PROMISSORY NOTE (INSTALLMENT)
TABLE OF CONTENTS
- Document Header................................................. 2
- Definitions..................................................... 3
- Operative Provisions............................................ 4
- Representations & Warranties.................................... 6
- Covenants & Restrictions........................................ 7
- Default & Remedies.............................................. 8
- Risk Allocation.................................................10
- Dispute Resolution..............................................11
- General Provisions..............................................12
- Execution Block................................................14
[// GUIDANCE: Page numbers above are illustrative—adjust after final formatting.]
1. DOCUMENT HEADER
PROMISSORY NOTE (INSTALLMENT)
Date: [EFFECTIVE DATE]
This Promissory Note (this “Note”) is executed by [BORROWER LEGAL NAME], a [STATE OF ORGANIZATION] [ENTITY TYPE] (“Borrower”), in favor of [LENDER LEGAL NAME], a [STATE OF ORGANIZATION] [ENTITY TYPE] (“Lender” and, together with any lawful endorsee or holder, “Holder”).
WHEREAS, Borrower has requested that Lender extend credit in the amount of [PRINCIPAL AMOUNT] United States Dollars (USD); and
WHEREAS, Lender is willing to make such extension of credit upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and promises contained in this Note and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower hereby unconditionally promises to pay to the order of Lender the principal, interest, fees, and all other amounts due under this Note, all as more fully set forth below.
[// GUIDANCE: If the Note will be secured, incorporate security language here and cross-reference the separate security agreement.]
2. DEFINITIONS
For purposes of this Note, the following capitalized terms have the meanings set forth below. Defined terms include any grammatical variations thereof.
“Applicable Law” means all federal and state statutes, regulations, and common law principles governing this Note, including Articles 3 and 9 of the Uniform Commercial Code as adopted in the Governing Law State.
“Business Day” means any day other than a Saturday, Sunday, or legal holiday in the Governing Law State.
“Default Interest Rate” has the meaning given in Section 3.4.
“Event of Default” has the meaning given in Section 6.1.
“Governing Law State” means the State of [GOVERNING LAW STATE].
“Indemnified Parties” has the meaning given in Section 7.1.
“Installment Due Date” has the meaning given in Section 3.2.
“Liability Cap” has the meaning given in Section 7.2.
“Maturity Date” means [MATURITY DATE].
“Payment Instructions” means the wire, ACH, or other transfer instructions specified by Holder from time to time.
“Prime Rate” means the per-annum rate of interest published in The Wall Street Journal as the “Prime Rate” (or, if discontinued, a comparable successor rate selected by Holder in good faith).
3. OPERATIVE PROVISIONS
3.1 Promise to Pay
Borrower hereby unconditionally and irrevocably promises to pay to the order of Holder, in lawful money of the United States, the Principal together with all accrued and unpaid interest, fees, costs, and any other amounts due under this Note, in the manner and at the times set forth herein.
[// GUIDANCE: Drafted to satisfy negotiability requirements under U.C.C. § 3-104.]
3.2 Payment Schedule
a. Principal and interest shall be paid in [NUMBER] equal (or nearly equal) installments of [INSTALLMENT AMOUNT] each (an “Installment Payment”) on the [DAY] day of each calendar month (each, an “Installment Due Date”), commencing on [FIRST PAYMENT DATE] and continuing until the Maturity Date, at which time all remaining unpaid amounts shall be due and payable in full.
b. Payments shall be remitted in immediately available funds pursuant to the then-current Payment Instructions.
3.3 Interest Rate
Except as provided in Section 3.4, interest shall accrue on the outstanding Principal at the rate of [ANNUAL INTEREST RATE]% per annum, computed on the basis of a 360-day year and the actual number of days elapsed. Interest shall be payable concurrently with each Installment Payment.
3.4 Default Interest
Upon and during the continuance of an Event of Default, the outstanding balance shall bear interest at a per-annum rate equal to the lesser of (i) [DEFAULT RATE]% or (ii) the maximum rate permitted under Applicable Law (the “Default Interest Rate”). The accrual or assessment of default interest shall not constitute a waiver of any Event of Default.
3.5 Prepayment
Borrower may prepay all or any portion of the outstanding Principal at any time without premium or penalty, provided that (i) any partial prepayment shall be applied first to accrued interest and then to Principal, and (ii) Borrower shall simultaneously pay all accrued but unpaid interest on the amount prepaid.
3.6 Application of Payments
Unless otherwise required by Applicable Law, Holder may apply each payment received from Borrower to (a) fees, costs, or expenses payable under this Note, (b) accrued interest, and (c) outstanding Principal, in such order as Holder may determine in its sole discretion.
3.7 Conditions Precedent
Holder shall have no obligation to disburse the loan proceeds unless and until Borrower has (i) executed and delivered this Note, (ii) delivered all ancillary documents reasonably requested by Holder, and (iii) satisfied all other conditions expressly set forth in any related loan agreement or term sheet.
