Collateral Agreement Template
Collateral Agreement Template
Collateral Agreement Template
For value received, and in consideration of one or more loans, letters of credit or other financial
accommodations extended by __________________________ or any of its subsidiaries or affiliates
(Lender), to the undersigned and/or _____________(the “Obligor”, and, if more than one, collectively,
the “Obligor”), the undersigned and the Lender agree as follows:
1. Definitions.
“Account Assets” means all assets held in trust, or in any custody, subcustody, safekeeping, investment
management accounts, or other accounts of the undersigned or its subsidiaries or partners.
“Account Control Agreement” means a securities account control agreement or other similar agreement
with any Intermediary and shall specifically include any master securities account control agreement
among the Lender and any of its affiliates, as amended from time to time.
“Clearing System” means the Depository Trust Company (“DTC”), Cedel Lender, societe anonyme, the
Euroclear system and such other clearing or safekeeping system that may from time to time be used in
connection with transactions relating to or the custody of any Securities, and any depository for any of the
foregoing.
“Collateral” means: (i) the Deposits, Securities and Account Assets that are listed on Exhibit A; (ii) all
additions to, and proceeds, renewals, investments, reinvestments and substitutions of, the foregoing,
whether or not listed on Exhibit A; and (iii) all certificates, receipts and other instruments evidencing any
of the foregoing.
“Deposits” means the deposits of the undersigned in any custody, subcustody, safekeeping, investment
management accounts, or other accounts of the undersigned with the Lender or any other Intermediary).
“Intermediary” means any party acting as a financial intermediary or securities intermediary, including,
without limitation, affiliates of the Lender that are parties to any Account Control Agreement from time
to time.
“UCC” means the Uniform Commercial Code. Unless the context otherwise requires, all terms used
in this Agreement which are defined in the UCC will have the meanings stated in the UCC.
As security for the payment of all the Liabilities, the undersigned pledges, transfers and assigns to the
Lender and grants to the Lender a security interest in and right of setoff against, the Collateral and
hereby agrees to be bound by the terms of any Account Control Agreement among the Lender and its
affiliates, as amended from time to time.
The undersigned agrees as follows and irrevocably authorizes the Lender to exercise the rights listed
below with respect to the Collateral, at its option, for its own benefit, either in its own name or in the
name of the undersigned, and appoints the Lender as its attorney-in-fact to take all action permitted
under this Agreement.
(a) Securities: Upon default or failure to satisfy the underlying note, the Lender may: (i)
transfer to the account of the Lender any Securities whether in the possession of, or registered in the
name of, any Clearing System or held otherwise; (ii) transfer to the account of the Lender with any
Federal Reserve Lender any Securities held in book entry form with any such Federal Reserve Lender;
and (iii) transfer to the name of the Lender or its nominee any Securities registered in the name of the
undersigned and held by the Lender and complete and deliver any necessary stock powers or other
transfer instruments; provided that until the occurrence of a Default, the Lender will only take that
action if, in its judgment, failure to take that action would impair its rights under this Agreement or
diminish its operational control over Collateral, or if such Securities are held in a custody, investment
management or similar account.
The undersigned grants to the Lender an irrevocable proxy to vote any and all Securities and give
consents, waivers and ratifications in connection with those Securities upon and after the occurrence
of a Default.
All payments, distributions and dividends in securities, property or cash shall be paid directly to and,
at the discretion of the Lender, retained by the Lender and held by it, until applied as provided in this
Agreement, as additional Collateral; provided that until the occurrence of a Default, interest on
Deposits and cash dividends on Securities paid in the ordinary course will be paid to the undersigned.
(c) General: The Lender may, in its name, or in the name of the undersigned: (i) execute and
file financing statements under the UCC or any other filings or notices necessary or desirable to create,
perfect or preserve its security interest, all without notice (except as required by applicable law and not
waivable) and without liability except to account for property actually received by it; (ii) upon a
Default demand, sue for, collect or receive any money or property at any time payable or receivable
on account of or in exchange for, or make any compromise or settlement deemed desirable with respect
to, any item of the Collateral (but shall be under no obligation to do so); (iii) make any notification
(to the issuer of any certificate or Security, or otherwise, including giving any notice of exclusive
control to the Intermediary) or take any other action in connection with the perfection or preservation
of its security interest or upon a Default any enforcement of remedies, and retain any documents
evidencing the title of the undersigned to any item of the Collateral; and (iv) upon a Default issue
entitlement orders with respect to any of the Collateral.
