Pari Passu Agreement

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This Pari Passu Agreement is between a borrower and two lenders who agree to share equal seniority in security given by the borrower. It is crucial that this type of agreement be clearly set out in writing.

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This Pari Passu Agreement is between a borrower and two lenders who agree to share equal seniority in regard to security given by the borrower. This agreement sets out the names of the lender, joint lender and borrower, as well as the type of agreements, their dates and the amount of loan secured by each agreement. It is imperative that this type of agreement be memorialized in writing. A written Pari Passu Agreement will be invaluable in the event of miscommunication or disagreements between the parties surrounding the loan agreements.

This Pari Passu Agreement contains the following:
  • Parties: Names of the three parties to this agreement;
  • Agreement Information: Sets out the type, date and amount of all agreements (i.e. credit agreement in a certain amount);
  • Security: Description of the debtor's security held by each individual lender;
  • Sale/Assignment of Security: Sets forth how security will be sold or assigned in the event a third party desires to purchase the pledged security;
  • Signatures: This agreement must be signed by both lenders and the borrower.

Protect yourself and your rights by using our attorney-prepared forms.

This attorney-prepared packet contains:
  1. General Instructions
  2. Pari Passu Agreement
State Law Compliance: This form complies with the laws of all states
Number of Pages11
DimensionsDesigned for Letter Size (8.5" x 11")
EditableYes (.doc, .wpd and .rtf)
UsageUnlimited number of prints
Product number#28637
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
Pari Passu Agreement

 

 

