COMFORT LETTER (CORPORATE SUPPORT LETTER)

COMFORT LETTER

[SELECT ONE VERSION BELOW]

OPTION A: NON-BINDING COMFORT LETTER (MORAL OBLIGATION ONLY)

Date: [DATE]

To:
[CREDITOR/LENDER LEGAL NAME]
[ADDRESS]
[CITY, STATE ZIP]
(the "Creditor")

From:
[PARENT COMPANY LEGAL NAME]
[ADDRESS]
[CITY, STATE ZIP]
(the "Company")

Re: [SUBSIDIARY LEGAL NAME] (the "Subsidiary")

Dear Sir or Madam:

We refer to the credit facilities / obligations of our subsidiary, [SUBSIDIARY NAME], under [DESCRIPTION OF CREDIT AGREEMENT/FACILITY] dated [DATE] (the "Facility").

We acknowledge that Creditor is extending the Facility to Subsidiary in reliance on, among other things, Subsidiary's relationship with us. In connection with such Facility, we provide the following statements:

1. OWNERSHIP

We confirm that we are the [direct/indirect] owner of [___]% of the issued and outstanding [shares/equity interests] of Subsidiary. We further confirm that we have no present intention to reduce our ownership interest in Subsidiary below [___]% without prior notice to Creditor.

2. AWARENESS OF OBLIGATIONS

We are aware that Subsidiary has applied for and is obtaining credit facilities from Creditor in connection with the Facility. We are aware of the terms and conditions of the Facility and the obligations of Subsidiary thereunder.

3. POLICY REGARDING SUPPORT

It is our current policy to ensure that Subsidiary maintains a sound financial condition and is in a position to meet its obligations, including its obligations under the Facility. We confirm our present intention to provide such financial support to Subsidiary as may be necessary to enable Subsidiary to meet its obligations under the Facility as they become due.

4. STATEMENT REGARDING MANAGEMENT

We will continue to ensure that Subsidiary is properly managed and operated in a manner consistent with good business practices. We will not take any action that would materially impair Subsidiary's ability to perform its obligations under the Facility.

5. ADVANCE NOTICE

We will endeavor to provide Creditor with advance written notice of any proposed:
(a) Sale, transfer, or other disposition of all or a material portion of our ownership interest in Subsidiary;
(b) Material change in the business or operations of Subsidiary;
(c) Liquidation, dissolution, or winding up of Subsidiary; or
(d) Merger or consolidation of Subsidiary with another entity.

6. DISCLAIMER - NOT A GUARANTEE

IMPORTANT: THIS LETTER DOES NOT CONSTITUTE A GUARANTEE, INDEMNITY, OR OTHER LEGALLY BINDING UNDERTAKING. Nothing in this letter shall be construed as creating any legal obligation on the part of the Company to provide financial or other support to Subsidiary. The statements contained herein are expressions of current policy and present intention only and do not constitute a promise or undertaking to perform any specific action or provide any specific support.

This letter creates only a moral, but not a legal, obligation. The Creditor acknowledges that it is not relying on this letter as a guarantee or as creating any legal rights against the Company.

7. REPRESENTATIONS OF FACT

The Company confirms that the foregoing statements regarding ownership, awareness, and current policy are accurate as of the date of this letter. Any misrepresentation of fact may give rise to claims for negligent misstatement, but nothing herein creates any contractual or guarantee-type obligation.

8. GOVERNING LAW

This letter shall be governed by and construed in accordance with the laws of the State of [GOVERNING LAW STATE].

This letter speaks only as of its date and shall not be deemed to be a continuing representation.

Very truly yours,

[PARENT COMPANY LEGAL NAME]

By: _____________________________________
Name: ___________________________________
Title: ___________________________________
Date: ____________________________________

OPTION B: BINDING COMFORT LETTER (LEGALLY ENFORCEABLE)

Date: [DATE]

To:
[CREDITOR/LENDER LEGAL NAME]
[ADDRESS]
[CITY, STATE ZIP]
(the "Creditor")

From:
[PARENT COMPANY LEGAL NAME]
[ADDRESS]
[CITY, STATE ZIP]
(the "Company")

Re: [SUBSIDIARY LEGAL NAME] (the "Subsidiary")
[CREDIT FACILITY DESCRIPTION]

Dear Sir or Madam:

We refer to the credit facilities / obligations of our subsidiary, [SUBSIDIARY NAME], under [DESCRIPTION OF CREDIT AGREEMENT/FACILITY] dated [DATE] (the "Facility").

In order to induce Creditor to extend or continue the Facility, the Company hereby provides the following undertakings and agreements:

1. OWNERSHIP COVENANT

We agree to maintain, directly or indirectly, beneficial ownership of not less than [___]% of the issued and outstanding [shares/equity interests] of Subsidiary. We undertake not to sell, transfer, or otherwise dispose of our ownership interest in Subsidiary without the prior written consent of Creditor.

