The Convertible Debenture Agreement is a sophisticated financing instrument used when a company seeks to raise capital while offering investors the potential upside of equity participation. This document is particularly relevant in the Nigerian market where companies need to balance immediate funding requirements with future growth potential. The agreement must comply with Nigerian legislation, particularly the Companies and Allied Matters Act (CAMA) 2020 and relevant securities laws. It typically includes detailed provisions on interest payments, conversion rights, security arrangements, and investor protections. The document is commonly used by growth-stage companies, established businesses seeking expansion capital, or companies looking to restructure their financing arrangements while providing investors with the flexibility to participate in the company's equity upside through conversion rights.
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1. Parties: Identification of the Issuer (Company) and the Debenture Holder(s)
2. Background: Context of the debenture issuance, including company's authority to issue and purpose of the financing
3. Definitions and Interpretation: Key terms used throughout the agreement, including financial definitions and calculation methodologies
4. Issue of Debentures: Terms of issuance, face value, and number of debentures being issued
5. Interest: Interest rate, calculation method, payment dates, and default interest provisions
6. Repayment and Redemption: Terms for repayment of principal, early redemption rights, and redemption procedures
7. Conversion Rights: Terms and conditions for converting debentures into equity shares, including conversion price and ratio
8. Conversion Procedure: Detailed process for exercising conversion rights, including notices and documentation requirements
9. Security: Details of any security or charge created to secure the debentures
10. Company Covenants: Positive and negative covenants binding the company during the debenture term
11. Events of Default: Circumstances constituting default and consequences thereof
12. Representations and Warranties: Standard company representations and debenture holder warranties
13. Transferability: Terms governing the transfer of debentures to third parties
14. Notices: Process for serving notices and communications between parties
15. Governing Law and Jurisdiction: Nigerian law as governing law and jurisdiction for disputes
16. General Provisions: Standard boilerplate provisions including amendments, waivers, and severability
1. Debenture Holders' Meetings: Required when there are multiple debenture holders, detailing voting rights and meeting procedures
2. Debenture Trustee: Include when a trustee is appointed to represent debenture holders' interests
3. Anti-dilution Provisions: Detailed provisions protecting conversion rights from dilution through corporate actions
4. Tag-Along Rights: Rights of debenture holders to participate in sale of company shares
5. Strategic Rights: Special rights such as board representation or veto rights for major decisions
6. Foreign Currency Provisions: Required for foreign currency denominated debentures, including exchange rate mechanisms
7. Tax Provisions: Detailed tax treatment and gross-up provisions if required
8. Security Trustee: Required when security is held by a trustee for multiple debenture holders
1. Schedule 1 - Debenture Certificate Form: Form of physical debenture certificate if required
2. Schedule 2 - Conversion Notice: Form of notice for exercising conversion rights
3. Schedule 3 - Calculation of Conversion Price: Detailed methodology for calculating conversion price and adjustments
4. Schedule 4 - Security Documents: Forms of security documents and charge registration requirements
5. Schedule 5 - Company Information: Details of company's share capital, constitutional documents, and corporate approvals
6. Schedule 6 - Financial Covenants: Detailed financial covenants and calculation methods
7. Schedule 7 - Conditions Precedent: List of documents and conditions required before debenture issuance
8. Appendix A - Shareholders' Resolution: Copy of shareholders' resolution approving debenture issuance
9. Appendix B - Board Resolution: Copy of board resolution approving debenture issuance
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