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This document serves as a legal framework for revenue-based financing transactions in Hong Kong, where traditional debt or equity financing may not be suitable or desired. A Royalty Based Financing Agreement is particularly useful for companies with stable revenue streams seeking growth capital without diluting ownership or taking on conventional debt obligations. The document structures the financing arrangement whereby an investor provides upfront capital in exchange for regular royalty payments calculated as a percentage of the company's revenue, typically continuing until a predetermined total amount is repaid. This financing model has gained popularity in Hong Kong and internationally, especially among technology companies and businesses with recurring revenue models. The agreement must comply with Hong Kong's financial regulations, including the Securities and Futures Ordinance and Money Lenders Ordinance where applicable.

1. Parties: Identification of the financing party and the company receiving financing

2. Background: Context of the financing arrangement and brief description of the business

3. Definitions and Interpretation: Definitions of key terms including 'Royalty', 'Gross Revenue', 'Payment Period', and interpretation rules

4. Amount and Purpose of Financing: Details of the financing amount, disbursement conditions, and intended use

5. Royalty Payments: Calculation methodology, payment frequency, and payment mechanisms

6. Reporting and Financial Statements: Requirements for financial reporting, revenue calculations, and audit rights

7. Representations and Warranties: Standard and specific warranties about the business, authority, and financial information

8. Covenants: Ongoing obligations including business operation requirements and restrictions

9. Events of Default: Circumstances constituting default and consequences

10. Term and Termination: Duration of the agreement and termination rights

11. Confidentiality: Protection of confidential information and trade secrets

12. Assignment and Transfer: Rights and restrictions regarding transfer of rights under the agreement

13. Notices: Communication methods and contact details

14. Governing Law and Jurisdiction: Hong Kong law as governing law and jurisdiction for disputes

15. General Provisions: Standard boilerplate clauses including entire agreement, amendments, and severability