/Docs/G/SeriesSeed-Cooley-CmA/Sec/Convert/0.md
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// = These are the conversion provisions of Convertible Promissory Note. Each of the alternatives expressed in the Cooley fork of the Series Seed documents is expressed here as separate parameters. So each of the alternatives can be configured for a particular deal. They can also be assembled into kits for kinds of deals, and then the kit can be referenced. (Click on "Document" will give you the unconfigured text, without the defined terms.) To see this in use, go to the Demo.
QualifiedFinancing. = [G/SeriesSeed-Cooley-CmA/Sec/Convert/QualifiedFinancing/0.md]
Non-QualifiedFinancing. = [G/SeriesSeed-Cooley-CmA/Sec/Convert/Non-QualifiedFinancing/0.md]
Maturity. = [G/SeriesSeed-Cooley-CmA/Sec/Convert/Maturity/0.md]
ChangeOfControl. = [G/SeriesSeed-Cooley-CmA/Sec/Convert/ChangeOfControl/0.md]
Procedure. = [G/SeriesSeed-Cooley-CmA/Sec/Convert/Procedure/0.md]
InterestAccrual.Ti = Interest Accrual
InterestAccrual.sec = If a Change of Control or {_Qualified_Financing} is consummated, all interest on this Note shall be deemed to have stopped accruing as of a date selected by the {_Company} that is up to 10 days prior to the signing of the definitive agreement for the Change of Control or {_Qualified_Financing}.
InterestAccrual. = [G/Z/ol/Base]
// = Provisions common to some of the subsections:
OutstandingAssumingConversion.cl = (assuming conversion of {OutstandingConvertible.cl}, including {OutstandingEquityIncentive.cl}, but excluding {OutstandingOther.cl})
OutstandingConvertible.cl = all securities convertible into {_Common_Stock} and exercise of all outstanding options and warrants
OutstandingEquityIncentive.cl = including all shares of {_Common_Stock} reserved and available for future grant under any equity incentive or similar plan of the {_Company}, and/or any equity incentive or similar plan to be created or increased in connection with the {_Qualified_Financing}
OutstandingOther.cl = the shares of equity securities of the {_Company} issuable upon the conversion of {_Notes} or other convertible securities issued for capital raising purposes (e.g., Simple Agreements for Future Equity)
Ti = Conversion
sec =
  1. {QualifiedFinancing.Sec}
  2. {Non-QualifiedFinancing.Sec}
  3. {Maturity.Sec}
  4. {ChangeOfControl.Sec}
  5. {Procedure.Sec}
  6. {InterestAccrual.Sec}
= [G/Z/ol/Base]
// = For convenience, temporarily including the definitions and other parameters. Need to remove this as we start to use for actual transactions.
= [G/SeriesSeed-Cooley-CmA/Demo/Acme_Note_ClosingBinder.md]
// = Historic:
2. CONVERSION AND REPAYMENT. =
### 2.1 Conversion upon a Qualified Financing. =
In the event that the Company issues and sells shares of its equity securities ( "**_Equity Securities_**") to investors (the "**_Investors_**") [on or before the Maturity Date][while this Note remains outstanding] in an equity financing with total proceeds to the Company of not less than $[**_________**] (excluding the conversion of the Notes or other convertible securities issued for capital raising purposes (_e.g._, Simple Agreements for Future Equity)) (a "**_Qualified Financing_**"), then the outstanding principal amount of this Note and any unpaid accrued interest shall automatically convert in whole without any further action by the Holder into Equity Securities sold in the Qualified Financing at a conversion price equal to [the cash price paid per share for Equity Securities by the Investors in the Qualified Financing[ multiplied by 0.[*__*].][the lesser of (i) the cash price paid per share for Equity Securities by the Investors in the Qualified Financing[ multiplied by 0.[*__*], and (ii) the quotient resulting from dividing $[*_________*] by the number of outstanding shares of Common Stock of the Company [immediately prior to the Qualified Financing ][as of the date of the Note ](assuming conversion of all securities convertible into Common Stock and exercise of all outstanding options and warrants, [including all shares of Common Stock reserved and available for future grant under any equity incentive or similar plan of the Company, and/or any equity incentive or similar plan to be created or increased in connection with the Qualified Financing,] but excluding the shares of equity securities of the Company issuable upon the conversion of Notes or other convertible securities issued for capital raising purposes (_e.g._, Simple Agreements for Future Equity)).] The issuance of Equity Securities pursuant to the conversion of this Note shall be upon and subject to the same terms and conditions applicable to Equity Securities sold in the Qualified Financing.[Notwithstanding this paragraph, if the conversion price of the Notes as determined pursuant to this paragraph (the "**_Conversion Price_**") is less than the price per share at which Equity Securities are issued in the Qualified Financing, the Company may, solely at its option, elect to convert this Note into shares of a newly created series of preferred stock having the identical rights, privileges, preferences and restrictions as the Equity Securities issued in the Qualified Financing, and otherwise on the same terms and conditions, other than with respect to (if applicable): (i) the per share liquidation preference and the conversion price for purposes of price-based anti-dilution protection, which will equal the Conversion Price; and (ii) the per share dividend, which will be the same percentage of the Conversion Price as applied to determine the per share dividends of the Investors in the Qualified Financing relative to the purchase price paid by the Investors.] =
