About the Authors...ix Table of Chapters...xi Preface and Acknowledgements to the First Supplement to the Eighth Edition...xxxix

Transcription

1 Table of Contents About the Authors...ix Table of Chapters...xi Preface and Acknowledgements to the First Supplement to the Eighth Edition...xxxix Chapter 1 Accounts Receivable Financing 1:1 Introduction :1.1 Commercial Finance :1.2 Bank Financing Transactions :2 Receivable Types :2.1 Conventional Receivables [A] Characteristics [B] Other Considerations :2.2 Secured Receivables [A] Contractual Security Interests [B] Statutory Liens [C] Letter-of-Credit Security :2.3 Unbilled Receivables :2.4 Consignment Sales :2.5 Government Receivables :2.6 Healthcare Receivables Financing [A] Medicare and Medicaid: Overview [B] Legislation to Curb Perceived Abuses [C] Narrowing of the Limitations on Security Interests in Governmental Receivables [D] The Double Lockbox Technique [E] Conclusion :2.7 Problem Areas [A] Goods Owned by or Securing Others [B] Rendition of Services [C] Bill-and-Hold Receivables [D] Ordinary-Course Transaction [E] Hidden Liens [F] Use of Assumed Names or Trade Styles [G] Nonassignability Clauses [H] Contra-Accounts [I] Inventory Liens [J] State Enforcement Statutes (Asset-Based Lending, Rel. #1, 10/16) xiii

2 ASSET-BASED LENDING 1:3 Transaction Types and Characteristics :3.1 Commercial Finance [A] Direct Loans [B] Revolving Versus Term Loans [C] Payable on Demand [D] On Open Account [E] Security [F] Control of Collateral [G] Non-Notification [H] Control of Proceeds [I] Lending Formula [J] Pursuant to a Commitment [K] Collection Days :3.2 Nonpossessory or Bank Financing [A] Direct Loans [B] Revolving Loans [C] Note [D] Security [E] Lack of Controls on Collateral [F] Lending Formula [G] Periodic Settlement :3.3 Multiple Borrowers :3.4 Multiple Lenders :3.5 Guaranties Appendix 1A General Continuing Guaranty... App. 1A-1 Chapter 2 Purchases of Accounts 2:1 Introduction :2 Treatment Under the U.C.C :2.1 Sale of Accounts :2.2 Sale of Intangibles :3 Factoring :3.1 Origins :3.2 Characteristics [A] Sale [B] Types of Accounts Sold [C] Limited Recourse; Disputes and Chargeback [D] Notice to the Customer [E] Credit Approval [F] Determination and Payment of the Purchase Price [G] Record Keeping :3.3 Variations on the Theme [A] Advance Factoring [B] Discount Factoring :3.4 Equity Loans xiv

3 Table of Contents 2:4 Off-Balance-Sheet Accounts Financing :4.1 In General :4.2 Characteristics [A] Batch Operation [B] Credit Approval [C] Notification [D] Perfection [E] Collection of Accounts [F] Recourse :5 True Sale; Purchase Versus Loan :5.1 Introduction :5.2 Accounting Sale Requirements :5.3 Legal Sale Requirements :5.4 Tax Sale Requirements :5.5 Related Legal Issues :6 Securitization :6.1 Introduction :6.2 Basic Elements [A] Special-Purpose Vehicle [B] Funding of Vehicle [C] Nature of Purchase/Facility [D] Collection Agent [E] Backup Facilities for the Vehicle :6.3 Nature of Accounts Financed :6.4 Bankruptcy Issues [A] Bankruptcy of the Vehicle [B] Bankruptcy of the Originator :6.5 Intangibles Subject to Federal Law :6.6 Tax Issues :7 Documentation :7.1 Factoring :7.2 Off-Balance-Sheet Financing :7.3 Intangibles Appendix 2A Factoring Agreement (Wholesale-Maturity)... App. 2A-1 Appendix 2B Factoring Agreement (Retail-Advance)... App. 2B-1 Appendix 2C Assignment of Factoring Proceeds and Intercreditor Agreement...App. 2C-1 Appendix 2D Agreement for the Off-Balance-Sheet Financing of Export Receivables...App. 2D-1 Appendix 2E Trademark Collateral Assignment and Security Agreement...App. 2E-1 (Asset-Based Lending, Rel. #1, 10/16) xv

