Tips for Borrowers Negotiating a Loan: Part 4 Existing Lenders

Clint M. Hanni
April 2017

New loans are more complicated when a borrower already has an existing loan with another lender. It’s all about collateral. Here are some tips to keep in mind:

1. Keep the old lender in the loop. If the old loan will remain in place, new lenders may only be willing to extend a loan if there is unencumbered collateral available to secure a new loan. For this reason, it’s wise for a borrower to: (i) know exactly what collateral has already been pledged to other lenders; and (ii) keep as many of its assets unencumbered as possible to use as collateral on additional loans. Existing lenders may be willing to release some of their collateral to secure a new loan, especially when the borrower will benefit from additional credit that the existing lender is unwilling to extend. As always, be careful to keep the old lender in the loop when looking for new or additional lenders.

2. Intercreditor Agreement. It’s common for two or more lenders to make loans secured by a single borrower’s collateral. To do this, they will enter into an intercreditor agreement that specifies the priority of each lender’s collateral. There are two possible scenarios: (i) the lenders can split the collateral between them, each maintaining a first priority position (e.g., one lender will take inventory as collateral, and the other lender will take equipment), and (ii) each lender can take the same assets of the borrower as collateral, with one lender being in a first priority position and the other being in second position. Intercreditor agreements can involve contentious negotiations between competing lenders, and it’s important for the borrower to have competent counsel to act play the role of a mediator. Many loan deals have failed to close because the lenders could not reach agreement on the intercreditor document.

3. Payoff Letter. When a new loan will be paying off an old loan, the old lender will be asked to provide a letter that details exactly how much principal, interest and fees are outstanding. The payoff letter should also state that, upon payment in full of all amounts owing, the old lender releases its lien on the borrower’s assets. Some lenders forget their obligation to release liens, and it can cause future problems for the borrower. Experienced finance counsel will help the borrower remember this important step and save money in the long run. Visit

Read Tips for Borrowers Negotiating a Loan: Part 5 Closing Documents

Tips for Borrowers Negotiating a Loan: Part 3 Ancillary Documents

Clint M. Hanni
April 2017

The loan agreement isn’t the only document in a loan transaction. Other documents (sometimes dozens of them) can come into play. Here are a few to consider:

  1. 1. Security Agreement. If the loan will be secured by personal property, such as accounts, inventory, equipment or IP (patents, trademarks, copyrights), there will be a security agreement. Many borrowers make the mistake of assuming security documents are simply standard agreements off the shelf and nothing to worry about. The truth is different: security agreements can be used by lenders to add additional terms into the deal. The most important consideration in a security agreement is to make sure it correctly describes the collateral. If the loan is to be secured by all the assets of the borrower, the collateral description is less of an issue, but if the loan is to be secured only by a certain type of collateral (e.g., inventory), an overly broad collateral description can get the borrower in trouble, especially if the borrower wants to reserve some of its assets to use as collateral on another loan. To avoid costly mistakes, have this document reviewed by an experienced finance lawyer.

2. Pledge Agreement. Loans are often secured by stock or limited liability company membership units. A Lender may require a borrower to pledge the stock of its subsidiaries. A parent company or other affiliate may be required to pledge its stock as collateral. For all the stock pledges, the lender will insist on taking possession of the original stock certificates (if they exist) until the loan is paid back. In addition, the bank will ask for stock powers, a document that gives the bank the power to transfer the stock into its own name if an event of default occurs. During the loan period, the borrower will not be allowed to sell the pledged stock.

3. Guaranty. The lender may require that a third party closely related to the borrower (such as a parent company, a subsidiary or a major stockholder) agree to provide a guaranty of the loan, which is essentially a promise to pay off the loan if the borrower fails to do so. Not all guaranties are the same. Some are limited in amount and revocable; others are unlimited and irrevocable. As with all the loan documents, you need a good finance lawyer to make sure you are getting the deal you agreed to.

4. Promissory Note. A promissory note is a short document that represents the borrower’s obligation to pay back the loan and details the payments of principal and interest to be made. This document should be carefully reviewed by a professional to confirm that it correctly states the terms found in the term sheet and doesn’t introduce additional terms the borrower has not agreed to. Visit

Read Tips for Borrowers Negotiating a Loan: Part 4 Existing Lenders



Tips for Borrowers Negotiating a Loan: Part 2 The Loan Agreement

Clint M. Hanni
April 2017

Once you have agreed on a term sheet for your loan, it’s time to turn to the “definitive loan documents.” The first document to get drafted is the loan agreement.

  1. 1. Get it reviewed by an attorney. The loan agreement contains the basic terms of the deal and describes what the bank will require the borrower to do beyond staying current on payments. All loan agreements are not the same. The bank may tell you it’s a “standard document” drafted by internal staff, but you can’t afford not to have it reviewed by a competent finance lawyer, potentially saving you thousands of dollars. If you decide to request a change in the document later, the bank will charge a modification fee. It’s best to get it right the first time.

