Intercompany Revolving Loan Agreement: Definition & Sample

An intercompany revolving loan agreement is a contract between two companies where one agrees to loan the other money up to a dollar limit. Meanwhile, the agreement allows the borrowing company to repay a portion of the current balance to the loaning company in payments. This type of loan agreement is commonly used to either shift cash to a business venture that would otherwise fail without the capital or to protect the investment interest of a lending company in the borrowing company.

The agreement is regularly made mutually beneficial by requiring the borrowing company to pay back to loan, plus interest, which results in a profit for the lending entity.

Common Sections in Intercompany Revolving Loan Agreements

Below is a list of common sections included in Intercompany Revolving Loan Agreements. These sections are linked to the below sample agreement for you to explore.

Intercompany Revolving Loan Agreement Sample

INTERCOMPANY REVOLVING CREDIT AGREEMENT

THIS INTERCOMPANY REVOLVING CREDIT AGREEMENT (this “ Agreement ”) is made and entered into as of April 24, 2020, by and between FAT Brands Inc., a Delaware corporation (“ Lender ”), and Fog Cutter Capital Group Inc., a Maryland corporation (“ Borrower ” and, together with Lender, the “ Parties ” and each, a “ Party ”).

WHEREAS, Lender has previously extended credit to Borrower pursuant to that certain Intercompany Promissory Note, dated October 20, 2017, with an initial principal balance of $11,906,000 (the “ Original Note ”), and Lender and certain of its direct or indirect subsidiaries (the “ Subsidiaries ”) have made additional intercompany advances to Borrower following the date of the Original Note through December 29, 2019 in the aggregate amount of $10,523,000 (the “ Prior Revolving Loans ”);

WHEREAS, Borrower has requested that the Prior Revolving Loans be converted into initial balances of borrowings under this Agreement payable to Lender or the Subsidiaries, as applicable, and that the Lender commit to make additional extensions of credit as provided herein, all on the terms and subject to the conditions described herein; and

WHEREAS, Lender is willing to convert the Prior Revolving Loans to borrowings under this Agreement, and to extend additional credit to Borrower under the terms and conditions herein set forth.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties hereby agree as follows:

1.1 Intercompany Debt .

(a) Starting Balance . As of December 29, 2019, the Original Note, the Prior Revolving Loans, other adjustments, and the aggregate balance of accrued and unpaid interest thereon (which amounts are reflected on Schedule I as of such date) shall be converted into an initial balance of borrowings under this Agreement in the aggregate amount of $21,067,000, and additional borrowings that were made during the first fiscal quarter of 2020 (which amounts will be reflected on Schedule I ) shall be added to the initial balance of borrowings under this Agreement (collectively, the “ Starting Balance ”). The amounts included in the Starting Balance that are owed directly to Lender on the date hereof shall continue to be due and payable to Lender, and the amounts included in the Starting Balance that are owed to each Subsidiary on the date hereof shall remain due and payable to such Subsidiary, as applicable.

(b) Reborrowing . Following the date hereof, Borrower may at any time and from time to time (i) repay to Lender or the applicable Subsidiary, and (ii) borrow and reborrow solely from Lender, and Lender shall be obligated to lend to Borrower, subject in all cases to the terms and conditions of this Agreement and other agreements and instruments that may apply to Lender and/or any of the Subsidiaries from time to time, up to a maximum amount of borrowings outstanding hereunder at any time of $35,000,000. Any such additional borrowings or reborrowings shall be subject to the approval by the Lender’s board of directors, in advance on a quarterly basis and may be subject to other conditions set forth by the Lender.

(c) Interest . Borrower shall be charged interest on a daily basis for the outstanding balance of borrowings and accrued and unpaid interest under this Agreement. The interest rate to be paid by Borrower shall be at a rate equal to ten percent (10.0%) per annum, compounded annually, and shall continue to accrue until paid. Interest shall be computed on the basis of a year of 365 days for the actual number of days elapsed.

(d) Schedules . Borrowings and accrued and unpaid interest hereunder shall be evidenced by one or more loan accounts or records maintained by Lender in the ordinary course of business. Lender shall also attach and update on at least a quarterly basis Schedule I to this Agreement, detailing the balances and payments made hereunder during each fiscal quarter of Lender.

1.2 Repayment . Borrower may repay at any time any and all outstanding borrowings hereunder without penalty. On the Maturity Date (defined below), Borrower shall be obligated to repay in full the entire amount of outstanding borrowings hereunder plus accrued and unpaid interest thereon. Repayment of borrowings hereunder and interest thereon may be made in cash, set off against other obligations owed by Lender to Borrower (including under the Tax Sharing Agreement, dated October 20, 2017, between the Parties), or such other form as may be agreed by the Parties.

1.3 Term of Agreement . The term of this Agreement shall commence on the date hereof and shall continue until the five-year anniversary of the date hereof, unless terminated earlier as provided below or extended by the mutual agreement of the Parties (the “ Maturity Date ”).

1.4 Termination . Either Party shall have the right to terminate this Agreement upon the occurrence of any of the following events:

(a) A material breach of this Agreement by either Party that is not cured within thirty (30) days after receipt of written notice of such breach from the other Party;

(b) Lender shall have the right to terminate this Agreement if Borrower or its affiliates own shares representing less than 80% of the voting power of the outstanding Common Stock of Lender; or

(c) In no way limiting the foregoing, the Parties may terminate this Agreement by mutual consent memorialized in a writing reasonably satisfactory to both Lender and Borrower.

1.5 Miscellaneous . The terms set forth in Schedule A attached hereto are incorporated by reference herein and shall apply to this Agreement as if fully set forth herein.

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IN WITNESS WHEREOF , Borrower and Lender have each caused this Agreement to be executed on the date and year first above written.