Consider the following scenario. A manufacturing company is experiencing significant financial and operational difficulties. A lender provides it with $20 million secured by a second priority lien and, in connection with this financing, is given two seats on the manufacturer's board of directors. For the next 3 years, the manufacturer continues to suffer losses and the lender continues to extend additional financing. By the third year, the lender has selected three of the company's four board members. At this point, the manufacturer is insolvent, undercapitalized and no disinterested third party will lend it additional money. Nevertheless, the lender extends new financing. No notes are issued for portions of this financing, and the lender does not obtain a valuation to determine whether the manufacturer has collateral to support the new financing. Then the lender, not management, negotiates a sale of the company to occur in the context of a pre-negotiated bankruptcy, with the lender to acquire more than 30% of the stock in the newly formed buyer. The manufacturer files a bankruptcy petition and immediately moves for approval of the sale. The buyer credit bids the lender's claim at the section 363(b) sale, and acquires the company's assets over the objection of the creditors' committee. Should the lender's third-year advances -- made while the company was insolvent and undercapitalized and at a time when no disinterested third party would lend money -- be recharacterized as equity? After examining all of the facts and circumstances, the Third Circuit answered no.

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Highlights of the latest commercial leasing cases from around the country.

There is a common misconception that the obligation to satisfy a "best efforts" clause requires rigorous performance, regardless of hardship or cost to the promisor. This misconception of the meaning of the term "best efforts" stems from the divergence between common parlance and jurisprudence. Considering the term in the vernacular, "best efforts" implies superlative action. Therefore, when one puts forth one's "best efforts," such action is not simply good, or better, but the best according to one's capabilities. James M. Van Vliet, Jr., <i>"Best Efforts" Promises Under Illinois Law,</i> Ill. B.J. 5 (Dec. 2000). The implication is that to satisfy a promise for "best efforts," there is no limit as to what one will do, no hardship or expense too great to satisfy the obligation. In fact, it would appear that many believe this to be the definition of "best efforts."

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When leasing or selling parcels of property that are located outside of an enclosed shopping center but within the perimeter of the shopping center property (<i>eg</i>, along the interior road of the shopping center, along the peripheral boundary of the shopping center, or along shared parking fields of a shopping center), a landlord should consider several concepts that may not be considered critical issues when leasing in-line space. However, for purposes of leasing or selling outparcel locations, these concepts are not only financially important to the landlord, but also will impact the day-to-day operations of a shopping center. These concepts include parking, insurance/casualty, maintenance and repair, and signage.

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Businesses borrow money. Security for the repayment of a loan often includes a lien granted by the borrower to its lender on the borrower's equipment, trade fixtures and inventory ("Tenant's Property"). A lender and its borrower can expend significant time and resources negotiating the loan documents whereby the borrower grants the lender a security interest in Tenant's Property. Of course, businesses also frequently lease the space in which they conduct their operations ("Leased Premises"). If they plan to locate portions of Tenant's Property within a Leased Premises, a conflict of interests inevitably arises between the lender and the owner of the Leased Premises, <i>ie</i>, the borrower's landlord. A lender will want to obtain an unfettered right to enter the Leased Premises and remove the Tenant's Property without being deemed a trespasser or a converter of any interest of the landlord in Tenant's Property.

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Visit <i>www.occupationalhazards.com</i> for everything you ever wanted to know about occupational safety, health and loss prevention. This month's column covers some of the many features offered by the site.

Does product liability law make economic sense? Ask a random group of economists and you will get, in all probability, three basic answers: 1) yes, sort of; 2) no, sort of; and 3) maybe, it depends.

Highlights of the latest product liability cases from around the country.