The Promissory Note Conversion Agreement is commonly used when companies, particularly startups, want to convert outstanding debt into equity. This typically occurs during financing rounds, restructuring, or when originally planned in convertible note financing. The agreement is essential in the United States where securities laws strictly regulate such conversions. It details the conversion terms, representations and warranties, and compliance with applicable securities regulations. The document should be carefully structured to ensure compliance with both federal securities laws and state-specific requirements, particularly regarding registration exemptions and disclosure obligations.
Promissory Note Conversion Agreement for the United States
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Key Requirements PROMPT example:
Promissory Note Conversion Agreement
"I need a Promissory Note Conversion Agreement to convert a $500,000 promissory note issued to an angel investor into Series A Preferred Stock at a 20% discount to the round price, with the conversion to be completed by March 2025."
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1. Parties: Identification of the note holder and the company
2. Background: Reference to original promissory note and context for conversion
3. Definitions: Key terms used throughout the agreement including conversion price, conversion shares, and original note
4. Conversion Terms: Specific terms of conversion, including conversion price, number of shares, and timing of conversion
5. Mechanics of Conversion: Process and procedures for executing the conversion, including delivery of documents and cancellation of original note
6. Representations and Warranties: Statements of fact from both parties regarding authority, binding effect, and securities law compliance
7. General Provisions: Standard legal provisions including governing law, notices, amendments, and counterparts
1. Registration Rights: Rights related to registration of converted securities with the SEC and related procedures
2. Anti-dilution Provisions: Protections against dilution of converted shares through future corporate actions
3. Tax Matters: Specific provisions addressing tax treatment of conversion and related obligations
1. Schedule A - Original Promissory Note: Copy of the original promissory note being converted
2. Schedule B - Conversion Calculation: Detailed calculation showing conversion price and number of shares to be issued
3. Schedule C - Form of Share Certificate: Template for share certificates to be issued upon conversion
4. Schedule D - Capitalization Table: Pre and post-conversion capitalization structure of the company
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