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This Private Placement Memorandum is a document that provides information on a new issue of securities to potential investors. A private placement is a funding round of securities which are not sold through a public offering, but rather through a private offering to a small number of investors. The memorandum contains relevant disclosures so that the investor can weigh the risk involved and make a fully informed decision with respect to the investment. This document contains numerous standard provisions as well as opportunities for customization to address the specific needs of the company. It should be used by companies when offering a private placement.
Confidential PRIVATE PLACEMENT MEMORANDUM This Private Placement Memorandum is a document that provides information on a new issue of securities to potential investors. A private placement is a funding round of securities which are not sold through a public offering, but rather through a private offering to a small number of investors. The memorandum contains relevant disclosures so that the investor can weigh the risk involved and make a fully informed decision with respect to the investment. This document contains numerous standard provisions as well as opportunities for customization to address the specific needs of the company. It should be used by companies when offering a private placement. ___________________________________________ Confidential Memorandum Copy No: _____Recipient: _________________ ______________________________________________ ____________Shares of Common Stock $0.___per share Minimum Purchase: ______ Shares ($__________) ________________________________________________________________________ This memorandum pertains to an offering of common stock (the “Shares”) of _____________________________(the Company) to Accredited Investors and a maximum of thirty-five (35) “Sophisticated” Investors. THE SECURITIES BEING OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE PURCHASED BY INVESTORS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW AND CONSIDER THE DISCUSSION UNDER "RISK AND OTHER IMPORTANT FACTORS." Price to Proceeds to Investors Commissions Company Minimum Offering (____________Shares) Per Share $______ $______ $.____per share Total Minimum $______ $______ $_________ Maximum Offering (____________Shares) Per Share $______ $_____ $___ per share Total Maximum $________ $_____ $________ The date of this Memorandum is________________. © Copyright 2011 Docstoc Inc. registered document proprietary, copy not ii CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM _______________________________ __________ Shares of Common Stock at $________ per Share THIS MEMORANDUM HAS BEEN PREPARED SOLELY FOR THE BENEFIT OF ACCREDITED INVESTORS AND A MAXIMUM OF THIRTY-FIVE(35) “SOPHISTICATED” INVESTORS INTERESTED IN THE PURCHASE OF THE SECURITIES OFFERED IN CONNECTION WITH THE FINANCING DESCRIBED HEREIN. THIS OFFERING INVOLVES A HIGH DEGREE OF RISK AND SHOULD BE PURCHASED BY INVESTORS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW AND CONSIDER THE DISCUSSION UNDER "RISK AND OTHER IMPORTANT FACTORS." THE SHARES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES COMMISSIONER OF ANY STATE OR OTHER JURISDICTION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PRIVATE PLACEMENT MEMORANDUM OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SHARES OF COMMON STOCK SOLD HEREBY WILL BE "RESTRICTED SECURITIES" FOR PURPOSES OF FEDERAL AND STATE SECURITIES LAWS AND INVESTORS MUST PURCHASE THESE SECURITIES FOR THEIR OWN ACCOUNT AND FOR INVESTMENT. SEE "RESTRICTIONS ON TRANSFERABILITY OF SHARES." THE SHARES OFFERED HEREUNDER HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION AND ARE BEING OFFERED PURSUANT TO EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THE SHARES MAY NOT BE TRANSFERRED IN ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE. © Copyright 2011 Docstoc Inc. registered document proprietary, copy not iii THESE SECURITIES INVOLVE A SUBSTANTIAL DEGREE OF RISK AND ARE SUITABLE ONLY FOR INVESTORS OF SUBSTANTIAL MEANS WHO HAVE NO NEED FOR LIQUIDITY IN THEIR INVESTMENT. THERE IS NO PUBLIC MARKET FOR THE SHARES AND NONE IS LIKELY TO DEVELOP. ACCORDINGLY, INVESTORS MAY NOT BE ABLE TO LIQUIDATE THEIR INVESTMENT AND MUST CONTINUE TO BEAR THE ECONOMIC RISK OF THE INVESTMENT AND SHOULD BE PREPARED TO HOLD THEIR INVESTMENT INDEFINITELY. THE