Create a Keepwell Agreement

Note: Links to our free templates are at the bottom of this long guide.
Also note: This is not legal advice

Introduction

Definitions

Keepwell Agreement: A legally binding contract between two or more parties designed to provide assurance that a company, or its parent company, will provide the necessary financial and operational support to keep a business running.

Corporate Governance: Rules and regulations outlining the management and operations of a company.

Financial Covenants: Clauses that outline the financial commitments of a company.

Parental Guarantees: Clauses outlining the commitments of a parent company to a subsidiary.

Reporting Requirements: Clauses outlining a company’s obligations to provide financial reports to its shareholders and creditors.

Enforceable by Law: When all of the clauses and provisions within an agreement are compliant with all applicable laws and regulations.

Properly Documented: When all necessary documents, such as the agreement itself, as well as any other supporting documents, are prepared.

Signed by All Parties: When the agreement is signed by all parties involved, such as the company, its parent company, and any other parties involved in the agreement.

Negotiate: To discuss and reach an agreement.

Strategy: A plan of action for achieving a goal.

Gather: To assemble or collect something.

Define Roles and Responsibilities: Outlining who is responsible for what, as well as any other relevant information.

Finalize: To complete or make ready for use.

Execute: To sign and formalize a document or agreement.

Provide Copies: To send copies of the agreement to all parties involved, as well as any other relevant documents.

Monitor: To observe and check the progress or quality of something.

Amend: To make changes or corrections to something.

Contents

1. Introduction to Keepwell Agreements
2. Definition, Purpose, and Benefits
3. How to Draft a Keepwell Agreement
4. Rules, Provisions, and Negotiations
   #1. Research relevant rules and regulations
   #1. Outline the main clauses and provisions
   #1. Consider tradeoffs and potential negotiation points
5. Common Keepwell Agreement Clauses
   #1. Corporate Governance
   #1. Financial Covenants
   #1. Parental Guarantees
   #1. Reporting Requirements
6. What is Required for a Keepwell Agreement to be Legally Binding?
   #1. Enforceable by law
   #1. Properly documented
   #1. Signed by all parties
7. Tips for Ensuring Your Keepwell Agreement is Successful
   #1. Establish clear goals for the agreement
   #1. Include provisions for dispute resolution
   #1. Monitor performance and compliance
   #1. Regularly review and update the agreement
8. Preparing to Negotiate Your Keepwell Agreement
   #1. Develop a strategy
   #1. Gather the necessary documents
   #1. Define roles and responsibilities
9. Executing Your Keepwell Agreement
   #1. Finalize the agreement
   #1. Execute the agreement
   #1. Provide copies to all parties
10. How to Monitor and Amend Your Keepwell Agreement
    #1. Set up a monitoring process
    #1. Review performance and compliance
    #1. Amend the agreement as needed
11. Keepwell Agreement Best Practices
    #1. Understand relevant laws
    #1. Consult legal advisors
    #1. Negotiate in good faith
12. Conclusion

Get started

Introduction to Keepwell Agreements

• Understand what a Keepwell Agreement is and the purpose it serves
• Learn what benefits come from having a Keepwell Agreement in place
• Have a basic understanding of how a Keepwell Agreement works
• Be able to explain the concept of a Keepwell Agreement to others

When you can check this off your list:

• You will know when you can check this off your list when you have a basic understanding of what a Keepwell Agreement is, what its purpose is, and what benefits it provides.

Definition, Purpose, and Benefits

• Understand the purpose of a Keepwell Agreement and its benefits to the company
• Recognize the different components that make up a Keepwell Agreement
• Collect the necessary information needed to construct a Keepwell Agreement
• Evaluate the implications of having a Keepwell Agreement in place

When you can check this off your list:

• When you have a good understanding of the purpose and benefits of a Keepwell Agreement, and have identified the components that make up a Keepwell Agreement.

