Trust the a publication of smith, gambrell & russell, llp
Winter 2018
SGRLAW.com
Emerging companies What it takes to make a splash
Trust the Winter 2018
Smith,Gambrell
&Russell, llp Attorneys at Law
1230 Peachtree Street, N.E. Promenade, Suite 3100 Atlanta, GA 30309-3592 editor@sgrlaw.com editor-in-chief
Dana Richens editorial advisory board
3 Editor’s Letter 4 Legal Briefs
News and views from the offices of Smith, Gambrell & Russell.
10 Startup and Growth Capital We explore the funding sources available to new and growing businesses.
16 IP Cautionary Tales
A company needs to ask the right questions when acquiring or protecting an intellectual property portfolio.
20 Employment & Benefits
Growing companies must be attuned to applicable laws that affect their employees.
24 Client Profile: Waec
Meet Waec, a developer of small-scale drones designed to help businesses reduce delivery costs.
26 Finish Line
Kyle Pease and Tim Beighley exude abundant faith and tireless spirit in their remarkable journies.
Nicole Haff Joyce Klemmer Brett Lockwood Jim Monacell Jim Porter
sgr marketing team
Lee Watts Kathleen Rast Jaleesa Smith Elizabeth Thomas Cheryl Walker Mollie Werner
Trust the Leaders is published on behalf of Smith, Gambrell & Russell, LLP by Fourth Element Creative. The information contained herein has been obtained from sources believed to be reliable. The content and information in this publication do not constitute legal advice, do not in all cases reflect the opinions of SGR or its attorneys and are not in all cases complete or current as of the publication date. This publication is not intended to and does not create an attorneyclient relationship or provide legal advice or legal opinion. Legal advice should be obtained from one’s legal counsel. Permission is granted to use and reproduce this publication in whole or in part for internal and personal reference, provided that proper attribution of authorship is given. Except for material in the public domain, this publication may not be further copied, modified, used or distributed, in whole or in part, in any form or by any means without the written permission of Smith, Gambrell & Russell, LLP. All other rights expressly reserved. © 2018 Smith, Gambrell & Russell, LLP. Leaders
used with permission of Leaders Magazine, Inc.
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TRUST THE LEADERS | Winter 2018 | SGRLAW.com
Editor’s Letter
Editor’s Letter
IN THIS ISSUE
Welcome to the first issue of Trust the Leaders for 2018! In this issue, we explore some of the challenges facing emerging companies. Incidentally, in this context we use the term “emerging company” in its broadest sense. It encompasses everything from 20-somethings forming a tech startup (such as SGR’s client Waec featured in our Client Profile at pp. 24-25), to a more established company looking to transition from a bit player to a major force in its industry. Regardless of the type of business, emerging companies face common challenges. How is the business going to raise the capital needed to get off the ground or to reach that next level? What strategies should the company employ to protect its intellectual property and stave off competition? And growth is accompanied by increased administrative considerations, such as employment-related benefits and regulations. The articles in this issue highlight and discuss many of these critical issues.
Nick Rueter p.10
Nick highlights the financing structures available during the various stages of an emerging business’s lifecycle.
Greg Kirsch p.16
Greg explains how tech companies can use patents and intellectual property tools to safeguard against competition, protect investors and increase their chances of business success.
Finally, you may find inspiration in Kristen Lewis’s introduction to her two clients, Kyle Pease and Tim Beighley, featured in the Finish Line (pp. 26-27). Kyle and Tim are experienced and enthusiastic athletes energized by their enduring faith as they serve as role models to others with disabilities. We hope this year is one of great prosperity and success for you and your business. Brandon Sherlinski p.20
Brandon examines six key considerations startups and growing businesses need to be aware of when recruiting, hiring and managing new employees.
Dana Richens Editor-In-Chief editor@sgrlaw.com
P.S. In case you missed it, SGR’s first U.S. West Coast office is open for business! SGR’s Los Angeles office – formed through a combination with California business law firm Rodi Pollock Pettker Christian & Pramov – will not only benefit the Firm’s domestic clients, but will also provide a gateway for clients based in Korea, Japan, China and other Asian countries who seek to do business in the U.S.
FOLLOW
ONLINE
Kristen Lewis p.26
Kristen introduces you to two of her favorite clients.
BLOGS: sgrlaw.com/blog TWITTER: twitter.com/sgrlaw LINKEDIN: linkedin.com/companies/27889
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LEGAL BRIEFS
THE LATEST NEWS AND UPDATES FROM THE SGR OFFICES
ATTORNEYS IN THE NEWS Dana Mark was a guest lecturer
honor was bestowed upon 12 nationwide
at Baruch College’s Zicklin
recipients from among more than 160,000
School of Business in New York
members of the Young Lawyers Division for
City. Dana spoke to students in
exemplary performance of duties in service
the Family Business Management course,
to the public and the ABA. Rich received the
discussing estate planning strategies in
award for his work as Co-Chair of the Young
connection with the succession of a family
Lawyers Division Litigation Committee during the 2016-17 term. In that role, Rich worked
business. The discussion included dealing with family dynamics and relationships
at Georgia Tech’s Conference Center. Brett also served as a roundtable panelist
relative to the business, exit strategies, and techniques to accomplish the taxefficient transfer of the business. Dana is a partner in the Private Wealth
to create a year-long series of programs guiding new practitioners through all stages
on “Managing Cybersecurity Risks” at a
of litigation and developed two new annual
recent meeting of the Atlanta Chapter of
programs for the Young Lawyers Division,
the CFO Leadership Council.
“ABA in My City” and “Litigation Week.” During Rich’s term, the Litigation
Services Practice in SGR’s New York office. Rich Rivera, an associate in
Committee also worked to set new policy
SGR partner Brett Lockwood
SGR’s Jacksonville office, received
for the ABA, including urging all jurisdictions
gave a presentation entitled
the American Bar Association
to require implicit bias training for all
“Avoiding Cybersecurity
(ABA) Young Lawyers Division
new judges. Richard has also accepted
Litigation and Other Calamities” at the 2017 Cybersecurity Symposium held
Star of the Year Award for 2017 at the
reappointment as Co-Chair of the Litigation
annual meeting held in New York. The
Committee position for 2017-18.
Former SGR Attorney Honored by Donation Atlanta’s Woodruff Arts Center is the recipient of a $100,000 donation recently made in honor of retired SGR partner Jim Bratton and his wife Alleen. Jim and Alleen are both active in the Atlanta community and have a special appreciation for the arts. They are humbled that their efforts and interest were recognized with the generous donation.
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ATTORNEYS IN THE NEWS Kristen Lewis, counsel in
today and healthier tomorrow.”
Legacy Leadership Forum).
Kristen was also a panelist at the
SGR’s Tax Practice, serves on
Legacy Advisors include attorneys,
the Children’s Healthcare of
wealth managers, CPAs and other allied
Forum, which addressed the power
Atlanta (CHOA) Legacy Advisors
professionals who assist their clients with
of deepening client relationships beyond
Leadership Council (pictured below in
the development of current and planned
simply fulfilling their professional service
their CHOA “hero” capes at the 2017
giving strategies that “help kids live better
needs.
