Wednesday, June 10, 2009


If you have any business with the State of California, please read the following Executive Order that was executed on June 8, 2009.

by the
Governor of the State of California

WHEREAS due to developments in the worldwide and national financial markets, and continuing weak performance in the California economy, the General Fund deficit for the 2009-2010 fiscal year is estimated to grow to $24.3 billion; and

WHEREAS the State Controller projects that as of July 29, 2009, California will not have the cash needed to meet all of its payment obligations; and

WHEREAS the projected budget deficit will require critical cuts to State programs and services, and additional borrowing from local governments; and

WHEREAS immediate action is needed to address the budget and cash crisis facing the State of California; and

WHEREAS immediate action to reduce current spending must be taken to ensure, to the maximum extent possible, that the essential services of the State are not jeopardized and the public health and safety is preserved; and

WHEREAS State agencies and departments under my direct executive authority must take all available steps to reduce their expenses to achieve budget and cash savings.

NOW, THEREFORE, I, ARNOLD SCHWARZENEGGER, Governor of the State of California, in accordance with the authority vested in me by the Constitution and the statutes of the State of California, do hereby issue the following orders to become effective immediately:

IT IS ORDERED that except for projects funded by the American Recovery and Reinvestment Act, or projects funded by bonds, grants or projects specifically mandated by court orders, or public-private partnerships that require no direct state expenditures, any funds encumbered on or after March 1, 2009, for contracts entered into for which goods or services have not been provided or for contracts proposed to be entered into during the 2008-2009 fiscal year by State agencies and departments, regardless of funding source, are hereby disencumbered and the funds will revert to their original funding source if no legal liability will be incurred by the State. If a legal liability will be incurred by the State, approval to continue encumbering the funds must be obtained from the Agency Secretary and the Director of the Department of Finance.

IT IS FURTHER ORDERED that by 30 days after the passage of a revised budget for fiscal year 2009-2010, all State departments, regardless of funding source, shall submit a plan to their Agency Secretary that provides for a reduction of the amount of the department's appropriation to be encumbered by new contracts, extended contracts or purchases from statewide master contracts in the 2009-2010 fiscal year by at least 15 percent, whether the reduction results from cancellation, suspension, renegotiation or otherwise.

IT IS FURTHER ORDERED that effective immediately and until a State department's plan is approved by the Agency Secretary, a State department is prohibited from entering into any new contracts, amending existing contracts, issuing purchase orders for goods or services, or making purchases from statewide master agreements or leveraged procurement agreements for goods or services.

IT IS FURTHER ORDERED that the Director of the Department of Finance shall establish an exemption process regarding all contract cost reduction measures contained in this Order that Agency Secretaries and Cabinet-level Directors shall utilize to determine if an exemption is justified based on an emergent situation to preserve and protect human life and safety; avoiding significant revenue loss; achieving significant net cost savings; maintaining multi-year IT system and service contracts approved by the Office of the Chief Information Officer; or providing critical services and functions.

IT IS FURTHER ORDERED that the services and functions of state government directly related to the preservation and protection of human life and safety, including but not limited to emergency and disaster response activities and the provision of 24-hour medical care, shall be deemed critical and exempt from this Order.

IT IS FURTHER ORDERED that all Agency Secretaries and Department Directors shall take immediate action to implement this Order to reduce state expenditures.

IT IS REQUESTED that other entities of State government not under my direct executive authority, including the California Public Utilities Commission, the University of California, the California State University, California Community Colleges, the legislative branch (including the Legislative Counsel Bureau), and judicial branch, implement similar or other mitigation measures to achieve budget and cash savings and additional transparency in state government.

This Order is not intended to create, and does not create, any rights or benefits, whether substantive or procedural, or enforceable at law or in equity, against the State of California or its agencies, departments, entities, officers, employees, or any other person.

I FURTHER ORDER that, as soon as hereafter possible, this Order shall be filed in the Office of the Secretary of State and that widespread publicity and notice be given to this Order.