How to Draft a Keepwell Agreement

• Define the purpose of the Keepwell Agreement, including any benefits that the parties should receive
• Discuss the rules and provisions that will be included in the agreement, such as how the agreement will be structured, the terms and conditions of the agreement, and any applicable deadlines
• Negotiate the terms of the agreement with the other party, such as the costs associated with the agreement and any additional provisions that need to be addressed
• Draft the agreement in accordance with the negotiated terms, ensuring that all relevant terms and conditions are included
• Review and revise the agreement as needed to ensure that it is in compliance with all applicable laws and regulations
• Once the agreement is finalized, both parties should sign it to signify their agreement to all of the terms and conditions of the Keepwell Agreement

You’ll know when you can check this off your list and move on to the next step when the Keepwell Agreement has been drafted, reviewed, and revised to the satisfaction of both parties and both parties have signed the agreement.

Rules, Provisions, and Negotiations

• Identify the key provisions to include in the agreement
• Determine the type of agreement that best suits the company - i.e. term-based or performance-based
• Establish the parameters of the agreement and any related performance metrics
• Negotiate any additional provisions with the issuing company
• Finalize the agreement and secure signature
• When the agreement is complete and all parties have signed off, you can move on to the next step: researching relevant rules and regulations.

Research relevant rules and regulations

• Research the relevant rules and regulations for your Keepwell Agreement, such as labor laws, company policies, and any other applicable laws
• Consider gathering any necessary documents that may be needed to support your agreement
• Consult with a lawyer or a legal expert to ensure that your agreement complies with all relevant rules and regulations
• Once you have all the necessary information and documents, you can move on to outlining the main clauses and provisions of your Keepwell Agreement.

Outline the main clauses and provisions

• Brainstorm a list of potential clauses and provisions that should be included in the Keepwell Agreement
• Consider any specific obligations or instructions that the agreement must include
• Research any legal requirements that must be observed when drafting the document
• Consult with relevant stakeholders and/or experts to gain insight into the types of clauses and provisions that should be included
• Draft the clauses and provisions that will be included in the Keepwell Agreement
• Once all relevant clauses and provisions have been outlined, review the document to ensure that all requirements have been met.

You’ll know you can check this off your list and move onto the next step when the Keepwell Agreement contains all necessary clauses and provisions, and all legal requirements have been met.

Consider tradeoffs and potential negotiation points

• Research any tradeoffs that may be associated with the Keepwell Agreement, such as potential losses or risks associated with the agreement
• Consider any potential negotiation points that may arise in the process of creating the Keepwell Agreement
• Look into any potential benefits that may come with the agreement, such as increases in employee morale or retention
• Talk to stakeholders and get an understanding of what their expectations are with regards to the Keepwell Agreement
• Make a list of all the tradeoffs and negotiation points that will need to be addressed when creating the Keepwell Agreement
• When you have a full understanding of all the potential tradeoffs and negotiation points, you can move on to the next step.

Common Keepwell Agreement Clauses

• Research existing Keepwell Agreements to determine the most common clauses that appear
• Identify any additional clauses that might be necessary to include, based on your company’s specific needs
• Draft the Keepwell Agreement, detailing the clauses that will be included
• Review the drafted Agreement with relevant stakeholders
• Revise and refine the Agreement, as necessary
• Finalize the Agreement and execute it

You’ll know when you can check this off your list and move on to the next step when you have finalized the Agreement and executed it.

Corporate Governance

• Research and decide on the corporate governance structure that best fits the company.
• Make sure to consider the Board of Directors, Board Committees, and Executive Officers.
• Determine if the company will have a corporate secretary, and how the roles and responsibilities of the Board of Directors and Executive Officers will be defined.
• Draft and finalize the corporate governance documents.
• Once the corporate governance documents have been finalized, this step is complete.

Financial Covenants

• Determine which financial metrics need to be included in the agreement
• Negotiate the financial metrics that will be in the agreement
• Establish the milestones for which the metrics will be measured
• Establish the financial consequences of failing to meet the milestones
• Agree on a schedule for periodic financial reviews
• Draft the financial covenants into the Keepwell Agreement
• Once all parties have agreed to the financial covenants, move on to the next step of creating the Parental Guarantees.

