The Negative Pledge Agreement serves as a crucial protective mechanism in Indonesian financing arrangements where direct security might be impractical, restricted, or undesirable. This document type is commonly used in unsecured lending facilities, bond issuances, and corporate financings where lenders seek contractual protection without the complexity of taking direct security interests under Indonesian law. The agreement restricts the borrower's ability to grant security interests to other creditors, thereby maintaining the lender's relative position in the borrower's capital structure. It typically includes detailed provisions on permitted exceptions, monitoring requirements, and enforcement mechanisms, all structured to comply with Indonesian legal requirements and market practice. The document becomes particularly important in the context of Indonesian corporate law where certain security interests require specific regulatory approvals or registrations.
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1. Parties: Identifies the parties to the agreement, typically the promisor (entity giving the negative pledge) and the beneficiary (often a lender)
2. Background: Sets out the context of the agreement, including reference to any related facility agreements or other financing arrangements
3. Definitions: Defines key terms used throughout the agreement, including 'Security Interest', 'Permitted Security', and 'Assets'
4. Negative Pledge Covenant: The core provision where the promisor commits not to create or permit to subsist any security interest over its assets
5. Permitted Exceptions: Lists specific types of security interests or transactions that are permitted despite the negative pledge
6. Representations and Warranties: Statements about the promisor's current position regarding existing security interests and capacity to enter into the agreement
7. Duration and Termination: Specifies how long the negative pledge remains in effect and circumstances for termination
8. Events of Default: Defines what constitutes a breach of the agreement and its consequences
9. Governing Law and Jurisdiction: Specifies Indonesian law as governing law and sets out jurisdiction for disputes
1. Further Assurance: Additional commitments to execute documents or perform actions to give effect to the agreement - include when enhanced enforcement mechanisms are required
2. Information Undertakings: Obligations to provide information about assets and potential security interests - relevant for high-value transactions or where ongoing monitoring is important
3. Positive Covenants: Additional positive obligations of the promisor - include when specific affirmative obligations are needed to support the negative pledge
4. Assignment and Transfer: Provisions regarding the ability to transfer rights under the agreement - include when transferability is a concern
5. Costs and Expenses: Allocation of costs related to the agreement - include for complex transactions with significant potential costs
6. Notices: Detailed provisions for how formal communications should be made - include for complex or long-term arrangements
1. Schedule 1 - Covered Assets: Detailed list or description of assets subject to the negative pledge
2. Schedule 2 - Permitted Security Interests: Comprehensive list of pre-approved security interests that are exempt from the negative pledge
3. Schedule 3 - Existing Security Interests: List of security interests already in existence at the time of the agreement
4. Schedule 4 - Form of Compliance Certificate: Template for periodic confirmation of compliance with the negative pledge obligations
5. Appendix A - Corporate Authorizations: Copies of relevant corporate approvals and authorizations for entering into the agreement
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