4. REPRESENTATIONS & WARRANTIES
Borrower represents and warrants to Holder, as of the date hereof and as of each Installment Due Date:
a. Organization; Authority. Borrower is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization and has full power and authority to execute, deliver, and perform this Note.
b. Due Authorization; Enforceability. The execution, delivery, and performance of this Note have been duly authorized by all requisite corporate or other organizational action of Borrower. This Note constitutes a legal, valid, and binding obligation of Borrower, enforceable in accordance with its terms, subject to Applicable Law relating to bankruptcy, insolvency, or creditor rights.
c. No Conflict. The execution, delivery, and performance of this Note do not violate (i) Borrower’s organizational documents, (ii) any material agreement binding on Borrower, or (iii) any Applicable Law.
d. Consents. No consent, approval, or authorization of any governmental authority or third party is required for Borrower to execute, deliver, and perform this Note, except those that have been duly obtained and are in full force and effect.
e. Solvency. Immediately after giving effect to the transactions contemplated herein, Borrower is solvent and will not be rendered insolvent by such transactions.
[// GUIDANCE: Add additional representations (e.g., environmental, ERISA) if relevant to the underlying transaction.]
All representations and warranties shall survive until full indefeasible payment of all Obligations under this Note.
5. COVENANTS & RESTRICTIONS
5.1 Affirmative Covenants
Borrower shall:
a. Timely Payments. Make all payments required under this Note when due.
b. Compliance with Law. Comply in all material respects with Applicable Law.
c. Books and Records. Maintain complete and accurate books and records in accordance with GAAP.
d. Notices. Promptly provide Holder with written notice of (i) any Event of Default or event that, with notice or lapse of time, would constitute an Event of Default, and (ii) any material adverse change in Borrower’s financial condition.
5.2 Negative Covenants
Borrower shall not, without Holder’s prior written consent:
a. Transfer of Assets. Sell, lease, or otherwise dispose of all or substantially all of its assets, except in the ordinary course of business.
b. Change of Control. Effect any merger, consolidation, or other transaction resulting in a change in ownership of more than [PERCENTAGE]% of its voting equity.
c. Additional Indebtedness. Incur additional indebtedness that would reasonably be expected to impair Borrower’s ability to perform its obligations hereunder.
[// GUIDANCE: Tailor negative covenants to the credit risk profile of the Borrower.]
5.3 Financial Reporting (Optional)
Borrower shall deliver to Holder (i) annual financial statements within [NUMBER] days after each fiscal year end and (ii) interim financial statements within [NUMBER] days after each fiscal quarter end.
6. DEFAULT & REMEDIES
6.1 Events of Default
Each of the following constitutes an “Event of Default”:
a. Payment Default. Borrower fails to pay any principal, interest, or other amount when due and such failure continues for [GRACE PERIOD] days.
b. Covenant Default. Borrower fails to perform or observe any covenant, agreement, or obligation contained in this Note (other than a payment obligation) and such failure continues unremedied for [CURE PERIOD] days after written notice from Holder.
c. Misrepresentation. Any representation or warranty made by Borrower herein is materially false or misleading when made.
d. Insolvency Events. (i) Borrower commences or has commenced against it any bankruptcy, insolvency, or similar proceeding; (ii) Borrower admits its inability to pay its debts as they become due; or (iii) Borrower makes a general assignment for the benefit of creditors.
e. Cross-Default. Any default occurs under any other indebtedness of Borrower aggregating more than [CROSS-DEFAULT THRESHOLD].
6.2 Notice and Cure
Holder shall give Borrower written notice of any Event of Default (other than those described in Section 6.1.d, which shall be automatic). Borrower shall have the applicable cure period set forth in Section 6.1 to remedy such default (if curable).
6.3 Remedies
Upon (and automatically in the case of Section 6.1.d) the occurrence and continuation of an Event of Default, Holder may, without presentment, demand, protest, or further notice of any kind:
a. Acceleration. Declare the entire unpaid balance of Principal, accrued interest, and all other amounts under this Note immediately due and payable.
b. Default Interest. Apply the Default Interest Rate pursuant to Section 3.4.
c. Set-off. Exercise any right of set-off or banker’s lien against Borrower’s accounts with Holder.
d. Collection Costs. Recover from Borrower all reasonable costs of collection, including attorneys’ fees and court costs.
e. Cumulative Remedies. Exercise any other rights and remedies available at law or in equity, which shall be cumulative and not exclusive.
6.4 Waivers by Borrower
Except as expressly provided herein or prohibited by Applicable Law, Borrower waives presentment, demand, notice of dishonor, protest, diligence, and all defenses based on suretyship or impairment of collateral.
