Appendix — Workshop Exercises
Workshop Exercises
These three exercises are designed to apply the doctrine from the training sessions to realistic fact patterns. Your supervising attorney will assign one or more of these during the training period. You are expected to use the training portal for reference — this is not a closed-book exam. The goal is practice applying legal analysis and drafting judgment to real-world scenarios.
Workshop A
Entity Selection Hypotheticals
For each of the following five client scenarios, (a) identify the entity type you would recommend, (b) explain the two or three most important reasons for that recommendation, and (c) identify one or two issues you would want to investigate further before finalizing the recommendation. Write your answers in memo format — addressed to the supervising attorney, not to the client.
Scenario 1
Two Oklahoma City dentists — Dr. A and Dr. B — want to form a new dental practice together. Each will own 50% and both will work full-time in the practice. Neither has any other business income. They expect the practice to generate approximately $400,000 per year in net profit within three years. They have no plans to take on outside investors and no plans to sell the practice in the near term. Dr. A is married; Dr. B is single.
Scenario 2
A software developer has built a mobile app that is gaining traction. He wants to "make it official" and form a company. He is currently the only person involved. Within the next 12 months, he plans to raise $500,000 from angel investors to fund a full commercial launch. He has been advised by a startup mentor that he needs a Delaware C corp before approaching investors.
Scenario 3
Three siblings — all Oklahoma residents — inherited a 640-acre tract of agricultural land with producing oil and gas royalties. They want to put the land in a formal entity to simplify management, separate the asset from their personal estates, and provide a structure for eventual transfers to their own children. One sibling is actively managing the property; the other two are entirely passive. They do not anticipate selling the land.
Scenario 4
An oil and gas operator with an established track record wants to form a new drilling venture with four investors — two individuals, one family trust, and one Texas LLC. The operator will contribute operational expertise and 10% of the capital; the investors will contribute the remaining 90%. The operator wants a 25% promoted interest after investors receive a 10% preferred return. One of the individual investors is a non-resident alien residing in Germany.
Scenario 5
An existing Oklahoma S corporation (state-law Oklahoma corporation, S election in effect since formation eight years ago) with three individual stockholders has been approached by a private equity fund that wants to invest $2 million for a 30% stake. The fund is a Delaware limited partnership. The client wants to know if the S corp can simply admit the fund as a new stockholder.
- For Scenario 1: What is your entity recommendation, and what is the single most important tax consideration that drives it?
Write your analysis here.
- For Scenario 2: The client's mentor says he needs a Delaware C corp. Do you agree? What questions would you ask before confirming that recommendation?
Write your analysis here.
- For Scenario 3: What entity type would you recommend, and what specific provisions would be most important in the governing documents given this family situation?
Write your analysis here.
- For Scenario 4: Can this venture use an S corporation? Why or why not? What entity would you recommend?
Write your analysis here.
- For Scenario 5: Can the S corp admit the PE fund as a stockholder? What would happen to S corp status if it did? What options does the client have?
Write your analysis here.
Note: For each scenario, cite to at least one specific statute (Oklahoma, federal tax, or Delaware) or regulatory provision that supports your analysis. Reference the relevant sessions from the training portal.
Workshop B
Distribution Waterfall Math Exercise
Work through the following distribution waterfall exercise. Show all calculations. Round to the nearest dollar. The goal is not just to get the right numbers — it is to demonstrate that you understand why each tier works the way it does and what the economics mean for each party.
Facts
Cantrell Energy Ventures LLC has two members. Investor A contributed $2,000,000 in cash on January 1, Year 1, for a 75% interest. Operator B contributed $200,000 in cash and agreed to manage all operations, receiving a 25% interest plus a promoted carried interest as described below. The LLC has been operating for four years. It is now time for a full distribution of all available cash — $3,500,000 total — and the LLC will then wind down.
Waterfall Terms (from the Operating Agreement):
Tier 1: Return each member's capital contribution in full.
Tier 2: Pay Investor A a preferred return of 9% per year, simple interest, on invested capital from date of contribution. (4 years × $2,000,000 × 9% = ?)
Tier 3: Catch-up to Operator B — after Tier 2 is satisfied, pay 100% to Operator B until Operator B has received an amount equal to 20% of all distributions made in Tiers 2 and 3 combined.
Tier 4: Residual — split remaining distributions 65% Investor A / 35% Operator B.
Waterfall Terms (from the Operating Agreement):
Tier 1: Return each member's capital contribution in full.
Tier 2: Pay Investor A a preferred return of 9% per year, simple interest, on invested capital from date of contribution. (4 years × $2,000,000 × 9% = ?)
Tier 3: Catch-up to Operator B — after Tier 2 is satisfied, pay 100% to Operator B until Operator B has received an amount equal to 20% of all distributions made in Tiers 2 and 3 combined.
Tier 4: Residual — split remaining distributions 65% Investor A / 35% Operator B.
