Keepwell Agreement

A keepwell agreement is a contract between two parties, in which one party (the guarantor) agrees to provide financial support to the other party (the principal) in the event that the principal experiences financial difficulties. The guarantor may agree to provide a loan, a guarantee, or other financial assistance to the principal.

Keepwell agreements are often used in mergers and acquisitions transactions, as a way to protect the buyer from the risk that the seller will experience financial difficulties after the transaction is completed. The buyer may require the seller to enter into a keepwell agreement with a third party, such as a bank or another financial institution.

Keepwell agreements can also be used in other business transactions, such as joint ventures or strategic alliances. In these cases, the keepwell agreement may be used to protect the parties from the risk that one party will experience financial difficulties and be unable to fulfill its obligations under the agreement.

Keepwell agreements are typically drafted by lawyers, and they can be complex and difficult to understand. It is important to have a lawyer review any keepwell agreement before you sign it, to make sure that you understand your rights and obligations under the agreement.

Here are some of the key provisions that are typically included in a keepwell agreement:

* The guarantor agrees to provide financial support to the principal in the event that the principal experiences financial difficulties.
* The guarantor's obligation to provide financial support is typically limited to a certain amount of money or a certain period of time.
* The guarantor may be required to provide a loan, a guarantee, or other financial assistance to the principal.
* The guarantor may be required to provide financial information to the principal on a regular basis.
* The guarantor may be required to obtain the consent of the principal before taking certain actions, such as selling assets or entering into new debt.

Keepwell agreements can be a valuable tool for protecting businesses from the risk of financial difficulties. However, it is important to understand the terms of the agreement before you sign it, to make sure that you are comfortable with your obligations under the agreement.