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The Negative Pledge Agreement is a fundamental tool in Australian corporate lending, particularly useful in scenarios where formal security arrangements are impractical, costly, or unnecessarily restrictive. This document is typically employed alongside facility agreements or loan documents, providing lenders with protection against subsequent secured creditors while offering borrowers more operational flexibility than traditional security arrangements. The agreement details prohibited security interests, permitted exceptions, compliance mechanisms, and remedies for breach. It operates within the Australian legal framework, particularly considering the Personal Property Securities Act 2009 (Cth) and the Corporations Act 2001 (Cth), and is commonly used in both bilateral and syndicated lending arrangements.

1. Parties: Identifies and defines the parties to the agreement, typically including the borrower/obligor and the beneficiary/creditor

2. Background: Sets out the context of the agreement, including reference to any related facility agreements or other financing arrangements

3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes interpretation principles

4. Negative Pledge Covenant: Core section containing the primary negative pledge obligations, prohibiting the creation of security interests over the borrower's assets

5. Permitted Security: Specifies exceptions to the negative pledge covenant, listing security interests that are permitted

6. Representations and Warranties: Borrower's confirmations regarding existing security interests, capacity, and authority

7. Undertakings: Additional positive and negative covenants related to the maintenance of assets and financial position

8. Duration: Specifies the term of the agreement and any survival provisions

9. Events of Default: Lists circumstances that constitute breach and trigger remedies

10. Remedies: Sets out the creditor's rights and remedies upon breach

11. General Provisions: Standard boilerplate clauses including notices, amendments, governing law, and jurisdiction