Note And Warrant Purchase Agreement for the United Kingdom

Note And Warrant Purchase Agreement Template for England and Wales

A Note And Warrant Purchase Agreement is a complex financial instrument governed by English and Welsh law, combining debt and equity elements. It establishes the terms under which an investor provides funding to a company through convertible notes, while simultaneously receiving warrants that grant the right to purchase equity at predetermined terms. This agreement details the purchase price, interest rates, conversion mechanisms, warrant exercise terms, and various rights and obligations of both parties, including representations, warranties, and conditions precedent to closing.

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What is a Note And Warrant Purchase Agreement?

The Note And Warrant Purchase Agreement is commonly used in growth-stage financing under English and Welsh law, particularly when companies seek to raise capital while offering investors both debt security and potential equity upside. This hybrid instrument provides immediate debt funding while giving investors the option to acquire equity through warrant exercise. The agreement typically includes detailed terms on note conversion, warrant exercise prices, anti-dilution provisions, and investor protection mechanisms. It's particularly useful when companies want to defer equity dilution while securing immediate funding.

What sections should be included in a Note And Warrant Purchase Agreement?

1. Parties: Identification and details of the contracting parties

2. Background: Context and purpose of the agreement

3. Definitions: Key terms used throughout the agreement

4. Purchase and Sale of Notes: Terms of the note purchase, including principal amount and interest rate

5. Issuance of Warrants: Terms of warrant issuance, including exercise price and period

6. Representations and Warranties: Statements of fact and assurances from both parties

7. Closing Conditions: Conditions precedent to the completion of the transaction

8. Events of Default: Circumstances constituting default and remedies

What sections are optional to include in a Note And Warrant Purchase Agreement?

1. Registration Rights: Rights regarding registration of underlying securities when warrants are exercisable for publicly traded securities

2. Board Observer Rights: Rights to attend board meetings when investor requires governance participation

3. Information Rights: Rights to receive financial and other company information when investor requires ongoing company information

What schedules should be included in a Note And Warrant Purchase Agreement?

1. Form of Note: Template of the promissory note to be issued

2. Form of Warrant: Template of the warrant certificate

3. Disclosure Schedule: Exceptions to representations and warranties

4. Capitalization Table: Current and pro-forma capitalization of the company

5. Use of Proceeds: Intended application of investment proceeds

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Genie AI

Document Type

Security Agreement

Cost

Free to use
Relevant legal definitions
Clauses
Industries

Companies Act 2006: Primary legislation governing company law in the UK, particularly relevant for share issuance and warrant provisions

Financial Services and Markets Act 2000: Key legislation regulating financial services and markets in the UK, including securities offerings and regulated activities

Consumer Credit Act 1974: Legislation governing consumer credit agreements, may be relevant if the note has consumer credit implications

Financial Promotion Order 2005: Regulates how financial products can be promoted and marketed in the UK

Regulated Activities Order 2001: Defines which activities require FCA authorization and regulation

Prospectus Regulation Rules: Rules governing the requirement for and content of prospectuses for public offerings of securities

Common Law of Contract: Body of law developed through court decisions governing formation and enforcement of contracts

Unfair Contract Terms Act 1977: Legislation restricting how businesses can exclude or limit their liability in contracts

Misrepresentation Act 1967: Governs remedies for misrepresentations made before contract formation

Money Laundering Regulations 2017: Regulations requiring due diligence and preventing use of financial system for money laundering

FCA Rules: Regulatory requirements and guidelines set by the Financial Conduct Authority

UK Listing Rules: Rules governing admission of securities to the Official List and ongoing obligations

Income Tax Act 2007: Primary legislation for income tax, relevant for tax treatment of notes and warrants

Corporation Tax Act 2009: Primary legislation for corporation tax, relevant for corporate tax implications

Stamp Duty Regulations: Rules governing stamp duty and stamp duty reserve tax on securities transactions

EU Retained Law: Former EU laws retained in UK law post-Brexit, relevant for cross-border transactions

UK GDPR: Data protection regulation governing processing of personal data

Data Protection Act 2018: UK's implementation of data protection requirements, supplementing UK GDPR

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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