### 2.2 Optional Conversion at non-Qualified Financing. =
In the event the Company consummates, [on or before the Maturity Date][while this Note remains outstanding], an equity financing pursuant to which it sells shares of Preferred Stock in a transaction that does not constitute a Qualified Financing, then the [Majority Holders][Holder] shall have the option to treat such equity financing as a Qualified Financing on the same terms set forth herein. =
### 2.3 Maturity Date Conversion. =
In the event that this Note remains outstanding on the Maturity Date, then the outstanding principal balance of this Note and any unpaid accrued interest shall [automatically without any further action by the Holder][upon the election of the Majority Holders given prior to the Maturity Date,][upon the election of the Holder given prior to the Maturity Date,] convert as of the Maturity Date into shares of [the Company's Common Stock][a newly created series of the Company's preferred stock on the terms and conditions set forth on **Exhibit A**] at a conversion price equal to the quotient resulting from dividing $[*_________*] by the number of outstanding shares of Common Stock of the Company [as of the Maturity Date][as of the date of the Note] (assuming conversion of all securities convertible into Common Stock and exercise of all outstanding options and warrants, [including all shares of Common Stock reserved and available for future grant under any equity incentive or similar plan of the Company,] but excluding the shares of equity securities of the Company issuable upon the conversion of Notes or other convertible securities issued for capital raising purposes (_e.g._, Simple Agreements for Future Equity)). =
### 2.4 Change of Control. =
If the Company consummates a Change of Control (as defined below) while this Note remains outstanding, the Company shall repay the Holder in cash in an amount equal to [(i) ]the outstanding principal amount of this Note plus any unpaid accrued interest on the original principal[, plus (ii) a repayment premium equal to [*___*]% of the outstanding principal amount of this Note][; provided, however, that upon the written election of the Holder made not less than five days prior to the Change of Control, the Company shall convert the outstanding principal balance of this Note and any unpaid accrued interest into shares of the Company's Common Stock at a conversion price equal to the quotient resulting from dividing $[*_________*] by the number of outstanding shares of Common Stock of the Company [immediately prior to the Change of Control][as of the date of the Note] (assuming conversion of all securities convertible into Common Stock and exercise of all outstanding options and warrants, but excluding the shares of equity securities of the Company issuable upon the conversion of Notes or other convertible securities issued for capital raising purposes (_e.g._, Simple Agreements for Future Equity))]. For purposes of this Note, a "**_Change of Control_**" means (i) a consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, other than any such consolidation, merger or reorganization in which the shares of capital stock of the Company immediately prior to such consolidation, merger or reorganization continue to represent a majority of the voting power of the surviving entity immediately after such consolidation, merger or reorganization; (ii) any transaction or series of related transactions to which the Company is a party in which in excess of 50% of the Company's voting power is transferred; or (iii) the sale or transfer of all or substantially all of the Company's assets, or the exclusive license of all or substantially all of the Company's material intellectual property; provided that a Change of Control shall not include any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor, indebtedness of the Company is cancelled or converted or a combination thereof. The Company shall give the Holder notice of a Change of Control not less than 10 days prior to the anticipated date of consummation of the Change of Control. Any repayment pursuant to this paragraph in connection with a Change of Control shall be subject to any required tax withholdings, and may be made by the Company (or any party to such Change of Control or its agent) following the Change of Control in connection with payment procedures established in connection with such Change of Control. =
Term Sheet: =
