LegalDeal Structure
Intercreditor Agreement
Also known as: Intercreditor arrangement, creditor priority agreement, lender consent agreement
The agreement between a senior lender and subordinated creditor governing payment priority, blocking rights, and notice requirements. Controls whether the founder gets paid on their seller notes.
WHY IT MATTERS
When seller notes are subordinated to senior acquisition debt, the intercreditor agreement is the document that governs the relationship between the two creditors. It specifies payment priority, blocking rights, standstill periods, and notice requirements. Without seller protections in the intercreditor agreement, the senior lender can block all principal distributions at will — even when the company has cash. Founders should negotiate standstill limits, notice rights when covenants are breached, and caps on how long blocking periods can last.