| Principal | $5,000.00 |
| Interest Rate | 5% per annum, simple |
| Valuation Cap | $500,000 (post-money) |
| Discount Rate | 20% on Equity Financing price |
| Maturity Date | October 31, 2027 |
| Equity Financing Threshold | $25,000 aggregate gross proceeds |
This Note shall bear simple interest at 5% per annum from the Date of Issuance. Interest shall accrue but not be payable until the Maturity Date or conversion, whichever occurs first.
Outstanding principal and accrued interest shall be due on October 31, 2027 (“Maturity Date”), unless earlier converted. Maker may prepay in whole without penalty upon 10 days’ written notice.
(a) Upon Incorporation + Equity Financing. If Maker incorporates SHEP and the Company completes an Equity Financing of at least $25,000, the Note automatically converts at the lesser of: (i) the investor price × 0.80 (20% discount), or (ii) the price implied by the $500,000 Valuation Cap divided by fully diluted capitalization.
(b) Upon Incorporation (No Equity Financing). If incorporation occurs but no Equity Financing within 90 days, Holder may elect conversion to a Y Combinator post-money SAFE at a $500,000 cap.
(c) Upon Liquidity Event. Holder receives the greater of: (i) principal plus accrued interest, or (ii) the amount receivable had the Note converted at the Valuation Cap.
Maker is the sole owner of SHEP (sheplegal.com) and will cause any successor entity to assume this Note. Holder acquires this Note for investment, not for distribution, and understands the investment involves substantial risk. This Note is governed by New York law. Holder has no management, voting, or employment rights. This Note may be amended only by written agreement of both parties. Notices by email to: Maker — sanoj@sheplegal.com; Holder — ___________________________.
Projected outcomes for $5,000 investment at $500,000 valuation cap (~1% ownership at conversion)
| Paying users | 36,250 |
| ARR | $3.9M |
| Valuation (10–15x) | $39M–$59M |
| Pre-dilution (1%) | $390K–$590K |
| Return multiple | 47x–71x |
| Paying users | 72,500 |
| ARR | $7.8M |
| Valuation (10–15x) | $78M–$117M |
| Pre-dilution (1%) | $780K–$1.17M |
| Return multiple | 94x–140x |
| What happens | Note matures |
| Maturity | Oct 31, 2027 |
| Backstop | Seward & Kissel |
| Annual salary | ~$215K |
| Return multiple | 1.08x |
| Scenario | ARR | Company Valuation | Holder’s Value (diluted) | Return on $5K |
|---|---|---|---|---|
| 25% at $9/mo | $3.9M | $39M–$59M | $234K–$354K | 47x–71x |
| 50% at $9/mo | $7.8M | $78M–$117M | $468K–$702K | 94x–140x |
| No traction | — | — | $5,375 repaid | 1.08x |
Dilution assumptions: Post-dilution figures assume two future rounds — seed (~20% dilution) and Series A (~25% dilution) — reducing Holder from 1% to ~0.6%. Actual dilution depends on future round terms. Anti-dilution protections apply upon conversion to SAFE Preferred Stock.
Backstop: In all scenarios, Holder’s principal is protected by Maker’s guaranteed return offer at Seward & Kissel LLP (BigLaw, ~$215K annual compensation). First-month salary covers full repayment.