PROMISSORY NOTE
1. For value received, the undersigned (Borrower) promise(s) to pay to [the order of][name of creditor] (Creditor), the principal amount of $[amount] and interest [(computed on the basis of a 360-day year for the actual number of days elapsed)] on the unpaid principal balance at a rate per annum of [Option A: [percentage] until maturity and [percentage] after maturity.][Option B: [percentage] above the index rate (as defined below) from time to time in effect until maturity, and [percentage] above the index rate from time to time in effect after maturity.][The interest rate on this note shall be adjusted [daily / on the first day of each [month / calendar quarter / year]] to the specified percentage above the index rate in effect on the date of adjustment.]
2. [Option A (Demand or single payment):]
[The principal of and accrued interest on this note shall be paid in full on [date / demand].]
[Option B (Demand or single payment—interest periodically):]
[The principal of this note shall be paid in full on [date / demand]. Accrued interest shall be paid on [date], and on the ______day of each succeeding ______until the principal balance is paid in full.]
[Option C (Installments inclusive of interest):]
[The principal of and interest on this note shall be paid in installments beginning [date] and on the ______day of each succeeding ______until [date], at which time the remaining balance of principal and interest shall be paid in full. Each installment shall be in an amount equal to [the greater of]$[amount][or the amount of unpaid interest accrued to the date of payment of the installment].]
[Option D (Level principal installments plus accrued interest):]
[The principal of this note shall be paid in installments of $[amount] each, beginning [date], and on the ______day of each succeeding ______until [date], when the remaining unpaid principal balance shall be paid in full. Accrued interest shall be paid on [date], and on the ______day of each succeeding ______until the principal balance is paid in full.]
[If any installment of interest is not paid when due, Borrower will immediately pay to the holder of this note a late charge of $[amount]. This is in addition to the holder’s other rights and remedies for default in payment of an installment of interest when due.]
[Optional provision:]
[3. Index Rate. As used in this note, “index rate” means [the rate of interest that ______of ______(Creditor), determines from time to time to be its “prime” interest rate /______]. The rate that ______(Creditor) determines to be its “prime” interest rate at any given time may not necessarily be the lowest rate of interest available to its commercial customers.]
[Optional provision:]
[4. Expenses. Borrower shall reimburse Creditor for all out-of-pocket expenses that Creditor incurs in connection with making the loan evidenced by this note and any renewals, extensions, or modifications and with taking any security for it, including, without limitation, filing and recording fees, attorney fees and expenses, and costs of credit reports, surveys, appraisals, title work, and mortgagee’s title insurance.]
[Optional provision:]
[5. Line of Credit. The principal of this note may be borrowed, repaid, and reborrowed by Borrower from time to time, subject to the provisions of [any written agreement / a certain ______agreement dated [date]] between Creditor and Borrower, as amended, extended, or replaced. Creditor’s records shall be prima facie evidence of all loans and repayments and of the indebtedness outstanding under this note at any time. [Unless Creditor has otherwise agreed in writing, Creditor is not obligated to extend any loan to Borrower under this note, and any loan extension shall be made in Creditor’s sole discretion.] Payee’s records shall be prima facie evidence of all loans and repayments and of the indebtedness outstanding under this Note at any time.]
[Optional provision:]
[6. Prepayments.
[Option A:]
[Borrower may prepay all or part of the principal of this note at any time. Any partial prepayment will be applied to the installment or installments last falling due under this note, and a partial prepayment shall not affect the amount or time of payment of succeeding required installments.]
[Option B:]
[Borrower may not [at any time / before the end of the ______loan year] prepay all or part of the principal of this note. If [[at any time before [date]/ the end of the ______loan year] all or part of the principal balance of this note is prepaid, whether voluntarily or involuntarily or] the unpaid principal balance of this note becomes immediately due and payable pursuant to paragraph 8, Borrower shall pay to Creditor a prepayment premium [of $[amount]/ in an amount equal to [percentage] of [the amount prepaid or, in the case of acceleration,] the unpaid principal balance][in an amount equal to the applicable percentage of [the amount prepaid or, in the case of acceleration,] the unpaid principal balances]. The applicable percentage shall be determined by the loan year in which the prepayment is made, as follows:
Loan Year / Applicable PercentageFirst / _____ percent
Second / _____ percent
Third / _____ percent
Fourth / _____ percent
Fifth / _____ percent
Loan year means each period of 12 consecutive months beginning on the date of this note or on any anniversary of the date of this note.]
