[{"data":1,"prerenderedAt":536},["ShallowReactive",2],{"document-participating-and-convertible-debenture-D5167":3},{"document":4,"label":23,"preview":11,"thumb":24,"thumb600":25,"description":5,"descriptionCustom":6,"apiDescription":5,"pages":8,"extension":10,"parents":26,"breadcrumb":30,"related":38,"customDescModule":182,"customdescription":6,"mdFm":183,"mdProseHtml":535},{"description":5,"descriptionCustom":6,"label":7,"pages":8,"size":9,"extension":10,"preview":11,"thumb":12,"svgFrame":13,"seoMetadata":14,"parents":15,"keywords":22},"PARTICIPATING AND CONVERTIBLE DEBENTURE [SPECIFY] (Corporation incorporated under the [SPECIFY CORPORATION ACT]) [SPECIFY AMOUNT] No.: [SPECIFY NUMBER] PROMISE TO PAY [SPECIFY]. (the \"Corporation\"), for value received, hereby recognizes owing and promises to pay to [SPECIFY] (\"[SPECIFY] \") or its authorized assignee, at the head office of [SPECIFY] or any other place which [SPECIFY] may communicate in writing from time to time to the Corporation: the principal amount of [AMOUNT SPECIFY CURRENCY] in [COUNTRY] legal currency (the \"Principal Amount\") upon presentation and remittance of this Debenture which Principal Amount shall be calculated as set forth in Section 2.2 hereof and which is repayable following the terms and conditions set forth in this Debenture; for as long as [SPECIFY] holds this Debenture, the interest on the Principal Amount equals to a percentage of the aggregate dividends and other distributions declared on the [SPECIFY] shares of the share capital of the Corporation (the \"[NUMBER] Shares\"), calculated by dividing [SPECIFY] Shares by the total number of issued and outstanding [NUMBER] shares on a fully diluted basis (the \"Interest\"). Such Interest is payable on the date where the dividends declared on [SPECIFY] shares of the Corporation are payable. If no dividends are declared, then no interest shall be payable for a given year. For the purposes of this Debenture \"fully diluted basis\" means, when determining the issued and outstanding [SPECIFY Shares of the Corporation, the aggregate of all issued and outstanding [SPECIFY] Shares and the number of [SPECIFY] Shares that would be issued on the full exercise of all convertible debentures, options, warrants and other rights of any kind and whether or not contingent, to acquire [SPECIFY] Shares or to have [SPECIFY] Shares issued from treasury. REPAYMENT OF THE DEBENTURE Unless [SPECIFY] (i) has previously requested the redemption of the aggregate of the Debenture in accordance with the provisions of Article 3, or (ii) has previously requested the conversion of the Debenture in accordance with Article 4, the Principal Amount is repayable concurrently with the exercise by [SPECIFY] of its Put Option described in Article [NUMBER] of the Unanimous Shareholders' Agreement of the Corporation entered into as of the date hereof (the \"Shareholders' Agreement\"). [SPECIFY] may request the repayment of this Debenture in [SPECIFY]'s Put Notice, as defined in Article [NUMBER] of the Shareholders' Agreement (the \"Put Notice\") (the \"Date of Repayment\"). The Principal Amount payable on the Date of Repayment pursuant to section 2.1 hereof shall be equal the Fair Market Value (as hereinafter defined) of [NUMBER] Shares of the Corporation on the Date of Repayment as if such shares were issued and outstanding on the Date of Repayment, event though such amount is less then the [AMOUNT] amount disbursed by [SPECIFY] as of the date hereof. For the purposes of this Debenture, Fair Market Value means: the fair market value of the shares of the Corporation, as determined by an independent evaluator, who must be an auditor with expertise in business evaluations, jointly designated by the Corporation and [SPECIFY]; in determining such fair market value; (i) no diminution or accretion in value shall be attributed to any majority or minority interest; in the event of failure to agree upon such an evaluator within [NUMBER] days of the date of the event by reason of which the evaluation is required to act hereunder, the Corporation and/or [SPECIFY] may apply to the arbitration as contemplated in the Shareholders Agreement; the evaluator shall deliver his report within [NUMBER] days of this appointment and his decision shall be final and binding upon all parties; all expenses incurred in relation with the determination of the fair market value will be borne by the Corporation. Concurrently with the payment of the Principal Amount as set forth in paragraph 2.2, the Corporation shall pay [SPECIFY] any unpaid Interest, as of the Date of Repayment. The Corporation may not repay by anticipation all or any portion of the Principal Amount hereunder, without the prior written consent of [SPECIFY]. Once the Debenture has been repaid in full, the Corporation shall be relieved of any and all obligations hereunder. REDEMPTION OF THE DEBENTURE AT THE OPTION OF [SPECIFY] [SPECIFY] may request the Corporation to redeem the Debenture by remitting to the Corporation a written notice in accordance with Article 11 hereof at any time following the occurrence of an event of default as provided under Article 8 or a special event as provided under Article 9. (The date of the written notice is the \"Date of Redemption\".) In the event of a default or a special event, the redemption price of the Debenture will be payable without delay by the Corporation to [SPECIFY] and shall be equal to the aggregate of (i) the Principal Amount as set forth in section 2.2 hereof (ii) the unpaid Interest, if any, as of the Date of Redemption. Once the Debenture has been redeemed in full, the Corporation shall be relieved of any and all obligations hereunder. RIGHT OF CONVERSION [SPECIFY] shall have the right at its option, and at any time, to convert in full this Debenture into [SPECIFY] shares of the Corporation (the \"Shares\") (or any other shares following the redesignation or reclassification of the Shares), by remitting the Debenture to the Corporation together with a notice of conversion in the form of the one attached hereto (the \"Date of Conversion\") in the manner set forth under Article 11 hereof. Upon compliance by [SPECIFY] with the provisions of section 4.1, the [SPECIFY] Shares to be issued at the time of the exercise of the right of conversion conferred by this Debenture is deemed to have been issued and [SPECIFY] is deemed to become the registered holder of these Shares as of the Date of Conversion and the Corporation must make the necessary inscriptions in its registers. The Corporation must as soon as possible following the Date of Conversion but within a maximum period of [NUMBER] days remit to [SPECIFY] a share certificate registered in the name of [SPECIFY] for the [SPECIFY] Shares to which [SPECIFY] is entitled. At the time of the conversion of the Debenture, [SPECIFY] shall also be entitled, at its sole discretion, to receive in cash the unpaid Interest thereon, as the case may be, at the Date of Conversion. The Corporation shall pay all costs incurred in connection with the issue of the Shares arising from the exercise of the right of conversion. The Corporation undertakes towards [SPECIFY], as long as a right of conversion pertaining to the Debenture may be exercised, to: make all necessary steps and see to it that a sufficient number of Shares is authorized at all times for the purposes of issue in order to satisfy the terms of the right of conversion pertaining to the Debenture; ensure that all the Shares issued at the time of the exercise of the right of conversion are duly and validly issued as fully paid. REPRESENTATIONS AND WARRANTIES In addition to the representations and warranties made pursuant to the Subscription Agreement entered into as of the date hereof which are hereby reiterated and repeated herein in favor of [SPECIFY], the Corporation represents and warrants to [SPECIFY] the following additional representations and warranties: the Corporation has all corporate powers and legal capacity required in order to execute and deliver this Debenture and to perform and satisfy all the conditions herein stipulated; all actions, steps and corporate proceedings of the Corporation necessary to approve and authorize it to execute and deliver this Debenture and perform all of its obligations hereunder have been duly and validly authorized and taken by the Corporation, its directors and, if required, its shareholders and no further actions, approvals or authorizations are required;",null,"Participating and Convertible 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Form","/template/funding-request-form-D13696","https://templates.business-in-a-box.com/imgs/250px/13696.png",{"label":81,"url":82,"thumb":83,"extension":10},"Funding Request Letter","/template/funding-request-letter-D13697","https://templates.business-in-a-box.com/imgs/250px/13697.png",{"label":85,"url":86,"thumb":87,"extension":10},"Letter of Request for an Equity Investment","/template/letter-of-request-for-an-equity-investment-D471","https://templates.business-in-a-box.com/imgs/250px/471.png",{"description":89,"descriptionCustom":6,"label":90,"pages":91,"size":92,"extension":10,"preview":93,"thumb":94,"svgFrame":95,"seoMetadata":96,"parents":97,"keywords":106,"url":107},"PROMISSORY