Leah Ward Sears, SGR partner and former Chief Justice of the Georgia Supreme Court, has been elected to the Board of Directors of the American Academy of Appellate Lawyers (AAAL), an invitation-only organization limited to 500 lawyers, or “Fellows,” who must “possess a reputation of recognized distinction as an appellate lawyer.” The AAAL’s mission is “to advance the highest standards and practices of appellate advocacy and to recognize outstanding appellate lawyers.” Justice Sears has been an AAAL Fellow since April 2013. She also currently serves as a member of the AAAL’s Amicus Curiae Committee. As a member of the Board of Directors, Justice Sears will support the work of the AAAL by providing mission-based leadership and strategic governance for the organization, which is committed to advancing the administration of justice and promoting the highest
Pro Bono Recognition
SGR is pleased to announce that the Firm has been recognized with an Outstanding Pro Bono Service Award by Jacksonville Area Legal Aid (JALA). The award was presented during the 18th Annual Robert J. Beckham Equal Justice Awards Celebration in recognition of SGR’s extensive pro bono legal work through the organization. SGR’s Jacksonville office has provided legal expertise to a number of JALA’s volunteer programs, including the SGR-pioneered JALA Tenant/ Landlord Pro Bono Project. The initiative involves Firm attorneys conducting intake interviews with potential clients in need of legal services to determine which cases JALA can take. SGR partners James Cummings and Steve Brust, assisted by associate attorneys in SGR’s Jacksonville office, have made a significant impact on the delivery of civil legal services to those in need through their longstanding involvement with JALA.
standards of professionalism and advocacy in appellate courts.
TRUST THE LEADERS | Winter 2018 | SGRLAW.com
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LEGAL BRIEFS THE LATEST NEWS FROM THE SGR OFFICES
ATTORNEYS IN THE NEWS SGR Attorney Nominated as Bar Association President SGR partner Roger Juan
this nomination,” Roger said.“I believe the New
Maldonado has been nominated
York City Bar Association, where we focus on
as the 2018 President of the
preserving basic rights for all and increasing
New York City Bar Association.
access to justice locally, nationally and globally,
Roger is currently Chair of the City Bar’s Task
can play an important role in a world that for
Force on Puerto Rico, and has served as a
many seems increasingly unsettled.”
Vice President and member of the Executive
Fluent in Spanish, Roger is a trial lawyer and
Committee, and as Chair of the Council on
commercial litigator who represents the interests
Judicial Administration, the Task Force on
of both Hispanic and American businesses,
International Legal Services, the Task Force
governmental entities and individuals. The
on Housing Court, and the Housing Court
formal election of officers will take place at the
Committee. “It’s an incredible honor to receive
City Bar’s annual meeting in May.
SGR Delivers Contractor Licensing Presentation SGR presented a Lunch and Learn on the topic of contractor licensing, entitled “The Orange Hard Hat: General Contracting 101,” to legal department and other employees at The Home Depot headquarters. SGR partner Peter Crofton discussed the different types of licenses and best practices for managing those licenses to stay compliant with state and federal contracting regulations. Other SGR attorneys assisted with the presentation and Q&A session, including Mark de St. Aubin, Justice Leah Ward Sears, Kate Rowe, Robin Silberzweig, Pete Barlow, Darren Rowles and Erin Peterson.
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IN BRIEF...
Mark Turnbull, a partner in SGR’s Air Transport Industry Group in the U.K., has been named to Airline Economics magazine’s “40 Under 40” list for 2017. The annual compilation recognizes the top 40 individuals under age 40 with careers in commercial aviation. The list is compiled from nominations provided by colleagues, peers and clients and narrowed to 40 by the editorial team at the magazine, which bases its decisions on interviews with industry leaders and investigations into nominees’ career paths. David Burge has been elected to the Board of Buckhead Christian Ministry, which provides financial and food assistance to homeless and low-income residents in north Atlanta. David is a partner in SGR’s Real Estate Practice. Perry McGuire, a partner in SGR’s Corporate Practice, was recently re-elected Treasurer of the Georgia Restaurant Association (GRA), and serves on the GRA’s Executive Committee. The GRA’s mission is to serve as the voice of Georgia’s 17,000+ restaurants in advocacy, education and awareness. Perry was also recently re-appointed to the Advisory Board of Emory University’s Winship Cancer Institute. He is a 17-year cancer survivor. SGR partner Jim Bikoff recently published an article in the European Communities Trade Mark Association’s monthly publication, entitled “Fake It ‘Til You Make It: Regulating Dangerous Counterfeit Goods.” The article dealt with the growing problem of trade in dangerous counterfeit goods such as medicines and automotive parts.
RECENT REPRESENTATIONS Solar Energy Agreement Signed with City of Atlanta Steve O’Day represented SGR client Cherry Street Energy in securing, negotiating and preparing its Solar Energy Procurement Agreement (SEPA) to place solar systems on the rooftops of 24 buildings owned by the City of Atlanta. Atlanta has set a goal to power its operations 100% by renewable energy by the year 2025. The City issued an RFP to solar companies interested in utilizing the Georgia Solar Energy Free Market Financing Act of 2015 (known as HB 57) – of which Steve was a principal draftsman and negotiator – to build and operate solar systems on City buildings and sell the electricity to the City. Cherry Street teamed with Radiance Solar in a proposal to the City in response to the RFP. Steve and an SGR team then negotiated with Atlanta’s Law Department and Office of Resilience to prepare and enter into the SEPA, which implements a 20-year solar energy program that is the largest municipal solar program in Georgia. The SEPA was
Fotografiska Brings New Life to NYC Landmark
approved by Atlanta City Council, and the parties are proceeding to design, build and operate the solar projects.
SGR served as legal counsel to
designed as an Episcopal church. In 1979, it was
Swedish company Fotografiska
designated as a city landmark and is included
International AB in its lease
in the National Register of Historic Places. With
agreement with RFR Realty for
its ornate façade and gabled, stained glass
the entire 45,000-square-foot
windows reminiscent of medieval architecture
SGR client Heritage Growth
building at 281 Park Avenue South
and unique ceiling heights, the19th-century
Partners LLC received a
in New York City. Fotografiska will
building complements the Swedish photography
2017 Atlanta Deals of
use all six floors of the distinctive
center’s 20th-century building in the artsy
the Year Award for its
Park Avenue landmark to create a
Södermalm district of Stockholm.
growth recapitalization
franchise operation of its Stockholm
The SGR legal team included Eliot
Deals of the Year Award
investment deal involving
contemporary photography center
Zuckerman and Sean Altschul from the Firm’s
including a gallery, event facilities
New York Real Estate Practice, who negotiated
and an upscale restaurant operated
the lease, Atlanta’s John Spillman, who
transactions that have a major impact
by a prominent restaurateur.
handled the corporate aspects of the deal, and
on Atlanta business. John Ethridge and
Joe Mandarino in Atlanta and Yoram Keinan
Nick Rueter of SGR’s Corporate Practice
in New York, who advised on tax issues.
advised in the transaction.
