How to map maturity and conversion conditions for Convertible Note Financing Transactions

Map each outstanding convertible note against the events that could require repayment or permit conversion, using executed instruments, amendments, side letters, funding records, and capitalization documents. Separate each contractual trigger from the election, notice, calculation, and approval needed to implement it. The resulting note conversion tracker should identify maturity exposure, financing and sale-event outcomes, missing evidence, and responsible decision-makers. It should also connect each proposed share count to reproducible calculations before the company commits to a financing timetable or conversion capitalization.

When to use this workflow

Company counsel and in-house legal teams should use this workflow before a priced financing, approaching maturity, extension negotiation, or acquisition that could activate noteholder rights. It is particularly useful when multiple closings or side letters have created different terms across the note register.

The scope is condition mapping, not a complete financing closing checklist. Identify viable conversion paths and unresolved repayment exposure, investigating other debt and security documents where they affect those outcomes.

This guide uses a US orientation, with Delaware corporate-law checks where applicable. Contract rights depend on wording, governing law, facts, and transaction structure. Securities compliance, tax, usury, and enforceability require separate analysis; this tracker does not resolve them.

What you need

Collect a controlled set of records:

• Executed notes, purchase agreements, amendments, extensions, waivers, side letters, and incorporated schedules or exhibits.
• Funding dates, advance ledgers, principal balances, payment records, and finance’s interest calculations.
• Current charter documents, capitalization records, equity plans, options, warrants, other notes, and SAFEs relevant to conversion definitions.
• Proposed financing terms, closing sequence, share classes, and available sale or IPO documentation.
• Holder identities, transfers, notice details, amendment thresholds, and relevant corporate, lender, or investor approvals.

Assign stable document IDs and distinguish executed, draft, and missing records. Link amendments to affected notes. A missing exhibit containing conversion terms is a substantive evidence gap.

Use the template

Use the Convertible Note Financing Transactions — Note conversion tracker below. You can copy this table into your working document or spreadsheet. Create one row per instrument and event; group notes only after confirming identical operative provisions.

In Note / source, identify the instrument, clause or page, and controlling amendment. Event / trigger records the defined event and threshold, not merely “financing.” Treatment / election distinguishes automatic conversion, holder choice, company choice, repayment, and contractual silence.

Use Amount / shares for the formula and calculation-cell reference. Timing / notice separates contractual dates from internal targets. Dependencies / proof identifies approvals, waiver authority, and satisfaction evidence. Record uncertainty and its proposed resolution in Issue / action; include the responsible person, status, and target date in the final column.

Keep detailed calculations in a referenced working schedule, with inputs traceable to documents and finance records.

Step by step

1. Establish the controlling terms for each note

Reconcile the note register with finance’s ledger and the document index. Confirm principal advanced, current holder, outstanding balance, and amendment history. Inspect amendment thresholds, consent evidence, and individual-consent protections before concluding that an extension or waiver binds a particular holder.

Compare the note, purchase agreement, and side letters. If definitions or dates conflict, investigate precedence provisions rather than selecting the commercially convenient reading. Separate a missing source from an interpretive disagreement: they require different resolution work.

Tracker output: instrument baseline, controlling version, balance reference, source citations, and missing-document requests.

2. Map maturity and competing repayment paths

Record stated maturity and any extension mechanism. Separately map acceleration, optional prepayment, sale-related payment, and conversion windows that could affect repayment. Determine whether maturity creates a payment obligation, an election, automatic conversion, or another result.

Historical wording illustrates why these paths need separate rows. Core Scientific’s filed note form specified repayment at stated maturity or qualifying earlier acceleration, unless previously prepaid or fully converted. It separately provided conditional voluntary prepayment with notice and a repayment multiplier. These are negotiated provisions, not startup-note norms or evidence of the debt’s subsequent status. See Exhibit A, § 1(b).

Tracker output: maturity, acceleration, and prepayment rows, including relevant notice, cure, premium, and conversion provisions.

3. Test each conversion event against its definition

Analyze qualified financing, nonqualified financing, sale, IPO, and maturity conversion independently, where addressed. Identify thresholds, aggregation periods, exclusions, and transaction characteristics. Determine whether converted debt counts toward a financing threshold and whether multiple closings aggregate from the controlling wording.

Identify who controls the result and whether an election is individual or collective. An event may activate an option rather than cause conversion. Core Scientific’s example gives holders an optional conversion right following defined Offering events through maturity; it does not establish automatic qualified-financing conversion. See Exhibit A, § 2(a).

Tracker output: event-specific treatment, election holder, threshold analysis, and unresolved definitions. Mark an event “not addressed” rather than inventing a default outcome.

4. Connect the trigger to a reproducible calculation

Identify converting principal, interest treatment, discount, valuation cap, capitalization denominator, share class, and rounding. Determine whether the document selects between competing prices or applies different treatment to principal and interest. Record the actual denominator definition, including treatment of options, reserved equity, and other converting instruments.

Reconcile interest using funding dates, day count, payments, capitalization, and applicable default terms. Advance facilities may need transaction-level records: the MiNK–Agenus agreement required an updated schedule of advances or payments and dates to track interest accrual. Its filed page does not substantively reproduce the referenced note’s interest terms. See Article I.1.

Tracker output: calculation-cell references, verified inputs, and clearly provisional alternatives for unresolved wording or capitalization.

5. Attach notices, elections, and authority dependencies

Identify notice sender, recipient, delivery method, contents, and delivery evidence. Determine when an election must arrive and preserve distinctions between calendar and business days under the agreement’s definitions.

