A Credit Facility & Revolving Line Agreement defines the terms for ongoing credit access between borrower and lender. This playbook reviews financial covenants, interest structures, and default remedies.
Why This Matters: Unbalanced termination rights can lead to hold-up risk or unanticipated losses. Clear exit provisions ensure parties can manage strategic changes or breaches efficiently.
Negotiation strategy
If you're the Lender:
Ensure termination clauses are balanced to protect against unexpected losses. Negotiate for reasonable notice periods and cure periods to allow for remediation of breaches.
If you're the Borrower:
Advocate for clear termination triggers that allow for strategic flexibility. Ensure any break-fee arrangements are fair and reflect the potential costs of termination.
Essential elements
1
Termination Triggers
Conditions for ending the agreement.
2
Notice Requirements
Timeframe for notifying termination.
3
Cure Periods
Time allowed to fix breaches.
Action framework
ACCEPT
Propose edits when termination triggers are unclear or unbalanced.
EDIT
Reject clauses that impose unfair penalties or lack mutuality.
ADD
Add language for jurisdiction-specific compliance or missing elements.
PRO TIP
Always align termination rights with strategic business objectives to minimize risk.
Example clauses
FAVORABLE
Preferred Termination for Cause
"Either party may terminate this Agreement upon a material breach, with a 30-day cure period following written notice."
NEUTRAL
Standard Notice of Termination
"Any notice of termination must be in writing and delivered to the other party at least sixty (60) days prior to the intended termination date."
UNFAVORABLE
Unilateral Termination Rights
"The Company may terminate this Agreement at any time without cause, with no notice required."
Fallbacks
High-Risk Projects
In high-risk projects, ensure termination rights are stringent to protect against potential losses and ensure project continuity.
Cross-Border Transactions
Consider jurisdiction-specific laws that may affect termination rights and ensure compliance with international regulations.
Long-Term Contracts
For long-term contracts, include periodic review clauses to reassess termination rights and ensure they remain relevant.
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WEEK 2
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WEEK 3
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WEEK 4
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