Liquidity/Exit Sample Clauses
A Liquidity/Exit clause defines the terms and conditions under which investors or stakeholders can convert their investment into cash, typically through the sale of the company, an initial public offering (IPO), or other exit events. This clause outlines the specific triggers for liquidity events, the process for distributing proceeds among shareholders, and any preferences or priorities that may apply, such as liquidation preferences for certain classes of shares. Its core practical function is to provide clarity and predictability regarding how and when investors can realize returns on their investment, thereby aligning expectations and reducing potential disputes during significant company transitions.
Liquidity/Exit. (a) At any time after the fourth anniversary of the Closing Date (the “Exit Right Commencement Date”), the Preferred Stockholders acting by Majority Preferred Approval shall have the right to cause the Company to use its commercially reasonable efforts to consummate an Exit Event (an “Exit Event Election”), with the form of such Exit Event to be selected by the Company. Upon an Exit Event Election by the Preferred Stockholders, the Company shall promptly engage a nationally recognized investment bank to advise the Company in connection with such process. The form of Exit Event to be pursued by the Company shall be selected by the Company in consultation with the investment bank selected by it. At the request of any Preferred Stockholders, the Company shall (and shall endeavor to make representatives of the investment bank selected by it available to) meet with the Preferred Stockholders to advise them regarding status of the Exit Event selection process. Following an Exit Event Election, the Company shall use commercially reasonable efforts to consummate an Exit Event. If the holders of Preferred Stock have voted in favor of an Exit Event by Majority Preferred Approval, then all holders of Preferred Stock shall be deemed to have voted all of their shares of Preferred Stock in favor of such action and shall be required to take all such other actions as may be reasonably necessary to consummate such action.
(b) If the Company fails to consummate an Exit Event after having used its commercially reasonable efforts to consummate such Exit Event, then at any time more than two (2) years after the date of the Preferred Stockholders’ prior request for an Exit Event, the Preferred Stockholders, acting by Majority Preferred Approval, may again cause the Company to use its commercially reasonable efforts to consummate an Exit Event, with the form of such Exit Event to be selected by the Company and implemented in accordance with this Section 2.07. Preferred Stockholders shall have the right to instruct the Company to attempt an Exit Event every two (2) years until an Exit Event is completed.
(c) The following penalties shall occur if an Exit Event has been requested and is not consummated on or before the Exit Event Deadline:
(i) the Conversion Price (as defined in the Certificate of Designation) will immediately and automatically be adjusted such that all the issued and outstanding shares of Preferred Stock on an as-converted basis taken together with the Warrant Sh...