4 ASSET-BASED LENDING Chapter 3 Inventory Financing 3:1 Introduction :1.1 Definition of Inventory [A] Goods [B] Held for Sale or Lease [C] To Be Furnished Under Contracts of Service [D] Raw Materials, Work in Progress [E] Materials Used or Consumed in a Business :1.2 Types of Inventory :1.3 Types of Financing [A] Working Capital [B] Purchase Money :1.4 Consignments Under Article [A] What Constitutes a Consignment Under Article 9? [A][1] Delivery for Purpose of Sale [A][2] The Merchant [A][3] Excluded Consignments [B] Perfection and Priority Rules for Consignments [C] Practical Considerations Regarding Consignment Transactions :2 Fungible Inventory Financing :2.1 Blanket Financing by a Lender [A] Basic Elements [B] Link with Receivables [C] Formula [D] Possession/Control [E] Sale of Goods [F] Other Terms :2.2 Blanket Financing by a Vendor [A] Basic Elements :2.3 Unitary Financings [A] Letter of Credit [B] Documentary Drafts :2.4 Statutory Aspects [A] Perfection and Priority [B] Other Priority Issues [C] Trademarks [D] Regulated Industries [E] Regulated Goods :3 In-Transit Inventory :3.1 Negotiable Documents [A] Perfection with Respect to Goods Covered by Negotiable Documents xvi

5 [B] Rights of the Secured Party Against a Holder of the Negotiable Documents That Have Been Duly Negotiated :3.2 Perfection with Respect to Goods Covered by Nonnegotiable Documents :3.3 Perfection with Respect to Goods Not Covered by Documents :3.4 Rights of Stoppage :3.5 Choice of Law Issues Related to In-Transit Inventory :3.6 Practical Considerations Regarding In-Transit Inventory :4 Unit Inventory Financing; Floor Plan :4.1 Basic Elements [A] Types of Units [B] Parties [C] Advance Rate [D] Agreement Terms [E] Interface with Chattel Paper [F] Cross-Collateral [G] Perfection [H] Intercreditor Issues and Priority :5 Documents Appendix 3A General Security Agreement (Inventory)... App. 3A-1 Appendix 3B Intercreditor Agreement... App. 3B-1 Appendix 3C Intercreditor Agreement...App. 3C-1 Appendix 3D Lender s Loss Payable Endorsement...App. 3D-1 Chapter 4 Table of Contents Equipment and Fixture Financing 4:1 Introduction :2 Definitional Issues :2.1 Defining Equipment [A] The Basic Term Goods [B] The Basic Definition of Equipment [C] Contrasted with Inventory [D] Contrasted with Fixtures [E] Contrasted with Other Goods [F] Accessions :2.2 Defining the Transaction [A] Purchase Money or Not [B] Type of Transaction [C] Contrast with Lease [D] Retail Transactions (Asset-Based Lending, Rel. #1, 10/16) xvii

6 ASSET-BASED LENDING 4:3 Documenting the Transaction :3.1 Purchase Money Vendor Transactions [A] Security Agreement [B] Warranty and Waiver Provisions :3.2 Purchase Money Lender Transactions [A] Security Agreement [B] Loan Proceeds Payment Letter :3.3 Non-Purchase Money Transactions :3.4 Documents and Issues in Common [A] Description of Collateral [B] Title to the Equipment [C] Landlord/Mortgagee Waiver [D] Use of Premises [E] Insurance [F] Financing Statement [G] Vendor Repurchase [H] Delivery and Installation Certificate [I] Proceeds [J] Related Rights :3.5 Certificate-of-Title Goods [A] Covered Goods [B] Perfection :4 Fixture Financing :4.1 Definitional Issues [A] Basic U.C.C. Definition [B] State Law [C] Related U.C.C. Definitions :4.2 Perfection [A] Mortgage [B] Financing Statement Filed in the Real Property [C] Records Financing Statement Filed in the Personal Property Records :4.3 Priority [A] Normal Priority [B] Purchase Money Priority [C] Movable Goods [D] Manufactured Homes [E] Lien Creditors [F] Transactional Subordination [G] Subordination [H] Removal :5 Collateral Assignments of Real Estate Leases :6 Documents xviii

7 Table of Contents Appendix 4A Security Agreement Equipment... App. 4A-1 Appendix 4B General Security Agreement Equipment... App. 4B-1 Appendix 4C Security Agreement...App. 4C-1 Appendix 4D Collateral Assignment of Leases...App. 4D-1 Chapter 5 Chattel Paper 5:1 Introduction :2 Definitional Issues :2.1 Chattel Paper :2.2 Lease Versus Finance Transaction :3 Creation of the Paper :3.1 Types of Chattel Paper :3.2 Terms [A] Monetary Obligation [B] Waiver of Defenses [C] Some Lease Provisions [D] Time-Price Doctrine :3.3 State Regulation :4 Financing Choices :4.1 Finance Transactions [A] Amount of Advance [B] Amortization [C] Independence of Transaction :4.2 Sale Transactions [A] Price and Payment [B] Collections [C] Recourse :4.3 Reserves :5 Priority Problems :6 Documentation Appendix 5A Conditional Sale Contract (Security Agreement)... App. 5A-1 Chapter 6 Letters of Credit 6:1 Introduction :1.1 Nature of a Letter of Credit [A] Legal Effect [B] Parties [C] Characterization :2 Uses of Letters of Credit :2.1 Support of Commercial Paper :2.2 Assure Payment of Investment Obligations (Asset-Based Lending, Rel. #1, 10/16) xix

