ARGUMENT

I. Introduction.

Beal respectfully requests the Court to grant this motion, vacate its March 22, 2007 decision, and render judgment for Beal because the Court misapprehended or overlooked, among other things, the following points:

1. Keep-Well is Enforceable by Each Lender. Section 18(b) of the Keep-Well Agreement expressly states that the Keep-Well is binding upon the Sponsors and is “enforceable by… each Lender….” The Court’s conclusion that “here, of course, neither the Credit Agreement nor the Keep-Well contains an explicit provision stating that a Lender may - or may not - take individual action in the event of default….” is not correct. Section 18(b) explicitly states that each Lender may enforce the Keep-Well. Similarly, the Court’s conclusion that “had the parties intended that an individual have the right to proceed independently, the Credit Agreement or the Keep-Well should have expressly so provided….” is not correct. The parties expressly did so provide by making the Keep-Well enforceable by each Lender under Section 18(b). The Court was not “compelled to look to other specific clauses and the agreements as a whole to ascertain the parties’ intent.” The reverse, of course, was true - the parties plainly intended to make the Keep-Well enforceable by each Lender by the terms they chose to include in Section 18(b).

2. Credit Agreement Includes No Terms or Provisions That Eliminate Individual Lender Enforcement Right Under the Keep-Well. The Court correctly notes that the Keep-Well must be “construed, administered and applied in accordance with the terms and provisions (of the Credit Agreement) ….” Under Section 18(b), the Keep-Well is enforceable by each Lender. The Credit Agreement (including Section 8.3) includes no provision that eliminates each Lender’s right to enforce the Keep-Well. As a consequence, after the Keep-Well is “construed, administered and applied in accordance with the terms and provisions (of the Credit Agreement)…,” each Lender’s right to enforce the Keep-Well plainly continues.

3. Court-Created Terms and Provisions. The Court’s decision imposes the following Court-created terms and provisions upon Beal. First, the Court eliminates Beal’s right to enforce the Keep-Well by overlooking or misapprehending that Section 18(b) expressly provides such right. Second, without citing any supporting terms or provisions, the Court concludes “that the agreements have an unequivocal collective design” - which, of course, dooms Beal’s right to enforce the Keep-Well. Since the Keep-Well did include an explicit provision in Section 18(b) that authorized enforcement by each Lender, the Court was not compelled to look to “the agreements as a whole to ascertain the parties’ intent.” The parties’ intent was clearly ascertainable from the (i) individual Lender enforcement terms and provisions in Section 18(b) of the Keep-Well, and (ii) the absence of any terms and provisions in the Credit Agreement that eliminate this right. The Court should not eliminate terms and provisions from the Keep-Well or add terms and provisions to the Credit Agreement.

4. Timing of BFC’s Acquisition. The Court concluded that “BFC acquired a 4.5% interest in the bank debt after the Borrower filed for bankruptcy. This is not correct. BFC acquired all of its interest in this bank debt before the Borrower filed for bankruptcy. While the timing of Beal’s acquisition of the debt should not make any difference in this case, the Court included a specific sentence to this effect. If this fact makes a difference, then the Court is respectfully advised accordingly.

5. Consideration. The Court concluded that Beal received its pro rata share of the Trust’s interest in a shopping mall. This is not correct. Beal did not participate in the settlement among the Trust and the other lenders and received no payment of any kind from such settlement.

II. The Court erred in holding there is no express right to individually enforce the Keep-Well.

“To prohibit an individual lender from the right to sue … is to disenfranchise a lender from an important individual right.” Rowan McR. Russell, Impact of Recent Corporate Collapses on Negotiating & Drafting Syndicated Loans, 27 Int’l Law. 397, 423 (1993). Thus, “[t]he usual limits to syndicate democracy are these: once amounts have become due under the loan agreement, whether by acceleration or otherwise, each bank is free to make its own decision about enforcing its claim for amounts owed to it.” Lee C. Buccheit, How To Negotiate Eurocurrency Loan Agreements 15 (2004). The Court’s decision turns this basic principle of syndicated lending on its head. Worse still, the Court’s holding thwarts the parties’ clearly-expressed intentions about the Lenders’ rights under the Keep-Well Agreement in this case.

