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Trust

Trust

A trust is a legal construct in which one person (the trustee) holds legal title to property previously owned (by the settlor) for the benefit of another (the beneficiary).

A non-profit can exist as a trust, when the trustee is under the obligation to use or hold the property for a charitable purpose.

A non-profit can also be named as the beneficiary to a trust, when the settlor makes a Planned Gift.

Unrelated Business Income

Unrelated Business Income

A non-profit can lose its 501(c)(3) Tax-Exempt Organization status if it generates too much unrelated business income from the exempt function of the organization. If your business idea addresses a social need but you plan on retaining a profit from your business, you can consider structuring your business as a Social Enterprise rather than a non-profit. California recently introduced two “hybrid” corporate forms for social enterprises: the Flexible-Purpose Corporation and the Benefit Corporation.

Sample Term Sheet

Sample Term Sheet

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com
elow you can find a Sample Term Sheet

Contents

TERM SHEET FOR THE PURCHASE AND SALE OF SECURED CONVERTIBLE PROMISSORY NOTE OF XYZ CORPORATION

<DATE>

THIS TERM SHEET (the “Term Sheet”) sets forth the principal terms proposed by _________________________ (the “Investor”) for the purchase of a Convertible Promissory Note from XYZ Corporation, an <State> corporation (the “Company”). These terms when finalized will be memorialized in a binding Convertible Note Purchase Agreement executed between the Company and the Investor along with other documents as described herein.

GENERAL:

Type of Security:
Convertible Note, bearing interest at a simple interest rate of _____ (__%) percent calculated on the basis of a 360-day year consisting of twelve, 30-day months (the “Notes”).

Investors:
The Investor named at the beginning of this Term Sheet, as well as other investors designated by and reasonably acceptable to the Company (collectively, the “Investors”).

Total Amount Invested:
U.S. $____________________.

Closing:
As soon as practicable following the Company¡¦s acceptance of this Term Sheet and execution of all other required documentation designated by the Company but no later than <Date> (the ¡§Initial Closing¡¨). Additional closings may occur at any time following the Initial Closing in the Company¡¦s discretion.

TERMS OF THE NOTES:

Term of Payment:
The day that is one year following the date of the Initial Closing shall be the end of the term of the Note (the “Maturity Date”). All principal and accrued interest under the Note is due and payable on the Maturity Date. The Note may be prepaid at any time by the Company without penalty upon five days prior written notice to the Holder.

Terms of Conversion:
The Note would be convertible on the following terms. In the event the Company consummates, prior to the Maturity Date (as defined below) an equity financing pursuant to which it sells shares of its Series A Preferred Stock (the “Series A Preferred Stock”) with an aggregate sales price of not less than $_____________, including any and all convertible notes which are converted into preferred stock (including the Notes issued under this Note Purchase Agreement), and with the principal purpose of raising capital (a “Qualified Financing”), then the Note shall automatically convert all principal and accrued interest under the Note into the Series A Preferred Stock at __% of the price paid by investors in the Qualified Financing. The Note shall convert into shares of Series A Preferred Stock on the same other terms as the other investors purchasing Series A Preferred Stock in the Qualified Financing.

Liquidity Event:
If a Liquidity Event occurs before repayment or conversion of the Note into equity, the Company will pay the holder of the Note an amount equal to ___% of the outstanding principal amount of the Note plus any accrued interest due under the Note upon the closing of such Liquidity Event. (For example the Holder of a $_________ note earning __% interest, upon a Liquidity Event would be paid $_________ plus accrued interest of __% on $_______.) For purposes of this provision, a “Liquidity Event” shall mean (a) a merger of the Company with or into another entity (if after such merger the holders of a majority of the Company’s voting securities immediately prior to the transaction do not hold a majority of the voting securities of the successor entity), (b) a sale by the Company of all or substantially all of its assets or (c) the closing of the Company’s first firm commitment underwritten public offering of the Company’s common stock registered under the Securities Act of 1933, as amended.

Security and Subordination:
Repayment of the Note would be secured by a first priority security interest in collateral consisting of all of the assets of the Company. The Note shall be subordinated to all indebtedness of the Company to banks, commercial finance lenders, insurance companies, leasing or equipment financing institutions or other lending institutions regularly engaged in the business of lending money (excluding venture capital, investment banking or similar institutions which sometimes engage in lending activities but which are primarily engaged in investments in equity securities), which is for money borrowed, or for the purchase or leasing of equipment in the case of lease or other equipment financing, whether or not secured.

OTHER:

Documentation:
The transaction would be documented by counsel of the

Company with the documents containing the provisions described above and consisting of the following:

  • Note Purchase Agreement;
  • Risk Factor Statement;
  • Convertible Promissory Note; and
  • Security Agreement.

Representations & Warranties:
The Convertible Note Purchase Agreement would contain customary representations from the Company including, without limitation: organization and qualification, execution and delivery, validity and enforceability of agreements, issuance of the Note, no litigation and compliance with laws. Customary representations from the Investor would include without limitation: suitability to invest, restrictions on the securities that will be issued in the event of conversion, “lock-up” provisions related to a potential public offering.

Non-Binding Terms:
Except for the provisions set forth in the captions below entitled ¡§Exclusivity¡¨ and “Expenses,” this Term Sheet is not an offer subject to acceptance or a legally binding commitment by Investor, and no obligation will be created by execution of this Term Sheet unless and until definitive documents have been executed and delivered.

Confidentiality:
The Company shall not disclose the terms of this Term Sheet to any person or entity except for the Company’s accountants and attorneys and other potential Investors acceptable to Investor, without the written consent of Investor.

Expiration:
This Term Sheet expires on _____________, 20__ if not accepted by the Company by that date.

Amendment:
Holders of a majority in interest of the principal amount of the Notes may amend or waive any provision of the Notes and such amendment or waiver shall be binding on all holders of the Notes.

Expenses:
The Company and the Investors will each bear their own legal and other expenses with respect to the transactions contemplated herein.

The undersigned hereby agree to the foregoing terms. This instrument may be executed in one or more counterparts and by facsimile, each of which will constitute an original, and all of which will constitute one and the same instrument.

INVESTOR: ______________________

By:_________________________

ACCEPTED AND AGREED TO AS OF THE DATE SET FORTH BELOW:

THE COMPANY: XYZ CORPORATION, an <State> corporation
By: _____
Name:______
Title:_______

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Sample Subscription Agreement

Sample Subscription Agreement

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Subscription Agreement

[Issuer Name], LP
STATEMENT REGARDING SECURITIES

THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED OR MAY NOT LAWFULLY BE MADE.