2. Representations and warranties; schedules. Representations and warranties are statements of fact made by the borrower in the loan agreement, and any untrue statement could be grounds for the bank to call the loan. The representations and warranties may refer to schedules where the borrower discloses exceptions. The number one rule for preparing schedules can be distilled down to three words: tell the truth! Disclose any and all exceptions. If you are making a representation that your assets don’t have any liens other than as disclosed on a schedule, be careful to disclose all the liens on the schedule. As a borrower, it’s in your best interest to be thorough and inclusive.

3. Covenants. There are two kinds of covenants: thou shalt, and thou shalt not. Borrowers should pay special attention to covenants that restrict it from corporate actions, such as making distributions to its shareholders or members, selling its assets, merging with another entity or undergoing a change in control. Make sure you understand the limits imposed by the bank and can live with them.

4. Focus on costs and fees. Banks don’t just make money from interest. Every loan agreement will include other costs and fees to be paid by the borrower. For example, the lender may require the borrower to pay for an annual appraisal of its assets. Make sure you have already agreed to the costs in the term sheet. If not, don’t be afraid to push back. The bank may agree to cover the costs itself.

5. Events of Default. The events of default section is a list of events that allows the bank to require immediate repayment of all amounts outstanding. Generally, any violation of a representation and warranty or a covenant will be deemed an event of default after the passage of some period during which you can cure the problem. Don’t assume that the bank will only call the loan if you fail to make a payment. There are a multitude of other grounds for putting a loan in default. As with the rest of the loan agreement, it is important that you have this section reviewed by a seasoned credit finance lawyer. Visit

Read Tips for Borrowers Negotiating a Loan: Part 3 Ancillary Documents



Tips for Borrowers Negotiating a Loan: Part 1 The Term Sheet

Clint M. Hanni
April 2017

Getting a business loan can be a long and difficult process. The bank wants to see everything, the good and the bad. Here are some tips when working with a bank to get a commercial loan. It all starts with a good term sheet.

    1. Have your lawyer review the term sheet. It’s understandable that you want to keep costs down, but don’t skip a legal review of the term sheet or letter of intent. Have your lawyer review it before you sign it. Getting counsel involved to review a loan agreement after a term sheet has been signed makes it difficult to renegotiate problematic financial or non-financial terms. An experienced credit finance lawyer will quickly identify terms that may be out of market and help you get them back in line with what works for your business. It’s in your favor to work as much detail into the term sheet (even if it’s a non-enforceable letter of intent) as possible before loan documents are prepared. The term sheet will set the tone for the rest of the loan negotiation, and you need to get it right.

Focus on the reporting requirements. Borrowers understandably pay a lot of attention to the basic terms of a loan: interest rate, maturity date, financial covenants and events of default. But there are other important obligations in a loan agreement that are often glossed over by borrowers. For example, the borrower will typically be required to send the bank periodic reports on the borrower’s financial condition. Usually, this includes providing quarterly financials 30-45 days after the end of each quarter and its annual financials 60-90 days after the end of its fiscal year. Asset-based loans often require frequent reporting of outstanding accounts and inventory. Some lenders may ask for monthly (or even weekly) budget reports. The point is, the borrower will have to live with the reporting requirements. Be aware of what the bank wants and don’t be afraid to push back before you sign if the reporting requirements are too onerous. It’s critical to have an experienced credit finance lawyer on your side to let you know if the bank is asking for more than is customary.

Understand the collateral. If the loan will be secured, the term sheet should clearly describe the extent and types of collateral. For loans secured by personal property (as opposed to real estate loans), it may be as simple as “all assets” or it may be only accounts, inventory and equipment. Most banks will require borrowers to provide “first priority liens” on the collateral, so you need to know whether there are any outstanding liens on the collateral that won’t be paid off with the new loan. The bank will do its own Uniform Commercial Code (UCC) lien search to confirm this, but many headaches can be avoided by clarifying at the term sheet stage exactly what the bank will have as collateral. Visit

Read Tips for Borrowers Negotiating a Loan: Part 2 The Loan Agreement

Tips for Effectively Using Your Business Lawyer

March 2017

Savvy business people understand that lawyers play an indispensable role in the successful execution of a business plan. Here are seven keys to get the most from lawyers for your business.

1. Call sooner rather than later. Problems are more expensive to solve than avoid. Call your lawyers before you get served with a lawsuit. Call them before you sign a lease or a loan or any other contract vitally important to your business. An hour or two of your lawyer’s time to review a document could save multiple hours down the road trying to unwind or modify a bad deal.

