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The Convertible Debt Agreement is a sophisticated financing instrument used primarily by growth-stage companies in Hong Kong seeking flexible funding options. It allows companies to raise capital without immediately determining a valuation, while providing investors with the security of debt and the upside potential of equity. This document combines elements of traditional loan agreements with equity investment provisions, structured in compliance with Hong Kong's legal framework, particularly the Companies Ordinance and Securities and Futures Ordinance. It's commonly used in bridge financing rounds, early-stage investments, or when companies prefer to defer valuation discussions. The agreement includes detailed terms for the debt component (interest rates, maturity, repayment), conversion mechanisms (triggers, pricing, process), and various investor protections.

1. Parties: Identifies the issuing company, the investor(s), and any guarantors

2. Background: Sets out the context of the agreement, including the company's intention to borrow and the investor's intention to provide convertible debt financing

3. Definitions: Defines key terms used throughout the agreement, including financial terms, conversion-related definitions, and other technical terminology

4. Loan Amount and Issuance: Specifies the principal amount, issuance date, and disbursement terms

5. Interest: Details the interest rate, calculation method, payment periods, and default interest provisions

6. Repayment Terms: Outlines repayment schedule, prepayment rights, and maturity date

7. Conversion Rights: Specifies conversion triggers, timing, price/mechanism, and process

8. Company Representations and Warranties: Standard company representations regarding corporate status, authority, and financial condition

9. Investor Representations and Warranties: Investor's representations regarding investment capacity and sophistication

10. Covenants: Ongoing obligations of the company, including information rights and operational restrictions

11. Events of Default: Lists circumstances constituting default and corresponding remedies

12. Termination: Conditions for early termination and its consequences

13. General Provisions: Standard boilerplate clauses including notices, amendments, governing law, etc.