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  1. #1

    Unsecured Convertible Promissory Note

    What is the name of your state (only U.S. law)? Texas

    A friend of mine is trying to decipher a contract to determine what his options are for repayment on a convertible promissory note. Repayment was contingent on qualified financing of $3,000,000, which was not received. The CEO has indicated that he would be willing to extend the note, but my friend has lost faith in the company and wishes to leave with his original $5,000 plus the 7% annual simple interest rate.

    There is a Conversion upon Maturity clause that automatically converts to common stock. The Maturity Conversion Price is "$10,000,000 divided by the total fully-diluted equity shares of the company, excluding all convertible promissory notes, as measured immediately prior to the conversion of the note."

    In Section 1 of the contract, "the aggregate principal of all such notes shall not exceed $32,500. The Notes shall be pari passu with respect to each other."

    I understand that this information is somewhat limited, but does anyone have any insight into what he options he may have to recover his investment?


  2. #2
    Join Date
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    For that kind of money, your friend needs a lawyer.


  3. #3
    Join Date
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    Quote Originally Posted by Peligroso View Post
    What is the name of your state (only U.S. law)? Texas

    A friend of mine is trying to decipher a contract to determine what his options are for repayment on a convertible promissory note. Repayment was contingent on qualified financing of $3,000,000, which was not received. The CEO has indicated that he would be willing to extend the note, but my friend has lost faith in the company and wishes to leave with his original $5,000 plus the 7% annual simple interest rate.

    There is a Conversion upon Maturity clause that automatically converts to common stock. The Maturity Conversion Price is "$10,000,000 divided by the total fully-diluted equity shares of the company, excluding all convertible promissory notes, as measured immediately prior to the conversion of the note."

    In Section 1 of the contract, "the aggregate principal of all such notes shall not exceed $32,500. The Notes shall be pari passu with respect to each other."

    I understand that this information is somewhat limited, but does anyone have any insight into what he options he may have to recover his investment?
    To decipher a contract, it needs to be read in its entirety. Your friend needs to seek local legal assistance for a personal review. I agree with adjusterjack.




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  4. #4
    Join Date
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    72,912
    Did everybody miss that the original investment was only 5k? Getting an attorney involved to recover 5k might cost more than can be recovered.


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