--- name: convertible-note-purchase-agreement title: Convertible Note Purchase Agreement description: Drafts a company-side Convertible Note Purchase Agreement for U.S. early-stage convertible debt financings. Structures note economics, conversion mechanics, reps and warranties, closing conditions, covenants, default provisions, and miscellaneous terms. Use when drafting a convertible note purchase agreement, bridge note, convertible debt financing, or SAFE alternative for a startup or early-stage company. author: CaseMark author_url: https://github.com/CaseMark/skills/tree/main/skills/legal/convertible-note-purchase-agreement license: Apache-2.0 version: 0.1.0 execution_mode: open jurisdiction: us practice: finance language: en --- # Convertible Note Purchase Agreement Drafts a company-side CNPA for U.S. early-stage convertible debt financings. Covers the full agreement from preamble through miscellaneous provisions. ## Prerequisites Gather before drafting: 1. **Parties** — legal names, jurisdictions, authorized signatories (issuer + each purchaser) 2. **Economics** — aggregate principal, purchase price, interest rate (simple/compound), maturity date, valuation cap, discount rate 3. **Conversion mechanics** — qualified financing threshold, optional conversion triggers, conversion price formula 4. **Cap table** — all outstanding equity and debt (for rep accuracy) 5. **Authorization** — term sheet or board resolution confirming deal economics 6. **Use of proceeds** — stated business purpose ## Drafting Workflow ### 1. Preamble Date, full legal names, recitals stating financing purpose and issuance authority. ### 2. Purchase and Sale of Notes - Note description: aggregate principal, per-note denomination, series designation - Purchase price: face value or specify OID if issued at discount - Closing mechanics: date, wire instructions, deliverables (executed notes to Purchasers; funds to Company) ### 3. Company Representations and Warranties Include reps for: organization and good standing, corporate authority (board authorization, no charter/bylaw conflicts), capitalization (fully-diluted cap table with all convertible instruments), no material litigation, compliance with law, financial statement accuracy, no default under material agreements, and use of proceeds. ### 4. Purchaser Representations and Warranties Include reps for: accredited investor status under Rule 501 [VERIFY], investment intent (own account, not for distribution), restricted securities acknowledgment, sophistication and ability to bear loss, and independent investigation. ### 5. Conditions to Closing - Reps and warranties true as of closing - All pre-closing covenants performed - No material adverse change - Legal opinion from Company counsel (if required) - All ancillary documents executed (side letters, ROFR waivers) - Board/stockholder approvals obtained - No injunction or legal prohibition ### 6. Post-Closing Covenants - Use of proceeds restricted to stated purpose - Financial reporting to Noteholders (specify frequency/format) - Additional indebtedness: parity or subordination rules - Maintain corporate existence; no dissolution without majority Noteholder consent - Prompt default notice to Noteholders - Inspection rights (if negotiated) ### 7. Note Terms | Term | Detail | |---|---| | Interest | Annual rate; simple vs. compound; accrual start date | | Maturity | Date principal + accrued interest due | | Automatic conversion | Triggers on Qualified Financing exceeding threshold (e.g., $1M+ equity) | | Optional conversion | Noteholder election at/after maturity or upon Change of Control | | Conversion price | Lesser of: (i) Valuation Cap / Fully-Diluted Shares; (ii) Next Round Price x (1 - Discount Rate) | | Anti-dilution | Broad-based weighted-average; specify excluded share carve-outs | | Change of Control | Cash repayment at premium, or Noteholder election to convert | | MFN | If applicable, match superior terms offered to later note purchasers | ### 8. Events of Default and Remedies | Default | Remedy | |---|---| | Failure to pay at maturity | Acceleration; default interest rate | | Breach of rep/warranty | Acceleration after notice + cure period | | Breach of covenant | Acceleration after notice + cure period | | Insolvency/bankruptcy | Automatic acceleration; no notice required | | Unapproved Change of Control | Convert at cap price or cash repayment at premium | ### 9. Indemnification Company indemnifies Purchasers for breach of Company reps, warranties, or covenants. Specify: claim notice procedure, rep survival period, indemnification cap (if any), and basket/deductible (if any). ### 10. Miscellaneous Governing law (typically Delaware), dispute resolution and venue, notice provisions, amendment (Company + majority-in-interest by principal), entire agreement/integration, severability, counterpart execution with electronic signatures, and jury trial waiver (confirm enforceability). ## Critical Checks - **Securities exemption**: Issue under Reg D 506(b) or 506(c) [VERIFY]; confirm all Purchasers are accredited; file Form D within 15 days of first sale [VERIFY] - **State blue sky**: Confirm notice/exemption filings for each Purchaser's state - **Authorized shares**: Verify sufficient authorized but unissued shares for full conversion at cap price; flag if stockholder approval needed to increase - **Cap vs. discount**: Both apply simultaneously — use whichever yields lower per-share price (more favorable to Noteholder) unless negotiated otherwise - **OID/tax**: If issued below face value, flag for tax counsel review of original issue discount rules - **Subordination**: Confirm senior, pari passu, or subordinated status; obtain required lender consents - **Outstanding SAFEs**: Address priority and interaction at conversion; check for MFN or pro-rata rights affecting this issuance - **Jurisdiction**: U.S. transactions only; non-U.S. elements require local counsel