How to prepare a deal issues list from transaction documents for Convertible Note Financing Transactions

Prepare a company-side deal issues list by reconciling the term sheet, purchase agreement, convertible notes, side letters, and existing financing restrictions against the company’s approved commercial position. Record each material discrepancy with its source, consequence, proposed company position, fallback, and decision owner. Separate confirmed drafting problems from missing evidence and unresolved legal questions. The deliverable is a prioritized negotiation document showing what must change, what requires approval or consent, and which residual risks management must decide whether to accept.

When to use this workflow

Use this workflow when company counsel receives substantive financing drafts, an investor’s revised note form, or side letters affecting economics or investor rights. Refresh the list before negotiation calls and after material revisions.

The scope is issue identification and resolution, not a complete diligence report or closing checklist. Focus on conversion economics, repayment exposure, priority, investor rights, amendment mechanics, and dependencies affecting the proposed financing.

This guide uses a US practice orientation, with Delaware corporate-law examples where identified. Contract rights depend on language, governing law, facts, and deal context. Securities exemptions, state filings, usury, tax, security interests, and enforceability require separate analysis where relevant. Record targeted referrals rather than unsupported conclusions.

What you need

Start with a controlled document set and management’s financing objectives, including expected runway, next-round timing, and acceptable repayment exposure. Collect:

• The current term sheet, purchase agreement, note forms, investor schedules, side letters, and proposed security or subordination documents.
• The charter, capitalization records, outstanding notes and SAFEs, equity financing documents, amendments, and waivers.
• Existing debt and material contracts containing relevant borrowing, lien, conversion, or consent restrictions.
• Finance’s funding schedule, interest assumptions, conversion scenarios, and maturity liquidity assessment.
• Approved company positions, unresolved commercial choices, and authority for accepting departures.

Give each document a stable ID, version, execution status, entity, and exhibit references. Request missing records from named custodians. An absent note attachment is an evidence gap, not permission to infer its economics from the purchase agreement.

Use the template

Use Convertible Note Financing Transactions — Deal issues list as the companion template. You can copy this table into your working document or spreadsheet.

Keep issue IDs stable across negotiation rounds. Cite document IDs, clauses or pages, and versions; cite both documents for a conflict. Calculation references should identify the model version and relevant cells.

“Finding / certainty” distinguishes confirmed text, an inference requiring validation, and missing evidence. Explain the consequence before assigning priority. State an actionable company ask, then record any fallback and required approval. “Owner / target” identifies the decision-maker and negotiation milestone. Close a row only when “Status / proof” identifies resolving language, supporting evidence, or authorized acceptance of residual risk.

Step by step

1. Establish the commercial baseline and review perimeter

Extract financing amount, closing structure, interest treatment, maturity, conversion triggers, valuation cap, discount, and repayment rights from the term sheet and company instructions. Record disagreements rather than silently choosing one source. Treat the term sheet as a comparison baseline; separately assess the effect of any binding provisions.

Clarify whether the financing is secured, subordinated, funded at closing, or advanced over time. Staged advances require attention to when principal becomes outstanding, whether funding is committed or discretionary, and when interest begins.

Record: each material baseline departure with its source, consequence, and company ask. Give missing commercial instructions their own decision rows.

2. Map conversion events before comparing economics

Read definitions and operative provisions together. Map qualified financing, other equity financing, maturity, acquisition, IPO, and default outcomes where addressed. Identify automatic versus elective treatment, thresholds, notice rights, share class, accrued-interest treatment, and rounding.

Do not assume a financing event compels conversion. The historical Core Scientific note form, Exhibit A § 2(a) gives holders an optional conversion right following defined Offering events through maturity. It illustrates negotiated wording, not a venture-financing benchmark.

Compare the capitalization denominator, option-pool treatment, and cap-versus-discount calculation against finance’s model. Determine whether the draft applies the lower conversion price or another formula; do not assume cap and discount are cumulative.

