Posts By: Gregory Cokinos

Chance Decker Joins Cokinos | Young as a Principal

Cokinos | Young is thrilled to welcome Chance Decker as a Principal to the firm. Initially, Chance will split his time between the Houston and San Antonio offices. At the end of the spring semester, Chance and his wife, Lauren, will move their family to San Antonio, where Chance grew up, where they will permanently reside.

“Chance is a highly skilled and experienced trial attorney in high-stakes disputes in the oil and gas, pipe and steel distribution, construction and real estate industries,” said Gregory Cokinos, President & CEO of Cokinos | Young. “We are excited to have Chance join our Team and he will be a great addition to further broadening and strengthening our capabilities in these sectors.” 

Decker’s practice focuses on Commercial Litigation, Commercial Real Estate, Construction Law, Labor & Employment Law, and Energy Litigation. 

“Chance’s arrival will add depth to our commercial litigation footprint throughout the State of Texas,” said Principal Stephanie O’Rourke, of the firm’s San Antonio office. “His addition will enhance our renowned expertise in complex, high-profile disputes.”

 

Honoring Our Friend, Michael B. Lee

It is with great sadness and heavy hearts that we announce the passing of our dear friend and colleague, Michael B. Lee. Michael passed away on Wednesday, January 27th.

Michael is a Houston native and received his undergrad and law degree from the University of Houston. He then entered the U.S. Army where he proudly served his country during the Vietnam War. He served as a member of U.S. Army Intelligence as a Prisoner of War Interrogator until 1970. He will be honored by many for his dedication to those he served throughout the years.

Michael, known as “G-Daddy” by his granddaughters, loved his family and it only took a short conversation to discover just how much they mean to him. He also was a big fan of baseball, particularly our Astros, and loved everything about the game.

Michael was a loyal friend and you would never question his motives. He wanted the best for the firm and everyone, a trait often lost in the business world. Michael loved to help others, so much so that when he “retired” a few years ago, after a few months of the retired life, he asked if he could come back to work on a part-time basis. It seems he greatly missed being involved and helping others.

Michael was exceptionally good at mentoring our young lawyers. He had an enormous capacity for friendship along with an immense wealth of knowledge and life experience that he was always happy to draw upon for the benefit of others, particularly our young lawyers. Although many of us knew Michael for decades before joining the firm, he was with Cokinos | Young for 12 years. He was a good soul and will be greatly missed.

Please keep Michael’s family in your thoughts and prayers as they go through this difficult time.
Thank you, Michael, for being you.

Going Virtual: A “How-To” Guide on Remote Meetings

As the world continues to operate remotely in 2021, businesses continue to adjust and evolve their corporate processes to accommodate COVID-19 gathering restrictions. If you or your company find yourselves planning your upcoming meetings to be remote (whether shareholder or director meetings for Texas corporations, or member or manager meetings for Texas LLCs), we recommend keeping the following checklist in mind as your company accommodates virtual meetings.

Check your Governing Documents

The Texas Business Organizations Code (the “TBOC”) allows Texas businesses to hold meetings by using a conference telephone or similar communications equipment, or another electronic communications system, including videoconferencing technology or the Internet, or any combination of these means, subject to the governing documents of the company (e.g., bylaws, company agreements, certificates of formation; collectively, the “Governing Documents”). If your company’s Governing Documents are silent on remote meetings, the TBOC contains certain rules that will apply.

Remote Meeting Requirements

In order to hold a remote meeting, a Texas company must ensure the following requirements are met:[1]

  • The meeting must be held in accordance with your company’s Governing Documents. In other words, corporate formalities required by the Governing Documents must still be observed.
  • The meeting notice must be in writing, timely given, and state:
    • the date and time of the meeting;
    • the form of communications system to be used for the meeting; and
    • the means of accessing such communications system.
  • The telephone or other equipment or system to be used for the remote meeting must permit each person participating in the meeting to communicate with all other persons participating in the meeting.
  • If voting is to take place at the meeting, the Company must:
    • implement reasonable measures to verify that every person voting by means of remote communications is sufficiently identified; and
    • keep a record of any vote or other action taken.
  • In addition to the above, the following requirements apply to Texas corporations only:
    • The meeting notice for a remote shareholder meeting must contain information on how to access the list of shareholders entitled to vote at the meeting.[2]
    • The list of shareholders entitled to vote must be open to inspection by shareholders during a remote shareholder meeting on a reasonably accessible electronic network.[3]

This checklist of requirements does not apply to a general partnership (“GP”) or limited partnership (“LP”) except to the extent its governing documents specify.[4] Instead, a Texas GP or LP should look to its partnership agreement for guidance on remote meetings.

