Curtis Johnson took part in a CLE webinar panel entitled Structuring Pledge Agreements for Equity Interests in Partnerships and LLCs to Maximize Protection for Lenders – Drafting Key Provisions in the Security Agreement and Corresponding Amendments to the Borrower’s Operating Agreement.
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This CLE webinar will prepare lenders’ counsel to draft equity interest pledge and other agreements for partnership and LLC interests that provide maximum protection for the lender’s security interest. The panel will outline corresponding provisions that should be contained in the borrower’s operating or partnership agreement.
Equity interests in LLC and partnership interests are a common form of collateral in many secured finance transactions, particularly mezzanine financing. The security agreement and related documents are important for the effectiveness of the security interest in an LLC or partnership equity interest.
Critical provisions that protect the lender’s interests include the choice of the LLC or partnership to opt-in to UCC Article 8. Representations, warranties and covenants of security agreements are often different than standard provisions for other collateral.
Listen as our authoritative panel of practitioners discusses UCC Article 9 and Article 8 requirements for equity interests in LLC or partnership interests. The panel will outline best practices for drafting pledge agreements and making corresponding amendments to the borrower’s operating agreement that maximize protection for the lender.
I.Overview of UCC Article 8 and 9 requirements
II.Drafting the security agreement
III.Recommended amendments to the LLC operating agreement or partnership agreement
IV.Common pitfalls and strategies to best protect the lender
The panel will review these and other key issues:
•Why is the UCC Article 8 opt-in and perfection by “control” preferable to perfection by the filing of a financing statement under Article 9?
•What steps should the lender take to ensure the borrower cannot opt-out of Article 8?
•What are the key provisions that should be included in the borrower’s operating agreement or partnership agreement to facilitate realization on the collateral?
•To what extent may the lender use the operating or partnership agreement to prevent the borrower from commencing a bankruptcy case to block the lender’s enforcement?