Qualified Financing Conversion Clause Samples
A Qualified Financing Conversion clause defines the terms under which convertible securities, such as convertible notes or SAFEs, automatically convert into equity when the company completes a specified round of financing that meets certain criteria. Typically, this clause specifies the minimum amount of new capital that must be raised and the type of equity securities that will be issued upon conversion. By establishing clear conditions for conversion, the clause ensures that early investors are rewarded with equity in the company during significant fundraising events, thereby aligning interests and reducing ambiguity about when and how conversion occurs.
Qualified Financing Conversion. Upon consummation of a Qualified Financing, any outstanding principal and interest of the Note shall automatically convert, in whole (subject to the conversion limitations set forth in Section 4(f) hereof), into shares of Common Stock (“QF Conversion Shares”) at the QF Conversion Price, which QF Conversion Shares shall be subject to a prohibition from any sale, pledge or transfer for a period of six (6) month from the date of the closing on which the Company generates an aggregate gross proceeds under the Qualified Financing of at least $5,000,000 (“QF Conversion Share Lockup”). In addition, upon conversion under this Section 4(a), the Holder of the Note shall automatically receive a warrant to purchase 100% of that number of shares of Common Stock into which the Note automatically converts under this Section 4(a), which warrant shall be exercisable for five years at an exercise price equal to the LESSER of (i) Seventy Percent (70%) of the price per share of Common Stock or per unit (assuming a unit consisting of one share of Common Stock) at which the Company sells its securities in the Qualified Financing; or (ii) $0.75. Such Underlying Warrant, at the sole discretion of the Company, shall be callable for $0.01 per share underlying the warrant if (i) the average daily volume weighted average price (VWAP) of the Company’s Common Stock for any twenty (20) consecutive trading days is at least 250% of the price per share of Common Stock or per unit (assuming a unit consisting of one share of Common Stock) at which the Company sells its securities in the Qualified Financing; and (ii) the Company notifies the holder of such Underlying Warrant that such holder has a 30 calendar day period in which to exercise such Underlying Warrant and such holder does not exercise on or prior to the 30th day after the date of such notice. Furthermore, upon conversion under this Section 4(a), the Holder of the Note shall receive, with respect to the QF Conversion Shares and the Common Stock into which the Underlying Warrant is exercisable, the same registration rights granted to the investors in the Qualified Financing. The Holder, and any assignee by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following a conversion into QF Conversion Shares of this Note, the Holder, and any assignee, shall be subject to the QF Conversion Share Lockup.
Qualified Financing Conversion. (a) The principal balance and unpaid accrued interest on each Note will automatically convert into Conversion Stock upon the closing of the Qualified Financing. The number of Conversion Stock the Company issues upon such conversion will equal the quotient (rounded down to the nearest whole unit) obtained by dividing (x) the outstanding principal balance and unpaid accrued interest under each converting Note on the date of conversion by (y) the applicable Conversion Price. At least five (5) days prior to the closing of the Qualified Financing, the Company will notify the holder of each Note in writing of the terms of the Equity Securities that are expected to be issued in such financing. The issuance of Conversion Stock pursuant to the conversion of each Note will be on, and subject to, the same terms and conditions applicable to the Equity Securities issued in the Qualified Financing.
(b) Upon any Smaller Financing, each Noteholder will have right to convert the principal balance and unpaid accrued interest upon the closing of a Smaller Financing, subject to the same terms and conditions as set forth for a Qualified Financing under Section 4.1(a).
Qualified Financing Conversion. 6. 1 In the event of, and simultaneously with the initial closing of, a Qualified Financing, the outstanding Principal Amount and accrued interest thereon shall automatically convert into shares of the same series of shares provided under the Qualified Financing (holding the same rights related to such series of shares) equal to the quotient obtained by dividing (i) the outstanding Principal Amount plus any accrued and unpaid interest under the Loan by (ii) the Qualified Financing Conversion Price.
6. 2 In conjunction with such conversion, the Lender shall become party to and shall execute all applicable definitive agreements relating to such Qualified Financing (the Qualified Financing Agreements).
Qualified Financing Conversion. In the event that the Company issues and sells shares of its preferred stock (“Next Equity Securities”) to investors (“Investors”) in an equity financing on or after January 1, 2023 with total cash proceeds to the Company of not less than $50,000,000 (excluding the conversion of the Notes and any other indebtedness for borrowed money or amounts received on account of Simple Agreements for Future Equity or similar convertible instruments), (such equity financing, a “Qualified Financing”) prior to repayment or conversion in full of this Note, the outstanding principal and any accrued but unpaid interest under this Note (the “Conversion Amount”) shall automatically convert in whole without any further action required by the Holder into shares of Next Equity Securities at a conversion price equal to 70% of the lowest price paid per share paid in cash (or cash equivalents) by the Investors for Next Equity Securities in the Qualified Financing (the “Qualified Financing Conversion Price”). Such conversion shall be effected at such closing in which the financing qualifies as a Qualified Financing. Except for the Qualified Financing Conversion Price, the issuance of Next Equity Securities pursuant to the conversion of this Note pursuant to the terms of this Section 2(a) shall be upon and subject to the same terms and conditions applicable to the Next Equity Securities sold in the Qualified Financing. In connection with conversion of this Note upon a Qualified Financing, the Holder hereby agrees to execute and deliver to the Company all transaction documents related to the Qualified Financing executed by the investors in the Qualified Financing, including a purchase agreement and other ancillary agreements, with customary representations and warranties and transfer restrictions, including a lock-up agreement in connection with an initial public offering.
Qualified Financing Conversion. Upon the closing of a Qualified Financing, the outstanding principal amount of the Loan plus accrued and outstanding Interest (the “Outstanding Debt”) owed to each Investor shall be converted in full into such number of Shares of most senior class issued in the Qualified Financing (or any Shares with identical rights and preferences and with the same obligations as such Shares) that is calculated by dividing the Outstanding Debt with the conversion price equal to the lesser of
3.3.1 Discount Rate multiplied by the lowest price paid per Share issued in the Qualified Financing; or
3.3.2 Valuation Cap divided by the Fully Diluted Share Capital immediately prior to the closing of the Qualified Financing. However, if the conversion price calculated in accordance with above is less than the price per Share paid in the Qualified Financing, the Company may convert the Outstanding Debt into the shares of the newly created series with identical rights and preferences and with the same obligations as the Shares of the most senior class issued in the Qualified Financing other than with respect to (if applicable) (a) the liquidation preference per share and (b) the starting price for the price-based anti-dilution protection, which both shall equal the conversion price.
Qualified Financing Conversion. If the Company, at any time before the full repayment of the Indebtedness or other conversion of the Indebtedness pursuant to this Article 2, issues fully paid and non- assessable shares in the capital of the Company (the “Next Financing Securities”) raising gross proceeds of at least $3,000,000.00, excluding the amounts raised from the conversion of the Notes, any other outstanding convertible note, or other convertible instruments issued by the Company (a “Qualified Financing”), then all of the outstanding Indebtedness will automatically and concurrently with the closing of the Qualified Financing, be converted into Next Financing Securities issued under the Qualified Financing at a price per share which is equal to the lesser of: (i) 80% of the lowest price per Next Financing Security (or units thereof) sold in the Qualified Financing (excluding any other discounts on any indebtedness converted into Next Financing Securities in connection with the Qualified Financing); and (ii) the price determined by dividing: (x) $6,000,000.00, by (y) the number of outstanding common shares in the capital of the Company (“Common Shares”) calculated on a Fully Diluted Basis (as defined herein), as of immediately prior to the closing of the Qualified Financing. FORM - DO NOT COPY