Parental Guarantees

• Draft a clause that outlines the parental guarantees
• Include the parent company’s obligation to guarantee the obligations of the subsidiary
• Note the parent company’s agreement to not take any action that would undermine the subsidiary’s ability to adhere to the Keepwell agreement
• Have the parent company sign off on the clause to make it legally binding
• Once the clause is signed and agreed upon, it can be included in the Keepwell agreement and the next step can be completed.

Reporting Requirements

• Establish the reporting requirements and agree on the timeline for delivery of the reports.
• Agree on the content of each report and the format in which it should be presented.
• Specify the means by which the recipient of the report can verify the accuracy of the report.
• Agree on the consequences, if any, for failure to deliver accurate reports on the agreed timeline.
• Document the agreed reporting requirements in the Keepwell agreement.

Once all the reporting requirements have been documented in the Keepwell agreement, you can check this off your list and move on to the next step.

What is Required for a Keepwell Agreement to be Legally Binding?

• Draft and agree on the terms of the Keepwell Agreement, including the purpose and scope of the agreement and the specific performance obligations of each party
• Ensure that all parties sign and date the Keepwell Agreement, if applicable
• Confirm that all parties are in compliance with applicable laws and regulations
• How to know when you can check this off your list and move on to the next step: once all parties have signed and dated the Keepwell Agreement, and it has been confirmed that all parties are in compliance with applicable laws and regulations, you can move on to the next step.

Enforceable by law

• Determine which jurisdiction the agreement is to be enforced in.
• Consult a lawyer to ensure the agreement is legally binding and enforceable in the jurisdiction in which it is to be enforced.
• Ensure that all parties to the agreement have a legally binding commitment.
• Once you have consulted with a lawyer, you can be confident that the agreement is enforceable by law.

You will know when you have completed this step when you have consulted a lawyer to ensure that the Keepwell Agreement is legally binding and enforceable in the jurisdiction in which it is to be enforced.

Properly documented

• Clarify what the document should contain and what needs to be included in the agreement.
• Assemble all necessary information and create a comprehensive document.
• Ensure the document is written in an enforceable language and is compliant with relevant legislation.
• Have the document reviewed and approved by a legal professional.
• Once the document has been reviewed and approved, it is ready to be signed by all parties.

Signed by all parties

• Arrange a meeting with all parties involved to discuss the Keepwell Agreement
• Ensure that all parties understand the terms of the agreement and are willing to sign it
• Provide copies of the Keepwell Agreement to each involved party
• Have each involved party sign the Keepwell Agreement and provide a copy of their signed document
• Retain copies of the signed Keepwell Agreement for your records
• When all parties have signed the Keepwell Agreement, it is considered complete and official.

Tips for Ensuring Your Keepwell Agreement is Successful

• Clearly define the terms of the agreement and ensure that everyone involved is aware and agrees to them
• Set a timeline and a clear plan of action for meeting the goals of the agreement
• Establish a system of communication between all parties to ensure that everyone is kept informed and involved
• Set up a system of accountability to ensure that all parties are meeting their obligations and taking responsibility for their actions
• Make sure to review the agreement regularly to ensure that it is still relevant and that it is accomplishing its goals
• Set up a dispute resolution process to ensure that any disagreements can be addressed quickly and efficiently
• Make sure that the agreement is legally binding so that all parties can trust it and feel secure in their commitments
• When these tips have been followed and the agreement has been created, you can move on to the next step in the process.

Establish clear goals for the agreement

• Identify key goals of the Keepwell Agreement, such as maintaining financial stability, keeping key employees in the organization, or increasing stockholder value
• Brainstorm the specific objectives that will help you achieve those goals, such as setting minimum liquidity requirements, performance metrics, and other financial targets
• Draft the targets, metrics, and other goals that will be included in the agreement, and ensure that they are measurable and achievable
• When you’ve identified and documented your goals for the agreement, you can move on to the next step of including provisions for dispute resolution.

Include provisions for dispute resolution

• Define the dispute resolution process that all parties must follow
• Outline a timeline for the dispute resolution process
• Include provisions for arbitration, mediation, or a combination of both
• Specify the selection of a neutral third party to assist in dispute resolution
• When possible, specify the language of the agreement
• When possible, specify the governing law of the dispute resolution
• When possible, specify the jurisdiction of the dispute resolution

Once you have written out and included all of these provisions for dispute resolution in the Keepwell Agreement, you can check this step off your list and move on to the next step.

