Choice of Law Analysis for Creation and Perfection of Security Interests

QUESTIONNAIRE

Instances of Non-U.S. Law Applying to Predominantly U.S. Based Pledges of Investment Property and Deposit Accounts

May [ ], 2012

I. BACKGROUND

The Uniform Commercial Code Committee of the American Bar Association Business Law Section is working in consultation with counsel from local jurisdictions to provide a survey of the choice of law rules and relevant substantive rules that a court in each such jurisdiction would apply to the pledge by a U.S. entity under a U.S.-law-governed security agreement of the following types of collateral: (i) directly-held certificated securities, (ii) directly-held uncertificated securities, (iii) securities accounts (and securities credited thereto) and (iv) deposit accounts. In particular, the survey will focus on what law would be applied to the enforceability of the secured party’s rights against the pledgor in respect of the pledge and to the enforceability (i.e., perfection) and priority of the secured party’s rights against third-party creditors of the pledgor. The purpose of the report is to provide general guidance to U.S. lawyers involved in pledges by U.S. entities of securities and deposit account collateral where the transaction implicates a foreign jurisdiction (e.g., either because of the location of the collateral, the jurisdiction of the issuer or the location of an intermediary or bank, as applicable).

The report is meant solely to highlight some of the circumstances in which the parties should consider the possible application of non-U.S. law and some of the issues that may arise from such application. Users of the report will be strongly advised to consult with local counsel. In fact, a primary purpose of the report is to highlight to readers circumstances in which local counsel advice should be sought with respect to seemingly “U.S.-centered” pledge arrangements.

For the purposes of this questionnaire, “directly-held” certificated or uncertificated securities are securities where the beneficial owner is registered as the securities’ owner on the books of the issuer or, in the case of securities in bearer form, holds the physical certificates in its own vault. This is in contrast to securities held in the indirect holding system where the securities are registered in the name of (or indorsed to) or simply held by (in the case of bearer securities) an intermediary who has a direct holding relationship with the issuer and credits the securities to an account of the underlying investor1 (or to the account of another intermediary

1 In the United States under the Uniform Commercial Code (the “UCC”), an investor holding through an intermediary in the indirect holding system is considered a beneficial – as opposed to a legal – owner of the underlying securities. In contrast, in some jurisdictions such as Germany, an investor holding through an who then credits the securities to an account of the investor or to another intermediary for ultimate credit to an account of the investor).

In the preparation of the answers to this questionnaire, please assume the following:

 The Pledgor is organized under the law of a U.S. State (defined as a State of the United States, the District of Columbia, Puerto Rico or the U.S. Virgin Islands).

 The Pledgor’s chief executive office is located in a U.S. State and the Pledgor is acting through a U.S. office.

 The security interest is granted pursuant to a security agreement stated to be governed by the law of a U.S. State2 and the transaction bears a “reasonable relation” to such U.S. State within the meaning of Section 1-301 (former Section 1-105) of the UCC (i.e. a U.S. Court should apply the law of the U.S. State stated to govern the agreement).

 The pledge complies with any U.S. statutory or contractual restrictions on, or procedures applicable to, any transfer of interests in the collateral.

 The questions presented in this Questionnaire assume the context of a regular corporate financing transaction and are not presented within the context of a bankruptcy, insolvency or other proceeding affecting creditors’ rights generally. Therefore, responses are not expected to address whether the transaction could be subject to avoidance as a fraudulent transfer or as a preference.

II. QUESTIONNAIRE

Questions 1 – 3: Securities as collateral

1. What constitutes a “security” under the law of your jurisdiction for purposes of creating and perfecting security interests? For example, are interests in business trusts, partnerships and limited liability companies treated as “securities” under the law of your jurisdiction for purposes of creating and perfecting security interests? Are loan participations treated as “securities” under the laws of your jurisdiction?

[Please insert answer.]

2. Are debt securities treated differently from equity securities for purposes of creation and perfection of security interests in such securities under the law of your jurisdiction? intermediary may, depending on the details of the holding pattern, be viewed as having legal ownership of the underlying securities.

2 Note that although this questionnaire only addresses circumstances where the security agreement is governed by the law of a U.S. State, such law may not be the law governing the relevant securities account and such U.S. State may not be considered the jurisdiction where such account is located. 2 [Please insert answer.]

3. Under what circumstances does intercompany debt constitute a “security” under the law of your jurisdiction?

Questions 4 – 12: In respect of collateral consisting of directly-held certificated securities pledged by a U.S. Pledgor pursuant to a security agreement governed by the law of a U.S. State

4. Choice of Law – Issuer Organized under Non-U.S. Jurisdiction: What law would a court in your jurisdiction apply to the creation and perfection of a security interest in, the effect of perfection or nonperfection and priority of such security interest, and exercise of remedies against, such collateral where the issuer of the certificated securities is organized under the laws of your jurisdiction and the certificates are either (a) physically located in your jurisdiction or (b) physically located in another jurisdiction:

(a) With respect to certificates physically located in your jurisdiction

Creation. [Please insert answer.]

