A "Pay to Play" provision is a requirement for an existing investor to participate in a subsequent investment round, especially a Down Round. Where Pay to Play provisions exist, an investor's failure to purchase its rata portion of a subsequent investment round will result in conversion of that investor's Preferred Stock into Common Stock or another less valuable series of Preferred Stock.
A provision that requires a stockholder to participate in a subsequent offering in order to benefit from certain antidilution protections. This provision is used to prevent all investors from benefiting when only certain investors continue providing needed equity, particularly in companies with troubled economic circumstances. Generally, if the stockholder does not purchase his or her pro rata share in a later offering, the stockholder loses the benefit(s) and in extreme cases, may be required to convert to common stock, thereby losing the protective preferred stock provisions.