2. FINANCIAL SUPPORT UNDERTAKING

We undertake to ensure that Subsidiary maintains adequate financial resources to meet its obligations under the Facility as they become due. We agree to provide such equity contributions, intercompany loans, or other financial support to Subsidiary as may be necessary to enable Subsidiary to:
(a) Pay all amounts owing under the Facility when due;
(b) Maintain a positive net worth of not less than $[AMOUNT];
(c) Maintain working capital sufficient to operate its business; and
(d) Otherwise perform its obligations under the Facility.

3. LIQUIDITY COVENANT

We covenant that we will not permit Subsidiary to make any dividend or distribution to the Company if, after giving effect to such dividend or distribution, Subsidiary would be unable to pay its debts as they become due or would have a net worth below $[AMOUNT].

4. MANAGEMENT UNDERTAKING

We undertake to ensure that Subsidiary is properly managed and operated in accordance with sound business practices. We agree not to cause or permit Subsidiary to take any action that would materially impair its ability to perform its obligations under the Facility.

5. NO ADVERSE ACTIONS

We agree not to:
(a) Liquidate, dissolve, or wind up Subsidiary without the consent of Creditor;
(b) Merge or consolidate Subsidiary with another entity without the consent of Creditor;
(c) Transfer substantially all of Subsidiary's assets without the consent of Creditor; or
(d) Take any other action that would frustrate the purposes of this letter.

6. INFORMATION UNDERTAKING

We agree to provide Creditor with:
(a) Notice of any default or event of default by Subsidiary within [5] business days;
(b) Copies of annual financial statements within [90] days of fiscal year end;
(c) Prompt notice of any material adverse change in the financial condition of the Company or Subsidiary; and
(d) Such other information as Creditor may reasonably request.

7. NATURE OF OBLIGATION

THIS LETTER CONSTITUTES A BINDING UNDERTAKING of the Company enforceable against the Company in accordance with its terms. The Company acknowledges that Creditor is extending or continuing the Facility in reliance on this letter and the undertakings contained herein.

8. THIRD-PARTY BENEFICIARY

Creditor is an intended third-party beneficiary of this letter and shall have the right to enforce the undertakings contained herein directly against the Company.

9. TERM

This letter shall remain in full force and effect until all obligations of Subsidiary under the Facility have been fully and finally paid and satisfied.

10. GOVERNING LAW

This letter shall be governed by and construed in accordance with the laws of the State of [GOVERNING LAW STATE]. The Company consents to the jurisdiction of the state and federal courts located in [COUNTY, STATE].

11. CONSIDERATION

The Company acknowledges that it has received good and valuable consideration for the undertakings contained herein, including the Creditor's extension or continuation of the Facility to Subsidiary, from which the Company derives direct and indirect benefit.

IN WITNESS WHEREOF, the Company has executed this letter as of the date first written above.

[PARENT COMPANY LEGAL NAME]

By: _____________________________________
Name: ___________________________________
Title: ___________________________________
Date: ____________________________________

COMPARISON: BINDING VS. NON-BINDING LANGUAGE

LEGAL CONSIDERATIONS

Enforceability Factors

Courts consider the following when determining enforceability:
1. Language used - Promissory vs. policy language
2. Commercial context - Reliance by creditor, benefit to issuer
3. Parties' intentions - Expressed understanding of legal effect
4. Consideration - Whether the issuer received value
5. Formalities - Whether the document is signed, witnessed, etc.

Risks for Issuers (Non-Binding Version)

Even non-binding comfort letters may create liability for:
- Negligent misstatement - If statements of fact are false
- Fraudulent misrepresentation - If statements are knowingly false
- Estoppel - In some circumstances

Risks for Creditors (Non-Binding Version)

• No legal recourse against issuer if subsidiary defaults
• Moral obligation only - issuer may choose not to honor
• Policy may change without notice

ACKNOWLEDGMENT BY CREDITOR (Optional)

For Non-Binding Version, the Creditor may be asked to acknowledge:

The undersigned Creditor acknowledges receipt of the foregoing comfort letter dated [DATE] from [COMPANY NAME]. Creditor understands and agrees that such letter:
(a) Does not constitute a guarantee or legally binding undertaking;
(b) Creates only a moral obligation on the part of the Company;
(c) Is not being relied upon as a guarantee or creating legal rights against the Company; and
(d) Is provided for informational purposes only.

[CREDITOR NAME]

By: _____________________________________
Name: ___________________________________
Title: ___________________________________
Date: ____________________________________

ATTORNEY CHECKLIST (DO NOT INCLUDE IN FINAL DOCUMENT)

☐ Determine whether binding or non-binding letter is intended
☐ Review language carefully to ensure it achieves intended legal effect
☐ Consider jurisdiction-specific case law on comfort letter enforceability
☐ If non-binding, ensure adequate disclaimers are included
☐ If binding, ensure adequate consideration and corporate authority
☐ Review for negligent misstatement exposure even if non-binding
☐ Consider whether a keepwell agreement or guarantee would be more appropriate
☐ Advise issuer of potential moral obligation even if legally non-binding
☐ Advise creditor of limitations on enforcement if non-binding
☐ Consider financial reporting implications (FASB guidance on guarantees)

END OF TEMPLATE