A Convertible Debt Agreement is commonly used by Australian companies, particularly startups and growth-stage businesses, seeking to raise capital while deferring company valuation discussions. This instrument bridges the gap between debt and equity financing, offering investors the security of debt with the potential upside of equity conversion. The agreement must comply with Australian securities laws and corporate regulations, including the Corporations Act 2001 (Cth) and ASIC requirements. It typically includes detailed terms about the debt component (principal, interest, maturity), conversion mechanisms (automatic and optional conversion triggers, conversion price calculations), and investor protections. This document is particularly useful in early-stage funding rounds where company valuation might be challenging to determine, or in bridge financing situations between larger equity rounds.
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1. Parties: Identifies the issuing company and the noteholder(s)
2. Background: Contextual information about the purpose of the convertible note and the company's intention to raise funds
3. Definitions and Interpretation: Defines key terms used throughout the agreement and interpretation rules
4. Issue of Convertible Notes: Details of the note issuance, including amount, issue date, and any tranches
5. Interest: Interest rate, calculation method, and payment terms
6. Conversion Rights: Terms and mechanisms for converting the notes to equity, including conversion price and timing
7. Conversion Mechanics: Detailed process for executing the conversion, including notice requirements and share issuance
8. Maturity and Repayment: Maturity date and repayment terms if notes are not converted
9. Company Representations and Warranties: Standard company warranties about its capacity and authority to enter the agreement
10. Noteholder Representations and Warranties: Declarations from the noteholder regarding their capacity and investment understanding
11. Events of Default: Circumstances constituting default and consequences
12. General Provisions: Standard clauses including notices, amendments, governing law, and dispute resolution
1. Security: Required if the notes are secured against company assets
2. Qualified Financing Provisions: Included when automatic conversion is triggered by a qualifying financing round
3. Pre-emptive Rights: Included when noteholders are given rights to participate in future funding rounds
4. Board Observer Rights: Optional provisions giving noteholders rights to observe board meetings
5. Information Rights: Detailed reporting obligations to noteholders beyond standard requirements
6. Tag-Along Rights: Included when noteholders are given the right to join in sales of shares by other shareholders
7. Most Favored Nation Clause: Used when noteholders should benefit from better terms given in future note issues
8. Change of Control Provisions: Special rights or obligations in case of company sale or change of control
1. Note Certificate Terms: Detailed terms and conditions of the convertible note certificates
2. Conversion Notice: Form of notice to be used when exercising conversion rights
3. Calculation of Conversion Price: Detailed methodology and examples of conversion price calculations
4. Cap Table: Current and post-conversion capitalization table
5. Company Information: Key company details including corporate structure and existing security holders
6. Subscription Agreement: Form of agreement for subscribing to the convertible notes
7. Security Documents: If applicable, documents detailing security arrangements and registrations
Relevant legal definitions
Accrued Interest
ASIC
Business Day
Change of Control
Company
Completion
Conversion Date
Conversion Notice
Conversion Price
Conversion Rights
Corporations Act
Default Event
Default Interest Rate
Discount Rate
Drawdown Date
Encumbrance
Event of Default
Exit Event
Face Value
Financial Indebtedness
Fully Diluted Share Capital
Government Agency
Initial Public Offering
Interest Payment Date
Interest Period
Interest Rate
Issue Date
Issuer
Maturity Date
Next Equity Financing
Note Certificate
Noteholder
Notes
Ordinary Shares
Post-Money Valuation
Pre-Money Valuation
Qualified Financing
Qualifying Exit Event
Redemption Amount
Redemption Date
Relevant Documents
Security
Security Interest
Shareholder
Subscription Amount
Subsidiary
Tax
Transaction Documents
Valuation Cap
ASIC
Business Day
Change of Control
Company
Completion
Conversion Date
Conversion Notice
Conversion Price
Conversion Rights
Corporations Act
Default Event
Default Interest Rate
Discount Rate
Drawdown Date
Encumbrance
Event of Default
Exit Event
Face Value
Financial Indebtedness
Fully Diluted Share Capital
Government Agency
Initial Public Offering
Interest Payment Date
Interest Period
Interest Rate
Issue Date
Issuer
Maturity Date
Next Equity Financing
Note Certificate
Noteholder
Notes
Ordinary Shares
Post-Money Valuation
Pre-Money Valuation
Qualified Financing
Qualifying Exit Event
Redemption Amount
Redemption Date
Relevant Documents
Security
Security Interest
Shareholder
Subscription Amount
Subsidiary
Tax
Transaction Documents
Valuation Cap
Clauses
Issue of Notes
Subscription
Interest
Repayment
Conversion Rights
Conversion Mechanics
Security
Representations and Warranties
Company Covenants
Information Rights
Pre-emptive Rights
Tag-Along Rights
Events of Default
Acceleration
Most Favored Nation
Assignment and Transfer
Confidentiality
Notices
Amendment and Waiver
Governing Law
Dispute Resolution
Force Majeure
Severability
Entire Agreement
Costs and Expenses
Further Assurance
Counterparts
Time of Essence
Anti-Dilution
Board Rights
Drag Along
Change of Control
Subordination
Security Interest
Subscription
Interest
Repayment
Conversion Rights
Conversion Mechanics
Security
Representations and Warranties
Company Covenants
Information Rights
Pre-emptive Rights
Tag-Along Rights
Events of Default
Acceleration
Most Favored Nation
Assignment and Transfer
Confidentiality
Notices
Amendment and Waiver
Governing Law
Dispute Resolution
Force Majeure
Severability
Entire Agreement
Costs and Expenses
Further Assurance
Counterparts
Time of Essence
Anti-Dilution
Board Rights
Drag Along
Change of Control
Subordination
Security Interest
Relevant Industries
Technology
Startups
Financial Services
Software Development
Biotechnology
Clean Energy
E-commerce
Healthcare Technology
Manufacturing
Professional Services
Relevant Teams
Legal
Finance
Executive Leadership
Corporate Development
Treasury
Compliance
Board of Directors
Company Secretariat
Investment
Risk Management
Relevant Roles
Chief Executive Officer
Chief Financial Officer
General Counsel
Legal Counsel
Corporate Lawyer
Investment Manager
Finance Director
Company Secretary
Venture Capital Associate
Investment Analyst
Corporate Development Manager
Treasury Manager
Financial Controller
Compliance Officer
Board Director
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