Sullivan
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Sullivan’s lawyers understand the unique challenges facing privately held and family businesses.

Our attorneys have extensive experience in identifying and helping to resolve key legal and business issues associated with the successful transition from one generation to the next of a family business. This includes advising on and drafting non-compete and non-solicitation agreements, employment agreements and shareholder agreements, and when necessary, separation agreements. By taking a holistic approach, we also advise on income and transfer tax planning – increasing ownership through stock bonus programs, implementation of deferred compensation arrangements, and similar strategies for efficiently transferring ownership to the next generation.

Our M&A and financing expertise also provides critical support for strategic acquisitions and dispositions, and financing acquisitions and critical operations. Our tax and benefits attorneys have guided clients through the transfer of ownership using employee stock ownership plans (ESOPs), phantom stock plans and other forms of equity compensation vehicles to provide ownership incentives to critical employees. Our ultimate goal is to help clients preserve and manage intergenerational transfers, where possible, and to protect the underlying value of the business as management and ownership shift.

Our practice involves a range of services including:

  • Mergers, acquisitions, and dispositions.
  • Banking and financing support, including as necessary advice with respect to bankruptcy and creditor issues.
  • Advising on and drafting all manner of employment, shareholder, and vendor contracts.
  • Advising on the effective use of non-compete agreements and other restrictive covenants.
  • Supporting ownership and management restructurings.
  • Dealing with ownership succession issues, including the effective use of ESOPs and other forms of equity and phantom compensation plan design and use.
  • Designing and supporting various forms of employee benefit plans.
  • Labor and employment support, including preparation and/or review of policies, handbooks, employee classification considerations, and effective use of performance improvement plans.
  • Integration of management and ownership objectives into estate planning instruments (wills and trusts).
  • Negotiating and executing venture capital and other private equity transactions.

Our attorneys have written articles on these subjects for national publications and have given seminars for the American Bar Association and other Bar Groups. In addition, our attorneys have taught at major law schools on these subjects.

