The Convertible Note Purchase Agreement is a critical financing instrument used when companies seek bridge funding or want to defer equity valuation discussions. It's particularly relevant for startups and growth companies in Australia looking to raise capital while postponing formal valuation discussions until a larger equity round. The document structures the investment as a loan that can convert into equity upon specified trigger events, typically at a discount to the next equity financing round. This agreement must comply with Australian securities laws and regulations, including the Corporations Act 2001 (Cth) and ASIC requirements. It includes essential terms such as conversion rights, interest rates, maturity dates, and investor protections, while also addressing specific Australian regulatory considerations such as foreign investment restrictions where applicable.
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1. Parties: Identifies the company issuing the notes and the purchaser(s)
2. Background: Recitals explaining the context and purpose of the agreement
3. Definitions and Interpretation: Defines key terms and establishes interpretation principles
4. Issue and Purchase of Notes: Core terms of the note purchase, including amount, price, and closing mechanics
5. Conversion Rights: Details of when and how notes can be converted to equity, including conversion price and mechanisms
6. Interest: Interest rate, calculation method, and payment terms
7. Repayment and Redemption: Terms for repayment of the principal and any redemption rights
8. Company Representations and Warranties: Standard company representations about its authority, business, and financial condition
9. Purchaser Representations and Warranties: Purchaser's representations about their authority and eligibility to invest
10. Covenants: Ongoing obligations of the company while notes are outstanding
11. Events of Default: Circumstances constituting default and consequences
12. Confidentiality: Obligations regarding confidential information
13. Notices: How formal notices must be given between parties
14. General Provisions: Standard boilerplate provisions including governing law, amendments, and assignment
1. Security: Include when notes are secured against company assets
2. Ranking: Include when specifying the ranking of notes relative to other debt
3. Tag-Along Rights: Include when note holders are given rights to participate in future equity sales
4. Board Observer Rights: Include when purchasers are granted rights to observe board meetings
5. Information Rights: Include when specifying additional reporting obligations to note holders
6. Pre-emptive Rights: Include when note holders are given rights to participate in future note issuances
7. Foreign Investment Provisions: Include when foreign investors are involved requiring FIRB consideration
1. Schedule 1 - Note Certificate Terms: Form and terms of the physical note certificates if issued
2. Schedule 2 - Conversion Mechanics: Detailed procedures and calculations for conversion of notes to equity
3. Schedule 3 - Warranties: Detailed list of company warranties
4. Schedule 4 - Note Holder Details: Register of note holders and their subscription amounts
5. Schedule 5 - Deed of Adherence: Form of deed for additional note purchasers to join the agreement
6. Appendix A - Form of Conversion Notice: Template notice for exercising conversion rights
7. Appendix B - Company Capital Structure: Details of company's share capital and existing securities
Relevant legal definitions
Affiliate
ASIC
Business Day
Change of Control
Closing
Closing Date
Company
Completion
Confidential Information
Conversion
Conversion Date
Conversion Notice
Conversion Price
Conversion Rights
Corporations Act
Default Interest Rate
Discount Rate
Event of Default
Existing Shareholders
Financial Indebtedness
FIRB
Fully Diluted Share Capital
Governing Documents
Government Agency
Initial Public Offering
Insolvency Event
Interest Rate
Issue Date
Maturity Date
Note Certificate
Note Holder
Notes
Notice
Permitted Security Interest
Purchase Price
Qualified Financing
Qualifying IPO
Related Body Corporate
Relevant Interest
Security Interest
Shareholder
Shares
Subscription Amount
Tax
Transaction Documents
Valuation Cap
Warranties
ASIC
Business Day
Change of Control
Closing
Closing Date
Company
Completion
Confidential Information
Conversion
Conversion Date
Conversion Notice
Conversion Price
Conversion Rights
Corporations Act
Default Interest Rate
Discount Rate
Event of Default
Existing Shareholders
Financial Indebtedness
FIRB
Fully Diluted Share Capital
Governing Documents
Government Agency
Initial Public Offering
Insolvency Event
Interest Rate
Issue Date
Maturity Date
Note Certificate
Note Holder
Notes
Notice
Permitted Security Interest
Purchase Price
Qualified Financing
Qualifying IPO
Related Body Corporate
Relevant Interest
Security Interest
Shareholder
Shares
Subscription Amount
Tax
Transaction Documents
Valuation Cap
Warranties
Clauses
Issue and Subscription
Purchase Price
Note Terms
Interest
Conversion Rights
Repayment
Security
Representations and Warranties
Covenants
Events of Default
Ranking
Pre-emptive Rights
Tag-Along Rights
Information Rights
Board Rights
Confidentiality
Assignment
Notices
Amendment
Governing Law
Dispute Resolution
Force Majeure
Termination
Indemnification
Entire Agreement
Severability
Further Assurance
Costs
Time of Essence
Counterparts
Purchase Price
Note Terms
Interest
Conversion Rights
Repayment
Security
Representations and Warranties
Covenants
Events of Default
Ranking
Pre-emptive Rights
Tag-Along Rights
Information Rights
Board Rights
Confidentiality
Assignment
Notices
Amendment
Governing Law
Dispute Resolution
Force Majeure
Termination
Indemnification
Entire Agreement
Severability
Further Assurance
Costs
Time of Essence
Counterparts
Relevant Industries
Technology
Financial Services
Healthcare
Biotechnology
Clean Energy
Software
E-commerce
Manufacturing
Professional Services
Media and Entertainment
Agriculture Technology
Real Estate Technology
Educational Technology
Relevant Teams
Legal
Finance
Executive Leadership
Corporate Development
Investment
Company Secretariat
Business Development
Compliance
Treasury
Relevant Roles
Chief Executive Officer
Chief Financial Officer
General Counsel
Corporate Lawyer
Investment Manager
Venture Capital Partner
Angel Investor
Company Secretary
Finance Director
Corporate Development Manager
Investment Analyst
Legal Counsel
Startup Founder
Business Development Director
Board Member
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