The undersigned agrees that it will not file or permit to be filed any termination statement with respect
to the Collateral or any financing or like statement with respect to the Collateral in which the Lender
is not named as the sole secured party, consent or be a party to any Account Control Agreement to
which the Lender is not also a party or sell, assign, or otherwise dispose of, grant any option with
respect to, or pledge, or otherwise encumber the Collateral provided, however, that until the occurrence
of a Default, the undersigned may buy, sell and withdraw Collateral subject to the other provisions of
this Agreement, including but not limited to, Section 4. At the request of the Lender the undersigned
agrees to do all other things which the Lender may deem necessary or advisable in order to perfect and
preserve its security interest, perfection and operational control and to give effect to the rights granted
to the Lender under this Agreement or enable the Lender to comply with any applicable laws or
regulations. Notwithstanding the foregoing, the Lender does not assume any duty with respect to the
Collateral and is not required to take any action to collect, preserve or protect its or the undersigned's
rights in any item of the Collateral. The undersigned releases the Lender and agrees to hold the Lender
harmless from any claims, causes of action and demands at any time arising with respect to this
Agreement, the use or disposition of any item of the Collateral or any action taken or omitted to be
taken by the Lender with respect thereto, except in any case where the claim, cause of action or demand
results from the gross negligence or willful misconduct of the Lender. The undersigned releases each
Intermediary and agrees to hold each Intermediary harmless from any claims, causes of action and
demands at any time arising with respect to any instruction made by Lender to any Intermediary
purporting to be made under this Agreement or any Account Control Agreement, except in any case
where the claim, cause of action or demand results from the gross negligence or willful misconduct of
the Lender or the Intermediary, it being understood that no Intermediary shall have any duty to
investigate Lender’s right to issue any such instruction or any other matter related to any such
instruction.
The rights granted to the Lender pursuant to this Agreement are in addition to the rights granted to the
Lender in any custody, investment management, trust, Account Control Agreement or similar
agreement. In case of conflict between the provisions of this Agreement and of any other such
agreement, the provisions of this Agreement will prevail.
The undersigned agrees that at all times the amount of the Liabilities may not exceed the aggregate
Loan Value of the Collateral. The undersigned will, at the Lender's option, either supplement the
Collateral or make, or cause to be made, any payment under the Liabilities to the extent necessary to
ensure compliance with this provision or the Lender may liquidate Collateral to the extent necessary
to ensure compliance with this provision. "Loan Value" means the value assigned by the Lender from
time to time, in its sole reasonable discretion, to each item of the Collateral. The Lender retains the
right to determine the eligibility of the Collateral.
5. Currency Conversion.
For calculation purposes, any currency or precious metal in which the Collateral is denominated (the
"Collateral Currency") will be converted into the currency of the Liabilities (the "Liability Currency")
at the spot rate of exchange for the purchase of the Liability Currency with the Collateral Currency
quoted by the Lender at such place as the Lender reasonably deems appropriate (or, if no such rate is
quoted on any relevant date, estimated by the Lender on the basis of the Lender's last quoted spot rate)
or another prevailing rate that the Lender reasonably deems more appropriate.