- Calculate Tier 1: How much does each member receive in return of capital? What amount remains after Tier 1?
Show your calculation.
- Calculate Tier 2: What is Investor A's total preferred return for four years? Is there enough remaining cash to fully satisfy it? What amount remains after Tier 2?
Show your calculation.
- Calculate Tier 3: How much does Operator B need to receive in the catch-up in order for Operator B's total distributions in Tiers 2 and 3 to equal 20% of the combined Tier 2 + Tier 3 pool? (Hint: this is an algebraic problem — let B's catch-up = X and solve for X.) What amount remains after Tier 3?
Show your calculation. Hint: Investor A's Tier 2 + X = total Tier 2+3 pool. B needs 20% of that pool, so X = 20% of (Investor A's Tier 2 + X). Solve for X.
- Calculate Tier 4: How is the remaining balance split? What are the final totals for each member?
Show your calculation.
- Sanity check: Do the totals for all members sum to exactly $3,500,000? What effective return (IRR in simple terms — total received divided by capital contributed, annualized) did Investor A receive? Is this what a reasonable investor would expect given the terms?
Write your verification and brief analysis.
- Drafting observation: If the catch-up provision in Tier 3 were removed entirely — so that after Tier 2, the residual split went straight to 65/35 — how would each member's total distribution change? What does this tell you about the economic significance of the catch-up?
Recalculate and compare. What is the dollar difference for each member?
Note: Distribution waterfalls are a core skill for any lawyer advising on LLC formations, JV agreements, or private investment transactions. The math must be airtight. A drafting error in the waterfall — even a small one — can result in one party receiving millions more or less than the parties intended.
Workshop C
Spot-the-Issue: Operating Agreement Drafting Review
The following is a set of excerpts from an operating agreement that a client brought to CLF after a dispute arose with their co-member. Your supervising attorney has asked you to review the excerpts and identify every problem, ambiguity, or missing provision you can find — in a numbered memo. For each issue you identify, (a) describe the problem, (b) cite the relevant legal concept or statute, and (c) state what the provision should say instead.
📁 Placeholder — Instructor-Provided Document
[INSTRUCTOR: Attach a redacted operating agreement excerpt — approximately 3–5 pages covering the distribution, transfer restriction, and buy-sell sections — for use in this exercise. The excerpt should contain at least 6–8 identifiable drafting issues based on the training sessions. Suggested issues to include: (1) no tax distribution provision; (2) blank valuation mechanism in the buy-sell; (3) ROFR with no stated exercise period; (4) non-compete with no reference to § 219A limitations; (5) transfer restriction that permits transfers to "family members" without defining the term; (6) dissolution provision that requires unanimous member consent with no deadlock carve-out; (7) capital call provision with no stated consequence for failure to contribute; (8) tag-along right with no floor on the acceptable sale terms. Blake to prepare and upload before training day.]
Using the excerpt provided by your supervising attorney, complete the following analysis:
- List every drafting issue, ambiguity, or missing provision you find in the excerpt. Number each issue. Aim for at least five; a thorough review should surface seven or more.
Write your numbered issue list here.
- For each issue, identify: (a) which session in the training portal covers the relevant concept, (b) what the legal consequence of the drafting problem could be if a dispute arises, and (c) what specific language or provision would fix it.
Write your analysis for each issue.
- Identify the single most serious issue in the excerpt — the one most likely to lead to litigation or an adverse outcome for the client — and explain your reasoning.
Write your conclusion here.
- Draft a corrected version of the two provisions you consider most problematic. Write them as you would if you were revising the actual operating agreement.
Draft your revised provisions here.
- Reflection: What does this exercise tell you about the importance of careful drafting at formation, as compared to trying to fix a poorly drafted agreement after a dispute has already arisen?
Write your reflection here.
Note for Workshop C: The purpose of this exercise is to develop the habit of systematic document review — reading every provision for what it says, what it doesn't say, and what could go wrong if circumstances change. A junior lawyer who can identify drafting problems accurately and explain them clearly in writing is doing the core work of transactional practice.
Reference Resources
The following resources may be uploaded to this portal for intern access. Consult your supervising attorney to confirm which are available.
📁 Placeholder — Practical Law Resources
[PRACTICAL LAW: "LLC Agreement — Multi-Member Operating Company" — Standard form long-form operating agreement. Upload if available under firm subscription.]
📁 Placeholder — Practical Law Resources
[PRACTICAL LAW: "Choice of Entity in the United States (Choosing an Entity)" — Comparison chart and analysis. Upload if available.]
📁 Placeholder — Practical Law Resources
[PRACTICAL LAW: "LLC Agreement Negotiating and Drafting Guide" — LLC Agreement Commentary. Upload if available.]
📁 Placeholder — CLF Standard Forms
[CLF INTERNAL: Standard Oklahoma LLC Articles of Organization template. Standard single-member LLC operating agreement. Standard multi-member operating agreement (short form). Available from your supervising attorney.]