NOTE This Promissory Note (the \"Note\") is made and effective the [DATE], BETWEEN: [LENDER NAME] (the \"Lender\"), an individual with his main address located at OR a corporation organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] AND: [YOUR COMPANY NAME] (the \"Borrower\"), a corporation organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [YOUR COMPLETE ADDRESS] TERMS FOR VALUE RECEIVED, the Borrower promises to pay to the order of Lender, at its principal office located at [ADDRESS], or at such other place that is designated in writing by the holder hereof, the principal sum of [AMOUNT], together with all charges and interest herein provided, payable at the rate and in the manner hereinafter set forth: Borrower shall make monthly payments of principal and interest at the rate of [%] per annum based upon an amortization of [NUMBER] months. Monthly payments shall be due on or before the first day of each month with the first payment being due on or before [DATE]. If not sooner paid, all amounts due under this Note, including principal, interest and other charges shall be due and payable in full on or before the first day of [MONTH], [YEAR] (the \"Maturity Date\"). Time is of the essence of the payment obligations hereunder and each monthly payment shall be due and payable on or before the first day of each month. This Note is and will be secured by a certain first priority security interest in all of the tangible and intangible property of the Borrower, to be recorded in all applicable governmental offices. The parties shall execute a separate security agreement, in form and substance acceptable to the Lender in all respects. Borrower agrees to execute any such security agreements presented by the Lender or other documents required by the Lender in order to perfect its security interest in the above described property. Said Security Agreement and any other instruments and documents executed in connection with or given as security for this Note shall hereinafter be referred to collectively as the \"Loan Documents.\" All of the terms, covenants, Conditions, representations and warranties contained in the Loan Documents are hereby made part of this Note to the same extent and with the same force and effect as if fully set forth herein. If all or any portion of any payment due hereunder is not received by the Lender within [NUMBER] calendar days after the date when such payment is due, Borrower shall pay a late charge equal to [%] of such payment, such late charge to be immediately due and payable without demand by Lender. Borrower shall have the right to prepay all (but not a portion) of the indebtedness evidenced by this Note at any time, by paying the Lender an amount equal to the sum of (I) the principal balance then outstanding, (ii) all interest accrued to the date of such prepayment, (iii) all interest calculated through the Maturity Date, and (iv) any late charge or charges then due and owing. If any payment under this Note is not paid in full by the [DAY] of any month during the term hereof or if the entire amount due as represented by this Note is not paid in full on or before the Maturity Date, or should default be made in the performance or observation of any of the terms, covenants, or conditions contained in the Loan Documents, or if any representation or warranty contained in the Loan Documents is breached or is or becomes untrue, this Note shall be in default, and the entire principal amount outstanding hereunder, accrued interest thereon, all late charges, if any, and any and all other charges due hereunder, shall, at Lender's option, immediately become due and payable, without further notice, the giving of such notice being expressly waived by the Borrower","Promissory Note","3",39,"https://templates.business-in-a-box.com/imgs/1000px/promissory-note-D434.png","https://templates.business-in-a-box.com/imgs/250px/434.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#434.xml",{"title":6,"description":6},[98,100,103],{"label":17,"url":99},"finance-accounting",{"label":101,"url":102},"Business Loans","business-loan",{"label":104,"url":105},"Promissory Notes","promisory-note","promissory note","/template/promissory-note-D434",{"description":109,"descriptionCustom":6,"label":110,"pages":111,"size":112,"extension":10,"preview":113,"thumb":114,"svgFrame":115,"seoMetadata":116,"parents":117,"keywords":121,"url":122},"POOLING AGREEMENT This Pooling Agreement (the \"Agreement\") is effective [DATE], BETWEEN: [YOUR COMPANY NAME] (the \"Original Shareholders\"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [YOUR COMPLETE ADDRESS] AND: [COMPANY NAME] (the \"Company\"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] WHEREAS each of [NAME OF THE SHAREHOLDERS] are shareholders of [COMPANY]; and WHEREAS the Original Shareholders are each parties to a shareholders agreement (the \"[COMPANY] Shareholders Agreement\") with [COMPANY] and its other shareholders, being [SPECIFY NAME OF THE SHAREHOLDERS]; WHEREAS the Original Shareholders have agreed to pool their shares for voting purposes as hereinafter set out; and NOW, THEREFORE, THIS AGREEMENT WITNESSETH: The preamble hereto shall form part of the present Agreement. All words herein whose initial letter is capitalized shall have the meaning ascribed to such word in the [COMPANY] Shareholders Agreement.","Pooling Agreement","2",42,"https://templates.business-in-a-box.com/imgs/1000px/pooling-agreement-D5168.png","https://templates.business-in-a-box.com/imgs/250px/5168.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#5168.xml",{"title":6,"description":6},[118,119],{"label":17,"url":99},{"label":20,"url":120},"raising-capital","debenture agreement","/template/debenture-agreement-D5168",{"description":124,"descriptionCustom":6,"label":125,"pages":111,"size":126,"extension":10,"preview":127,"thumb":128,"svgFrame":129,"seoMetadata":130,"parents":132,"keywords":131,"url":136},"LOAN AGREEMENT This Loan Agreement (\"Agreement\") is made and effective the [DATE], BETWEEN: [LENDER NAME] (the \"Lender\"), an individual with his main address located at OR a corporation organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] AND: [YOUR COMPANY NAME] (the \"Borrower\"), a corporation organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [YOUR COMPLETE ADDRESS] Promise to Pay Within [NUMBER] months from today, Borrower promises to pay to Lender the sum of [AMOUNT], and interest and other charges stated below. Responsibility Although this Agreement may be signed below by more than one person, Borrower understands that both parties are individuals responsible for paying back the full amount. Breakdown of Loan Amount of Loan: Other (Describe): Amount Financed: Finance Charge: Total of Payments: Annual Rate: Repayment Borrower will repay the amount of this note in [NUMBER] equal uninterrupted monthly installments of [AMOUNT] each on the [DAY] of each month starting on the [DATE], and ending on [DATE]. Prepayment Borrower has the right to prepay the whole outstanding amount at any time","Loan Agreement",513,"https://templates.business-in-a-box.com/imgs/1000px/loan-agreement-D417.png","https://templates.business-in-a-box.com/imgs/250px/417.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#417.xml",{"title":131,"description":6},"loan agreement",[133,134,135],{"label":17,"url":99},{"label":101,"url":102},{"label":101,"url":102},"/template/loan-agreement-D417",{"description":138,"descriptionCustom":6,"label":139,"pages":140,"size":126,"extension":10,"preview":141,"thumb":142,"svgFrame":143,"seoMetadata":144,"parents":146,"keywords":145,"url":153},"SECURED LUMP-SUM PROMISSORY NOTE AGREEMENT This Secured Lump-Sum Promissory Note Agreement (the \"Agreement\") is effective [DATE], BETWEEN: [FIRST PARTY NAME], (the \"Issuer\") a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE] with its head office located at/Individual having an address at: [YOUR COMPLETE ADDRESS] AND: [SECOND PARTY NAME], (the \"Holder\") company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE] with its head office located at/Individual having an address at: [YOUR COMPLETE ADDRESS] FOR VALUE RECEIVED, the undersigned Issuer hereby promises to pay to the order of the Holder, the maximum Principal Amount of [PRINCIPAL AMOUNT] together with interest on the unpaid Principal Amount (as defined in this Agreement) outstanding from time to time at the rate (or rates) hereafter specified, and all other sums which may be owing to the Holder by the Issuer hereunder. The terms of the Note are as follows: MATURITY DATE AND PAYMENT TERMS This Note will mature, and be due and payable in full, on [DATE] (the \"Maturity Date\") and shall be paid in the lump sum amount of [LUMP SUM AMOUNT TO BE PAID]. INTEREST From and after the date hereof, all outstanding principal of this Note will bear simple interest at the rate of [PERCENT OF INTEREST] per annum. On the date that is [NUMBER OF DAYS] days after the