2. Understand the fees upfront. When hiring a lawyer, you should ask for a document (sometimes called an engagement letter or retainer agreement) to describe how your lawyer will charge for their work. Not all projects need be billed by the hour. If you are looking for more certainty as to cost, ask for an alternative, such as a cap on fees or a hard quote on the total cost. Alternative fee structures don’t automatically lower total legal fees. Getting certainty in your fees may come at a cost.

3. Be prepared and do your homework. Prior to meeting with your lawyer in person or on the phone, spend time getting prepared. Read in advance any documents or contracts you would like the lawyer to review and have specific questions. Spend time to get a clear understanding of the deal you want to do and the goals you hope to accomplish. In short, use your lawyer’s time as efficiently as possible.

4. Keep your lawyer in the loop. As your business plan unfolds and new developments arise, touch base with your lawyer through a quick email or phone call to apprise them of what’s going on. They may see issues that you haven’t thought about, and it could end up saving you thousands of dollars in legal fees down the road.

5. Don’t hide the ball. Be totally honest with your lawyer. Your discussions will be protected by the attorney-client privilege and kept in strict confidence (assuming you don’t plan to commit a crime). Legal issues are driven by facts, and the more detail you provide your lawyer, the better they will be able to serve you.

6. Get the right lawyer. Don’t ask a patent lawyer to review a loan agreement. The legal system is complicated. Like most professions, law has become incredibly specialized in the last few decades. Before your hire a lawyer, make sure they have experience handling your type of project. The lawyers at RBMN have deep expertise in business litigation and all aspects of business transactions.

7. Treat your lawyer like a business partner. Unlike the caricatures in lawyer jokes, most lawyers are dedicated professionals with the knowledge and experience to safely guide you through the legal risks of running a business. Treat them as you would a business partner. You’ll find the value they add to your business far exceeds the cost.

Personal Injury Legal Representation

Richards Brandt Miller Nelson usually represents defendants in personal injury property loss claims through assignment by their insurance carriers. However, our experience on the defense side makes us especially effective in injured persons, provided that we do not have a conflict. We welcome inquiries from accident victims who have suffered serious injuries in catastrophic or life threatening accidents, as well as businesses seeking personal injury liability protection.

Experience and success representing both plaintiffs and defendants give an attorney a distinct advantage when a claim has been filed. This type of experience gives the personal injury attorney a better understanding of which cases are better settled quickly and which should be tried. Experienced personal injury accident lawyers also know how to provide what the insurance company or claims evaluator needs at the beginning of the case, and how to present information at the right time to reach the most beneficial outcome for the client.

Salt Lake City Personal Injury Attorneys

The personal injury attorneys at Richards Brandt fully understand the strategies on both sides of personal injury claims. Our lawyers are well positioned to advise and represent either side of a personal injury claim adeptly and aggressively. Whether you are a property owner, insurer, truck driver, or a driver or passenger in a car accident, do not hesitate to contact us for skilled personal injury legal representation.

Common personal Injury Cases

Our attorneys are experienced in many types of personal injury cases. These include, but are not limited to:

    • Auto Accidents
    • Boat Accidents
    • Dog Bites
    • Industrial and Work Accidents
    • Motorcycle Accidents
    • Bike Accidents
    • Truck Accidents
    • Wrongful Death
    • Why Do I Need a Personal Injury Attorney?

Our Utah personal injury attorneys have an extensive history of successfully securing settlements and results for injured persons, family members of fatal accident victims, and insurance companies. We have taken a tremendous number of personal injury cases to trial. We know how to present complex evidence and compelling arguments to juries and judges in Utah state and federal courts, including appellate courts. That extensive trial experience provides the necessary foundation for producing the best possible settlements for our clients. The knowledgeable, experienced Salt Lake City personal injury lawyers of Richards Brandt represent individuals in cases involving serious and objective injuries, including wrongful death, spinal cord injuries, quadriplegia and paraplegia, brain injuries, high-loss property damage, and other catastrophic injuries.

Contact us directly to discuss your legal needs

If you have been injured or if your business may be subject to liability in a personal injury lawsuit, contact Richards Brandt today to arrange a consultation. Our skilled and experienced attorneys are committed to representing clients in significant personal injury and wrongful death cases throughout the state of Utah.

2016 Yancey Memorial Award

Gary L. Johnson
August 2016


The International Association of Defense Counsel announced at their annual meeting that RBMN’s litigation practice chair, Gary L. Johnson, was the recipient of the 2016 Yancey Memorial Award. This award is bestowed annually on the author of the best article published in The Defense Counsel Journal in the previous year. Gary’s winning article is Proving the Negative: On the Admissibility of the Lack of Prior Accidents in a Products Liability Case. The Yancey Memorial Award, instituted in 1963, honors George W. Yancey, former president of the IADC and founder of the Defense Counsel Journal.