In keeping with the “usual limits to syndicate democracy,” the parties to the Keep-Well agreed – using the clearest language possible – that once the debtor’s loans had been accelerated, the Keep-Well would be “enforceable by … each Lender.” (R. 366; A289) (emphasis added). Reinforcing that point, the Keep-Well provided that the Sponsors could not rely on the statute of limitations as a defense in any action or proceeding brought against them “by the Administrative Agent or any Lender.” (R. 338; A261) (emphasis added). Yet, inexplicably, this Court concluded that the Keep-Well contains no “explicit provision stating that a Lender may – or may not – take individual action in the event of default….” (Op. at 11).

The Court justifies disregarding the “enforceable by each Lender” language in Keep-Well Section 18(b) by simply concluding, without the benefit of any terms or provisions that so state, that (i) “the agreements have an unequivocal collective design,” (ii) there is a “collective enforcement scheme envisioned by the signatories of the Loan Documents,” (iii) “the Lenders contemplated unified action by the Administrative Agent,” and finally (iv) “the parties intended for collective action in the event that the obligations of the Borrower could be accelerated.” Under the Court’s reasoning, the individual enforcement language in the Keep-Well, no matter how explicit, can never be given effect because the Credit Agreement’s Court-ordered collective enforcement scheme will always require that it be ignored.

Indeed, the Court’s approach leads it far afield from the Keep-Well’s actual text when it declares that “[t]he only entity section 4 mentions as having the right to pursue default remedies is the Administrative Agent.” (Op. at 14). Contract clauses, this Court once emphasized, should be given their plain meaning “without resorting to subtle and forced construction for the purpose of either limiting or extending their operation.” McCluskey v. Cromwell, 11 N.Y. 593, 601-02 (1854). Keep-Well Section 4 states only that in the event the Borrower’s Obligations are accelerated, the Sponsors will “pay the Accelerated Payment Amount to the Administrative Agent for the benefit of the Lenders….” (R. 335; A258).

Thus, Section 4 does not even remotely, as the Court states, confer a “right to pursue default remedies” on the Administrative Agent. Rather, by merely directing that payment be made to the Administrative Agent, Section 4 is entirely consistent with this well-known fact about syndicated credits: “The whole thrust of the relationship between agent banks and participants is to make the agent’s task one of a mere collector and conduit.” John O’Sullivan, The Roles of Managers and Agents in Syndicated Loans, 3 J. Banking & Fin. Law & Prac. 162, 183 (Sept. 1992); see also Joseph J. Norton, Int’l Syndicated Lender: The Legal Context for Economic Devel. in Latin America, 2-Sum. NAFTA: L. & Bus. Rev. Am. 21, 41 (1996) (“[S]yndicate members themselves are generally not willing to delegate overly broad discretionary management functions to the agent bank. Thus, the agent bank’s functions are normally defined precisely and are narrow in scope.”).

III. The Court confused the supermajority’s ability to control acceleration with the separate issue of an individual bank’s right to sue for its share of an overdue payment.

Equally disturbing is that the Court’s construction of Credit Agreement Section 8.3 confuses the supermajority’s ability to control acceleration with the separate issue of an individual bank’s enforcement rights after the loan has become due. Again, it is a basic truism of syndicated lending that once amounts have become due under the loan agreement, whether by acceleration or otherwise, “each bank is free to make its own decision about enforcing its claim for amounts owed to it.” Buccheit, supra, at 15. Thus, once the loan becomes due, it is “considered to be inappropriate to restrict an individual lender from its right to sue for its debt.” Russell, supra, 27 Int’l Law. at 423.[1]

The Aladdin Credit Agreement embodies these fundamental principles. Section 8.2, under which the loans are automatically accelerated in the event of the borrower’s bankruptcy (which is what happened here), does not provide for any enforcement action by the Administrative Agent. For an event of default other than the borrower’s bankruptcy, Section 8.3 gives the supermajority control over the decision whether to accelerate the loan. (R. 265; A211). Through the ability to control whether to accelerate for a default short of the borrower’s bankruptcy, the Required Lenders can prevent a single lender from acting precipitously at a point when the borrower is still viable. But once the loans have been accelerated, the supermajority’s control ends, and each Lender is indisputably free to individually enforce its loan against the debtor and to take one or more of the actions listed in Section 8.3(a)-(k). See Russell, supra, 27 Int’l Law. at 423 (explaining that a lender’s right to sue comes into effect after the majority lenders have agreed to act on a default).