Record: the mechanism, exposing scenario, proposed correction, model reference, and finance reviewer.

3. Test debt economics and repayment exposure

Review interest accrual, payment timing, capitalization, default interest, maturity, acceleration, and voluntary prepayment together. A stated rate does not establish whether interest compounds, converts, or becomes payable in cash before the next financing.

Have finance test proposed funding dates, day-count convention, simple or compound treatment, cash or payment-in-kind mechanics, and payment waterfall. Review liquidity exposure alongside senior-debt restrictions and holder conversion windows.

The historical Core Scientific Exhibit A § 1(b)(i) illustrates conditional voluntary prepayment with ten business days’ notice and a 200% repayment multiplier. That provision supports checking the complete clause, not assuming repayment at par or treating the multiplier as customary.

Record: trigger, modeled cash consequence, company position, finance validation, and any governing-law or usury question requiring specialist review.

4. Reconcile rights across documents and investors

Compare definitions, priority provisions, amendment thresholds, information rights, transfer rights, and consent requirements across the purchase agreement, notes, and side letters. Identify the voting denominator, excluded holdings, protected changes, and whether individual consent is required under the draft.

Distinguish inconsistency from intentional investor-specific treatment. Check whether side-letter rights survive conversion, depend on minimum holdings, or constrain later financing. If a most-favored-nation provision exists, identify its scope, exclusions, election mechanics, and potential effect on negotiated concessions.

Do not assume the main agreement overrides a side letter. Read their interaction and precedence provisions.

Record: conflicting clauses, affected holders, intended result, proposed drafting solution, and authorized decision-maker for differential rights.

5. Identify authority, consent, and closing dependencies

Compare the financing with existing borrowing limits, lien provisions, and consent rights. Preserve qualifications and distinguish note issuance, security grants, conversion, and a later acquisition. Separate the representation being requested from evidence supporting its accuracy.

A historical filed purchase-agreement form, § 4.1(e)–(l) includes specified prior-noteholder consents, intercreditor arrangements, and lender approvals. This secured, subordinated example does not prescribe deliverables for an unsecured startup bridge.

Check conversion-share authority separately from economics. For Delaware corporations, DGCL § 151(g) requires an effective certificate of designations when stock rights are established through board resolutions under charter-granted authority rather than already stated in the charter. This conditional procedure does not apply to every note issuance or conversion.

Record: exact dependency, source, missing evidence, proposed cure, timing, and responsible counsel. Identify whether it affects this closing or a future conversion.

6. Prioritize issues and prepare company positions

Rank by consequence, not clause order: potential transaction blockers, material economic or control exposure, then drafting clarifications. Missing evidence may outrank confirmed drafting errors when it prevents assessment of payment obligations or required consent.

Write a specific ask and usable fallback. “Automatic conversion at the agreed new-cash threshold; elective conversion requires CFO approval because continuing debt affects runway” gives negotiators a decision path. Avoid recording an unapproved concession as an available fallback.

Maintain separate internal and external versions. Remove reservation positions and internal legal analysis before sharing with investors; have counsel assess confidentiality and privilege implications rather than assuming a label protects the document.

Record: priority rationale, approved ask, fallback limits, decision owner, and target negotiation milestone.

7. Validate resolution against revised documents

Check the full revised provision and related definitions, not just the changed sentence. Confirm that a correction has not created inconsistencies in another note, side letter, or capitalization model.

Treat oral agreement as pending documentation. For accepted commercial risk, identify the authorized decision-maker and remaining exposure. Transfer execution tasks to the closing checklist with linked issue IDs; do not mark the underlying dependency satisfied merely because someone owns the task.

Record: resolving version and clause, verification owner, approval evidence, and closed status or an assigned remaining question. Reopen the row if later drafting changes the agreed result.

Worked example

The following parties, documents, amounts, and provisions are entirely fictional.