date of this Note, the Issuer shall pay the then accrued interest on this Note. Upon the occurrence and during the continuance of any Event of Default (as hereinafter defined) under this Note, all outstanding principal of this Note shall bear interest at the rate of [PERCENT OF INTEREST] per annum. All outstanding principal and accrued but unpaid interest on this Note shall be payable on the Maturity Date. SECURITY This Note is Secured by a Security Agreement on the Issuer's Property, described as [PROPERTY DESCRIPTION], hereinafter known as the \"Security,\" which shall transfer to the possession and ownership of the Holder immediately in case of Acceleration. The Security may not be sold or transferred without the Holder's consent until the Maturity Date. If the Issuer breaches this provision, the Holder may declare all sums due under this Note immediately due and payable, unless prohibited by applicable law. The Holder shall have the sole option to accept the Security as full payment for the Principal Amount without further liabilities or obligations. If the market value of the Security does not exceed the Principal Amount, the Issuer shall remain liable for the balance due while accruing interest at the maximum rate allowed by law. PREPAYMENT The Issuer may prepay this Note prior to the Maturity Date, without premium or penalty, upon written notice to the Holder. EVENTS OF DEFAULT The occurrence of any one or more of the following events shall constitute an \"Event of Default\" under this Note: the failure of the Issuer to pay any sum due under this Note when due, whether by demand or otherwise, and such sum remains unpaid for five (5) days after the Due Date; and any other Event of Default described in the Security Agreement that might be signed between the Parties regarding the Property that is pledged as collateral to the loan. RIGHTS AND REMEDIES UPON DEFAULT ","Secured Lumpsum Promissory Note Agreement","4","https://templates.business-in-a-box.com/imgs/1000px/secured-lumpsum-promissory-note-agreement-D13041.png","https://templates.business-in-a-box.com/imgs/250px/13041.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#13041.xml",{"title":145,"description":6},"secured lumpsum promissory note agreement",[147,150],{"label":148,"url":149},"Business Plan Kit","business-plan-kit",{"label":151,"url":152},"Business Procedures","business-procedures","/template/secured-lumpsum-promissory-note-agreement-D13041",{"description":155,"descriptionCustom":6,"label":156,"pages":157,"size":126,"extension":10,"preview":158,"thumb":159,"svgFrame":160,"seoMetadata":161,"parents":163,"keywords":162,"url":169},"SHAREHOLDERS AGREEMENT This Shareholders Agreement (the \"Agreement\") is made and effective [DATE], BETWEEN: [YOUR COMPANY NAME] (the \"Company\"), a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [YOUR COMPLETE ADDRESS] AND: [FIRST SHAREHOLDER NAME] (the \"First Shareholder\"), an individual with his main address located at OR a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] AND: [SECOND SHAREHOLDER NAME] (the \"Second Shareholder\"), an individual with his main address located at OR a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] AND: [THIRD SHAREHOLDER NAME] (the \"Third Shareholder\"), an individual with his main address located at OR a company organized and existing under the laws of the [State/Province] of [STATE/PROVINCE], with its head office located at: [COMPLETE ADDRESS] WITNESSETH: WHEREAS, the present distribution of shares of the Company is as follows: Name Number of Shares WHEREAS, in order to insure the harmonious and successful management and control of the Company, and to provide for an orderly and fair disposition of shares of common stock of the Company now or hereafter owned by any Shareholder; NOW, THEREFORE, in consideration of the mutual promises of the parties hereto, and intending to be legally bound, the parties hereby agree as follows: Definitions and organisation of the company \"Offering Shareholder\" means any Shareholder, or his personal representatives, heirs, administrators, and executors, as the case may be, who pursuant to this Agreement must or does offer all or any of his Shares to the Company or the Continuing Shareholders. \"Continuing Shareholders\" means all Shareholders other than an Offering Shareholder. \"Shares\" means shares of Common Stock of the Company now or hereafter owned by any Shareholder. \"Buyer\" means the Company or those Continuing Shareholders who purchase an Offering Shareholder's Shares pursuant to this Agreement. \"Management Shareholder\" means First Shareholder, Second Shareholder and Third Shareholder. ORGANISATION OF THE COMPANY The affairs of the Company will be managed by a board of [NUMBER] directors unless changed by a unanimous Directors' Resolution. The present directors of the Company are [DIRECTORS' NAMES]. It is agreed that [SHAREHOLDERS' NAMES] shall each be entitled to elect one director to the board of directors of the Company so long as each is a Shareholder. Two (2) directors shall constitute a quorum for the transaction of any business at any meeting of the board of directors. At all meetings of the board of directors, every motion to be carried must receive a majority of the votes cast, subject to the provisions of subparagraphs 2.4 and 2.5. Unless otherwise agreed, board meetings will be held at the head office of the Company. In the event that a nominee to the Board of one of the Shareholders shall fail to vote and act as a director to carry out the provisions of this agreement, then the shareholders agree to exercise their right as shareholders of the Company and in accordance with the Articles of the Company to remove such nominee from the Board and to elect in the place or stead thereof such individual who will use his/her best efforts to carry out the provisions of this agreement but only in the event that the Shareholder whose nominee has been removed fails to appoint a successor within a period of fourteen days from the date such nominee has been removed. The election, appointment and determination of officers and the auditors and advisors of the Company, the defining of their duties and functions and the salaries and remuneration to be paid to them will be a function of the board of directors. Until changed by the board of directors, the Officers of the Company and their annual salaries shall be: Office Held: Director: [NAME] [SALARY] Secretary: [NAME] [SALARY] All direct out-of-pocket expenses will be reimbursed provided these falls within guidelines set out by the Board of Directors from time to time. Until otherwise agreed, each officer of the Company will commit to spending his/her full time on the affairs of the Company. Until changed by the board of directors, the auditors and advisors of the Company shall be: Auditor: Legal Advisors: There shall be kept, in such bank or banks (including trust companies) as may be determined by the board of directors, bank accounts of the Company in which shall be deposited all monies received by the Company in the course of carrying on business from time to time. All payments on account of the Company shall be made by cheques drawn on the bank account and all cheques, drafts or other instruments drawn and made for the purposes of the business of the Company shall be executed by such directors, officers or employees as may from time to time be authorized so to do by the board of directors. Subject to paragraph 2.6, all decisions relating to the management and control of the business of the Company shall be determined by the board of directors of the Company, provided always that the following matters shall be determined by a Special Directors' Resolution: any capital expenditures greater than xxxx; any lease commitments greater than xxxx; the acquisition of any business interests by the Company; the elections of officers of the Company; the payment of any cash dividends or stock dividends to Shareholders of the Company; the issuance of any debt obligations of the Company; the disposal of the whole or any part of the business, undertaking, or assets of the Company outside the normal course of business of the Company the transfer of any shares of the Company; changes or variations in the objects or powers of the Company; the liquidation or winding up of the Company; the approval of any contracts or transactions outside the normal course of business; the execution of any contract involving a consideration greater than xxxx within the normal course of business; the lending of money by the Company; the guarantee by the Company of the debts or obligations of any other person, firm or body corporate; any non-budgeted expenditures greater than xxxx; business plan and/or budgets. The following decisions shall be determined by a Unanimous Directors' Resolution: alterations, variations or changes to the authorized or issued capital of the Company; the salaries and bonuses of officers and directors of the Company; the issue, redemption or purchase of any Shares; and changes in the number of directors of the Company The Shareholders may pledge any of their Shares as security for any borrowings by them provided the pledgee executes an agreement, in writing, providing that the pledgee shall be subject to all of the terms of this Agreement. The board of directors shall meet at least four times during each fiscal year of the Company. Any director can call a meeting provided 10 days notice is given. Notice may be waived. During the first year from the date of this agreement, the board of directors shall meet on a monthly basis. Directors may elect to attend a board meeting by telephone conference call. Each Shareholder shall, for so long as s/he is the owner of shares of the Company devote such of his/her business, time and energy as may be reasonably required to carry on the business of the Company and the Shareholder shall use his/her best efforts, skill and abilities to promote the interests of the Company. Each Shareholder agrees that he/she will not engage, without the consent of the other Shareholders, in a business which is directly competitive to that of the Company. Purchase for Investment","Shareholders Agreement","16","https://templates.business-in-a-box.com/imgs/1000px/shareholders-agreement-D1016.png","https://templates.business-in-a-box.com/imgs/250px/1016.