7. RISK ALLOCATION
7.1 Indemnification (Borrower Payment Duty)
Borrower shall indemnify, defend, and hold harmless Holder and its affiliates, and each of their respective officers, directors, employees, agents, successors, and assigns (collectively, the “Indemnified Parties”) from and against any and all losses, liabilities, damages, costs, and expenses (including reasonable attorneys’ fees) actually incurred by any Indemnified Party arising out of or relating to the negotiation, execution, performance, or enforcement of this Note, except to the extent such losses are finally determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party.
[// GUIDANCE: Indemnity phrased as borrower-side duty per metadata.]
7.2 Limitation of Liability
Notwithstanding anything to the contrary herein, Holder’s aggregate liability to Borrower under this Note shall in no event exceed the aggregate amount of Principal and accrued but unpaid interest outstanding hereunder at the time the claim arises (the “Liability Cap”). The Liability Cap shall not apply to (i) Holder’s gross negligence or willful misconduct or (ii) Borrower’s indemnification obligations under Section 7.1.
7.3 Force Majeure
Holder shall not be liable for any delay or failure in the performance of its obligations caused by events beyond its reasonable control, including acts of God, war, terrorism, civil unrest, epidemic, governmental action, or interruption of telecommunications or power facilities, provided that Holder uses commercially reasonable efforts to resume performance promptly.
8. DISPUTE RESOLUTION
8.1 Governing Law
This Note and any dispute arising hereunder shall be governed by and construed in accordance with the laws of the Governing Law State, without regard to its conflicts-of-law rules.
8.2 Forum Selection
Subject to Section 8.3 (Arbitration), Borrower and Holder hereby irrevocably submit to the exclusive jurisdiction of the state courts located in [COUNTY], Governing Law State, and waive any objection based on inconvenient forum.
8.3 Arbitration (Optional)
[ARBITRATION SELECTION: [CHECK “APPLICABLE” OR “NOT APPLICABLE”]]
If “Applicable” is selected, any dispute, claim, or controversy arising out of or relating to this Note shall be resolved by binding arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules. The seat of arbitration shall be [CITY, STATE], and judgment on the arbitral award may be entered in any court of competent jurisdiction.
8.4 Jury Trial Waiver (Optional)
[// GUIDANCE: Include if required by lender; ensure mutual waiver for enforceability in some states.]
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, EACH PARTY HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY in any action or proceeding arising under or relating to this Note.
8.5 Injunctive Relief (Limited)
Nothing in this Section 8 shall prohibit Holder from seeking temporary or preliminary injunctive relief in any court of competent jurisdiction solely to preserve the status quo pending the outcome of arbitration or litigation under this Section, provided such relief is narrowly tailored and does not extend beyond what is reasonably necessary to prevent irreparable harm.
9. GENERAL PROVISIONS
9.1 Amendments; Waivers
No amendment, modification, or waiver of any provision of this Note shall be effective unless in a writing signed by Borrower and Holder. Any waiver shall be limited to the specific instance and purpose for which given.
9.2 Assignment
Borrower may not assign, delegate, or otherwise transfer any of its rights or obligations under this Note without Holder’s prior written consent. Holder may assign or endorse this Note in accordance with Applicable Law. This Note shall inure to the benefit of and be binding upon the parties and their respective successors and permitted assigns.
9.3 Severability
If any provision of this Note is held invalid or unenforceable, the remaining provisions shall remain in full force and effect, and the invalid provision shall be deemed modified to the minimum extent necessary to make it valid and enforceable.
9.4 Integration
This Note constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous oral or written agreements or understandings.
9.5 Notices
All notices shall be in writing and delivered (i) by certified mail (return receipt requested), (ii) by nationally recognized overnight courier, or (iii) by email with confirmation of receipt, in each case to the addresses set forth below (or as subsequently designated in writing). A notice shall be deemed given upon receipt (or refusal to accept delivery).
9.6 Electronic Signatures
The parties agree that signatures transmitted by electronic means shall be deemed original signatures and are binding for all purposes, in accordance with 15 U.S.C. § 7001 et seq. (ESIGN).
9.7 Counterparts
This Note may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one instrument.
10. EXECUTION BLOCK
IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of the date first written above.
BORROWER:
[BORROWER LEGAL NAME]
By: ____
Name: ____
Title: _____
Address: ______
Email: ____
[Corporate Seal, if applicable]
LENDER:
[LENDER LEGAL NAME]
By: ____
Name: ____
Title: _____
Address: ______
Email: ____
NOTARY ACKNOWLEDGMENT (if required)
State of ___ )
County of ___ )
On this _ day of _, 20__, before me, ____, a Notary Public in and for said state, personally appeared ______, known to me (or satisfactorily proven) to be the person(s) whose name(s) is/are subscribed to the foregoing instrument, and acknowledged that he/she/they executed the same for the purposes therein contained.
Notary Public Signature: ___
My Commission Expires: ____
[// GUIDANCE: Notarization and witness requirements vary by state—consult local law.]
END OF DOCUMENT