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At APX, we aim to make our early-stage investments easy & fast. For this reason, we made all details of our standardized convertible loan agreement (CLA), together with a set of explainers, fully available below. For more information on our deal, you can read this article, and find out more about our investment strategy in our FAQ section.

If you have received relevant commitment(s) from other qualified investors, and our standard deal is not entirely in line with your current fundraising strategy, we are always happy to discuss alternative investment solutions for your specific case. Get in touch with our team via hello@apx.vc.

___________________

Convertible Loan Agreement
relating to [Company’s name]

(the “Agreement”)

PARTIES

1.

[Company’s name], with its seat in [Seat], registered with the commercial register at the local court of [Commercial Register] in [City] under [Registration no.]

(the “Borrower”)

2.

Axel Springer Porsche GmbH & Co. KG, with its seat in Berlin, registered with the commercial register at the local court of Charlottenburg in Berlin (Amtsgericht Charlottenburg) under HRA 54663 B

  1. (the “Lender” and, collectively with the Borrower, the “Parties” and each a “Party”)

RECITALS

A.

As of the date of last signature of this Agreement (the “Signing Date”), the Borrower’s registered share capital amounts to EUR [∙] and it is divided into [∙] Shares, as set forth in Exhibit A.

B.

The Borrower seeks financing and the Lender is willing to grant such financing up to an amount of EUR 201,000.00 (in words: two hundred one thousand euros) (the “Aggregate Investment”) pursuant to terms and conditions as set out in this Agreement.

NOW THEREFORE, the Parties hereby agree as follows:

DEFINITIONS

In this Agreement (including the RECITALS and these DEFINITIONS), except where the context requires a different interpretation, the words and expressions set out below shall have the following meaning:

“Business Days”

any day on which banks in [Berlin] are generally open for non-automated business, other than Saturday, Sunday, and public holidays.

“Conditions”

(i) the occurrence of a Subsequent Round during the term of this Agreement; and

(ii) the approval of the Second Tranche by the investment committee of the Lender, to be assessed at its investment discretion and on the basis of customary due diligence to the satisfaction of the Lender.

“Conversion Capital Increase”

the shareholders’ resolution on the share capital increase for purposes of implementation of the conversion of the Loan pursuant to section 4.

“Conversion Request Notice”

notice to request conversion of the Loan to be made at least in Textform.

“Conversion Shares”

Shares issued to the Lender in the relevant Conversion Capital Increase.

“Exit Transaction”

transfer or any other disposition of more than 50% of all outstanding Shares (pursuant to nominal amounts) or of more than 50% of the Borrower’s (direct or indirect, tangible or intangible) assets, or a transaction within the meaning of the German Transformation Act (UmwG) or comparable transaction having commercially comparable results (excluding, for the avoidance of doubt, any change of legal form).

“Fully Diluted Share Capital”

the sum of (calculated immediately prior to the relevant conversion under section 4):

(i) the Borrower’s registered share capital;

(ii) any (virtual) shares and options that are allocated and/or available for allocation to employees or other parties, which shall represent no less than 10% of the fully diluted shares of the Borrower and to be implemented prior to conversion under section 4;

(iii) any convertible loans, SAFEs, warrants or any other instrument outstanding at a time under which a party can become shareholder or realize monetary gains from sale of the Borrower, but excluding the Loan under this Agreement.

“Maturity Date”

[Last date of month on the elapse of 18 months’ as from Signing Date].

“Qualified Debt Financing Round”

a bona fide debt financing of no less than EUR [∙] being raised in the form of convertible loans, SAFEs, warrants or any other instrument under which a party can become shareholder or realize monetary gains from sale of the Borrower.

“Qualified Equity Financing Round”

a bona fide equity financing round of the Borrower of no less than EUR [∙] being raised.

“Share(s)”

each and all shares in the Borrower from time to time.

“Shareholder(s)”

the Shareholders of the Borrower from time to time.

“Subsequent Round”

means either a Qualified Debt Financing Round or a Qualified Equity Financing Round.

“Textform”

text form (Textform) pursuant to section 126b German Civil Code (BGB).

OPERATIVE PROVISIONS

1

Structure of Investment

1.1

Aggregate Investment. The Lender’s Aggregate Investment shall be structured as follows:

(a)

First Tranche. A first tranche of EUR 51,000.00 (in words: fifty-one thousand euros) (the “Principal Amount”) in the form of a convertible loan (the “First Tranche”); and

(b)

Second Tranche. A second tranche of EUR 150,000.00 (in words: one hundred fifty thousand euros), which shall be subject to section 1.2 below (the “Second Tranche“).