Perfection. [Please insert answer.]

Effect of Perfection or Nonperfection and Priority. [Please insert answer]

Remedies. [Please insert answer.]

(b) With respect to certificates physically located in another jurisdiction

5. Choice of Law – Certificates Located in Non-U.S. Jurisdiction: What law would a court in your jurisdiction apply to the creation and perfection of a security interest in, the effect of perfection or nonperfection and priority of such security interest, and exercise of remedies against, such collateral where the issuer of the securities is organized under the laws of another jurisdiction and the certificates are physically located in your jurisdiction?

3 Effect of Perfection or Nonperfection and Priority. [Please insert answer]

6. Choice of Law – Other Instances Where Law of Non-U.S. Jurisdiction May Apply: Are there any other circumstances in which your jurisdiction’s laws may apply to the creation or perfection of a security interest in, the effect of perfection or nonperfection and priority of such security interest, or the exercise of remedies against, such collateral?

7. Circumstances Requiring Additional Security Agreement / Additional Provisions: Under what circumstances, if any, would you recommend either: (i) executing an additional security agreement stated to be governed by the law of your jurisdiction, the jurisdiction where the certificate is located or the jurisdiction of formation of the issuer in the case of such collateral or (ii) incorporating specific provisions in a NY- law governed security agreement to address non-U.S. law issues? In circumstances where you recommend executing an additional agreement governed by a non-NY jurisdiction, (i) would the agreement take the form of a security agreement, a charge, an assignment or another form and (ii) would the existence of a NY-law governed security agreement (including an agreement that incorporates the concept of a collateral agent) raise issues under the law of your jurisdiction?

8. Perfection: If a court in your jurisdiction applies the law of your jurisdiction to govern the perfection of a security interest in such collateral in any of the instances in Questions 4 to 6, what steps are required under the law of your jurisdiction to perfect a security interest in such collateral? If there is more than one method to perfect a security interest in such collateral, is one method preferable to another? Under the law of your jurisdiction, does the security certificate embody the rights inherent in the asset or is the certificate itself (and, e.g., possession of it) irrelevant to the analysis?

9. Exercise of Remedies: If a court in your jurisdiction applies the law of your jurisdiction to govern the exercise of remedies against such collateral in any of the instances in Questions 4 to 6, what actions may a secured party take to enforce its security interest in such collateral after the debtor’s default? For example, do the

4 secured party’s rights include, inter alia, taking proceeds of collateral such as dividend and interest payments, exercising voting rights, reregistering the securities, “accepting” the securities in partial or full satisfaction of the secured obligations and “purchasing” the securities (via a credit-bid)? What steps are required under the law of your jurisdiction to exercise remedies against such collateral (e.g. is judicial involvement required or are self-help remedies available, what limitations are placed on third party dispositions)?

10. Corporate Issues: Under any of the circumstances addressed in Questions 4 to 6, are there corporate or authority issues for the pledgor that may arise under the law of your jurisdiction in respect of the pledge and, if so, please identify any steps that may need to be taken to address such issues.

11. Rehypothecation: If a court in your jurisdiction applies the law of your jurisdiction under any of the circumstances addressed in Questions 4 to 6, would the secured party’s right to sell, pledge, rehypothecate or otherwise use the collateral affect your analysis?

12. Proceeds: If a court in your jurisdiction applies the law of your jurisdiction to the creation of a security interest under any of the circumstances addressed in Questions 4 to 6, discuss whether a security interest created under the law of your jurisdiction continues in proceeds of the original collateral. Similarly, if a court in your jurisdiction applies the law of your jurisdiction to the perfection of a security interest under any of the circumstances addressed in Questions 4 to 6, discuss the steps required under the law of your jurisdiction to perfect a security interest in such proceeds.

Questions 13 – 20: In respect of collateral consisting of directly-held uncertificated securities pledged by a U.S. Pledgor pursuant to a security agreement governed by the law of a U.S. State

13. Choice of Law – Issuer Organized under Non-U.S. Jurisdiction: What law would a court in your jurisdiction apply to the creation and perfection of a security interest in, the effect of perfection or non-perfection and priority of such security interest, and exercise of remedies against, such collateral where the issuer of the securities is organized under the laws of your jurisdiction?

5 Perfection. [Please insert answer.]

Effect of Perfection or Nonperfection and Priority. [Please insert answer.]

