1. Contract Drafting Class 19 Tues. Mar. 27 University of Houston Law Center D. C. Toedt III

2. In the news

3. Bulletproof a limitation of liability Abacus Fed. Svgs. Bk. v. ADT Security Serv., Inc., summarized in this blog posting Abacus Fed. Svgs. Bk. v. ADT Security Serv., Inc.this blog posting Diebold’s magic formula:  Limitation of liability  Customer must buy insurance  Customer waives subrogation

4. Subrogation Party A must buy insurance Party B is an “additional named insured” Party A waives subrogation Waiver is binding on insurance carrier So even if Party B is at fault, insurance carrier can’t sue Party B to recoup payout (See this blog posting for cites)this blog posting

5. Z&B Chapter 5A Loan Agreement A guided tour (continued)

6. Loan Agrmt § 4.1(a) – p. 326 DISCUSSION QUESTION: How can Borrower “cause” its Subsidiaries to comply with the Borrower’s covenants? (Note the definition of “Subsidiary.”)

7. Loan Agrmt § 4.1(a) – p. 326 DISCUSSION QUESTION: Can Borrower make the reps and warranties about all Subsidiaries? (Note the definition of “Subsidiary.”)

8. Loan Agrmt DISCUSSION QUESTION: What’s the “nuclear” option for Lender? (Hint: See p. 354, 372-73)

9. Loan Agrmt DISCUSSION QUESTION: Why might Lender want, or not want, to exercise its “nuclear” option?

10. Z&B Chapter 5B Security Agreement

11. SPG Agreement – Z&B p. 384 QUESTION: How could these definitions have been structured to reduce the risk of inter-agreement inconsistency?

12. SPG Agreement QUESTION: Generally speaking, how would Lender perfect its security interest in the Collateral? (Hint: See Z&B p. 376)

13. SPG Agreement QUESTION: Is it worth the Lender’s while to go through the motions of perfecting its security interest in the Collateral? A. Not really – perfecting a security interest often isn’t worth the trouble B. Yes – perfecting a security interest can provide the Lender with benefits

14. SPG Agreement FACT: Borrower files for bankruptcy protection. QUESTION: What can Lender do with the Collateral? (Hint: See http://goo.gl/35ZlW - scroll down to the “XXX in Chapter 11” heading.)http://goo.gl/35ZlW

15. SPG Agreement § 2.07(a) QUESTION: Why is Borrower required to keep its chief place of business and chief executive office and records in a specific address? (Hint: See UCC § 9.401, Tex. Bus. & Comm. Code § 9.501.)9.4019.501

16. SPG Agreement § 3.01(b), (c) QUESTION: Must Lender successfully sue Borrower and obtain a judgment before it can proceed against a Guarantor or its assets? A. Yes B. No C. Maybe

17. SPG Agreement § 3.01(b), (c) QUESTION: If Borrower could successfully defend against a collection suit by Lender, would that stop Lender from collecting from a Guarantor? A. Yes B. No C. Maybe

18. SPG Agreement § 3.01(b), (c) FACTS: 1) Borrower files for bankruptcy protection. 2) The trustee in bankruptcy success-fully forces Lender to return a payment Borrower previously made, on grounds that it was a “preference.” QUESTION: Can Lender collect the returned payment from a Guarantor?preference A. Yes B. No C. Maybe

19. Preferences in bankruptcy FACTS: 1) Supplier fills an order from Customer under a longstanding Master Purchase Agreement. 2) Customer pays Supplier’s invoice. 3) Customer files for bankruptcy protection 89 days later. QUESTION: Will Supplier have to return Customer’s payment? (Hint: See this article.)this article A. Yes B. No C. Maybe