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The Subordinate Loan Agreement is essential for financial transactions in Saudi Arabia where parties seek to establish a clear hierarchy of debt while maintaining Shariah compliance. This document is typically used when a borrower requires additional financing that ranks junior to existing senior debt, often for capital adequacy purposes or strategic funding arrangements. The agreement must navigate both the technical requirements of subordinated debt structures and the religious principles of Islamic finance, making it particularly complex in the Saudi Arabian context. It includes detailed provisions on profit calculation methods, payment restrictions, and subordination mechanics, all structured to comply with Shariah principles. The document is crucial for financial institutions meeting regulatory capital requirements, corporations seeking mezzanine financing, or in situations requiring structured, hierarchical funding arrangements within the Saudi Arabian legal framework.

1. Parties: Identification of the lender, borrower, and any other relevant parties to the agreement

2. Background: Context of the transaction and purpose of the subordinated loan

3. Definitions and Interpretation: Definitions of key terms and interpretation principles, including Shariah-compliant financing terms

4. The Facility: Details of the loan amount, purpose, and nature of the subordinated facility

5. Subordination Terms: Provisions establishing the subordinated nature of the loan and its ranking in relation to other debts

6. Islamic Finance Compliance: Specific provisions ensuring Shariah compliance of the financing structure

7. Conditions Precedent: Conditions that must be satisfied before the loan becomes effective

8. Drawdown: Procedures and conditions for drawing down the loan

9. Repayment and Prepayment: Terms for repayment, including any profit payments and prepayment provisions

10. Representations and Warranties: Standard and transaction-specific representations and warranties

11. Covenants: Positive and negative undertakings of the borrower

12. Events of Default: Circumstances constituting default and consequences

13. Changes to Parties: Provisions regarding assignment and transfer rights

14. Payment Mechanics: Details of payment procedures and calculations

15. Notices: Communication procedures between parties

16. Governing Law and Jurisdiction: Saudi law as governing law and jurisdiction provisions

17. Execution: Signature blocks and execution formalities