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Generic Convertible Note

Generic Convertible Note

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Published by g4nz0
Convertible Note Form for TechCrunch post comment
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Published by: g4nz0 on Aug 24, 2009
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04/01/2013

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THIS NOTE AND THE SECURITIES INTO WHICH IT MAY BE CONVERTED HAVE NOTBEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF ANEFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR SUCH LAWS COVERINGTHE TRANSFER OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THATSUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
 ________________________, Inc.2008 CONVERTIBLE PROMISSORY NOTE$______,000August ____, 2008
FOR VALUE RECEIVED, the undersigned, ________________________, Inc., a Delawarecorporation (the "Company"), promises to pay to the order of 
INVESTOR NAME
, or its registeredassigns (the "Holder"), the principal amount of $____,000 – __________ US Dollars - (the “NoteAmount”), plus interest at a rate equal to five percent (5%) per annum payable upon maturity.Interest shall be calculated monthly on the basis of actual number of full calendar months elapsed. Notwithstanding any other provision of this Note, the holder hereof does not intend to charge and theCompany shall not be required to pay any interest or other fees or charges in excess of the maximum permitted by applicable law; any payments in excess of such maximum shall be refunded to theCompany or credited to reduce principal hereunder. All payments received by the holder hereunder will be applied first to costs of collection, if any, then to interest and the balance to principal.Payments of principal and interest will be made by check in immediately available UnitedStates funds sent to the holder at the address furnished to the Company for that purpose.This is one of a series of the Company's notes known as its 2008 Convertible Promissory Notes (collectively referred to herein as the "Notes"), all of like tenor, except as to the name of theholder, the date of issuance, and the principal amount thereof and other non-material details. The Notes are limited in aggregate principal amount to
[anticipated total face value of notes]
and areintended to provide financing to the Company in anticipation of an Equity Financing (as defined below). The Company, may, by written notice to the Holder, increase the aggregate principal amountof the Notes at any time.The following is a statement of the rights of the Holder of this Note and the conditions towhich this Note is subject to and to which the Holder hereof, by the acceptance of this Note, agrees:1.Maturity Date. Unless earlier converted in accordance with Section 2, the principaland accrued interest on this Note shall be due and payable on demand at any time followingSeptember 1, 2010 (the "Maturity Date").2.Note Conversion.
 
2.1.
Conversion upon Equity Financing. If the Company shallobtain an arms' length preferred stock equity investment from aninvestor or a group of investors (the "Investors") in a transaction orrelated series of transactions of at least $2,000,000, not includingfor such purpose the outstanding principal amount of the Notes (an"Equity Financing"), prior to the Maturity Date, then, upon the dateof the closing of such Equity Financing (the "Closing Date"), thisNote and all accrued interest shall be automatically converted intosuch number of shares of the type of equity securities (the "EquitySecurities") to be issued in the Equity Financing at a conversion rateequal to the lowest per share price the Equity Securities are issuedin the Equity Financing multiplied by the Applicable Percentage. Forpurposes of this Section 2.1, the Applicable Percentage shall equal
75%
. Notwithstanding anything set forth herein, if 75% of thepremoney valuation of the Company (on a fully diluted basis) basedon the Equity Financing (“Premoney Valuation”) exceeds
_________[conversion cap amount]
, then the Applicable Percentage will bereduced to the percentage which when multiplied by the PremoneyValuation equals
_____________________
.
Premoney Valuation” shall bedefined as the product of (i) the number of shares of Company stock outstanding or reserved for issuance pursuant to outstanding stock options or warrants prior to theEquity Financing, and (ii) the price per share at which shares will be issued in theEquity Financing. The Company shall not be obligated to issue certificatesevidencing the shares of the securities issuable upon such automatic conversionunless the Note is either delivered to the Company or its transfer agent, or the Holder notifies the Company or its transfer agent that the Note has been lost, stolen or destroyed and executes a customary lost note agreement.2.2.Conversion or Payment upon Change of Control. If prior to the MaturityDate, there is a Change of Control (as defined below) and the Notes have not previously converted, the Holder may, upon 10 days notice, elect to have this Noteconverted or repaid in one of the following two ways: (a) the Holder may elect toreceive from the Company an amount in cash equal to the sum of the original principal amount and interest then accrued under the Note or (b) the Holder may electto convert this Note plus all accrued interest into shares of Common Stock immediately prior to the closing of such Change of Control. Such number of sharesshall be determined by dividing the principal on this Note plus all accrued interest bythe quotient of (a) ________________[conversion cap amount], plus the aggregateamount of funds raised pursuant to the Notes divided by (b) the OutstandingSecurities (as defined below), each calculated as of immediately prior to the closingof such Change of Control. In the event that the Holder does not make an electionwithin 10 days of the notice from the Company (with email being adequate notice),the Company shall determine, in its reasonable discretion, to convert or repay the Note, based upon whether the value of the consideration that would be payable to the
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Holder in a Change of Control if the Holder converted this Note is greater than the principal and interest on this Note. A "Change of Control" for purposes of this Noteshall mean any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization in whichthe Company shall not be the continuing or surviving entity of such reorganization or any transaction or series of related transactions by the Company in which in excess of 50% of the Company's voting power is transferred, or a sale of all or substantially allof the assets of the Company, other than any transaction or series of relatedtransactions which is primarily for the purpose of financing the Company or areincorporation of the Company. "Outstanding Securities" for purposes of this Noteshall mean that number which is the sum of (i) all outstanding stock of the Company,(ii) all outstanding options, warrants or other convertible securities of the Company(other than pursuant to the Notes).2.3.Conversion Procedure.2.3.1Notice of Conversion. Upon the conversion of this Note, writtennotice shall be delivered to the Holder of this Note at the address shown onthe records of the Company for the Holder or given by the Holder to theCompany for the purpose of notice or, if no such address appears or is given,at the place where the principal executive office of the Company is located,notifying the Holder of the conversion to be effected, specifying theconversion price, the principal amount of the Note to be converted, the date onwhich such conversion will occur and calling upon such Holder to surrender to the Company, in the manner and at the place designated, the Note.2.3.2Delivery of Stock Certificates. As promptly as practicable after theconversion of this Note and delivery of this Note to the Company, theCompany at its expense will issue and deliver to the Holder of this Note acertificate or certificates for the number of full shares of Common Stock or other Equity Securities, as the case may be, issuable upon such conversion.2.3.3Mechanics and Effect of Conversion. No fractional shares of theCompany's capital stock shall be issued upon conversion of this Note. In lieuof the Company issuing any fractional shares to the Holder upon theconversion of this Note, the Company shall pay to the Holder the amount of outstanding principal that is not so converted, such payment to be in the formas provided below. Upon the conversion of this Note pursuant to Sections 2.1or 2.2 above, the Holder shall surrender this Note, duly endorsed, at the principal office of the Company. At its expense, the Company shall, as soonas practicable thereafter, issue and deliver to such Holder at such principaloffice a certificate or certificates for the number of shares of the Company'sCommon Stock or other Equity Securities, as the case may be, to which theHolder shall be entitled upon such conversion, together with any other securities and property to which the Holder is entitled upon conversion of this
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