The wording of Section 8.3 expressly confirms that both the Administrative Agent and the individual Lenders have the right to commence the enforcement actions listed in subsections (a)-(k). For example, Section 8.3(e) authorizes “the Lenders,” not the Administrative Agent, to “take and hold possession of any portion of the Main Project” and requires that the sums expended in doing so “be repaid by the Borrower to the Lender,” not the Administrative Agent. (R. 266; A212) (emphasis added). Similarly, Section 8.3(c) authorizes the defense of an action brought against “the Lenders.” (R. 266; A212). Plainly, an individual lender retains the right to appear in and defend against a lawsuit brought against it. Finally, the concluding paragraph of Section 8.3 makes it crystal clear that the Credit Agreement does not grant the Agent the exclusive right to take any of the listed enforcement actions: “The Administrative Agent or the Lenders” may at any time “discontinue any action or remedy commenced by it or them, as the case may be….” (R. 267; A213).[2]

Beal’s reading of Section 8.3 in accordance with its plain language does not, as the Court concludes, render the section meaningless. As explained above, either the Administrative Agent or any Lender may commence one or more of the enforcement actions listed in Section 8.3(a)-(k). The Administrative Agent will do so if directed to by 66^2/3% of the Lenders, even though up to 33^1/3% of the Lenders might be opposed. Once the supermajority directs the Agent to commence an enforcement action, then under Credit Agreement Section 9.1, all of the Lenders, even those opposing the action, must reimburse the Agent on a pro rata basis for the expenses associated with the enforcement action. (R. 268; A214). In other words, the purpose behind empowering the Required Lenders to direct the Agent to take the enforcement actions listed in Section 8.3(a)-(k) is to provide a mandatory cost-spreading mechanism for enforcement actions deemed advisable by the vast majority of lenders, not to vest the Required Lenders with the power to prevent an individual lender from bringing an enforcement action. See Russell, supra, 27 Int’l Law. at 423 (“to prohibit an individual lender from the right to sue … is to disenfranchise a lender from an important individual right.”).

If Section 8.3 can only be construed to mean that the Administrative Agent has the sole power to bring one of the listed enforcement actions, then how can that reading be reconciled with the last two sentences of Section 9.1? There, the Credit Agreement provides that the Administrative Agent is not required to take any enforcement action “unless it is indemnified to its satisfaction.” (R. 268; A214). If it is not indemnified to its satisfaction, the Administrative Agent “may,” but is not required to, call for additional indemnification. Under the Court’s reading of Section 8.3, the Administrative Agent, if it disagrees with the Required Lenders’ decision to commence enforcement proceedings, can stymie all enforcement efforts by simply declining to bring an action on the grounds that it is not indemnified “to its satisfaction,” a subjective matter left to “the Administrative Agent’s determination.” (R. 268; A214).[3] Similarly, an overly timid Agent can effectively hold a gun to the Lenders’ heads by refusing to take any enforcement action unless they indemnify the Agent to its subjective satisfaction. Clearly, that is not what the parties intended.

IV. The Court erred in concluding that the Administrative Agent was given a broad grant of power.

The Court concluded that the parties “contemplated unified actions by the Administrative Agent” because the “Agent does not perform merely mechanical or technical functions but rather has a broad grant of power.” (Op. at 14). That surprising conclusion is both inaccurate and directly contrary to the traditional understanding of an Administrative Agent’s role. The grant of power to the Administrative Agent in this case is no broader than the grant of power to an agent in any other syndicate. For example, to support its conclusion that the Agent was granted broad powers, the Court observes: “The Agent may, among other things, set rates of interest and review the Borrower’s financial statements.” (Op. at 14). But the general administrative duties of any agent bank will normally include those tasks. Norton, supra, 2-Sum. NAFTA: L. & Bus. Rev. Am. at 42 (“The general administrative duties of the agent bank will normally include … determining the interest rate … [and] the power to call for … other information so as to monitor the progress of the borrower…”).

