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Loan Conversion To Equity Agreement
"I need a Loan Conversion to Equity Agreement for my Nigerian tech startup where a US-based venture capital firm wants to convert their $500,000 loan into a 25% equity stake, with the conversion to be completed by March 2025 and including anti-dilution provisions."
1. Parties: Identification of the Lender(s) and the Company (Borrower)
2. Background: Recitals describing the original loan agreement, current status, and parties' intention to convert the loan to equity
3. Definitions and Interpretation: Definitions of key terms and interpretation rules used throughout the agreement
4. Loan Status and Acknowledgment: Confirmation of the outstanding loan amount and accrued interest to be converted
5. Conversion Terms: Details of the conversion mechanism, including conversion price/ratio and timing
6. Conditions Precedent: Conditions that must be satisfied before the conversion can take place
7. Implementation of Conversion: Step-by-step process for executing the conversion
8. Resulting Share Structure: Description of the post-conversion shareholding and share rights
9. Representations and Warranties: Standard and specific warranties from both parties
10. Covenants: Ongoing obligations of the parties
11. Completion Mechanics: Specific actions required at completion of the conversion
12. Termination: Circumstances under which the agreement can be terminated
13. Notices: Communication procedures between parties
14. Governing Law and Jurisdiction: Specification of Nigerian law as governing law and jurisdiction for disputes
15. General Provisions: Standard boilerplate clauses including amendments, waivers, and severability
1. Shareholder Rights: Additional rights granted to the converting lender as a new shareholder, used when the lender will receive special rights
2. Board Representation: Rights of the converting lender to appoint directors, used when board seats are part of the conversion deal
3. Anti-dilution Protection: Provisions protecting the value of the converted shares, used in cases of sophisticated investors
4. Foreign Exchange Provisions: Specific provisions for handling foreign currency aspects, used when foreign currency loans are involved
5. Multiple Lender Provisions: Coordination mechanisms between multiple converting lenders, used when multiple loans are being converted
6. Regulatory Compliance: Specific provisions addressing regulatory requirements, used when specific regulatory approvals are needed
7. Tax Provisions: Specific tax-related provisions and allocations, used when complex tax implications exist
1. Original Loan Agreement: Copy or key terms of the original loan agreement(s)
2. Calculation of Conversion Amount: Detailed calculation of the loan amount including principal and interest to be converted
3. Valuation Report: Independent valuation report or agreed valuation methodology
4. New Share Certificate Format: Format of share certificates to be issued upon conversion
5. Required Corporate Resolutions: Form of board and shareholder resolutions required for the conversion
6. Completion Checklist: List of all documents and actions required for completion
7. Post-Conversion Cap Table: Detailed breakdown of the post-conversion shareholding structure
8. Required Regulatory Filings: Forms and documents required for regulatory compliance
Authors
Financial Services
Technology and Startups
Manufacturing
Real Estate
Energy and Resources
Healthcare
Telecommunications
Agriculture
Construction
Retail and Consumer Goods
Legal
Finance
Corporate Secretariat
Treasury
Compliance
Risk Management
Corporate Development
Investment
Board of Directors
Executive Management
Chief Financial Officer
Finance Director
Legal Counsel
Corporate Secretary
Investment Manager
Managing Director
Chief Executive Officer
Treasury Manager
Corporate Finance Manager
Compliance Officer
Risk Manager
Investment Banker
Private Equity Manager
Venture Capital Manager
Financial Controller
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