6. Representations and Warranties.
(a) this Agreement constitutes the legal, valid and binding obligation of the undersigned,
enforceable against the undersigned in accordance with its terms, except as the enforcement hereof and
thereof may be limited by Lender bankruptcy, insolvency, or other similar laws affecting the
enforcement of creditors' rights generally and subject to the applicability of general principles of
equity;
(b) the execution, delivery and performance by the undersigned of this Agreement and all other
documents contemplated hereby, do not and will not (i) conflict with or constitute a breach of, or
default under, or require any consent under, or, except as contemplated hereby, result in the creation
of any lien, charge or encumbrance upon the property or assets of the undersigned pursuant to any
other agreement or instrument to which the undersigned is a party or is bound or by which its
properties may be bound or affected; or (ii) violate any provision of any law, rule, regulation
(including, without limitation, Regulation U of the Federal Reserve Board), order, writ, judgment,
injunction, decree, determination or award presently in effect having applicability to the undersigned;
(c) no consent, approval or authorization of, or registration, declaration or filing with, any
governmental authority or other person or entity is required as a condition to or in connection with the
due and valid execution, delivery and performance by the undersigned of this Agreement;
(d) there are no actions, suits, investigations or proceedings pending or, to the best of the
undersigned’s knowledge, threatened at law, in equity, in arbitration or by or before any other authority
involving or affecting: (i) the undersigned that, if adversely determined, are likely to have a material
adverse effect on the prospects or condition of the undersigned; (ii) any material part of the assets or
properties of the undersigned or any part of the Collateral; or (iii) any of the transactions contemplated
in this Agreement. There are currently no material judgments entered against the undersigned and the
undersigned is not in default with respect to any judgment, writ, injunction, order, decree or consent
of any court or other judicial authority, which default is likely to have or has had a material adverse
effect on the prospects or condition of the undersigned;
(e) in the event the undersigned is not an Obligor, in executing and delivering this Agreement
the undersigned has (i) without reliance on the Lender or any information received from the Lender
and based upon such documents and information it deems appropriate, made an independent
investigation of the transactions contemplated hereby and the Obligor, the Obligor’s business, assets,
operations, prospects and condition, financial or otherwise, and any circumstances which may bear
upon such transactions, the Obligor or the obligations and risks undertaken herein with respect to the
Liabilities; (ii) adequate means to obtain from the Obligor on a continuing basis information
concerning the Obligor and the Lender has no duty to provide to the undersigned any such information;
(iii) full and complete access to the Liability Documents and any other documents executed in
connection with the Liability Documents; (iv) not relied and will not rely upon any representations or
warranties of the Lender not embodied herein or any acts heretofore or hereafter taken by the Lender
(including but not limited to any review by the Lender of the affairs of the Obligor), and (v) determined
that this Agreement will benefit the undersigned directly or indirectly;
(f) in the event that the undersigned is a partnership, limited liability partnership, corporation or
limited liability company, the undersigned also represents and warrants that it is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization,
and has all requisite power and authority to execute, deliver and perform its obligations under this
Agreement;
(g) in the event that the undersigned is a trust, the undersigned also represents and warrants that
(i) it is a duly constituted and validly existing trust, (ii) the undersigned has delivered to the Lender a
true, complete and accurate copy of the agreement pursuant to which it has been organized and all
amendments and modifications thereto, and (iii) the trustees of the undersigned signing this Agreement
have the legal capacity and full power and authority to execute, deliver, and perform their obligations
under, and to bind the undersigned to perform its obligations under, this Agreement, and to execute
and deliver any and all documents and instruments in connection therewith;
(h) the undersigned is either the sole owner or is an agent authorized to leverage the Collateral
and the Collateral is free of all encumbrances except for the security interest in favor of the Lender
created by this Agreement;
(i) with respect to the Collateral, as to Deposits and Account Assets, the undersigned has not
withdrawn, canceled, been repaid or redeemed all or any part of any Deposits or Account Assets other
than in compliance with this Agreement and there is no such pending application; and
(j) with respect to the Collateral, as to Securities, the Securities are fully paid and non-assessable,
there are no restrictions on pledge of the Securities by the undersigned nor on sale of the Securities by
the Lender (whether pursuant to securities laws or regulations or shareholder, lock-up or other similar
agreements) and the Securities are fully marketable by the Lender as pledgee, without regard to any
holding period, manner of sale, volume limitation, public information or notice requirements.