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#1016.xml",{"title":162,"description":6},"shareholders agreement",[164,166],{"label":33,"url":165},"business-legal-agreements",{"label":167,"url":168},"Incorporation Agreements","incorporation-agreement","/template/shareholders-agreement-D1016",{"description":171,"descriptionCustom":6,"label":172,"pages":91,"size":112,"extension":10,"preview":173,"thumb":174,"svgFrame":175,"seoMetadata":176,"parents":177,"keywords":180,"url":181},"TERM SHEET Issue: [Venture Capital FIRM] (\"VC\") and/or any member of its corporate group (\"the VC Group\") will purchase up to [AMOUNT] Series A Convertible Preferred Stock (\"Series A\") newly issued by [YOUR COMPANY NAME] (the \"Company\") at a price per share of [PRICE] (the \"Purchase Price\"). In addition, other investors shall purchase at least [AMOUNT] but not more than [AMOUNT] of newly issued Series A at the Purchase Price. The shares of Series A will be convertible at any time at the option of the holder into common shares of the Company (\"Common Stock\") on a one-for-one basis, adjusted for future share splits. The Purchase Price equates to a pre-money valuation of [VALUATION]. The calculation is based on [NUMBER] fully diluted shares of Common Stock. If the number of shares issued, or stock awards/options authorized increases before the closing the price per share for Series A Convertible Preferred Stock shall be reduced so that the pre-money valuation is unchanged. The Series A Convertible Preferred Stock shall be referred to herein as the \"Preferred Stock.\" Dividend: The Preferred Stock is entitled to an annual [AMOUNT] per share dividend, payable when and if declared by the Board of Directors, but prior to any payment on Common Stock; dividends are not cumulative. Liquidation Preference: The Series A will have a liquidation preference so that proceeds on a merger, sale or liquidation (including non-cumulative dividends) will first be paid to the Series A and will include a [%] per annum compounding guaranteed return calculated on the total amount invested. Upon completion of an additional round of funding of at least [AMOUNT] the compounding guaranteed return feature will expire. The liquidation preference will cease to operate if the proceeds due to Series A, on a merger, sale or liquidation on an as-converted basis, exceed the proceeds that would be due under the liquidation preference. Use of Proceeds: The funds raised by Series A will be used principally for general working capital purposes. Voting Rights: The holders of the Series A shall have the right to vote with the Common Stock on an as-if-converted basis. Redemption: If not previously converted, the Series A is to be redeemed in three equal successive annual installments beginning [DATE]. Redemption will be at the purchase price plus a [%] per annum cumulative guaranteed return. Pre-emptive Rights: Holders of the Preferred Stock will be granted rights to participate in future equity financings of the Company based upon their pro-rata, as-if-converted, ownership of the Company. Automatic Conversion: The Preferred Stock shall be automatically converted into Common Stock at the then applicable conversion rate (1:1 assuming no share splits) in the event of an underwritten public offering of shares of the Company at a total offering of not less than [AMOUNT] and at a per share public offering price of not less than three times the Series A purchase price per share, adjusted for splits. Anti-Dilution: Series A shall have weighted average anti-dilution, based on a weighted average formula to be agreed, for all securities purchased as part of this transaction (excluding shares, options and warrants issued for management incentive and small issues for strategic purposes of under [NUMBER] shares). Management Options: Simultaneously with this transaction, one million new shares shall expand the Company's management incentive stock option pool - bringing the total number of shares issued and stock incentives (awards and options) authorized to [NUMBER OF SHARES]. Rights of First Offer; Tag-Along: The Company and the Investors will have a right of first refusal with respect to any employee's shares proposed to be resold. Alternatively, the Investors will have the right to participate in the sale of any such shares to a third party (co-sale rights), which rights will terminate upon a public offering. Information Rights: Monthly actual vs. plan and prior year. Annual budget [NUMBER] days before beginning of fiscal year","Term Sheet","https://templates.business-in-a-box.com/imgs/1000px/term-sheet-D473.png","https://templates.business-in-a-box.com/imgs/250px/473.png","https://templates.business-in-a-box.com/svgs/docviewerWebApp1.html?v6#473.xml",{"title":6,"description":6},[178,179],{"label":17,"url":99},{"label":20,"url":120},"term sheet","/template/term-sheet-D473",false,{"seo":184,"reviewer":196,"quick_facts":200,"at_a_glance":203,"personas":207,"variants":232,"glossary":259,"clauses":296,"how_to_fill":347,"common_mistakes":388,"faqs":413,"industries":441,"comparisons":466,"diy_vs_lawyer":479,"jurisdictions":492,"related_template_ids_curated":513,"schema":522,"classification":523},{"meta_title":185,"meta_description":186,"primary_keyword":187,"secondary_keywords":188},"Participating And Convertible Debenture Template (Free Word)","Free participating and convertible debenture template for structured debt financing. Trusted by companies in USA, Canada, UK, Australia, and 190+ countries. Free Word and PDF download.","participating and convertible debenture template",[189,190,191,192,193,194,195],"convertible debenture agreement","participating debenture template","convertible debt agreement template","convertible note template word","debenture agreement template free","structured debt financing template","convertible debenture template word",{"name":197,"credential":198,"reviewed_date":199},"Bruno Goulet","CEO, Business in a Box","2026-05-02",{"difficulty":201,"legal_review_recommended":202,"signature_required":202},"advanced",true,{"what_it_is":204,"when_you_need_it":205,"whats_inside":206},"A Participating and Convertible Debenture is a hybrid debt instrument that gives the holder the right to convert the outstanding principal into equity at a defined price or ratio, while also granting a participation right in the issuer's profits or revenue above a set threshold. This template is a free Word download you can edit online and export as PDF — covering conversion mechanics, interest, participation rights, security interests, covenants, and default in a single binding document.\n","Use it when a company raises growth or bridge capital from investors who want downside protection as a creditor and upside participation as a quasi-equity holder. It is common in pre-IPO rounds, mezzanine financing, and private placements where a straight debt or straight equity instrument does not meet both parties' risk-return requirements.\n","Principal amount and interest rate, maturity date, conversion rights and conversion price formula, participation rights tied to revenue or EBITDA thresholds, security and ranking provisions, affirmative and negative covenants, events of default, repayment mechanics, and governing law.