Convertible debt question

[Canyonside]

(CA) I am working with an underfunded, pre-revenue company that has the opportunity to bring in some cash to get their product to market. The potential investor wants it in the form of a convertible note. The company is good with this and the valuation upon conversion. The majority shareholder would like to reserve a portion of his own shares for the conversion, rather than the company issuing new shares from treasury stock. If the note was repaid, then the shares would revert back to the shareholder. I presume the shares would sit in escrow until the note was retired or converted.

I have not encountered a transaction like this. Any guidance would be appreciated and if anyone is aware of a similar situation (preferably a public comany so I can read the documents on EDGAR), I would be grateful.
Thanks!
Brian
CA