Inside the Stock Pledge Agreements for Financial Institutions

The online legal document provider, RealDealDocs.com has released a number of stock pledge agreements for the top companies in America including many Fortune 500 companies. These are the actual legal documents drafted by the nation’s top law firms.

Rogers Corporation filed a Stock Pledge Agreement in Novemebr 2008 with Induflex Holding as Pledgor in order to secure the amounts payable by way of a pledge on the shares in the company. Another recently released stock pledge agreement is the Superior Bancorp agreement with Colonial Bank. Both of these Stock Pledge Agreements are available in their entirety on the RealDealDocs.com website.

A Stock Pledge Agreement is a legal document documenting the pledge of a fixed number of shares of common stock by a shareholder as security for payment of a promissory note.

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The contracts, agreements and clauses available at RealDealDocs.com are the actual legal documents used by both the smallest of small capital companies as well as Fortune 500 companies alike.

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Financial institutions are being swallowed by the economic tidal wave. As they try to exit bankruptcy or find reorganizations, the lack of financing to assist them may lead to these five things, as researched by the National Law Journal:

1. Sudden, prenegotiated mergers or buyouts, similar to Lehman Brothers’ fate.

2. Increased asset liquidation, rather than traditional reorganizations.

3. Significant international costs related to layoffs of overseas employees, based on foreign severance protections.

4. As firms merge and restructure, a loss of in-house counsel jobs.

5. Significant changes in executive retention packages to reflect attitudes against large bonuses.

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As major financial corporations are crumbling down, multimillion-dollar companies seeking bankruptcy protection can’t secure funding. They are also losing pledged money to save their operations resulting in liquidations and thousands of job losses.

“It is not just the consumer that is running low on cash, but major financial institutions are running short on cash and are having trouble borrowing to cover their loan commitments,” said Peter J. Gurfein, a restructuring specialist in Akin Gump Strauss Hauer & Feld’s Los Angeles office.

According to Gurfein, “the heart of the problem for companies trying to emerge from bankruptcy is lack of funding to pay for it, or withdrawal of previously committed funds.”

Filing a Chapter 11 bankruptcy means that the company has the ability to put off existing debts while attempting to raise capital and restructure their business in order to remain above water. However, as reported in The National Law Journal, “failure to keep up with payments in bankruptcy, or find money to exit as a viable business, may prompt what’s called a Section 363 liquidation sale, or even a conversion to a Chapter 7 liquidation for the sale of assets.”

“A lack of funding to assist troubled businesses through a tough economy is widespread,” said Victor G. Milione, head of the restructuring practice in the Boston office of Nixon Peabody. “We’re seeing it across all segments of the revenue stream for our clients as well as companies not our clients, from midcap to large-capital companies and those publicly traded.”

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