14. Choice of Law – Other Instances Where Law of Non-U.S. Jurisdiction May Apply: Are there any other circumstances in which your jurisdiction’s laws may apply to the creation or perfection of a security interest in, or the exercise of remedies against, such collateral?

Effect of Perfection or Nonperfection and Priority. [Please insert answer.]

15. Circumstances Requiring Additional Security Agreement / Additional Provisions: Under what circumstances, if any, would you recommend either: (i) executing an additional security agreement stated to be governed by the law of your jurisdiction or the jurisdiction of formation of the issuer in the case of such collateral or (ii) incorporating specific provisions in a NY-law governed security agreement to address non-U.S. law issues? In circumstances where you recommend executing an additional agreement governed by a non-NY jurisdiction, (i) would the agreement take the form of a security agreement, a charge, an assignment or another form and (ii) would the existence of a NY-law governed security agreement (including an agreement that incorporates the concept of a collateral agent) raise issues under the law of your jurisdiction?

16. Perfection: If a court in your jurisdiction applies the law of your jurisdiction to govern the perfection of a security interest in such collateral in any of the instances in Questions 13 and 14, what steps are required under the law of your jurisdiction to perfect a security interest in such collateral? If there is more than one method to perfect a security interest in such collateral, is one method preferable to another?

17. Exercise of Remedies: If a court in your jurisdiction applies the law of your jurisdiction to govern the exercise of remedies against such collateral in any of the instances in Questions 13 and 14, what actions may a secured party take to enforce its security interest in such collateral after the debtor’s default? For example, do the secured party’s rights include, inter alia, taking proceeds of collateral such as dividend and interest payments, exercising voting rights, reregistering the securities,

6 “accepting” the securities in partial or full satisfaction of the secured obligations, “purchasing” the securities (via a credit-bid) amd directly instructing the issuer? What steps are required under the law of your jurisdiction to exercise remedies against such collateral (e.g. is judicial involvement required or are self-help remedies available, what limitations are placed on third party dispositions)?

20. Proceeds: If a court in your jurisdiction applies the law of your jurisdiction to the creation of a security interest under any of the circumstances addressed in Questions 13 to 14, discuss whether a security interest created under the law of your jurisdiction continues in proceeds of the original collateral. Similarly, if a court in your jurisdiction applies the law of your jurisdiction to the perfection of a security interest under any of the circumstances addressed in Questions 13 to 14, discuss the steps required under the law of your jurisdiction to perfect a security interest in such proceeds.

Questions 21 – 30: In respect of collateral consisting of assets credited to a securities account pledged by a U.S. Pledgor pursuant to a security agreement governed by the law of a U.S. State

21. Securities Account as Collateral: Under the law in your jurisdiction, would a securities account to which securities are credited constitute a category of collateral in your jurisdiction separate from the underlying securities themselves? Under the law in your jurisdiction, can assets other than securities be credited to a securities account?

7 22. Choice of Law – Securities Account Located in Non-U.S. Jurisdiction: What law would a court in your jurisdiction apply to the creation and perfection of a security interest in, the effect of perfection or nonperfection and priority of, and exercise of remedies against, such collateral where the securities account is maintained by a broker/intermediary located in your jurisdiction (or where your jurisdiction is the law governing the account, if relevant)? Please include in your answer a discussion of what it means for a securities account to be “located” in your jurisdiction.

23. Choice of Law – Governing Law of Account Agreement: What law would a court in your jurisdiction apply to the creation and perfection of a security interest in, the effect of perfection or nonperfection and priority of, and exercise of remedies against, such collateral where the securities account is maintained by a broker/intermediary located in your jurisdiction, but the agreement governing the account expressly provides that either another law governs the account agreement generally or another law governs those issues specifically?

24. Choice of Law – Other Instances Where Law of Non-U.S. Jurisdiction May Apply: Are there any other circumstances in which your jurisdiction’s laws may apply to the creation or perfection of a security interest in, the effect of perfection or nonperfection and priority of, or the exercise of remedies against, such collateral? For example, if the securities account is not maintained by a broker/intermediary located in your jurisdiction, but the issuer of securities credited to the securities account is organized under the laws of your jurisdiction would your jurisdiction’s laws apply? Similarly, if the securities account is not maintained by a broker/intermediary located in your jurisdiction, but an intermediary in the holding system between the issuer and the Pledgor’s intermediary is located in your jurisdiction, would your jurisdiction’s laws apply?

25. Circumstances Requiring Additional Security Agreement / Additional Provisions: Under what circumstances, if any, would you recommend either: (i) executing an additional security agreement stated to be governed by the law of your jurisdiction or (ii) incorporating specific provisions in a NY-law governed security agreement to address non-U.S. law issues? In circumstances where you recommend executing an additional agreement governed by a non-NY jurisdiction, (i) would the agreement take the form of a security agreement, a charge, an assignment or another form and (ii) would the existence of a NY-law governed security agreement (including an agreement that incorporates the concept of a collateral agent) raise issues under the law of your jurisdiction?

