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Convertible Promissory Note by Corporation - One of Series of Notes...

Broward Florida Convertible Promissory Note by Corporation - One of Series of Notes Issued Pursuant to Convertible Note Purchase Agreement

Name: Broward Florida Convertible Promissory Note by Corporation - One of Series of Notes Issued Pursuant to Convertible Note Purchase Agreement
Brand: US Legal Forms
Rating: 4.64 (306 reviews)

Category:

Promissory Notes - Convertible

State:

Multi-State

County:

Broward

Control #:

US-02860BG

Format:

Instant download

Description

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.

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FAQ

A convertible promissory note is a debt obligation in which a company borrows money from an investor in exchange for a promise of repayment and an option to convert the outstanding principal into equity of the company upon some triggering event. Notes have a maturity date and bear interest.

Convertible notes are debt instruments that include terms like a maturity date, an interest rate, etc., but that will convert into equity if a future equity round is raised. The conversion typically occurs at a discount to the price per share of the future round.

Convertible notes are just like any other form of debt you'll need to pay back the principal plus interest. In an ideal world, a startup would never pay back a convertible note in cash. However, if the maturity date hits prior to a Series A financing, investors can choose to demand their money back.

A convertible note is a form of short-term debt that converts into equity, typically in conjunction with a future financing round; in effect, the investor would be loaning money to a startup and instead of a return in the form of principal plus interest, the investor would receive equity in the company.

A convertible note purchase agreement is an agreement between certain investors and a company that binds all the investors to the same terms and conditions for a particular round of convertible debt financing. Convertible debt is debt that can be converted into equity.

A convertible note is a debt instrument often used by angel or seed investors looking to fund an early-stage startup that has not been valued explicitly. After more information becomes available to establish a reasonable value for the company, convertible note investors can convert the note into equity.

Key Takeaways. Convertible bonds are corporate bonds that can be exchanged for common stock in the issuing company. Companies issue convertible bonds to lower the coupon rate on debt and to delay dilution.

More info

Drafting Note to Notes: Convertible notes are often issued together pursuant to a separate Note Purchase. Unregistered Sales of Equity Securities and Use of Proceeds.See Note 4 and Note 9 to Notes to Consolidated Financial Statements.

Broward Florida Convertible Promissory Note by Corporation - One of Series of Notes Issued Pursuant to Convertible Note Purchase Agreement

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