CONTENTS OF THIS CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM AND ASSOCIATED SUPPLEMENTAL MATERIAL, INCLUDING ALL FINANCIAL DATA, HAVE BEEN SUPPLIED BY, AND ARE THE RESPONSIBILITY OF THE COMPANY. THE PROJECTED FINANCIAL STATEMENTS CONTAINED IN THIS MEMORANDUM ARE NOT TO BE CONSTRUED AS A REPRESENTATION OR WARRANTY OF FUTURE PERFORMANCE OR RESULTS OF ECONOMIC RETURN WHICH MAY ACCRUE TO INVESTORS. NO PERSON OTHER THAN OFFICERS OF THE COMPANY HAS BEEN AUTHORIZED TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN WHAT IS CONTAINED OR INCORPORATED BY REFERENCE IN THIS CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM, AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS MEMORANDUM CONSTITUTES AN OFFER ONLY TO THE PROSPECTIVE INVESTORS TO WHOM THIS MEMORANDUM IS DELIVERED. THE DELIVERY OF THIS MEMORANDUM TO ANYONE OTHER THAN SUCH PROSPECTIVE INVESTOR IS UNAUTHORIZED AND ANY REPRODUCTION OF THIS MEMORANDUM, IN WHOLE OR IN PART, OR ANY DIVULGENCE OF ITS CONTENTS, IN WHOLE OR IN PART, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY IS PROHIBITED. EACH PERSON, BY ACCEPTING DELIVERY OF THIS MEMORANDUM, AGREES TO RETURN THIS MEMORANDUM AND ALL ENCLOSED DOCUMENTS TO THE COMPANY, IF HE OR SHE DOES NOT PURCHASE ANY OF THE SECURITIES OFFERED HEREBY. OFFERS MAY BE MADE ONLY TO PERSONS DEEMED SUITABLE FOR AN INVESTMENT IN THE COMPANY UNDER THE CRITERIA SET FORTH IN THIS MEMORANDUM. THE COMPANY RESERVES THE RIGHT, NOTWITHSTANDING ANY SUCH OFFER, TO WITHDRAW OR MODIFY THIS OFFERING AND TO REJECT ANY SUBSCRIPTIONS FOR SHARES IN WHOLE OR IN PART. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SHARES BY ANY PERSON IN ANY STATE IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE. © Copyright 2011 Docstoc Inc. registered document proprietary, copy not iv NEITHER THE DELIVERY OF THIS MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE MATTERS SET FORTH HEREIN SINCE THE DATE OF THIS MEMORANDUM. THIS MEMORANDUM INCLUDES SUMMARIES OF AND REFERENCES TO VARIOUS DOCUMENTS PERTAINING TO THE BUSINESS OF THE COMPANY. SUCH SUMMARIES DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE ORIGINAL DOCUMENTS. ALL SUCH DOCUMENTS ARE AVAILABLE FOR INSPECTION AND COPYING AND COMPLETE ACCESS WILL BE GIVEN UPON REQUEST TO THE COMPANY. THE COMPANY HAS AGREED TO MAKE AVAILABLE, PRIOR TO THE SALE OF THE SHARES, TO EACH PROSPECTIVE INVESTOR, HIS REPRESENTATIVE, OR BOTH, THE OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE ANSWERS FROM, THE OFFICERS OF THE COMPANY OR ANY PERSON ACTING ON THEIR BEHALF CONCERNING THE TERMS AND CONDITIONS OF THE OFFERING AND TO OBTAIN ANY ADDITIONAL INFORMATION, TO THE EXTENT THEY POSSESS SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE, WHICH IS NECESSARY TO VERIFY THE ACCURACY OF THE INFORMATION SET FORTH IN THIS MEMORANDUM. THE COMPANY HAS ALSO AGREED TO PROVIDE TO EACH OFFEREE OR HIS REPRESENTATIVE, OR BOTH, ANY ADDITIONAL INFORMATION WHICH AN OFFEREE OR HIS REPRESENTATIVE MIGHT REQUIRE TO MAKE A DECISION CONCERNING THE PURCHASE BY SUCH OFFEREE OF THE SHARES, TO THE EXTENT THE COMPANY POSSESSES SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE. THIS MEMORANDUM CONTAINS REFERENCES TO EXHIBITS, ALL OF WHICH SHOULD BE READ IN CONJUNCTION WITH THIS MEMORANDUM. CERTAIN DOCUMENTS RELATING TO THE SHARES ARE NOT ATTACHED HERETO, INCLUDING MATERIAL CONTRACTS AND AN OPINION OF COUNSEL REGARDING THE LEGALITY OF THE SHARES. SUCH DOCUMENTS WILL BE FURNISHED TO THE OFFEREE HEREOF AND TO HIS ADVISORS UPON HIS REQUEST TO THE COMPANY PRIOR TO HIS PURCHASE. QUESTIONS, INQUIRIES AND REQUESTS FOR INFORMATION MAY BE DIRECTED TO THE COMPANY TO THE ATTENTION OF _________________________AT _________________________________. © Copyright 2011 Docstoc Inc. registered document proprietary, copy not v THIS MEMORANDUM SHALL BE TREATED AS CONFIDENTIAL. ANY REPRODUCTION OR DISTRIBUTION OF THIS MEMORANDUM, IN WHOLE OR IN PART, OR THE DIVULGENCE OF ANY OF ITS CONTENTS TO ANY PERSON OTHER THAN THE OFFEREE, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY, IS PROHIBITED. PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY PRIOR OR SUBSEQUENT COMMUNICATION FROM THE COMPANY OR ANY OF ITS OFFICERS OR EMPLOYEES AS LEGAL OR INVESTMENT ADVICE. EACH INVESTOR SHOULD CONSULT HIS OWN LEGAL COUNSEL, TAX ADVISORS AND OTHER ADVISORS AS TO LEGAL, TAX AND RELATED MATTERS CONCERNING HIS OR HER INVESTMENT. The shares are being offered for sale at $______ per share. A minimum