Separate conversion entitlement from authority to issue shares. For a Delaware corporation establishing series rights through board resolutions under charter-granted authority, DGCL § 151(g) requires the applicable certificate of designations to be executed, filed, and effective through the statutory procedure. This is conditional, not a requirement for every conversion. See DGCL § 151(g).

Check authorized shares, the proposed class or series, corporate approvals, and relevant lender or investor consents. Identify who may waive each contractual condition; do not assume contractual waiver replaces corporate authorization.

Tracker output: dependencies supported by approvals, filings, notices, elections, or assigned requests for missing proof.

6. Reconcile the map with the proposed closing sequence

Apply the provisions to signing, initial funding, later funding, maturity, and conversion. Expected investor participation is not completed funding. A later closing that might satisfy a threshold does not establish that the initial closing qualifies.

Compare conversion and repayment paths with other debt restrictions. Ask finance to confirm cash exposure if conversion fails, including accrued interest and any contractual premium. Available cash alone does not establish a right to prepay.

Rank issues by consequence: payment before closing, disputed trigger, unavailable shares, missing election, or uncertain calculation. Assign an action such as obtaining evidence, negotiating an extension, seeking a waiver, or revising the closing sequence.

Tracker output: working scenario, fallback exposure, decision owner, target date, and required resolution evidence.

7. Verify and preserve the decision version

Have a second reviewer trace material conclusions to executed sources and finance verify calculation inputs. Date the decision version and preserve its assumptions and superseded scenarios.

Close a condition only when supporting evidence is available. An unsigned extension or oral expression of support remains open. Assign responsibility for revisiting affected rows when financing size, timing, share terms, or elections change.

Tracker output: dated decision version distinguishing confirmed conditions, provisional assumptions, and assigned open issues.

Worked example

Entirely fictional scenario: Alder Circuit, Inc., a Delaware startup, proposes an October 20, 2026 preferred-stock financing. Juniper Seed Fund holds its $600,000 Note N-01, maturing October 31, 2026. The fictional note automatically converts principal and accrued interest upon a financing raising at least $2 million of new cash, excluding converted debt. Below that threshold, Juniper may elect conversion on the same terms by written election delivered before closing. Otherwise, principal and unpaid interest are payable at maturity unless effectively extended.

The fictional conversion price is the lower of 80% of the new-money share price or the cap-derived price. The financing team expects $1.6 million initially and $700,000 later; N-01 does not expressly address aggregation across closings.

Finance’s provisional October 20 balance is $624,000. At a $2.00 new-money price and provisional $1.75 cap-derived price, the discount price is $1.60: $624,000 ÷ $1.60 produces 390,000 shares. Interest and denominator inputs remain unverified. N-01 specifies the financing’s preferred-stock series; the team must verify its authorization and sufficient available shares.

The map replaces “the note converts at closing” with two conditional paths. Counsel must resolve qualification or obtain an effective below-threshold election. Neither anticipated later funding nor the unsigned extension resolves the gap. Finance must calculate the October 31 payoff separately; the October 20 conversion balance is not that payoff.

Common mistakes

• Treating maturity as automatic conversion. Read maturity and conversion provisions together; preserve payment exposure unless the controlling language supports another result.
• Counting all financing value toward a cash threshold. Separate new cash, converted debt, and other consideration using the actual definition.
• Applying one conversion price across the register. Compare amendments, side letters, caps, discounts, and interest treatment before grouping instruments.
• Recording an election without delivery evidence. Verify form, recipient, timing, and proof rather than relying on informal investor support.
• Treating a modeled share count as issuance authority. Verify calculations and corporate approvals separately; correct arithmetic does not establish available, authorized shares.

Final quality check

• Every outstanding note reconciles to company and finance records.
• Material conclusions trace to executed sources and controlling amendments.
• Maturity, financing, sale, IPO, and acceleration paths are addressed or expressly marked inapplicable or unaddressed.
• Thresholds identify included consideration, exclusions, and closing aggregation assumptions.
• Interest, denominator, price, class, and rounding inputs are verified or explicitly provisional.
• Notices, elections, waivers, and approvals have evidence or assigned requests.
• Open issues have owners, target dates, and stated conversion or repayment consequences.

Complete the workflow with DecoverAI

DecoverAI is the Legal Intelligence Platform for litigation and transactions. Use due diligence classification to organize note packages and prioritize human review, and tabular review to compare provisions across documents. In contract review in Word, select the company as represented party and provide deal-specific instructions. Findings quote and locate clauses, rank severity, and identify missing language as not present. Lawyers verify findings and edit or insert suggestions as ordinary tracked changes in the signed-in Word user’s name. The tracker and calculations remain team work products. To assess this workflow against your note portfolio, book a demo.

Frequently asked questions

Should all notes appear in one tracker?

Yes, provided instrument-level differences remain visible. Use separate event rows and calculation references. Grouping solely by issuance round can conceal holder-specific rights or extensions.

What if the financing closes shortly before maturity?

Test the precise closing sequence, conversion trigger, and notices. Maintain a documented repayment or extension fallback until the conversion path is supported by evidence.

Does accrued interest convert with principal?

Only if the controlling terms provide for it. Determine whether interest converts at the same price, receives different treatment, or remains payable, and reconcile it to the relevant event date.

How should missing conversion schedules be handled?

Mark affected conclusions unsupported and request the executed attachment from the company or holder. Do not substitute a term sheet or another investor’s note without establishing that it controls.

Sources

• Delaware General Corporation Law, § 151(g): conditional procedure for establishing stock-series rights.
• Core Scientific convertible note purchase agreement, Exhibit A: historical repayment and optional-conversion wording.
• MiNK–Agenus convertible promissory note purchase agreement, Article I.1: historical advance-schedule requirement.

Filed agreements illustrate particular wording, not market standards.

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.