[Conversion at Qualified Financing: In the event the Company consummates, [on or prior to the Maturity Date][while this Note is outstanding], an equity financing pursuant to which it sells shares of its equity securities (the "Next Round Securities"), with an aggregate sales price of not less than $________, excluding any and all indebtedness under the Notes that is converted into Next Round Securities, and with the principal purpose of raising capital (a "Qualified Financing"), then all principal, together with all unpaid accrued interest under the Notes, shall automatically convert into shares of the Next Round Securities at [___]% of ]the cash price per share paid by the other purchasers of Next Round Securities in the Qualified Financing.[ If the conversion price of the Notes is less than the cash price per share at which Next Round Securities is issued in the Qualified Financing, the Company may, solely at its option, elect to convert the Notes into shares of a newly created series of capital stock having the identical rights, privileges, preferences and restrictions as the Next Round Securities issued in the Qualified Financing, and otherwise on the same terms and conditions, other than with respect to (if applicable): (i) the per share liquidation preference and the conversion price for purposes of price-based anti-dilution protection, which will equal the conversion price; and (ii) the per share dividend, which will be the same percentage of the conversion price as applied to determine the per share dividends of new investors in the Qualified Financing relative to the purchase price paid by such investors.] =
[Conversion at Qualified Financing: In the event the Company consummates, [on or prior to the Maturity Date][while this Note is outstanding], an equity financing pursuant to which it sells shares of its equity securities ("Next Round Securities"), with an aggregate sales price of not less than $________, excluding any and all indebtedness under the Notes that is converted into Next Round Securities, and with the principal purpose of raising capital (a "Qualified Financing"), then all principal, together with all unpaid accrued interest under the Notes, shall automatically convert into shares of Next Round Securities at the lesser of (i) [___]% of ]the cash price per share paid by the other purchasers of Next Round Securities in the Qualified Financing and (ii) the price obtained by dividing $________ by the number of outstanding shares of common stock of the Company [immediately prior to the Qualified Financing][as of the date of the Note] (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants, [including all shares of common stock reserved and available for future grant under any equity incentive or similar plan of the Company, and/or any equity incentive or similar plan to be created or increased in connection with the Qualified Financing,] but excluding the shares of equity securities of the Company issuable upon the conversion of the Notes or other indebtedness). [ If the conversion price of the Notes is less than the cash price per share at which Next Round Securities are issued in the Qualified Financing, the Company may, solely at its option, elect to convert the Notes into shares of a newly created series of capital stock having the identical rights, privileges, preferences and restrictions as the Preferred Stock issued in the Qualified Financing, and otherwise on the same terms and conditions, other than with respect to (if applicable): (i) the per share liquidation preference and the conversion price for purposes of price-based anti-dilution protection, which will equal the conversion price; and (ii) the per share dividend, which will be the same percentage of the conversion price as applied to determine the per share dividends of new investors in the Qualified Financing relative to the purchase price paid by such investors.] =
[Optional Conversion at non-Qualified Financing. In the event the Company consummates, on or prior to the Maturity Date, an equity financing pursuant to which it sells shares of Next Round Securities in a transaction that does not constitute a Qualified Financing, then [the Majority Holders][each Investor] shall have the option to treat such equity financing as a Qualified Financing on the same terms set forth herein.] =
[Conversion at Maturity: In the event that the Note remains outstanding on the Maturity Date, then the outstanding principal balance of the Investor's Note and any unpaid accrued interest shall [automatically without any further action by such Investor][upon the election of the Majority Holders][upon the election of such Investor] convert into shares of [the Company's common stock][a newly created series of the Company's preferred stock on the terms and conditions set forth on Exhibit A] at a conversion price equal to the quotient resulting from dividing $________ by the number of outstanding shares of common stock of the Company [as of the Maturity Date][as of the date of the Note] (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants,[ including all shares of common stock reserved and available for future grant under any equity incentive or similar plan of the Company,] but excluding the shares of equity securities of the Company issuable upon the conversion of the Notes or other indebtedness).] =
Change of Control: If the Company is acquired prior to the Qualified Financing, [then at each Investor's option, either (i) such][each] Investor shall receive a cash repayment equal to the outstanding principal and unpaid accrued interest[, plus an additional payment equal to [___]% of the principal amount of such Investor's Note][, or (ii) such Investor's Note shall be converted into shares of common stock at a conversion price equal to the quotient resulting from dividing $________ by the number of outstanding shares of common stock of the Company [immediately prior to the Change of Control][as of the date of such Investor's Note] (assuming conversion of all securities convertible into common stock and exercise of all outstanding options and warrants, but excluding the shares of equity securities of the Company issuable upon the conversion of the Notes or other indebtedness)]. =