1.2

Enforcement of Second Tranche. Subject to the cumulative fulfilment of the Conditions, the Lender shall invest the Second Tranche into the Borrower in accordance with and subject to the terms and conditions of the relevant Subsequent Round, provided that:

(a)

In the event that the Second Tranche is implemented as a convertible loan in the context of a Qualified Debt Financing Round, the general principles set out in this Agreement, except for the relevant principal amount, applicable interest and conversion economics (i.e., maximum valuation or discount, as applicable), shall apply mutatis mutandis; and

(b)

In the event that the Second Tranche is implemented in the context of a Qualified Equity Financing Round, the Lender shall have the exclusive right to subscribe to a certain number of Shares pertaining to the same class and carrying the same rights (including a same ranking proceeds, dividends, and liquidation preference) as the highest-ranking Shares that are being issued to the equity investor(s) in such Qualified Equity Financing Round.

2

First Tranche Granting and Disbursement of Loan; Purpose of Loan

2.1

Granting of Loan. The Lender hereby grants to the Borrower a loan at the Principal Amount pursuant to the terms and conditions of this Agreement (the “Loan”).

2.2

Disbursement. The disbursement of the Principal Amount shall be effected no later than fifteen (15) Business Days as of Signing Date to the following bank account of the Borrower (the date of the receipt by the Borrower, the “Disbursement Date”):

Bank:   [∙]
IBAN:   [∙]
BIC:      [∙]

2.3

Purpose of Loan. The Loan shall be exclusively used for general expansion and developing the Borrower’s business and liquidity purposes.

3

Term; Interest; Repayment

3.1

Term. The Loan shall have a fixed term until Maturity Date.

3.2

Interest. The Principal Amount shall bear interest at a rate of [∙]% per annum, calculated pro rata temporis based on the actual number of days elapsed in a 365-day year, accruing as from the Disbursement Date until the latest of (i) date of repayment pursuant to section 3.3, (ii) date of conversion pursuant to section 4 or (iii) date of notice of termination pursuant to section 8.

3.3

Repayment. Provided that no conversion pursuant to section 4 has been implemented, the Principal Amount and any interest accrued thereon shall be repaid in full upon request by the Lender in Textform within two (2) weeks as of the earlier of the (i) Maturity Date or (ii) date of notice of termination pursuant to section 8.

The Borrower shall not be entitled to repay the Principal Amount and any interest accrued thereon prior to the Maturity Date without the prior consent of the Lender in Textform.

3.4

Lender’s Bank Account. The repayment shall be effected to the bank account of the Lender notified to the Borrower by the Lender prior to the relevant repayment in Textform for this purpose.

4

Conversion of the Loan

4.1

Conversion of the Loan. The Principal Amount and any accrued interest thereon shall (fully but not partially) be converted into equity of the Borrower as follows:

(a)

Conversion in the Context of a Qualified Equity Financing Round. In the context of a Qualified Equity Financing Round at the latest two (2) weeks prior to the Maturity Date, the Lender shall be entitled to request conversion of the Principal Amount and any accrued interest thereon into such number and class of Conversion Shares to be determined pursuant to section 4.2 below.

(b)

Conversion upon Exit Transaction. Unless previously converted, in the context of an Exit Transaction at the latest two (2) weeks prior to the Maturity Date, the Lender shall be entitled to request conversion of the Principal Amount and any accrued interest thereon into such number and class of Conversion Shares to be determined pursuant to section 4.2 below.

(c)

Conversion upon Maturity Date. To the extent that no conversion pursuant to the preceding section 4.1(a) and (b) has been implemented at the latest two (2) weeks prior to the Maturity Date, the Lender may, instead of repayment under section 3.1, request conversion of the Principal Amount and any accrued interest thereon into such number and class of Conversion Shares to be determined pursuant to section 4.2 below.

4.2

Conversion Shares. The number and class of Conversion Shares shall be as set out below:

(a)

Number of Conversion Shares. The number of Conversion Shares shall be determined as follows, provided that any fractioned figure shall be rounded down to the next whole number:

\[NCS = {PA \over (CSP-EUR \;1.00)}\]

whereas

NCS = number of conversion shares

PA = the outstanding balance of the Principal Amount and any accrued interest thereon immediately prior to the relevant conversion

CSP = the “Conversion Share Price”, as determined as follows:

\[{MV \over FDC}\]

whereas

MV = EUR 969,000.00 (in words: nine hundred sixty-nine thousand euros)

FDC = Fully Diluted Share Capital immediately prior to the relevant conversion

(b)

Class of Conversion Shares.

