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📝 Introduction

The promissory note is the core legal innovation that enables Backerville’s village system to function. Unlike traditional secondary sales, our promissory note creates a binding obligation to contribute proceeds from future liquidity events without requiring immediate transfer of shares or tokens. This approach solves several critical problems:
  • Bypasses company transfer restrictions and ROFR clauses
  • Avoids triggering immediate taxable events
  • Preserves employee equity rights and voting powers
  • Creates enforceable legal claims for diversification
  • Accommodates both traditional equity and blockchain tokens

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📄 Complete Promissory Note Template

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BACKERVILLE PROMISSORY NOTE AGREEMENT

EFFECTIVE DATE: [DATE]BETWEEN:
  • CONTRIBUTOR: [FULL LEGAL NAME], residing at [ADDRESS] (“Contributor”)
  • VILLAGE: [VILLAGE NAME], a Limited Liability Company organized under the laws of Delaware (“Village”)
  • ADMINISTRATOR: Backerville Inc., a Delaware Corporation (“Administrator”)

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1. DEFINITIONS

1.1 “Committed Assets” means either: a) [NUMBER] shares of [CLASS OF EQUITY] in [COMPANY NAME] (“Issuer”), or the economic equivalent represented by such shares; or b) [NUMBER] tokens of [TOKEN NAME/SYMBOL] issued by [PROTOCOL/PROJECT NAME] (“Token Issuer”), or the economic equivalent represented by such tokens.1.2 “Issuer” means either: a) The company in which the Committed Shares are held; or b) The blockchain protocol, project, or entity that issued the Committed Tokens.1.3 “Promissory Interest” means the binding commitment to contribute proceeds from the Committed Assets upon a Triggering Event.1.4 “Triggering Event” means any event described in Section 3 that activates the Contributor’s obligation to deliver proceeds.1.5 “Village Units” means the units of membership interest in the Village issued to the Contributor in exchange for this Promissory Note.1.6 “Valuation” means: a) For equity shares: the per-share value established through the most recent of: (i) priced equity financing, (ii) board-approved 409A valuation, or (iii) qualifying secondary transaction, currently valued at [AMOUNT]pershare;orb)Fortokens:theaveragepriceacrossmajorexchangesoverthepast[30]days,orthepriceinthemostrecenttokensaleevent,currentlyvaluedat[AMOUNT] per share; or b) For tokens: the average price across major exchanges over the past [30] days, or the price in the most recent token sale event, currently valued at [AMOUNT] per token.

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2. CONTRIBUTION & CONSIDERATION

2.1 Promissory Commitment. The Contributor hereby commits to contribute to the Village the future proceeds from the Committed Assets upon the occurrence of a Triggering Event.2.2 Value of Commitment. Based on the current Valuation, the total value of this promissory commitment is $[TOTAL VALUE].2.3 Village Units Issued. In consideration for this promissory commitment, the Village hereby issues to the Contributor [NUMBER] Village Units, representing [PERCENTAGE]% of the Village’s total outstanding units as of the Effective Date.2.4 Ownership Rights. Until a Triggering Event occurs, the Contributor shall remain the legal and beneficial owner of the Committed Assets with all associated rights.

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3. TRIGGERING EVENTS

3.1 The Contributor’s obligation to deliver the economic value of the Committed Assets shall be triggered by any of the following events:a) For traditional equity: i) The Issuer undergoes an initial public offering or direct listing on a securities exchange; ii) The Issuer is acquired through merger, acquisition, or change of control transaction that results in a cash payment for the shares, or liquid shares, or a combination of cash and liquid shares; iii) The Contributor sells or transfers any portion of the Committed Shares through a secondary transaction; iv) The Contributor’s shares become eligible for sale following a lock-up period after an IPO or direct listing; v) The Issuer authorizes or facilitates a formal secondary liquidity program for employees; or vi) The Contributor’s equity becomes liquid through any other means.b) For tokens: i) The expiration of any token lock-up, vesting period, or transfer restriction; ii) The Token Issuer’s initial token listing on any cryptocurrency exchange; iii) The Contributor sells or transfers any portion of the Committed Tokens; iv) The Contributor’s tokens become eligible for staking, lending, or other yield-generating activities; v) The tokens become transferable on a blockchain network; or vi) The Contributor’s tokens become liquid through any other means.3.2 Partial Triggering. If the Contributor sells or liquidates any portion of their equity, the proceeds from such sale or liquidation shall be delivered to the Village until the obligation for the total Committed Assets has been fully satisfied. For clarity:a) If the Contributor sells fewer assets than the total Committed Assets, 100% of the proceeds from such sale must be delivered to the Village.b) If the Contributor sells more assets than the total Committed Assets, only the proceeds corresponding to the Committed Assets must be delivered to the Village, with the Contributor retaining proceeds from any additional assets.