IN WITNESS WHEREOF I have hereunto set my hand and caused the Great Seal of the State of California to be affixed this 8th day of June 2009.

Governor of California

Secretary of State

If you have any questions about how this executive order may affect your business with the State of California, please contact me at [email protected]

Tuesday, June 2, 2009

Business Succession Plan Buy-Sell Agreements - Addressing the Critical “What Ifs?”

Consider what planning should be done now for the eventual sale or transfer of your interest in your business (i.e. should you have a buy-sell agreement in place?). The time to prevent disputes is before they occur. My experience is that owners anxieties created in dealing with one another, are inversely proportional to the effort they spend addressing business problems in the event that they should happen. Dealing with these contingencies before they manifest themselves is the secret to a harmonious business relationship with other owners. Legal fees as well as sleepless nights will be minimized if you agree to the "What Ifs" now.

Use the checklist below to determine areas where you may need assistance. Answer Yes or No to each question. Establishing a business succession plan is as important as a business plan when you start a business. This is probably the most neglected aspect of running a business. If you are a business owner and do not have a succession plan in place, you need to address this issue. Take this checklist and your answers to a qualified business attorney to get your succession plan in place.


  • Should the agreement apply only to the current owners or should it be binding on all owners throughout the life of the business entity?
  • Should the agreement provide language that it supersedes all other agreements to redeem a business interest?
  • Is the agreement being reviewed annually? Changes of price or terms should require a unanimous vote of the owners.

Type of Agreement

  • Should the agreement be structured as a redemption agreement (corporate buy-back) or as a cross-purchase agreement (shareholder purchase)?
  • Should the agreement be structured:

-To require the seller to sell and the buyer to buy?

-To give the buyer an option to require the seller to sell?

-To give the seller an option to require the buyer to buy?

-To give a right of first refusal to the buyer?

-As a combination of any of the above?

  • Should the death of an owner cause an automatic buyout of the owner’s interest or should his/her family be allowed to remain as an owner?

Buyout Price and Time for Payout

  • Should the buyout price from the estate or heirs of a deceased owner be addressed? If yes, when should it be paid? What interest rate should the obligation bear?
  • Should the buyout price to a disabled owner be addressed?
  • Should the buyout price to an owner who resigns or is dismissed be addressed?
  • Should there be a difference in price if there is an amiable parting of ways?
  • Should the buyout price to an owner who goes bankrupt be addressed?
  • Should the price reflect the fact that you are selling to a long time business associate rather than an outsider?


  • Should the agreement provide that the buyout be funded by life insurance or some other investment vehicle?
  • If funded with life insurance: Should the type of life insurance used be addressed (i.e. term life, ordinary life, last to die, paid-up life, universal life or an endowment policy?)
  • Should a life insurance trust be used?
  • Should all of the policy proceeds be required for redeeming the interest?
  • Can part of the proceeds be used to help the entity recover from the loss of the owner?
  • Should whole life insurance policies with cash values be transferred to the owner at termination or retirement?


  • Should the agreement be guaranteed or secured?
  • If so, should the security be in the form of:

-A pledge of business assets?

-A personal guarantee by the other owners?

-An agreement obligating the entity to refrain from increasing salaries, paying dividends or making loans until all outstanding liabilities to the beneficiaries are paid?


  • Should the disposition of owners' loans, whether receivables or payables, in the event of termination because of death or disability be addressed?
  • Should the disposition of owners' loans in the event of termination other than because of death or disability be addressed?


  • Should there be a covenant not to compete? If so, should there be geographic and time limitations?
  • Should there be a period of disability before the other owners of the business have the right to buy out a disabled owner?
  • Should an owner have the right to transfer or assign to a trust, for estate-tax planning purposes, their rights and interests in the business?
  • Should the spouses of the owners sign the buy/sell agreement?
  • Do other family members presently own any stock?