\n",[208,212,216,220,224,228],{"title":209,"use_case":210,"icon_asset_id":211},"Growth-stage founders","Raising mezzanine capital without immediately diluting equity at a fixed valuation","persona-startup-founder",{"title":213,"use_case":214,"icon_asset_id":215},"Private equity and venture debt investors","Structuring hybrid instruments that provide interest income plus equity upside","persona-investor",{"title":217,"use_case":218,"icon_asset_id":219},"CFOs and finance directors","Documenting convertible debt on the balance sheet with clearly defined conversion terms","persona-cfo",{"title":221,"use_case":222,"icon_asset_id":223},"Corporate lawyers and in-house counsel","Drafting or reviewing debenture terms for private placement transactions","persona-corporate-lawyer",{"title":225,"use_case":226,"icon_asset_id":227},"Angel investors and family offices","Investing in early-stage companies with structured downside protection and profit participation","persona-angel-investor",{"title":229,"use_case":230,"icon_asset_id":231},"Investment bankers and placement agents","Structuring mezzanine or bridge financing packages for middle-market clients","persona-investment-banker",[233,236,240,244,247,251,255],{"situation":234,"recommended_template":44,"slug":235},"Short-term bridge financing converting at the next equity round","convertible-note-agreement-D870",{"situation":237,"recommended_template":238,"slug":239},"Debt financing with no equity conversion feature","Debenture Agreement","debenture-agreement-D5168",{"situation":241,"recommended_template":242,"slug":243},"Equity investment with no debt component or repayment obligation","Shareholder Agreement","adhesion-to-the-unanimous-shareholder-agreement-D848",{"situation":245,"recommended_template":125,"slug":246},"Investor loan with simple interest and a fixed repayment date","loan-agreement-D417",{"situation":248,"recommended_template":249,"slug":250},"Mezzanine financing secured against specific company assets","Secured Loan Agreement","secured-lumpsum-promissory-note-agreement-D13041",{"situation":252,"recommended_template":253,"slug":254},"Revenue-based financing with no conversion right","Revenue Participation Agreement","revenue-sharing-agreement-D13477",{"situation":256,"recommended_template":257,"slug":258},"Startup funding with valuation cap and discount but no participation","SAFE Agreement","safe-driving-policy-D13767",[260,263,266,269,272,275,278,281,284,287,290,293],{"term":261,"definition":262},"Debenture","A medium- to long-term debt instrument issued by a company to a lender, creating an obligation to repay principal and interest under defined terms.",{"term":264,"definition":265},"Conversion Right","The holder's contractual option to exchange outstanding principal — and sometimes accrued interest — for shares of the issuing company at a specified price or ratio.",{"term":267,"definition":268},"Conversion Price","The per-share price at which the debenture principal converts into equity, often set at a discount to the most recent round or pegged to a valuation cap.",{"term":270,"definition":271},"Participation Right","A provision entitling the debenture holder to receive a share of the company's profits, revenue, or distributable cash above a defined threshold, in addition to interest.",{"term":273,"definition":274},"Mezzanine Financing","A hybrid capital layer ranking below senior secured debt but above equity, combining debt repayment terms with equity-linked returns such as warrants or conversion features.",{"term":276,"definition":277},"Anti-Dilution Provision","A clause adjusting the conversion price downward if the company issues shares at a lower price after the debenture is issued, protecting the holder against dilution.",{"term":279,"definition":280},"Security Interest","A lender's legal claim over specific company assets — or all assets — as collateral, giving the holder priority recovery rights if the company defaults.",{"term":282,"definition":283},"Negative Covenant","A contractual restriction preventing the issuer from taking specified actions — such as incurring additional debt, paying dividends, or selling key assets — without the holder's consent.",{"term":285,"definition":286},"Event of Default","A defined trigger — such as missed interest payment, insolvency, or breach of covenant — that entitles the holder to demand immediate repayment or exercise conversion rights.",{"term":288,"definition":289},"Maturity Date","The date on which all outstanding principal and accrued interest become due and payable if the holder has not previously exercised their conversion right.",{"term":291,"definition":292},"Subordination","An agreement ranking the debenture holder's claims below those of senior secured lenders, defining the order of repayment in a liquidation or restructuring.",{"term":294,"definition":295},"Accrued Interest","Interest that has accumulated on the outstanding principal since the last payment date but has not yet been paid to the holder.",[297,302,307,312,317,322,327,332,337,342],{"name":298,"plain_english":299,"sample_language":300,"common_mistake":301},"Parties, Principal Amount, and Issuance Date","Identifies the issuing company and the debenture holder as legal entities, states the total principal amount advanced, and records the date the instrument is issued and becomes effective.","This Participating and Convertible Debenture is issued on [DATE] by [COMPANY LEGAL NAME], a [STATE/PROVINCE] [ENTITY TYPE] ('Issuer'), to [HOLDER LEGAL NAME] ('Holder') in the principal amount of $[AMOUNT] ('Principal').","Using a trade name instead of the registered legal entity for the issuer. If the entity name does not match corporate registry records, the security interest registration and conversion mechanics may be legally unenforceable against the correct entity.",{"name":303,"plain_english":304,"sample_language":305,"common_mistake":306},"Interest Rate and Payment Schedule","States the annual interest rate, how it accrues (simple or compound), payment frequency, and whether interest is paid in cash or accrues to principal until conversion or maturity.","The Principal shall bear interest at [X]% per annum, calculated on a 365-day basis. Interest shall [accrue and be added to Principal / be paid in cash on the [DATE] of each [MONTH/QUARTER]] until the Maturity Date or earlier conversion.","Failing to specify whether interest accrues as simple or compound. Courts and tax authorities treat these differently, and compounding on a large principal over a multi-year term creates a materially different repayment obligation than simple interest.",{"name":308,"plain_english":309,"sample_language":310,"common_mistake":311},"Maturity Date and Repayment","Sets the date on which outstanding principal and all accrued but unpaid interest become due, and specifies repayment mechanics if the holder has not converted.","Unless earlier converted or repaid, the entire outstanding Principal and all accrued and unpaid interest shall be due and payable on [MATURITY DATE] ('Maturity Date'). Repayment shall be made by wire transfer to the account designated by Holder in writing.","Omitting a provision for what happens if the Issuer cannot repay at maturity. Without an automatic extension or default mechanism, the parties face an ambiguous enforcement situation when the maturity date passes without payment or conversion.",{"name":313,"plain_english":314,"sample_language":315,"common_mistake":316},"Conversion Rights and Conversion Price","Grants the holder the right to convert all or a specified portion of the outstanding principal and accrued interest into shares of the issuer at a defined price or formula, at any time or on specified trigger events.","Holder may, at its sole option, convert all or any portion of the outstanding Principal plus accrued interest into [CLASS] shares of Issuer at a Conversion Price of $[X] per share, subject to adjustment as set out in Schedule A. Conversion shall be effected by delivery of a written Conversion Notice to Issuer.","Defining a fixed conversion price with no anti-dilution adjustment. If the issuer raises a subsequent round at a lower valuation, the holder's conversion value is materially impaired without a weighted-average or full-ratchet adjustment mechanism.",{"name":318,"plain_english":319,"sample_language":320,"common_mistake":321},"Participation Rights","Entitles the holder to receive a defined percentage of the issuer's net profits, revenue, or free cash flow above a stated threshold, in addition to interest, until conversion or repayment.","In addition to interest, Issuer shall pay Holder [X]% of Issuer's [Net Revenue / EBITDA / Distributable Cash] exceeding $[THRESHOLD] in each fiscal year, calculated within [60] days of fiscal year end and paid within [30] days of such calculation.","Defining the participation base (revenue, EBITDA, or distributable cash) ambiguously or by reference to accounting standards without specifying GAAP or IFRS. Disputes over the participation calculation are among the most frequently litigated debenture terms.",{"name":323,"plain_english":324,"sample_language":325,"common_mistake":326},"Security Interest and Ranking","Creates a security interest over specified company assets — or all assets — as collateral securing the debenture, and states the holder's ranking relative to other creditors.","As security for the obligations under this Debenture, Issuer hereby grants Holder a [first / second] priority security interest over [all present and after-acquired personal property of Issuer / the following assets: [DESCRIPTION]]. Holder's claim ranks [senior to / pari passu with / subordinate to] [NAMED CREDITOR(S)].","Failing to register the security