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4. DELIVERY OF PROCEEDS

4.1 Notification Requirement. Within 5 calendar days of a Triggering Event or awareness of a pending Triggering Event, the Contributor must notify the Administrator.4.2 Delivery Methods. Upon a Triggering Event, the Contributor shall satisfy their obligation through one of the following methods:a) For traditional equity: i) Direct Share Transfer: If permitted by the Issuer, transferring the actual Committed Shares to the Village or its designee; ii) Proceeds Transfer: If share transfer is restricted or impractical, delivering the cash proceeds from the sale of the Committed Shares; or iii) Hybrid Approach: A combination of shares and proceeds as agreed upon with the Administrator.b) For tokens: i) Direct Token Transfer: Transferring the tokens to the Village’s designated wallet address; ii) Proceeds Transfer: Delivering the cash proceeds from the sale of the Committed Tokens; or iii) Hybrid Approach: A combination of tokens and proceeds as agreed upon with the Administrator.4.3 Timing of Delivery. The Contributor shall complete the delivery within the earlier of:a) 30 calendar days following the Triggering Event; orb) 5 calendar days after the Contributor receives liquid proceeds from the Committed Assets.

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5. SECURITY & ENFORCEMENT

5.1 Security Interest. To secure this obligation:a) For traditional equity: The Contributor grants the Village a first-position security interest in the Committed Shares and any proceeds derived therefrom. The Contributor authorizes the Administrator to file UCC financing statements.b) For tokens: The Contributor agrees to either: i) Use a multi-signature wallet requiring Village approval for token transfers; or ii) Sign a cryptographic message proving ownership of the tokens and intention to transfer upon a Triggering Event; or iii) Grant the Village a first-position security interest in the rights to receive the tokens and any proceeds derived therefrom, with appropriate UCC filings.5.2 Default Remedies. If the Contributor fails to deliver as required:a) The Village may enforce its security interest;b) The Contributor shall be liable for all enforcement costs;c) The Village may reduce or cancel the Contributor’s Village Units; andd) The Village may pursue all other available legal remedies.

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6. VILLAGE GOVERNANCE & REBALANCING

6.1 Quarterly Voting. The Contributor shall participate in quarterly voting on:a) Bullishness ratings for their employing company;b) Admiration votes for other companies matching the Village’s investment strategy.6.2 Rebalancing Authority. The Contributor acknowledges that the Village may:a) Sell promissory interests in lower-ranked companies;b) Acquire additional promissory interests in higher-ranked companies; andc) Adjust portfolio allocations based on collective intelligence signals.

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7. REPRESENTATIONS & WARRANTIES

7.1 The Contributor represents and warrants that:a) They have legal capacity to enter this agreement;b) They have genuine ownership or vesting rights to the Committed Assets;c) The Committed Assets are not otherwise pledged, encumbered or subject to claims; andd) Entering this agreement does not violate any other agreements to which they are bound.

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8. TERM & TERMINATION

8.1 Effective Period. This agreement remains in effect until:a) Complete satisfaction of the promissory obligation, after which the Contributor shall retain all issued Village Units; orb) The Contributor elects to terminate by providing cash payment equal to the current valuation of the Committed Assets, provided that such buyout option cannot be exercised until at least one (1) year has passed from the Effective Date.8.2 No Time Limitation. There is no time limitation on the Contributor’s obligations under this agreement, and obligations shall not convert to a best-efforts basis at any time.