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED HEREBY OR THE TERMS OF THE OFFERING. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED HEREUNDER ARE EXEMPT FROM REPRESENTATION. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO REGISTRATION OR EXEMPTION THEREUNDER. ANY REPRESENTATION TO THE CONTRARY OF THE FOREGOING IS A CRIMINAL OFFENSE.

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER ANY STATE SECURITIES LAWS AND ARE OFFERED PURSUANT TO CERTAIN EXEMPTIONS THEREUNDER. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY STATE SECURITIES AGENCY AND NO REGULATORY BODY HAS PASSED UPON OR ENDORSED THESE SECURITIES. THESE SECURITIES MAY NOT BE TRANSFERRED EXCEPT IN TRANSACTIONS WHICH ARE EXEMPT UNDER APPLICABLE SECURITIES LAWS OR PURSUANT TO EFFECTIVE REGISTRATIONS THEREUNDER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. INVESTMENT IN THE [CLASS ??] LIMTED PARTNER UNITS INVOLVES A SIGNIFICANT DEGREE OF RISK AND SHOULD BE UNDERTAKEN ONLY BY PERSONS WHOSE FINANCIAL RESOURCES ARE SUFFICIENT TO ENABLE THEM TO ASSUME SUCH RISK.

INVESTMENT IN SMALL BUSINESS INVOLVES A HIGH DEGREE OF RISK, AND INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT.

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVESTMENT IN THE SECURITIES INVOLVES A HIGH DEGREE OF RISK. INVESTORS MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF THE INVESTMENT FOR AN INDEFINITE PERIOD AND BE ABLE TO WITHSTAND A TOTAL LOSS OF THEIR INVESTMENT.

THIS DISCLOSURE DOCUMENT CONTAINS ALL OF THE REPRESENTATIONS BY THE COMPANY CONCERNING THIS OFFERING. NO PERSON SHALL MAKE DIFFERENT OR BROADER STATEMENTS THAN THOSE STATEMENTS CONTAINED HEREIN. INVESTORS ARE CAUTIONED NOT TO RELY UPON ANY INFORMATION NOT EXPRESSLY SET FORTH IN THIS DOCUMENT.

THE SECURITIES ARE BEING OFFERED ONLY TO PERSONS WHO HAVE SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS TO BE ABLE TO MAKE AN INFORMED DECISION REGARDING AN INVESTMENT IN THE SECURITIES. POTENTIAL INVESTORS MUST REPRESENT THAT THEY ARE CAPABLE OF EVALUATING THE MERITS AND RISKS OF THIS INVESTMENT. INVESTORS MUST BE ACQUIRING THE SECURITIES FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO ANY RESALE OR DISTRIBUTION. THE SECURITIES ARE SUITABLE ONLY FOR PERSONS WHO HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT.

FURTHER, THE COMPANY IS EXTENDING THE OFFERING ONLY TO THOSE PERSONS WHO MEET THE DEFINITION OF ¡§ACCREDITED INVESTOR¡¨ UNDER THE SECURITIES ACT OF 1933, REGULATION D. THE MOST COMMON WAYS TO MEET THE DEFINITION OF AN ACCREDITED INVESTOR ARE AS FOLLOWS:

1. ANY NATURAL PERSON WHOSE INDIVIDUAL NET WORTH, OR JOINT NET WORTH WITH THAT PERSON¡¦S SPOUSE, AT THE TIME OF HIS OR HER PURCHASE EXCEEDS $1,000,000;
2. ANY NATURAL PERSON WHO HAD AN INDIVIDUAL INCOME IN EXCESS OF $200,000 IN EACH OF THE TWO MOST RECENT YEARS OR JOINT INCOME WITH THAT PERSON¡¦S 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; OR
3. ANY TRUST, WITH TOTAL ASSETS IN EXCESS OF $5,000,000, NOT FORMED FOR THE SPECIFIC PURPOSE OF ACQUIRING THE SECURITIES OFFERED, WHOSE PURCHASE IS DIRECTLY BY A SOPHISTICATED 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.

THE COMPANY IS OFFERING THE SECURITIES PURSUANT TO AVAILABLE EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS. THE SECURITIES WILL BE RESTRICTED SECURITIES AND MUST BE HELD INDEFINITELY ACCORDING TO THEIR TERMS. THEY MAY NOT BE TRANSFERRED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN AVAILABLE EXEMPTION FROM REGISTRATION WITH AN OPINION FROM LEGAL COUNSEL TO THAT EFFECT SATISFACTORY TO THE COMPANY. THE COMPANY IS UNDER NO OBLIGATION, AND HAS NO INTENTION, TO REGISTER THE SECURITIES AND IS UNDER NO OBLIGATION TO ATTEMPT TO SECURE AN EXEMPTION FOR ANY SUBSEQUENT SALE.

AN INVESTMENT IN THE SECURITIES IS HIGHLY ILLIQUID. ANY PERSON ACQUIRING THE SECURITIES SHOULD BE ABLE TO WITHSTAND A HIGHLY RISKY INVESTMENT OVER THE TERM OF THE SECURITIES. THERE WILL BE NO MARKET FOR THE SECURITIES.

THE OFFERED SECURITIES ARE BEING OFFERED SUBJECT TO ACCEPTANCE, PRIOR TO SALE AND WITHDRAWAL, CANCELLATION OR MODIFICATION OF THE OFFER BY THE COMPANY AT ANY TIME WITHOUT NOTICE.

[ISSUER NAME], LP

SUBSCRIPTION AGREEMENT
FOR OWNERSHIP OF [CLASS ??] LIMITED PARTNER UNITS OF A LIMITED PARTNERSHIP

Name of Subscriber ___________________________________________________________ .

Total U.S. Dollar Amount of Subscription US $ _______________ (the “Subscription Amount”).