investment of ______________ shares ($_____) is required of each investor, and shares will only be sold in blocks of __________ shares each, provided that the Company, in its discretion, may reduce the size of the minimum investment, and may permit the purchase of shares in amounts less than in blocks of ___________Shares each. Payment in full is due upon subscription. Subscription funds will initially be held in an interest bearing escrow account at____________________________________________________________________________ ______________________________________________. Funds in escrow may be invested in highly liquid short-term certificates of deposit, money market funds, United States government securities or interest bearing accounts. This offering will terminate on or before a date _____________________________days from the date of this memorandum unless the maximum amount of shares offered hereby are sold prior to such date, or unless this offering is otherwise extended in the discretion of the Company. When subscriptions for the minimum amount of shares have been received and accepted by the Company, such funds will be released from escrow to the Company, and investors whose subscriptions for Shares have been accepted by the Company will be issued common stock certificates evidencing the number of shares of the Company's common stock acquired, and the initial escrow will close. See "TERMS OF THE OFFERING and ESCROW OF SUBSCRIPTION FUNDS.” The shares are being offered on a "best efforts" basis by the Company. The Company does not intend to engage independent broker-dealers to sell the shares, and therefore does not expect to pay selling commissions. However, the Company does expect that during the course of this offering, it will be introduced to certain purchasers of its Shares by broker-dealer individuals or organizations (hereinafter referred to as "finders"). The Company anticipates that it will pay to such finders commissions equal to ____________percent (___%) of the purchase price of a share actually purchased by investors who are introduced to the Company by said finders. © Copyright 2011 Docstoc Inc. registered document proprietary, copy not vi Table of Contents Page I. EXECUTIVE SUMMARY .................................................................... II. COMPETITION…………………………………………...................... III. RISK AND OTHER IMPORTANT FACTORS…................................. IV. ESTIMATED USE OF PROCEEDS…………...................................... V. SUMMARY AND TERMS OF OFFERING …………………………. VI. INVESTOR QUALIFICATIONS…………........................................... VII. TAX CONSIDERATIONS.………........................................................ VIII. DIVIDEND POLICY....………............................................................. IX. DESCRIPTION OF CAPITAL STOCK................................................ X. REGISTRATION RIGHTS…………................................................... XI. RESTRICTIONS ON TRANSFERABILITY OF SHARES..….......... XII. ESCROW OF SUBSCRIPTION FUNDS........…………………......... EXHIBITS 1. SUBSCRIPTION AGREEMENT 2. CONFIDENTIAL OFFEREE QUESTIONNAIRE © Copyright 2011 Docstoc Inc. registered document proprietary, copy not vii I. EXECUTIVE SUMMARY. The Company. The Company is a __________ Corporation that trades publicly on the NASDAQ Over the Counter Bulletin Board. The Market. ______________________________________________________________________________ ___________________________________________________________________________ The Product Line. The Company’s product line is made up of the following categories: ___________________________________________________________________________ Patents and Proprietary Technology. ______________________________________________________________________________ ______________________________________________________________________________ ___________________________________________________________________________ THE ENCLOSED BUSINESS PLAN PROVIDES FURTHER INFORMATION AND DETAIL WITH RESPECT TO THE COMPANY, INCLUDING WITHOUT LIMITATION, ITS BUSINESS, PRODUCT LINE, MARKET ANALYSIS, MARKETING PLANS, COMPETITION, RISK FACTORS AND MANAGEMENT. © Copyright 2011 Docstoc Inc. registered document proprietary, copy not 1 II. COMPETITION. ______________________________________________________________________________ ______________________________________________________________________________ III. RISK AND OTHER