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The Convertible Note Subscription Agreement is commonly used in early-stage financing when determining a company's valuation is challenging or premature. This document, governed by U.S. federal and state securities laws, provides a structured framework for debt that can convert to equity, typically during a future financing round. It outlines key terms such as conversion discount, valuation cap, interest rate, and maturity date, while ensuring compliance with securities regulations and protecting both investor and company interests. The agreement is particularly popular among startups seeking bridge financing between equity rounds.

1. Parties: Identification of the issuing company and the investor(s)

2. Background: Context of the investment and purpose of the note

3. Definitions: Key terms used throughout the agreement including conversion mechanics, qualified financing, and other critical definitions

4. Subscription and Issuance: Terms of the note subscription and issuance, including purchase price and closing conditions

5. Conversion Rights: Terms and conditions for converting the note to equity, including conversion price, triggers, and mechanics

6. Interest: Interest rate, calculation method, and payment terms

7. Maturity and Repayment: Maturity date, repayment provisions, and procedures for extension

8. Company Representations: Company's warranties and representations regarding authority, compliance, and business condition

9. Investor Representations: Investor's warranties and representations regarding investment intent and accredited status

10. Events of Default: Circumstances constituting default and corresponding remedies

11. Miscellaneous: Standard boilerplate provisions including notices, amendments, and governing law