A VC’s Term Sheet and a Prenuptial Agreement – both define important legal rights at exit

New businesses are started every day around the world. Some businesses will become hugely successful (i.e. Twitter, Google, Amazon, Facebook), others, not so much. Many start-up businesses seek funding to help grow their business. The source of start-up funds often comes from a venture capitalist, also known as a VC. Angel investors are similar to venture capitalists, but they usually provide seed-stage funding (less than $1,000,000). Often, angel investors are high net worth individuals with excess liquid capital they want to invest. As this blog post is being written (May 2015), the amount of angel investment money and venture capital money available to fund new ventures has never been higher. However, it still remains very difficult for many start up companies to raise money from angel investors and VC’s for reasons beyond the scope of this blog post.

Jonathan C. Noble, Esq.
Jonathan C. Noble, Esq.

When founders and VC’s choose to work with each other, some people, (myself included), believe it is similar to a marriage, with one major exception. Investors almost always expect their investment relationship in the companies they finance (known as their “portfolio companies”) to eventually end. VC’s properly prepare an exit strategy from day one.

Unlike a marriage, nearly every single investor has the primary goal of someday exiting the company they once funded.  For many reasons, some investors remain on the board of directors of their portfolio companies even after the company has gone public or has been acquired.

Certain provisions contained in a VC’s term sheet act like a prenuptial agreement for investors. A term sheet controls the economics of the investment deal when the relationship between the portfolio company and the investor ends. In many ways, prenuptial agreements act in the same manner as a term sheet. 

In very basic terms, before money changes hands between the investor  (VC or angel) and the founders of a company, a document known as a term sheet must be negotiated and signed by both. The term sheet is a critical document for both the founder and the potential investor. The term sheet controls the economics of the deal and often, control of the company. Basically, the term sheet sets forth the economic terms when the company experiences a liquidity event. The term sheet establishes who is entitled to how much money when the company is acquired, merged, issues an initial public offering (IPO), or the company is otherwise liquidated. Modern day investors could not function without a term sheet.

In the technology sector, it is not unusual for some investors to earn 25 to 50 times back on their initial investment if a company they funded becomes successful. If you were an early investor in Google or Facebook, that could translate into hundreds of millions of dollars in profit. The term sheet becomes critical when valuing the everyone’s share of the company.

What does a term sheet have in common with a prenuptial agreement? 

Venture capitalists and angel investors make investments with the expectation they will eventually exit. In contrast, people do not marry each other with the expectation that they will eventually divorce. However, statistics tell us about 50% of first time marriages in the United States end in divorce. The divorce rate is even higher for second and third marriages.

Given the high likelihood of divorce, having a prenuptial agreement in place is simply a good economic decision. For high net worth individuals, it can save tens of thousands of dollars, (or more) in legal fees and costs in the event your marriage ends.

At first, it may seem difficult to approach the subject of entering into a prenuptial agreement. In reality, many people are surprised to discover the idea is welcomed and even embraced by their significant other.

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Social media can create marital problems

by Jonathan C. Noble, Esq.

More than one-third of divorce complaints in the United States include some form of social media as factor in divorce. According to a recent survey, the word “Facebook” appears in over one-quarter of divorce actions. It seems that the digital age has created a vehicle for marital unrest to creep into the sanctity of holy matrimony. Recently, one woman filed for divorce because she alleged that her husband of two months refused to change his Facebook relationship status from “single” to “married”. Hopefully, she lives in a “no-fault” state.

Jonathan C. Noble, Esquire
Jonathan C. Noble, Esquire

The rules of evidence are important.

The rules of evidence play a vital role in the admissibility of certain documentary evidence. E-mails, text messages, tweets, snap-chats, Linked In messages, What’s App communications, Facebook postings, Tweets on Twitter, and the like provide some of the best evidence in family law matters. However, all documents introduced at trial are governed by the various rules of evidence. Simply put, the probative value of any piece of evidence must outweigh the danger of unfair prejudice, confusion, or misleading the fact finder. All potential documents you want introduced in evidence must also be relevant and authentic. Courts are given wide latitude when making rulings on the admissibility of evidence. A skilled lawyer can navigate the rules of evidence and put your case in the best possible light.

Authenticating documents in family law cases – a potential trap for the unwary. 

Before documents can be admitted in evidence and considered by the trier of fact, they must be properly authenticated. There are several methods to authenticate documents in a legal proceeding. This is another area where skilled legal counsel can employ a pretrial strategy to greatly improve the chances that relevant evidence is admitted in evidence and properly considered.

Custody cases and Social Media – think twice, then think again before acting. Do not be your own worst enemy. 

