Convertible Note
(Note Purchase Agreement)

Summary

This template is a convertible note to be issued in the seed-stage financing of a startup company. A convertible note is a loan with interest that converts into preferred or common stock upon certain events. This template includes practical guidance, drafting notes, alternate clauses, and optional clauses. Early stage companies often use convertible notes in place of equity for early seed financing before their initial preferred stock offering. This template assumes that the convertible note is issued pursuant to a note purchase agreement (as opposed to on a standalone basis). For further information on various seed financing options, including simple agreements for future equity (SAFEs) and convertible notes, see Seed Financing Options Checklist, Seed Financing: Convertible Note or SAFE, and Convertible Notes. For additional resources related to start-up seed financing, see Start-Up Seed Financing Resource Kit. For a full listing of content relating to promissory notes for use in various practice areas, see Promissory Notes Resource Kit (Small to Mid-Sized Law). For more on convertible notes, see Business Organizations with Tax Planning § 92.01, Top 10 Practice Tips: Convertible Note Offerings, and Convertible Note Financing Term Sheet (Seed-Stage Startup). For templates related to convertible note financing, see Term Sheet (Convertible Note), Note Purchase Agreement, Convertible Note Financing Checklist, Convertible Note (Standalone), Board Resolutions: Issuance and Sale of Standalone Note, and Board Resolutions: Issuance and Sale of Convertible Notes under a Note Purchase Agreement. To compare state laws on corporation formation and qualification, see the Corporation: Formation and Qualification topic in the Business Entities State Law Comparison Too.