An amended and restated credit agreement is a contract that has been amended multiple times and stands altered. This includes the fresh clauses along with the original agreement and thorough inclusion of all the previous amendments. Thus, it may be concluded that an amended and restated document would include all the past amendments along with any key or new changes that have been made up to date.
These agreements tend to crop up in the context of organizational documents that may have many amendments over time. In financing transactions, the parties tend to use amended and restated credit agreements, mostly intending to secure the obligations of the original credit agreement.
The parties, just as a practice and to avoid further legal disputes, actively mention if the new agreement is meant to be used as a novation of the already existing agreement between the parties or is intended to be an addition or alteration of the already existing contractual obligation governing both the parties.
Purpose of Amended and Restated Credit Agreement
One of the key purposes of this agreement is to simply ease the process of comparison and analysis. Since all the clauses are listed with their due application and deadline, side by side comparison of the original and new contract is mitigated, and the analysis of change becomes easier and more efficient. It eases the process of drafting, as it retains the original document and at the same time establishes the amendments that the parties would like to introduce. It mitigates the need for multiple agreements governing just one contractual relationship thereby saving both time and paperwork for both the parties.
Inclusions in an Amended and Restated Credit Agreement
An amended and restated credit contract requires the inclusion of standard boilerplate clauses. Being in the nature of an amendment contract, such an agreement should ideally contain the entire agreement and severability clauses.
Key Terms of Amended and Restated Credit Agreement
The key terms of a form of Amended and Restated Credit Agreement are as follows:
- Effect: This clause talks about the effect of the current amendment over the original contract. It stipulates whether the agreement which has come into force post all the amendments would negate the existing contract, or it would only replace certain clauses.
- Adjusted Quick ratio: This clause will determine what the status quo is for the asset holdings of the business taking into account all its current liabilities.
- Current Assets and Liabilities: There shall also be a clause naming all current assets and liabilities that may be brought forward during the trade. Any alteration from the original contract should be captured.
- Timelines: Any modification from the original closing date and duration of the contract should be mentioned in the amended and restated contract.
- Interest rates: Any variation in the interest rates must be captured.
- Total Credit Exposure: This is the unused commitments and revolving extensions of credit at such a time. Any modification in the same must also be captured.
Drafting of Amended and Restated Credit Agreement
The following guidelines must be followed to draft this contract:
- Review the original contract in its entirety including the suggested amendments and attachments.
- Take the original contract as the template or main document and add to it the upgrades.
- It is essential for the contract to be labeled as being amended and restated, which must be mentioned in various places so as to avoid confusion.
- The recitals must mention the original clauses including dates and other background information, and must further mention the alteration of all iterations of the amendment process.
- After the creation of one consolidated document with all the originally agreed to terms, the parties must include the newest amends to the contractual relationship. This must be followed by an integration clause. This clause is essential because it provides legal backing to the newly integrated clauses and at the same time announces the legal working of other clauses.
Pros of Amended and Restated Credit Agreement
Following are the pros of this contract:
- Minimal effort:
The drafting process may be cumbersome for the first edit of the original agreement however, it becomes fairly easy to add on to the existing agreement instead of having to draft another fresh agreement
- Avoids Repetition:
Since the pre-existing clauses are present in the original version, the new changes alone would be incorporated thereby avoiding the task of rewriting all the clauses. This also helps if any clauses have a binding effect from the original contract. Incorporation of new changes along with the original clauses is therefore drafted neatly.
- No clutter:
Since all the clauses are mentioned in one place, there is no need for referring to files of multiple documents. Everything is neatly cumulated in one document.
- Makes Comparison easier:
It allows the proper analysis of the new and original or pre-existing clauses making comparison easier instead of referring to multiple documents and making the work cumbersome and time-consuming. This is done with the help of a blackline that is meant for comparison.
A lawyer may, instead of drafting a fresh contract, alter certain clauses thereby changing or altering the relationship instead of nullifying the original contract. A single amended and restated agreement be easier to read than that of an original agreement and a separate amendment. These contracts allow the initial credit or loan agreement to be altered so as to suit the current relationship while retaining some pre-existing clauses which may still apply to both parties.
Sample for Amended and Restated Credit Agreement
A sample of the agreement can be downloaded from below.
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