Question
20. XYZ, Inc. is entering into a loan agreement to borrow $100 million from a syndicate of banks. The loan agreement contains a provision that
20. XYZ, Inc. is entering into a loan agreement to borrow $100 million from a syndicate of banks. The loan
agreement contains a provision that reads: "The Borrower shall pay or cause to be paid, prior to becoming
past due, all taxes, charges, and assessments and all other lawful claims required to be paid by the
Borrower." This provision is an example of what type of clause?
a. A Representation and Warranty
b. A Negative Covenant
c. An Affirmative Covenant
d. An Event of Default
21. ABC Corporation is a publicly-traded company with over $100,000,000 in revenues. A shareholder who
bought ABC Corporation shares shortly after it had filed its annual report with the SEC sued when his
share value declined by approximately 25% in the two-week period following his purchase. The
shareholder admits, however, that he never read the annual report before the purchase. The suit alleges that
ABC Corporation violated Rule 10b-5 because had failed to disclose in its annual report a pending litigation matter that is estimated by management to result in an adverse judgment of $25,000. What is
ABC Corporation's best argument for why the claim should fail?
a. The omission of the litigation disclosure from the annual report was not material.
b. The shareholder did not rely upon the information in the annual report when making his decision to
purchase the shares.
c. The shareholder did not suffer any economic loss.
d. The omission was not in connection with the purchase or sale of a security.
22. Spiro asks Jay to purchase supplies from a local hardware store to be used in Spiro's business, Builder, Inc.
Spiro tells Jay to charge the supplies to Builder's account. Jay buys the supplies and charges them to the
company's account. A month later Spiro refuses to pay the charges. What is the most likely theory under
which Builder, Inc. will be held liable?
a. Estoppel
b. Inherent Agency Power
c. Actual Authority
d. Apparent Authority
e. Ratification
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