Prudential Undertaking Clause Samples
A Prudential Undertaking is a contractual commitment by one party to maintain certain financial standards or reserves to ensure ongoing solvency and reliability. Typically, this clause requires the party to meet specified financial ratios, maintain minimum levels of capital, or adhere to regulatory requirements throughout the term of the agreement. By imposing these obligations, the clause helps protect the other party from the risk of default or financial instability, thereby ensuring the continued performance and security of the contractual relationship.
Prudential Undertaking. (a) If User does not have, or ceases to have, a long term senior unsecured debt rating of at least "BBB-" by Standard & Poor’s or an equivalent rating from another internationally recognised rating agency (Minimum Credit Rating), User will provide Service Provider with a guarantee of all User's obligations under this Agreement for the Term from a Related Body Corporate of User with the Minimum Credit Rating (Guarantor) in favour of Service Provider (Undertaking).
(b) For the avoidance of doubt, Service Provider will not be required to commence providing the Services or continue providing the Services until User:
(i) provides Service Provider with an Undertaking under clause 17.9(a); or
(ii) otherwise satisfies Service Provider of the ability of User to meet its contractual obligations to Service Provider.
(c) If User is unable to provide the Undertaking or if an Undertaking provided by User ceases to have effect or the credit rating of the Guarantor is downgraded below the Minimum Credit Rating or, in Service Provider's reasonable opinion, one or more events have occurred that have or are likely to have a material adverse effect on the Guarantor's ability to meet its obligations under the Undertaking, then Service Provider may request that User provide it with any one of the following:
(i) an irrevocable demand guarantee issued on terms and by a bank or other financial institution acceptable to Service Provider;
(ii) an irrevocable letter of credit satisfactory to Service Provider, acting reasonably; or
(iii) some other form of prudential assurance satisfactory to Service Provider, (each an Adequate Assurance) for a sum equal to the amount that would be payable by User under this Agreement over the Term (and ignoring any sales or transfers by User of Firm Service MDQ or Other Entitlements that may take place during the Term) (Security Amount).
(d) If User does not provide Service Provider with Adequate Assurance within 14 Days of Service Provider's request, Service Provider may suspend the performance of any and all of its obligations under this Agreement until User has provided the requested Adequate Assurance.
(e) If User fails to pay Service Provider:
(i) any amount due and payable under this Agreement within the time provided under this Agreement; or
(ii) any amount due and payable following the resolution of a Dispute pursuant to clause 32, Service Provider may demand payment of such amount from the Guarantor or apply the Adequate Assurance (as applic...