8 ASSET-BASED LENDING 6:2.3 Support Industrial Revenue Bonds :2.4 Replace Cash Deposits :3 Applicable Law :4 Issuers of Letters of Credit :5 Characteristics of Letters of Credit :5.1 Commercial Letter of Credit :5.2 Standby Letter of Credit :5.3 Direct Pay Letter of Credit :5.4 Payment upon Demand Alone :6 Documentation :6.1 Application :6.2 Reimbursement Agreement :6.3 Drafts and Documents :6.4 Other Documents :6.5 Bank Authority :7 Provisions of Letters of Credit :7.1 Revocability :7.2 Multiple Drawings :7.3 Acts of God :7.4 Transferability and Assignment :7.5 Right to Pay :8 Enforcement of Letters of Credit :8.1 Issuer s Basic Obligation or Right to Pay :9 Bankruptcy Considerations :9.1 Bankruptcy of the Account Party :9.2 Bankruptcy of the Beneficiary :10 Documentation Appendix 6A Reimbursement Agreement... App. 6A-1 Appendix 6B Letter Agreement for Assigning the Right to Proceeds Under a Letter of Credit... App. 6B-1 Appendix 6C Standby Letter of Credit...App. 6C-1 Chapter 7 Covenants 7:1 Introduction :2 General Types :3 Distinction from Conditions :4 Distinction from Events of Default :5 Distinction from Representations and Warranties :6 Covenants in Commercial Finance :6.1 Traditional Covenants [A] Collateral Maintenance [B] Collateral Protection xx

9 [C] Change of Structure or Location [D] Maintenance of Existence [E] Maintenance of Perfection [F] Furnishing of Information [G] Lien Prohibition [H] Ordinary-Course Receivable Creation [I] Compliance with Laws [J] Leases [K] Environmental Matters [L] Interest Rate Protection [M] Determination of Borrowing Base [N] Transactions with Affiliates [O] Use of Proceeds [P] Accounting Methods [Q] ERISA and Tax Compliance [R] Insurance [S] Title to the Goods [T] Location of the Goods [U] Disposition of the Goods [V] Other Protections :6.2 Expanded Covenants [A] Financial Positions and Ratios [B] Dividend and Investment Restrictions [C] Capital Expenditures [D] Debt Limitations [E] Reporting Requirements :7 Role of Covenants in Purchases of Receivables :8 Role of Covenants in Financing of Intellectual Property :8.1 Collateral Protection by Debtor :8.2 Lender/Borrower Covenants :8.3 Borrower Representations :8.4 Default :9 Documentation [Review] Chapter 8 Table of Contents Participations and Assignments 8:1 Introduction :1.1 Format of the Transaction :1.2 Authorities :2 General Nature of Participation :2.1 Purchase from Lead Lender Versus Loan to Lead Lender [A] Purchase Characteristics [B] Loan Characteristics (Asset-Based Lending, Rel. #1, 10/16) xxi

10 ASSET-BASED LENDING 8:2.2 Obligations of the Lead Lender to Its Participants [A] At Inception [B] Is a Loan Participation a Security? [C] During the Transaction :2.3 Lead Lender/Participant Conflicts [A] Other Loans and Collateral [B] Partial Participations [C] Fees and Interest [D] Computation Issues [E] Modification of Loan Terms [F] Overadvances [G] Enforcement Activity [H] Right of Termination [I] Sales of Other Participations [J] The Perils of Participations Redux [K] Bankruptcy of the Lead Lender [L] Performance by Participant [M] Indemnities and Expenses :2.4 Multi-Lender Issues :3 Participations in Purchases of Receivables :3.1 Factoring Participation :3.2 Layoff Agreements :3.3 Off-Balance-Sheet Transactions :4 Reverse Participations :4.1 Purpose :4.2 Mechanics :5 Junior Participations :5.1 Equalization or Default Participations [A] Origination [B] Mechanics :6 Syndicated Loans and the Secondary Loan Trading Market :6.1 Introduction :6.2 Development of Loan Trading Market :6.3 Types of Secondary Loan Sales :6.4 Formation of the LSTA :6.5 Syndicated Loan Trading and the Use of LSTA Documentation [A] Underwriting and Due Diligence [B] Binding Trade and Trade Confirmation [C] Documentation Requirements and Timing [D] LSTA Standard Terms and Conditions :6.6 Syndicated Loan Market Information xxii

