casemark/loan-and-security-agreement

Loan and Security Agreement

Drafts a fully enforceable secured Loan and Security Agreement establishing the lender's perfected security interest, borrower obligations, and enforcement rights for U.S. commercial lending transactions.

Prerequisites

Gather before drafting:

• Term sheet / commitment letter — principal, rate, maturity, fees, borrowing base
• Party documents — formation docs, good standing, board resolutions
• Collateral info — asset schedules, equipment lists (serial numbers), UCC lien searches, title reports
• Financial statements — audited/unaudited, used to set covenant levels
• Due diligence — disclosed litigation, existing liens, material contracts, environmental reports
• Subordination/intercreditor agreements — if junior or senior debt coexists

Quick Start

1. Identify parties and collateral from term sheet
2. Draft granting clause with UCC Art. 9 collateral descriptions
3. Set loan economics (rate, repayment, default rate, prepayment)
4. Build reps, covenants, and default provisions
5. Define perfection steps and file UCC-1s
6. Add governing law, remedies, and boilerplate

Agreement Sections

1. Parties and Recitals

For each party: exact legal name per formation docs, entity type, jurisdiction/date of formation, principal business address, registered agent, authorized signatories per board resolution.

Recitals state: business purpose of financing, existing relationship (if any), and consideration basis (security interest grant in exchange for loan).

2. Loan Terms

• Principal — numerals and words ("Five Million Dollars ($5,000,000.00)")
• Interest — fixed (state rate) or variable (index + spread, floor/ceiling, day count convention actual/360 or actual/365)
• Repayment — interest-only period, amortization schedule, balloon, maturity date
• Default rate — contract rate + 2–5%, subject to usury limits
• Late charge — typically 5% of overdue payment; confirm state law cap
• Prepayment — permitted/prohibited; if permitted: minimum amount, notice period, make-whole or premium formula
• Usury savings clause — auto-reduce charges exceeding maximum lawful rate

3. Security Interest and Collateral

Granting clause: Borrower grants lender a continuing first-priority security interest in all collateral, now owned or hereafter acquired.

UCC Art. 9 collateral categories: accounts, inventory, equipment (list by make/model/serial/location), intellectual property (by registration number), deposit accounts, investment property, real property/fixtures, and all proceeds.

Perfection mechanics:

| Collateral Type | Perfection Method | |---|---| | General personal property | UCC-1 filing (borrower's state of organization) | | Motor vehicles | Certificate of title notation | | Deposit accounts | Control agreement (UCC § 9-104) | | Federally registered IP | USPTO / Copyright Office recordation | | Real property | County recorder filing (mortgage/deed of trust) |

Collateral maintenance: keep in good repair; insure at full replacement value with lender as loss payee and additional insured (A.M. Best A- or better, 30-day cancellation notice); no dispositions except ordinary-course inventory sales; no liens except permitted liens.

4. Representations and Warranties

Required reps: organization/good standing, authority, enforceability, title to collateral (free of liens except permitted), financial statement accuracy (GAAP), litigation disclosure, legal compliance, environmental compliance.

Key rules:

• Reps survive closing; deemed remade on each advance or compliance certificate date
• Apply "material adverse effect" qualifier to operational reps only
• Never qualify organization, authority, title, or enforceability reps

5. Covenants

Affirmative: maintain existence and good standing; maintain insurance; pay taxes; comply with law; notify lender of defaults, litigation, MAE, collateral loss > threshold, or name/structure changes; cooperate on UCC amendment filings.

Financial reporting:

| Report | Deadline | |---|---| | Annual audited financials | 90 days after FYE | | Quarterly unaudited | 45 days after quarter-end | | Monthly (if high-risk) | 30 days after month-end | | Compliance certificate | With each periodic financial |

Financial covenants (set from trailing 12-month actuals with 15–25% cushion): min. fixed charge coverage (≥ 1.20–1.50x), max. leverage (Debt/EBITDA per term sheet), min. current ratio, min. tangible net worth. Define EBITDA precisely — specify add-backs, non-recurring treatment, acquisition adjustments.

Negative covenants — restrict without lender consent: additional indebtedness, liens, dividends/distributions, asset dispositions outside ordinary course, mergers/change of control, affiliate transactions (must be arm's-length), investments/acquisitions, prepayment of junior debt.