interest with the applicable registry (UCC filing in the US, PPSA registration in Canada, Companies House charge registration in the UK). An unregistered security interest may be void against third-party creditors or a trustee in bankruptcy.",{"name":328,"plain_english":329,"sample_language":330,"common_mistake":331},"Affirmative and Negative Covenants","Lists actions the issuer must take (affirmative covenants — e.g., maintain insurance, deliver financials) and actions the issuer is prohibited from taking without the holder's written consent (negative covenants — e.g., incur senior debt, pay dividends, sell material assets).","Issuer shall: (a) deliver audited annual financial statements within [90] days of fiscal year end; (b) maintain adequate insurance on all material assets. Without Holder's prior written consent, Issuer shall not: (i) incur indebtedness exceeding $[X] in aggregate; (ii) declare or pay any dividend; (iii) sell or encumber any material asset outside the ordinary course of business.","Setting negative covenant thresholds so low that ordinary operating decisions require holder consent. This creates friction that slows the business and often leads to consent fatigue — where the holder starts approving waivers reflexively, making the covenants meaningless.",{"name":333,"plain_english":334,"sample_language":335,"common_mistake":336},"Events of Default and Remedies","Defines the specific triggers that constitute a default — missed payments, covenant breach, insolvency, material misrepresentation — and the remedies available to the holder, including acceleration of all amounts owed and immediate conversion.","Each of the following constitutes an Event of Default: (a) failure to pay any amount due within [10] business days of the due date; (b) material breach of any covenant not remedied within [30] days of written notice; (c) commencement of insolvency or bankruptcy proceedings. Upon an Event of Default, Holder may, at its option: (i) declare the entire Principal and accrued interest immediately due and payable; or (ii) convert the outstanding Principal at the Conversion Price.","Omitting a cure period for non-payment defaults. Without a grace period, a wire transfer delay or administrative error triggers full acceleration — a disproportionate remedy that courts may not enforce and that poisons the lender-borrower relationship.",{"name":338,"plain_english":339,"sample_language":340,"common_mistake":341},"Anti-Dilution Adjustments","Specifies how the conversion price is adjusted if the issuer issues new shares at a price below the current conversion price, protecting the holder's equity value on conversion.","If Issuer issues [CLASS] shares at a price per share less than the then-current Conversion Price, the Conversion Price shall be adjusted to equal the [weighted-average price / lower issuance price], calculated as set out in Schedule A, effective immediately upon such issuance.","Applying a full-ratchet rather than weighted-average anti-dilution adjustment. Full ratchet is the most aggressive protection for the holder but can dramatically reduce founder equity on a down round, often triggering renegotiation or litigation.",{"name":343,"plain_english":344,"sample_language":345,"common_mistake":346},"Governing Law, Dispute Resolution, and Entire Agreement","Specifies the jurisdiction whose law governs the debenture, the forum and mechanism for resolving disputes, and an entire-agreement clause confirming the written instrument supersedes all prior representations.","This Debenture is governed by the laws of [STATE / PROVINCE / COUNTRY]. Any dispute shall be resolved by [binding arbitration administered by [AAA/JAMS] in [CITY] / the courts of [JURISDICTION]]. This Debenture, together with the Schedules, constitutes the entire agreement of the parties with respect to its subject matter and supersedes all prior negotiations, representations, and agreements.","Selecting a governing jurisdiction with no connection to the issuer's place of incorporation or the holder's domicile. Courts in several jurisdictions decline to apply the chosen law where no real nexus exists, leaving the parties in an unpredictable legal environment.",[348,353,358,363,368,373,378,383],{"step":349,"title":350,"description":351,"tip":352},1,"Identify the parties with their registered legal entity names","Enter the issuer's full corporate name exactly as it appears on the certificate of incorporation, including entity type and jurisdiction. Do the same for the holder. Attach signing authority evidence (director resolution or incumbency certificate) to confirm who is authorized to execute.","Cross-check the issuer's current registered name against the corporate registry before execution — name changes after prior financing rounds are common and create enforcement gaps.",{"step":354,"title":355,"description":356,"tip":357},2,"Set the principal amount, interest rate, and accrual method","Enter the total amount being advanced, the annual interest rate, and whether interest accrues as simple or compound. Specify whether interest is paid periodically in cash or accrues to principal and converts with it.","If the parties intend interest to accrue to principal (PIK interest), state this explicitly — courts treat silence as an obligation to pay in cash.",{"step":359,"title":360,"description":361,"tip":362},3,"Define the maturity date and repayment mechanics","Set a specific calendar maturity date. Include a provision for what happens if the issuer cannot repay at maturity — automatic 12-month extension, mandatory conversion, or default. Specify the wire transfer details or payment method.","A forced-conversion fallback at maturity is more protective for the issuer than a hard repayment obligation when cash position at maturity is uncertain.",{"step":364,"title":365,"description":366,"tip":367},4,"Draft the conversion price and anti-dilution schedule","Set the initial conversion price per share and choose between weighted-average and full-ratchet anti-dilution protection. Attach a Schedule A working through the adjustment formula with a numerical example.","Always include at least one worked numerical example of the anti-dilution adjustment in Schedule A — it prevents disputes when the trigger event occurs months or years later.",{"step":369,"title":370,"description":371,"tip":372},5,"Define the participation threshold and calculation basis","Choose the participation base (net revenue, EBITDA, or distributable cash), set the threshold above which participation accrues, and state the percentage. Specify the accounting standard (GAAP or IFRS) and the timeline for calculation and payment.","Add an audit right — the holder's right to review relevant financial records — when participation is tied to internally calculated EBITDA rather than audited revenue.",{"step":374,"title":375,"description":376,"tip":377},6,"Complete the security interest and register it","Describe the collateral precisely — all personal property, specific assets, or a defined asset class. Indicate the intended ranking. File or register the security interest with the correct registry before or immediately after execution.","In the US, UCC-1 financing statements must be filed in the debtor's state of incorporation, not the state of the collateral's location, for most personal property.",{"step":379,"title":380,"description":381,"tip":382},7,"Calibrate the covenants to the issuer's operating reality","Set affirmative reporting covenants (financials, insurance, regulatory compliance notices) and negative covenant thresholds (debt cap, dividend restriction, asset sale limits) proportionate to the issuer's current revenue and debt levels. Thresholds set too low will require constant waiver requests.","Include a carve-out for ordinary-course trade payables and equipment leases so routine operations don't inadvertently trigger a negative covenant breach.",{"step":384,"title":385,"description":386,"tip":387},8,"Execute before funds are advanced and file all registrations within 24 hours","Both parties must sign — typically by authorized directors or officers — before any funds are transferred. File security interest registrations the same day. In most jurisdictions, priority is determined by registration date, not execution date.","Use a closing checklist: executed debenture, corporate resolution of the issuer, UCC-1 / PPSA / Companies House filing receipt, and wire confirmation — all retained in the deal file.",[389,393,397,401,405,409],{"mistake":390,"why_it_matters":391,"fix":392},"Failing to register the security interest immediately after execution","An unregistered security interest may be void against a trustee in bankruptcy or a subsequent secured creditor who registers first. The holder becomes an unsecured creditor in a wind-up, recovering pennies on the dollar instead of having priority over the collateral.","File the UCC-1 financing statement (US), PPSA registration (Canada), or Companies House charge (UK) on the same day the debenture is executed and retain the filing confirmation as part of the deal