(i)

Conversion in the Context of a Qualified Equity Financing Round: The Conversion Shares shall have the same class and carry the same rights (including a same ranking proceeds, dividends, and liquidation preference based on the respective PA plus the nominal amount per each Conversion Share) as the highest-ranking Shares that are being issued to the equity investor(s) in the Qualified Equity Financing Round,

(ii)

Conversion upon Exit Transaction or Maturity Date: The Conversion Shares shall have the same class and carry the same rights (including a same ranking proceeds, dividends, and liquidation preference based on the respective PA plus the nominal amount per each Conversion Share) as the existing highest-ranking class of Shares,

provided that such Conversion Shares under both lit. (i) and lit. (ii) shall carry no less than customary investor rights as (without limitation), investor information and reporting, pre-emption right, 1x non-participating (anrechenbar) liquidation preference, right of first refusal, tag-along right, customary investor put option and market standard vesting provision applicable to Shares held, directly or indirectly, by Borrower’s founders.

4.3

Exercise of Conversion Right.

(a)

The conversion right of the Lender shall be exercised by the Lender within two (2) weeks following (i) being informed of the relevant Qualified Equity Financing Round or Exit Transaction or (ii) the Maturity Date by Conversion Request Notice directed to the Borrower.

(b)

Upon receipt of the Conversion Request Notice, the Borrower shall take, or cause its Shareholders to take, all actions and measures and shall make, or cause its Shareholders to make, all declarations necessary or appropriate to implement the Lender’s relevant conversion right. Particularly, the Borrower shall without undue delay convene a shareholders’ meeting of the Borrower to resolve upon the Conversion Capital Increase, admit, and cause its Shareholders to admit, the Lender to subscribe to the Conversion Shares and apply for registration of the Conversion Capital Increase with the competent commercial register of the Borrower.

(c)

Subject to the approval of the Conversion Capital Increase by the shareholders’ meeting, the Lender shall (i) subscribe to the Conversion Shares and (ii) pay in cash the nominal amount of EUR 1.00 per each Conversion Share subscribed by the Lender.

(d)

Subject to the registration of the Conversion Capital Increase with the competent commercial register of the Borrower, the Lender hereby irrevocably transfers and assigns to the Borrower, which accepts such transfer and assignment of this Agreement and any claims arising from it or in relation thereto.

5.1

In order to prevent or avoid a possible over-indebtedness or illiquidity of the Borrower within the meaning of section 19(2) and section 17(2), respectively, of the German Insolvency Code (InsO), the Parties hereby agree that

(a)

Any and all present and future claims of the Lender under or in relation to this Agreement (including, but not limited to, any repayment claim of the Principal Amount and any accrued interests under section 3. of this Agreement, the “Subordinated Claims”) shall be (i) subordinated to any and all present and future liabilities of the Borrower vis-à-vis any present and future creditors of the Borrower within the meaning of section 38 of the German Insolvency Code (InsO) and section 39, para. 1, no. 1 through 5 of the German Insolvency Code (InsO), and (ii) rank pari passu with any other contractually subordinated liabilities with further present and future creditors of the Borrower; and

(b)

The Borrower is only obliged to settle the Subordinated Claims and, accordingly, the Lender may only request their payment or other settlement, to the extent that (i) the Borrower is able to make such a payment from any future annual surplus (Jahresüberschuss), any liquidation surplus (Liquidationsüberschuss) or any other freely disposable assets (sonstiges freies Vermögen) and (ii) the Borrower is at that time neither illiquid nor over-indebted nor would it become nor is it threatened to become illiquid or over-indebted (within the meaning of the German Insolvency Code (InsO)) as a result of such payment or other settlement of the Subordinated Claims.

5.2

The subordination herein shall not constitute as a waiver of the Subordinated Claims by the Lender.

5.3

The preceding sections 5.1 and 5.2 shall also apply in case of the liquidation of the Borrower.

6.1

Guarantees in Respect of the Borrower. The Borrower hereby represents and warrants to the Lender, by way of an independent guarantee (selbständiges Garantieversprechen) within the meaning of section 311(1) of the German Civil Code (BGB) that, as of the Signing Date:

(a)

All facts, circumstances and information fairly disclosed to the Lender in the course of the due diligence process from [Date] through and including [Date] (e.g., in the due diligence form attached hereto as Exhibit 6.1(a) or further communicated to the Lender through e-mail or during calls) are true, accurate, complete and in no way misleading. There are no facts, circumstances or information which should be reasonably expected to be of material importance to Lender’s investment decision and which could lead to a financial damage of the Borrower.