There have been many reported custody cases where one parent does things to undermine their position. Some people do things without thinking. Some people cannot control their urge to disparage their former spouse on social media sites or in written communications. Other people cannot resist the urge to post photos of themselves doing things that undermine their credibility or that potentially damage the court’s view of their fitness for parenting their minor children.  Simply put, it is always better to refrain from doing anything that can be documented, authenticated and admitted in evidence and work against you in any legal matter. I recommend taking the mindset that you should expect that the finder of fact will be reading anything you put into the cyber world. Once your document, photograph or other electronic communication is out there, it is not always possible to retrieve. Think twice, then think again before acting on social media or before sending any electronic communication. Using common sense and focusing on the best interests of your child usually works well in custody matters. You can help yourself a great deal simply by not being your own worst enemy. Think about it.

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Gordon Gekko and the Art of Family Law

In 1987 Michael Douglas won the Academy Award for Best Actor for his role as Gordon Gekko, a wealthy, unscrupulous corporate raider in the movie Wall Street. In one memorable scene from the film, Gekko quotes a line from the ancient Chinese military treatise, Sun Tzu, The Art of War. In the film, Gekko tells a young stockbroker (played by Charlie Sheen) that:

“Every battle is won BEFORE it is fought”.   Sun Tzu Every Battle Quote

In the world of business, this famous quote often rings true. In the context of family law matters, especially contested family law matters, this quote also rings true. In any fight, or competitive contest, whether it is business, legal, sporting, or any other battle life throws our way, solid preparation and planning can often dictate the outcome.

Why am I writing about Sun Tzu  in a family law blog ?

Solid preparation is one key element to getting a good result in most family law matters. My goal is to prepare every matter as though it is going to trial. It is amazing how many family law issues can be settled without court intervention when the case is properly prepared. The need to engage in protracted litigation in family law matters can sometimes be avoided through meticulous preparation and having a sound legal strategy. Many of the battles in divorce and family law are won before they are fought. The key is to pick your battles, (and your counsel) wisely. I wrote about these issues in earlier posts on this blog.

Of course, human emotions can also play a role in family court. Some people insist on “scorching the earth” in search of what they perceive as justice. Some people insist on “making their spouse pay”, despite not having a sound legal reason not to settle, mediate, arbitrate, or collaborate and simply move on. Some people want their “day in court”, despite the unpredictable nature of litigation and the associated costs involved. Some people insist that the law is broken and that their sense of fairness should dictate the outcome of their family law matter.  This is not a recipe for success.

Don’t be like Gordon Gekko. Protect what could become your achilles heel. In family law matters, you should protect your legal rights, however greed is usually counterproductive in divorce proceedings. 

In the original 1987 film Wall Street, Gordon Gekko provides us with a memorable declaration that “greed is good”.  In the end, this mantra becomes his achilles heel, and he pays dearly for it. “Greed is good” is not usually a good mindset in family law matters. Clear thinking coupled with a sound legal strategy usually carries the day during a contentious divorce.

In many divorce and family law matters, greed is often bad. Greed by one (or both) parties can sometimes grind the divorce process to a slow crawl.  This is rarely, if ever, a good thing for the parties involved. You should be thinking about preserving your assets. When counsel fees and litigation costs start to approach the real value of the issue at stake, you need to take a step back and take an assessing view. Hopefully your counsel, therapist, coach and/or family member is helping you put things in perspective.

For example, some people mistakenly believe that upon divorce, they are entitled to much more of the marital estate than the facts of their case and the law will reasonably allow. Their expectations are wildly out of sync with statutory and decisional law. This is where getting assistance to start thinking in a logical manner along with hiring and working closely with the the right counsel becomes critical. Think about it.



Bad-mouthing your ex in front of your children – don’t do it

Divorce and custody litigation can bring out the worst in many people. Emotions run high. Some people cannot resist the temptation to say something nasty or inappropriate to their kids about the other parent. Some parents even try to poison their children against the other parent. When a parent acts in a vindictive manner towards the other parent, this wreaks havoc with the child.

Jonathan C. Noble, Esq.Some parents make the same mistakes over and over, by continually bad-mouthing their former spouse. This can negatively impact your children as they grow up into young adulthood and beyond. Whenever a child hears one parent bash the other parent, the child can suffer. Continual bad-mouthing by either parent can slowly damage a child’s sense of self-esteem. Some people call continual bad-mouthing in the presence of a child “death by a thousand cuts”.