Monitor performance and compliance

• Monitor performance and compliance of the Keepwell Agreement by regularly assessing the effectiveness of the agreement, tracking any changes made to it, and ensuring the agreement is being followed by all parties.
• Track any changes made to the agreement and ensure that all parties are compliant with the agreement.
• Check in with all parties regularly to assess their performance and compliance with the agreement.
• When you can see that all parties are properly adhering to the agreement and that the agreement is being followed, you can move on to the next step.

Regularly review and update the agreement

• Arrange a meeting with the relevant stakeholders to review the Keepwell Agreement.
• Revise the agreement if necessary to reflect changes in circumstances, such as changes in the company’s financial status or goals.
• Make sure that all changes to the agreement are documented and agreed upon by all parties.
• Once any changes have been made, ensure that all parties involved sign the amended agreement.
• Evaluate the success of the agreement and identify any areas for improvement.
• Check off this step once the review and update process is complete.

Preparing to Negotiate Your Keepwell Agreement

• Gather all key stakeholders who will be involved in the negotiation of the Keepwell Agreement
• Evaluate the financial and operational health of the company
• Collect any relevant legal documents, such as existing contracts and bylaws
• List out the goals and objectives that need to be achieved through the Keepwell Agreement
• Determine the timeline for the negotiation process
• When you have gathered all the necessary stakeholders, documents, and objectives, you will be ready to begin the negotiation process and move on to the next step.

Develop a strategy

• Identify the issues that need to be addressed in the Keepwell Agreement
• Decide which terms you want to include
• Consider any important legal and financial considerations
• Take into account the interests of all parties involved
• Create a draft of the Keepwell Agreement
• When you have a draft of the Keepwell Agreement, you can move on to the next step of gathering the necessary documents.

Gather the necessary documents

• Gather all documents related to the agreement, such as job descriptions, organizational policies, and employee contracts
• Identify any legal or compliance requirements that need to be included in the agreement
• Make a list of all the documents needed for the agreement
• Reach out to the relevant parties to collect any documents that are missing
• When all the necessary documents have been gathered, you can move on to the next step.

Define roles and responsibilities

• Identify who will be responsible for each required action in the Keepwell Agreement
• Assign roles and designates responsibilities to each party for meeting the requirements of the Agreement
• Ensure that all parties are in agreement with the roles and responsibilities assigned
• Create a document outlining the roles and responsibilities of each party
• Have all parties sign the document to confirm their agreement
• You can check this step off your list when all parties have agreed to and signed the document outlining the roles and responsibilities.

Executing Your Keepwell Agreement

• Establish an effective date for the Keepwell Agreement
• Draft a signature page for all parties to sign
• Circulate the signature page to all parties
• Once all parties have signed the signature page, the Keepwell Agreement is officially executed
• Send a copy of the executed Keepwell Agreement to all parties
• File a copy of the executed Keepwell Agreement in a secure location

Once all parties have signed the signature page, the Keepwell Agreement is officially executed and you can move on to the next step.

Finalize the agreement

• Review the agreement as a group, to ensure all parts are understood and agreed upon by all parties
• Make any changes or additions to the agreement if needed
• Once all parties are in agreement, sign and date the agreement
• Each party should receive a signed copy of the agreement
• You will know the agreement is finalized when all parties have signed the agreement and each party has a copy.

Execute the agreement

• Have all parties sign the agreement
• Notarize the agreement if necessary
• Scan the agreement for digital copies
• Ensure all signatures are legible
• Once all signatures are verified, you have successfully executed the Keepwell Agreement.

Provide copies to all parties

• Make sure all parties involved in the agreement have a copy of the document.
• Send the copies out via email or other methods, or hand out physical copies as needed.
• Make sure all parties have acknowledged receipt of the document in writing.
• Once all parties have a copy of the document and have acknowledged receipt, you can check this step off your list and move on to the next step.