WHEREAS, the undersigned party (the “Subscriber”) desires to subscribe for ___ [Class ??] Limited Partner Percentage Units, (the “[Class ??] Units”), of [Issuer Name], LP (the “Company”), a limited partnership organized under the laws of the State of [Domicile State] for the Subscription Amount stated above; and

WHEREAS, the Company is willing to offer the [Class ??] Units to Subscriber in the manner and subject to the terms set forth in this Subscription Agreement, the Certificate of Formation, the Private Placement Memorandum and the Limited Partnership Agreement of the Company (the “Enabling Documents”);

NOW, THEREFORE, the Company and Subscriber do hereby agree as follows:

1. Delivery of Subscription Amount. In order to subscribe for the [Class ??] Units, Subscriber must: (a) complete and execute this Subscription Agreement as well as the signature page to the Limited Partnership Agreement and deliver both documents to the Company, at: ________________________________; and (b) transmit the Subscription Amount by wiring funds to the _______________________ (the ¡§Escrow Agent¡¨), pursuant to the following wire transfer instructions:

Bank: __________________
Address: ___________________________
City, [Domicile State] _______________
Phone: _________________________
ABA Routing No. __________________
Credit account name: __________________________
Escrow Agent for: [Issuer Name], LP
Address:
Phone:
Credit account number: _____________________

If Subscriber does not execute and deliver to the Company a signature page to the Operating Agreement, upon written request to the Company, Subscriber may have its Subscription cancelled and its Subscription Amount returned in full. However, the Company reserves the right to cancel the Subscription and return the associated Subscription Amount in full if the Subscriber has not executed and returned the Operating Agreement in a timely manner.

Please notify the Company of your wire by fax to the Company at: _____________________. Please ensure the following information is included in your notification:

  • Name and Account Number
  • Amount of Wire
  • Date of Wire
  • Name of Remitting Bank
2. Acceptance. Subject to the acceptance hereof by the Company, Subscriber does hereby subscribe for the [Class ??] Units having a total U.S. dollar amount described on the first page of this Subscription Agreement above.
3. Subscription.
a. The Subscriber hereby subscribes for and agrees to purchase [Class ??] Units of the Company in the aggregate total of the U.S. dollar amount described on the first page of this document, all subject to the terms and conditions of this Subscription Agreement (the ¡§Subscription¡¨).
b. The Subscriber understands that the Company is offering a minimum of ___________ and a maximum of ___________________ Units for _______________ for each [Class ??] Limited Partnership Unit. Upon full subscription, the [Class ??] Limited Partners will own _________ of the equity of the Company. The minimum subscription amount is ____________, although the Company reserves the right to accept a lesser amount.
c. The Subscriber understands that the [Class ??] Limited Partner Units and the General Partner Unit have been issued to management and its affiliates in exchange for services or nominal consideration.
d. The Subscriber understands that the [Class ??] Units are offered with preference described as follows: The investor subscribing for a [Class ??] Unit will be provided a quarterly preferred return (non-cumulative and non-guaranteed) in an amount up to but not exceeding _____________ per annum calculated on the amount of their capital account as of the date of the quarterly payment. The return shall be calculated as of the date the original investment, based on the beginning balance of the Limited Partner¡¦s capital account and shall be adjusted in the event that the Limited Partner¡¦s capital account is reduced as a result of a return of equity. Additionally, in the event of the sale of all of the assets of the partnership, (the residential real estate portfolio, collectively the ¡§Property¡¨), the [Class ??] Limited Partners will be paid on a prorated basis between them______________ percent of the gain on the sale (the ¡§Bonus Payment¡¨) if any gain is realized, at the time of the closing of the sale of all of the Property. The General Partner and the [Class ??] Limited Partner will be allocated the balance of the earnings in proportion their respective ownership interests. Additionally, in the event of a sale of all of the Property, __________________ percent preferred annual return will be prorated on a calendar year basis calculated on the balance of the Limited Partner¡¦s capital account as of the date of the closing of the sale. A [Class ??] Limited Partnership Interest owner shall also have a priority as to other Partners for repayment of the balance due of his, her or its Capital Account in the event of liquidation.
e. The Subscriber understands that the [Class ??] Units are being issued pursuant to exemption afforded under Regulation D of the Securities Act of 1933, and that therefore the [Class ??] Units can only be sold to the Company and cannot be sold to a third party without a separate exemption from registration.
f. The Subscriber understands that this Subscription Agreement, the consideration delivered and all other subscription documents will be held by the Company prior to the closing of the Offering. The Subscriber understands that if the Offering is terminated without closing, any amount delivered to the Company will be returned to the Subscriber with 1% annualized interest.
g. The Subscriber acknowledges that the Company reserves the right, in its sole and absolute discretion, to accept or reject this Subscription, in whole or in part, and that this Subscription shall not be binding unless and until accepted by the Company.
h. The Subscriber and its/his/her purchaser representative, if any, may only rely on the information furnished or made available or to be made available to the Subscriber and its/his/her purchaser representative, if any, by the Company, as described above.
i. Subscriber acknowledges and agrees that the Subscription Price will be disbursed from the Company¡¦s escrow account at the time the General Partner concludes that the offering is complete.
4. Subscriber Representations, Warranties and Covenants. The Subscriber understands that the information provided by the Subscriber in this Subscription Agreement is being furnished in order for the Company to verify the Subscriber¡¦s qualification to acquire the [Class ??] Units. The Subscriber understands that such information is needed by the Company so that it can determine the validity and applicability of certain exemptions from the registration requirements of the Securities Act of 1933, as amended (the ¡§Act¡¨) and applicable state securities laws (the ¡§State Acts¡¨) in respect to the sale of the [Class ??] Units. Accordingly, the Subscriber represents and warrants to the Company as follows:
a. The Subscriber understands that if it/he/she uses the service of a Purchaser Representative as such term is defined in Regulation D under the Act (¡§Purchaser Representative¡¨), that: (1) it/he/she must acknowledge in writing prior to its/his/her purchase of the [Class ??] Units that such Purchaser Representative is its/his/her Purchaser Representative in connection with evaluating the merits and risks of its/his/her prospective investment in the Company, (2) such Purchaser Representative must disclose, in writing, prior to the acknowledgment referred to above, any material relationship between such Purchaser Representative or its affiliates and the Company or its affiliates which now exists or is mutually understood to be contemplated or which has existed at any time during the previous two years, and any compensation received or to be received as a result of such relationship, including any compensation received or to be received in connection with the offering of the [Class ??] Interests, and (3) the Subscriber must furnish true and complete copies of the foregoing acknowledgments promptly upon their execution.
b. The Subscriber and its/his/her Purchaser Representative, if any, have received and read a copy of the Private Placement Memorandum of the Company dated _____________, the Limited Partnership Agreement of the Company, the Certificate of Formation and this Subscription Agreement, in order that they are able to: (1) ask questions and receive satisfactory answers concerning the Company and its Officers, the business and the financial condition of the Company, and the terms and conditions of the offering, and (2) obtain any additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy or completeness of such information. The Subscriber also has been furnished access to any and all other information that is material to the Subscriber or would be as requested by a reasonable investor making a decision to purchase the [Class ??] Interests.
c. Neither the Subscriber nor its/his/her Purchaser Representative, if any, has been furnished any offering literature other than the Enabling Documents.
d. The [Class ??] Units are being acquired solely for investment for the Subscriber¡¦s own account and not as nominee or agent or otherwise on behalf of any other entity or person, and are not being acquired with a view to or with a present intention to reoffer, resell, fractionalize, assign, grant any participating interest in, or otherwise distribute the [Class ??] Interests.
e. The Subscriber certifies that: (1) no other entity or person has any direct or indirect beneficial interest in the [Class ??] Interests, (2) the Subscriber is not acting as an underwriter or directly or indirectly participating in any underwriting of the [Class ??] Interests, (3) the Subscriber has not formed any entity for the purpose of making the investment in the [Class ??] Units or if so, has previously reported such fact to the Company, (4) the Subscriber will not take, or cause to be taken, any action that would cause the Subscriber to be an underwriter (as defined in Section 2(11) of the Act) of the [Class ??] Interests, and (5) the Subscriber does not have any contract, undertaking, agreement, arrangement or understanding with any entity or person which is contrary to the representations, warranties and agreements contained in this Subscription Agreement.
f. The Subscriber further agrees that the [Class ??] Units shall only be sold, pledged, assigned, hypothecated, or otherwise transferred (with or without consideration) in compliance with the conditions specified in the Limited Partnership Agreement, to which the Company is a party.
g. The Subscriber agrees that the Company is under no obligation to register the [Class ??] Units under the Act or any State Acts on its/his/her behalf or to assist it/him in complying with any exemption from registration.
h. The Subscriber understands that no federal or state agency has passed upon the [Class ??] Interests, or made any finding or determination as to the fairness of the investment or any recommendation or endorsement of the [Class ??] Interests.
i. The Subscriber is a citizen of either Canada or the United States of America, is at least 21 years of age, and has the legal capacity and authority to execute, deliver and perform this Subscription Agreement, and its/his/her principal residence is located within the state designated under its/his/her name below.
j. All information which the Subscriber has provided to the Company concerning the Subscriber is true and complete as of the date set forth at the end hereof, and if there should be any change in such information prior to this Subscription being accepted, the Subscriber will immediately provide the Company with accurate and complete information concerning any such change.
k. The Subscriber understands that the [Class ??] Units are not a liquid investment.
l. The Subscriber understands that the Company will be subject to all of the risks inherent in the operation of a business in general, including, without limitation, those related to local and national economic conditions, changes in market conditions and costs, changes in management, changes in consumer preferences and demographics, competition, ability to obtain and retain qualified employees, and government laws and regulations.
m. The Subscriber certifies reaffirms that statements set forth on the previously delivered Investor Suitability Questionnaire are applicable to the Subscriber as indicated.
n. The Subscriber represents that the Subscriber: (i) has adequate means of providing for the Subscriber¡¦s current needs and possible contingencies, (ii) has no need for liquidity in this investment, (iii) believes that the nature and amount of this investment is suitable for the Subscriber and consistent with the Subscriber¡¦s overall investment program and financial position, (iv) believes that the Subscriber¡¦s overall commitment to investments which are not readily marketable is not disproportionate to the Subscriber¡¦s net worth and the investment in the [Class ??] Units will not cause such overall investment commitment to become excessive, (v) is under no present or contemplated future need to dispose of the [Class ??] Units to satisfy any existing or contemplated undertaking, need or indebtedness, (vi) is able to bear the economic risks of the investment in the [Class ??] Units, (vii) at the present time is able to afford a complete loss of such investment, and (viii) has such knowledge and experience in business and financial matters that he is capable of evaluating the merits and risks of the investment.
o. The Subscriber is aware that no market may exist for the resale of the [Class ??] Units.
p. The Subscriber is aware of any and all restrictions imposed by the Company on the further distribution of the [Class ??] Units.
5. Indemnification. The Subscriber agrees to indemnify and hold harmless the Company, the General Partner and any entity or person, attorney or other acting on behalf of the Company, from and against any and all damage, loss, liability, cost and expense (including attorneys¡¦ fees) which any of them may incur by reason of the failure by the Subscriber to fulfill any of the terms or conditions of this Subscription Agreement, or by reason of any breach of the representations and warranties made by the Subscriber herein, or in any other document provided by the Subscriber to the Company. All representations, warranties and covenants contained in this Subscription Agreement, and the indemnification contained in this Section 5, shall survive the acceptance of this Subscription.
6. Special Securities Laws Notices. The Subscriber understands and acknowledges that:

THE [CLASS ??] LIMTED PARTNERSHIP UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACTS, WILL BE ACQUIRED FOR INVESTMENT ONLY, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE ACT OR THE STATE ACTS OR AN EXEMPTION THEREFROM, AND THEN ONLY SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE OPERATING AGREEMENT.

7. Miscellaneous.
a. No Waiver. Notwithstanding any of the representations, warranties, acknowledgments or agreements made herein by the Subscriber, the Subscriber does not thereby or in any other manner waive any of the rights granted to it/him/her under federal or state securities laws.
b. Entire Agreement; Modification. This Subscription Agreement, the Enabling Documents and the Risk Factor Statement attached hereto constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and neither this Subscription Agreement nor any provisions hereof shall be waived, changed, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought.
c. Notices. Any notice, demand or other communication which any party hereto may be required, or may elect, to give to anyone interested hereunder shall be sufficiently given if: (i) deposited, postage prepaid, in the United States mail, certified or registered mail, a nationally recognized overnight delivery service, addressed, in the case of the Company, to the Company, attention President at the above address, and in the case of the Subscriber, to the address set forth on the signature page hereof or at such other address as the Subscriber shall so notify the Company in writing, or (ii) delivered personally at such address.
d. Binding Effect. Except as otherwise provided herein, this Subscription Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns, as applicable. If the Subscriber is more than one entity or person, the obligations of the Subscriber shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and its/his/her respective heirs, executors, administrators, successors, legal representative and assigns.
e. Assignability. The Subscriber agrees not to transfer or assign this Subscription Agreement, or any of the Subscriber¡¦s interest herein, and further agrees that the transfer or assignment of the [Class ??] Units shall be made only in accordance with applicable laws and the terms of the Limited Partnership Agreement.
f. Applicable Law. This Subscription Agreement shall be governed by and construed in accordance with the laws of the State of [Domicile State], without regard to conflict of law principles.
g. ARBITRATION OF DISPUTES. THE UNDERSIGNED ACKNOWLEDGES, BY HIS, HER OR ITS EXECUTION OF THIS SUBSCRIPTION AGREEMENT, THAT IT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE. BY SIGNING THIS AGREEMENT, THE PARTIES AGREE AS FOLLOWS:
1). ALL PARTIES TO THIS AGREEMENT ARE GIVING UP THE RIGHT TO SUE EACH OTHER IN COURT, INCLUDING THE RIGHT TO A TRIAL BY JURY, EXCEPT AS PROVIDED BY THE RULES OF THE ARBITRATION FORUM IN WHICH A CLAIM IS FILED.
2). ARBITRATION AWARDS ARE GENERALLY FINAL AND BINDING: A PARTY’S ABILITY TO HAVE A COURT REVERSE OR MODIFY AN ARBITRATION AWARD IS VERY LIMITED.
3). THE ABILITY OF THE PARTIES TO OBTAIN DOCUMENTS, WITNESS STATEMENTS AND OTHER DISCOVERY IS GENERALLY MORE LIMITED IN ARBITRATION THAN IN COURT PROCEEDINGS.
4). THE ARBITRATORS DO NOT HAVE TO EXPLAIN THE REASON(S) FOR THEIR AWARD.
5). THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
6). THE RULES OF SOME ARBITRATION FORUMS MAY IMPOSE TIME LIMITS FOR BRINGING A CLAIM IN ARBITRATION. IN SOME CASES, A CLAIM THAT IS INELIGIBLE FOR ARBITRATION MAY BE BROUGHT IN COURT.
7). THE RULES OF THE ARBITRATION FORUM IN WHICH THE CLAIM IS FILED, AND ANY AMENDMENTS THERETO, SHALL BE INCORPORATED INTO THIS AGREEMENT.

NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED [CLASS ??]CTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE [CLASS ??]CTION; OR WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE [CLASS ??]CTION UNTIL: (a) THE CLASS CERTIFICATION IS DENIED; OR (b) THE CLASS IS DECERTIFIED; OR (c) THE SUBSCRIBER IS EXCLUDED FROM THE [CLASS ??]Y THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.

IN THE EVENT THAT A DISPUTE ARISES BETWEEN THE UNDERSIGNED SUBSCRIBER AND THE COMPANY, OR ANY OF THEIR LEGAL REPRESENTATIVES, ATTORNEYS, ACCOUNTANTS, AGENTS, EMPLOYEES OR ANY OTHER PARTY EMPLOYED BY THE COMPANY, SAID DISPUTE ARISING OUT OF, IN CONNECTION WITH OR AS A RESULT OF THE SUBSCRIPTION HEREBY MADE, THE UNDERSIGNED HEREBY EXPRESSLY AGREES THAT SAID DISPUTE SHALL BE RESOLVED THROUGH ARBITRATION RATHER THAN LITIGATION. THE UNDERSIGNED HEREBY AGREES TO SUBMIT THE DISPUTE FOR RESOLUTION TO EITHER THE AMERICAN ARBITRATION ASSOCIATION, IN PHOENIX, [DOMICILE STATE] OR THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., IN [DOMICILE STATE], WHICHEVER ASSOCIATION MAY ASSERT JURISDICTION OVER THE DISPUTE, WITHIN FIVE (5) DAYS AFTER RECEIVING A WRITTEN REQUEST TO DO SO FROM ANY OF THE AFORESAID PARTIES. IF THE UNDERSIGNED FAILS TO SUBMIT THE DISPUTE TO ARBITRATION AS REQUESTED, THEN THE REQUESTING PARTY MAY COMMENCE AN ARBITRATION PROCEEDING. THE FEDERAL ARBITRATION ACT SHALL GOVERN THE PROCEEDING AND ALL ISSUES RAISED BY THIS AGREEMENT TO ARBITRATE.

IN WITNESS WHEREOF, the Subscriber has executed this Subscription Agreement on the date above.

THIS AGREEMENT CONTAINS A BINDING ARBIRTATION PROVISION ON _________.

INVESTOR:
By: _________________________________
[Print Name] _________________________
Social Security or EIN Number:
____________________________________
Address:

SUBSCRIPTION ACCEPTED:
[Issuer Name], LP,
By: _______________________________

STATEMENT OF RISK FACTORS

Investing in the Securities involves a high degree of risk. The risk factors and all other information disclosed in this Subscription Agreement must be carefully considered before making an investment decision regarding the Securities. One or more of these risk factors could cause a loss of part or all funds invested in the Securities.
[Copy]

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Sample Stock Certificate

Sample Stock Certificate

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

~ CERTIFICATE OF STOCK ~

NUMBER: ___ COMMON SHARES:____

ORGANIZED UNDER THE LAWS OF THE STATE OF xxxxxxxxxxxx

XYZ, INC. A XYZ CORPORATION

The Corporation is authorized to issue ________________ Shares of Common Stock without Par Value.

THIS CERTIFIES THAT XXXXXXXX is the owner of XXXXXXXX (xxxxx) fully paid and non-assessable share(s) of Common Stock without Par Value, transferable only on the books of the Corporation by the holder hereof in person or by a duly authorized Attorney upon surrender of this Certificate property endorsed.

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE MADE WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

Transfer of these Shares is subject to restrictions in the By Laws for this Corporation.

The Corporation will furnish without charge to each Shareholder who so requests, the powers, designations, preferences and relative participation rights of Shareholders and the qualifications, limitations or restrictions of such rights.

In Witness Whereof, the said Corporation has caused this Certificate to be signed by its duly authorized Officers.
Dated_____________________

__________________________
xxxxxxxxx, President

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Sample Security Agreement

Sample Security Agreement

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

SECURITY AGREEMENT FOR XYZ CORPORATION

CONVERTIBLE PROMISSORY NOTE

THIS SECURITY AGREEMENT (the “Security Agreement”) is entered into as of ___________, 20__, by and between XYZ Corporation, an <State> corporation (the “Company”), and _______________________ (the “Secured Party”).

RECITALS:

Company has borrowed funds and may borrow through subsequent advances additional funds, from Secured Party pursuant to a Convertible Promissory Note of even date herewith (the “Note”) the terms of which are incorporated herein by reference.

As security for its repayment obligations under the Note, Company has agreed to grant Secured Party a security interest in all of its assets on the terms set forth in this Security Agreement.