11 Chapter 9 Subordination Table of Contents 9:1 Introduction :2 Debt Subordination :2.1 Definitional Issues [A] Definition of Junior Debt [B] Definition of Senior Debt :2.2 Degree of Subordination [A] Principal [B] Interest [C] Standstill :2.3 Enforcement [A] Direct Collection [B] Turnover [C] Reliance :2.4 Related Problem [A] Junior Covenants [B] Events of Default [C] Senior Debt Amendments and Changes [D] Junior Debt Amendments and Changes [E] Indenture Trustees [F] Junior Voting Provisions [G] Maturity of Junior Debt :2.5 Subordinated Debt As Capital [A] Verification [B] Debt Versus Equity :2.6 Enforceability Against Transferees :2.7 Bankruptcy Issues [A] Enforceability [B] Turnover [C] Reinstatement [D] Waivers [E] Unauthorized Solicitation; Designation :2.8 Drafting Concerns [A] Notice Considerations [B] Borrower :2.9 Subrogation :3 Lien Subordination :3.1 Definition Issues [A] Debt [B] Collateral [C] Liens [D] Parties :3.2 Extent of Subordination [A] Standstill [B] Review Rights [C] Marshaling (Asset-Based Lending, Rel. #1, 10/16) xxiii

12 ASSET-BASED LENDING 9:3.3 Circular Liens and Waivers [A] Circular Liens [B] Waivers :3.4 Split Collateral Intercreditor Agreements [A] Access and Use Rights [B] Allocation of Mixed Collateral Proceeds :4 Bifurcated Unitranche Agreements :4.1 Special Bankruptcy Considerations :4.2 Key Points of Negotiation :5 Purchase Option :6 Structural Subordination :7 Equitable Subordination :8 Documentation :8.1 Debt Subordination :8.2 Lien Subordination Appendix 9A Debt Subordination Provisions for Note...App. 9A-1 Appendix 9B Intercreditor Agreement... App. 9B-1 Chapter 10 Fraudulent Transfers 10:1 Introduction :2 Basic Definitions :2.1 Bankruptcy Code :2.2 Uniform Fraudulent Conveyance Act :2.3 Uniform Voidable Transactions Act :2.4 Common Law and Other Sources :3 Transfer Made or Obligation Incurred :4 Consideration or Value :4.1 Direct Consideration [A] Bankruptcy Code [B] U.F.C.A [C] U.V.T.A :4.2 Indirect Consideration :4.3 Recipient of Consideration :4.4 Repayment of Existing Debt :4.5 Savings Clauses :5 Insolvency :5.1 Solvency Letters or Procedures :5.2 Assets :5.3 Liabilities :5.4 Leveraged Buyout Merger/Pro Forma Technique :6 Unable to Pay Its Debts :7 Unreasonably Small Capital :8 Actual Intent xxiv

13 10:9 Creditor Remedies :9.1 Generally :9.2 Protection of a Buyer/Transferee Chapter 11 Table of Contents Competing Liens 11:1 Introduction :2 U.C.C. Lien Competition :2.1 Collateral from Another Jurisdiction :2.2 Previously Owned Goods :2.3 Nonfiling Perfection :2.4 Assignees, Subrogees, Affiliates, and Other Acquirers :2.5 Bulk Sale Creditors :2.6 Sellers of Goods :2.7 Insignificant Assignments of Accounts :2.8 Certified Securities, Instruments, and Negotiable Documents :2.9 Subsequent Lien Creditors :2.10 Ordinary-Course Buyers :2.11 Non-Ordinary-Course Buyers :2.12 Purchase Money Security Interests :2.13 Consignments :2.14 Returned Goods :2.15 Negotiable Documents [A] Goods Held by a Bailee :2.16 Chattel Paper :2.17 Collecting Bank :2.18 Changes of Structure :2.19 Disposition of Collateral :3 Bankruptcy :4 State Statutory Liens :4.1 Suppliers of Goods :4.2 Suppliers of Services :4.3 Landlords :4.4 Warehousemen :4.5 Mortgagees :4.6 Environmental Laws :5 Federal Statutory or Regulatory Competitors :5.1 Federal Tax and Similar Liens :5.2 Government Contracts :5.3 Special Statutes :5.4 Hot Goods :5.5 Environmental Laws :5.6 Perishable Agricultural Commodities Act (Asset-Based Lending, Rel. #1, 10/16) xxv

