Profit Sharing Loan Agreement Template for Philippines

The Profit Sharing Loan Agreement is a specialized financing instrument used in the Philippines when traditional fixed-interest loans may not suit the borrower's business model or cash flow patterns. This document is particularly valuable for growing businesses that prefer to align their loan obligations with their profitability. It comprehensively details the loan amount, profit-sharing calculations, payment mechanisms, and reporting requirements while ensuring compliance with Philippine regulatory requirements, including the Civil Code, Securities Regulation Code, and relevant banking regulations. The agreement is structured to protect both the lender's investment and the borrower's operational flexibility, incorporating necessary safeguards and monitoring mechanisms while maintaining commercial practicality.

1. Parties: Identifies and provides full details of the Lender and Borrower, including registration details for companies

2. Background: Contextual information about the purpose of the loan and the basis for the profit-sharing arrangement

3. Definitions: Defines key terms used throughout the agreement, including 'Profit', 'Calculation Period', and 'Distribution Date'

4. Loan Amount and Disbursement: Specifies the principal amount, disbursement conditions, and drawdown procedures

5. Interest and Profit Share: Details the interest rate (if any) and the profit-sharing mechanism, including calculation methods and payment periods

6. Repayment Terms: Outlines the repayment schedule for the principal amount and profit share distributions

7. Borrower's Representations and Warranties: Standard and specific representations regarding business operation and financial condition

8. Borrower's Covenants: Positive and negative covenants, including business operation requirements and restrictions

9. Financial Reporting and Audit Rights: Requirements for financial statements and Lender's rights to verify profit calculations

10. Events of Default: Lists circumstances constituting default and consequences thereof

11. Remedies: Details the Lender's rights and remedies upon occurrence of an Event of Default

12. Governing Law and Jurisdiction: Specifies Philippine law as governing law and jurisdiction for disputes

13. Miscellaneous: Standard boilerplate provisions including notices, amendments, and severability