(b)

The Borrower is a company duly formed, validly existing and in good standing under the laws of [the Federal Republic of Germany]. The Shares have been validly issued pursuant to applicable law and each Shareholder is the legal and beneficial owner of the Shares in the Borrower as outlined in Exhibit A. The Shares have been fully paid in, have not been paid back, do not carry any payment obligations towards the Borrower, and are free and clear of any direct or indirect liens, encumbrances, options, voting arrangements, trust agreements or similar third-party rights. To the Borrower’s best knowledge, no Shareholder is, or has committed to become, a party to any agreement to dispose of or encumber Shares in any circumstance or exercise the rights arising from such Shares in any way, except as provided for in this Agreement.

(c)

The Borrower has full power and authority, and no consents or approvals are required, to execute and consummate the transactions contemplated in this Agreement, other than: (i) any corporate approvals by the Borrower’s competent bodies, or (ii) any requirements under applicable law, which the Borrower has obtained prior to Signing Date (as applicable). The consummation of the transactions or performance of the obligations contemplated in this Agreement do not violate any applicable law and do breach any existing agreement to which the Borrower is a party or by which it is bound.

(d)

The Borrower is neither over-indebted (überschuldet) nor illiquid (zahlungsunfähig) within the meaning of the German Insolvency Act (InsO). No application to initiate an insolvency procedure has been filed and there are no facts or circumstances that could indicate that such application shall be filed in the future.

(e)

No lawsuits or administrative proceedings against the Borrower are pending, have been threatened, are to be reasonably expected or intended. No injunctions or other prohibitive orders have been issued against the Borrower.

(f)

The Borrower is the unlimited and unencumbered sole legal owner of all intellectual property rights, whether registered or not registered, and similar rights, including (but not limited to) patents, utility models, design rights, copyrights, and neighbouring rights (Leistungsschutzrechte), trademarks, service marks, trade names, titles, internet domain names, other labelling rights, rights deriving from corresponding applications and registrations of such rights as well as any licenses (Nutzungsrechte) under and entitlements to any such intellectual property rights, including any rights to software and databases (the “IP Right(s)”) necessary to conduct the Borrower’s business. Such IP Rights are not subject to, or infringe, any rights and/or claims of third-parties or there are no pending rescission, cancellation, invalidation, revocation or correction proceedings which may limit the Borrower’s ability to use and exploit the IP Rights free of charge.

(g)

The Borrower’s founders and employees have transferred or will transfer to the Borrower any and all (present and future) IP Rights and know-how, which they may have created or acquired, and which concern the Borrower’s business.

6.2

In case of breach of a guarantee under the preceding section 6.1, the Borrower shall put the Lender in such position as it would have been in, had such a breach not occurred. In case such restitution in kind is not possible, sufficient or performed within ten (10) Business Days, the Lender shall be entitled to claim monetary damages against the Borrower, which shall be limited to the Principal Amount actually disbursed pursuant to section 2.2. In the event of repayment pursuant to section 3.3, the monetary damage(s), if any, paid under this section 6.2 shall be offset against the final amount to be repaid to the Lender.

7

Governance

7.1

Information rights. The Lender shall be entitled to receive from the Borrower at such a format to be determined by the Lender:

(a)

Annual financial statements of the Borrower, to be prepared in accordance with applicable laws and regulations, within 120 calendar days after the end of the relevant financial year.

(b)

Monthly progress reporting within the first 10 calendar days of each month (relating to the relevant previous month), including: (i) certain financial and operational key performance indicators to be jointly agreed between the Parties (ii) the relevant equity and debt agreements executed by the Borrower to be reasonably requested by the Lender from time to time and (iii) the current cash balance.

7.2

Lender Consent. The Borrower hereby undertakes vis-à-vis the Lender, and shall cause its Shareholders, not to approve any of the following matters without the Lender’s prior consent, to be granted in Textform:

(a)

Any transfer or disposal of any kind of Shares by a Borrower’s founder or his/her holding entity.

(b)

Any sale, transfer or lease of the Borrower’s business as a whole or a substantial part of the Borrower’s business as well as any restructuring and transformation measures of the Borrower.

(c)

Disposal and all other transactions (and any amendments or terminations thereto) relating to intellectual property rights outside the ordinary course of business.

(d)

Granting and taking up of loans or other financial measures (including convertible loan agreements) exceeding EUR 50,000.00 (in words: fifty thousand euros) per financial year.

(e)

The implementation of an employee incentive program.

(f)

Any material matter or matters outside of the ordinary business of the Borrower.