14 ASSET-BASED LENDING Chapter 12 Bankruptcy Issues 12:1 Introduction :1.1 Property of the Estate :2 Lender s Right to Deal with the Collateral :2.1 Automatic Stay [A] Lifting the Stay [B] Exemptions :2.2 Ownership of Property [A] Accounts Receivable [B] Leased Property [C] Consigned Inventory [D] After-Acquired Property :2.3 Setoff :3 Debtor s Rights to Use the Collateral :3.1 Cash and Cash Collections :3.2 Noncash Property :3.3 Leased Property :4 Provision for Adequate Protection :5 Financing the Chapter 11 Debtor :5.1 Voluntary Versus Involuntary Financing :5.2 Documentation :5.3 Crossover Versus Continuing Lien :5.4 Protecting the Repayment of New Loans :5.5 Ability to Foreclose :5.6 Conversion of Pre-Petition Collateral :5.7 Coming Out of Chapter :5.8 Some Thoughts on Approaches :6 Other Dangers for the Secured Creditor :6.1 Preferences :6.2 Fraudulent Conveyances :6.3 Lapse of Perfection During the Case :6.4 Other Financings :6.5 Setoffs :6.6 Fair Labor Standards Act :6.7 Equitable Subordination :6.8 Chapter 11 Plans [A] Credit Bidding [B] Gifting :7 Early Payment Premiums and Make-Whole Payments :7.1 Introduction :7.2 State Law Issues :7.3 Bankruptcy Law Issues [A] Allowability Under Applicable Law: Bankruptcy Code Section 502(b)(1) xxvi

15 Chapter 13 Table of Contents [B] Unmatured Interest: Bankruptcy Code Section 502(b)(2) [C] Reasonableness: Bankruptcy Code Section 506(b) [D] No-Call Provisions: Enforcement and Damages [E] The Automatic Stay, Acceleration, and Deceleration [F] Solvency Closing Considerations 13:1 Introduction :2 Receivables Finance Takeover :2.1 Alternative Choices [A] Purchase of Position [B] Payout of Old Lender :2.2 Mechanics [A] Purchase [B] Payout [C] Indemnities by New Lender [D] General Closing Steps :3 Factoring :3.1 Differences from Receivables Finance [A] Re-Assignment of Receivables [B] Credit Balance [C] U.C.C. Filings [D] Indemnity :4 Opinion Issues :4.1 General Terms [A] Organization and Authorization [B] Due Execution and Delivery [C] Valid, Binding, and Enforceable [D] Noncontravention of Other Agreements [E] Noncontravention of Laws :4.2 Collateral Security Terms [A] Valid, Binding, Enforceable Liens [B] Perfection [C] Priority :4.3 Assumptions and Reliance [A] Genuineness [B] Due Execution by Others [C] Certificates of Officers [D] Other Opinions :4.4 Exceptions [A] As to Enforceability [B] As to Priority (Asset-Based Lending, Rel. #1, 10/16) xxvii

16 ASSET-BASED LENDING 13:5 U.C.C. Filing Issues :5.1 Used Equipment; Specially Acquired Inventory :5.2 Computer Searches :5.3 Bankrupt Companies :5.4 General Search and Filing Issues :6 Disbursement and Use of Loan Proceeds :6.1 Tying in to Loan Documents :6.2 Use of Proceeds :6.3 Timing Issues [A] Taking of Collateral and Perfection [B] Acquired Entities [C] Release of Liens :7 Commitment Letters :7.1 Compensation :7.2 Conditions [A] SunGard Provisions [B] Modifications to SunGard and Xerox Provisions :7.3 Syndication :8 Regulation U :8.1 Substantive Requirement [A] Purpose Credit [B] Direct or Indirect Security [C] Maximum Loan Value :8.2 Reporting Requirement [A] Regulation U Forms [B] Revolving Credit Facilities [C] Annual Reporting for Non-Bank Lenders :8.3 Consequences of Non-Compliance with Regulation U :9 Documentation Appendix 13A Indicative Terms: Revolving Credit Facility... App. 13A-1 Appendix 13B Commitment Letter...App. 13B-1 Appendix 13C Commercial Finance Association: Letter of Indemnity... App. 13C-1 Appendix 13D Landlord s Waiver and Consent...App. 13D-1 Appendix 13E Closing Memorandum...App. 13E-1 Chapter 14 Lender Liability 14:1 Introduction :2 Contract Liability :2.1 Oral Promises :2.2 Failure of a Condition xxviii

