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PLAYBOOK TEMPLATES

Underwriting Agreement

An Underwriting Agreement governs the sale of securities by underwriters on behalf of an issuer. This playbook provides insights on indemnification, representations, and allocation of liability among underwriters.

Termination & Prepayment

Why This Matters: Uncertain prepayment provisions can trigger unintended penalties or opportunistic exits. Well-defined termination terms provide exit flexibility and protect economic interests on both sides.

Negotiation strategy

If you're the Lender:

Negotiate for flexible prepayment options with minimal penalties. Ensure notice periods are reasonable and compensation formulas are based on market standards.

If you're the Borrower:

Secure compensation for early repayment to cover potential losses. Advocate for clear termination conditions to manage credit risk effectively.

Essential elements

1

Prepayment Rights

Terms for early loan repayment.
2

Termination Conditions

Criteria for ending the agreement.
3

Compensation Formula

Method for calculating penalties.

Action framework

ACCEPT

Propose edits when notice periods are too short or compensation formulas are unclear.

EDIT

Reject clauses that impose excessive penalties or lack clear termination conditions.

ADD

Add clauses if prepayment or termination terms are missing.

PRO TIP

Always align prepayment and termination terms with current market practices to avoid disputes.

Example clauses

FAVORABLE

Preferred Prepayment Clause

"The Borrower may prepay the loan in whole or in part, subject to a 30-day notice period and a compensation formula based on yield maintenance."
NEUTRAL

Standard Termination Clause

"Termination is permissible under defined conditions with a 60-day notice period."
UNFAVORABLE

Excessive Penalty Clause

"Prepayment is allowed only with a 90-day notice and a punitive make-whole provision."

Fallbacks

High-Risk Projects

In high-risk projects, ensure termination terms allow for quick exits to mitigate potential losses.

Cross-Border Transactions

Consider jurisdiction-specific requirements that may affect prepayment and termination rights.

Volatile Markets

In volatile markets, flexible prepayment options can provide strategic advantages.
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