Mezzanine Financing: Tools, Applications and Total Performance

Appendix 2

First Lien/Second Lien Inter-creditor Agreement

[First Lien Agent]

[Second Lien Agent]

[Control Agent]

[Borrower]

[Holdings]

[Guarantor Subsidiaries]

[date]

Updates of the ABA model agreement can be found at: http://apps.americanbar.org/dch/committee.cfm?com=CL190029

Table of Contents

Preamble

Parties

Background

Agreement

1 Lien Priorities

1.1 Seniority of Liens securing First Lien Obligations

1.2 No payment subordination

1.3 First Lien Obligations and Second Lien Obligations

1.4 First Lien Cap

1.5 First and Second Lien Collateral to be identical

1.6 Pledged Collateral

1.7 Limitations on duties and obligations

1.8 Prohibition on contesting Liens; no marshaling

1.9 Confirmation of subordination in Second Lien Collateral Documents

1.10 Release of Liens [or guaranties]

1.11 Subordination of Liens securing Excess First Lien Obligations

2 Modification of Obligations

2.1 Permitted modifications

2.2 Modifications requiring consent

2.3 Parallel modifications to Second Lien Obligations

2.4 Notice of modifications

3 Enforcement

3.1 Who may exercise remedies

3.2 Manner of exercise

3.3 Specific performance

3.4 Notice of exercise

4 Payments

4.1 Application of proceeds

4.2 Insurance

4.3 Payment turnover

4.4 Refinancing after discharge of First Lien Obligations

5 Purchase of First Lien Obligations by Second Lien Claimholders

5.1 Purchase right

5.2 Purchase Notice

5.3 Purchase Price

5.4 Purchase closing

5.5 Excess First Lien Obligations not purchased

5.6 Actions after purchase ...