Subrogation Law

With tens, or even hundreds of thousands of dollars on the line, subrogation actions are bitterly fought and hard won. Whether you are the plaintiff or the defendant, subrogation claims are not to be taken lightly. The more you know and the more experience you have on your legal team, the better off you’ll be in the courtroom.

Attorneys with the law firm of Richards Brandt Miller Nelson have been handling subrogation claims for decades. We represent both insurance carriers and alleged at-fault parties — plaintiffs and defendants — so we have a vast amount of experience with every aspect of subrogation law.

What is Subrogation?

Subrogation is the assumption by a third party (as a second creditor or an insurance company) of another’s legal right to collect a debt or damages.

Subrogation typically applies to cases involving insurance carriers or business contracts with indemnification provisions. For example, when there is an automobile accident in which property is damaged and injuries are incurred, there is often a period of time where the insurance carrier runs an investigation to determine who was at fault. The injured party can’t wait for the investigation to be over to receive medical attention or to have their car repaired, so the insurance carrier will step in and pay the medical and auto repair/replacement bills. If another party is determined to be at fault in the accident, the insurance carrier can then attempt to recover from that party. In other words, when the insurance company covered the damages for its insured, it assumed the right to collect damages from the at-fault party. That re-assignment of rights is subrogation.

Why Do I Need Legal Representation?

If you are an insurance carrier pursuing a subrogation claim, you need experienced counsel to make sure you have standing to pursue the claim and that your subrogation rights have not been compromised, such as through a settlement with a waiver of subrogation. If you are being sued by an insurance carrier who claims that you’re at-fault in an accident, you will need experienced counsel to determine whether the carrier has standing to pursue the claim. Whichever side you are on, you need a knowledgeable, experienced attorney to step in as soon as a loss is incurred. Laws vary from state to state, that’s why it’s important to hire a firm that’s familiar with Utah subrogation laws to help with your claim.

For knowledgeable, experienced legal help in a Utah subrogation action, contact the law firm of Richards Brandt Miller Nelson. We have been handling subrogation claims for decades and, whether you’re the plaintiff or defendant, we will use that experience to help you reach the best possible result in your case.


Mark L. McCarty


Mark L. McCarty 1963-2016

So Mark we’ll miss you,
Sly satirist,
Our proud partner, friend
and anarchist.

-Richards Brandt Miller Nelson

Mark L. McCarty passed away June 20, 2016 due to complications from the HIN1 flu virus.

Mark practiced law at Richards Brandt for 20 years. He was a member of the firm’s Board and Chair of the firm’s Business Practice Section. Mark built RBMN’s practice groups in employment law and the representation of religious groups and organizations. He served on the Board of Trustees for Catholic Community Services. Mark attended law school in Michigan and later worked for the Attorney General’s office. After joining the law firm of Richards Brandt Miller Nelson, Mark made friendships as close as family.

Enforcing Electronically Signed Construction Contracts

August 2016
Contractors, subcontractors and suppliers understand that the usual course of construction requires a paper trail of documents beginning with plans, specifications, drawings, bids and proposals, and concluding with inspections, punch lists, final payment and warranties. Moreover, standard contract clauses and simple prudence require those in the construction industry to retain documents for years. The advantages of storing documents and conducting all related business electronically is obvious. But, are electronically signed contracts enforceable?

In 2000 Utah’s legislature passed the Uniform Electronic Transactions Act. The statute permits the use of electronic documents and signatures in a transaction if both parties agree. Electronic contracts and signatures “may not be denied legal effect or enforceability solely because…in electronic form.” Utah Code Ann. § 46-4-201(1), (2). If a law requires that a record be in writing, or that a signature be obtained, an electronic record or signature is acceptable. Id., at (3), (4). For example, in Anderson v. Bell, 2010 UT 47, the Utah Supreme Court held that electronic signatures on a petition to place an unaffiliated candidate’s name on the statewide ballot for governor satisfied the requirement under Utah’s Election Code for such a petition to be signed by 1,000 registered voters. Id., ¶ 26. In judicial proceedings, the law requires a party to use the original record of a transaction to prove the terms of the transaction. The Uniform Electronic Transactions Act addresses this requirement by stating that an electronic record can suffice as an “original” if it “accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise” and “remains accessible for later reference.” Utah Code Ann. § 46-4-301(1). “In a proceeding, evidence of a record may not be excluded solely because it is in electronic form.” Utah Code Ann. § 46-4-302.

To improve the chances that electronically signed contracts are enforceable, and can be admitted as evidence of the terms of the parties’ transaction, contractors should amend their form subcontracts. If you have any questions regarding the enforceability of electronic documents in Utah, or need help in drafting suitable contract clauses, contact Jack W. Reed at Richards Brandt Miller Nelson.

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