Convertible Promissory Note Template

Principal Amount: $[Amount]
Date: [Date]
Company: [Company Name], a [State] [Entity Type]
Investor/Holder: [Investor Name]

FOR VALUE RECEIVED, the Company promises to pay to the order of Holder the principal sum set forth above, together with interest, subject to the terms below.

1. Interest

• Interest accrues on unpaid principal at [Rate]% per annum, compounded annually/simple interest, commencing on the date hereof.

2. Maturity Date

• Principal and accrued interest due on [Maturity Date] unless earlier converted or repaid.

3. Conversion upon Equity Financing

• Upon closing of equity financing raising at least $[Qualified Financing Amount], outstanding principal and interest automatically convert into securities issued in such financing at the lesser of: (a) [Discount]% of price per share, or (b) price implied by valuation cap of $[Cap].
• Conversion mechanics and issuance of securities per closing documents.

4. Optional Conversion on Maturity

• If no qualified financing before maturity, Holder may elect to convert into [Series Seed Preferred/Common] at valuation cap or require repayment.

5. Liquidity Event

• If change of control or IPO occurs before conversion, Holder may receive (a) cash payment equal to principal + accrued interest, or (b) conversion into common stock at valuation cap, whichever is greater.

6. Prepayment

• Company may not prepay without Holder consent unless all outstanding notes are prepaid on pro rata basis.

7. Representations

7.1 Company

• Organization, authority, compliance with agreements, no conflicts.

7.2 Holder

• Accredited investor status, investment intent, access to information.

8. Events of Default

• Failure to pay principal/interest when due.
• Insolvency, bankruptcy filing, assignment for benefit of creditors.
• Breach of covenants not cured within [Number] days.
• Upon default, interest rate increases to [Default Rate]% and Holder may accelerate obligations.

9. Covenants

• Company to provide quarterly financial statements.
• Maintain corporate existence and good standing.
• Restrictions on incurring senior indebtedness without Holder consent.

10. Amendments and Waivers

• Require written consent of Company and holders of majority of outstanding note principal.

11. Governing Law

• Governed by laws of [State], without regard to conflict-of-law principles.

12. Miscellaneous

• Notices, assignments, successors, counterparts, electronic signatures.

Signature Blocks

Company: [Company Name]
By: ________
Name: [Officer Name]
Title: [Title]

Holder: [Investor Name]
By: ________
Name/Title: [Name/Title]

Attach conversion schedule and capitalization table as exhibits.