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Private Placement Term Sheet

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					This Private Placement Term Sheet outlines specific terms to potential investors for the
issuance of shares of preferred stock. It sets forth provisions regarding dividends,
liquidation, conversion, redemption and voting rights. The document contains numerous
standard provisions as well as opportunities for customization to fit the specific needs of
the company. This form can be used by both small and large businesses alike seeking
to raise capital through a private placement.
                  ___________________ [Instruction: Enter company name here.]
                       MEMORANDUM OF TERMS FOR PRIVATE PLACEMENT OF

                                        SERIES A PREFERRED STOCK

                                           ________ __, 200_


________________ [Instruction: Enter company name here.], a ________________
[Instruction: Enter state of incorporation here.]corporation (the “Company”), intends to issue
shares of its Series A Preferred Stock to certain qualified individuals and entities (each an “Investor”
and collectively, the “Investors”). This memorandum summarizes the principal terms proposed by
________________ [Instruction: Enter name of lead investor, aka, venture capital firm here.]
(the “Lead Investor”) with respect to the purchase of Series A Preferred Stock (the “Financing”).

                         SECTION I.         GENERAL TERMS OF THE FINANCING
Security:                                             Series A Preferred Stock (“Series A”)

Minimum Amount of Offering:                           ___________ [Instruction: Enter total
                                                      amount of capital to be raised by this
                                                      offering.]

Number of Shares:                                     ___________ [Instruction: Enter total
                                                      number of stock shares available.]

Purchase Price:                                       $_________ [Instruction: Enter price per
                                                      share here.]

Capitalization:                                       Immediately following the closing of the
                                                      Financing, the Company’s capitalization will be
                                                      as follows:

                                                  Shares Outstanding             Percentage

             Common Stock                                      _____                 ____%

             Series A Preferred Stock                          _____                 ____%

             Totals                                               0                 100.0%

                    [Instruction: Enter shares outstanding and percentages here.]




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                       SECTION II.      RIGHTS, PREFERENCES AND PRIVILEGES

1.     Dividends.
The holders of Series A Preferred Stock (“Series A”) shall be entitled to receive in preference to the
Common Stock (“Common”), noncumulative dividends of $____ per share per annum when and if
declared by the board of directors.

2.     Liquidation Preference
In the event of any liquidation or winding up of the Company, the holders of Series A shall be
entitled to receive, in preference to the holders of Common, an amount equal to the price paid per
Series A share, plus all declared but unpaid dividends on such shares. Thereafter, the assets available
for distribution shall be distributed ratably among the holders of
_____________________________________ [Instruction: Explain how shares will be
distributed among preferred stock and common stock holders after payouts to preferred stock
holders.] A merger or sale of all or substantially all of the assets of the Company shall be treated as
a liquidation or winding up for purposes of the liquidation preference.

3.     Conversion:
Optional Conversion: The holders of Series A shall have the right to convert their shares of Series
A, at the option of the holder, at any time into shares of Common, at the rate of one share of Series A
for one share of Common, subject to adjustment as described below.

4.     Automatic Conversion:
The Series A shall be automatically converted into Common, at the then applicable conversion rate,
(i) in the event of the closing of an underwritten public offering of the Company’s securities in
which the aggregate gross proceeds to the Company equals or exceeds $_____________, or (ii) upon
the election of the holders of a _______ majority [Instruction: Enter percentage of majority
here.] of the shares of Series A then outstanding.

5.     Anti-dilution Provisions
In the event that the Company issues additional securities without consideration or for a
consideration per share less than the price paid for Series A, as adjusted for capital reorganization,
stock splits, reclassification, etc., (other than (i) the issuance of options or shares of Common to
employees, directors, and consultants, (ii) the sale of shares in connection with a firm commitment
underwritten public offering, (iii) the issuance of Common upon conversion of the Series A or other
already outstanding convertible securities, (iv) dividends or distributions on Series A, (v) the
issuance of warrants to banks or equipment lessors, o
				
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Description: This Private Placement Term Sheet outlines specific terms to potential investors for the issuance of shares of preferred stock. It sets forth provisions regarding dividends, liquidation, conversion, redemption and voting rights. The document contains numerous standard provisions as well as opportunities for customization to fit the specific needs of the company. This form can be used by both small and large businesses alike seeking to raise capital through a private placement.