The Profit Participating Loan Agreement is primarily used in situations where traditional debt financing needs to be combined with equity-like returns, particularly common in growth financing, real estate development, and project finance in Belgium. This hybrid financing instrument allows lenders to participate in the borrower's success while maintaining creditor rights under Belgian law. The agreement is structured to comply with Belgian financial regulations, tax laws, and corporate governance requirements, making it particularly suitable for medium to large-scale financing transactions where the lender seeks higher returns than conventional loans but doesn't want full equity exposure. It includes detailed provisions for profit calculation, information rights, and security arrangements, while addressing specific Belgian law requirements regarding profit sharing and financial instruments.
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1. Parties: Identification of the Lender and Borrower, including full legal names, registration details, and addresses
2. Background: Context of the loan agreement, including purpose and any relevant corporate approvals
3. Definitions and Interpretation: Definitions of key terms including 'Profit', 'Participation Rate', 'Calculation Period', and interpretation rules
4. The Loan: Principal amount, purpose, drawdown conditions and mechanics
5. Interest and Profit Participation: Base interest rate, profit participation calculation methodology, payment dates and mechanics
6. Calculation of Profit Share: Detailed provisions on how profits are calculated, what adjustments apply, and verification rights
7. Repayment and Prepayment: Terms for repayment of principal, prepayment conditions and any associated penalties
8. Representations and Warranties: Standard and specific representations by the Borrower regarding its business and financial condition
9. Information Covenants: Borrower's obligations to provide financial information and profit calculations
10. General Covenants: Borrower's operational and financial covenants
11. Events of Default: Circumstances constituting default and consequences
12. Changes to Parties: Transfer and assignment provisions
13. Payment Mechanics: Bank accounts, payment times, currency and calculations
14. Governing Law and Enforcement: Choice of Belgian law and jurisdiction provisions
1. Security: Required if the loan is secured by any assets or guarantees
2. Tax Gross-Up and Indemnities: Include if tax gross-up provisions are required based on the parties' tax status
3. Subordination: Include if the loan needs to be subordinated to other debt
4. Regulatory Compliance: Include if either party is subject to specific regulatory requirements
5. Anti-Corruption and Sanctions: Include for cross-border transactions or regulated entities
6. Currency Protection: Include if profit calculations involve multiple currencies
7. Parent Company Guarantee: Include if parent company guarantee is required
1. Schedule 1 - Conditions Precedent: List of documents and conditions required before drawdown
2. Schedule 2 - Form of Drawdown Request: Template for requesting loan disbursement
3. Schedule 3 - Profit Calculation Methodology: Detailed formula and examples of profit share calculations
4. Schedule 4 - Form of Compliance Certificate: Template for periodic compliance certification
5. Schedule 5 - Financial Covenants Calculations: Detailed methodology for calculating financial covenants
6. Schedule 6 - Form of Transfer Certificate: Template for transferring loan participation
7. Schedule 7 - Agreed Accounting Principles: Specific accounting treatments for profit calculations
8. Schedule 8 - Payment Schedule: Template showing payment dates and expected amounts
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