casemark/pledge-agreement-securities

Pledge Agreement (Securities)

Grants a perfected security interest in certificated or uncertificated securities to secure a loan, credit facility, or other obligation. Covers collateral description, perfection mechanics, covenants, and UCC Art. 9 remedies.

Prerequisites

Collect before drafting:

1. Credit documents — credit agreement or note (principal, rate, maturity)
2. Party details — legal names, entity types, formation jurisdictions, addresses, signing authority
3. Securities details — issuer, type (common/preferred/bonds), share count or principal amount, certificate numbers, CUSIPs, account numbers, intermediary info
4. Existing encumbrances — prior liens, shareholder agreements, transfer restrictions, ROFR
5. Related security package — guarantees, intercreditor agreements, other collateral docs

Document Structure

| Section | Key Contents | |---|---| | Title & Preamble | Execution date; full party identification; representative capacity if agent | | Recitals | Reference underlying obligation; state principal/commitment; note pledge required under credit docs | | Definitions | "Pledged Securities," "Secured Obligations" (all principal, interest, fees, indemnities, extensions, refinancings), "Collateral," "Event of Default" | | Collateral Description | Per collateral checklist below | | Grant of Security Interest | Continuing first-priority security interest in all Collateral to secure Secured Obligations | | Perfection & Delivery | Method-specific mechanics per perfection table | | Representations & Warranties | Per R&W checklist | | Covenants | Affirmative + negative; voting/distribution rights; LTV/margin maintenance | | Events of Default | Payment default; rep breach; covenant breach; cross-default; bankruptcy; material collateral value decline; delisting | | Remedies | UCC Art. 9 disposition; commercially reasonable sale; proceeds waterfall; credit bidding; deficiency | | Valuation & Substitution | Methodology; substitution conditions; simultaneous exchange | | Release & Termination | Full release on payment; partial release at LTV thresholds; return certificates; file UCC-3s | | General Provisions | Governing law; notices; amendments; severability; integration; indemnification | | Signature Blocks | Entity name, signatory name/title, date; notarial certificates if needed |

Collateral Checklist

• [ ] Security type (common stock, preferred, bonds, debentures, notes)
• [ ] Issuer full legal name
• [ ] Number of shares or principal amount
• [ ] Certificate numbers (certificated) or account number (uncertificated)
• [ ] CUSIP / ISIN identifiers
• [ ] Class or series designation
• [ ] Securities intermediary name/address (if book-entry)
• [ ] All proceeds, dividends, distributions, interest, redemption proceeds, subscription rights, stock splits, liquidation proceeds

Perfection Mechanics

| Collateral Type | Method | UCC Basis | Actions | |---|---|---|---| | Certificated | Possession | § 9-313 | Deliver certificates + blank stock/bond powers to pledgee/custodian | | Uncertificated (intermediary-held) | Control | § 9-106, § 9-314 | Tri-party control agreement: intermediary complies with pledgee entitlement orders without pledgor consent | | Uncertificated (direct) | Registration | § 8-301(b) | Register pledge on issuer's books; obtain issuer consent | | Protective filing | Filing | § 9-310 | UCC-1 financing statement (advisable even if possession/control achieved) |

R&W Checklist

• [ ] Good, marketable title free of liens (except permitted liens)
• [ ] Full authority to pledge; all organizational approvals obtained
• [ ] No violation of law, charter, bylaws, or shareholder agreement
• [ ] Securities duly authorized, validly issued, fully paid, non-assessable (equity)
• [ ] No third-party ROFR, preemptive rights, or co-sale rights triggered
• [ ] Securities law compliance (pledge exempt from registration or registered)
• [ ] No pending litigation affecting pledged securities
• [ ] Information about securities is accurate and complete

Covenant Framework

Affirmative: Maintain securities in good standing; pay taxes/assessments; defend security interest; deliver periodic valuations (market close for listed, independent appraisal for unlisted); notify pledgee of material events.

Negative: No sale/transfer/disposition without consent; no additional liens; no amendment of issuer organizational documents impairing collateral value.

Voting & Distributions (bifurcated):

• Pre-default: pledgor retains voting rights and receives dividends
• Post-default: all voting and economic rights shift to pledgee

LTV / Margin Maintenance: Specify LTV ratio and valuation methodology; cure by pledging additional securities or paying down principal within [X] business days; uncured breach triggers Event of Default.

Remedies Framework

Upon Event of Default, pledgee may:

• Exercise all UCC Art. 9 secured-party remedies
• Sell at public or private sale on commercially reasonable terms
• Apply proceeds: (i) enforcement costs → (ii) Secured Obligations → (iii) surplus to pledgor
• Credit bid at any sale; exercise all voting/governance rights
• Collect deficiency from pledgor [unless non-recourse]
• Notice: [10] days before disposition deemed reasonable; pledgor may redeem by paying Secured Obligations in full plus expenses before disposition

Pitfalls & Checks

• Match perfection to collateral type — possession for certificated, control for intermediary-held; UCC Art. 9 compliance is non-negotiable
• Cross-check defined terms across pledge and all related credit documents (party names, obligation definitions, default triggers)
• Securities law restrictions — confirm pledge does not trigger registration; address Rule 144 and contractual lock-ups
• Control agreement timing — specify deadline and consequence if intermediary refuses or delays
• Never waive commercial reasonableness of disposition (UCC § 9-610)
• Closely held securities — add issuer acknowledgment/consent; require independent appraisal for valuation
• Multi-lender deals — clarify agent authority, lien-sharing, intercreditor coordination
• Choice-of-law — UCC §§ 9-301 to 9-307 may override contractual selection for perfection
• Do not waive pledgor's redemption right or statutory notice requirements beyond UCC limits
• Mark uncertain citations with [VERIFY] — especially state-specific UCC variations