The Private Equity Subscription Agreement is a crucial document used in Canadian private equity transactions when investors are purchasing equity securities in a private company. This agreement is typically used for investments that rely on prospectus exemptions under National Instrument 45-106 and applicable provincial securities legislation. The document serves multiple purposes: it formalizes the investment terms, ensures regulatory compliance, provides investor protection through representations and warranties, and establishes the rights and obligations of both the company and the investor. The agreement must be carefully structured to comply with Canadian securities laws, including provincial Securities Acts and federal legislation such as the Income Tax Act and anti-money laundering regulations. It typically includes detailed information about the investment structure, investor accreditation status, and various schedules supporting the main agreement.
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1. Parties: Identification of the issuing company and the subscriber/investor
2. Background: Context of the private equity offering and purpose of the agreement
3. Definitions: Definitions of key terms used throughout the agreement
4. Subscription and Purchase of Securities: Details of the securities being purchased, including class, number, and price
5. Purchase Price and Payment Terms: Specification of the total investment amount and payment mechanisms
6. Closing: Closing date, conditions, and mechanics for completing the transaction
7. Representations and Warranties of the Company: Company's confirmations regarding its status, authority, and material aspects of its business
8. Representations and Warranties of the Subscriber: Investor's confirmations regarding their status, investment sophistication, and compliance with securities laws
9. Covenants: Ongoing obligations of both parties
10. Survival of Representations and Warranties: Duration for which the representations and warranties remain in effect
11. Indemnification: Provisions for compensating parties for losses arising from breaches
12. Confidentiality: Obligations regarding the protection of confidential information
13. Notices: Process and requirements for formal communications between parties
14. General Provisions: Standard boilerplate provisions including governing law, amendments, and assignment
1. Tag-Along Rights: Optional section for when existing shareholders are given the right to join in sales of shares by other shareholders
2. Drag-Along Rights: Optional section when majority shareholders can force minority shareholders to join in the sale of the company
3. Pre-emptive Rights: Optional section giving existing shareholders the right to maintain their percentage ownership in future offerings
4. Board Nomination Rights: Optional section when investors are granted rights to nominate board members
5. Registration Rights: Optional section for rights related to future public offerings
6. Anti-Dilution Protection: Optional section protecting investors from dilution in future down rounds
7. Information Rights: Optional section specifying investor rights to receive company information and reports
8. Foreign Investment Provisions: Optional section for compliance with Investment Canada Act when foreign investors are involved
1. Schedule A - Subscription Details: Detailed information about the securities being purchased, including price, class, and number
2. Schedule B - Accredited Investor Certificate: Certification and questionnaire confirming the investor's accredited status
3. Schedule C - Corporate Resolution: Corporate authorization for the subscription (if subscriber is a corporation)
4. Schedule D - Wire Transfer Instructions: Banking details for payment of subscription funds
5. Schedule E - Capitalization Table: Pre and post-investment capital structure of the company
6. Schedule F - Risk Factors: Detailed description of investment risks
7. Schedule G - Shareholders' Rights: Summary of rights attached to the subscribed securities
8. Schedule H - Know Your Client Form: Anti-money laundering and investor identification documentation
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