ABA Section of Business Law
September/October 2001 (Volume 11, Number 1)
Legal-ease
Running with the e-mail monster
By Howard Darmstadter
Last year, I was involved in a project to amend approximately 60 credit agreements and issue 60 parent-company guaranties to the lenders. The documents weren't difficult, but the project had to be done Speed of Light.
And it was, thanks to two modern marvels: computerized document production and e-mail. Neither of these advances was new to me, but on this project both were used with an intensity that went beyond anything I'd seen before. While the experience was novel, it seemed obvious that this could be the shape of law to come.
Time was - 15? years ago - each part of a drafting project had
an inflexible deadline: The documents had to be at the FedEx office
by 8 p.m. The deadline was draconian - a minute late, and you'd
lose a whole day. But it often provided two kinds of comfort: First,
there was no point to getting the document to FedEx much before
the deadline. So if you were running ahead of schedule, you had
leisure to ornament and fuss over your document. Second, once the
documents went out the door Tuesday evening, you knew you wouldn't
see them again before Thursday morning, leaving you all of Wednesday
to regroup, rethink, and rejoice.
Then along came fax. Now you could send out documents at any time
of day. But there was still a reluctance to send out long documents
by fax in anything short of a full emergency.
Say hello to e-mail (and buy a cot for the office). Now, with the touch of a button, any document can instantly be sent any place in the world. But if you're sending the documents to Europe, you have to get them out by lunchtime, before the Euro folk have left for the day. For Asia, you can send the documents as late as you want, but while you sleep, the documents will be worked on, returning as an unwelcome e-mail when you power up next morning. In many transactions, there may be no downtime in the drafting process.
With these new time pressures, documents are likely to get pretty sloppy, at least by the standards of the hyper-fastidious recent past. Since every additional minute spent on a document means it gets to the recipient one minute later, there are pressures to forego the usual legal flyspecking. Parts of this problem may have technological fixes - Hail spellcheck! - but not all. In the future, documents are likely to be fast and funky.
The second engine propelling us toward a rapid-fire future is computerized
document production, specifically the merge feature found in all
(two) word processing programs. For example, you can create your
annual Christmas letter to your friends and relations as a single
standard form, and then merge it with a second data document containing
125 addresses to produce 125 semi-personalized letters. (These days,
even Christmas needs a productivity boost.)
The same magic works for legal documents. My 60 credit agreements,
for example, had different lenders, borrowers, commitments, section
numbering, governing laws and other messy singularities. Luckily,
only two covenants had to be amended, though not every agreement
had both. We created a single data document and half a dozen slightly
different forms to produce the 60 amendments and guaranties.
For a lawyer, not having enough time is like not having enough money: It can be unpleasant, but also refreshing - you have to ask yourself what is essential, what merely useful, and what entirely frivolous. Had we but world enough and time, we could have arranged the merges to take account of every variation in the credit agreements; as it was, we did a rough cut and sent the draft documents out. Here, "rough" meant:
- We did one quick internal review and launched. Our mistakes were there for all the world to see. The lenders pointed them out, and we tried not to act embarrassed.
- We amended covenants that didn't exist. That is, every amendment dealt with both objectionable covenants, even if the particular credit agreement only had one. The critical sections of the amendment thus began "To the extent that the credit agreement requires that …." Some lenders marked the sections as "not applicable," but relented when we explained.
- We specified sections by title rather than number. The amendment thus referred to "the section titled 'covenants' or 'representations, warranties and covenants.'" New sections were stated to be inserted "at the end of the 'covenants' section, appropriately numbered."
As lenders came back with comments, we rejected every change that wasn't absolutely necessary. Dealing with so many amendments and lenders, and moving so fast, we wanted the second drafts to be as close to the first as possible. For example, we had inserted a notice address for the guarantor in the amendment, even though the guarantor wasn't a party to the amendment. It was a mistake, but since it did no harm, it stayed.
Our modern ruthlessness also extended to the junk documents - the numerous opinions and certificates that clutter every closing. In particular, we skinnied down the secretary's certificates.
A secretary's certificate attempts to trace, through a succession of documents, the authority of the corporation to enter into the transaction and of its designated officers to bind the corporation. A typical certificate will thus state that up-to-date copies of the company's certificate and by-laws are attached, as well as resolutions of the board of directors stating which corporate officers can bind the company to the transaction. Finally, the certificate, or a separate "incumbency certificate," will name the current occupants of those offices, and provide specimen signatures of the officers that the other parties can compare to the signatures on the substantive documents.
In many closings, one party leaves the room with a pile of money,
the other with a stack of paper promises. My own style has been
to give the papered party whatever extra documents it wants, as
lavishly sealed and beribboned as may give it comfort.
But here, we declined to attach copies of the certificate of incorporation
or the by-laws to the certificates. In mid-rush, we weren't salivating
at the thought of assembling, copying and collating thousands of
pages of additional documents. In any case, the guarantor was a
public company, and the documents could be gleaned from its SEC
filings (not that many lenders bothered).
Board resolutions were another story. Some boards give their officers
wide latitude, others confine them narrowly. So it's usually a good
idea to look at the resolutions. And it was easy enough to add a
single page of resolutions to the certificate form.
Which brings us to the incumbency certificate, a minor document
with major perplexities. For one thing, once you start to worry
about the bona fides of the signers of the substantive documents,
there seems nothing to stop you worrying about the identity and
authority of the signer of the incumbency certificate.
Many incumbency certificates address this problem by having a second signer certify as to the first signer. Like having Atlas stand on a tortoise, it settles nothing. I've even heard of lawyers requesting a third certification, which was good for some laughs. (A friend once usefully suggested that we forget about the incumbency certificate, and instead have each signer produce a driver's license and two major credit cards.) Also, many lawyers don't relish being amateur graphologists, asked to compare the specimen signatures on the incumbency certificate with the signatures on the substantive documents.
Most of the incumbency certificates I prepare these days don't include specimen signatures. Instead, they simply recite that "Petulia Powerluncher is a vice president of the company, and signed the credit agreement as such." Such a certificate, besides being easier to prepare, is probably more useful to the recipient than the traditional form.
Perhaps you don't envision ever being asked to cook up documents in batches of 60. But any standard document can be set up as a merge form; the next time you use it, you just load another record into the data document, and squeeze the trigger. Merge-Blaster: weapon of choice for the lightspeed lawyer!
Darmstadter is an assistant general counsel at Citigroup in New
York City. His e-mail is darmstadte@citi.com.