Formerly known as the Church Missions House, the building was
East West Manufacturing, LLC. The Awards recognize
TRUST THE LEADERS | Winter 2018 | SGRLAW.com
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LEGAL BRIEFS THE LATEST NEWS FROM THE SGR OFFICES
LITIGATION SUCCESSES Summary Judgment Success Pat Hill and Yash Dave in SGR’s Jacksonville office successfully obtained summary judgment on behalf of a client on an employment-related breach of contract claim. The plaintiff claimed that a basic human resources form created a contract because it indicated various hourly rates that might apply for different shifts worked. When the plaintiff did not receive the hourly rate she thought she should get for the shift, she claimed there was a breach
SGR Client Survives Google IPR Challenge
of contract. SGR argued for the defendant that the pay rates and schedule were not
SGR attorneys Michael Makuch and Ryan Varnum successfully defended the
negotiated between the plaintiff and the
validity of a patent covering turn-by-turn navigation for SGR client InfoGation LLC.
defendant, and there was no duration of
The United States Patent and Trademark Office (PTO) declined to institute an Inter
employment or guaranteed hours of work.
Partes Review (IPR) filed by Google. The PTO agreed with SGR’s arguments that
After extensive briefing and two hearings,
Google’s IPR petition failed to present sufficient grounds for instituting a review.
the court granted SGR’s motion, holding that
The patent in question was asserted against handset makers HTC, ZTE and Huawei in litigation in the Southern District of California, based on the defendants’
employment contracts require definiteness and certainty in their essential terms.
use of the Google Maps navigation application. InfoGation was founded by Dr. Kent Pu, an early pioneer in personal navigation, and has supplied software for notable users such as Hertz, supporting its “Never Lost” devices.
Judgment Obtained in Wrongful Death Case SGR’s litigation team, led by Dana Bradford and James Cummings
Fair Labor Standards Act Decision
8
to talk to co-workers, eat breakfast and
in Florida, and John Weeks in
Pat Hill, Yash Dave and Jennifer
engage in personal activities. The issue
Atlanta, obtained a victory in
Lawson received a favorable
presented was whether the standard for
favor of a manufacturing client
decision from the United States
determining compensation was based on the
who was sued for wrongful
Court of Appeals for the Fifth
“predominant benefit” test (was the wait
death and other product liability
Circuit in a Fair Labor Standards
time for the benefit of the employer) or the
claims in state court in Miami.
Act matter. The three appellants
“integral and indispensable” test (was the
In a matter of first impression
were employees who claimed
wait time integral and indispensable to the
in Florida, the trial court ruled
they were entitled to be paid
principal activity of the employees’ work).
that the plaintiffs’ claims were
for the time they waited in a
The court agreed with SGR’s client that the
barred by operation of the federal
tent each day prior to walking
latter test was the correct one and that the
Protection of Lawful Commerce in Arms
to their work site. While in
personal activities were not integral and
Act and granted summary judgment in the
the tent, they were permitted
indispensable to their construction work.
client’s favor.
TRUST THE LEADERS | Winter 2018 | SGRLAW.com
ATTORNEY INTERVIEW
10 minutes with…
Kiyo Kojima Partner in SGR’s Corporate, Labor & Employment, and Japan Practices
Kiyo’s practice centers around general
Q What advice would you like to give to
“tick,” including mergers and acquisitions,
I am always impressed by the talent of new
corporate matters that make companies joint ventures, licensing and franchise
agreements, and corporate governance/
compliance, as well as providing human
resources and employment law assistance. He is also involved with various
a young attorney?
lawyers, and far be it for me to give them
what I call the “3 E’s” – the economy, the environment and education. Q What are some of your favorite traditions
advice. Truthfully, I hope they will have the
in the Japanese culture?
privilege of struggling through seemingly
I am very fond of the Japanese notion of
insurmountable challenges, facing harrowing
“mottai – nai.” It translates into something
despair, savoring occasional victories and
like “such a pity to waste.” This applies to
international transactions, both inbound
have a great time doing it all.
food, resources, money and people/talent, as
Kiyo joined SGR in 2017.
Q What has been the best career advice you
Q You majored in music as an undergraduate
The practice of law is a “way of life.” It’s not
into and outbound from the U.S.
well. We all have limited time and resources; have received?
at the Eastman School of Music and the
work, not a job, and not even a career.
I double-majored in bassoon performance
Q What do you like to do when you are not
University of Rochester. What do you play?
it is best to use them wisely, and not in waste or haste. Q What are some industries that you see emerging in the next few years?
I believe automation will continue to play
(B.M.) and political science/economics (B.A.).
working?
a great role in a variety of industries. Other
I fell in love with the sound and the sensation
I like to play bassoon around town whenever
areas I see emerging include IoT (Internet
of playing the bassoon back when I was in
I can. I also enjoy hiking, eating good food,
of Things), biotech, aerospace/space and
middle school. People say that we do not pick
watching a movie with a happy ending and
“smart” everything (cars, planes, weapons,
the instrument, the instrument picks us. This
catching up on sleep.
machines, cities, etc.).
Q Are there any special causes or
Q Tell me about the most interesting deal/
I donate to causes that pay attention to
This is such a cliché answer, but I think every
was certainly the case for me. Q What made you decide to choose law
as a career?
organizations that are important to you?
client you’ve handled.
I was an average math student and
deal/case is absolutely fascinating, and a great
computers really didn’t like me at all, so
learning experience. I relish every single one
engineering and IT were “no go” subjects.
of them.
And because I didn’t want to handle blood, medicine was not an option for me, either!
Q What have you enjoyed most about
On a more serious note, I was very much
working at SGR?
enamored by the fact that law is involved in
The Firm has been in a period of growth
virtually every human endeavor. To borrow
geographically and continues expanding its
from Captain Jack Aubrey in Master and
practices internationally. It’s an exciting time
Commander, “Men must be governed.”
to be with SGR and the platform is perfect
The law is one of the vehicles by which
for what I do. I am just thrilled that I am here.
we accomplish this. How exciting it is to
Everyone has been most kind. It truly has
be a part of this profession!
been like coming home!
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Startup and Growth Capital
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HOW AM I GOING TO PAY FOR THIS? BY NICK RUETER
A startup and growth capital primer for issuers and investors
O
ne of the most pressing questions on
financing will originate from friends and family of the
every would-be entrepreneur’s mind is
founder(s). Less commonly, such funding may come
how to fund their business venture. Like
from an “angel investor” – typically a wealthy individual
it or not, it’s hard to make money if you
who invests in startup companies on a part-time basis
don’t have any. Fortunately, as investor
and contributes not only funds but also expertise to the
interest in startup businesses has grown
startup business.
over the past several decades, so too have the
Seed stage investments take many forms. The
financing options available to those businesses.
simplest is a direct investment into common stock – the
This article provides an overview of the common
same security held by the startup company’s founders.
financing structures available to issuers and
An investment in common stock is usually accompanied
investors of growth capital at various stages of
by the right to vote on matters presented to stockholders
an emerging business’s life cycle.
for approval, the right to receive dividends (although they are unlikely to be declared by a startup company),
The seed stage
and the right to receive a proportionate share of the
The first stage of financing a startup business is typically
company’s assets upon liquidation, after the prior
referred to as the “seed” stage. Most commonly, such
satisfaction of the company’s debts.
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Several alternative instruments have emerged in recent years that have the potential to simplify and streamline the seed financing process.
Investments in common stock of a startup company
purchase of the company’s equity, an investor benefits
are highly illiquid, meaning that they cannot be readily
from sitting in priority to equity holders in the event the
resold on an open market and do not carry with them
business should be unsuccessful and needs to liquidate
many of the benefits associated with other investment
its assets.
instruments discussed in this article. Common
outstanding indebtedness will convert, convertible notes
stakes diluted during the course of a startup’s growth.
usually offer the investor favorable conversion ratios.