How to Monitor and Amend Your Keepwell Agreement

• Establish a timeline for when to review, monitor, and amend the Keepwell Agreement
• Determine the methods for monitoring, such as reaching out directly to the parties involved or collecting feedback from stakeholders
• Set up a process for how to make amendments to the Keepwell Agreement, as needed
• Define a process for how to communicate the amendments to the parties involved
• Check off the step and move on to the next one when the timeline, methods, processes, and communication plan for monitoring and amending the Keepwell Agreement are set up.

Set up a monitoring process

• Develop a system to monitor the conditions of the Keepwell Agreement, including any changes to the agreement
• Determine how often you will review the agreement and any changes to it
• Assign a person or group of people to be responsible for monitoring the Keepwell Agreement
• Document the process so that everyone involved and affected is aware of the monitoring process
• Once the process is set up, review performance and compliance to ensure the agreement is being followed

Once the system and process has been developed and documented, the step can be checked off the list and moved onto the next step: #### Review performance and compliance.

Review performance and compliance

• Establish a timeline for review of performance and compliance with the Keepwell agreement
• Meet with your team to look at the performance and compliance measures that have been put in place
• Review the measures to ensure they are sufficient and appropriate
• Make any necessary adjustments to the agreement to ensure it is working effectively
• Check with the relevant stakeholders to ensure they are in agreement with the changes
• Document any changes that have been made for future reference

Once all performance and compliance measures have been reviewed and any necessary adjustments have been made, this step can be checked off your list.

Amend the agreement as needed

• Obtain legal advice and input from the appropriate parties to ensure that the Keepwell Agreement is tailored to the specific needs of the company
• Make sure that the Keepwell Agreement is compliant with any relevant laws and regulations
• Review the Keepwell Agreement to ensure that all the necessary provisions are included
• Document any amendments to the Keepwell Agreement
• Once the Keepwell Agreement has been amended, get the agreement signed by all necessary parties

You will know you can check this off your list and move on to the next step when the Keepwell Agreement is amended and signed by all necessary parties.

Keepwell Agreement Best Practices

• Make sure to include core elements like the purpose of the agreement, the parties involved and the conditions of the agreement
• Make sure the agreement clearly defines the scope of the services to be provided, the roles and responsibilities of those involved and the terms of the agreement
• Specify the obligations of the parties, including any payment or other commitments
• Include any termination clauses and outline any dispute resolution processes
• Determine whether any additional documents or contracts need to be included as part of the agreement
• Ensure the agreement is written in plain language and is easy to understand
• Review the agreement carefully to make sure everything is accurate and up-to-date
• Check that all parties involved have signed the agreement
• When all of these steps are complete, you can move on to the next step in creating your Keepwell Agreement.

Understand relevant laws

• Familiarize yourself with applicable laws, such as the Uniform Commercial Code, that could affect the Keepwell Agreement.
• Research any relevant case law related to the subject matter of the Keepwell Agreement.
• When you have researched the relevant laws and have an understanding of how they apply, you can check this step off your list and move on to consulting legal advisors.

Consult legal advisors

• Research the laws relevant to your situation and understand what types of clauses are required in a Keepwell Agreement
• Speak to a lawyer who specializes in contract and corporate law to get advice on the different clauses and protections you should include
• Discuss the specific details of the agreement with the legal advisors and get their input
• Draft the agreement based on the legal advisors’ advice and send it to them for review
• Make any changes or adjustments to the agreement as recommended by the legal advisors
• Once the legal advisors have approved the agreement, you can move on to the next step of negotiating in good faith.

Negotiate in good faith

• Establish a list of topics to be discussed in the Keepwell Agreement
• Meet with the relevant parties to discuss the topics and negotiate the terms of the agreement
• Ensure all parties understand what is expected of them under the agreement
• Address any potential issues that may arise from the agreement
• Seek legal advice on any points that are unclear or require further clarification
• Revise the agreement as necessary to reflect the parties’ agreement to the terms
• Finalize the agreement and have all relevant parties sign off on it
• When all parties have signed the agreement, the negotiation process is complete.

Conclusion

• Agree on a final version of the Keepwell Agreement that both parties are happy with.
• Ensure that each party has a signed copy of the Agreem