A Compulsory Convertible Debentures Agreement is utilized when companies seek to raise capital while providing investors with assured equity participation in the future. This instrument, governed by English and Welsh law, combines elements of debt and equity financing, offering interim interest payments with mandatory conversion into shares. The agreement is particularly valuable for companies in growth phases or those seeking to optimize their capital structure while managing their immediate debt obligations. It includes detailed provisions on conversion mechanics, valuation methods, timing triggers, and investor protections, all within the framework of UK financial regulations and company law.
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1. Parties: Identification of issuer and debenture holders
2. Background: Context of the debenture issuance and key commercial terms
3. Definitions: Key terms used throughout the agreement
4. Issue and Status of Debentures: Terms of issuance, face value, and ranking of debentures
5. Conversion Terms: Mandatory conversion triggers, conversion ratio, and mechanism
6. Interest: Interest rate, calculation method, and payment terms
7. Security: Details of any security provided for the debentures
8. Covenants: Issuer's obligations and restrictions
9. Events of Default: Circumstances constituting default and consequences
1. Transfer Restrictions: Limitations on transfer of debentures (used when transferability needs to be restricted)
2. Tax Provisions: Tax treatment and withholding obligations (used when specific tax considerations apply)
3. Anti-dilution Provisions: Protections against share dilution (used when additional shareholder protections are required)
1. Form of Debenture Certificate: Template of the physical debenture certificate
2. Conversion Notice: Form of notice for initiating conversion
3. Security Documents: Details of security arrangements if applicable
4. Calculation Methods: Detailed formulae for conversion and interest calculations
5. Corporate Authorizations: Relevant board and shareholder resolutions
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