If one thing is clear as we dive into the New Year, it’s that not only is virtual is the norm, but it’s likely here to stay. Evolving your company’s corporate processes to accommodate virtual meetings can be complicated. The checklist above is not an exhaustive list of things your company should consider in advance of your annual meetings. If you have questions on how to integrate this checklist into your company’s existing practices, or if you have specific questions about these requirements or other aspects of corporate governance, Cokinos | Young STRUCTURE, the transactional team of Cokinos | Young, would be happy to discuss your individual needs and questions further.

[1] Tex. Bus. Org. Code § 6.002.

[2] Tex. Bus. Org. Code § 21.353.

[3] Tex. Bus. Org. Code § 21.354.

[4] Tex. Bus. Org. Code § 6.301.

Tiffany Melchers

 

Cokinos | Young Elevates Three Attorneys to Principal

Cokinos | Young is pleased to announce that three attorneys in the Houston office have been promoted to Principal in recognition of their commitment to their clients and the firm, hard work and dedication. Congratulations Chris Wan, Matt Thompson and James Richards! We are proud to have you all as part of our Cokinos | Young family.

     

6th Court of Appeals Confirms Trial Court Summary Judgment

Dallas / Fort Worth – Cokinos | Young Attorneys Ryan Allen and Anderson Sessions prevailed on appeal defending the successful summary judgment win of BenCo Machinery, LLC’s breach of contract claims in which the trial court granted full relief, including more than 250K in contract damages and attorney’s fees. On appeal, BenCo defended the trial court’s summary judgment on several points of error, including striking inadmissible summary judgment evidence and applying well-settled principles of Texas contract law.  

In affirming the trial court’s rulings, the Sixth Court of Appeals, Texarkana, concluded BenCo established summary judgment as a matter of law on all grounds argued in June 2020. In relevant part, the Court agreed BenCo had satisfied its burden of proof to show the parties reached a ‘meeting of the minds’ on all essential contract terms, thereby forming a valid, enforceable contract, noting BenCo’s argument that:

“While the delivery of 100 frac tanks was a material term of the agreement, how they were to get to BenCo was not. In other words, by making the offer in the Purchase Order, Ho agreed that BenCo would be provided with delivery of 100 frac tanks, whether by Ho, Nicholas, or someone else, and such delivery by any party would have satisfied the obligations in the Purchase Order to provide the tanks. As a result, a meeting of the minds as to whether Ho or Nicholas was to deliver the tanks was not required. Thus, we conclude that, as a matter of law, BenCo established the existence of a valid contract as memorialized in the Purchase Order.”

The Court affirmed all relief granted in the trial court, and further awarded BenCo all costs of appeal. Enclosed is a copy of the Court’s Judgment and Memorandum Opinion. 

Huge win for Cokinos client, BenCo Machinery, LLC!

On Duty: The Duties of Management in a Pandemic

It is no secret that COVID-19 has been difficult for businesses, both in terms of financial health and longevity. In addition to keeping your business afloat, what else should you consider “essential” during this time of economic volatility?  Your fiduciary duties. Whether a director, an officer, or a manager, if you are part of an entity’s management, you owe fiduciary duties to the entity itself and its owners, and, in times of severe financial distress, these duties may in fact be owed to additional third parties. This article provides a recap of duties and suggestions on how you, as a member of management, can protect yourself while also furthering the best interests of the company. 

Fiduciary Duties of Management

As a general principle, if you are a director, officer, or manager (collectively, “Management”), you owe duties of care and loyalty to the corporation or company (collectively, the “Company”) and its shareholders, partners, or members (collectively, “Stakeholders”). Depending on the type of entity involved—a corporation, a limited liability company, or otherwise—the application of these duties may be more nuanced, but the principles are largely the same. 

  • Duty of Care: requires that you act in the same manner as a reasonably prudent person in your position would act when making decisions for the Company. This means that you must be informed of all material information prior to making any decision. 
  • Duty of Loyalty: requires that you act in good faith and in the best interests of the Company and its Stakeholders and avoid conflicts of interest through self-dealing or personal gain. 

The duties you owe to the Company and its Stakeholders could eventually shift to include other third parties—creditors—if your Company becomes insolvent. It is important to be mindful of your Company’s financial performance and seek the guidance of experienced counsel to better understand your Company’s solvency and prepare strategies to minimize the risk of breach of fiduciary duties.