I have seen custody cases where one spouse simply cannot control their own contemptuous, bad-mouthing-of-the-ex-spouse. Remarkably, for some reason, after sharing a life with the targeted spouse and having children with the targeted spouse, the bad-mouthing spouse cannot stop speaking in derogatory terms about the other spouse in the presence of the children. In one recent case, not even a court order could subdue ongoing ad hominem attacks by a mother about her ex, in front of her young children.

Why am I writing about this issue?

First, under the Pennsylvania Child Custody Statute, bad-mouthing your ex could be considered an attempt to turn a child against the other parent. This must be taken into consideration when a court is being asked to modify custody of a minor child. Bad-mouthing conduct may be difficult to prove in court, but it is not impossible to prove. Talk to a family law attorney with experience in this area. For some reason, some parents just cannot seem to stop themselves from bad-mouthing their ex, even though they know bad-mouthing their ex is hurting their children. This may seem counter-intuitive, but it is true.

Second, a few years ago I read Divorce Poison – How to Protect Your Family from Bad-Mouthing and Brainwashing by Dr. Richard A. Warshak. I consider it a must-read for any parent involved in a high-conflict divorce. It is available on Amazon for about $10.00. Read the reviews on Amazon. (You will thank me later).

If you, or someone you know, feel you can’t control the temptation of bad-mouthing your ex in front of your children, I urge you to read the book and seek professional help, before you hurt your children. If you are the targeted parent, the book is full of useful suggestions to protect yourself and your relationship with your children.  You will be doing your children a great service by understanding how much it hurts a child when they hear a parent speak negatively about the other parent.

If you are the targeted parent, I also recommend you refuse to “fight fire with fire”. Always take the high road, despite the path your ex may choose. Do the next “right” thing. Your kids will be grateful.

Kids are defenseless against the ill-advised actions of a bad-mouthing or brainwashing parent. Think twice before saying anything that could be perceived by a child as being negative or bad-mouthing. Kids are smarter than some adults realize. The negative things you say in front of your children today, may come back to hurt you as they grow up. Think about it.

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Writing a $974,790,317.77 check and moving on in divorce

Sometimes keeping things in perspective is half of the battle.

Recently, a couple from the midwest (Harold and Sue Ann) were going through a divorce. Harold is a billionaire, but his fortune is largely tied to the price of oil. Jonathan C. Noble, Esq.The price of oil can and does fluctuate . Therefore the value of their marital assets can and do fluctuate.


The court valued Harold and Sue Ann’s marital estate at a little over two billion dollars. The Oklahoma divorce court awarded Sue Ann almost half. In an effort to end the divorce proceedings, Harold decided to write a check to Sue Ann for $974,790,317.77. You may have already seen a copy of the widely publicized check.

Here is a link from Reuters with the story and an image of Harold’s handwritten check to Sue Ann:


Sue Ann allegedly vowed to appeal the award, claiming Harold’s company was worth much more. A few days later, she cashed the check, pretty much ending her rights on appeal regarding the valuation and distribution of marital assets.

Why is this story important? 

This story is important because this couple could have spent more money on lawyers fighting over millions (or billions) of dollars, with absolutely no guarantee of a positive outcome for either party. I imagine Harold is a very smart guy. Instead of fighting for an indeterminate amount of time with no guarantee that either party would achieve a better outcome, he simply wrote a check that “got the deal done”.  Harold simply wrote a check to Sue Ann for $974,790,317.77. She deposited the check a few days later. Here below is a link to the story from CBS news:


Harold appeared on CNBC soon after Sue Ann cashed the check. Here is the link to his very short interview:


Notice Harold’s mindset. During the CNBC interview, he said his divorce is “in the rearview mirror, movin’ on”.

While the case may still be pending on appeal, many legal analysts believe that Sue Ann faces an uphill battle to overturn the award on appeal.

For some going through divorce, the story of Harold and Sue Ann should act as a reminder that setting smart goals (i.e. putting the divorce in the rearview and movin’ on) is often an important part of a good overall strategy.


How long does it take to get divorced in Pennsylvania ? – It depends

How long does it take to get divorced in Pennsylvania? Unfortunately, there are no easy or common answers. It depends upon a number of factors. Perhaps as much as than any other area of law, divorce and family law cases are factually different from one another. Here below is a non-exhaustive and very basic, extremely short list of factors and reasons that commonly impact the total elapsed time between filing a divorce complaint in Pennsylvania, to the entry of a divorce decree.

