A Convertible Note is a simple promissory note, usually bearing interest and payable at some future date. The unique aspects of a convertible note are:
A. It converts into equity in the company so long as certain agreed metrics are achieved;
B. Conversion rather than repayment is the usual intention of the parties
C. The usual events for conversion (a conversion event) could be some or all of:
1. Later financing acquired of an agreed minimum level;
2. Developmental milestones reached by the company; and/or
3. Strategic partnerships concluded with important companies;
The conversion into equity is usually at a valuation that is consistent with the valuation agreed to with investors in an investment round that occurs at a later time.
A South Dakota Convertible Promissory Note by Corporation is a legal document that shows evidence of a loan agreement between a corporation and the lender, where the loan can be converted into company stock at a later date. This note is usually part of a series of notes issued pursuant to a Convertible Note Purchase Agreement. In South Dakota, there may be different types of Convertible Promissory Notes by Corporation, each tailored to specific circumstances or preferences. These variations could include: 1. Senior Convertible Promissory Note: This type of note may have priority over other debt obligations, ensuring that the lender will be repaid before other creditors in case of default. 2. Junior Convertible Promissory Note: These notes may hold a lower priority than senior notes in terms of repayment. In case of default, these lenders might receive repayment after the senior creditors. 3. Unsecured Convertible Promissory Note: This note would lack any specific asset pledged as collateral. Repayment is not backed by any particular security, which may be reflected in higher interest rates due to increased risk for the lender. 4. Secured Convertible Promissory Note: Unlike unsecured notes, secured notes have specific assets pledged as collateral. This provides more security for the lender, potentially lowering interest rates. 5. Fixed-Rate Convertible Promissory Note: This note would have a fixed rate of interest, allowing for predictable and consistent payments throughout the loan period. 6. Variable-Rate Convertible Promissory Note: With a variable rate, the interest on this note varies over time, usually linked to an external benchmark such as the prime rate or an index. This type of note may provide an opportunity for lower interest rates during periods of economic decline. The South Dakota Convertible Promissory Note is generally used when a corporation seeks financing from lenders willing to convert their debts into equity. It serves as an agreement outlining the terms of the loan, including interest rates, conversion ratio, maturity date, conversion terms, and repayment conditions. It offers flexibility to the lender and potential equity participation in the corporation for financial growth. Furthermore, it is important to consider consulting legal or financial professionals for advice and assistance when drafting, executing, or entering into these types of agreements.A South Dakota Convertible Promissory Note by Corporation is a legal document that shows evidence of a loan agreement between a corporation and the lender, where the loan can be converted into company stock at a later date. This note is usually part of a series of notes issued pursuant to a Convertible Note Purchase Agreement. In South Dakota, there may be different types of Convertible Promissory Notes by Corporation, each tailored to specific circumstances or preferences. These variations could include: 1. Senior Convertible Promissory Note: This type of note may have priority over other debt obligations, ensuring that the lender will be repaid before other creditors in case of default. 2. Junior Convertible Promissory Note: These notes may hold a lower priority than senior notes in terms of repayment. In case of default, these lenders might receive repayment after the senior creditors. 3. Unsecured Convertible Promissory Note: This note would lack any specific asset pledged as collateral. Repayment is not backed by any particular security, which may be reflected in higher interest rates due to increased risk for the lender. 4. Secured Convertible Promissory Note: Unlike unsecured notes, secured notes have specific assets pledged as collateral. This provides more security for the lender, potentially lowering interest rates. 5. Fixed-Rate Convertible Promissory Note: This note would have a fixed rate of interest, allowing for predictable and consistent payments throughout the loan period. 6. Variable-Rate Convertible Promissory Note: With a variable rate, the interest on this note varies over time, usually linked to an external benchmark such as the prime rate or an index. This type of note may provide an opportunity for lower interest rates during periods of economic decline. The South Dakota Convertible Promissory Note is generally used when a corporation seeks financing from lenders willing to convert their debts into equity. It serves as an agreement outlining the terms of the loan, including interest rates, conversion ratio, maturity date, conversion terms, and repayment conditions. It offers flexibility to the lender and potential equity participation in the corporation for financial growth. Furthermore, it is important to consider consulting legal or financial professionals for advice and assistance when drafting, executing, or entering into these types of agreements.
Para su conveniencia, debajo del texto en español le brindamos la versión completa de este formulario en inglés. For your convenience, the complete English version of this form is attached below the Spanish version.