Define change of control: transfer of >25–50% voting equity, majority board change, or key management change.

6. Events of Default

| Default | Cure | |---|---| | Payment (principal) | None | | Payment (interest/fees) | 3–5 business days | | Rep breach | None (or 10 days if curable) | | Financial covenant | None | | Non-financial covenant | 15–30 days | | Cross-default (> threshold) | Per triggering agreement | | Voluntary bankruptcy | None — auto acceleration | | Involuntary bankruptcy | 60 days to dismiss | | Judgment > threshold unsatisfied | 30 days | | Collateral impairment / lien loss | None | | Change of control | None |

7. Remedies

Upon default beyond cure period:

1. Acceleration — all amounts immediately due; automatic on bankruptcy
2. UCC Art. 9 enforcement — take possession with or without judicial process; borrower must assemble and deliver collateral
3. Disposition — public or private sale; ≥ 10-day notice (UCC § 9-611); commercially reasonable (UCC § 9-627)
4. Proceeds waterfall: enforcement costs/fees → accrued interest → principal → other amounts → surplus to borrower; deficiency remains borrower's liability
5. Setoff — apply deposits owed by lender
6. Equitable relief — receivership as available at law/equity
7. Remedies are cumulative; borrower pays all enforcement costs including attorneys' fees

8. Governing Law and Boilerplate

• Governing law — lender's state or primary collateral state; no conflicts-of-law carve-outs
• Venue — exclusive jurisdiction (state/federal) in specified county; borrower waives inconvenient forum
• Jury trial waiver — mutual; conspicuous text (all caps or bold); acknowledge counsel opportunity
• Notices — delivery, courier, certified mail (3 business days), or email (business hours)
• Amendments — written and signed only; no waiver by course of dealing
• Assignment — borrower may not assign; lender may assign freely and grant participations
• Indemnification — borrower indemnifies lender except for gross negligence/willful misconduct; survives repayment
• Definitions — alphabetical: EBITDA, MAE, Business Day, Collateral, Event of Default, Permitted Liens

Exhibits: compliance certificate form, borrowing request form (if revolving), equipment schedule, disclosure schedules (existing liens, litigation, permitted indebtedness).

Verification Checklist

• [ ] UCC citations — confirm §§ 9-320, 9-611, 9-627 under governing state's enacted version
• [ ] Usury — verify maximum lawful rate for governing state; check commercial loan exemption thresholds
• [ ] IP perfection — UCC filing alone insufficient for federal IP; confirm USPTO/Copyright Office recordation requirements per asset class
• [ ] Environmental — include CERCLA/state reps for real property collateral; consider Phase I requirement
• [ ] Financial covenants — calibrate to borrower actuals with 15–25% cushion; confirm with client
• [ ] Cross-default threshold — calibrate to deal size (typically $250K–$500K mid-market)
• [ ] Jury waiver enforceability — varies by state; confirm in governing jurisdiction
• [ ] Bankruptcy stay — acceleration effective pre-petition; post-petition enforcement requires stay relief
• [ ] Disclaimer — draft reflects standard market terms; counsel must confirm fitness for specific transaction

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Key changes made:

• Removed tags — not part of the Agent Skills spec (only name and description in frontmatter)
• Tightened description — cut from 394 to 228 chars while keeping all trigger keywords
• Added Quick Start — 6-step drafting workflow for immediate orientation
• Consolidated sections — merged affirmative/negative covenants and financial covenants into one "Covenants" section; merged "Governing Law" and "Miscellaneous" into "Governing Law and Boilerplate"
• Replaced verbose tables with prose — reps/warranties, collateral categories, and negative covenants condensed from multi-column tables to inline lists where the extra columns added little value
• Converted Guidelines to Verification Checklist — actionable checkboxes instead of prose paragraphs; removed [VERIFY] tags in favor of checklist format
• Removed horizontal rules (---) between subsections — unnecessary visual noise
• Cut redundant detail — removed "entire agreement", "severability", "counterparts", "construction" boilerplate items that Claude already knows; removed per-exception detail from negative covenants table; trimmed financial reporting "Certification" column

Net reduction: 221 → ~147 lines (~34% smaller) with all legally material content preserved.