Convertible Promissory Note review
Convertible promissory note (UCC Article 3 negotiable instrument convertible into preferred stock at next qualified financing).
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What it checks
Principal amount stated
Convertible note must state principal (UCC § 3-104 — unconditional promise to pay a fixed amount).
Critical · EQT-010
Interest rate stated
Convertible note should state interest rate (vs. SAFE which does not bear interest).
Critical · EQT-011
Interest rate above plausible usury threshold
Most state usury caps for non-bank lenders sit in the 7–24% range; rates above 25% are heuristically usurious in many states.
Critical · EQT-012
Maturity date specified
Convertible note must have a maturity date.
Critical · EQT-013
Qualified financing / conversion mechanics
Convertible note must define qualified-financing trigger and conversion price (discount and/or cap).
Critical · EQT-014
Change-of-control treatment
Convertible note must address change of control before conversion.
Critical · EQT-015
Subordination acknowledgment
Convertible notes are typically subordinate to senior debt — clause should say so.
Warning · EQT-016
Events of default enumerated
Convertible note must enumerate events of default.
Critical · EQT-017
Investor accredited-investor representation
Convertible notes are sold under Reg D Rule 506; investor must represent accredited-investor status.
Warning · EQT-018
Every run also applies 120 general checks that belong to any agreement: structure, parties and signatures, defined terms, cross-references, dates, amounts, and one-sided terms.
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