--- name: loan-and-security-agreement title: Loan and Security Agreement description: Drafts a U.S. secured Loan and Security Agreement with UCC Article 9 security interests, perfection mechanics, covenants, and enforcement remedies. Use when documenting secured commercial loans, acquisition financing, working capital facilities, or equipment financing requiring perfected lien documentation. author: CaseMark author_url: https://github.com/CaseMark/skills/tree/main/skills/legal/loan-and-security-agreement license: Apache-2.0 version: 0.1.0 execution_mode: open jurisdiction: us practice: finance language: en --- # 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 --- **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.