Intercompany Promissory Note
(Credit Agreement)

Summary

This template is an intercompany promissory note, often included as an exhibit to a credit agreement in a typical syndicated loan transaction. This template includes practical guidance and drafting notes. An intercompany promissory note is an instrument that evidences a loan between affiliated entities within a corporate group. Intercompany loans are regularly made as a means to move funds from one area of a business to another but are not always formally documented. However, since intercompany loans are assets of a company that can be included as collateral for a loan, lenders want certainty that they can track these loans and take and perfect a security interest in them. By evidencing intercompany loans with a promissory note, secured lenders can perfect their security interest in the loans extended pursuant to the note by taking physical possession of the note. This template contains bracketed subordination clauses that may be appropriate for a given transaction depending on the terms of the credit agreement and the requirements of the secured lenders. Subordination clauses also allow secured lenders to ensure that no creditors under intercompany debt (including affiliates of the borrower that may not be members of the loan group) are allowed to compete with the secured lenders' claims in a bankruptcy or foreclosure process. For more information on lien and debt subordination, see Lien Subordination versus Debt Subordination. Conform the capitalized terms to the defined terms in the relevant credit agreement. For an example of promissory notes issued to credit agreement lenders to evidence their loans, see Term Loan Promissory Note (Credit Agreement) and Revolving Promissory Note (Credit Agreement).