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Royalty Financing Agreement Template for Nigeria

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Key Requirements PROMPT example:

Royalty Financing Agreement

"I need a Royalty Financing Agreement for a 50 million Naira investment into a Nigerian tech startup, where the investor will receive 3% of monthly revenue until January 2025, with additional provisions for international payment handling and intellectual property protection."

Document background
The Royalty Financing Agreement is a vital instrument in the Nigerian business landscape, providing an alternative financing mechanism to traditional debt or equity funding. This document is typically used when a company seeks growth capital without diluting ownership or taking on conventional debt obligations. The agreement is structured to comply with Nigerian corporate law, investment regulations, and tax requirements, making it suitable for both domestic and international investors. It provides detailed terms for the investment relationship, including the initial funding, ongoing royalty payments calculated against agreed metrics (typically revenue), reporting obligations, and investor protections. The document is particularly relevant in sectors where traditional financing may be less suitable or where revenue patterns are predictable but collateral assets may be limited.
Suggested Sections

1. Parties: Identification of the parties entering into the agreement

2. Background: Context of the agreement, including business purpose and relationship between parties

3. Definitions: Key terms used throughout the agreement

4. Investment Amount: Details of the principal investment amount and disbursement terms

5. Royalty Calculation: Formula and methodology for calculating royalty payments

6. Payment Terms: Timing, method, and currency of royalty payments

7. Reporting Requirements: Financial reporting obligations and audit rights

8. Representations and Warranties: Statements of fact and assurances from both parties

9. Company Covenants: Ongoing obligations of the company including operational and financial covenants

10. Events of Default: Circumstances constituting default and consequences

11. Term and Termination: Duration of agreement and termination provisions

12. Confidentiality: Protection of confidential information

13. Governing Law and Jurisdiction: Nigerian law as governing law and jurisdiction for disputes

14. General Provisions: Standard boilerplate clauses including notices, amendments, and assignment

Optional Sections

1. Security: Include if the royalty financing is secured against specific assets

2. Intellectual Property Rights: Required if royalties are based on IP exploitation

3. Foreign Exchange Provisions: Include if any party is foreign or payments are in foreign currency

4. Tag-Along Rights: Optional protection for investor in case of company sale

5. Buy-Out Provisions: Terms for early termination through buy-out

6. Board Observer Rights: If investor is granted rights to observe board meetings

7. Competition Restrictions: Non-compete and non-solicitation provisions if required

8. Tax Provisions: Detailed tax treatment and withholding requirements if complex arrangements

Suggested Schedules

1. Schedule 1 - Calculation of Royalty: Detailed methodology and examples of royalty calculations

2. Schedule 2 - Reporting Template: Standard format for periodic financial reporting

3. Schedule 3 - Initial Business Plan: Company's business plan and financial projections

4. Schedule 4 - Permitted Encumbrances: List of permitted liens and encumbrances

5. Schedule 5 - Corporate Information: Company's corporate details and structure

6. Appendix A - Form of Compliance Certificate: Template for periodic compliance certification

7. Appendix B - Notice Details: Contact information for formal notices

8. Appendix C - Bank Account Details: Payment account information for both parties

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈ˰æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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Relevant Industries

Mining and Natural Resources

Technology

Manufacturing

Entertainment and Media

Pharmaceuticals

Agricultural Processing

Oil and Gas

Renewable Energy

Consumer Products

Software and Technology

Relevant Teams

Legal

Finance

Treasury

Corporate Development

Risk Management

Compliance

Business Development

Executive Leadership

Company Secretariat

Investment

Relevant Roles

Chief Financial Officer

Finance Director

Investment Manager

Legal Counsel

Corporate Lawyer

Business Development Director

Treasury Manager

Financial Controller

Company Secretary

Risk Manager

Commercial Director

Investment Analyst

Managing Director

Chief Executive Officer

Industries










Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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