The Loan Offset Agreement is a crucial document used in Hong Kong's financial sector when parties wish to establish a formal arrangement for offsetting multiple loan facilities against each other. This agreement is particularly relevant when a borrower or related group of borrowers has multiple loans with one or more lenders, and there is a need to establish a clear legal framework for how these loans can be offset against each other. The document typically includes detailed provisions on calculation methodologies, trigger events for offset, and the impact on existing security arrangements. It must comply with Hong Kong banking regulations and financial laws, particularly regarding security interests and enforcement rights. The agreement is commonly used in corporate lending, structured finance, and complex banking arrangements where multiple facilities exist.
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1. Parties: Identification of all parties to the agreement, including lender(s), borrower(s), and any guarantors
2. Background: Recitals explaining the context of existing loans and the purpose of the offset arrangement
3. Definitions and Interpretation: Definitions of key terms used in the agreement and rules of interpretation
4. Offset Arrangement: Core provisions detailing how the offset mechanism works, including calculation methods and timing
5. Representations and Warranties: Standard representations and warranties from all parties regarding their capacity and authority
6. Conditions Precedent: Conditions that must be satisfied before the offset arrangement becomes effective
7. Covenants: Ongoing obligations of the parties during the term of the agreement
8. Events of Default: Circumstances that constitute default and consequences thereof
9. Termination: Provisions for termination of the offset arrangement and consequences
10. Notices: Communication requirements and contact details for all parties
11. General Provisions: Standard boilerplate clauses including governing law, jurisdiction, and amendments
1. Currency Provisions: Required when loans being offset are in different currencies, specifying exchange rate mechanisms
2. Multiple Lender Provisions: Required when there are multiple lenders, addressing ranking and priority
3. Security Provisions: Required when specific collateral or security interests are involved in the offset arrangement
4. Tax Provisions: Required when there are specific tax implications that need to be addressed
5. Assignment and Transfer: Required when parties want to allow for potential transfer of offset rights
6. Agent Provisions: Required when an agent is appointed to manage the offset arrangement
1. Schedule 1 - Existing Loans: Details of all loans subject to the offset arrangement, including amounts, interest rates, and maturity dates
2. Schedule 2 - Offset Calculation Methodology: Detailed explanation and examples of how offsets will be calculated
3. Schedule 3 - Forms of Notice: Standard forms for various notices required under the agreement
4. Schedule 4 - Contact Details: Detailed contact information for all parties and authorized representatives
5. Appendix A - Conditions Precedent Documents: List of all documents required as conditions precedent
6. Appendix B - Offset Statement Template: Template for periodic statements showing offset calculations and balances
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