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9. TAX CONSIDERATIONS

9.1 Non-Taxable Commitment. This promissory commitment is structured to avoid creating an immediate taxable event upon execution.9.2 Tax on Delivery. The Contributor acknowledges they will be subject to applicable taxes upon actual transfer of shares, tokens, or proceeds.9.3 Token-Specific Considerations. For token commitments, the Contributor acknowledges that tax treatment of cryptocurrencies and tokens varies by jurisdiction and may change over time.9.4 Independent Advice. The Contributor acknowledges they have been advised to seek independent tax counsel.

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10. GENERAL PROVISIONS

10.1 Governing Law. This agreement is governed by the laws of Delaware without regard to conflict of law principles.10.2 Dispute Resolution. Any disputes arising out of or relating to this Agreement shall be resolved through binding arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules. The arbitration shall take place in Wilmington, Delaware, before a single arbitrator. The arbitrator’s decision shall be final and binding and may be entered as a judgment in any court of competent jurisdiction. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts located in Delaware for any proceedings related to the enforcement of the arbitration provision or award. The parties agree to waive any right to a jury trial.10.3 Amendments. This agreement may only be modified in writing signed by all parties.10.4 Assignment. The Village may assign its rights to the Administrator or a designated third party. The Contributor may not assign their obligations.10.5 Severability. If any provision is found unenforceable, the remainder of the agreement shall continue in effect.IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.CONTRIBUTOR:
[NAME]FOR THE VILLAGE:
By: Backerville Inc., Administrator

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💡 Key Innovations

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1. Delayed Transfer Mechanism

Unlike traditional equity sales, our promissory note creates a binding obligation that activates only upon future liquidity events:
  • No Immediate Transfer: Assets remain with the employee until a triggering event
  • Proceeds-Based Obligation: Commitment is to the economic value, not necessarily the assets themselves
  • Flexible Delivery: Multiple options for satisfying the obligation based on circumstances
The promissory note includes robust enforcement mechanisms:
  • Security Interest: First-position lien on the specified assets and proceeds
  • UCC Filing: Proper documentation for legal recognition of the security interest
  • Default Remedies: Clear consequences for non-compliance
  • Administrator Authority: Backerville has explicit powers to enforce on behalf of the village

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3. Compatibility with Company Restrictions

The promissory structure is designed to be compatible with typical startup equity restrictions:
  • ROFR Compliance: Does not trigger Right of First Refusal clauses in company bylaws
  • Transfer Restrictions: Avoids restrictions on transferring unvested or restricted assets
  • Lock-up Periods: Works with post-IPO lock-up periods by activating afterward

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4. Token Accommodation

The promissory structure is also designed to work with blockchain token compensation:
  • Token Lock-up Compatibility: Works with typical token vesting and lock-up schedules
  • Wallet Integration: Flexible delivery methods including direct wallet transfers
  • Cross-border Functionality: Works across jurisdictions for globally distributed blockchain teams
  • Adaptable Valuation: Accommodates the volatility and unique valuation challenges of tokens

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🔄 Implementation Process

The process of executing a promissory note follows these steps:
  1. Initial Valuation: Determine the current value of the employee’s assets based on last round price
  2. Commitment Sizing: Employee decides how much assets to commit (typically $50K-$250K worth)
  3. Documentation: Customized promissory note drafted with precise terms
  4. Execution: Digital signing by the employee and Backerville
  5. Security Filing: UCC filing made to secure the village’s interest
  6. Unit Issuance: Village units issued to the employee representing their pro-rata share
Our promissory note structure builds on established legal principles:
  • Secured Transactions: Well-established under UCC Article 9
  • Investment Club Regulations: Compliant with SEC guidelines for investment clubs
  • Future Proceeds Claims: Similar to structures used in litigation financing
  • Contingent Obligations: Common in various areas of contract law
By combining these established legal mechanisms in an innovative way, we’ve created a structure that solves the unique challenges of private company equity diversification.
This template is provided for informational purposes only and should not be used without proper legal counsel. Each implementation requires customization based on specific circumstances and Village policies.