THIS AGREEMENT made as of [Date (ie. July 31, 2002)]
B E T W E E N:
[NAME OF LENDER], of [Address of Lender]
(the “Lender”)
- and -
[NAME OF JOINT LENDER], of [Address of Joint Lender]
(the “Joint Lender”)
- and -
[NAME OF BORROWER]
(the “Borrower”)
WHEREAS 
(A)   Pursuant to a [Type of Agreement between Lender and Borrower (ie. a credit agreement)] between the Borrower and the Lender dated [Date of Lender Credit Agreement (ie. July 31, 2002)] (the “Lender Credit Agreement”) the Lender agreed to provide to the Borrower a loan in the amount of [Amount of Lender Credit Facility (ie. $150,000.00)], subject to the terms and conditions contained therein, and as security therefor, the Borrower has provided to the Lender, inter alia, the “Lender Security” (as described below);
(B)   Pursuant to a [Type of Agreement between Joint Lender and Borrower (ie. a credit agreement)] between the Borrower and the Joint Lender dated [Date of Joint Lender Credit Agreement (ie. July 31, 2002)] (the “Joint Lender Credit Agreement”) the Joint Lender agreed to provide to the Borrower a loan in the amount of [Amount of Joint Lender Credit Facility (ie. $150,000.00)], subject to the terms and conditions contained therein, and as security therefor, the Borrower has provided to the Lender, inter alia, the “Joint Lender Security” (as described below); and
(C)   The parties hereto intend that each of the Lender Security and the Joint Lender Security shall rank pari passu with the other and that all of the Security shall be held for the benefit and security of both Lenders, subject to the terms and conditions of this Agreement;
NOW THEREFORE in consideration of the recitals, the mutual covenants hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1 -    DEFINITIONS
1.1   In this Agreement, the following capitalized words and phrases shall have the following respective meanings, unless otherwise defined herein or the context otherwise requires:
(a)   Lender Security” means [Describe Lender Security (ie. the Security Agreement dated July 31,2002 between the Borrower and the Lender)].
(b)   Joint Lender Security” means[Describe Lender Security (ie. the Security Agreement dated July 31,2002 between the Borrower and the Joint Lender)].
(c)   Lenders” means the Joint Lender and the Lender and “Lender” means either of them.
(d)   Security” means the Lender Security and the Joint Lender Security and, where the context requires, means either the Lender Security or the Joint Lender Security, as the case may be.
ARTICLE 2 -    CONSENT
2.1   The Joint Lender hereby consents to (i) the entering into by the Borrower of the Lender Credit Agreement, (ii) the creation and issue by the Borrower of the Lender Security, and (iii) the incurring by the Borrower of the indebtedness under the Lender Credit Agreement.
2.2   The Lender hereby consents to (i) the entering into by the Borrower of the Joint Lender Credit Agreement, (ii) the creation and issue by the Borrower of the Joint Lender Security, and (iii) the incurring by the Borrower of the indebtedness under the Joint Lender Credit Agreement.
ARTICLE 3 -    PRIORITIES
3.1   Each of the Lender Security and the Joint Lender Security shall rank pari passu with the other, with all the Security being for the benefit and security of both Lenders, without any preference or priority to either Lender, subject to the terms and conditions of this Agreement.
3.2   To the extent necessary to give effect to the provisions of this Agreement each Lender hereby:
(a)   postpones and subordinates the Security of such Lender to the Security of the other Lender; and
(b)   confirms and agrees that it holds all its right, title and interest in and to the Security of such Lender and in and to the property and assets of the Borrower arising by virtue of the grants and covenants contained in such Security on behalf of and for the benefit and security of both Lenders on a pari passu basis, subject to the terms and conditions of this Agreement.
3.3   Subject to Section 3.5, the covenants and agreements contained herein shall apply in all events and circumstances regardless of:
(a)   the date of execution, attachment, registration or perfection of any Security held by either Lender;
(b)   the date of any advance or advances made to the Borrower by either Lender;
(c)   the date of default by the Borrower under any of the Security of either Lender; or
(d)   any priority granted by any principle of law or any statute.
3.4   Any proceeds of insurance or expropriation received by the Borrower, the Lender or the Joint Lender in respect of any of the property and assets charged by the Security shall be dealt with as though such proceeds of insurance or expropriation were paid or payable as proceeds of realization of the property and assets for which they compensate.
3.5   If either of the Lender Security or the Joint Lender Security is found to be unenforceable, invalid, unregistered or unperfected against any party other than the Lender herein by a court of competent jurisdiction and all appeals from any such finding have been heard and determined or the period for making any such appeal has expired without an appeal being made, the foregoing provisions of this Article 3 shall not apply to such Security.
3.6   Each Lender shall allow the other, and their agents, access at all reasonable times to any property and assets of the Borrower charged by the Security to view the same, and access to, so as to make copies of or extracts from, any books or account and all records, ledgers, reports, documents and other writings relating to such property and assets.
ARTICLE 4 -    COVENANTS OF BORROWER
4.1   The Borrower hereby confirms to and agrees with the Lenders:
(a)   that default under the Security of either Lender shall constitute default under the Security of the other Lender, notwithstanding any provision to the contrary in any Security; and
(b)   that so long as the Borrower remains obligated or indebted to the Lenders, or either of them, it shall hold its property and assets for the Lenders in accordance with their respective interests under this Agreement; and
(c)   that any amendment or variation of the terms of this Agreement by the Lenders shall not require the consent or agreement of the Borrower unless the interests of the Borrower are directly affected thereby.
ARTICLE 5 -    REALIZATION
5.1   Each Lender shall, upon becoming aware of any default under the terms of its Security and prior to making any demand for payment or taking any steps to enforce its Security, notify the other Lender of such default and the intention of such Lender to make demand and enforce its Security (the “Notice”). The Lenders shall meet promptly after the giving by a Lender of a Notice and, in any event, not later than seven (7) days after the giving by a Lender of a Notice to discuss and reach agreement as to the procedure to be followed in the realization of the Security, including without limitation, the appointment of a single receiver or receiver-manager to effect such realization.
5.2   If subsequent to the giving by a Lender of a Notice, either Lender does not wish to realize upon its Security it shall, upon request by the other Lender, subordinate and postpone its Security in favour of the other Lender and shall do all such further acts and things as may be necessary to give effect to such subordination and postponement. In such event, the Lender wishing to realize upon its Security may appoint a receiver or receiver-manager to realize upon its Security, provided that it shall give written notice of such appointment to the other Lender concurrent with such appointment. Notwithstanding the foregoing it is understood and agreed that any realization by a Lender shall be for the benefit of both Lenders in accordance with the provisions of this Agreement.
