Angel Capital Association's New Model Convertible Promissory Note: Key Features and Alternative Provisions

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Course Details

Course Information

smart_display Format
On-Demand
signal_cellular_alt Difficulty Level
Intermediate
work Practice Area
Banking and Finance

Date & Time

event Date
Tuesday, May 6, 2025
schedule Time
1:00 p.m. ET./10:00 a.m. PT
timer Program Length
90 minutes

Credit Information

This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00

CLE

ALL

This CLE webinar will discuss the key features and additions of the Angel Capital Association's (ACA) new Model Convertible Promissory Note (Model Note). The panel will engage in a mock negotiation highlighting the Model Note's usefulness in practice and provide guidance on when alternative provisions may come into play in a particular transaction.

Faculty

Dror Futter

Senior Counsel

Touro University

Mr. Futter is the Senior Counsel to the President of Touro University. Previously he was a venture capital and technology attorney in private practice. He has been the general counsel of both a venture capital firm and a venture backed startup. Mr. Futter serves on the legal advisory board of the Angel Capital Association and previously served on the Model Forms Drafting Group of the National Venture Capital Association. Mr. Futter participated in the drafting of the Angel Capital Association's Model Convertible Promissory Note.

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Elizabeth D. Sigety

Partner & Chair, National Emerging Companies & Venture Capital Practice

Fox Rothschild LLP

As an attorney practicing finance and franchise law in Pennsylvania and New York including a strong presence in the New York City, Philadelphia and Bucks County regions, Ms. Sigety focuses on a wide variety of corporate, finance, mergers and acquisitions, franchising, licensing and distribution matters. For 30 years, she has been a trusted adviser to clients, including emerging companies and entrepreneurs, handling business and financial transactions such as venture capital and angel financing, mergers and acquisitions, structured finance, securities, private placements, franchise regulatory matters and franchise agreements. She offers her clients a comprehensive practice equipped to provide risk management through innovative guidance in a company’s expansion

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Description

In response to the significant increase in the use of convertible instruments for early-stage financing, the ACA created a new Model Note in an all-in-one document that combines common convertible promissory note features with "best practice" provisions often found in side letters or note purchase agreements and includes alternative provisions for consideration. The Model Note, along with the accompanying Model Note Term Sheet, aims to streamline the use of convertible notes in early-stage financing and endeavors to balance the rights of founders and investors. The new Model Note has the potential to boost early-stage investment by reducing confusion between the parties, setting achievable expectations, and encouraging transparency, thereby making transactions more efficient and cost-effective.

The Model Note incorporates provisions for conversion into equity and outlines the typical provisions for conversion, including a discount to the next round and valuation cap. The key features of the new Model Note include various optional provisions such as expanded representations and warranties, participation rights in future financings, select information rights, most favored nation rights, board observer rights, and protective provisions.

Listen as our expert panel, who were members of the task force that drafted the Model Note, reviews the Model Note's key features and structures and highlights its usefulness in the early stage venture capital ecosystem.

Outline

Background: why ACA created the new Model Note
ACA's new Model Note vs. SAFEs and the National Venture Capital Association's forms
Structure of the new Model Note and the issues it addresses
Key features and additions of the new Model Note
Alternative provisions to consider
Practitioner pointers and key takeaways

Benefits

The panel will address these and other key considerations:

What were the goals of ACA's task force when creating the new Model Note?
What are the key features and additions of the new Model Note?
How is the Model Note structured and what issues does it address?
What are the alternative provisions to consider in the Model Note and under what circumstances should they be used?
How does the new Model Note balance the interests of both founders and investors?
How recent case law has influenced the provisions of the Model Note