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Form of Convertible Securities Purchase Agreement

Form of Convertible Securities Purchase Agreement



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Published by Yoichiro Taku
Form of Convertible Securities Purchase Agreement as an alternative to convertible debt
Form of Convertible Securities Purchase Agreement as an alternative to convertible debt

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Published by: Yoichiro Taku on Aug 30, 2012
Copyright:Attribution Non-commercial


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This sample Convertible Securities Purchase Agreement has been prepared by Wilson Sonsini Goodrich & Rosati forinformational purposes only and does not constitute advertising, a solicitation, or legal advice. Neither the transmissionof this sample Convertible Securities Purchase Agreement nor the transmission of any information contained in thiswebsite is intended to create, and receipt hereof or thereof does not constitute formation of, an attorney-clientrelationship. This sample Convertible Securities Purchase Agreement was drafted for companies incorporated inDelaware with principal executive offices in California for use with California purchasers that qualify under applicablestate and federal securities laws. Internet subscribers and online readers should not rely upon this sample ConvertibleSecurities Purchase Agreement or the information contained in this website for any purpose without seeking legal advice
from a licensed attorney in the reader’s state.
 The information contained in this website is provided only as general information and may or may not reflect the mostcurrent legal developments; accordingly, information on this website is not promised or guaranteed to be correct orcomplete. Wilson Sonsini Goodrich & Rosati expressly disclaims all liability in respect to actions taken or not takenbased on any or all the contents of this website. Further, Wilson Sonsini Goodrich & Rosati does not necessarilyendorse, and is not responsible for, any third-party content that may be accessed through this website.
This Convertible Securities Purchase Agreement
, dated as of [______] (this “
”), is entered
into by and among [Company]
(the “
, a corporation incorporated in the state of [Delaware], andthe persons and entities listed on the schedule of investors attached hereto as
Schedule I
(the “
 The parties hereby agree as follows:1.
The Convertible Securities
 Issuance of Convertible Securities
. Subject to all of the terms and conditions hereof,the Company agrees to issue and sell to each of the Investors, and each of the Investors severally agrees topurchase, a convertible security in the form of 
Exhibit A
hereto (each, a “
Convertible Security
” and,collectively, the “
Convertible Securities
”) for the investment amount set forth opposite the respectiveInvestor’s name on
Schedule I
hereto (the “
Investment Amount
”). The obligations of the Investors to
purchase Notes are several and not joint. The aggregate Investment Amounts for the purchase of ConvertibleSecurities hereunder shall not exceed $[AMOUNT].(b)
 Delivery; Use of Proceeds
. The sale and purchase of the Convertible Securities shall
take place at a closing (the “
”) to
be held at such place and time as the Company and the Investors
may determine (the “
Closing Date
”). At the Closing, the Company will deliver to each of the Investors the
Convertible Security to be purchased by such Investor, against receipt by the Company
of such Investor’s
Investment Amount. The Company may conduct one or more additional closings within 120 calendar days of 
the Closing (each, an “
Additional Closing
”) to be held at such place and time as the Company and the
Investors participating in such
Additional Closing may determine (each, an “
Closing Date
”). The
proceeds of the Convertible Securities shall be used for general corporate purposes.2.
 Representations and Warranties of the Company
. The Company represents and warrants toeach Investor that, except as set forth on
Schedule II
 Due Incorporation, Qualification.
The Company (i) is a corporation duly organized,validly existing and in good standing under the laws of its jurisdiction of organization; (ii) has the power andauthority to own, lease and operate its properties and carry on its business as now conducted; and (iii) is dulyqualified, licensed to do business and in good standing as a foreign corporation in each jurisdiction wheresuch qualification or license is required.
 Authority; Enforceability
. The execution, delivery and performance by the Company
of this Agreement and each Convertible Security issued hereunder (collectively, the “
”) and the consummation of the transactions contemplated hereby a
nd thereby (i) are within thepower of the Company and (ii) have been duly authorized by all necessary actions on the part of theCompany. Each Transaction Document executed by the Company has been duly executed and delivered bythe Company and constitutes a legal, valid and binding obligation of the Company, enforceable against theCompany in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors’ ri
ghts generally and general principles of equity.(c)
. The execution and delivery by the Company of the TransactionDocuments executed by the Company and the performance and consummation of the transactionscontemplated thereby do not and will not (i)
violate the Company’s Articles of Incorporation, Certificate of Incorporation, Bylaws or other formation or charter documents, as applicable (as amended, the “
”), or any material judgment, order, writ, decree, statute, rule or reg
ulation applicable to theCompany; (ii) violate any provision of, or result in the breach or the acceleration of, or entitle any otherperson to accelerate (whether after the giving of notice or lapse of time or both), any material mortgage,indenture, agreement, instrument or contract to which the Company is a party or by which it is bound; or(iii) result in the creation or imposition of any lien or encumbrance upon any property, asset or revenue of theCompany.(d)