17 14:2.3 Good Faith :2.4 Commercial Reasonableness :3 Tort Liability :3.1 Fiduciary Duty and Control :3.2 Improvident Lending/Aiding and Abetting :4 Statutory Liability :4.1 Environmental Laws :4.2 Securities Laws :4.3 Federal Tax Laws :4.4 RICO Appendix 14A Term Sheet... App. 14A-1 Chapter 15 Overview of Revised Article 9 15:1 Introduction :1.1 Status :1.2 Purpose of Revisions :1.3 Consumer Transactions :2 Scope of Revised Article :2.1 Accounts :2.2 Payment Intangibles :2.3 Promissory Notes :2.4 Chattel Paper :2.5 Electronic Chattel Paper :2.6 Investment Property :2.7 Deposit Accounts :2.8 Health-Care-Insurance Receivables :2.9 Commercial Tort Claims :2.10 Software Versus Goods :2.11 Consignments [A] What Constitutes a Consignment Under Article 9? [A][1] Delivery for Purpose of Sale [A][2] The Merchant [A][3] Excluded Transactions [B] [C] Table of Contents Perfection and Priority Rules for Consignments Practical Considerations Regarding Consignment Transactions :2.12 Promissory Notes Secured by Real Estate :2.13 Agricultural Liens :2.14 Letter-of-Credit Rights :2.15 Supporting Obligations :2.16 Good Faith :2.17 Adaptation to Electronic Contracting :2.18 Federal Preemption (Asset-Based Lending, Rel. #1, 10/16) xxix

18 ASSET-BASED LENDING 15:2.19 Exclusions :2.20 Debtor Versus Obligor :3 Creation of Security Interests :3.1 The Security Agreement :3.2 Description of Collateral :3.3 Rights in or Power to Transfer Rights to Collateral :3.4 Assignment of Rights to Payment :3.5 Assignment of Other General Intangibles :3.6 New Debtor :4 Perfection of Security Interests :4.1 Automatic Perfection :4.2 Perfection in Supporting Obligations :4.3 Perfection by Filing [A] Kinds of Collateral Subject to Perfection by Filing [B] Location of the Debtor [C] The Debtor s Name [D] Indication of the Collateral [E] The Debtor s Signature [F] Effectiveness As to New Debtor [G] Rejection or Incorrect Indexing by Filing Officer [H] Minor Errors [I] Agents and Multiple Secured Parties [J] Termination Statements [K] Bogus Filings [L] Transition from Former Article 9 to Revised Article :4.4 Perfection by Control [A] Investment Property [B] Deposit Accounts [C] Electronic Chattel Paper [D] Letter-of-Credit Rights :4.5 Perfection by Possession [A] Instruments [B] Money [C] Tangible Chattel Paper [D] Certificated Securities [E] Goods and Negotiable Documents [F] Collateral in the Hands of Third Parties [G] Governing Law :4.6 Perfection in Proceeds [A] Revised Definition of Proceeds [B] Automatic Attachment and Perfection [C] Tracing xxx

19 Table of Contents 15:5 Priority of Security Interests :5.1 General Rule :5.2 Effect of Other U.C.C. Provisions :5.3 Filing Versus Control :5.4 Filing Versus Possession :5.5 Automatic Versus Other Methods of Perfection :5.6 Control Versus Control :5.7 Purchase Money Security Interests [A] Multiple Shipments [B] Multiple Purchase Money Security Interests [C] Software [D] Consignments [E] Proceeds [F] Dual Status Versus Transformation Rule :5.8 Lien Creditors :6 Transfers of Collateral :6.1 Rights of Transferees Generally :6.2 Transferees of Money and Funds from Deposit Accounts :6.3 Buyers in Ordinary Course of Business :6.4 Nonexclusive Licensees in Ordinary Course of Business :6.5 Purchasers of Chattel Paper :6.6 Purchasers of Promissory Notes :6.7 Purchasers of Property Subject to Articles 3 and :6.8 Retention of Proceeds by Junior Secured Party :7 Enforcement of Security Interests :7.1 Rights of Guarantors :7.2 Collection Rights of Secured Party :7.3 Disposition of Collateral by Secured Party [A] Preparation of Collateral [B] Certain Unusually Low-Priced Dispositions [C] Warranties [D] Non-Cash Proceeds [E] Notice of Disposition [F] Acceptance of Collateral [G] Effect of Non-Compliance :8 Transition Rules Appendix 15A Revised Article 9 Security Agreement... App. 15A-1 (Asset-Based Lending, Rel. #1, 10/16) xxxi

