What are the cross-default provisions?

A clause which operates by automatically defaulting a borrower under Agreement A when it defaults under Agreement B. A cross-default provision effectively gives the lender under Agreement A the benefit of the default provisions in Agreement B. Cross-default provisions therefore have a domino effect.

Are cross-default provisions enforceable?

This is not to say that cross-default provisions never are enforceable, but the party seeking enforcement likely will face an uphill battle. The chief issue that courts consider when confronted with a cross-default clause is whether the multi-obligation lease arrangement is “indivisible” under state law.

What is the difference between cross acceleration and cross-default?

In contrast to a cross-acceleration, a cross-default clause in Agreement A causes an automatic event of default under that agreement when the borrower defaults under Agreement B, even if the lender under Agreement B does not accelerate repayment.

How do you calculate cross-default threshold?

Cross Default Threshold means, for a Party, the amount specified in Schedule 2 (Elections) in the Termination Currency. Cross Default Threshold means, with respect to Wells Fargo, an amount (including its equivalent in another currency) equal to 3% of the Shareholders Equity of Wells Fargo & Co.

What is a default clause?

A default clause is a provision in a legal contract that states what will happen if either party in a contract defaults or fails to hold up their end of the agreement.

What is an event of default clause?

An event specified in a commercial agreement that gives the non-defaulting party the right, among other things, to terminate the agreement. An event of default entitles the lender to cancel the facility and/or declare all amounts owing by the borrower to be immediately due and payable.

What is cross termination?

Cross-Termination. In the event that either Party terminates the License Agreement for the other Party’s breach of any material provision thereof, the terminating Party, in its sole discretion, may, at that time, terminate this Agreement for cause upon written notice to the other Party.

What is an accelerated loan?

An accelerated clause is a term in a loan agreement that requires the borrower to pay off the loan immediately under certain conditions.

What is the difference between default and event of default?

The phrase default or event of default is a fixture of loan agreements. Usually default and event of default are used as defined terms. “Default” means any event that with notice or passage of time, or both, would constitute an Event of Default.” …

What is a potential event of default?

A Potential Event of Default is a Failure to Pay or Deliver, Breach of Agreement (or other Event of Default) with an unexpired grace period, or where the grace period has expired but the Non-defaulting Party hasn’t (yet) given a notice of default actually accelerating the default into an actual Event of Default.

What is the difference between a default and an event of default?

What happens after an event of default?

An event of default is a predefined circumstance that allows a lender to demand full repayment of an outstanding balance before it is due. An event of default enables the lender to seize any collateral that has been pledged and sell it to recoup the loan.

How are cross default provisions used in loan agreements?

For example, a corporation (Borrower) receives financing from Bank A (Lender A) under Loan Agreement A and Bank B (Lender B) under Loan Agreement B. Instead of competing with each other, Lender A and Lender B use cross-default provisions to ensure both of them get equal rights if the Borrower fails.

Can a court enforce a cross default agreement?

According to the court, cross-default provisions should be enforced depending on facts and circumstances surrounding the particular transaction. In In re T & H Diner, Inc., the court reached the conclusion that cross-default provisions can be enforced because the court found that the cross-defaulted agreements were indivisible.

What are cross collateralization and cross default clauses?

Both cross-collateralization (aka “dragnet”) and cross-default clauses are common provisions in commercial loan documents. A cross-collateralization clause generally provides that the same collateral, often real property, secures multiple loans from the same lender.

When does a default constitute a default in this agreement?

A default in this Agreement, shall constitute a default in the other agreements described in this Agreement to be delivered by the parties at Closing, and a default in any one or more of such agreements shall constitute a default in this Agreement. Cross-Default Provision.