 No Violation or Default 
. The Company is not in violation of or in default with respectto (i) its Charter Documents or any material judgment, order, writ, decree, statute, rule or regulationapplicable to the Company; or (ii) any material mortgage, indenture, agreement, instrument or contract towhich the Company is a party or by which it is bound.(e)
. No actions (including, without limitation, derivative actions), suits,proceedings or investigations are pending or, to the knowledge of the Company, threatened in writing againstthe Company
or the Company’s subsidiaries, if any, at law or in equity in any court or before any other 
governmental authority.(f)
. The Company and the Company’s subsidiaries, if any, own and have good and
marketable title in fee simple absolute to, or a valid leasehold interest in, all their respective real propertiesand good title to their other respective assets and properties. Such assets and properties are subject to no liensor encumbrances.(g)
 Intellectual Property
. The Company and the Company’s subsidiaries,
if any, own orpossess sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets,licenses, information, processes and other intellectual property rights necessary for its business as nowconducted and as proposed to be conducted, without any conflict with, or infringement of, the rights of others.Each employee of the Company has executed a confidential information and invention assignment agreementin favor of the Company.
Each consultant to the Company th
at has had access to the Company’s intellectual
property has entered into an agreement containing appropriate confidentiality and invention assignmentprovisions in favor of the Company.(h)
. As of the date of this Agreement, the authorized and outstandingcapital stock of the Company is as set forth on
Schedule III
Schedule III
also sets forth alloutstanding options, warrants and convertible securities of the Company outstanding as of the date hereof,including any shares reserved for issuance under any equity incentive or similar plan of the Company. Alloutstanding shares of the Company have been duly authorized and validly issued in compliance with
applicable laws, and are fully paid and nonassessable. As of immediately prior to the Closing, no holder of any equity security of the Company or other person is entitled to preemptive or similar statutory orcontractual rights, either arising pursuant to any agreement or instrument to which the Company is a party orthat are otherwise binding on it.3.
 Representations and Warranties of Investors
. Each Investor, for that Investor alone,represents and warrants to the Company upon the acquisition of a Convertible Security as follows:(a)
 Binding Obligation
. Such Investor has full legal capacity, power and authority toexecute and deliver this Agreement and to perform its obligations hereunder. This Agreement and theTransaction Documents constitute valid and binding obligations of such Investor, enforceable in accordancewith their terms, except as limited by bankruptcy, insolvency or other laws of general application relating to
or affecting the enforcement of creditors’ rights generally and general principles of equity.
Securities Law Compliance
. Such Investor has been advised that the ConvertibleSecurities and the underlying securities have not been registered under the Securities Act of 1933, as amended
(the “
Securities Act
”), or any state securities laws and, therefore, cannot be resold unless they are registered
under the Securities Act and applicable state securities laws or unless an exemption from such registrationrequirements is available. Such Investor has not been formed solely for the purpose of making this investmentand is purchasing the Convertible Securities to be acquired by such Investor hereunder for its own account forinvestment, not as a nominee or agent, and not with a view to, or for resale in connection with, the distributionthereof, and Investor has no present intention of selling, granting any participation in, or otherwisedistributing the same. Such Investor has such knowledge and experience in financial and business matters thatsuch Investor is capable of evaluating the merits and risks of such investment, is able to incur a complete lossof such investment without
impairing such Investor’s financial condition and is able to bear the economic risk 
of such investment for an indefinite period of time. Such Investor is an accredited investor as such term isdefined in Rule 501 of Regulation D under the Securities Act.4.
Conditions to Closing of the Investors
. Each Investor’s obligations at the Closing and each
Additional Closing are subject to the fulfillment, on or prior to the Closing Date or applicable AdditionalClosing Date, of all of the following conditions:(a)
 Representations and Warranties
. The representations and warranties made by theCompany in
Section 2
hereof shall have been true and correct when made, and shall be true and correct on theClosing Date or applicable Additional Closing Date.(b)
Governmental Approvals and Filings
. Except for any notices required or permitted tobe filed after the Closing Date or applicable Additional Closing Date with certain federal and state securitiescommissions, the Company shall have obtained all governmental approvals required in connection with thelawful sale and issuance of the Convertible Securities.(c)
 Legal Requirements
. At the Closing or the applicable Additional Closing, the saleand issuance by the Company, and the purchase by the Investors, of the Convertible Securities shall be legallypermitted by all laws and regulations to which the Investors or the Company are subject.(d)
Transaction Documents
. The Company shall have duly executed and delivered to theInvestors the following documents: (i) this Agreement and (ii) each Convertible Security issued hereunder.

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