Pre-workout Agreement

Summary

This template pre-workout agreement (sometimes also called a pre-negotiation agreement) is for use by a lender following default, to simply set the parameters for the upcoming workout negotiations. This template includes practical guidance and drafting notes. The vital parts to a pre-workout agreement from the lender's perspective are that: • There will be negotiations, which can be broken off at any time without prejudice • Nothing will be binding until a definitive workout agreement is entered into and executed in writing • There will be no waiver of any right because of the decision to negotiate or based on the non-binding discussions • The discussions will not be admissible in any proceeding While the lender and the borrower might want to include other more substantive provisions, for example, the lender requiring the borrower to confirm the debt and lack of defenses or the borrower asking for a standstill, such substantive provisions are more appropriate for the actual subsequent workout agreement. Before beginning to prepare the pre-workout agreement, all relevant loan agreements must be reviewed (1) to determine how to reference them in the agreement, (2) to ensure that any loan requirements are strictly followed, and (3) to determine whether amendments to the loan agreements are needed. The template could easily be adapted to specify the defaults that have occurred, usually if the borrower has already admitted their occurrence so that detailing them is not controversial, that could be done by listing them in an Exhibit A, which could be referenced in the agreement where "Defaults" are defined. For related content, see Representing Secured and Unsecured Creditors and Borrower Default and Lender Next Steps. For additional resources, see Out-of-Court Restructuring and Liquidation Alternatives Resource Kit and Loan Agreement Events of Default: Lenders' Remedies Resource Kit. For a treatise discussing this topic, see Collier Business Workout Guide P 2A.03.