From a founder’s perspective, issuing common stock
The investor is therefore likely to see a more favorable
to outside investors may threaten the founder’s control
return on his or her investment from conversion into
over the company, especially as the founder’s own
equity rather than from the repayment of principal and
equity gets diluted as a result of subsequent financing
interest on the note. For this reason, the conversion
rounds. Investments in common stock are, however,
formula and mechanics set forth in a convertible note
relatively simple to document and understand, and may
are typically far more important to both issuers and
be viewed by issuers and investors as a “default” option
investors than the interest rate, maturity date and other
during the earliest stages of a startup’s life cycle.
traditional debt terms.
Experienced investors will often prefer to invest seed
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In calculating the amount of equity for which the
stockholders can and typically will find their equity
In addition, several alternative financing instruments
capital through convertible notes. Convertible notes are
have emerged in recent years that, while not yet widely
debt securities that contemplate repayment of principal
adopted, have the potential to simplify and streamline
upon maturity, accrue interest at a modest, fixed rate
the seed financing process. Perhaps the most popular of
and are convertible into equity (often at the option
these instruments is the “simple agreement for future
of the investor) upon the occurrence of a subsequent
equity” or “SAFE,” created by the influential startup
financing event, the sale of the borrower’s business or
accelerator, Y Combinator. SAFEs share many features
maturity. By using a debt instrument versus the direct
with convertible notes, including similar conversion
TRUST THE LEADERS | Winter 2018 | SGRLAW.com
Startup and Growth Capital
in the startup’s life cycle. Naming a financing round involves considerations beyond the scope of this article. For example, a startup may not wish to signal to the marketplace that it has needed to raise too much capital too quickly. However, the “classic” rounds of financing are typically labeled “Series A,” “Series B” and so forth, with smaller rounds falling in between significant milestones often labeled with numbers such as “Series A-2.” Regardless of nomenclature, these growth rounds are usually structured as investments in preferred stock, since early-stage companies are typically not good candidates for commercial bank loans, and venture triggers, conversion prices and priority in the event
capital investors are ordinarily seeking returns on their
of a liquidation. However, unlike traditional debt
investments that traditional debt structures cannot offer.
instruments, SAFEs do not include a maturity date and do not accrue interest. The lack of a maturity date and interest accrual
The first such round, which we will term a “Series A” financing, is customarily documented through a stock purchase agreement, an amendment and restatement
makes SAFEs a very attractive financing option for
of the company’s certificate of incorporation, and
startup founders who are reluctant to put debt on
related ancillary agreements providing for various
their books or are fearful of their ability to repay that
investor rights and protections. While exact terms will
debt should their loan reach its maturity date before
vary from deal to deal, Series A financings typically
the startup has raised another round of financing. For
include the following terms:
investors, however, use of a SAFE may carry more risk
● Liquidation preference. Series A investors are
than a traditional convertible note. Because SAFEs lack
usually granted a liquidation preference to ensure that,
a maturity date, investors lose leverage they would have
in the event the company is liquidated, they will receive
with a convertible note because they could demand
at least their invested capital before any common
repayment of their investment upon maturity and,
stockholders receive payments.
theoretically, bankrupt the company.
● Conversion. Upon issuance, each share of Series A
Furthermore, investment through a SAFE presupposes
The lack of a maturity date and interest accrual makes SAFEs a very attractive financing option for startup founders who are reluctant to put debt on their books.
preferred stock is convertible into one share of common
that the startup company will engage in subsequent financing rounds. If the company instead grows organically without ever needing to raise additional equity capital, it is possible that a conversion event is never triggered and the SAFE holder is left in limbo until the company is eventually sold or liquidated. For these reasons, SAFEs are generally viewed as “issuer-friendly” investment instruments and may only be a realistic financing avenue for the hottest startups.
Early stage and growth financing After a startup has proven that it has a viable business concept, the company may seek larger sums of capital from venture capital funds and other sophisticated investors to fuel its growth. Such financings are typically referred to as “rounds” and are often delineated by letters and numbers representing each round’s “place”
TRUST THE LEADERS | Winter 2018 | SGRLAW.com
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Later-stage investors will typically seek more control over the company’s governance, particularly as it pertains to any liquidity event.
stock at the stockholder’s option at any time. This conversion mechanism is used to calculate the proceeds payable to the preferred stockholders in the event of a successful liquidity event, i.e., a liquidity event in which the Series A stockholders receive proceeds greater than their invested capital, as well as to protect stockholders against dilution. ● Anti-dilution protection. Series A investors typically receive protections against future, dilutive equity issuances. These protections are usually triggered only if the company later issues equity at a price below the price paid for the Series A shares – commonly referred to as a “down round.” In the event the company engages in a down round, the conversion ratio applicable to the Series A preferred stock is adjusted in accordance with a predetermined formula such that each share of preferred stock will convert into more than one share of common stock. ● Minority stockholder protections. Series A investors are usually granted “veto” powers over certain company actions. Where there is more than one
● Co-sale rights. In the event that one or more
Series A investor, such decisions are typically made as
common stockholders agree to sell to a third party
a group by majority vote. While the specific list of veto
a significant amount of the company’s outstanding
rights is usually highly negotiated, it often includes the
common stock, Series A investors usually have the right
issuance of additional equity, declaration or payment
to sell a proportionate amount of their preferred stock
of dividends, amendment of the company’s charter
as part of the same transaction.
documents, and entering into certain major corporate
● Dividends. Most Series A financings provide that
transactions.
stockholders may not be paid dividends on their
● Board seats. Series A investors are usually entitled to
common stock unless the preferred stock is paid the
one or more seats on the company’s board of directors.
same proportionate dividend.
Where multiple investors participate in the round, typically the largest investor will receive the board seat. In
provide a good idea of the complexity of a Series A
addition, the Series A director will
financing. Subsequent rounds of financing, while
often receive certain veto rights
structured in much the same manner, are accompanied
over important board decisions.
by the additional complexity of determining the rights
● Preemptive rights and rights
and privileges of different series of preferred stock
of first refusal. Series A investors
vis à vis each other. Subsequent financing rounds
usually receive a “preemptive”
may become increasingly difficult to negotiate, as
right to purchase, on a pro rata
the company’s existing investors will usually want to
basis, any new equity securities
participate in the negotiations. If new investors desire
offered by the company. They
veto rights or other protections that are greater than
also are typically granted a “right
those granted to existing preferred stockholders, those
of first refusal” in the event that
existing stockholders will often demand to receive the
a company founder or other large
same rights.
common stockholder desires to sell their shares.