file.",{"mistake":394,"why_it_matters":395,"fix":396},"Defining the participation base ambiguously","If the debenture says 'profits' without specifying GAAP or IFRS, including or excluding specific items, the parties will dispute the calculation every year — and litigation costs often exceed the disputed participation amount.","Attach a Schedule defining the participation calculation in full, including the accounting standard, a list of specific inclusions and exclusions, and a worked numerical example using the issuer's most recent financials.",{"mistake":398,"why_it_matters":399,"fix":400},"Setting conversion price with no anti-dilution protection","A subsequent equity round priced below the conversion price effectively strips the holder of equity value on conversion, creating an incentive to block future financing or demand renegotiation precisely when the company most needs capital.","Include a weighted-average anti-dilution adjustment clause with a Schedule A example. Agree upfront on whether broad-based or narrow-based weighted average applies — the difference is significant for founders.",{"mistake":402,"why_it_matters":403,"fix":404},"Omitting cure periods in the events of default clause","Without a grace period, a missed wire transfer due to a bank processing delay or an unintentional covenant breach constitutes an immediate event of default, triggering full acceleration of all amounts owed and damaging an otherwise healthy lender-borrower relationship.","Include a minimum 5-business-day cure period for payment defaults and a 20–30 day cure period for covenant breaches after written notice. Reserve immediate default for insolvency events and material fraud.",{"mistake":406,"why_it_matters":407,"fix":408},"Using the issuer's trade name instead of the registered corporate entity","A debenture issued by 'Acme Tech' rather than 'Acme Technologies Inc.' may be unenforceable against the legal entity, and a security interest registered against the wrong name is legally ineffective in most jurisdictions.","Verify the exact registered name in the corporate registry and include the entity's registration number in the parties block. If the company operates under a trade name, add a 'also known as' reference for clarity.",{"mistake":410,"why_it_matters":411,"fix":412},"No forced-conversion or maturity fallback mechanism","If the issuer cannot repay at maturity and the holder has not elected to convert, neither party has a clear path forward — the company is technically in default but the holder may not want equity at that stage, creating a standoff.","Include a maturity fallback clause: either automatic conversion at the then-applicable conversion price, a 12-month extension at an increased interest rate, or a documented negotiation period before the holder can accelerate.",[414,417,420,423,426,429,432,435,438],{"question":415,"answer":416},"What is a participating and convertible debenture?","A participating and convertible debenture is a hybrid debt instrument that combines two features: a conversion right allowing the holder to exchange outstanding principal — and often accrued interest — into equity at a pre-agreed price, and a participation right entitling the holder to a share of the issuer's profits or revenue above a defined threshold. It gives investors downside protection as a creditor and upside participation as a quasi-equity holder, making it common in mezzanine financing and pre-IPO bridge rounds.\n",{"question":418,"answer":419},"How is a convertible debenture different from a convertible note?","A convertible note is typically a short-term, simple instrument used in early-stage startups to bridge to the next equity round — it usually lacks a participation feature, extensive covenants, and a formal security interest. A participating and convertible debenture is a more structured, longer-term instrument with negotiated interest, participation rights, security over assets, and detailed covenants. Debentures are more common in growth-stage or middle-market transactions where the investment is larger and the investor requires more comprehensive protections.\n",{"question":421,"answer":422},"What is the participation right in this debenture?","The participation right entitles the debenture holder to receive a percentage of the issuer's net revenue, EBITDA, or distributable cash above a defined threshold, in addition to the stated interest rate. For example, a holder might receive 5% of EBITDA exceeding $500,000 per fiscal year. This participation continues until the debenture is converted or repaid, giving the investor a profit-sharing return on top of the fixed-income component. The calculation base and accounting standard should be defined precisely to avoid disputes.\n",{"question":424,"answer":425},"Does a convertible debenture have to be secured?","No — a convertible debenture can be unsecured, but most holders in arms-length commercial transactions require a security interest over some or all of the issuer's assets. A secured debenture gives the holder priority recovery rights over collateral in the event of default or insolvency. If secured, the security interest must be registered with the applicable registry — UCC in the US, PPSA in Canada, Companies House in the UK — to be effective against third parties.\n",{"question":427,"answer":428},"What conversion price should I use?","The conversion price is typically set at a discount of 10–25% to the price per share in the most recent equity round, or pegged to a valuation cap agreed at the time of issuance. For pre-revenue companies, a valuation cap with an automatic discount at the next qualifying financing round is the most common structure. The key is to include an anti-dilution adjustment so the conversion price tracks future down-round pricing — otherwise the holder's equity value on conversion may be significantly less than expected.\n",{"question":430,"answer":431},"Is a participating and convertible debenture treated as debt or equity for accounting purposes?","Under GAAP and IFRS, a participating and convertible debenture is generally classified as a compound financial instrument — part liability (the host debt contract) and part equity (the conversion option). The equity component is measured at fair value on initial recognition and recorded in equity; the debt component is the residual. The participation feature may be classified as a derivative depending on its terms. Companies should work with their auditors to determine the correct classification before issuance, as reclassification after the fact is disruptive and costly.\n",{"question":433,"answer":434},"What happens if the company cannot repay the debenture at maturity?","Without a maturity fallback clause, the failure to repay at maturity triggers an event of default, giving the holder the right to accelerate all amounts and enforce the security interest. In practice, most well-drafted debentures include a fallback — either automatic conversion at the then-applicable conversion price, a 12-month extension at an increased interest rate, or a mandatory negotiation period. Parties should agree on the maturity mechanism at the outset rather than negotiating it under distress.\n",{"question":436,"answer":437},"What covenants are typically included in a convertible debenture?","Affirmative covenants typically require the issuer to deliver annual and quarterly financial statements, maintain adequate insurance, preserve its corporate existence, and notify the holder of material adverse events. Negative covenants typically prohibit the issuer from incurring senior debt above a defined threshold, paying dividends, selling material assets outside the ordinary course, changing its business in a material way, or granting security interests that rank ahead of the debenture holder — all without prior written consent.\n",{"question":439,"answer":440},"Do I need a lawyer to prepare a participating and convertible debenture?","Yes, for most transactions a lawyer review is strongly recommended. The conversion mechanics, anti-dilution provisions, participation calculation, security registration, and covenant thresholds all involve legal and financial nuances that a template alone cannot fully address for your specific situation. A template provides a solid structural starting point and reduces drafting time significantly, but a securities or corporate lawyer should review the final document — particularly for transactions above $250,000 or where the security interest and conversion terms are commercially significant.