NOW, THEREFORE, to that end and in consideration of the premises, covenants and agreements set forth below, and the mutual benefits to be derived from this Security Agreement, and other good and valuable consideration, the parties hereto agree as follows:

1. Security Interest. To secure the “Obligation” (as defined below), Company hereby transfers, conveys, assigns, and grants to Secured Party a security interest in all of Company’s assets, which may include one or more of the following items (hereinafter, collectively, the “Collateral”):
a. General Intangibles. All of Company’s General Intangibles, now existing or hereafter arising or acquired, together with the proceeds therefrom. As used herein, the term “General Intangibles” means all personal property (including things in action) other than goods, accounts, chattel paper, documents, instruments, and money, and includes, but is not limited to, business records, deposit accounts, inventions, intellectual property, designs, patents, patent applications, trademarks, trademark applications, trademark registrations, service marks, service mark applications, service mark registrations, trade names, goodwill, technology, knowhow, confidential information, trade secrets, customer lists, supplier lists, copyrights, copyright applications, copyright registrations, licenses, permits, franchises, tax refund claims, and any letters of credit, guarantee claims, security interests, or other security held by the Company to secure any “Accounts” (as hereinafter defined).
b. Accounts (Including Accounts Receivable). All of Company’s Accounts, whether now existing or hereafter arising or acquired, together with the proceeds therefrom. As used herein, the term “Accounts” means any right of Company to receive payment from another person or entity, including payment for goods sold or leased, or for services rendered, no matter how evidenced or arising, and regardless of whether yet earned by performance. It includes, but is not limited to, accounts, accounts receivable, contract rights, contracts receivable, purchase orders, notes, drafts, acceptances, all rights to payment earned or unearned, and other forms of obligations and receivables.
c. Inventory. All of Company’s Inventory, whether now owned or hereafter acquired, together with the products and proceeds therefrom and all packaging, manuals, and instructions related thereto. As used herein, the term “Inventory” means all goods, merchandise, and personal property held for sale or leased or furnished or to be furnished under contracts of service, and all raw materials, work in process, or materials used or consumed in Company’s business, wherever located and whether in the possession of Company, a warehouseman, a bailee, or any other person.
d. Equipment. All of Company’s Equipment, now owned or hereafter acquired, together with the products and proceeds therefrom, and all substitutes and replacements therefor. As used herein, the term “Equipment” includes all equipment, machinery, tools, office equipment, supplies, furnishings, furniture, or other items used or useful, directly or indirectly, in Company’s business, all accessions, attachments, and other additions thereto, all parts used in connection therewith, all packaging, manuals, and instructions related thereto, and all leasehold or equitable interests therein.
e. Fixtures. All of Company’s interest in and to all fixtures and furnishings, now owned or hereafter acquired, together with the products and proceeds therefrom, all substitutes and replacements therefor, all accessories, attachments, and other additions thereto, all tools, parts, and supplies used in connection therewith, and all packaging, manuals, and instructions related thereto, located on or attached to Company’s business premises located at: XYZ Corporation, ______________________________.
f. Chattel Paper, Documents and Instruments. All of Company’s right, title, and interest in any chattel paper, documents, or instruments, now owned or hereafter acquired or arising, or now or hereafter coming into the possession, control, or custody of either Company or Secured Party, together with all proceeds therefrom. The terms “chattel paper,” “documents,” and “instruments” shall have those meanings ascribed to them in the <State> Uniform Commercial Code.
2. Obligation. This security interest is given as security for all indebtedness and obligations owed by Company to Secured Party, whether now existing or hereafter incurred, under this Security Agreement or the Note, together with all extensions, modifications, or renewals thereof (hereinafter referred to, collectively, as the “Obligation”).
3. Proceeds. As used in this Security Agreement, the term “proceeds” means all products of the Collateral and all additions and accessions to, replacements of, insurance or condemnation proceeds of, and documents covering any of the Collateral, all property received wholly or partly in trade or exchange for any of the Collateral, all leases of any of the Collateral, and all rents, revenues, issues, profits, and proceeds arising from the sale, lease, license, encumbrance, collection, or any other temporary or permanent disposition, of any of the Collateral or any interest therein.
4. Title; Filing. Company warrants that, except as previously disclosed in writing to Secured Party, it is the owner of the Collateral free and clear of all liens, claims, and encumbrances of whatever kind or nature. Company covenants that so long as any portion of the Obligation remains unpaid, Company will not execute or file a financing statement or security agreement covering the Collateral to anyone other than Secured Party, except in the ordinary course of business or as otherwise allowed. Company agrees to sign and deliver one or more financing statements or supplements thereto or other instruments as Secured Party may from time to time require in order to comply with the Uniform Commercial Code or other applicable law to preserve, protect and enforce the security interest of Secured Party and to pay all costs of filing such statements or instruments. In addition, the Secured Party shall have the right to promptly file a financing statement to perfect Secured Party’s interest in the Collateral.
5. Care of Collateral. Company will keep in effect all licenses, permits and franchises required by law or contract relating to Company’s business (if applicable), property, or the Collateral; maintain insurance on the Collateral; keep the Collateral in good repair and be responsible for any loss or damage to it; at all times warrant and defend Company’s ownership and possession of the Collateral keep the Collateral free from all liens, claims, encumbrances and security interests; pay when due all taxes, license fees, and other charges upon the Collateral or upon Company’s business, property or the income therefrom; and not misuse, conceal or in any way use or dispose of the Collateral unlawfully or contrary to the provisions of this Security Agreement or of any insurance coverage. Loss of, damage to, or un-collectability of the Collateral or any part thereof will not release Company from any of its obligations hereunder.
6. Default. A default hereunder will occur if any of the following events occur: (1) Company fails to pay any portion of the Obligation when due; (2) Company fails to perform any undertaking or materially breaches any warranty or covenant in this Security Agreement or the Note; (3) any statement, representation or warranty of Company under this Security Agreement or the Note is untrue in any material respect when made; (4) Company becomes insolvent or unable to pay debts as they mature or makes an assignment for the benefit of creditors or any proceeding is instituted by or against it alleging that it is insolvent or unable to pay its debts as they mature; (5) dissolution of Company; (6) an attachment, garnishment, execution or other process is issued or a lien filed against any property of Company, which is not removed within a reasonable period of time; and (7) Company transfers an interest in any of the Collateral contrary to the provisions of this Security Agreement without the prior written consent of Secured Party other than in the ordinary course of business. Waiver of any default will not constitute a waiver of any other or subsequent default.
7. Remedies. Upon the occurrence of any default hereunder at any time thereafter, all of the Obligation will, at the election of Secured Party and without notice of such election, or demand for payment, become immediately due and payable and Secured Party will have the remedies of a secured party under the <State> Uniform Commercial Code or other applicable law.
8. General. The wavier by Secured Party of any breach of any provision of this Security Agreement or warranty or representation herein set forth will not be construed as a waiver of any subsequent breach. The failure to exercise any right hereunder by Secured Party will not operate as a waiver of such night. All rights and remedies herein provided are cumulative. Company may not assign its nights or delegate its duties hereunder without Secured Party’s written consent. This Security Agreement may not be altered or amended except by a writing signed by all the parties hereto. This Security Agreement will be governed by and construed and interpreted in accordance with the laws of the State of <State>. Any provision hereof found to be invalid will not invalidate the remainder. All words used herein will be construed to be of such gender and number as the circumstances require. This Security Agreement binds Company, its successors and assigns, and inures to the benefit of Secured Party, its successors and assigns.
9. Notices. Any notice or other communication hereunder must be given in writing and either (i) delivered in person, (ii) transmitted by telefacsimile, provided that any notice so given is also mailed as provided in clause (iii), or (iii) mailed, postage prepaid, or by an overnight delivery service, as follows:

If to Company, addressed to:

XYZ Corporation
Address:
Phone:
Attention:
Email:

If to Holder, addressed to:

_________________________
Attention: _________________
Address: __________________
_________________________
_________________________
Email: ___________________
Phone No.: __________________
Fax No.: ________________
SSN or EIN #: _________________________

or to such other address or to such other person as any party shall have last designated such notice to the other parties. Each such notice or other communication shall be effective (i) if given by mail, three days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (ii) if given by tele-facsimile, when transmitted to the applicable number so specified in (or pursuant to) this Section 9 provided that appropriate confirmation of receipt is generated by the tele-facsimile and a duplicate copy is mailed, postage prepaid, or (iii) if given by any other means, when actually delivered at such address.

IN WITNESS WHEREOF, the Parties to this Agreement have executed the same on the date first written above.

SECURED PARTY: ______________________________.

By: _________________________________

THE COMPANY: XYZ CORPORATION, an <State> corporation

By:
Name:
Title:

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Sample Risk Factor Statement

Sample Risk Factor Statement

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

STATEMENT OF RISK FACTORS

THIS STATEMENT OF RISK FACTORS (the “Risk Factors”) is provided on this ___________, 20__, by and between XYZ Corporation, an <State> corporation (the “Company”), and _______________________ (the “Investor”).

RECITALS:

The Investor and the Company have entered into a Convertible Note Purchase Agreement of event date herewith. The Company has identified certain risks which the Investor should be apprised of which it desires to disclose to the Investor as a part of the note purchase transaction.

– STATEMENT OF RISK FACTORS –

Investing in the Securities involves a high degree of risk. The risk factors and all other information disclosed in the Convertible Promissory Note transaction must be carefully considered before making an investment decision regarding the Securities. One or more of these risk factors could cause a loss of part or all funds invested in the Securities.

The Company may not be able to create the products or produce the inventory is estimates it will need to launch the business with Seed Capital to prove its business concept.

The Company may not be able to create the products or produce the inventory necessary to prove its business concept and in turn to make its Series A offering. In such a case, the expected conversion of the Investors’ debt into an equity security would not take place and the anticipated benefit of equity ownership would not occur.

The Company may not raise sufficient funds to close the Series A offering and the investor may not be able to convert its debt to equity.

The Company may not raise funds sufficient to close the Series A Round. If sufficient funds are not raised to close the Series A Round, the Investors’ only recourse may be to secure the repayment of the principal and interest of their loans from the Company.

The Company is recently formed and has not operating history and no revenues.

The Company was only recently formed and has no operating history and has generated no revenues. There is no assurance that the Company can generate revenues or sell any of its products in the marketplace, and even if revenues are generated there is no assurance that the Company can earn a profit, in which case the Investors’ notes may not be repaid

Estimated expenses may exceed the projected Seed Capital needs.

The Company has estimated the cost of certain expenses required to fund its seed capital needs which will allow it to conduct its Series A offering. If expenses exceed those projected, the Series A offering may be delayed or cancelled which would negatively impact the conversion of the Investors’ notes into equity.

The Company is thinly capitalized and may default on the Convertible Notes.

The Company’s working capital will consist of the funds secured from the sale of the Convertible Notes. If expenses and anticipated uses of these funds exceed those anticipated by the Company there may be insufficient funds to pay back the Investors’ loans.

In the event of default on the notes, the assets of the Company pledged as collateral in the Security Agreement would not be sufficient to repay all of the Investors’ loans.

The Company has provided a Security Agreement for each Convertible Note which encumbers all of the assets of the Company. If the assets were liquidated pursuant to a default and foreclosure, there would not be sufficient cash generated to pay off the principal or interest due on the Convertible Promissory Notes.

THE COMPANY IS OFFERING THE SECURITIES PURSUANT TO AVAILABLE EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS. IF THE INVESTORS’ PROMISSORY NOTES ARE CONVERTED, ADDITIONAL RISKS WILL BE DISCLOSED ACCORDING TO A PRIVATE PLACEMENT MEMORANDUM AT THE TIME OF THE CONVERSION. THESE SECURITIES WHEN ISSUED WILL BE RESTRICTED SECURITIES AND GENERALY MUST BE HELD INDEFINATELY. THEY MAY NOT BE TRANSFERRED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN AVAILABLE EXEMPTION FROM REGISTRATION WITH AN OPINION FROM LEGAL COUNSEL TO THAT EFFECT SATISFACTORY TO THE COMPANY. THE COMPANY IS UNDER NO OBLIGATION AND HAS NO INTENTION, TO REGISTER THE SECURITIES AND IS UNDER NO OBLIGATION TO ATTEMPT TO SECURE AN EXEMPTION FOR ANY SUBSEQUENT SALE.

Additional disclosures may have been required if this Note Purchase Agreement and related documents had been reviewed by federal or state securities regulators.

Because this transaction is a private offering and not registered under the U.S. Securities Act of 1933 or state securities laws, it has not been reviewed by the Securities and Exchange Commission or the state securities regulators. Review may have resulted in additional disclosures by the Company.

Investment in the Securities involves complex tax consequences; no tax opinion has been secured.