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This list of terms is far from exhaustive, but should
Later-stage investors will typically seek more control over the company’s governance, particularly as it
Startup and Growth Capital
THE INVEST GEORGIA EXEMPTION: HOW INTRASTATE OFFERINGS CAN HELP START AND GROW GEORGIA’S BUSINESSES
BY NICK FLINT
What is it? The Invest Georgia Exemption (IGE) is a tool that allows Georgia businesses to raise capital by offering their securities solely to in-state investors. This relatively new law provides an avenue for Georgia-based companies to “go public” without having to go through the costly and time-consuming reporting procedures for going public on national exchanges. However, there are some limitations with the IGE – most notably, that investors can only be Georgia residents and that the amount that can be raised is capped. What is an intrastate offering? The federal Securities Act of 1933 imposed strict registration requirements for companies wanting to go public. This, in effect, precluded smaller companies from selling their securities to the general public because the process became so expensive and time consuming. To help such companies grow, the Securities and Exchange Commission (SEC) provided an exemption from the registration requirements for in-state businesses that offer their securities to only in-state investors – the “intrastate offering” exemption. The SEC later adopted Rules 147 and 504 to provide guidelines and limitations for businesses seeking to use this exemption.
pertains to any liquidity event. This desire for control may be driven largely by the investors’ desire to ensure that they receive a certain return on their investment prior to their exit. Such control is usually accomplished by a combination of board seats and veto rights. To help them realize some value for their (presumably) years of hard work and low pay, it is not uncommon for company founders and other early employees to be permitted to sell a portion of their stock as part of a later financing round.
The Takeaway
The proliferation of venture capital firms and technology startups, and the incredible dollar amounts attached to some of their deals, has brought an unprecedented level of attention to the world of startup financing. Despite popular belief, however, startup financing is by no means “one size fits all.” Investment terms should be custom tailored to the needs of both the issuer and investor, and all parties should be wary of the ill effects that a poorly planned and documented transaction can have on a business’s growth and returns. Nick Rueter is a partner in SGR’s Corporate Practice. He represents clients in corporate and transactional matters, including mergers and acquisitions, joint ventures, venture capital and private equity transactions, emerging company issues, fund formations, private placements, and franchise law. nrueter@sgrlaw.com.
How does it work? In 2011, Georgia adopted its original version of the IGE to provide a regulatory framework for businesses to take advantage of the intrastate offering exemption in Georgia, becoming just the second state to adopt such a framework. The early IGE effectively mirrored the SEC’s rules, but its requirements made it difficult for companies to qualify for the exemption, and companies were only allowed to raise a maximum of $1 million through an offering. At the end of 2016, the SEC amended Rule 147 and promulgated new Rule 147A in an attempt to modernize the intrastate offering exemption and lower the regulatory burden on companies using the exemption. Taking effect in April 2017, these changes make it easier for companies to qualify for the exemption and allow companies to raise increased amounts from in-state investors. In response to the new SEC rule, Georgia revised the IGE, giving companies more flexibility in their use of its intrastate offering framework. The amended IGE took effect in July 2017. As of this writing, only 50 companies have taken advantage of the IGE by filing with the Secretary of State to issue securities under Georgia’s intrastate offering framework. It is a useful tool of which startups, small businesses and larger, established companies in industries such as real estate, construction, health care, restaurants and film production should be aware. What are the requirements? Companies may issue their securities to in-state investors if the following general requirements (among other things) are met: ● The company must be a for-profit entity that has its principal place of business, and is doing business, in Georgia. ● Offers to sell securities can only be made to residents, or individuals the issuing company reasonably believes to be residents, of Georgia. ● The company cannot raise more than $5 million through a single offering. ● The company cannot accept more than $10,000 from a non-accredited investor. ● The company must file a notice with the Georgia Secretary of State before conducting an offering. Nick Flint is an associate in SGR’s Corporate Practice. He advises on a variety of corporate and transactional matters, including mergers and acquisitions, private equity and venture financing, corporate governance, and securities law. nflint@sgrlaw.com.
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Startups and Intellectual Property
STARTUPS AND INTELLECTUAL PROPERTY
T
A PAIR OF CAUTIONARY TALES
BY GREG KIRSCH
ech startup companies often rely on patents and other
including some of the patent claims (“patent claims”are the
types of intellectual property (IP) rights to help safeguard
sentences embedded within all patents that specifically define the
against competition, thereby protecting their investors and
invention that is covered by the patent – similar to the metes and
increasing the chance that they will succeed in executing
bounds of a property description).
on their business models. However, in many cases there
are fundamental misunderstandings among the individuals and
“Are you sure that’s what the patents cover?” he said. The next hour was spent discussing the patents in further
companies who invest in startups as to how best to use IP rights.
detail. My friend was completely surprised by the nature of the
Either the wrong attributes of the startup’s products and services
patent portfolio owned by the company in which the VC fund
are protected, or IP is forgotten as a critical asset altogether. There
had just invested a large sum of money. “I thought the patent
is no better way to learn how best to protect and exploit IP than
portfolio was directed to Technology B, not Technology A,” he
by examining the successes – and miscues – of others. That being
stated. Technology B was the technology at the heart of Acme’s
said, below are two stories I’m happy to share, which are based
current business model.
on my real-life experiences while practicing IP law over the last 27
“Do you know why Acme’s patents would be directed to
years.
Technology A?” I asked.
Cautionary Tale 1
used Technology A, but they pivoted away from that business
Asking the right questions about IP
about three years ago into a new product line that employed
About 10 years ago, I received a call from a friend who worked
newly developed Technology B. I guess they never filed new
as a general partner at a well-known venture capital (VC) firm.
patent applications for the new products and technologies!”
The VC firm had recently made a large investment in a startup
“Didn’t anybody take a look at their portfolio before the
technology company, “Acme Corp.,” which had a large patent portfolio. My friend wanted me to take a quick look at the Acme
He responded, “Well, Acme used to have some products that
investment was finalized?” I asked. “No,” he responded. “We simply asked whether Acme had
patent portfolio, and provide him with my general thoughts.
filed patent applications, and they answered in the affirmative. It
My first thought was, “Why is he calling me now, after
was a line item on a checklist – ‘patent applications filed, check!’
the investment has closed, rather than calling me before the
Acme’s management answered correctly – the company did
investment was finalized?” Nevertheless, I told him I’d take a
indeed have patent applications filed. But not the proper patent
look.
applications directed to the relevant products and technologies.
I received a listing of the patent portfolio and downloaded the
We didn’t ask the right question!”
patents. The patents looked interesting and appeared to cover a
At this point, our conversation ended. Relations between
technology (“Technology A”) fairly well. A few days later, I called
the VC firm and the management of Acme subsequently were
my VC friend back. I walked him through Acme’s various patents,
strained over this major oversight. Acme later tried to correct the
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17
misstep by filing additional patent applications for Technology B, but because it had waited too long and the technology had already been disclosed publicly and commercially, it was severely limited in what it could claim in its new patent applications. As a result, the firm’s competitive advantage in the marketplace was significantly damaged. Some important lessons from this true story: ● Ask the right questions about IP. Don’t just ask, “Have patent applications been filed?” Rather, ask, “Have the right patent applications been filed?” And then take a look at them, to be sure. Your patent attorneys can help in this regard. ● IP should not just be a line item in a checklist. All too often, IP is oversimplified to a binary question, with one of two possible answers: “patent applications filed,” or “patent applications not filed.” Or, similarly “trade secrets protected” or “trade secrets not protected.” The real answer is almost always much more nuanced and usually necessitates a closer look. ● Management doesn’t always know what they have and don’t have with IP. Often without deceptive intent, management of a startup may not truly know what IP they own. They may throw around words like “proprietary,” “protected” and “patent pending,” but without looking more deeply, the true substance of what they own may be more complicated, and not what they think. ● Take action early. Missteps with respect to protecting your IP may not be able to be corrected later. Whether it’s waiting too long to file for patent protection, or inadvertently letting
Cautionary Tale 2
that proactive steps be taken early in the stage of technology
David v. Goliath: How an IP slingshot resulted in an acquisition
development. Waiting too long can be a costly mistake.