IMPORTANT FACTORS An investment in the Company's Common Stock involves a high degree of risk and is suitable only for persons possessing substantial financial means who have no need for liquid investments. In analyzing this offering, prospective investors should consider, among other things, the following: OFFERING PRICE: The per share offering price of $______ has been arbitrarily set by the Company and is not based on earnings or any history of operations. COMPETITION: All areas of business engaged in by the Company are highly competitive. By virtue of their considerably greater financial resources, the competing companies will have been in business for a longer period, will provide a more diversified line of products and will have a greater number of employees. DIVIDENDS: The management of the Company presently intends to follow a policy of retaining earnings, if any, for increasing the capital surplus of the Company during the Company's initial expansion of operations. Accordingly, no cash dividends will be declared during the early stages of the Company's development and no assurance can be given that the Company's earnings will permit the payments of dividends of any kind. See "Dividend Policy". TRADING MARKET: It is not anticipated that an active market will develop in the near future for the Company’s Common Stock. Consequently, investors may have difficulty in selling their shares. PROFITABILITY: It is possible the Company may incur operating losses during its early years and no assurance can be given as to the ultimate success of the Company, or as to the return, if any, that purchasers of the Company common stock will receive on their investment. Such losses might be substantial, in which case the investors of the Company © Copyright 2011 Docstoc Inc. registered document proprietary, copy not 2 Common Stock being offered, might sustain a total loss on their investment. KEY PERSONNEL: The Company is greatly dependent on the services of the essential personnel named in the Business Plan, and the loss of their services would be extremely detrimental to the Company. FINANCIAL PROJECTIONS: The operating results contemplated by the financial projections included in the Business Plan are based on certain assumptions. Management of the Company believes such assumptions to be reasonable. Events may occur, however, that will cause these assumptions to be incorrect. Because of the risks inherent in projections of this nature, no assurance is or can be given as to the accuracy of any such projections. REGULATORY MATTERS: The Company may be subject to regulation by various federal and state agencies and compliance with the requirements of such regulatory bodies may involve significant expense and effort. There can be no assurance that the Company will be able to comply with such requirements, and, in such event, it may not be able to follow its proposed plan of business or to commence or continue operations in a particular jurisdiction. ADDITIONAL FINANCING: In addition to the proceeds arising from sale of the Shares, it is possible that additional financing (equity or debt) will be necessary in the future. There can be no assurance that such additional financing will be able to be arranged or, if so, upon what terms and conditions. Failure to arrange additional financing, if it were needed, would have a material adverse effect on the Company's ability to operate according to its plan of business. OPERATING HISTORY: The Company was formed in _____________and has a limited operating history. IV. ESTIMATED USE OF PROCEEDS. The gross proceeds to be received by the Company from the sale of Shares will be $____________ if the minimum number of ___________Shares are sold and $__________ if the maximum number of ___________Shares are sold. The amount of net proceeds, which the Company may receive more than the minimum amount, if any, is uncertain. The following table © Copyright 2011 Docstoc Inc. registered document proprietary, copy not 3 sets forth the estimated application by the Company of the proceeds to be derived from the sale of the Shares offered hereby. The figures herein set forth represent the best estimate of the Company and, consequently, do not purport to be a prediction of the actual use of proceeds. Minimum Offering Maximum Offering Working Capital $ ________ $ ________ Research and Development (1) $ ________ $ ________ Offering Expenses Commissions and Finder's Fees (2) $ _________ $ ________ TOTAL $________ $_________ (1) The Company anticipates that a portion of the proceeds of this offering will be used to enhance the Company’s existing products. No assurance can be given that the Company’s research and development will result in the development of additional products. (2) The Company may pay commissions to finders of up to ___ percent (__%) of the aggregate purchase price of all shares sold. See "Summary and Terms of Offering." The foregoing allocations are estimates only and are subject to revision from time to time to meet the Company's requirements. Pending full utilization of the proceeds of this offering, the Company may invest the net proceeds in insured interest-bearing savings accounts, insured United States Government obligations, insured certificates of deposit or other insured short-term investments of similar quality. The Company will incur significant expenses during the current fiscal year for salaries of employees and other overhead costs, sales and advertising, and further research and development. Assuming the maximum number of Shares are sold in this offering and assuming realization of revenues from sales of the Company's software and products, the Company believes that the net proceeds of the offering will provide the Company with working capital sufficient enough to fund the Company's present and future operations. Such belief, however, is dependent upon assumptions and variables, many of which the Company will be unable to control. Unless the Company is able to generate sufficient future earnings, it may be required, at a future date that cannot now be predicted, to obtain additional financing to continue its operations. There can be no assurance that the Company will be able to obtain such additional © Copyright 2011 Docstoc Inc. registered document proprietary, copy not 4 financing or that, if available, it will be on terms and conditions favorable or acceptable to the Company. See "Risk And Other Important Factors.” V. SUMMARY AND TERMS OF OFFERING. THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND MUST BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM. Common Stock Offered: __________ shares of Common Stock, at $____ per share. Minimum/Maximum Shares The minimum amount of shares to be issued under this private placement is ________. The maximum amount of shares to be issued under this private placement is____________. Finders Fees/Commissions Finders fees or commissions paid, if any, will not exceed __% of the amount raised by this offering. Minimum Investment: _____ shares ($_____) unless waived by Company. Investor Qualifications: With limited exceptions, each purchaser of Shares will be required to represent that he or she qualifies as an “accredited” investor as defined in the Securities and Exchange Commission (SEC) Rule 501(a). In addition, each purchaser will be required to represent that he or she is acquiring the Shares for investment and that he or she is capable of evaluating the merits and risks of this investment. See "Investor Qualifications." Transferability: All of the Shares will be restricted securities and may not be transferred without registration under the Securities Act of 1933 or unless an exemption from such registration is available. See "Restrictions on Transferability." Period of Offering: This offering will terminate on or before a date ___________________days from the date of this Memorandum unless the maximum amount of © Copyright 2011 Docstoc Inc. registered document proprietary, copy not 5 Shares offered hereby are sold prior to such date, or unless this offering is otherwise extended at the discretion of the Company. THE ENCLOSED BUSINESS PLAN, WHICH INCLUDES PROJECTED FINANCIAL INFORMATION, HAS BEEN PREPARED BY The Company AND IS BASED ON ASSUMPTIONS WHICH MANAGEMENT BELIEVES TO BE REASONABLE. SOME OR ALL OF THE RESULTS OR EVENTS CONTEMPLATED BY THE ASSUMPTIONS MAY NOT MATERIALIZE AND UNANTICIPATED EVENTS MAY OCCUR SUBSEQUENT TO THE DATE OF THIS MEMORANDUM. THEREFORE, THE ACTUAL RESULTS ACHIEVED DURING THE PROJECTION PERIOD MAY VARY FROM THE PROJECTIONS AND THE VARIATIONS MAY BE MATERIAL. THE INFORMATION SET FORTH IN THE BUSINESS PLAN DOES NOT PURPORT TO BE COMPLETE. INVESTORS ARE ADVISED TO CONSULT WITH THEIR TAX AND BUSINESS ADVISORS CONCERNING THE VALIDITY OF THE FACTUAL, ACCOUNTING AND BUSINESS ASSUMPTIONS EMPLOYED HEREIN. Method of Subscribing Each Subscriber must deliver to