Subordination Agreement - Except Inventory - Short Form

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This Subordination Agreement (Except for Inventory/Short Form) will set out the security interests between a debtor and two creditors. This form can be tailored to fit your unique situation.

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This Subordination Agreement is between a debtor, original creditor and a new creditor who has agreed to provide a loan to the debtor. In this agreement the original creditor agrees to subordinate all security interest to the new creditor except security in debtor's inventory which is pledged to original creditor. This agreement sets out the names of all parties and the amount and date of the loan. It also sets out the exclusion of inventory which is secured by the original loan. A written Subordination Agreement (Except for Inventory) will prove invaluable in the event there are disagreements or miscommunication between the parties about the loan security. This agreement is set forth in a short format.

This Subordination Agreement (Except for Inventory/Short Form) includes the following:
  • Parties: Identity of both creditors and the debtor;
  • Loan Information: Sets forth the amount and date of loan agreement between the debtor and the new creditor;
  • Consent/Disentitlement: Sets forth original creditor's consent to new creditor's rights to security and disentitlement of new creditor's security in debtor's inventory.

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

This attorney-prepared packet contains:
  1. General Instructions
  2. Subordination Agreement (Except for Inventory/Short Form)
State Law Compliance: This form complies with the laws of all states
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.
 
 
Subordination Agreement
(Short Form  Excluding Inventory)

 

 

TO:   [Name of Lender] (the “New Creditor”)
WHEREAS:
(A)   [Name of Debtor] (the “Debtor”) is indebted to [Name of Creditor] (the “Creditor”), (such indebtedness being herein referred to as the “Creditor Indebtedness”), and as security therefor, the Creditor has taken security over all of the assets and undertaking of the Debtor (the “Creditor Security”);
(B)   The New Creditor has agreed to provide to the Debtor a loan in the principal amount of $[Amount of Loan] pursuant to a loan agreement dated [Date of Loan Agreement] (the indebtedness under such loan agreement being herein referred to as the “New Creditor Indebtedness”), and as security therefor, the New Creditor has taken security over all of the assets and undertaking of the Debtor (the “New Creditor Security”);
(C)   The Creditor has agreed to the establishment of the New Creditor Security and to subordinate the Creditor Security to the New Creditor Security, upon the terms and conditions hereinafter contained;
NOW THEREFORE for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Creditor agrees as follows:
1.   Consent. The Creditor hereby consents to the establishment of the New Creditor Security.
2.   Subordination. Subject to paragraph 3 hereof, the Creditor hereby subordinates the Creditor Security to the New Creditor Security, up to the aggregate amount of the New Creditor Indebtedness..
3.   Exception. Notwithstanding paragraph 2 hereof, nothing herein shall be construed or interpreted as subordinating the Creditor Security over any inventory or any proceeds thereof, to the extent that such inventory has not been paid for by the Debtor.
4.   Disentitlement of Proceeds. Nothing herein contained shall be construed as entitling the New Creditor to receive any proceeds from any of the property or assets of the Debtor in respect of which the New Creditor does not have any security, in respect of which the security is invalid and unenforceable as against third parties or in respect of which the obligation secured by the security is invalid or unenforceable. If any person shall have a valid claim to proceeds of realization from any of the property or assets of the Debtor in priority to or on a parity with the New Creditor, then this Agreement shall not apply so as to diminish the rights (as such rights would have been but for this Agreement) of the Creditor to the proceeds of realization from such property or assets. Nothing contained in this Agreement shall be construed as conferring any rights upon the Debtor or any third party. The priorities provided for in this Agreement shall be effective notwithstanding any matter or thing including, without limitation, the order of any bankruptcy court having jurisdiction as to the entitlement of the New Creditor or the Creditor to any proceeds.
5.   Default by Debtor. In the event that the Debtor defaults in payment of any of the Creditor Indebtedness, then the Creditor agrees to notify the New Creditor of such default prior to realizing under the Creditor Security, provided however, that failure to so notify the New Creditor will not affect any actions or proceedings taken by the Creditor in connection with such default.
6.   Governing Law and Attornment. This Agreement shall be governed by and construed in accordance with the laws of the State of [State (ie. California)].
 
DATED this _____ day of ___________________, 20_____
 
 
 
[NAME OF CREDITOR]
 
 
 
 
Per:
 
 
 
 
Name:   
Title:         
 
Number of Pages4
DimensionsDesigned for Letter Size (8.5" x 11")
EditableYes (.doc, .wpd and .rtf)
UsageUnlimited number of prints
Product number#28646
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.
 
 
Subordination Agreement
(Short Form  Excluding Inventory)

 

 

TO:   [Name of Lender] (the “New Creditor”)
WHEREAS:
(A)   [Name of Debtor] (the “Debtor”) is indebted to [Name of Creditor] (the “Creditor”), (such indebtedness being herein referred to as the “Creditor Indebtedness”), and as security therefor, the Creditor has taken security over all of the assets and undertaking of the Debtor (the “Creditor Security”);
(B)   The New Creditor has agreed to provide to the Debtor a loan in the principal amount of $[Amount of Loan] pursuant to a loan agreement dated [Date of Loan Agreement] (the indebtedness under such loan agreement being herein referred to as the “New Creditor Indebtedness”), and as security therefor, the New Creditor has taken security over all of the assets and undertaking of the Debtor (the “New Creditor Security”);
(C)   The Creditor has agreed to the establishment of the New Creditor Security and to subordinate the Creditor Security to the New Creditor Security, upon the terms and conditions hereinafter contained;
NOW THEREFORE for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Creditor agrees as follows:
1.   Consent. The Creditor hereby consents to the establishment of the New Creditor Security.
2.   Subordination. Subject to paragraph 3 hereof, the Creditor hereby subordinates the Creditor Security to the New Creditor Security, up to the aggregate amount of the New Creditor Indebtedness..
3.   Exception. Notwithstanding paragraph 2 hereof, nothing herein shall be construed or interpreted as subordinating the Creditor Security over any inventory or any proceeds thereof, to the extent that such inventory has not been paid for by the Debtor.
4.   Disentitlement of Proceeds. Nothing herein contained shall be construed as entitling the New Creditor to receive any proceeds from any of the property or assets of the Debtor in respect of which the New Creditor does not have any security, in respect of which the security is invalid and unenforceable as against third parties or in respect of which the obligation secured by the security is invalid or unenforceable. If any person shall have a valid claim to proceeds of realization from any of the property or assets of the Debtor in priority to or on a parity with the New Creditor, then this Agreement shall not apply so as to diminish the rights (as such rights would have been but for this Agreement) of the Creditor to the proceeds of realization from such property or assets. Nothing contained in this Agreement shall be construed as conferring any rights upon the Debtor or any third party. The priorities provided for in this Agreement shall be effective notwithstanding any matter or thing including, without limitation, the order of any bankruptcy court having jurisdiction as to the entitlement of the New Creditor or the Creditor to any proceeds.
5.   Default by Debtor. In the event that the Debtor defaults in payment of any of the Creditor Indebtedness, then the Creditor agrees to notify the New Creditor of such default prior to realizing under the Creditor Security, provided however, that failure to so notify the New Creditor will not affect any actions or proceedings taken by the Creditor in connection with such default.
6.   Governing Law and Attornment. This Agreement shall be governed by and construed in accordance with the laws of the State of [State (ie. California)].
 
DATED this _____ day of ___________________, 20_____
 
 
 
[NAME OF CREDITOR]
 
 
 
 
Per:
 
 
 
 
Name:   
Title:         
 
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