Note Secured by Stock
(Corporation)

Summary

This template is a promissory note that includes a pledge agreement securing the note with stock of a corporation. The principal and interest due under the note will be paid in equal, monthly installment payments. This template includes practical guidance, drafting notes, and alternate and optional clauses. In this template, to secure repayment of the note, the borrower (referred to as the note "maker") is pledging shares of stock in a corporation to the lender (referred to as the note "holder"). The borrower agrees to take the steps necessary for the lender to perfect its security interest in the stock through taking possession of a stock certificate (either directly by the lender or using an escrow agent) or by otherwise exercising control over the stock. Upon a breach of the borrower's payment obligations under the note, the lender has the right to exercise its rights with respect to the stock to pay the outstanding amount under the note. This template includes an optional confession of judgment provision that may be included if the governing state law permits. A confession of judgment provision must be conformed to governing state law and provides that the borrower waives its right to notice and a hearing and permits entry of judgment in court against it and in favor of the lender in the event of an uncured payment default by the borrower. 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 other templates and more information regarding taking stock of a corporation as collateral, see Stock Pledge Agreement (Short Form) and Perfecting Security Interests by Possession, Filing, and Control.