In fact, the Administrative Agent’s authority in this case is far more limited than that which would be granted to an agent with broad powers. A syndicated loan agreement granting expansive authority to the agent bank would give it the power to “accelerate at its own initiative,” limited only by a clause enabling a “majority or supermajority … of the syndicate members” to subsequently “override any enforcement or other action taken or proposed by the agent bank….” Id. at 43. Here, before the Administrative Agent can either accelerate or commence any enforcement action, it must first obtain the consent of the Required Lenders.[4] And in Section 9.1 of the Credit Agreement, the parties granted the Administrative Agent only the powers “specifically delegated” to it. (R. 268; A214).

V. The Court erred in holding that the unanimous consent clause does not grant Beal the right to individually enforce the Keep-Well.

The Court erred in concluding that Credit Agreement Section 10.1(f) was not implicated by the decision to effectively release the Sommer Trust of its obligations to Beal under the Keep-Well. The Court held that “the Settlement did not release the Trust of its obligations by amending, modifying or waiving any provision in the agreements.” (Op. at 17). The Court’s reading of Section 10.1(f) is far too narrow. See Penthouse Int’l, Ltd. v. Dominion Fed. Sav. & Loan Ass’n, 855 F.2d 963, 981 (2d Cir. 1988). When a loan agreement requires that a guaranty not be amended, modified, or waived so as to release the guarantor without the consent of all the lenders, a supermajority of lenders cannot waive or alter material terms “‘or otherwise … diminish or discharge the obligation of the third person[.]’” Id. (emphasis added). In the hypertechnical sense, the Required Lenders may not have amended, modified, or waived any provision in the Keep-Well, but clearly they “otherwise diminished or discharged” the Sponsors’ obligations, and under a fair reading of Credit Agreement Section 10.1(f) and Keep-Well Section 7, they were not empowered to do so.

VI. The Court’s collective-action reasoning is contrary to actual practice in the syndicated loan industry.

The Court noted at least seven times that the Credit Agreement and the Keep-Well Agreement evidenced the intention of the parties to only permit the lenders to act collectively through the administrative agent. The Court presumably also believes that when the settlement decision was made, the lenders in this case and in syndicated debt transactions like this one would meet, discuss the merits of competing proposals and reach reasoned decisions after a lively debate.

Unfortunately, this rarely, if ever, happens and did not happen here. Instead, the lenders are typically presented with proposals from the administrative agent, lead lenders or ad hoc committees on an individual basis with no opportunity for discussion with other lenders - the identity of which is usually not known by each lender. In the case at hand, the settlement proposal with the Sommer Trust was not the product of group decision-making. The lenders were approached individually and given an opportunity to vote up or down in isolation from the other lenders. No group decision was made. The lenders were serially polled and the final tally favored the settlement. This flawed process hardly reflects the kind of collective decision that should strip the one lender that did not vote for the settlement of its contractual right to enforce the Keep-Well Agreement.

The Credit Agreement, however, accurately reflects the “real world” process of lender decision-making in large syndicated debt transactions like this one at Section 9.6:

“Each Lender also acknowledges that it will, independently of the Administrative Agent and each other Lender, and based on documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document.”

(R.270; A216) (emphasis supplied).

The lenders are contractually required to conduct their own due diligence review and then make decisions in a vacuum apart from their fellow co-lenders. The Credit Agreement expressly calls for such individual lender decision-making and does not permit the kind of group-think that purports to justify stripping the minority lenders of their contractual enforcement rights in this case.

Note too that Section 9.6 of the Credit Agreement assumes that lenders have rights and privileges under both the Credit Agreement and the Keep-Well Agreement that they may choose to exercise or not exercise following their own independent investigations. This Court, however, reads around these terms and concluded that no lenders have such rights and that all lender action and loan enforcement must be collectively taken through the administrative agent following a group decision-making process that does not exist.

