Convertible Loan Agreement Template

CONVERTIBLE LOAN AGREEMENT

This Convertible Loan Agreement (the Agreement) is made as of between:

Parties

Recitals

WHEREAS, the Lender agrees to loan to the Borrower, and the Borrower agrees to borrow from the Lender, the principal amount and upon the terms set forth in this Agreement; and

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the parties agree as follows.

Definitions

In this Agreement the following capitalized terms have the meanings set forth below:

"Principal Amount" means the original principal amount of the Loan: $.

"Interest Rate" means the simple annual interest rate of per annum, calculated on the outstanding Principal Amount.

"Maturity Date" means .

"Qualified Financing" means an equity financing of the Borrower in which the Borrower raises aggregate gross proceeds of at least $.

"Conversion Discount" means discount to the price per share in a Qualified Financing.

"Valuation Cap" means a pre-money company valuation cap of $ for purposes of conversion computation.

Loan Terms

1. Loan and Disbursement. Subject to the terms and conditions of this Agreement, the Lender shall loan to the Borrower the Principal Amount on or before .

2. Interest and Payment. Interest shall accrue on the outstanding Principal Amount at the Interest Rate and shall be payable at maturity unless converted earlier pursuant to Section Conversion. If not converted, the Principal Amount and accrued interest shall be due and payable on the Maturity Date.

Prepayment is: permitted without penalty    permitted with penalty (describe below)

The Loan is: Unsecured    Secured — if secured, describe collateral below.

Conversion

1. Automatic Conversion upon Qualified Financing. Upon the closing of a Qualified Financing prior to repayment, the outstanding Principal Amount and accrued but unpaid interest shall automatically convert into the securities issued in such financing. The Conversion Price shall be the lesser of: (a) the price per share paid by investors in the Qualified Financing, less the Conversion Discount, or (b) the price per share derived from the Valuation Cap. The formula and mechanics of conversion shall be set forth in the closing documents of the Qualified Financing and shall be binding on the parties.

2. Optional Conversion at Maturity. If the Loan has not been converted prior to the Maturity Date, the Lender may elect to convert the outstanding Principal Amount and accrued interest into equity at a Conversion Price determined by reference to the Valuation Cap or at a mutually agreed price; alternatively, the Lender may demand repayment.

Adjustments; Anti-Dilution

Conversion shall be subject to customary adjustments to give effect to stock splits, stock dividends, combinations, recapitalizations, and other similar events. The parties agree to anti-dilution protections as set forth in the applicable conversion documents; absent agreement, conversions shall be on a pro rata basis consistent with the terms set forth herein.

Representations and Warranties

Borrower represents and warrants that: (a) it is duly organized and in good standing under the laws of the jurisdiction of its organization; (b) it has full power and authority to execute and deliver this Agreement; (c) the execution and performance of this Agreement do not violate any agreement or law; and (d) the proceeds of the Loan will be used for legitimate business purposes as described:

Lender represents and warrants that it has full power and authority to extend the Loan and that the Loan is made for investment purposes; the Lender is acquiring any securities issued upon conversion for investment and not with a view to distribution.

Events of Default and Remedies

The following shall constitute an Event of Default: (a) failure to pay principal or interest within days after written notice; (b) insolvency, bankruptcy, or assignment for the benefit of creditors; (c) material breach of this Agreement not cured within days after notice.

Upon an Event of Default, the Lender may declare the Loan immediately due and payable, pursue all available remedies at law or in equity, and exercise any rights provided by applicable security instruments and this Agreement.

Governing Law; Venue

This Agreement shall be governed by and construed in accordance with the laws of the State of , without regard to its conflicts of law principles. The parties submit to the exclusive jurisdiction of the state and federal courts located in that state for all disputes arising under this Agreement.

Notices

All notices, requests, consents and other communications under this Agreement must be in writing and shall be deemed given when delivered personally, by nationally recognized overnight courier, or by certified mail (return receipt requested) to the addresses below or to such other address as a party may specify by notice in accordance with this Section.

Miscellaneous

Assignment. Neither party may assign its rights or obligations under this Agreement without the prior written consent of the other party, except that the Lender may assign all or part of its rights to an affiliate or in connection with a financing without Borrower consent.

Amendment and Waiver. Any amendment or waiver of any provision of this Agreement must be in writing signed by the party against whom enforcement is sought. No failure or delay in exercising any remedy shall operate as a waiver.

Severability. If any provision of this Agreement is held invalid or unenforceable, the remainder shall continue in full force and effect.

Payment Instructions

Preferred payment method: Wire transfer    Check    ACH

Acknowledgments

Each party acknowledges that it has read and understands this Agreement, had an opportunity to consult counsel, and accepts the legal and financial risks associated with the transactions contemplated herein.

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