The Negative Pledge Agreement is a crucial document in New Zealand's commercial lending landscape, typically used in situations where a lender provides unsecured financing but seeks protection against the borrower creating security interests in favor of other creditors. This agreement is particularly common in corporate lending, syndicated facilities, and bond issuances. The document details the scope of prohibited security arrangements, permitted exceptions, and consequences of breach, all within the context of New Zealand law and market practice. The agreement must comply with the Personal Property Securities Act 1999 and other relevant New Zealand legislation, while also considering practical aspects of enforcement and monitoring. It's especially relevant when lenders want to maintain the borrower's asset base available for unsecured creditors without taking formal security.
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1. Parties: Identifies and defines the parties to the agreement, typically the borrower/pledgor and the lender/beneficiary
2. Background: Sets out the context of the agreement, including reference to any related facility agreements or other financing arrangements
3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes interpretation principles
4. Negative Pledge Covenant: The core provision where the pledgor agrees not to create or permit the creation of any security interests over its assets
5. Permitted Security: Defines exceptions to the negative pledge covenant, listing types of security interests that are permitted
6. Representations and Warranties: Pledgor's confirmations regarding its capacity, authority, and existing security interests
7. Duration: Specifies the period during which the negative pledge remains in effect
8. Events of Default: Lists circumstances that constitute a breach of the agreement
9. Remedies: Sets out the rights and remedies available to the beneficiary in case of breach
10. Governing Law and Jurisdiction: Specifies New Zealand law as governing law and establishes jurisdiction for disputes
1. Financial Covenants: Additional financial obligations of the pledgor, used when stricter financial control is required
2. Information Undertakings: Obligations to provide financial and other information, included for more complex arrangements
3. Security Release Provisions: Procedures for releasing security interests, included when existing security needs to be released
4. Cross-Default: Provisions linking defaults under other agreements, used when there are multiple related agreements
5. Further Assurance: Obligations to execute additional documents or take further steps, included for complex transactions
6. Assignment and Transfer: Rules regarding transfer of rights under the agreement, included when transferability is important
7. Costs and Expenses: Allocation of transaction costs and enforcement expenses, included for larger transactions
1. Schedule 1 - Existing Security Interests: Lists all existing security interests that are permitted to remain in place
2. Schedule 2 - Affected Assets: Identifies the assets or classes of assets subject to the negative pledge
3. Schedule 3 - Permitted Security Interest Categories: Detailed list and description of categories of security interests that are permitted exceptions
4. Schedule 4 - Form of Compliance Certificate: Standard form for periodic confirmation of compliance with the agreement
5. Appendix A - Related Party Details: Lists related entities or subsidiaries affected by the negative pledge
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