VII. The Court’s ruling deprives Beal of its substantive due process rights.

Finally, the Court’s refusal to enforce the “enforceable by each lender” provision in the Keep-Well and Section 10.1(f) of the Credit Agreement amounts to a denial of Beal’s substantive due process rights under the United States Constitution. “[S]ubstantive due process provides that, irrespective of the constitutional sufficiency of the processes afforded, government may not deprive individuals of fundamental rights unless the action is necessary and animated by a compelling purpose.” Bartell v. Lohiser, 215 F.3d 550, 557-58 (6th Cir. 2000). A party has a fundamental right not to be deprived of its rights under a contract, and there is no compelling reason to deprive Beal of its right to individually enforce the Keep-Well agreement.

CONCLUSION

This is the default rule for syndicated credits: “If a disagreement among lenders were to arise as to a course of action to follow, absent an express agreement to the contrary, individual lenders separately could pursue remedies against the borrower.” Warren J. Bernstein, Multiple Lender Transactions, 523 PLI/Real 355, 369 (Jan.-March 2006) (emphasis added). The Court acknowledges that here there is no express provision precluding an individual lender from pursuing its remedies, and that alone compels a finding that Beal may individually enforce the Keep-Well. But instead of reaching that result, the Court reverses the usual presumption in favor of individual enforcement by holding that Beal cannot enforce the Keep-Well because “the parties decided not to include a specific statement that each Lender individually may enforce its rights in the event of default.” (Op. at 19). Compounding the Court’s error is the inescapable fact that the parties did include a specific statement that the Keep-Well would be enforceable by “each Lender.”

The Court admonishes that “parties should expressly state their intention[s]” regarding a lender’s individual right to enforce the loan security (Op. at 20, n. 3), but if a clause providing that a guaranty is enforceable by “each Lender” is not sufficient, then how can parties ever comply with the Court’s directive? In any event, as Judge Smith observed, “[f]airness to these parties, and the confidence with which future parties enter similar transactions would be

better served by reading the agreements as they are written.” The Court should grant this motion, vacate its March 22, 2007 decision, and render judgment for Plaintiff-Appellant.

Dated:	New York, New York
	April 19, 2007

Respectfully submitted,

Schulte Roth & Zabel LLP

By:__________________________________

Michael L. Cook

Curtis J. Weidler

919 Third Avenue

New York, New York 10022

(212) 756-2000

Robert B. Gilbreath

Hawkins, Parnell

& Thackston, LLP

4514 Cole Avenue, Suite 500

Dallas, Texas 75205-5449

(214) 780-5114

Attorneys for Plaintiff-Appellant

[1] Russell also observes: "It may be that the right to sue for the debt is a right without any substance in the case of a secured lending if the security has been granted to a security agent for the benefit of all lenders. In these circumstances, the security arrangement will usually provide that the agent is only entitled to act on the instructions of the majority of the beneficiaries of the security." Id. Here, the Keep-Well was not granted to the Administrative Agent for the benefit of all the Lenders, it was granted "in favor of each of the Administrative Agent and the Lenders." (R. 328; A251) (emphasis added). And the Keep-Well does not provide that it may only be enforced by the Administrative Agent on the instructions of the Required Lenders. On the contrary, it provides that it is enforceable by "each Lender."

[2] This language is consistent with Credit Agreement Section 9.6, in which each Lender reserved the right to "continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document. (R. 270; A216).

[3] This is not a farfetched scenario: "Even though the agent bank acts on behalf of the syndicate banks, it is normally selected by the borrower." Sandra Schnitzer Stern, Structuring & Drafting Commercial Loan Agreements ¶ 11.04[2] (A.S. Pratt & Sons 2006).

[4] Again, the reason for this requirement is that when the Administrative Agent commences an enforcement action, all of the Lenders must foot the bill for the enforcement action. It would be inappropriate to impose that expense on every Lender if only a handful were in favor of the enforcement action. Under those circumstances, the Lenders favoring enforcement should be required to foot the bill themselves, and that is exactly what Beal has done.

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