[Option C:]
[Borrower may prepay all, but not less than all, of the outstanding principal of this note on seven days’ prior written notice to Creditor (which shall specify the date of prepayment) if, simultaneously with the prepayment, Borrower pays to Creditor a Prepayment Premium (as defined below). In this Note:
[“Prepayment Premium” means the amount calculated by Creditor, as of the third Business Day preceding the date of prepayment (Calculation Date), as follows:
• [Creditor shall calculate the interest for each month during the remaining term of this note that would be earned by Creditor by reinvesting the outstanding principal amount of this note at the Reinvestment Rate, and Creditor shall subtract that amount from the interest for that month that would have been earned by Creditor if the prepayment had not been made. The result for each month is the Monthly Payment Differential for that month.
• [Creditor shall calculate the present value of each Monthly Payment Differential by discounting the Monthly Payment Differential to the Calculation Date at the Reinvestment Rate. The total of all of those present values shall be the Prepayment Premium.
[“Reinvestment Rate” means [percentage] plus the yield for the most recent week under the heading “Week Ending” published in the Statistical Release under the caption “Treasury Constant Maturities” for the maturity (rounded to the nearest month) corresponding to the Weighted Average Life to Maturity of the outstanding principal of this note on the Calculation Date. If no maturity exactly corresponds to that Weighted Average Life to Maturity, the Reinvestment Rate shall be calculated by interpolating or extrapolating using the yields for the two published maturities most closely corresponding to that Weighted Average Life to Maturity. Such interpolation or extrapolation shall be on a straight-line basis. For the purpose of calculating the Reinvestment Rate, the most recent Statistical Release published before the Calculation Date shall be used.
[“Statistical Release” means the then most recently published statistical release designated “H.15(519)” or any successor publication that is published weekly by the Federal Reserve Board and that establishes yields on actively traded U.S. Government Securities adjusted to constant maturities or, if that statistical release is not published at the time of any determination of the Formula Amount, any other reasonably comparable index that Bank shall designate.
[“Weighted Average Life to Maturity” of the outstanding principal amount of this note means, as of the Calculation Date, the number of years obtained by dividing the then Remaining Dollar-Years of that principal amount by that principal amount. “Remaining Dollar-Years” of that principal amount means the amount obtained by (a) multiplying (i) the remainder of the amount of principal that would have become due under this note on each scheduled payment date if the prepayment had not been made by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between the Calculation Date and that scheduled payment date and (b) totaling the products obtained in (a).
[“Business Day” means a weekday on which Creditor is open to the public for carrying on substantially all of its banking functions.
[Creditor’s calculation of the Prepayment Premium shall, absent manifest error, be binding and conclusive on Borrower and Creditor. If all or any part of the principal of this note shall be paid to or collected by Creditor before the regularly scheduled due date for payment of that principal, for any reason, including, without limitation, acceleration after default, Borrower shall pay to Creditor, simultaneously with the payment or collection, a Prepayment Premium (as defined above) with respect to the amount of the payment or collection.]
[Optional provision:]
[7. Security. This note and all obligations of Borrower under it are secured by [a certain ______dated [date] given by ______to Creditor / any and all security agreements, guaranties, mortgages, pledge agreements, assignments, and all other agreements and instruments that have been or in the future are given by any Borrower or any third party to Creditor] (security document(s)) [including but not limited to security documents given in connection with or referred to in any prior promissory notes given to Creditor by any Borrower and security documents that secure any present or future guaranty of all or part of the indebtedness evidenced by this note]. Creditor shall have all of the rights and powers set forth in the security document(s) and in any other written agreements that have been or in the future are given to Creditor by Borrower, as though they were fully set forth in this note. As additional security for the payment of Borrower’s obligations under this note, Borrower grants to Creditor a security interest in all tangible and intangible property of Borrower now or in the future in the possession of Creditor.]
[Optional provision:]
[8. Default and Acceleration. Each of the following shall be an event of default under this note:
a. a default in the payment of any installment of principal or interest under this note or of any late charge or out-of-pocket expense that Borrower at any time owes to the holder of this note or in the payment of any other indebtedness or obligation that Borrower now or in the future owes to the holder, as and when it shall be or become due and payable [and if the default continues for [number] days after Creditor has given notice of the default to Borrower]
b. a default in the performance of any other obligation to Creditor under this note [or any security document] or any other agreement that has been or in the future is entered into between Borrower and Creditor [and if, in the case of a default that is capable of being cured, the default continues for [number] days after Creditor has given written notice of the default to Borrower]
c. any warranty or representation made to Creditor by Borrower [or by any Guarantor of all or part of the indebtedness evidenced by this note (Guarantor)], in [any security document or in] any financial statement or other document given to Creditor, was false in any material respect
d. Borrower [or any Guarantor or any of Borrower’s or Guarantor’s partners (if any Borrower or Guarantor is a partnership),][dies,][dissolves,] becomes insolvent, or makes an assignment for the benefit of creditors
[Optional provision:]
[e. any guaranty that now or in the future secures payment of all or any part of the indebtedness evidenced by this note is terminated or limited for any reason without the written consent or agreement of the holder of this note]
[Optional provision:]
[f. at any time the holder of this note for any reason in good faith believes that the prospect of payment or performance of this note or any other indebtedness or obligation of Borrower to the holder is impaired.