7. Default.
(i) any sum payable on any of the Liabilities is not paid when due; (ii) any representation and warranty
of the undersigned or any party liable on or for any of the Liabilities (including but not limited to the
Obligor, a "Liability Party") in this Agreement or in any Liability Document shall prove to have been
incorrect in any material respect when made; (iii) the undersigned or any Liability Party fails to
perform or observe any term, covenant, condition or agreement on its part to be performed or observed
contained in (a) this Agreement or under any Liability Document or (b) any loan, credit agreement,
extension of credit, lease or derivative agreement to which the Lender or any subsidiary or affiliate is
a party; (iv) any indebtedness of the undersigned or any Liability Party or interest or premium thereon
is not paid when due (whether by scheduled maturity, acceleration, demand or otherwise); (v) the
undersigned or any Liability Party: (a) is generally not, or is unable to, or admits in writing its inability
to, pay its debts as its debts become due; (b) makes an assignment for the benefit of creditors, or
petitions or applies to any tribunal for the appointment of a custodian, receiver or trustee for its or a
substantial part of its assets; (c) commences any proceeding under any law relating to Lenderruptcy,
reorganization, arrangement, readjustment of debt, dissolution or liquidation; (d) has any such petition
filed, or any such proceeding has been commenced against it, in which an adjudication is made or order
for relief is entered or which remains undismissed for a period of 30 days; (e) has a receiver, custodian
or trustee appointed for all or a substantial part of its property; or (f) takes any action effectuating,
approving or consenting to any of the events described in this section (v); (vi) the undersigned or any
Liability Party shall die, dissolve or for any reason cease to be in existence or merge or consolidate, or
if there is a change in the direct or indirect beneficial ownership of the undersigned or any Liability
Party; (vii) the undersigned or any Liability Party is involved in a proceeding relating to, or which is
likely to
6
result in, a forfeiture of all or a substantial part of the undersigned’s or any Liability Party’s assets or
a material judgment is entered against the undersigned or any Liability Party; or (viii) there is, in the
opinion of the Lender, a material adverse change in the business, prospects or financial condition of
the undersigned or any Liability Party.
8. Remedies.
Upon a Default, the Lender will have the rights and remedies under the UCC and the other rights
granted to the Lender under this Agreement and may exercise its rights without regard to any premium
or penalty from liquidation of any Collateral and without regard to the undersigned’s basis or holding
period for any Collateral.
The Lender may sell in one or more sales or parcels, at the price as the Lender deems best, for cash or
on credit or for other property, for immediate or future delivery, any item of the Collateral, at any
broker's board or at public or private sale, in any reasonable manner permissible under the UCC (except
that, to the extent permissible under the UCC, the undersigned waives any requirements of the UCC)
and the Lender or anyone else may be the purchaser of the Collateral and hold it free from any claim
or right including, without limitation, any equity of redemption of the undersigned, which right the
undersigned expressly waives.
The Lender may also, in its sole discretion: (i) convert any part of the Collateral Currency into the
Liability Currency; (ii) hold any monies or proceeds representing the Collateral in a cash collateral
account in the Liability Currency or other currency that the Lender reasonably selects; (iii) invest such
monies or proceeds on behalf of the undersigned; and (iv) apply any portion of the Collateral, first, to
all costs and expenses of the Lender, second, to the payment of interest on the Liabilities and any fees
or commissions to which the Lender may be entitled, third, to the payment of principal of the
Liabilities, whether or not then due, and fourth, to the undersigned.
9. Expenses.
The undersigned will pay to the Lender all reasonable costs, expenses (including attorney’s fees and
legal expenses incurred by the Lender, in connection with the exercise of any of the Lender’s rights or
obligations under this Agreement or the Liability Documents. The undersigned will take any action
requested by the Lender to allow it to sell or dispose of the Collateral. Notwithstanding that the Lender
may continue to hold Collateral and regardless of the value of the Collateral, the applicable Liability
Party will remain liable for the payment in full of any unpaid balance of the Liabilities.
