings are limited to the following:

Bridge -Single span structure erected from top of bank to top of bank carrying temporary roadway over a stream.

Causeway – An embankment constructed partially across or along a stream.

Ford – A road crossing of a stream utilizing the existing stream bed.

8. Permits or approvals for placement of fill. Permits needed to bring approved fill in to a project site/area. May not be exempt if the original top soil is removed before applying the fill.
9. Permits and approvals specific to agricultural plowing or tilling activities, timber harvesting and road maintenance activities. Timber harvesting may be exempt if activity occurs on previously timbered site and the
10. Emergency Permits and Undertakings. An emergency undertaking is one that requires an immediate response to an imminent threat to public health, safety, property or the environment. Examples of emergencies may include responses to natural disasters or major environmental accidents.

When addressing an emergency, DEP will make reasonable efforts to notify PHMC of such emergency undertakings as the situation allows.

Some emergencies may require follow-up permits, which may not be exempt from PHMC coordination.

Again, this Proposal has not been adopted, but we will keep an eye on its activity. Third-party approvals can unnecessarily delay the land development process and permit applicants want to avoid any of these delays at all costs. Anticipating new requirements can save time down the road.

Thanks to our colleagues over at BOW Renewables who inquired about this DEP Proposal. BOW Renewables has a deep knowledge of the land development process and is efficient and detail-oriented when it comes to obtaining these types of third-party approvals.

DECOMMISSIONING LEGISLATION UPDATE: As of April 26, 2022, House Bill 2104 still sits in the PA House of Representatives. Meanwhile, Senate Bill 284 still sits in the PA House’s Environmental Resources & Energy Committee.

COMMUNITY SOLAR UPDATE: We all anxiously await any positive movement on the various PA community solar bills. Here is the most recent status of House Bill 1555 and here is the most recent status of Senate Bill 472.

If you have other specific questions about third-party approvals, renewable energy, or anything related or unrelated, please don’t hesitate to call our firm at (717-845-1524) or email Andy Miller (amiller@mpl-law.com) or Cory Dillinger (cdillinger@mpl-law.com) with any questions or comments.