Royalty Financing Agreement Template for Philippines

The Royalty Financing Agreement serves as a critical alternative financing instrument in the Philippine market, particularly suitable for companies seeking growth capital without traditional debt or equity dilution. This document type is commonly used when a company has stable revenue streams but prefers to align financing costs with business performance through royalty payments rather than fixed debt obligations. The agreement must comply with Philippine financial regulations, corporate law, and securities requirements, especially when involving foreign investors. It includes detailed provisions for calculating and paying royalties based on agreed revenue metrics, financial reporting requirements, and protections for both the financing party and the recipient company. The document is structured to provide clarity on payment obligations while ensuring flexibility for business operations and growth.

1. Parties: Identification of the financing party and the recipient company, including their legal status and addresses

2. Background: Context of the financing arrangement, business purpose, and general intent of the parties

3. Definitions and Interpretation: Definitions of key terms including Royalty, Gross Revenue, Payment Period, and other technical terms used in the agreement

4. Financing Amount and Disbursement: Details of the financing amount, disbursement conditions, and funding mechanics

5. Royalty Payments: Structure of royalty payments, calculation methodology, payment frequency, and reporting requirements

6. Calculation of Gross Revenue: Detailed definition and methodology for calculating the revenue base for royalty payments

7. Payment Terms and Mechanics: Specific procedures for making payments, including timing, currency, and payment methods

8. Records and Audit Rights: Requirements for maintaining financial records and the financier's audit rights

9. Representations and Warranties: Standard and specific representations and warranties from both parties

10. Covenants: Ongoing obligations of the recipient company, including financial, operational, and reporting covenants

11. Events of Default: Circumstances constituting default and corresponding remedies

12. Term and Termination: Duration of the agreement and termination provisions

13. Confidentiality: Protection of confidential information shared between parties

14. Governing Law and Jurisdiction: Specification of Philippine law as governing law and jurisdiction for disputes

15. General Provisions: Standard boilerplate provisions including notices, amendments, and assignment