10. Jurisdiction.
To the maximum extent not prohibited by applicable law, the undersigned hereby irrevocably: (i)
submits to the jurisdiction of any Texas or United States federal court sitting in Texas over any action
or proceeding arising out of this Agreement;(ii) agrees that all claims in respect of such action or
proceeding may be held and determined in such Texas state or federal court; (iii) agrees that any action
or proceeding brought against the Lender may be
7
brought only in a Texas state or United States federal court sitting in Texas; (iv) consents to the service
of process in any such action or proceeding in either of said courts by mailing thereof by the Lender
by registered or certified mail, postage prepaid, to the undersigned at its address specified on the
signature page hereof, or at the undersigned's most recent mailing address as set forth in the records of
the Lender; and (v) waives any defense on the basis of inconvenient forum.
The undersigned agrees that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in any other jurisdiction by suit or proceeding in such state and hereby waives any
defense on the basis of an inconvenient forum. Nothing herein shall affect the right of the Lender to
serve legal process in any other manner permitted by law or affect the right of the Lender to bring any
action or proceeding against the undersigned or its property in the courts of any other jurisdiction.
THE UNDERSIGNED AND THE LENDER EACH WAIVE ANY RIGHT TO JURY TRIAL.
12. Notices.
Unless otherwise agreed in writing, notices may be given to the Lender and the undersigned at their
telecopier numbers (confirmed by telephone to their telephone numbers) or addresses listed on the
signature page of this Agreement, or such other telecopier (and telephone) number or addresses
communicated in writing by either party to the other.
If the undersigned is not an Obligor, the undersigned’s obligations under this Agreement are absolute
and unconditional irrespective of: (a) any change in the amount, time, manner or place of payment of,
or in any other term of, all or any of the Liability Documents or the Liabilities, or any other amendment
or waiver of or any consent to departure from any of the terms of any Liability Document or the
Liabilities; (b) any release or amendment or waiver of, or consent to departure from, any other guaranty
or support document, or any exchange, release or non-perfection of any item of the Collateral, for all
or any of the Liability Documents or the Liabilities; (c) any present or future law, regulation or order
of any jurisdiction (whether of right or in fact) or of any agency thereof purporting to reduce, amend,
restructure or otherwise affect any term of any Liability Document or the Liabilities; (d) without being
limited by the foregoing, any lack of validity or enforceability of any Liability Document or the
Liabilities; and (e) any other defense, setoff or counterclaim whatsoever (in any case, whether based
on contract, tort or any other theory) with respect to the Liability Documents or the transactions
contemplated thereby which might constitute a legal or equitable defense available to, or discharge of,
the Obligor or a guarantor.
14. Miscellaneous.
(a) As used herein, the term undersigned shall include all signatories hereto, if more than one. In
such event, the obligations, representations and warranties of the undersigned hereunder shall be joint
and several. This Agreement shall be binding on the undersigned and its successors and assigns and
shall inure to the benefit of the Lender and its successors and assigns, except that the undersigned may
not delegate any of its obligations hereunder without the prior written consent of the Lender.
(b) No amendment or waiver of any provision of this Agreement nor consent to any departure
by the undersigned will be effective unless it is in writing and signed by the undersigned and the Lender
and will be effective only in that specific instance and for that specific purpose. No failure on the part
of the Lender to exercise, and no delay in exercising, any right will operate as a waiver or preclude any
other or further exercise or the exercise of any other right.
(c) The rights and remedies in this Agreement are cumulative and not exclusive of any rights
and remedies which the Lender may have under law or under other agreements or arrangements with
the undersigned or any Liability Party.
(d) The provisions of this Agreement are intended to be severable. If for any reason any
provision of this Agreement is not valid or enforceable in whole or in part in any jurisdiction, that
provision will, as to that jurisdiction, be ineffective to the extent of that invalidity or unenforceability
without in any manner affecting the validity or enforceability in any other jurisdiction or the remaining
provisions of this Agreement.
(e) The undersigned hereby waives presentment, notice of dishonor and protest of all instruments
included in or evidencing the Liabilities or the Collateral and any other notices and demands, whether
or not relating to those instruments.
(f) This Agreement is governed by and construed according to the law of the State of New York,
without regard to the conflict of laws principles, and with the laws of the United States of America as
applicable.
11