\n",[442,446,450,454,458,462],{"industry":443,"icon_asset_id":444,"specifics":445},"Technology / SaaS","industry-saas","ARR-based participation thresholds, conversion tied to Series A or B pricing, and IP-inclusive security packages covering software and data assets.",{"industry":447,"icon_asset_id":448,"specifics":449},"Real estate and property development","industry-real-estate","Participation pegged to net operating income or property sale proceeds, security registered against land title, and conversion into partnership or REIT units rather than common shares.",{"industry":451,"icon_asset_id":452,"specifics":453},"Manufacturing","industry-manufacturing","Security interests over equipment and inventory, participation tied to EBITDA margins, and negative covenants restricting capex above a defined threshold without holder consent.",{"industry":455,"icon_asset_id":456,"specifics":457},"Healthcare / MedTech","industry-healthtech","Milestone-linked conversion triggers tied to regulatory approval or clinical trial outcomes, participation tied to product revenue post-commercialization, and covenants covering licensing and IP maintenance.",{"industry":459,"icon_asset_id":460,"specifics":461},"Professional services","industry-professional-services","Participation based on annual fee revenue above a retention threshold, security over receivables and client contracts, and change-of-control provisions protecting the holder if key principals depart.",{"industry":463,"icon_asset_id":464,"specifics":465},"Mining and natural resources","industry-mining","Participation tied to commodity revenue or royalty streams, security registered against mineral rights and equipment, and conversion into shares priced relative to resource asset valuations.",[467,471,473,476],{"vs":468,"vs_template_id":469,"summary":470},"Convertible Promissory Note","convertible-promissory-note-D5190","A convertible promissory note is a simpler, shorter-term instrument commonly used in early-stage startup bridge rounds. It typically carries no participation right, minimal covenants, and no formal security interest. A participating and convertible debenture is a more structured instrument with profit participation, extensive covenants, and security — appropriate for larger, longer-term transactions where the investor needs both income and upside.",{"vs":238,"vs_template_id":239,"summary":472},"A standard debenture agreement is a straightforward debt instrument with interest and repayment terms but no conversion right or profit participation. A participating and convertible debenture adds both features, making it a hybrid instrument. Use a standard debenture when the investor wants fixed-income debt with no equity upside; use a participating convertible when they want both downside protection and a share of growth.",{"vs":125,"vs_template_id":474,"summary":475},"loan-agreement-D155","A loan agreement documents a straightforward debt arrangement with interest and repayment — no equity conversion and no profit participation. It is simpler, faster to execute, and appropriate when both parties want a clean debt relationship. A participating and convertible debenture is a more complex instrument designed for investors who want structured equity-like returns alongside the security of a creditor position.",{"vs":156,"vs_template_id":477,"summary":478},"shareholders-agreement-D167","A shareholders agreement governs the rights and obligations of equity holders — voting, dividends, drag-along, and tag-along rights. A participating and convertible debenture is a debt instrument that may eventually convert into equity, at which point a shareholders agreement becomes relevant. The two documents serve different stages of the capital relationship and are often used together in structured financing transactions.",{"use_template":480,"template_plus_review":484,"custom_drafted":488},{"best_for":481,"cost":482,"time":483},"Straightforward debenture transactions between known parties where both sides have negotiated the key commercial terms and need a structured document to record them","Free","1–2 hours to complete the template",{"best_for":485,"cost":486,"time":487},"Transactions up to $1M where conversion mechanics, participation calculation, and security registration need validation by a corporate or securities lawyer","$500–$1,500 for a lawyer review","2–5 business days",{"best_for":489,"cost":490,"time":491},"Transactions above $1M, cross-border issuances, complex anti-dilution structures, regulated securities offerings, or instruments that will be traded or syndicated","$3,000–$15,000+ depending on complexity","1–4 weeks",[493,498,503,508],{"code":494,"name":495,"flag_asset_id":496,"note":497},"us","United States","flag-us","Convertible debentures issued to investors may constitute securities under federal and state law, requiring compliance with SEC exemptions — most commonly Regulation D Rule 506(b) or 506(c) for private placements. Security interests must be perfected by filing a UCC-1 financing statement in the debtor's state of incorporation. Anti-dilution provisions and conversion mechanics are subject to state corporate law, and California, Delaware, and New York each have nuances that affect enforceability.",{"code":499,"name":500,"flag_asset_id":501,"note":502},"ca","Canada","flag-ca","Convertible debentures are securities under provincial securities legislation; issuances must comply with an applicable prospectus exemption — most often the accredited investor or minimum amount exemption under National Instrument 45-106. Security interests must be registered under the applicable provincial Personal Property Security Act (PPSA). Quebec uses the Civil Code security regime, requiring a hypothec published at the Registre des droits personnels et réels mobiliers (RPRM).",{"code":504,"name":505,"flag_asset_id":506,"note":507},"uk","United Kingdom","flag-uk","Convertible debentures are regulated as specified investments under the Financial Services and Markets Act 2000; issuance to the public requires FCA authorization unless an exemption applies. Security charges over company assets must be registered at Companies House within 21 days of creation under the Companies Act 2006, or the charge is void against liquidators and creditors. Post-Brexit, UK and EU regulatory frameworks diverge — dual-jurisdiction transactions require separate legal advice.",{"code":509,"name":510,"flag_asset_id":511,"note":512},"eu","European Union","flag-eu","Convertible debentures offered to investors in EU member states may trigger the EU Prospectus Regulation unless an exemption applies — typically the offer to qualified investors or fewer than 150 persons per member state. Security interest registration requirements vary by member state: France uses the Registre du commerce et des sociétés; Germany uses the Handelsregister for certain charges. GDPR considerations apply where the debenture documentation contains personal data of individual holders. Participation rights may also engage local profit-sharing or labor law requirements in some member states.",[514,239,246,250,515,516,517,518,514,519,520,521],"promissory-note-D434","shareholders-agreement-D1016","term-sheet-D473","non-disclosure-agreement-nda-D12692","investment-agreement-D12831","security-agreement-D915","share-subscription-agreement-private-long-form-D343","board-resolution-D78",{"emit_how_to":202,"emit_defined_term":202},{"primary_folder":165,"secondary_folder":524,"document_type":525,"industry":526,"business_stage":527,"tags":528,"confidence":534},"loans-and-promissory-notes","agreement","general","growth",[529,530,531,532,533],"fundraising","convertible-debenture","debt-instrument","equity-conversion","hybrid-security",0.85,"\u003Ch2>What is a Participating and Convertible Debenture?\u003C/h2>\n\u003Cp>A \u003Cstrong>Participating and Convertible Debenture\u003C/strong> is a hybrid debt instrument that combines the protections of a secured loan with two equity-linked features: a conversion right allowing the holder to exchange outstanding principal — and typically accrued interest — into shares of the issuing company at a pre-agreed price, and a participation right entitling the holder to a share of the company's profits or revenue above a defined threshold. Unlike a plain loan or a simple convertible note, this instrument is designed for investors who need both the downside protection of a creditor position and the upside of an equity-like return — making it a common structure in mezzanine financing, pre-IPO bridge rounds, and private placements where a straight debt or straight equity instrument does not meet both parties' risk-return requirements.\u003C/p>\n\u003Ch2>Why You Need This Document\u003C/h2>\n\u003Cp>Without a properly drafted participating and convertible debenture, the commercial terms agreed between the issuer and the investor exist only in emails and term sheets — neither of which creates enforceable security over assets, legally valid conversion mechanics, or a binding participation obligation. If the company grows and hits the participation threshold, an undocumented or poorly drafted arrangement becomes a disputes trigger. If the company struggles and cannot repay at maturity, the investor has no perfected security interest to enforce and no clear acceleration right. An unregistered security interest is void against a trustee in bankruptcy, turning a secured creditor into an unsecured one at the worst possible moment. This template gives both parties a complete, structured instrument — covering conversion, participation, covenants, security, and default — that can be executed, registered, and enforced from day one.\u003C/p>\n",1781186021678]