On the occurrence of any event of default, all or any part of the indebtedness and all or any part of all other indebtedness evidenced by this note and obligation then owing by Borrower to the holder shall, at the option of the holder, become immediately due and payable without notice or demand. If a voluntary or involuntary case in bankruptcy, receivership, or insolvency is at any time be begun by or against Borrower [or any Guarantor], or if any levy, writ of attachment, garnishment, execution, or similar process is issued against or placed on any property of Borrower [or any Guarantor], all such indebtedness shall automatically become immediately due and payable. All or any part of the indebtedness evidenced by this note also may become, or may be declared to be, immediately due and payable under the terms and conditions contained in any [security document or] other agreement that has been or in the future is entered into between Borrower and the holder of this note.]]
[Optional provision:]
[9. Agreement. This note is given under a certain ______Agreement dated [date][between / among] Creditor [and /______,] the undersigned [and ______] (Agreement), and the holder shall have all of the rights and powers set forth in the Agreement as though they were set forth fully in this note. The Agreement is incorporated by reference for a statement of the terms and conditions under which the principal of this note and accrued interest may become, or may be declared to be, immediately due and payable.]
10. Place and Application of Payments. Each payment on this note shall be made at Creditor’s address set forth above or any other place that the holder directs in writing. Any payment on this note shall be applied in the following order: first to any expenses (including expenses of collection) then due and payable to Creditor under this note, second to any unpaid late charges, third to any applicable prepayment premium, fourth to any accrued and unpaid interest, and fifth to the unpaid principal balance. If Borrower at any time owes the holder of this note any indebtedness or obligation in addition to the indebtedness evidenced by this note, and if any indebtedness owed by Borrower to the holder is then in default, Borrower shall have no right to direct or designate the particular indebtedness or obligation on which any payment made by or collected from Borrower [or from any Guarantor or other security] shall be applied. Borrower waives any such right and agrees that the manner of application of any such payment, as between or among such indebtedness and obligations, shall be determined solely by the holder.
11. Setoff. The holder of this note shall have the right at any time to set off any indebtedness that Creditor then owes to Borrower against any indebtedness evidenced by this note that is then due and payable.
12. Remedies. The holder of this note shall have all rights and remedies provided by law and by agreement of any Borrower. [Any requirement of reasonable notice with respect to any sale or other disposition of collateral shall be met if the holder sends the notice at least 10 days before the date of sale or other disposition.] Borrower shall reimburse the holder for all expenses, including reasonable attorney fees and legal expenses, that the holder pays or incurs in protecting and enforcing the rights of and obligations to the holder under any provision of this note [or any security document].
13. Waivers. No delay by the holder of this note shall be a waiver of the exercise of any right or remedy. No single or partial exercise by the holder of any right or remedy shall preclude any other or future exercise of that or any other right or remedy. No waiver by the holder of any default or of any provision of this note shall be effective unless it is in writing and signed by the holder. No waiver of any right or remedy on one occasion shall be a waiver of that right or remedy on any future occasion.
Borrower waives demand for payment, presentment, notice of dishonor, and protest of this note; waives all defenses based on suretyship or impairment of collateral; and consents to any extension or postponement of time of its payment, to any substitution, exchange, or release of all or any part of any security given to secure this note, to the addition of any party, and to the release, discharge, waiver, modification, or suspension of any rights and remedies against any person who may be liable for the indebtedness evidenced by this note.
14. General. [Each of the persons signing below as Borrower is primarily liable on this note and (a) receipt of value by any one of them constitutes receipt of value by both or all of them; (b) their liability on this note is joint and several; and (c) the term “Borrower” means each of them and all of them.] In this note, “maturity” means the time when the entire remaining unpaid principal balance shall be or shall become due and payable for any reason, including acceleration as provided in paragraph 8.
15. Applicable Law and Jurisdiction. This note shall be governed by and interpreted according to the laws of the State of [state] without giving effect to conflict-of-laws principles. Borrower irrevocably agrees and consents that any action against Borrower to collect or enforce this note may be brought in any state or federal court that has subject-matter jurisdiction and is located in, or whose district includes, [county], [state], and that any such court shall have personal jurisdiction over Borrower for purposes of such action.