Jonathan C. Noble, Esq.
Jonathan C. Noble, Esq.

a) Filing for a Mutual Consent, No Fault Divorce – If your circumstances allow, Pennsylvania has a 90 day waiting period from the commencement of the divorce action for uncontested (mutual consent), no fault divorce, without any other economic issues. Economic issues between the parties can slow the divorce process down. The 90 day waiting period acts as a “cooling off” period. Depending on the county where you file, the particular judge, the potential backlog, etc., the time it takes the court to enter a divorce decree is usually 4 to 6 months for a mutual consent, no fault divorce without economic issues. Note: Do not plan to get remarried until you have a divorce decree in hand. Things can and do get delayed.

b) Filing for divorce under Irretrievable Breakdown of the marriage section of the divorce code now requires that the parties live separate and apart for at least one year. What is an “irretrievable breakdown”? Pennsylvania law defines it as “estrangement due to marital difficulties with no reasonable prospect of reconciliation”. If this sounds like your situation, you will need to live separate and apart for at least two years and the defendant agrees that the marriage is over. Note: you certainly can, and some people do “live separate and apart” under the same roof for all or part of the one year waiting period while they wait to obtain money to purchase a new home, or for other reasons. If one of the parties wants to try to reconcile, the court can order up to three counseling sessions. Note: In 2016 the Pennsylvania law reduced the “living separate and apart” requirement from two years to one year.

c) Extensive marital assets that need to be valued prior to being divided can slow down your divorce. Homes, businesses, pension plans, retirement plans, stock options, artwork, etc., etc. In some cases the parties disagree on the method used to value the asset and this can cause significant additional expense and delay.

d) Marital assets that for one reason or another are “missing” or misappropriated.

e) Backlog in the system, or one side is not adequately prepared to move forward when they should to be. This may include one party having an attorney while the other is without an attorney (known as a pro se party).

f) One of the parties cannot be located.

g) If the parties agree to use binding arbitration, the collaborative divorce process or mediation to settle economic issues they cannot otherwise settle, this can usually move the process along much more quickly than traditional litigation. Drawback:  alternate dispute resolution methods can still be expensive, but not as expensive as litigation.

h) One of the parties truly cannot see the forest from the trees and decides to “scorch the earth” (sometimes with cooperation from their counsel or on advice from others) on every point, no matter how minor. This may include refusing to negotiate a reasonable  marital settlement agreement, demanding all aspects of the case be litigated, being unresponsive to discovery requests, deciding that “having their day in court” must occur despite great expense and lack of any guaranteed result.

i) One of the parties mistakenly believes that seeking revenge via the divorce process is somehow better than getting on with their life. This can be a mental health issue that may be helped with coaching, counseling and the like.

These are just a few of the many issues that can arise and impact how long your divorce process takes. As you and your attorney navigate the legal landscape during a Pennsylvania divorce, stay focused on the end game. Less conflict means things move more quickly and usually with less cost to the parties. A skilled family law attorney will be able to keep your matter moving swiftly to a successful conclusion, while keeping you informed of the process.

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The importance of maintaining good mental health and good physical health during divorce

Take care of yourself. Maintaining good mental health is one key element in being able to think clearly and logically during divorce. Maintaining good physical health, including getting enough exercise, will benefit you during divorce and beyond.

Research confirms that one of the most difficult issues you can face in life is going through a divorce. No two people will have the same exact response to the stress caused by a life changing event.  Your world may be turned upside down during divorce. Emotions may run wild. You are in unfamiliar territory. It is easy to feel out of control. You are not alone. This is common.

Think Logically
Having the ability to think logically will be a great benefit as you manage the stress of divorce.

Your ability to think clearly and logically will be two important assets for you during divorce. Maintaining good mental health may help you think more logically when you are under the tremendous stress that divorce can cause. 

While no two family law cases are exactly alike, there is a very good chance you will be called upon to make many choices during the divorce process. If you are working with a lawyer, he or she will set the legal strategy, do the legal work, explain the divorce process and the law, negotiate on your behalf,  keep you updated,  and answer your questions and concerns. Remember this fact: your lawyer works for you. It’s your case and ultimately, it is your life and future. Your lawyer will help guide you through the divorce process, and zealously advocate your position, within the law and within the rules of professional conduct. The more clearly and logically you can think, the better you will be able to evaluate what is happening around you and then make good choices with input from your lawyer. Thinking clearly and logically is not always easy during stressful and emotional times, but if you take the time to focus on your own well being, it can make the divorce process easier.

There are abundant mental health resources  available for people going through divorce. If you need assistance, be assured, you are not alone and help is available. 

Mental health professionals, support groups, and counselors are available to help you through the process of divorce. Some are trained to deal with divorce related issues. There are also books, webinars, and other media available to help you maintain your perspective and ability to think logically during what can be a very stressful time. It usually makes sense to use all the tools available to you to deal with the stress that can accompany divorce and allow the healing process to begin.

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