20 Chapter 16 Revised Article 9 Transition Rules 16:1 Introduction :2 The Rules :2.1 Perfection by Filing Under Former Article :2.2 Perfection by Non-Filing Under Revised Article :2.3 Perfection Outside of Former Article :2.4 Perfection Under Former Article 9 but Revised Article 9 Inapplicable :2.5 Unperfected Under Former Article 9 but Perfected Under Revised Article :2.6 Continuation Under Revised Article 9 of Filings Under Former Article :2.7 Amendment Under Revised Article 9 of Filings Under Former Article :2.8 Termination Under Revised Article 9 of Filings Under Former Article :2.9 Terminology :2.10 Transition Issues When Searching :2.11 Earlier Attached, Unperfected Security Interests :3 How Priority Will Work Under the Transition Rules :4 What Secured Party Can Do to Anticipate Revised Article Chapter 17 Intellectual Property Financing 17:1 Introduction :1.1 Types of Intellectual Property :1.2 Increasing Importance of Intellectual Property As Collateral :1.3 Interplay of State, Federal, and International Law :2 Legal Background :2.1 Perfection of Security Interests Under Article :2.2 Impact of Bankruptcy on Security Interests :2.3 Federal and International Preemption of Article [A] Article 9 Provisions Addressing Preemption [B] Case Law Addressing Preemption [C] ASSET-BASED LENDING Not All Intellectual Property Is Governed by Federal or International Law :3 Security Interests in Patents :3.1 Federal Law The Patent Act of :3.2 Case Law on Perfection of Security Interests in Patents :3.3 Uncertainties and Practice xxxii

21 Table of Contents 17:4 Security Interests in Trademarks :4.1 Federal Law The Lanham Act :4.2 State Trademark Protection :4.3 Case Law on Perfection of Security Interests in Trademarks :4.4 Uncertainties and Practice :5 Security Interests in Copyrights :5.1 Federal Law The Copyright Act of :5.2 Case Law on Perfection of Security Interests in Copyrights :5.3 Uncertainties and Practice :5.4 Source Code Escrows :6 Security Interests in Mask Works :6.1 Federal Law The Semiconductor Act of :6.2 Uncertainties and Practice :7 Security Interests in Trade Secrets :7.1 Uncertainties and Practice :8 Security Interests in Rights in Proceeds of Intellectual Property :8.1 Royalties, Licenses, and Infringement Claims :8.2 Uncertainties and Practice :9 Security Interests in Goods That Incorporate Intellectual Property Rights :9.1 Trademark Branded Goods :9.2 Goods Manufactured Under Patents :9.3 Goods Whose Packaging or Labeling Includes Copyrights :9.4 Hybrid Goods with Embedded Computer Programs :10 Other Issues Affecting Intellectual Property Security Interests :10.1 Difficulty of Obtaining Current Accurate Searches :10.2 Delays in Recordation of Documents :10.3 Inability to Make Blanket Federal Filings :10.4 Multiplicity of Rights :10.5 After-Acquired Rights :10.6 Need for Federal Legislative Solutions :10.7 Proposals for an International Convention on Intellectual Property Financing Appendix 17A Patent Security Agreement... App. 17A-1 Appendix 17B Trademark Security Agreement... App. 17B-1 Appendix 17C Copyright Security Agreement...App. 17C-1 (Asset-Based Lending, Rel. #1, 10/16) xxxiii

22 ASSET-BASED LENDING Chapter 18 Debtor in Possession Financing 18:1 Introduction :2 Legal Framework for DIP Financing :2.1 Statutory Provisions :2.2 Case Law :2.3 Applicable Rules, Orders, Guidelines, and Procedures :3 Typical Financing Orders Approved by Courts :4 Key Issues in DIP Financings :4.1 Rollup and Cross-Collateralization :4.2 Use of Cash Collateral Versus DIP Financing :4.3 Joint Debtors and De Facto Substantive Consolidation :4.4 Myths and Realities of Priming :4.5 Section 506(c) Surcharge and Section 552(b) Equities of the Case Waivers :4.6 Obtaining Requisite Prebankruptcy Lender Consent to Do a DIP :4.7 Prefiling DIP Commitments :4.8 Carve-Outs for Professionals and Other Administrative Expenses :4.9 Avoiding Power Claims and Recoveries As DIP Collateral :4.10 Ratification of Prebankruptcy Liens or Claims (and Time Limits on Challenging Them) :4.11 Scope and Automatic Perfection of Postpetition Liens :4.12 Interim Versus Final Orders :4.13 Appropriate Findings of Fact in DIP Orders :4.14 Binding Future Parties :4.15 Milestones and Credit Bidding :5 How to Document a DIP Financing Appendix 18A Statutory Provisions Relevant to Use of Cash Collateral and DIP Financing... App. 18A-1 Appendix 18B Decisions Regarding DIP Financing... App. 18B-1 Appendix 18C Federal Rule of Bankruptcy Procedure App. 18C-1 Appendix 18D-1 Sample Interim DIP Financing Order... App. 18D-1-1 Appendix 18D-2 Sample Final DIP Financing Order... App. 18D-2-1 Appendix 18E Milestones 363 Sale... App. 18E-1 Appendix 18F Milestones Plan of Reorganization...App. 18F-1 xxxiv

