A revolving credit facility agreement template is a critical legal document that outlines the terms and conditions governing a credit facility between a lender and a borrower. This facility allows the borrower to access funds up to a predetermined limit, which can be repaid and drawn upon multiple times within a specified period. To ensure a professional and legally sound template, consider the following essential elements:
1. Parties
Clearly Identify the Parties: Begin the template by explicitly stating the names and legal addresses of both the lender and the borrower.
Specify Roles and Responsibilities: Define the roles and responsibilities of each party, including their obligations and expectations.
Establish the Credit Limit: Clearly state the maximum amount of credit that the borrower can access under the agreement.
Outline Repayment Terms: Specify the repayment schedule, including interest rates, due dates, and any applicable fees or penalties.
Address Interest Calculation: Detail the method used to calculate interest, such as simple or compound interest.
3. Security and Collateral
Describe Security Interests: If applicable, outline the specific security interests that the lender will hold over the borrower’s assets.
Specify Collateral: List any collateral that the borrower will provide to secure the loan.
Address Default Procedures: Clearly define the procedures that will be followed in the event of a default, including the lender’s rights to seize and sell collateral.
4. Covenants and Restrictions
Impose Financial Covenants: Include financial covenants that the borrower must adhere to, such as maintaining a certain debt-to-equity ratio or minimum working capital.
Specify Affirmative Covenants: Outline affirmative covenants that the borrower must perform, such as providing financial statements or maintaining insurance coverage.
Impose Negative Covenants: Specify negative covenants that the borrower must refrain from doing, such as incurring additional debt or making significant capital expenditures.
Define Events of Default: List specific events that would constitute a default under the agreement, such as failure to make payments, breach of covenants, or insolvency.
Outline Remedies: Specify the remedies available to the lender in the event of a default, including acceleration of the debt, termination of the facility, and foreclosure on collateral.
6. Governing Law and Dispute Resolution
Choose Governing Law: Specify the jurisdiction whose laws will govern the agreement.
Select Dispute Resolution Mechanism: Determine the method for resolving disputes, such as arbitration or litigation.
7. Representations and Warranties
Require Representations: Include representations made by the borrower regarding its financial condition, business operations, and compliance with applicable laws.
Require Warranties: Specify warranties made by the borrower regarding the accuracy of the information provided in the agreement.
8. Termination and Amendment
Address Termination: Outline the circumstances under which either party can terminate the agreement, such as upon maturity or in the event of a default.
Specify Amendment Procedures: Define the procedures for amending the agreement, including the requirement for written consent from both parties.
9. Notices
Specify Notice Addresses: Provide the addresses where notices should be sent to each party.
Outline Notice Requirements: Specify the method and timing for sending notices, such as by registered mail or email.
10. Entire Agreement
Include Entire Agreement Clause: State that the agreement constitutes the entire understanding between the parties and supersedes all prior agreements or representations.
By carefully addressing these key elements, you can create a professional and comprehensive revolving credit facility agreement template that effectively protects the interests of both the lender and the borrower.