the Company (a) a signed and completed Confidential Offeree Questionnaire, (b) a signed Subscription Agreement and (c) payment of the purchase price of the Shares subscribed for, to be made by check or wire transfer in accordance with the Subscription Agreement. Funds received by the Company will be deposited in a segregated interest bearing escrow account and held by the escrow agent until certain conditions are met. See “Escrow of Subscription Funds”. The purchase price paid by the Subscriber will be returned if the subscription is rejected. Suitability Standards The suitability standards referred to below represent minimum suitability requirements for prospective investors. The satisfaction of such standards by a prospective investor does not necessarily mean that the Shares are a suitable investment for such prospective investor. The Company may make or cause to be made such further inquiry and obtain such additional information as it deem appropriate with regard to the suitability of prospective investors. The Company may reject subscriptions, in whole or in part, in its absolute discretion. © Copyright 2011 Docstoc Inc. registered document proprietary, copy not 6 The Shares will be offered and sold only to prospective investors who: (a) represent, among other things, that they are acquiring the Shares for their own account, for investment only and not with a view toward the resale or distribution thereof, and that they are aware that the Shares have not been registered under the Act and that their transfer rights are restricted by the Act, applicable state securities laws, the Subscription Agreement to be entered into in connection with the purchase of the Shares and the absence of a market for the Shares; (b) The Company reasonably believes are "accredited” investors, as that term is defined in Regulation D promulgated under the Act; (c) The Company reasonably believes are “sophisticated” investors, as described in Rule 506 (b)(2) of Regulation D under the Act; and (d) if not a United States citizen or resident, represents that the Shares will not be transferred to any citizen, resident or former citizen of the United States, its territories or possessions, including, but not limited to, any partnership, corporation, trust or other entity existing in or under the laws of any state, territory or possession of the United States, or entity controlled or owned by any of the foregoing. See “Investor Qualifications.” VI. INVESTOR QUALIFICATIONS. The Company will sell Shares only to investors who are "accredited” investors as that term is defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the "Act"), and to a maximum of thirty-five (35) investors who are “sophisticated” as described in Rule 506(b)(2) of Regulation D under the Act. “Accredited” investors are those investors who meet at least one of the following standards: (1) A natural person (not an entity) who individual net worth, or joint net worth with his or her spouse, at the time of his or her purchase exceeds, (2) A natural person (not an entity) who had an individual income in excess of $200,000 in each of the preceding two years or joint income with his or her spouse in excess of 300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (3) An employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in section 3(21) thereof, which is either a bank, savings and loan association, insurance Company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000.000 or, if a self- directed plan, with investment decisions made solely by persons that are accredited investors; (4) A trust, with total assets in excess of $5,000,000 not formed for the specific purpose of acquiring the securities of the Company being offered, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment in the Company; © Copyright 2011 Docstoc Inc. registered document proprietary, copy not 7 (5) A bank as defined in section 3(a)(2) of the Act, or a savings and loan association or other institution as defined in section 3(a)(5)(A) of the Act, whether acting in its individual or fiduciary capacity; (6) A broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934; (7) An insurance Company as defined in section 2(13) of the Act; (8) An investment Company registered under the Investment Company Act of 1940 or a business development Company as defined in section 2(a)(48) of the Investment Company Act of 1940; (9) A Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c) or (d) of the Small Business Investment Act of 1958; (10) A private business development Company as defined in section 202(a)(22) of the Investment Advisers Act of 1940; (11) An organization described in section 501(c)(3) of the Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership not formed for the specific purpose of acquiring the securities of the Company being offered, with total assets in excess of $5,000,000; (12) A director or executive officer of the Company; or (13) An entity in which all the equity owners are accredited investors. “Sophisticated” investors are those investors who do not quality as an “accredited” investor, but The Company reasonably believes that the investor (either personally or through the investor’s “personal representative”) has such knowledge and experience in financial and business matters that the investor is capable of evaluating the merits and risks of the investment. Pursuant to Rule 506(b)(2)(i) of Regulation D under the Act, Securities maybe purchased by a maximum of 35 “sophisticated” investors. The Shares offered hereby are suitable only for those investors (a) whose business and investment experience, either alone or together with a purchaser representative, makes them capable of evaluating the merits and risks of their prospective investment in the Company and (b) who can afford to bear the economic risk of their investment for an indefinite period and have no need for liquidity in this investment. Each investor will be required to represent that (i) he is acquiring the Shares being purchased by him for his own account as principal, for investment and not with a view to resale or distribution and (ii) he is aware that his transfer rights are © Copyright 2011 Docstoc Inc. registered document proprietary, copy not 8 restricted by the Securities Act and applicable state securities laws, and of the absence of a market for the shares. Each investor must also represent that: (a) his overall commitment to investments that are not readily marketable is not disproportionate to his net worth, and his acquisition of Shares will not cause such overall commitment to become excessive; (b) he has adequate net worth and means of providing for his current needs and personal contingencies to sustain a complete loss of his investment in the Company and has no need for liquidity in his investment in the Shares; (c) he has evaluated the risks of investing in the Company, (d) he has substantial experience in making investment decisions of this type or is relying on his own advisor or other qualified purchase representative in making this investment decision; and (e) he has been given the opportunity to ask questions and receive answers concerning the terms and conditions of the offering and to obtain additional information that the Company possesses. VII. TAX CONSIDERATIONS. As the Company is a corporation, there are no individual tax considerations for the Investor as a result of any profits or losses derived from Company operations. Only upon disposition of the shares, if possible, or, upon the declaration of a dividend by the Company, if any, would the investor create or incur any type of tax liability or tax benefit. Prospective investors are not to construe the contents of this memorandum or any prior or subsequent communication from the Company or any of its officers or employees as tax advisors concerning his or her investment. INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX AND BUSINESS ADVISORS CONCERNING THE TAX CONSEQUENCES OF THIS INVESTMENT. VIII. DIVIDEND POLICY. The payment of dividends by the Company is contingent upon earnings, if any, and there can be no assurance that earnings will be such that dividends can or will be paid. In addition, the payment of dividends is contingent upon the Company's earnings, financial condition, tax and capital requirements, general business conditions and other factors deemed relevant by the Company's Board of Directors. It is the Company's intent not to pay dividends until it has retained earnings in an amount in excess of its reasonable financial needs. The payment of dividends rest within the discretion of the Board of Directors, so long as dividends are otherwise payable under applicable law. IX. DESCRIPTION OF CAPITAL STOCK. The Company's authorized capital stock consists of ________________ shares of common stock, $._____ par value per share. As of________________, there are approximately ___________ shares issued and outstanding, including options to purchase _______ shares of common stock. Holders of shares of common stock are entitled to one vote for each share on matters submitted to a vote of the stockholders. Such holders do not have preemptive rights or the right of cumulative voting for directors. © Copyright 2011 Docstoc Inc. registered document proprietary, copy not 9 XI. RESTRICTIONS ON TRANSFERABILITY OF SHARES. The Company has not registered the Shares under the Securities Act or the securities laws of any state. The Company is offering the Shares in reliance on certain exemptions from registration contained in the Securities Act and such laws. Therefore, purchasers may not sell the Shares offered hereby unless the Shares are subsequently registered under the Securities Act or an exemption from such registration is available. Accordingly, any purchaser of Shares must bear the economic risk of such investment for an indefinite period of time. The Company has taken certain measures to restrict the sale or assignment of the Shares, including (i) placing a legend on all certificates evidencing Shares stating that the Company has not registered the common stock evidenced by such certificates and that the holder of such Shares may not sell or assign the Shares evidenced thereby without registration or an available exemption therefrom, except in accordance with an opinion of counsel acceptable to the Company, (ii) instituting stop-transfer procedures to aid in the prevention of transfers of record without compliance with the foregoing restrictions, and (iii) requiring each purchaser to represent in writing in its Subscription Agreement that such purchaser is acquiring the Shares for the purchaser's own account of investment and not for resale, and that the purchaser will not sell or otherwise dispose of the Shares without registration under the Securities Act or pursuant to an available exemption therefrom. . PROSPECTIVE INVESTORS OF SHARES ARE ADVISED TO SEEK INDEPENDENT LEGAL ADVICE REGARDING THE EFFECT OF THESE RESTRICTIONS AND INVESTMENT REPRESENTATIONS. XII. ESCROW OF SUBSCRIPTION FUNDS. Each person who proposes to purchase Shares will be required to execute and deliver to the Company the Subscription Agreement and the Confidential Offeree Questionnaire in the form attached hereto, together with payment in full of the price of the Shares being purchased. Subscription funds will initially be held in an interest bearing escrow account at______________________________________________. Funds in escrow may be invested in highly liquid short-term certificates of deposit, money market funds, United States government securities or interest bearing accounts. This offering will terminate on or before a date one hundred and twenty (120) days from the date of this Memorandum unless the maximum amount of Shares offered hereby are sold prior to such date, or unless this offering is otherwise extended in the discretion of the Company. When subscriptions for the minimum amount of Shares have been received and accepted by the Company, such funds will be released from escrow to the Company, and investors whose subscriptions for Shares have been accepted by the Company will be issued Common Stock certificates evidencing the number of shares of the Company's Common Stock acquired, and the initial escrow will close. © Copyright 2011 Docstoc Inc. registered document proprietary, copy not 10 No references documents in this Memorandum purport to be complete descriptions thereof and all such references are qualified in their entirety by references to such instruments or documents, any or all of which may be reviewed by any prospective purchaser on request. The Company has agreed to make available to prospective investors, prior to the sale of the Shares, the opportunity to ask questions of, and receive answers from, officers of the Company concerning the terms and conditions of the offering and to obtain any additional information, to the extent the Company possesses such information or can acquire it without unreasonable effort or expense, that is necessary to verify the accuracy of the information set forth in this Memorandum. Questions, inquiries and requests for information may be directed to the Company to the attention of ________________________at (___) ____________. © Copyright 2011 Docstoc Inc. registered document proprietary, copy not 11
"Private Placement Memorandum"