The Standby Equity Purchase Agreement (SEPA) is a strategic financing tool used in the Canadian market when companies require flexible access to equity capital without the immediate dilution of a traditional equity offering. This agreement type is particularly valuable for public companies that experience variable capital needs or want to maintain the option to raise funds opportunistically. The document establishes a commitment from an investor to purchase newly issued shares at the company's request, subject to specified conditions and pricing mechanisms. It must comply with Canadian securities regulations, including provincial securities laws and relevant stock exchange rules. The agreement typically includes detailed provisions for draw-down procedures, pricing calculations, regulatory compliance, and investor protections. SEPAs are commonly used by growth-stage companies or those in capital-intensive industries that benefit from having assured access to equity funding while maintaining control over the timing and amount of capital raised.
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1. Parties: Identification of the company issuing shares and the investor(s) purchasing shares
2. Background: Context of the agreement and general purpose of the arrangement
3. Definitions: Key terms used throughout the agreement
4. Purchase Commitment: The investor's commitment to purchase shares and the overall size of the facility
5. Draw Down Mechanics: Process and requirements for the company to request share purchases
6. Pricing Mechanism: Formula or method for determining the purchase price of shares
7. Conditions Precedent: Conditions that must be satisfied before any draw down can occur
8. Representations and Warranties: Statements of fact by both parties regarding their capacity, authority, and compliance
9. Covenants: Ongoing obligations of both parties during the agreement term
10. Closing Mechanics: Procedures for completing each draw down transaction
11. Term and Termination: Duration of the agreement and circumstances for early termination
12. Confidentiality: Protection of confidential information exchanged between parties
13. Notices: Method and addresses for formal communications between parties
14. Governing Law and Jurisdiction: Applicable law and courts for dispute resolution
15. General Provisions: Standard boilerplate provisions including assignment, amendments, and severability
1. Registration Rights: Rights of the investor to require registration of purchased shares for resale, included when dealing with restricted securities
2. Ownership Limitations: Restrictions on maximum ownership percentage, included when regulatory or corporate governance concerns exist
3. Market Making Restrictions: Provisions preventing market manipulation, included when required by securities regulations
4. Anti-Dilution Protection: Protection for the investor against dilutive events, included when negotiated by the investor
5. Exclusivity: Restrictions on the company's ability to enter similar arrangements, included when required by the investor
6. Break Fee: Fee payable if the agreement is terminated under specific circumstances, included in larger transactions
7. Foreign Investment Provisions: Additional provisions for compliance with foreign investment laws, included when the investor is foreign
1. Form of Draw Down Notice: Standard form for the company to request a share purchase
2. Pricing Examples: Detailed examples showing how the pricing mechanism works
3. Company's Corporate Details: Details of company's incorporation, share capital, and board resolutions
4. Disclosure Schedule: Exceptions to representations and warranties
5. Required Regulatory Approvals: List of necessary regulatory approvals and their status
6. Form of Compliance Certificate: Standard form certifying compliance with conditions precedent
7. Form of Legal Opinions: Required format for legal opinions to be delivered at closing
Relevant legal definitions
Clauses
Relevant Industries
Technology
Mining and Resources
Biotechnology
Pharmaceutical
Renewable Energy
Infrastructure
Real Estate
Financial Services
Healthcare
Manufacturing
Clean Technology
Cannabis (where legal)
Relevant Teams
Legal
Finance
Treasury
Corporate Development
Investor Relations
Compliance
Executive Leadership
Board of Directors
Corporate Secretariat
Relevant Roles
Chief Financial Officer
Chief Executive Officer
Corporate Secretary
General Counsel
Finance Director
Treasury Manager
Corporate Development Director
Investment Relations Officer
Compliance Officer
Legal Counsel
Financial Controller
Board Director
Investment Manager
Capital Markets Director
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