Juniper Circuit, Inc., a Delaware startup, proposes a $2.4 million unsecured bridge. Term sheet TS-01 calls for automatic conversion at an equity financing raising at least $5 million in new cash. Draft N-01 v2 instead makes conversion elective and counts converting note principal toward that threshold.

Finance scenario F-01 assumes the entire bridge is funded and a later round raises $4 million cash. Under that assumption, cash plus bridge principal exceeds the draft threshold, although new cash alone does not meet the term-sheet threshold. The draft could therefore create an earlier conversion election without ensuring all debt converts. Actual funding and accrued-interest treatment remain unverified.

Side letter SL-02 also adds an individual amendment veto. Existing loan L-01 references a missing schedule defining permitted borrowing; counsel cannot yet determine whether lender consent is required.

The list changes the agenda. Resolve when debt converts before debating the discount. Escalate the amendment veto as a commercial decision, not proofreading. Keep the borrowing restriction as an evidence gap: neither assert breach nor conclude consent is unnecessary without the missing source.

Common mistakes

• Reviewing only the note. Reconcile the purchase agreement, existing debt, schedules, and side letters.
• Comparing only cap and discount. Test triggers, capitalization denominator, interest treatment, and conversion share class.
• Calling missing evidence a defect. Identify the uncertainty and request the exact attachment, waiver, or approval.
• Assigning unexplained priority. State the closing, cash, control, or future-financing consequence.
• Closing on email agreement alone. Verify operative language and definitions, or document authorized risk acceptance.

Final quality check

• Every material issue cites the correct version and clause or page.
• Conflicts identify both sources and preserve qualifications.
• Conversion scenarios distinguish automatic and elective outcomes and address interest.
• Repayment calculations use verified inputs and finance-reviewed assumptions.
• Amendment and side-letter rights are reconciled across affected holders.
• Legal propositions have primary-source support within the stated jurisdiction and scope.
• Open items have owners and targets; closed items have resolution evidence or authorized risk acceptance.

Complete the workflow with DecoverAI

DecoverAI is the Legal Intelligence Platform for litigation and transactions. In contract review, counsel can choose the company as the represented party in Word and provide deal-specific instructions. Findings quote clauses, rank severity, locate text, and identify missing language as not present. Lawyers can edit or insert suggestions as ordinary tracked changes under the signed-in Word user’s name, or dismiss findings with reasons. Tabular review supports work across documents, while due diligence classification can organize the source set. Counsel retains verification and negotiating judgment. Book a demo to discuss this workflow.

Frequently asked questions

Should every drafting comment appear in the deal issues list?

No. Include decisions, economic or rights issues, dependencies, and coordinated changes. Keep routine typographical corrections in the redline unless they affect operative meaning.

How should we handle different investor note forms?

Identify affected instruments and holders in each row. Compare conversion, repayment, amendment, and side-letter rights before applying a change across the financing.

Can a capitalization model resolve ambiguous conversion language?

No. It shows outcomes under assumptions. Record ambiguous denominators or interest treatment and obtain drafting clarification before treating modeled results as agreed.

When is an issue ready to close?

When counsel verifies resolving language or evidence, or an authorized company decision-maker accepts identified residual risk. Track any remaining execution dependency separately with a linked owner and completion criterion.

Sources

• Delaware General Corporation Law, § 151(g): conditional procedure for establishing stock rights through board resolutions.
• SEC-filed Form of Convertible Note Purchase Agreement, § 4.1: historical secured, subordinated closing conditions.
• Core Scientific Convertible Note Purchase Agreement, Exhibit A: historical conversion and prepayment wording, not market-standard evidence.

This guide is general information about legal workflows, not legal advice for any matter. It was drafted and reviewed with AI assistance. The worked example is fictional. Contract rights and procedure depend on the governing law, the actual wording, and the facts, so check the cited sources and the rules that apply in your jurisdiction before relying on it.