The Convertible Note Agreement serves as a crucial financing instrument in the Malaysian business landscape, particularly for startups and growing companies seeking to raise capital while deferring company valuation. This document type combines elements of debt and potential future equity, offering companies a flexible financing solution while providing investors with the security of debt and potential upside of equity participation. The agreement must comply with Malaysian regulatory requirements, including the Companies Act 2016 and securities regulations, while addressing key commercial terms such as interest rates, maturity dates, conversion triggers, and investor rights. It's particularly useful in bridge financing rounds or when traditional equity financing might be premature or impractical.
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1. Parties: Identification of the issuing company and the note holder(s)
2. Background: Context of the agreement and purpose of the convertible note issuance
3. Definitions and Interpretation: Key terms used throughout the agreement and rules of interpretation
4. Subscription and Issue: Terms of note subscription, payment details, and issuance conditions
5. Principal and Interest: Loan amount, interest rate, calculation method, and payment terms
6. Conversion Rights: Conditions and mechanics for converting the note to equity, including conversion price and timing
7. Qualifying Financing: Definition and terms of qualifying financing events that trigger automatic conversion
8. Maturity and Repayment: Maturity date, repayment terms, and options at maturity
9. Company Covenants: Company's obligations and restrictions during the note term
10. Events of Default: Circumstances constituting default and consequences
11. Representations and Warranties: Standard company and investor representations
12. Confidentiality: Confidentiality obligations and permitted disclosures
13. Notices: Communication procedures between parties
14. General Provisions: Standard boilerplate clauses including governing law, assignment, and amendments
1. Pre-emptive Rights: Rights of note holders to participate in future financing rounds
2. Information Rights: Company's obligations to provide financial and other information to note holders
3. Board Observer Rights: Rights of note holders to appoint board observers
4. Most Favored Nation: Protection ensuring note holders receive best terms offered to other investors
5. Change of Control: Special provisions for company sale or change of control
6. Security: If the note is secured, provisions regarding collateral and security arrangements
7. Tax Provisions: Specific tax-related provisions and obligations
8. Shareholder Approval: Requirements for shareholder approval of conversion terms
1. Schedule 1 - Note Certificate: Form of convertible note certificate
2. Schedule 2 - Conversion Notice: Form of notice to be used when exercising conversion rights
3. Schedule 3 - Company Cap Table: Current capitalization table of the company
4. Schedule 4 - Subscription Details: Details of note subscription amount, interest rate, and maturity date
5. Schedule 5 - Constitutional Documents: Company's constitution and relevant corporate authorizations
6. Schedule 6 - Conversion Calculations: Detailed methodology for calculating conversion price and number of shares
7. Schedule 7 - Events of Default: Detailed list and description of events of default
8. Schedule 8 - Required Consents: List of required regulatory and third-party consents
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