5.3   Any realization upon the Security by the Lenders or either Lender shall be made for an amount, after payment of all costs and expenses, at least equal to the aggregate amount owing to the Lenders, unless otherwise agreed upon by the Lenders. A Lender who receives a bona fide offer to purchase the property and assets charged by the Security for an amount, after payment of all costs and expenses, less than the aggregate amount outstanding to the Lenders, which offer it wishes to accept, shall, prior to accepting such offer, give the other Lender fifteen (15) days to consent to the acceptance of such offer. If the other Lender fails to consent to the acceptance of the offer within the said fifteen (15) day period, then such other Lender shall be deemed to have agreed to purchase, within a further fifteen (15) day period, the Security of the Lender who received the said offer for an amount equal to the pro-rata proceeds that such Lender would have received on a successful completion of such offer, after payment of costs and expenses, in accordance with the provisions of this Agreement.
5.4   Neither Lender shall become absolute owner by foreclosure of any of the property or assets which are subject to the Security without the consent of the other Lender.
5.5   All proceeds received by the receiver or receiver-manager or either of the Lenders after the giving of a Notice by a Lender shall be applied as follows:
(a)   firstly, in payment of all costs, charges and expenses of and incidental to the appointment of a receiver or receiver-manager and the exercise by such receiver or receiver-manager of all or any of its powers including the remuneration of the receiver or receiver-manager and all amounts properly payable by him;
(b)   secondly, in payment of or in reimbursement to the Lenders of all reasonable costs, charges and expenses incurred in connection with the protection and realization of the Security including any payments made upon claims having priority over the Security;
(c)   thirdly, on account of the indebtedness due to each of the Lenders under the Security, rateably according to the proportion that the principal amount then outstanding to each Lender bears to the total principal amount then outstanding to both Lenders under the Security;
(d)   fourthly, any surplus remaining to the Borrower or to the party next entitled thereto, or if there are competing claims to the knowledge of the Lenders, then payment may be made into Court by way of interpleader.
ARTICLE 6 -    AMENDMENTS
6.1   Each of the Lender and the Joint Lender covenants and agrees with the other that it will not amend any of the terms or conditions of the Lender Credit Agreement or the Joint Lender Credit Agreement, as the case may be, without the consent of the other Lender having been firstly obtained in writing.
ARTICLE 7 -    PREPAYMENTS
7.1   If, at any time after the Lender Credit Agreement or the Joint Lender Credit Agreement have been advanced to the full principal amounts thereof, either of the Lenders receives notice from the Borrower of the Borrowers intention to make any prepayment or accelerated payment permitted by its agreements with the Lenders, then such Lender shall promptly notify the other. No prepayment is to be accepted by either lender without the written consent of the Lender and the Joint Lender.
ARTICLE 8 -    OTHER SECURITY
8.1   The parties acknowledge that the Lenders have obtained security for their loans in addition to the Security. Such other security and any other security that may hereafter be obtained by either Lender shall not be taken into consideration to reduce the amounts owing to either Lender at any time for the purpose of this Agreement, unless and until any of such security has in fact been realized upon by a Lender and then only to the extent that the proceeds derived from such realization have reduced the balance owing to such Lender.
ARTICLE 9 -    SALE OR ASSIGNMENT
9.1   If either Lender wishes to sell or assign its Security and shall have received a bona fide offer from a third party to purchase its Security which it is prepared to accept, then it shall first offer to sell its Security to the other Lender for a period of fifteen (15) days, at the price and on the same terms and conditions as contained in the offer. If the offer is accepted by the other Lender within such fifteen (15) day period, then the sale and assignment of such Security to the other Lender shall be completed in accordance with the terms and conditions contained in the offer. If the offer is not accepted by the other Lender within such fifteen (15) day period, then the Lender receiving the offer from the third party may complete the sale to such third party in accordance with the terms and conditions of the offer.
9.2   Neither Lender shall sell or assign any of the Lender Security or the Joint Lender Security without obtaining from the purchaser or assignee an agreement to be bound by the provisions of this Agreement in form satisfactory to the other Lender.
ARTICLE 10 -    NOTICE
10.1   Any notice required or permitted to be given pursuant to this Agreement shall be in writing and shall be addressed and delivered by the pre-paid registered mail or sent by facsimile transmission to the parties hereto as follows:
If to the Lender:
[Address of Lender]
Attention:   [Attention]Fax No:   [Fax No.]
If to the Joint Lender:
[Address of Joint Lender]
Attention:   [Attention]Fax No:   [Fax No.]
If to the Borrower:
[Address of Borrower]
Attention:   [Attention]Fax No:   [Fax No.]
or to such other address as the parties may from time to time by notice in writing direct. Notice, if by facsimile shall be deemed to be received the next business day following transmission thereof, and if by mail, shall be deemed to be received three business days after the date of mailing, unless there exists at the time of mailing or within three days of mailing a labour dispute which would preclude the delivery of the mail, in which case notice shall only be deemed to have been received if actually delivered.
ARTICLE 11 -    ARBITRATION
11.1   If the Lenders are unable to agree on any matter intended to be governed by this Agreement then, upon written notice to the other, either Lender may demand that the matter be submitted to arbitration. In such event each Lender shall nominate one person within seven (7) days of the said notice and the arbitrators so chosen shall agree on an additional arbitrator. If the appointment of the additional arbitrator cannot be agreed upon within fourteen (14) days of the said notice either party to the dispute can refer the matter to a Judge to appoint such an arbitrator. The arbitration shall be carried out in accordance with the terms and conditions contained in the governing arbitration legislation.
ARTICLE 12 -    GENERAL
12.1   From time to time upon request therefor the Lenders shall advise each other of the particulars of the indebtedness and liability of the Borrower to each of them.
12.2   The Lenders and the Borrower shall do, perform execute and deliver all acts, deeds and documents as may be necessary from time to time to give full force and effect to the intent of this Agreement.
12.3   This Agreement may be executed in several counterparts each of which when so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument and shall be effective as of the formal date hereof.
12.4   This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, successors and assigns, and shall be governed in all respects by the laws of the State of [State (ie. California)].
12.5   This Agreement shall continue in full force and effect until the date on which it is terminated by the mutual consent of the Lenders.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the date first above written.
 
 
[NAME OF LENDER]
 
 
 
Per:
 
 
 
 
Name:   
Title:   
 
 
 
[NAME OF JOINT LENDER]
 
 
 
Per:
 
 
 
 
Name:   
Title:   
 
 
 
[NAME OF BORROWER]
 
 
 
Per:
 
 
 
 
Name:   
Title:   
 
 
 
Schedule "A"Security
Lender Security
[Describe Lender Security]
 
 
Joint Lender Security
[Describe Joint Lender Security]
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