Representative Client Work

  • Represented Horizon Beverage Group Inc., one of New England’s premier alcohol distributors, in its sale to Southern Glazer’s Wine & Spirits, the world’s preeminent distributor of beverage alcohol
  • Represented principals of a manufacturer that makes and distributes ink-based dyes for industrial applications around the world in a $50 million sale of assets in the U.S. and the sale of the capital stock of affiliates operating in the Netherlands, China and Japan; engagement included assistance with estate planning for the proceeds of the sale
  • Represented a family in an equity investment in a joint venture among the family, a public company in which the family is already a major investor and a new outside investor, as well as a term loan to the public company
  • Advised a family-owned metals manufacturing business regarding growth through strategic acquisitions and succession planning
  • Represented an employee-owned company that does advanced research for the military and other government agencies
Viewpoints
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Cooking Up Pandemic Relief: the Restaurant Revitalization Fund and Grants to Food and Beverage Providers
In March 2021, the American Rescue Plan Act of 2021 (the “Act”) was signed into law. The Act provides for $1.9 trillion of relief to many individuals and businesses overcoming the economic impact caused by the COVID-19 pandemic. Among the Act’s intended recipients are food service providers and adult beverage producers, who may be eligible for grants under the newly established Restaurant Revitalization Fund (the “Fund”). The Small Business Administration (“SBA”) will administer the Fund and distribute up to $28.6 billion in grants to eligible restaurants and similar establishments, $5 billion of which is preliminarily earmarked for eligible businesses with gross receipts during 2019 of not more than $500,000. Which Businesses are Eligible? As you might guess from the name of the Fund, restaurants are of course eligible. Eligible to receive a grant in addition to conventional restaurants are food stands, food trucks and carts, caterers, bars and saloons, taverns, inns, lounges, brewpubs, tasting rooms, taprooms, licensed facilities or premises of a beverage alcohol producer where the public may taste, sample or purchase products, or other similar places of business in which the public or patrons assemble for the primary purpose of being served food or drink, including those located in an airport terminal or businesses that are tribally-owned. As a result, the Fund may prove critical for many businesses, including struggling craft breweries, distilleries and wineries. While many businesses are eligible for a grant from the Fund, businesses with more than twenty locations, public companies and government-operated providers are ineligible. In addition, some live venue operators who applied for certain grants under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act are also ineligible. How much Money can a Business Receive from the Fund and How must it be Spent? A single-location business may receive a grant in an amount of up to $5 million. A business with two or more locations may receive a grant in an amount of up to $10 million. Generally, the amount a business will receive will be equal to the pandemic-related revenue loss of the business. In calculating the amount of the grant to a business, the SBA will generally compare a business’ 2019 and 2020 revenues. Funds may be used in a similar manner to those funds received for Paycheck Protection Program (“PPP”) loans. That is, funds from a grant must be spent on certain payroll costs, payments of principal or interest on mortgage obligations, rent payments, utilities, maintenance expenses, supplies, food and beverage expenses, covered supplier costs, operational expenses, paid sick leave and any other expenses the SBA determines to be essential to maintaining the business. It is also important to note that funds must be used by December 31, 2021 or may need to be returned to the U.S. Treasury. Can PPP Loan Recipients Receive Grants from the Fund? Yes, an otherwise eligible business may receive a Fund grant even if it previously received a loan under the PPP; the SBA will deduct any PPP loan amounts from such grant, however. It is important to note that the Fund’s distributions are grants. By contrast, previous relief programs, such as the PPP, generally provided loans (though potentially forgivable loans) to eligible businesses. How can a Business Apply for a Grant? The SBA will administer the Fund’s distribution. Unfortunately, as of the date of this advisory, the SBA’s application process is not yet open. Nonetheless, we expect the application to be available on the SBA’s website and, once available, that applications will be submitted directly through the SBA’s website (as opposed to being submitted through approved banks as is the case for the PPP). Similar to that for the PPP, however, applicants will need to make a good faith certification along with their application that the uncertainty of current economic conditions makes necessary the grant request to support the ongoing operations of the business. In addition, businesses owned and controlled by women and veterans and certain other socially and economically disadvantaged small businesses will receive priority for the first three weeks of the application period. Even if your business is not expected to receive priority, any eligible business should prepare to submit its application as soon as possible, as grants are otherwise made on a first-come first-served basis. Your business can prepare for the Act’s application process and keep up-to-date on other pandemic relief programs by consulting with your primary Sullivan attorney or reaching out to the authors of this advisory.
SBA Imposes Cap of $20 Million on Aggregate Paycheck Protection Program Loans to Related Businesses
Over the last several weeks, Sullivan has issued numerous client alerts that explore the Paycheck Protection Program (PPP) instituted under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and other funding opportunities available to small businesses. Yesterday, the Small Business Administration issued additional interim final rules that, among other things, impose an aggregate limit of $20 million of PPP loans to businesses that are part of a single corporate group. Businesses are part of a “single corporate group” if they are majority owned, directly or indirectly, by a common parent. This limitation applies even if the businesses are eligible for a waiver of the affiliation rules under the PPP. Less clear is the true scope of this rule. Does it, for example, apply to ownership of businesses that are in a brother-sister type of relationship, rather than parent-subsidiary, and was there an intent to limit its application to corporate entities? Presumably, additional guidance will be forthcoming as businesses try to make sense of this latest twist. To the extent the limitation applies, it impacts any loan that was not fully disbursed as of April 30, 2020, including any additional disbursement from an already approved loan that would cause the total loans to a single corporate group to exceed $20 million. In addition, the new rule makes clear that it is the responsibility of the loan applicant to (i) notify the lender if the applicant has applied for or received loans in excess of $20 million and (ii) withdraw or request cancellation of any pending loan application or approved loan not in compliance with the limitation. An applicant’s failure to do so may result in the loan not being eligible for forgiveness. In light of these new rules, we urge those who may be impacted by this new limitation to contact their loan officer or a member of Sullivan’s COVID-19 team immediately to ensure continuing compliance with the many PPP rules. *  *  * Sullivan has developed a rapid response team of attorneys to help our clients and our communities cope with the impact of the COVID-19 pandemic and understand the implications of the CARES Act and other actions taken by state governments and the federal government. Please refer to Sullivan’s resource center at www.sullivanlaw.com/COVID19 for more information and for access to Sullivan’s library of related advisories. Please know that Sullivan is focusing substantial efforts to provide assistance to businesses and individuals affected by COVID-19 and benefited by the CARES Act.  If you have questions about how to move forward and navigate the novel legal issues raised by COVID-19 and/or the CARES Act, please contact your primary Sullivan attorney or send a message to CARES@sullivanlaw.com