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Contract Drafting 2011-03-24. University of Houston Law Center Spring 2011 D. C. Toedt III. Guest speakers from Akin Gump:. William D. Morris. Eddy S. Blanton, Jr. Objective of this class session. High-level overview of typical transaction Survey of documents to be drafted

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contract drafting 2011 03 24

Contract Drafting2011-03-24

University of Houston Law Center

Spring 2011

D. C. Toedt III

guest speakers from akin gump
Guest speakers from Akin Gump:

William D. Morris

Eddy S. Blanton, Jr.

objective of this class session
Objective of this class session
  • High-level overview of typical transaction
  • Survey of documents to be drafted
  • Selected legal- and business points
  • NOT:
    • Equip students to do financing deals “solo”
    • Provide contract forms
overview
Overview

What’s the objective – why do this deal?

What kind of borrower(s) get to do it?

Who are the “influencers” a.k.a. “players”?

Mechanics of the transaction?

creditworthiness investment grade rating
Creditworthiness – “investment grade rating”

Who decides?

What criteria?

What consequences?

definitions
Definitions

GAAP [12] – what is it?

Cash Equivalents [13, 14] – why so detailed?

EBITDA [16] – what is it?Why do we care?

Control [17] – why allow < 50% ownership?

Equity Interests [18] – how does that come in?

Facility Fee [21] – what’s that? Why use it?

definitions continued
Definitions (continued)

Guarantor [22] – why would a subsidiary guarantee the parent’s debt (instead of vice versa)?

Hedging [24] – what’s that?

Letter of credit [25] – mechanics?

Majority Lenders [27] – why define this?

MAC clause [30] – what role does it play?

definitions continued1
Definitions (continued)

Material Subsidiary [31] – why define so precisely?

Moody’s [32] – any fallout from 2008?

Note [33] – why bother?

Restricted Payment [37] – where does this come in?

Swingline Loan [38] – any difference from a regular loan?

loan mechanics
Loan mechanics

[39] Can borrower pick and choose which lender(s) to borrow from? Why / why not?

[42] Why “prima facie evidence”?

[45] Telephonic borrowing – why not require a writing?

[46] Letters of credit – why address here?

[53] Increased cost of loans – how does this work, and why that way?

article iii reps and warranties
Article III – reps and warranties

[57] Why both a rep and warranty?

[58] Whom the reps are addressed to

[59] Financials present “fairly, in all material respects” – why this language?

article iv affirmative covenants
Article IV – Affirmative Covenants

Why have these?

[60] Use of proceeds – why? What’s the significance?

[62] Additional guarantors – why?

[63] Guaranty release at IGRD – is this typical?

article v financial covenants
Article V – Financial Covenants

[67] Why the IGRD carve-out?

[68] Restrictions on transactions with Affiliates – what does this language address?

[72] Permitted Senior Debt – restrictions apply even after IGRD; why?

[73] Fundamental changes

See also Negative Covenants PDF

article vii conditions
Article VII - Conditions

[76] Certificates – personal liability?

[77] Opinions of counsel – why? What consequences? How are these handled?

article viii defaults
Article VIII - Defaults

[80] events of default “shall occur and be continuing” – what does that mean?

Some defaults have cure periods, others don’t – why?

Any particular defaults that are especially “horrible”?

article ix miscellaneous sic
Article IX – Miscellaneous [sic]

[92] Survival of reps, warranties, etc. – why is this language included?

[95] Why NY law?

last question

Last question

(With apologies to Wait Wait Don’t Tell Me)