Keep These on Your “To-Do” List

COVID-19 presents a unique set of challenges, and the following “best practices”—should remain on your “to-do” list in all circumstances:

  • Maintain the Company’s corporate formalities. This is not a time to skimp on the process. You should strive to be available and participating in meetings and ensure the corporate books and records, including financials, are accurate and up to date. 
  • Make informed, transparent decisions. You should continue to do the necessary due diligence and information gathering prior to making corporate decisions. All decisions should be made by fully informed Management in good faith and in the best interests of the Company, with particular emphasis on avoiding conflicts of interest. 
  • Review terms of major contracts. You should review major contracts, especially those affecting finances and supply chain, to assess whether current trends could lead to a breach of representations or warranties. You should also review force majeure clauses (1) in existing contracts to assess whether any relief or protections are available and (2) in future contracts to ensure adequate protection of your Company’s interests. 

Understanding Your Exposure

Following the best practices above may help reduce the risk of litigation and limit challenges to Management decisions. You should be familiar with your Company’s governing documents to better understand your risk exposure. 

You should also examine your director and officer (“D&O”) insurance coverage and be aware of the type and limits of your Company’s policy. If you do not have D&O coverage, consider whether promptly procuring such a policy is feasible and makes sense from a business perspective. Despite the uncertainties, it is essential that each member of Management remain vigilant in fulfilling his or her fiduciary duties—during COVID-19 and beyond. If you have specific questions about the topics discussed in this article or need guidance on how to implement these best practices in your company, Cokinos | Young STRUCTURE, the transactional team of Cokinos | Young, would be happy to discuss and help tailor a plan that fits your company’s individual needs.

     

alec herzog - construction attorney
Alec Herzog
Tiffany M. Melchers

Cokinos | Young Holiday Video

We put together a short video to wish you a Merry Christmas and Happy Holidays. Click below to watch and enjoy. We wish you and yours a Merry Christmas and Happy Holidays.

Cokinos | Young Welcomes Three New Attorneys to our DFW Office

Cokinos | Young is thrilled to announce three attorneys, Ryan Allen, Anderson Sessions and Sam Crecelius, have joined our Dallas/Fort Worth office, further expanding our construction and commercial litigation capabilities throughout the State of Texas. 

“We are pleased that Ryan, Anderson and Sam have joined our office. Each of them brings a high degree of skill, particularly in construction and commercial litigation, and will be great contributors to the firm and the service of our clients” – Pat Wielinski

Ryan Allen 

Ryan joins the firm with 17 years’ experience in business law and business litigation, including construction.  Ryan represents a broad variety of clients from individuals to start-ups and Fortune 500 corporations. He also works with physicians, physician groups, ambulatory surgical centers, pharmacies and other medical service providers. Ryan acts as a strategic advisor to swiftly and effectively implement the right business solutions for his clients. 

Ryan graduated from the University of Oklahoma in 2000 and from the University of Oklahoma College of Law in 2003. He is admitted to practice in Texas and Oklahoma. 


Anderson Sessions

Anderson Sessions is a business trial lawyer whose practice focuses on resolving a broad array of complex commercial disputes. As an experienced advocate in and out of the courtroom, Anderson is able to deliver strategic legal solutions to clients in all aspects of the dispute resolution process in matters involving breaches of contract, deceptive trade practices, common law and securities fraud, unfair competition and trade-secret litigation, partnership disputes, breaches of fiduciary duty, and other business torts. Anderson also has experience counseling oil and gas and energy-related companies in regulatory matters involving the Texas Railroad Commission, Texas General Land Office, and Texas Commission on Environmental Quality. 

Anderson graduated from Baylor University in 2010 and from Baylor University School of Law in 2013.

Read Full Bio Here


Sam Crecelius

Sam Crecelius focuses on representing clients in all phases of litigation, including mediation, trial, and appeals.  A decorated Army combat veteran, Sam knows the value of hard work, discipline, and perseverance in the face of adversity, and he applies those values to each case he handles.  His experience includes practice in construction defect, creditors rights and premises liability litigation.  As a litigator, Sam leverages his real-world experience to obtain a favorable outcome for clients.

Sam graduated from University of Dallas in 2002 and Texas A&M University School of Law in 2017. 

Read Full Bio Here

Please contact us for further information as to developments in the DFW office. 

