Ecvc Draft Convertible Note Purchase Agreement

Skill: Draft Convertible Note Purchase Agreement

1. Subject-matter triage

• Identify the governing form, any attached term sheet, the company capitalization support, and every referenced transaction document before drafting.
• Confirm whether the note is a single-investor or multi-investor closing, whether any purchaser is affiliated with management or the board, and whether the note sits alongside other convertible or debt instruments.
• Determine at the outset whether any exhibit, schedule, board consent, or disclosure package must align with the main agreement, because the memo must flag cross-document mismatches, not merely standalone drafting issues.

2. Failure modes the skill is correcting

• The capitalization definition is left ambiguous, which makes downstream conversion price calculations contestable and propagates into any analysis involving other convertible securities.
• The interaction with other outstanding convertible instruments that will also convert in the same financing is not addressed, leaving open an ordering or circularity problem in the denominator.
• Debt-incurrence covenants in existing financing documents are ignored, so the note issuance is drafted without the necessary consent or no-restriction representation.
• Interested-director or insider-purchase issues are omitted, creating avoidable validity risk in the board approval record and the agreement recitals.
• Maturity conversion mechanics are under-specified, leaving the company without a clean path for conversion at the note’s end date or a clear interaction with organizational documents.
• MFN language, if used, is overbroad or internally inconsistent, making the holder election mechanics impossible to administer.
• The agreement, note, exhibits, and schedules do not cross-check cleanly, so the operative documents contradict one another on amounts, dates, or defined terms.

3. Legal frameworks / domain conventions that apply

• Cap table arithmetic must be verified before drafting; outstanding shares, reserved shares, and convertible instruments must reconcile across the support materials, and any discrepancy must be flagged before finalization.
• Company capitalization should be defined with precision, including whether it is pre-money or post-money and whether converting instruments are included in the denominator; see the agreement’s defined terms and conversion mechanics.
• Conversion sequencing must be internally coherent if multiple instruments convert in the same financing; the agreement should state the ordering rule or aggregate treatment and avoid circular definitions.
• Existing debt covenants must be checked against the issuance; if a negative covenant or consent right is implicated, the agreement should include a representation, covenant, or disclosure tied to the relevant credit document.
• Interested-director transactions should be handled under the applicable corporate law framework, including the statutory safe harbor or cleansing procedure that governs board approval and disclosure.
• Maturity conversion should be drafted consistently with the note terms and the organizational documents, including any required stockholder approval, charter authority, or class rights mechanics.
• MFN provisions should be limited to a workable election right and should not permit selective stacking of the most favorable fragments across multiple prior notes.
• For any legal proposition stated in the agreement or issues memo, cite the controlling authority or governing document section that supports the position, whether it is a statute, charter provision, financing covenant, or other controlling source.

4. Analytical scaffolds

• Start with a document map: agreement, note form, schedules, exhibits, closing deliverables, and any referenced corporate approvals or third-party consents.
• Define every operative term once and test that the same term is used identically in the purchase agreement, note, and schedules.
• Reconcile the purchase price, principal amount, purchaser identity, closing date, and note terms across all source documents before drafting the final execution version.
• Cross-check conversion mechanics against the capitalization support: confirm the denominator, inclusion or exclusion of convertible instruments, and the treatment of other same-round securities.
• Test the issuance against existing debt documents: identify any consent requirement, issuance prohibition, or notice obligation, then reflect it in the representations, conditions, or closing deliverables.
• If any purchaser is a director, officer, or affiliate, draft the disclosure and board approval record so the conflict is affirmatively addressed rather than implied away.
• Draft maturity and default provisions so the conversion path, repayment path, and holder remedies are mutually consistent.
• If an MFN right appears, define the comparison set, the election mechanism, and the timing of the election with enough specificity to prevent cherry-picking or administrative ambiguity.
• Prepare the issues memorandum as a cross-document diagnostic: each item should identify the mismatch, the affected documents, the practical consequence, and the proposed fix.
• Treat the agreement as the primary deliverable and the issues memorandum as secondary; complete the executable agreement and its exhibits/schedules first, then memorialize open points and conflicts in the memo.

5. Vertical / structural / temporal relationships

• Identify whether the financing is a bridge round, a rolling closing, or a single closing, and align the closing mechanics, funding dates, and signature blocks accordingly.
• Track relationships across time: signing, funding, note issuance, conversion trigger, maturity, and any post-closing notice or filing deadline.
• Track relationships across documents: the purchase agreement, note, board consent, purchaser schedule, capitalization schedule, and any disclosure schedule must all tell the same story.
• When more than one purchaser exists, enumerate each purchaser and each funded amount separately before drafting the schedule or memo, rather than collapsing them into a generic investor population.
• When more than one outstanding convertible or debt instrument is in scope, treat each as a separate comparison item for purposes of conversion sequencing, covenant analysis, and disclosure consistency.
• If only one purchaser, one note, or one financing tranche exists, say so expressly and state that the drafting assumptions are single-issuer, single-closing, and single-instrument unless the source documents indicate otherwise.

6. Output structure conventions

• Produce an execution-ready convertible note purchase agreement with operative terms, signature blocks, exhibits, and schedules integrated into one cohesive draft.
• Include the note as an exhibit and keep defined terms consistent between the agreement and the note text.
• Include a purchaser schedule that captures each investor’s identity, principal amount, and closing timing in a form ready for execution.
• Include any disclosure or approval schedule needed to memorialize conflicts, consents, or other closing conditions.
• Prepare a separate issues memorandum that flags cross-document inconsistencies, ranks their practical importance using a clear ordinal severity scale defined at the top, and explains the downstream effect of each issue.
• For each issue, state the affected source document, the controlling authority or governing document provision, and the recommended fix.
• End the memo with a Recommended Actions section that assigns each action to a responsible role and ties it to the signing, closing, or post-closing milestone.
• Before finalizing, confirm by name that the agreement file is complete, non-empty, and contains operative clauses and attachments, and that the memorandum file is complete, non-empty, and contains actual issues and recommendations rather than a summary of the draft.