Convertible Bond Agreement Template

What happens to a convertible note if a company is acquired or merges with another company?Most convertible notes call for the note to be converted to common shares in the company at a pre-set price just before the acquisition/merger, often at the same price as the cap of the note.

A convertible note cap sets the maximum valuation at which the investment made via the convertible note can convert into equity. Investors in the convertible note typically get converted at the lesser of the valuation of the next qualified priced round and the cap.

The amount you're raising on the convertible note (say $500k), the conversion discount of the note (say 20%), the pre-money valuation cap of the note (say $4m), the percentage of your company which the VCs will take in your Series A (say 30%),

No while convertible debt is outstanding, then Yes after it converts to equity. No repayment until sale of company. Repayment on fixed schedule. Repayment on maturity, or converted to equity and no repayment until sale of company.

The maturity date is a deadline for a preferred round, and only during a preferred round can a convertible note convert into equity. Let's say there was a maturity date of 2 years from the date of investment. If the company hasn't had a preferred round within 2 years, the investor could demand their money back.

Generally, convertible notes convert into shares (the Conversion Shares) at a qualified equity financing round (this term should be defined in the note and usually means a preferred financing round of a minimum size) at the lower of two different prices per share: (1) the price per share using the conversion cap (

A convertible note is short-term debt that converts into equity. In the context of a seed financing, the debt typically automatically converts into shares of preferred stock upon the closing of a Series A round of financing.