26. Perfection: If a court in your jurisdiction applies the law of your jurisdiction to govern the perfection of a security interest in such collateral in any of the instances in Questions 22 to 24, what steps are required under the law of your jurisdiction to perfect a security interest in such collateral? If there if more than one method to perfect a security interest in such collateral, is one method preferable over another?

27. Exercise of Remedies: If a court in your jurisdiction applies the law of your jurisdiction to govern the exercise of remedies against such collateral in any of the instances in Questions 22 to 24, what actions may a secured party take to enforce its security interest in such collateral after the debtor’s default? For example, do the secured party’s rights include, inter alia, directly instructing the intermediary as to the assets credited to the securities account, taking proceeds of collateral such as dividend and interest payments, exercising voting rights, reregistering the securities, “accepting” the securities in partial or full satisfaction of the secured obligations and “purchasing” the securities (via a credit-bid)? What steps are required under the law of your jurisdiction to exercise remedies against such collateral (e.g. is judicial involvement required or are self-help remedies available, what limitations are placed on third party dispositions)? Please also address any distinction under the law of your jurisdiction between enforcement as against the debtor and the ability to require the intermediary to act on instructions of the secured party without court process.

9 [Please insert answer.]

Questions 30 – 37: In respect of collateral consisting of a deposit account pledged by a U.S. Pledgor pursuant to a security agreement governed by the law of a U.S. State

30. Deposit Account as Collateral: Under the law in your jurisdiction, does a deposit account constitute a separate category of collateral and, if so, what kinds of assets can a deposit account consist of?

31. Choice of Law – Deposit Account Located in Non-U.S. Jurisdiction: What law would a court in your jurisdiction apply to the creation and perfection of a security interest in, the effect of perfection or nonperfection and priority of such security interest, and the exercise of remedies against, such collateral where the deposit account is maintained by a bank located in your jurisdiction (or where your jurisdiction is the law governing the account, if relevant)? Please include in your answer a discussion of what it means for a deposit account to be “located” in your jurisdiction.

32. Choice of Law: Governing Law of Account Agreement: What law would a court in your jurisdiction apply to the creation and perfection of a security interest in, the effect of perfection or nonperfection and priority of such security interest, and exercise of remedies against, such collateral where the deposit account is maintained by a bank located in your jurisdiction, but the agreement governing the account expressly provides that either another law governs the account agreement generally or another law governs those issues specifically?

33. Choice of Law – Other Instances Where Law of Non-U.S. Jurisdiction May Apply: Are there any other circumstances in which your jurisdiction’s laws may apply to the creation or perfection of a security interest in, the effect of perfection or nonperfection and priority of a security interest in, or the exercise of remedies against, such collateral?

34. Circumstances Requiring Additional Security Agreement / Additional Provisions: Under what circumstances, if any, would you recommend either: (i) executing an additional security agreement stated to be governed by the law of your jurisdiction or (ii) incorporating specific provisions in a NY-law governed security agreement to address non-U.S. law issues? In circumstances where you recommend executing an additional agreement governed by a non-NY jurisdiction, (i) would the agreement take the form of a security agreement, a charge, an assignment or another form and (ii) would the existence of a NY-law governed security agreement (including an agreement that incorporates the concept of a collateral agent) raise issues under the law of your jurisdiction?

35. Perfection: If a court in your jurisdiction applies the law of your jurisdiction to govern the perfection of a security interest in such collateral in any of the instances in Questions 31 to 33, what steps are required under the law of your jurisdiction to perfect a security interest in such collateral? If there is more than one method to perfect a security interest in such collateral, is one method preferable to another?

36. Exercise of Remedies: If a court in your jurisdiction applies the law of your jurisdiction to govern the exercise of remedies against such collateral in any of the instances in Questions 31 to 33, what actions may a secured party take to enforce its security interest in such collateral after the debtor’s default? For example, do the secured party’s rights include, inter alia, directly instructing the bank to pay the balance of the deposit account to or for the benefit of the secured party? What steps are required under the law of your jurisdiction to exercise remedies against such collateral (e.g. is judicial involvement required or are self-help remedies available)?

11 Please also address any distinction under the law of your jurisdiction between enforcement as against the debtor and the ability to require the bank to act on instructions of the secured party without court process.

37. Corporate Issues: Under any of the circumstances addressed in Questions 31 to 33, are there corporate or authority issues for the pledgor that may arise in respect of the pledge under the law of your jurisdiction and, if so, please identify any steps that may need to be taken to address such issues.