M&A Transactions Involving PPP Borrowers: Practical Experience Under the SBA’s “Change of Ownership” Guidelines

The Paycheck Protection Program (“PPP”) created under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020, as a response to the COVID-19 pandemic. The PPP provided small businesses financial assistance in the form of a loan that could be forgiven if the PPP borrower utilizes the loan proceeds in accordance with the CARES Act and guidance issued by the Small Business Administration (the “SBA”). The SBA recently issued long-awaited guidance to address situations where a PPP borrower undergoes a “change of ownership.” The new guidance represents a welcome simplification and clarification of the SBA rules and procedures for PPP borrowers seeking to undertake such transactions, and, in many cases, eliminates the requirement of SBA approval. After several weeks of experience under the new guidance, however, it has become clear that some questions remain unanswered, both in the M&A context and with respect to internal reorganizations of PPP borrowers.       

Background

PPP loans are considered part of the SBA’s existing “7(a)” loan program and are therefore subject to the same rules and guidelines that apply toward 7(a) loans generally. The SBA’s existing 7(a) guidelines require that a 7(a) borrower obtain SBA approval to undergo a “change in ownership” within 12 months of the final disbursement of such loan. When PPP borrowers began contemplating “change of ownership” transactions, the SBA recognized the need to issue formal guidance to address when, and if, SBA and/or lender approval is needed for a PPP borrower to undertake a “change of ownership” transaction.  

New SBA guidance on changes of ownership

On October 2, 2020, the SBA issued Procedural Notice 5000-20057 (the “Procedural Notice”), which provided PPP borrowers with the guidance and procedures necessary to carry out “change of ownership” transactions.

Definition of “change of ownership”

 The Procedural Notice defines a “change of ownership” of a PPP borrower as any of the following events:

  • at least 20% of the common stock or other ownership interest (which, for brevity, we will refer to as “equity”) of the PPP borrower is sold or transferred, whether in one or more transactions, including to an affiliate or existing owner of the borrower;
  • the borrower sells or otherwise transfers at least 50% of its assets (measured by fair market value), whether in one or more transactions; or
  • the borrower is merged with, or into, another entity.

The “change of ownership” definition is quite broad in several respects:

All sales or transfers since the original loan disbursement will be aggregated for purposes of deciding whether the 20% or 50% thresholds have been met. 

  • (Special rules apply, however, in the case of a publicly-traded borrower.)
  • The term “transferred” is broad and presumably includes such non-sale transfers as exchanges and gifts.
  • At least with respect to sales or transfers of equity, the fact that the transferee is an affiliate or existing owner of the borrower is irrelevant. Transfers between existing owners, for example, are covered by the definition.
  • In the case of mergers, the definition applies to the merger of a borrower “with” another entity as well as “into” another entity. In other words, it applies even if the borrower is the surviving entity of the merger.

No requirements if PPP loan is fully satisfied

If the PPP loan has been fully satisfied, either through forgiveness, repayment, or a combination of the two, the requirements of the Procedural Notice do not apply.

Safe-harbor guidelines

The principal purpose of the Procedural Notice is to establish certain safe-harbor guidelines that permit a PPP borrower to engage in a “change of ownership” transaction without obtaining approval from the SBA for the transaction. 

This is important because, as discussed in the next section, SBA approval may take at least 60 days and potentially result in the imposition of onerous requirements or even disapproval.

 Under the Procedural Notice, SBA approval is not required where: 

  • less than 50% of the equity of the PPP borrower is being transferred; 
  • 50% or more of the equity of the PPP borrower is being transferred, and the PPP borrower takes the following actions: (a) it completes a forgiveness application and supporting documentation, reflecting its use of all the PPP loan proceeds, and submits it to the PPP lender; and (b) it establishes an interest-bearing escrow account controlled by the PPP lender with funds equal to the outstanding balance of the PPP loan, providing for disbursement, after completion of the forgiveness process, first to repay any remaining PPP loan balance plus interest; or
  • 50% or more of the PPP borrower’s assets are being transferred, and the PPP borrower takes the two actions described in paragraph (2) above.  

SBA approval required if safe-harbor guidelines are not satisfied

If a “change of ownership” transaction does not satisfy one of the safe-harbor guidelines described above, prior SBA approval of the transaction is required, and the PPP lender may not unilaterally approve the transaction. To obtain SBA approval, the PPP lender must submit a request to the appropriate SBA Loan Servicing Center along with additional information and documentation as specified in the Procedural Notice. Once properly submitted, the SBA states that it will deliver its determination within 60 days. As a practical matter, however, it is possible the actual period may be longer. In addition, even if approval is given, the SBA reserves the right in the Procedural Notice to impose “additional risk mitigation measures” as a condition of its approval, in addition to ones specified in the Procedural Notice.  

General requirements 

Regardless of the type of “change of ownership” transaction, the PPP borrower will remain responsible for (i) the performance of all obligations under its PPP loan, (ii) the certifications made in connection with the PPP loan application (including the certification of economic necessity), and (iii) compliance with all other applicable PPP requirements.

