JavaBoost, Part Two

Managing Uncertainty

You represent Betty Buyer. Last week, you and Betty discussed some concerns that you had about Sam’s continuing management of JavaBoost. Betty has spent the last several days talking to Sam about their plans for the business, and she’s convinced that he will be a team player. Nevertheless, Betty is nervous about maintaining the success of the coffeeshop and preparing the business for expansion, and she would like the terms of the deal to protect her interests and incentivize Sam to do a good job. You will be meeting with Betty in the morning, and she has sent you an email describing possible approaches to improving the deal structure and/or Sam’s employment contract.

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To: A. Attorney

From: Betty Buyer

Date: January 22, 2002

Re: Sam’s employment contract

Here’s five things I thought of to get our discussion started tomorrow.

1. Earnout. We could restructure the deal so that part of the purchase price of the business is based on the ongoing profits of the business.

2. Options. We could give Sam some stock options to incentivize him. I’m not sure if we should do this in addition to his salary or reduce his cash salary.

3. Employment Contract. We could write a more detailed contract outlining exactly what we expect from him.

4. Management Restrictions. We could grant Sam wide authority to run the business but require that major decisions go through me first.

5. Reputation. Sam’s been in the coffee business for a while and everyone seems to think that he’s a great guy. Maybe I’m just worrying about this too much?

Interested in hearing your thoughts.

BB

Write a concise, 2-3 page email memorandum to Betty Buyer addressing the following issues:

  • What are the advantages and disadvantages of each approach?
  • How well does each respond to Betty’s concern about the ongoing management of the business?
  • How difficult is each one to implement?
  • What questions would you ask Betty?
  • What would you ask Sam?

Please note: Email correspondence is often less formal than a traditional legal memorandum. Do not be fooled into thinking that this excuses you from the usual rules of good writing. When emailing a client you should err on the side of formality, and in any event you still observe the usual rules of grammar, spelling, etc., and, most importantly, organize your thoughts before writing.