A number of our clients fall into the category of “serial
trade secrets become public, protecting your IP usually requires
entrepreneurs” – individuals or teams who have a knack for founding startups, building the companies into strong players in the market, selling their interests and then moving on to found new startups. I represented one such serial entrepreneur who developed some pioneering financial services using Internet technology. I worked closely with the client to map out a suitable patent strategy, balancing a comprehensive patent protection approach with a limited budget. Over time, while starting with a small patent portfolio, we built the patent portfolio further to protect a large swath of the various inventions embedded within the client’s products. After operating in the marketplace for several years, it became clear that a much larger competitor was slowly but steadily encroaching into our client’s space. The competitor took important features from our client’s service offerings and
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Startups and Intellectual Property
Starting with a small patent portfolio, we built the patent portfolio further to protect the inventions embedded within the client’s products. After developing an appropriate approach with the client, we carefully reached out to the competitor, set up meetings to discuss our client’s patents in general terms, and negotiated a solution to the potential dispute. After thoughtful discussions and negotiations, it became clear to both sides it was in everyone’s best interest for the competitor to acquire our client. Our client would contribute its valuable patent portfolio and related technical expertise to the deal, and the competitor would contribute its existing products and technologies and its position as a larger player in the field, with deeper pockets. And the competitor would pay our client a significant amount for the acquisition – truly a win-win. We helped structure the deal, and the transaction was consummated. After the deal closed, the benefits that were anticipated played out well, and the combined company continues to be dominant in the field. Some important lessons from this true story: ● IP can be a sword, but also can be a means to a beneficial end incorporated them into its own. By the time our client fully
for both sides of a dispute. It’s important to be creative when
realized what was happening, we fortunately had secured
considering potential solutions to an IP dispute, and a win-win
several key patents for our client, including its most valuable
outcome can often be achieved, eliminating or minimizing more
inventive features. While the competitor had also filed for patent
expensive legal options, such as litigation.
protection, our client had superior patent claims given its head
● IP can level the playing field between smaller and larger
start in filing.
companies. In many cases, IP can help bring different types
Our client was undoubtedly alarmed by the competitor’s
of companies together, leveraging the strengths of both – for
actions – both because the competitor was likely infringing the
example, the innovation and scrappiness of a startup company
client’s patents, and because the competitor was much larger
and the deeper pockets and market reach of a larger player.
in size, with more funding and resources at its disposal and
● A robust IP position can be created on a startup firm’s limited
greater visibility in the marketplace. After taking a closer look
budget. With help from patent/IP counsel, there are innovative
at the competitor’s activities, we determined they were, indeed,
techniques to protect the most important IP initially, and later
likely infringing.
expand and cement the IP position as the company grows.
Our client’s first inclination was to file a patent infringement lawsuit against the competitor and try to recover damages and/or force the competitor to cease infringement. However, as we explored options further with the client, we determined it was in our client’s best interest to work with the competitor in some fashion, as opposed to trying to force them to stop infringing or take a license.
Greg Kirsch is the head of SGR’s Intellectual Property Practice. His clients range from multinational corporations to startups to universities. His practice encompasses the entire range of patent law, including patent procurement, strategic patent portfolio development, patent opinions, post-grant proceedings at the U.S. Patent and Trademark Office, licensing and patent litigation. gkirsch@sgrlaw.com.
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Employment Law Considerations
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E M P L O Y M E N T
BY BRANDON SHERLINSKI
AND BENEFITS Six key considerations for startups and growing businesses
A
growing company – whether a new startup or
classifying workers as independent contractors. Misclassification
an existing business that is expanding – needs to
of workers can be very costly, and is considered a hot-button
be aware of a number of legal requirements as
issue for the IRS, the federal and state departments of labor, and
the company begins to hire employees. The following is a summary of some of the laws and other considerations for new and growing employers.
1
Employee paid time off
plaintiffs’ attorneys.
3
Health and welfare benefits Whether or not an employer is subject to the ACA
mandate, many employers choose to offer health and welfare
There is currently no federal law that requires private
benefits, e.g., dental, vision, group life insurance, and short-
employers to provide employees with paid time off. However,
and long-term disability, as a way of attracting and retaining
many states, cities and counties have enacted laws requiring
employees. If other employers in your industry offer such benefits,
employers to provide employees with paid time off or paid
your company may be at a recruiting disadvantage if you choose
sick time. For example, Massachusetts currently requires most
not to do so. Most small employers that offer health and welfare
employers to allow employees to accrue up to 40 hours of paid
benefits do so by contracting with one or more insurance carriers,
sick leave per year. Separately, most states require employers to
such as AETNA, BlueCross BlueShield or Humana, through a local
provide non-exempt employees with mandated break and/or
insurance broker.
meal periods, which may be paid or unpaid, depending on the
If an employer offers health and welfare benefits, the employer
state. Employers should consult with an attorney regarding the
will be subject to and must comply with the requirements of the
requirements applicable to their operations.
federal laws governing health and welfare plans, including the
2
Employee Retirement Income Security Act of 1974 (ERISA), the
Payroll and tax withholding requirements
All employers are required to withhold applicable federal (and, where applicable, state and local) tax withholdings, including income, FICA, FUTA and Medicare. For many small employers,
Internal Revenue Code of 1986 (IRC) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
4
Retirement plans There is no legal requirement that private employers offer
complying with payroll laws is most easily accomplished through
any form of retirement plan to their employees. If an employer
the use of a third-party payroll provider. In addition, many states
does choose to sponsor a retirement plan, the employer becomes
have specific requirements regarding how frequently – e.g.,
subject to and must comply with the requirements, including
bi-weekly – employees are required to be paid.
annual reporting requirements, applicable to retirement plans
Although independent contractors are exempt from payroll taxes and withholding, employers should use caution in
under the IRC and ERISA. Even if an employer utilizes a retirement plan provider and a third-party administrator for its plan, the
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21
LLC EQUITY COMPENSATION BY RETT PEADEN
Before the advent of LLC statutes, the only way to combine the benefits of limited liability with pass-through taxation was with an S corporation. Entrepreneurs were told that if they dreamed of a major exit or liquidity event, going public through a C corporation was the way to go. Today, all 50 states have well-developed LLC statutes; the IRS has enacted “check the box” regulations making it easier to elect pass-through status; and the growth of private equity combined with increasing regulation of the public markets have made going public less attractive for many. As a result, LLCs now represent the most common form of business organization for emerging companies. At some point during the life cycle of an LLC, it likely will become important to reward extraordinary effort – whether a co-owner contributing “sweat equity,” a key manager who wants some ownership or rank-and-file staff. Flexibility is a hallmark of LLCs, and there are several possibilities for structuring rewards. The conversation often turns to equity compensation. However, without appropriate consideration of the implications, the result could be frustration and an unexpected tax bill. To better understand some of the tax implications, one must recognize the basic distinction between capital interests and profits interests in an LLC taxed as a partnership. A capital interest represents immediate ownership in the assets of the LLC. If the LLC liquidated immediately after an employee’s receipt of a capital interest, the employee would be entitled to a share of the liquidated assets. After an employee’s receipt of a profits interest, however, if the LLC immediately liquidated the employee would not be entitled to any portion of the LLC’s assets. A profits interest only grants a share of future appreciation and distributions from the LLC. The most straightforward way to acquire a capital interest in an LLC is by purchase, but that is not what is usually intended by either the issuing company or the employee. Instead, the LLC typically grants an employee a capital interest without requiring payment in return. The employee owes tax on the fair market value of the capital interest, and the LLC receives a corresponding deduction. If the capital interest is restricted and does not immediately vest, then the employee may consider making a Section 83(b) election, which provides for the employee to be taxed on the restricted interest on the date the equity was granted rather than on the date of vesting. Because the value of a profits interest is mostly speculative, receipt of a profits interest should not be taxable, as there is no fair market value to report. In Revenue Procedure 93-27, the IRS issued guidance that receipt of a vested profits interest should generally not be taxable. The IRS expanded that guidance in Revenue Procedure 2001-43, which provides a safe harbor for receipt of an unvested profits interest, and treats that grant as if a Section 83(b) election were made, as long as certain qualifying conditions are met. Equity compensation can be an ideal way to align an employee’s interest with the LLC, but the details carry important tax and non-tax consequences. Rett Peaden is a partner in SGR’s Corporate Practice, where he helps clients navigate the complicated process of mergers and acquisitions. He also provides general counsel to business clients, advising on ongoing transactional matters and succession planning. rpeaden@sgrlaw.com.