Loan documents

PPP borrowers that are contemplating a “change of ownership” transaction should also consult their PPP loan documents for any additional requirements that must be satisfied.

Issues in implementation of the Procedural Notice

Now that the Procedural Notice has been in effect for well over a month, other M&A attorneys and we are beginning to see different approaches being taken by PPP lenders and their counsel in how the Procedural Notice should be implemented in practice. A few issues that we have personally encountered are highlighted below:

  • Whether interest must also be escrowed. As discussed above, an interest-bearing escrow account controlled by the PPP lender must be established with funds equal to the outstanding balance of the PPP loan. However, the Procedural Notice does not contain an express requirement that interest on the PPP loan amount be escrowed as well. (As a reminder, interest accrues on the PPP loan from the loan disbursement but is not payable for any amounts that are forgiven). We are aware of at least one lender that has required PPP borrowers to escrow the accrued interest on the PPP loan amount in addition to the PPP loan amount itself.
  • Whether PPP lender approval is required. The Procedural Notice does not expressly require that the PPP lender grant its approval in the event SBA approval is not required in connection with a “change of ownership” transaction. Working through these types of transactions, we have seen at least one lender resist granting a formal approval to a “change of ownership’ transaction, agreeing instead only to waive specific events of default under the PPP loan documents. We believe the better practice is for the PPP lender to expressly grant approval.
  • Internal reorganizations. As discussed above, the Procedural Notice applies to equity transfers to affiliates and existing owners of the borrower, and to any merger engaged in by a PPP borrower (even if it is the surviving entity). Many types of internal company reorganizations or restructurings may involve such transfers or mergers and therefore literally constitute a “change of ownership” under the Procedural Notice, even though no third party is involved. Therefore, contemplated internal reorganizations may need to be postponed by a company that is also a PPP borrower.  

If a company has a PPP loan and is considering a “change of ownership” transaction, the Cokinos | Young STRUCTURE, the transactional team of Cokinos | Young (principal office in Houston, Texas), under the leadership of Tiffany Melchers, will be happy to discuss the specific transaction in connection with the issues raised in this white paper. With first-hand experience representing PPP borrowers through various “change of ownership” transactions, we are well suited to continue representing PPP borrowers in transactions of this type.

Alec C. Herzog
Tiffany M. Melchers

Cokinos | Young Nationally Ranked Tier 1 Law Firm

Cokinos | Young is pleased to announce that the firm has been ranked as a “Best Law Firm” by U.S. News and Best Lawyers®. Firms included in the 2021 “Best Law Firms” list are recognized for professional excellence with persistently impressive ratings from clients and peers. Achieving a Tier 1 ranking signals a unique combination of quality law practice and breadth of legal expertise.

us news best law firms - 2021

To be eligible for a ranking, a firm must have one lawyer listed in The Best Lawyers in America, which recognizes the top four percent of practicing attorneys in the United States. Cokinos | Young has fourteen lawyers listed in The Best Lawyers in America – Gregory Cokinos, Stephanie Cook, Stanley Curry, Jay FarwellParker Fauntleroy, Patrick Garner, Charles Getman, John GraysonDana Livingston, Shelly Masters, Stephanie O’Rourke, Roger Townsend, John Warren, and Patrick Wielinski. Over 13,000 attorneys provided more than 1,000,000 law firm assessments, and over 7,500 clients provided more than 65,000 evaluations.

ABOUT “BEST LAW FIRMS” The U.S. News – Best Lawyers® “Best Law Firms” rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process. To be eligible for a ranking, a law firm must have at least one lawyer listed in the 24th Edition of The Best Lawyers in America list for that particular location and specialty.

ABOUT U.S. NEWS & WORLD REPORT U.S. News & World Report is a digital news and information company that empowers people to make better, more informed decisions about important issues affecting their lives. Focusing on Education, Health, Personal Finance, Travel, Cars, and News & Opinion, USNews.com provides consumer advice, rankings, news, and analysis to serve people making complex decisions throughout all stages of life. More than 37 million people visit USNews.com each month for research and guidance. Founded in 1933, U.S. News is headquartered in Washington, D.C.

ABOUT BEST LAWYERS Best Lawyers is the oldest and most respected attorney ranking service in the world. For more than 30 years, Best Lawyers has assisted those in need of legal services to identify the attorneys best qualified to represent them in distant jurisdictions or unfamiliar specialties. Best Lawyers lists are published in leading local, regional, and national publications across the globe. The Best Lawyers in America list recognizes the very best lawyers in each practice area and metropolitan region in the country.

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