Legal Advance Conversion Contract

LEGAL ADVANCE CONVERSION CONTRACT

This Legal Advance Conversion Contract (the "Agreement") is made and entered into as of by and between Lender: with a principal address at , and Borrower: with a principal address at .

RECITALS

WHEREAS, Lender has previously advanced to Borrower the principal sum of (the "Advance") pursuant to the terms of a promissory note dated ; and

WHEREAS, the parties desire that, upon the occurrence of a Conversion Event (as defined below), the outstanding principal and accrued but unpaid interest under the Advance be converted into securities of Borrower on the terms and conditions set forth in this Agreement.

WHEREAS, the parties intend by this Agreement to set forth the mechanics, adjustments and procedures for such conversion.

NOW THEREFORE

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. DEFINITIONS

1.1 "Advance" means the principal amount described in the Recitals plus any additional advances agreed in writing. The principal amount of the Advance is .

1.2 "Conversion Event" means (a) the closing of an equity financing of Borrower with aggregate gross proceeds to Borrower of at least , (b) at the option of Lender upon the Maturity Date of , or (c) such other event as the parties may agree in writing.

2. CONVERSION TERMS

2.1 Conversion Amount. Upon a Conversion Event, the outstanding principal and accrued but unpaid interest under the Advance (the "Conversion Amount") shall automatically convert into such number of shares or other securities of Borrower as determined pursuant to Section 2.2. The Conversion Amount for calculation purposes shall be: .

2.2 Conversion Price. The Conversion Amount shall be divided by the Conversion Price, which shall be: per share (the "Conversion Price"), subject to adjustment as set forth in this Agreement.

2.3 Security Issued. The security to be issued upon conversion shall be selected as follows (check applicable box or boxes): Common Stock Preferred Stock Convertible Note or other convertible instrument

2.4 Conversion Cap. Notwithstanding the foregoing, the number of shares issuable on conversion shall not exceed such number as would result in Lender holding, following conversion, equity representing more than % of Borrower on a fully diluted basis, unless otherwise consented to in writing by Borrower.

3. ADJUSTMENTS

3.1 Anti-Dilution. The Conversion Price and the number of securities issued upon conversion shall be subject to customary adjustments for stock splits, stock dividends, combinations, reclassifications and similar recapitalization events. Any issuance of securities or rights to acquire securities that are dilutive to Lender's post-conversion ownership shall be subject to adjustment as set forth in this Section.

3.2 Corporate Actions. If, prior to issuance of securities upon conversion, Borrower effects any reorganization, merger, sale of substantially all assets or other transaction in which the securities issuable on conversion are converted into or exchanged for other securities, property or cash, the Lender shall be entitled to receive, upon conversion, the securities or property receivable in such transaction in lieu of the securities otherwise issuable under this Agreement.

4. REPRESENTATIONS AND WARRANTIES

4.1 Borrower Representations. Borrower represents and warrants to Lender that: (a) Borrower is duly organized and validly existing under the laws of its jurisdiction of organization and has the corporate power and authority to enter into and perform this Agreement; (b) the consummation of the conversion contemplated by this Agreement will not violate any material agreement or instrument binding on Borrower; and (c) upon issuance and delivery in accordance with this Agreement, the securities issued on conversion will be duly authorized and validly issued, fully paid and nonassessable.

4.2 Lender Representations. Lender represents and warrants to Borrower that: (a) Lender has the power and authority to enter into this Agreement and to perform its obligations hereunder; (b) this Agreement constitutes a valid and binding obligation of Lender enforceable against Lender in accordance with its terms; and (c) Lender is acquiring any securities issuable upon conversion for investment purposes and not with a view to distribution.

5. COVENANTS

5.1 Issuance Procedures. Borrower shall, within a commercially reasonable time following a Conversion Event, prepare and deliver to Lender all documentation reasonably required to effect the conversion and issuance of securities, free and clear of liens and encumbrances, except for restrictions on transfer under applicable securities laws and customary legends.

5.2 No Impairment. Borrower covenants that no action shall be taken by Borrower that would materially and adversely affect the rights of Lender to convert the Advance as provided in this Agreement.

6. EVENTS OF DEFAULT; REMEDIES

6.1 Events of Default. The occurrence of any of the following shall constitute an Event of Default: (a) Borrower's failure to perform any material covenant herein and failure to cure within 30 days after written notice; (b) Borrower's insolvency, appointment of a receiver, or commencement of bankruptcy proceedings by or against Borrower; or (c) any material misrepresentation by Borrower in this Agreement.

6.2 Remedies. Upon an Event of Default, Lender shall have the right to pursue all remedies available at law or in equity, including, at Lender's election, acceleration of repayment, specific performance of conversion obligations, or enforcement of security interests, subject to any limitations set forth in this Agreement.

7. TAXES; EXPENSES

All transfer, documentary, stamp and other taxes and fees (other than taxes based on Lender's net income) payable in connection with the conversion and issuance of securities shall be paid by Borrower. Borrower shall pay reasonable fees and expenses incurred by Lender in connection with enforcement of rights under this Agreement if Borrower is in default.

8. NOTICES

All notices, consents and other communications required or permitted under this Agreement shall be in writing and delivered to the addresses below:

9. AMENDMENTS; WAIVER

No amendment, modification or waiver of any provision of this Agreement shall be effective unless in writing and signed by the party against whom enforcement is sought. No failure or delay by any party in exercising any right shall operate as a waiver of such right.

10. COUNTERPARTS

This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Signatures delivered by electronic means shall be effective as originals.

11. GOVERNING LAW

This Agreement shall be governed by and construed in accordance with the internal laws of the jurisdiction of incorporation of Borrower without regard to conflict of law principles.

12. ENTIRE AGREEMENT; SEVERABILITY

This Agreement, together with any exhibits and documents expressly incorporated herein, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, whether written or oral. If any provision of this Agreement is held to be invalid or unenforceable, the remaining provisions shall remain in full force and effect.

13. CONFIDENTIALITY

Each party shall keep confidential the terms of this Agreement and any non-public information obtained in connection with the negotiation and performance of this Agreement, except as required by law or as reasonably necessary to enforce rights under this Agreement.

14. MISCELLANEOUS

14.1 Assignment. Neither party may assign its rights or obligations under this Agreement without the prior written consent of the other, except that Borrower may assign to an affiliate or in connection with a merger or sale of substantially all of its assets.

14.2 Expenses. Each party shall bear its own legal and other fees and expenses incurred in connection with the negotiation and preparation of this Agreement, except as otherwise expressly provided.

Sign Now