employer will still be directly liable for failures to comply with such laws. A 401(k) plan is the most commonly known and understood type of retirement plan offered by private employers. However, there are more simplified types of retirement plans that small employers may choose to offer, such as a Simplified Employee Pension Individual Retirement Arrangement (SEP-IRA) or a Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA. These plans are easier to administer and are exempt from certain reporting and testing requirements applicable to other qualified retirement plans, such as 401(k) plans.
5
Incentivizing key employees Attracting and retaining talented and capable personnel is
critical to the success of any business. However, new and growing companies often do not have sufficient cash flow to properly compensate key employees. To address this issue, many growing companies choose to offer incentives that do not require current cash payments, such as equity (i.e., granting an ownership interest in the company), phantom equity (i.e., awards that provide benefits similar to equity, but that do not grant actual ownership interests) and grants of bonuses that are tied to
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Employment Law Considerations
becomes increasingly important to implement a comprehensive employee handbook. Additionally, even for employees treated as at-will, written employment agreements or offer letters with signed acknowledgements can serve to clearly define employee job duties and responsibilities, including confidentiality and non-disclosure obligations. The content and phrasing of employee handbooks and employment agreements can have significant legal ramifications. Accordingly, these documents should be prepared or reviewed by legal counsel.
The Takeaway
This article provides a brief overview of employment and benefits law considerations for new and growing companies. We recommend you contact your legal counsel if you have any questions regarding your obligations as an employer, and before implementing any type of employee benefit plan or incentive arrangement. Brandon Sherlinski is an associate in SGR’s Executive Compensation and Employee Benefits Practice. He specializes in employee benefits law with a specific concentration in qualified plans, deferred compensation, equity plans, and health and welfare matters, including compliance with ERISA, COBRA, FMLA and HIPAA. bsherlinski@sgrlaw.com.
a sale of the company. Such equity incentives typically will include stock options, restricted stock and stock appreciation rights. Similar types of awards can be made for partnerships and limited liability companies. Providing equity and equity-based awards encourages employees to contribute to the growth and profitability of
FEDERAL EMPLOYMENT LAW THRESHOLDS The chart below provides a breakdown of when certain significant federal employment laws will begin to apply (based on number of employees): LAW
EMPLOYEE THRESHOLD
REQUIREMENTS
Fair Labor Standards Act (FLSA)
1
Must pay all employees minimum wage, and non-exempt employees overtime
Americans with Disabilities Act (ADA)
15
Prohibits discrimination against workers with disabilities, and requires employer to provide reasonable accommodations to qualified employees with disabilities
Age Discrimination in Employment Act (ADEA)
20
Prohibits discrimination against workers age 40 and older
Consolidated Omnibus Budget Reconciliation Act (COBRA)
20
Must offer post-termination continuation of certain health benefits to eligible employees
Patient Protection and Affordable Care Act (ACA) employer mandate
50
Must offer full-time employees (30 hours or more) health care coverage that meets affordability and minimum value requirements
Family Medical Leave Act (FMLA)
50
Must offer eligible employees with up to 12 weeks of unpaid, job-protected leave for specified family and medical reasons
Equal Employment Opportunity Act EEO-1 filing
100
Employers are required to complete filing (and maintain records of) employee demographic (diversity) data
Worker Adjustment Retraining Notification Act (WARN)
100
Must notify employees at least 60 days in advance of a plant closing or mass layoff (or provide employees pay in lieu of such notice)
the company. Additionally, each of these types of awards can be structured as a form of retention tool by requiring an employee to remain employed for a set period of time in order to receive the benefit of the award. Equity and other incentive arrangements can often have complex tax and securities implications, and employers should consult with their legal counsel to ensure compliance.
6
Employee handbooks, policies and agreements
New and growing companies need to decide when to enact written employee policies. Documenting company policies helps employees to understand an employer’s expectations, helps to ensure legal compliance and can provide defenses to the employer in the event of employment litigation. Although startups may not consider it a priority, as a company grows it
*Please note that this list is not exhaustive, and that many states have similar laws that apply to smaller employers (e.g., mini-COBRA and mini-WARN statutes).
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Safe and sound Small items for delivery are stored in locked holding compartments within the drone.
BY BRETT LOCKWOOD
Tracking devices Owners can remotely track the drones to always know their whereabouts.
Fitted sensors Sensors help keep the drones on the sidewalk and off of the roads.
SGR CLIENT PROFILE
WAEC’S DRONES
AND THE LAST MILE OF DELIVERY 24
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Walking speed The drones travel at about 4 mph – the average walking speed.
Client Profile: Waec
W
hen most people think about a future filled
SIX THINGS YOU NEED TO KNOW ABOUT THE WAEC DRONES
with drones, a sky dotted with creature-like devices flitting about overhead is the likely
vision that comes to mind. However, if Brandon Eck and Brett Wagner, the two 20-something co-founders of Waec (pronounced WAY-eck) have their way, we’ll also have to pay close attention to what’s going on underfoot. Waec’s mission is to develop and offer an autonomous ground-drone delivery service for restaurants and retail stores that is quick, inexpensive and environmentally friendly. Affectionately and collectively known as “Spot,” the company’s drones will provide an additional delivery alternative for these businesses that already often operate at thin margins. By reducing the costs for their business customers, the ultimate consumers of these businesses should also benefit from these savings in the form of smaller delivery charges. Eck, who has an architectural background, is an avid designer, which is evident in the funky but sleek prototype ground drone that Waec has developed. Eck notes that “delivering four-pound items using 4,000-pound vehicles doesn’t make sense anymore. We live in a time where alternative, energy-efficient delivery methods using autonomous systems are now possible. By providing cities with electric autonomous ground drones, local deliveries can now be environmentally friendly and low cost.” Eck envisions a seamless urban integration of autonomous delivery systems that not only provides cities a greener local delivery option, but
Waec co-founders Brandon Eck (top) and Brett Wagner.
that is consciously adapted to urban environments and how
products and services. The company’s potential has been
people interact in those environments.
recognized by others – Waec is currently a participant in two
When he’s not working on Waec matters, the company’s
highly regarded early-stage business incubator programs: the
other co-founder, Wagner, is completing a master’s
1776 startup tech incubator in Washington, D.C., and the
degree in entrepreneurial leadership at Babson College in
MassRobotics incubator in Boston.
