The Profit Participating Loan Agreement is a sophisticated financing instrument used when traditional debt or equity financing alone may not meet the parties' needs. It's particularly suitable for situations where the borrower seeks flexible financing terms and the lender desires potential upside through profit participation. The agreement, governed by Hong Kong law, combines elements of debt financing with equity-like returns, making it attractive for growth companies and strategic investors. It includes comprehensive provisions for profit calculation, payment mechanics, and information rights, while ensuring compliance with Hong Kong's regulatory framework, particularly the Companies Ordinance and Securities and Futures Ordinance. This structure is often used in real estate development, venture capital investments, and corporate restructuring scenarios where traditional financing methods may be less suitable.

1. Parties: Identification of the Lender and Borrower, including registration details

2. Background: Context of the loan arrangement and brief description of the profit participation structure

3. Definitions and Interpretation: 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

6. Repayment Terms: Repayment schedule, prepayment provisions, payment mechanics

7. Conditions Precedent: Prerequisites for drawdown including documentation and due diligence requirements

8. Representations and Warranties: Standard and specific representations by the Borrower

9. Covenants: Financial and operational covenants, including information rights and business conduct

10. Events of Default: Default triggers and consequences

11. Information Rights and Audit: Lender's rights to verify profit calculations and business performance

12. Tax Provisions: Treatment of withholding tax, stamp duty, and other tax implications

13. Boilerplate Provisions: Standard clauses including notices, amendments, governing law, etc.