As a business owner, you are a special breed -- unafraid to dream big and take risks, despite being faced with numerous laws and regulations. Whether planning, starting or operating an existing family or closely held business, you need to stay grounded to both boost sales and limit your liability. As you review, you will gain insights and practical guidance to grow and protect your business. Subjects discussed are: -Tools for protecting the family's equity interests -Protecting patents, trademarks, and copyrights -Protecting against unfair competition -Avoiding employment law claims and suits

1. The Importance of Being
Earnest
How to Dodge Legal Pitfalls that Confront Family and Closely Held
Businesses
October 30, 2013
Bob Kaiser, Jennifer Hoekel, Steve Pozaric, Bill Corrigan
© 2013 Armstrong Teasdale Teasdale
© 2013 Armstrong
LLP
LLP

2. Evading Employment
Law Landmines
October 30, 2013
Bob Kaiser
© 2013 Armstrong Teasdale Teasdale
© 2013 Armstrong
LLP
LLP

3. Things You Need to Say Out Loud
 99% of Lawsuits are controllable before the plaintiff
files suit.
 I Don’t Want the Government in My Business.
 My Employees Know their rights and they all have
Lawyers.
 The Courts Don’t Really Want to Run My Business.
 I Don’t Want to Invite them In.
© 2013 Armstrong Teasdale
LLP

4. Sexual Harassment
 Fix the Problem before the Court makes you
 Have Clear and Understandable Policies
 Follow them
 Make sure your Supervisors do, too
© 2013 Armstrong Teasdale
LLP

5. Americans with Disabilities Act
 Engage in the “Interactive Process”
 Create a record of trying to help the disabled
person do the job.
© 2013 Armstrong Teasdale
LLP

6. Hiring and Firing
 Tell the truth and nothing but the truth, even when
your goal is to “protect” the applicant or employee
from the truth.
 Make sure your documents tell the same story you do
 Invest the time and energy in your investigation
© 2013 Armstrong Teasdale
LLP

7. Protecting Your Business with
Patents, Trademarks and
Copyrights
October 30, 2013
Jennifer Hoekel
© 2013 Armstrong Teasdale Teasdale
© 2013 Armstrong
LLP
LLP

8. Patents
 Consists of a set of exclusive rights granted to an
inventor for limited duration
 In exchange for the public disclosure of an invention.
 Utility patent
v
Design patent
© 2013 Armstrong Teasdale
LLP

9. Copyrights
 Gives the creator of an original work exclusive rights
for a limited time (decades).
 Registered at the Library of Congress
© 2013 Armstrong Teasdale
LLP

10. Trademarks
 A distinctive
name, word, phrase, logo, symbol, design, image, or
a combination
 Identifies source
 Unlimited duration
 Applied for at the USPTO
© 2013 Armstrong Teasdale
LLP

11. Protecting Your Equity
in the Business
October 30, 2013
Steve Pozaric
© 2013 Armstrong Teasdale Teasdale
© 2013 Armstrong
LLP
LLP

12. The Issue:
 Alignment of Incentives:
• A desire to reward key members of management
(other than the founders or family members)
based on the success of the business.
 The “easy” solution:
• Equity stake in the company.
© 2013 Armstrong Teasdale
LLP

13. Equity Ownership includes a Bundle of
Rights
 Economic Rights
 Notice and Voting Rights
 Information and Inspection Rights
 Fiduciary Duties
© 2013 Armstrong Teasdale
LLP

14. The Challenges
 Two main challenges:
• What powers or rights do you really want to give these
individuals if they own equity?
• What to do when these individuals leave the business
(voluntarily or not) or are impacted by events such as
divorce?
© 2013 Armstrong Teasdale
LLP

15. Tools to Protect Family or Founder
Equity
 Mechanisms to issue equity:
• Restricted stock grants or purchases
• Stock options
© 2013 Armstrong Teasdale
LLP

16. Tools to Protect Family Equity
(con’t)
 Mechanisms to control rights
• Separate class of equity for non-Family
holders/Founders to vary economic, voting and other
rights
• Shareholder Agreements
− Voting agreements / trusts; appointment of directors
and managers by certain equity holders
− Transfer Provisions
© 2013 Armstrong Teasdale
LLP

17. Transfer Provisions
 Typical Transfer Restrictions and Obligations
• General restriction on transfer except pursuant to the
agreement
• Permitted transfers to controlled entities and trusts, so
long as control is maintained
• “ROFR” (Right of First Refusal)
• “Drag Along” Rights – sale of company / control;
typically coupled with a “Tag Along” right
© 2013 Armstrong Teasdale
LLP

18. Transfer Provisions
 Automatic Repurchase Option Triggers
• The “Four D’s” – death, disability, discharge, divorce
• “Non-sale” transfers – bankruptcy, insolvency, creditor
action, dissolution
• “Non-permitted transfers” – attempted transfers in violation
of restrictions or other breaches of agreements or duties
 Price is often variable based on the type of event
• It is often discounted in the event of discharge “for cause”
or some other breach / wrongful act scenario
© 2013 Armstrong Teasdale
LLP

19. Alternatives to Equity
 Goal - Provide Economic Rewards without Equity-based
Rights
• Incentive Bonus Plans based on Company and/or
Individual Performance
• Phantom Stock Plans /Equity Incentive Units
• Stock Appreciation Rights Plans
© 2013 Armstrong Teasdale
LLP

20. Remember:
 Important to review current structure before granting
equity interests to new holders; the current
agreements may not be appropriate for a nonFamily/founder equity holder
 Consider the tax and accounting impacts to the
Company and the recipient
© 2013 Armstrong Teasdale
LLP

21. Protecting Your Trade
Secrets
October 30, 2013
Bill Corrigan
© 2013 Armstrong Teasdale Teasdale
© 2013 Armstrong
LLP
LLP

22. Trade Secrets
Protecting Your Trade Secrets
 What Are They?
1. Economic value
2. Not generally known
3. Reasonable measures taken to keep confidential
© 2013 Armstrong Teasdale
LLP

23. Trade Secrets
Case Pending in Missouri Supreme Court
 Central Trust and Investment Co. v. Signalpoint Asset
Management, LLC, et al.
 Oral Argument – 11/13/13
© 2013 Armstrong Teasdale
LLP

24. Trade Secrets
 Practical Considerations to Protect Trade
Secrets
1) Confidentiality agreement
2) Confidentiality policy – employee handbook
3) Employee exit interview checklist
4) Follow-up letter to departing employee
5) Non-compete agreements
© 2013 Armstrong Teasdale
LLP

25. Trade Secrets
Non-Compete Agreements and Unfair
Competition
• When are they enforceable?
• Recent Missouri Supreme Court decision
• Defenses to the enforcement of a non-compete
© 2013 Armstrong Teasdale
LLP

26. Trade Secrets
Misappropriating Computer Data
• The Missouri Act
• The Federal Computer Tamper Act
© 2013 Armstrong Teasdale
LLP

27. Questions?
William Corrigan, Jr.
Robert Kaiser
314.342.4105
314.342.4153
wcorrigan@armstrongteasdale.co rkaiser@armstrongteasdale.com
m
Steve Pozaric
Jennifer Hoekel
314.552.6643
314.342.4162
spozaric@armstrongteasdale.co
jhoekel@armstrongteasdale.com m
© 2013 Armstrong Teasdale
LLP