Wellesley, Massachusetts, which has one of the country’s
SGR is proud to have assisted Waec with both intellectual
most prestigious entrepreneurship programs. He shares his
property and corporate matters. The SGR team assisting
colleague’s view that autonomous drones will make a positive
Waec includes Ryan Varnum in the Firm’s Washington, D.C.
impact on our daily lives and in the communities we inhabit.
Intellectual Property Practice, and Brett Lockwood in the
“Our cities are going to drastically change in terms of transportation methods over the coming years,” Wagner
Atlanta Corporate & Technology Transactions Practice. If Waec has its way, the era of assistive land-based drones
observes. “The tech industry is on the verge of perfecting
is just around the corner, and Waec will help shape that
new capabilities that will allow us to perform delivery logistics
transformation. So, next time you place that online order
beyond what most of us can imagine – the fourth industrial
for a pizza or an iPhone and you want it in a hurry, don’t be
age is upon us! Waec’s mission is to be a key influencer
surprised if the messenger delivering your desired fare or
for the integration of autonomous ground drones into our
must-have object is a charming little bot named Spot.
neighborhoods.” Eck and Wagner have assembled a talented team of engineers and developers to help them further refine their
Brett Lockwood is a partner in SGR’s Corporate Practice and chairs the Technology Law Practice. blockwood@sgrlaw.com.
1. Ground drones will carry packages and other items by traveling along city sidewalks at about 4 mph, which is comparable to the average walking speed of most people. 2. The range of the Waec drones will be about three miles. After that, a battery recharge will be required. 3. Each drone is equipped with sophisticated cameras, GPS and other detection systems that recognize the edges of sidewalks so it will not mistakenly veer into the street. 4. The drones can also detect and sync with crosswalk signals so they “know” exactly when to cross a street. Obstacle-detection monitors also allow the drones to avoid running into pedestrians, animals or inanimate objects. 5. Items up to 20 pounds in weight are stored for delivery in a locked holding compartment that is activated by secure key codes. These compact land rovers are also constantly tracked so their users always know the drones’ whereabouts. 6. In terms of security, because the land drones weigh about 50 pounds each, it is not easy for someone simply to walk off with one.
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Tim Beighley and brothers Brent and Kyle Pease enjoy the Publix Georgia Half Marathon in Atlanta.
“WHERE THERE’S A WHEEL, THERE’S A WAY”
BY KRISTEN LEWIS
SGR CLIENTS ROLL ACROSS THE FINISH LINE
T
his article is about two of my favorite clients with disabilities. In
the cerebral palsy that shackles their bodies. They are also loving sons
my 34 years of serving families challenged by the special needs
to their parents, who have tirelessly supported them in their efforts to
of their loved ones with various disabilities, Kyle Pease and Tim
overcome the challenges of their physical limitations. Kyle and Tim are
Beighley have revolutionized the way I now collaborate with families to
spirit-filled Christians whose faith sustains them as they encounter myriad
develop and implement comprehensive special needs estate plans. My
predicaments each day. They are both ambassadors for others with
colleague, Emma Barry, who recently joined SGR, has already benefited
disabilities who struggle to live full and inclusive lives in their communities.
greatly from her early experience with the Pease and Beighley families as
They have demonstrated how persons with significant disabilities can have
she develops her expertise in this challenging estate planning subspecialty
happy and fulfilling lives on their own terms. “I choose to look at my life as
that very few traditional estate planning attorneys pursue.
a blessing – an opportunity to show the world that my disability is actually
Kyle and Tim are handsome young men filled with joy, notwithstanding
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a gift, an ability with slight modifications,” Kyle says. One of Tim’s favorite
Finish Line
quotes, from Randy Pausch, is “We cannot change the cards we are dealt,
Kyle has worked for many years at the Buckhead campus of Piedmont
just how we play the hand.”
Hospital, cheerfully guiding patients and visitors through the maze of professional buildings, offices and hospital facilities where even regulars
Even though they use wheelchairs to get around, Tim and Kyle are
routinely get lost. He is beloved by the medical staff, patients and visitors.
experienced athletes who regularly compete in road races – 5Ks, 10Ks,
So the next time you feel discouraged, be lifted up and inspired by my
half-marathons and full marathons around the country under the auspices of the Kyle Pease Foundation (www.kylepeasefoundation.org). The
friends and clients, Kyle Pease and Tim Beighley, who helped make 2017
Foundation facilitates the inclusion of persons with disabilities in their larger
the most rewarding year of my career. As the motto of the Kyle Pease
communities through innovative sports programming. Engineers design
Foundation so aptly proclaims: “Where there’s a wheel, there’s a way.”
and build customized racing chariots for racers who use wheelchairs. Each “rolling” racer is paired with a running racer. As a team, these athletes participate in races throughout the country – Atlanta, New York, Washington, D.C., and Boulder, Colorado, to name just a few of their recent race venues. Kyle has even competed in several Ironman competitions
Kristen Lewis is counsel in SGR’s Tax Practice. She specializes in estate planning and wealth protection, and is a frequent speaker on elder and special needs topics. klewis@sgrlaw.com.
with his brother, Brent. Each year, Kyle and Tim cross the finish line to the applause and cheers of their many fans. In their free time Kyle and Tim spread messages of faith, acknowledging that their disabilities give them a platform to do so. Kyle composes an on-line daily devotional that inspires hundreds of followers with his insights, while Tim is about to finish his chaplaincy studies so that he can minister
“THE DIFFERENCE BETWEEN THE ALMOST RIGHT WORD AND THE RIGHT WORD… ‘TIS THE DIFFERENCE BETWEEN THE LIGHTNING BUG AND THE LIGHTNING.” M A R K T WA I N
to college students. They are both in demand as motivational speakers, bringing hope to those who feel hopeless as a consequence of their own disabling conditions. Tim is an ambassador for Champions Place, a new residential community underway in Roswell, Georgia, for young adults with physical disabilities (www.championscommunityfoundation.org). This housing model will be replicated in cities across the nation. Tim is also a spokesman for Canine Assistants, in Milton, Georgia (www.canineassistants.org), which raised and
Many of my clients have children with autism (not “autistic children”). Some of my clients’ children use a wheelchair to get around (they are not “wheelchair bound”). People with disabilities (not “disabled people”) do take notice when we use person-first (rather than disability-first) language. For an excellent primer on person-first language, go to: www.rtcil.org/guidelines for “Guidelines: How to Write and Report About People With Disabilities,” published by the Kansas University Research and Training Center on Independent Living.
trained his certified service dog, Ringer, to be his canine partner.
Tim Beighley and Eric Ledbetter at the Adult Disability Medical Home “Run for Health” 5K.
Kyle Pease at the 2013 IRONMAN Florida.
Tim Beighley and friends set the pace at the Publix Georgia Half Marathon in Atlanta.
TRUST THE LEADERS | Winter 2018 | SGRLAW.com
27
125
th
Anniversary
Trust the Leaders is printed on recycled paper