7.3

Further Participation in Future Rounds. In addition to the Aggregate Investment, the Lender shall be entitled to further participate in any future round(s) of the Borrower either (i) in such investment necessary for the Lender to reach its target shareholding of 10% of the Borrower’s Fully Diluted Share Capital, assuming the conversion of any outstanding debt instrument, or (ii) further investment(s) by the Lender of up to EUR 300,000.00 (in words: three hundred thousand euros) in the aggregate.

7.4

Most Favoured Nation Provision. To the extent that, in the context of any future convertible loan agreement(s) relating to the Borrower, certain rights, benefits or any other terms are offered or granted to an investor in a more beneficial manner than the terms and conditions set forth herein (to be determined by the Lender in its sole discretion), the Lender shall be entitled to request from the Borrower in Textform that such rights, benefits or other terms apply to this Agreement.

8

Termination

This Agreement cannot be terminated by any Party hereto except for cause (aus  wichtigem Grund) pursuant to applicable law by furnishing the other Party with a notice of termination in Textform.

9

General Provisions

9.1

Shareholders’ Approval. The Shareholders approved the execution of this Agreement and undertook to take all actions or measures and make all declarations required to bring into effect the provisions of this Agreement by shareholders’ resolution dated [Date].

9.2

Effectiveness and Amendments. This Agreement shall be binding upon signature of all Parties. Any amendment, modification, waiver or supplementation of this Agreement, including of this section 9.2, shall be in writing in order to be effective, unless a stricter form is required under applicable law.

9.3

Assignment of Rights and Obligations. The rights and obligations in this Agreement may not be assigned or transferred, wholly or partially, without the other Party’s prior written consent, except for the Lender’s assignment or transfer of rights or obligations to its related parties (i) within the meaning of section 15 et seq. of the German Stock Corporation Act (AktG) or section 1(2) of the German Foreign Tax Act (Außensteuergesetz), or (ii) any investment fund or person managed, advised, initiated, sponsored, or controlled by or under common control with general partner(s) (and, upon liquidation, limited partner(s)) of or by same management company or investment advisor with the Lender.

9.4

Interpretation. In respect of any legal term (regardless of whether such term is used in the German language or in the English language) employed in this Agreement, the German legal meaning of such term shall be authoritative for the meaning, construction and interpretation of the relevant provision and all matters related thereto.

9.5

Confidentiality. The Parties shall keep the content of this Agreement strictly confidential vis-à-vis any third party, except if and to the extent (i) disclosure is expressly agreed between the Parties, (ii) the relevant underlying facts and circumstances are publicly known, (iii) disclosure is required pursuant to any applicable laws, regulations, or official or judicial orders, (iv) disclosure is made to any Shareholder or a third party (including their advisors) that can reasonably be expected to invest in the Borrower, provided that (A) a corresponding confidentiality obligation is signed by such parties and (B) the other Party is reasonably informed of the relevant disclosure.

9.6

Costs. The Parties shall each bear their own costs incurred in connection with the negotiation and execution of this Agreement and the transactions contemplated herein. In addition to the foregoing, the Borrower shall bear the notarial costs related to the conversion of the Loan pursuant to section 4 and the execution of the relevant investment-related documents therewith.

9.7

Contact Details. Any and all communications, notices or declarations in connection with this Agreement shall be made to the following persons (or any such other person as reasonably in advance instructed by the relevant Party):

For the Lender:

For the Borrower:

  • [∙]
  • [∙]

9.8

Severability. In the event that, (i) a provision of this Agreement is or becomes partly or entirely invalid or unenforceable or (ii) this Agreement contains an unintended gap or omission, the validity of the remaining provisions of this Agreement shall not be affected thereby. The Parties shall replace the partly or entirely invalid or unenforceable provision with a valid and enforceable provision with the closest economic purpose of such invalid or unenforceable provisions. The same applies in case of an unintended gap or omission under this Agreement.

9.9

Completeness. This Agreement constitutes the entire agreement of the Parties and supersedes any prior agreements in connection with the subject matter herein described.

9.10

Governing Law and Jurisdiction. This Agreement is governed by and construed in accordance with the laws of the Federal Republic of Germany under exclusion of its rules of conflict of laws. To the extent legally permissible, the courts of [Berlin] shall have exclusive jurisdiction in respect of any dispute arising under or in connection with this Agreement.

The above deal terms are not meant to be final, but rather our standard proposal to be generally discussed between the parties. All provisions will be finally negotiated between the parties and, subject to the target company’s specific situation, other and/or further provisions may be necessary.

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