profit share agreement

profit share agreement
England, Wales
In the context of a finance transaction, an agreement between a lender and borrower, where the borrower agrees to pay the lender a fee or profit share on the occurrence of a specified, future contingent event. Profit share agreements have long been a feature of certain property finance transactions.
Events which may trigger the payment of such a fee or profit share include one or more of the following:
• An event of default occurring under the finance documents.
• Prepayment or repayment in full of the facility (or certain tranches of the facility).
• Disposal of certain property prior to the final repayment date of the facility.
• A change of control occurring (as defined in the facility agreement).
The parties may need to consider how the exit fee or profit share is classified for accounting and tax purposes. For example, in certain circumstances, it can be treated as interest and, in others, a capital payment.

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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