23 Chapter 19 Perfecting Liens Under Select European Laws 19:1 Introduction :2 Granting Security in Italy :2.1 General :2.2 Type of Security Overview :2.3 Type of Security Analysis [A] Land and Buildings [A][1] Rankings and Registrations [A][2] Voluntary Mortgages [A][3] Judicial Mortgages [A][4] Legal Mortgages [A][5] Enforcement of the Mortgages [A][6] Reduction and Extinction of the Mortgages [B] Moveable Goods [C] Shares/Quotas [C][1] Pledge over Shares [C][2] Pledge over Quotas :2.4 Bank Accounts :2.5 Receivables [A] Assignment of Receivables [B] Pledge over Receivables [C] Table of Contents Differences Between the Pledge and the Assignment of Receivables :2.6 Moveable Goods Taken as a Group :2.7 Guarantees [A] Fideiussione [B] The First Demand (Independent) Guarantee :2.8 General Overview on Enforcement Proceedings [A] Enforcement Concerning Real Estate Property [B] Special Enforcement of Pledge [C] Enforcement Following Insolvency [D] Hardening Period and Claw-Back Action [E] Enforceability of Foreign Decision :2.9 General Issues [A] Corporate Interest [B] Financial Assistance [C] Priorities [C][1] Liens [D] Ranking :3 Creation of Security in England and Wales :3.1 Types of Security Interest General :3.2 Mortgage :3.3 Charge (Asset-Based Lending, Rel. #1, 10/16) xxxv

24 ASSET-BASED LENDING 19:3.4 Priority :3.5 Registration :3.6 Debenture :3.7 Pensions Regulator :3.8 Possible Challenges to Security Interests :3.9 Financial Assistance :4 Taking Security in France :4.1 General :4.2 Reform of French Security Laws :4.3 Type of Security Overview :4.4 Types of Security Analysis [A] Land and Buildings [A][1] Freehold Mortgage (hypothèque conventionnelle) [A][2] Reloadable Mortgage (hypothèque rechargeable) [A][3] Freehold Lender s Lien (privilège du prêteur de deniers) [B] Moveable Goods [B][1] Pledge over Tangible Movables [B][2] Pledge over Tools and Equipment (nantissement du materiel et de l outillage) [C] Shares [C][1] Pledge over Financial Instruments Accounts [C][2] Pledge over Shares Other than Financial Instruments Accounts [C][3] Security over Shares Issued by a SARL [C][4] Security over the Shares Issued by a [C][5] société en nom collectif Security over Shares Issued by Civil Companies [C][6] Advantages and Disadvantages [D] Bank Accounts and Cash Collateral [D][1] Pledge over Bank Account [D][2] Pledge of Cash Collateral [E] Receivables [E][1] [E][2] Assignment of Receivables by Way of Security Known as Cession Dailly Pledge over Receivables (nantissement de créances) [E][3] Delegation [F] Guarantees and Cautionnement [F][1] Four Categories of Guarantees [F][2] Cautionnement Personnel [F][3] Bank Guarantees [G] Intellectual Property xxxvi

25 19:4.5 General Issues Relating to Taking Security and Guarantees in France [A] Banking Monopoly Rules [B] Corporate Interest [C] Financial Assistance [D] Shared Security [E] Transferability of Loan and Security [F] Priority Among Creditors [G] Insolvency :5 Granting Security in Germany :5.1 General :5.2 Types of Security Overview :5.3 Types of Security Analysis [A] Guarantees [A][1] Suretyship (Bürgschaft) [A][2] Guarantee (Garantie) [B] Security over Shares (Anteilsverpfändung) [B][1] Formalities and Costs [B][2] Enforcement [C] Security over Receivables [C][1] Assignment of Receivables [C][1][a] Blanket Assignments [C][1][b] Realization of Assigned Rights and Receivables [C][2] Pledge of Receivables [D] Security over Bank Accounts [E] Security over Land and Buildings [E][1] Land Charges (Grundschulden) [E][2] Mortgages (Hypotheken) [E][3] Registration Process [E][4] Table of Contents Costs Incurred upon the Creation of a Land Charge or Mortgage [E][5] Enforcement of a Land Charge or Mortgage [E][5][a] Enforcement Procedure [E][5][b] Costs of Enforcement [E][5][c] Suspension of Enforcement Proceedings [F] Security over Intellectual Property [F][1] Pledge of Right [F][2] Assignment for Security [F][3] Trademark Usufruct (Markennießbrauch) [F][4] Formalities [G] Security over Personal Property [H] Security over Aircraft and Ships [H][1] Security over Aircraft [H][2] Security over Ships (Asset-Based Lending, Rel. #1, 10/16) xxxvii

26 ASSET-BASED LENDING 19:5.4 General Issues [A] Risk of Over-collateralizing (Übersicherung) [B] Corporate Benefit [C] Financial Assistance [D] Priority [E] Insolvency Law Table of Authorities...T-1 Index... I-1 xxxviii