The tax consequences related to an investment in the Convertible Notes is complex and may involve the application of United States, state and local taxes. There has been no tax opinion secured related to the taxation of the Limited Partnership Units or any other advice or counsel for the investors. INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES OR TO SECURE THEIR OWN TAX OPINIONS.

Conclusion.

GENERALLY, IN ADDITION TO THE ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT. IN REVIEWING THIS INVESTMENT, POTENTIAL INVESTORS SHOULD KEEP IN MIND OTHER POSSIBLE RISKS THAT COULD BE IMPORTANT.

THE INVESTORS CONSIDERING THESE CONVERTIBLE PROMISSORY NOTE SECURITIES ARE ADVISED TO SEEK LEGAL, TAX AND FINANCIAL COUNSEL PRIOR TO PARTICIPATING IN THE INVESTMENT POGRAM.

IN WITNESS WHEREOF, this document is executed on the day and year first above written.

COMPANY: XYZ CORPORATION, AN <STATE> CORPORATION
By: __________________________________

The Aforementioned Risks are Acknowledged and Understood:

INVESTOR: __________________________

Name: ______________________________
Title: _______________________________

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Sample Promissory Note

Sample Promissory Note

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Below you will find a Sample Convertible Promissory Note

Convertible Promissory Note

THE SECURITIES REPRESENTED HEREBY AND THE SHARES ISSUABLE UPON CONVERSION OF SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM, HOLDERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

$____________.00
EFFECTIVE DATE: __________, 20__
PLACE OF EXECUTION: __________________________

FOR VALUE RECEIVED, XYZ Corporation, an <State> corporation (“Company”), promises to pay to the order of ___________________________________, (“Holder”), in lawful money of the United States of America, the sum of __________________ and 00/100 Dollars ($___________.00) (the “Principal Sum”), plus simple interest, accrued on the unpaid Principal Sum from the Effective Date through the Maturity Date, payable as herein provided.

1. Interest Rate; Payment of Interest. During the period commencing on the date of this Note and ending on the Maturity Date, Interest shall accrue on the Principal Sum at a simple rate equal to __ (__%) per annum.

2. Maturity Date. The entire unpaid Principal Sum evidenced by this Note, together with accrued and unpaid interest, shall be due and payable in full on or before ______________ (the “Maturity Date”).

3. Prepayment. The Company may prepay any portion of this Note and accrued interest prior to the Maturity Date without the prior consent of the Holder.

4. Payment of Accrued Interest Upon Conversion. If the Company elects to prepay all or a portion of the Principal Sum, then at the time of such payment any accrued and unpaid interest due as of the date calculated on the amount of the payment shall also be paid to the Holder. If, according to Section 5 below the Company converts this Note, then all or the unpaid balance of the Principal Sum of the Note due and all accrued interest due as of the date of the conversion shall be considered the amount to be converted (the “Conversion Amount”).

5. Mandatory Conversion.

a. Automatic Conversion in a Qualified Financing. If the Company issues equity securities (“Equity Securities”) in a transaction or series of related transactions resulting in aggregate gross proceeds to the Company of at least $__________, including conversion of the Notes and any other indebtedness (a “Qualified Financing”), then the Note, and any accrued but unpaid interest thereon, will automatically convert into the equity securities issued pursuant to the Qualified Financing at a conversion price equal to _______ (__%) percent of the per share price paid by the purchasers of such Equity Securities in the Qualified Financing. The Equity Securities issuable upon conversion of this Note shall be of the same type as the Equity Securities issued in the Qualified Equity Financing and shall otherwise be issued on substantially the same terms and conditions applicable to the Qualified Equity Financing. Upon any such conversion in connection with a Qualified Equity Financing, the Holder of this Note agrees to execute and deliver the same documents in the Qualified Equity Financing, if applicable, as are executed and delivered by the investors in such Qualified Equity Financing, as applicable, if any, that are not converting a promissory note.
b. Conversion Procedure. If this Note is being converted into Equity Securities in connection with a Qualified Equity Financing, the Holder shall surrender the Note at the office of the Company for the applicable Equity Securities. Thereupon, there shall be issued and delivered to such Holder the applicable Equity Securities into which the Note surrendered was convertible on the date of the closing of the Qualified Equity Financing. The Company shall not be obligated to issue the Equity Securities issuable upon such conversion unless the Note being converted is either delivered to the Company or the Holder notifies the Company or any such transfer agent that such certificate has been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by Company in connection therewith. In lieu of the Company issuing any fractional shares to the Holder upon the conversion of this Note, the Company shall have the option to pay the Holder the unconverted amount of the Note, such payment to be in the form of cash or a Company’s check payable to the Holder. Upon conversion of this Note in full and the payment of the amounts specified in this Section 5, the Company shall be forever released from all its obligations and liabilities under this Note and such Note shall be deemed to be cancelled as of such time.

6. Events of Default; Holder’s Rights on Default.

a. Events of Default. This Note shall be immediately due and payable on the Maturity Date as to the Principal Sum and all accrued and unpaid interest. An Event of Default shall occur upon any of the following: the failure of the Company to pay this Note in full on the Maturity Date or upon any of the following occurrences of the Company: (i) applying for or consenting to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) being unable, or admitting in writing its inability, to pay its debts generally as they mature, (iii) making a general assignment for the benefit of its or any of its creditors, (iv) being dissolved or liquidated, (v) becoming insolvent (as such term may be defined or interpreted under any applicable statute), (vi)commencing a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consenting to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vii) taking any action for the purpose of effecting any of the foregoing.
b. Rights of Holder. On the occurrence or existence of any Event of Default, the Holder may declare the Principal Sum and all accrued interest under this Note to be immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived) and (1) the Principal Sum shall bear interest at the Default Rate of Interest (as defined below), (2) the Holder may immediately initiate legal action for the collection of this Note, (3) the Holder may immediately pursue the other remedies under applicable law that Holder deems appropriate. In the event of any default in the payment of this Note, or if suit is brought hereon, the Holder hereof shall be entitled to collect all reasonable costs and expenses of attorney’s fees, and the Company agrees to pay same in the event of such default.
c. Security Agreement. This Note is secured by a Security Agreement dated of even date herewith between the Holder and the Company. Upon default on this obligation, the Holder may foreclose upon the security provided for in the Security Agreement and pursue any and all other rights provided by law.
d. Shareholders. Officers and Directors Not Liable. In no event shall any shareholder, officer or director of the Company be liable for any amounts due or payable pursuant to this Note.

7. Default Rate of Interest. From and after the Maturity Date, the Principal Sum remaining unpaid shall accrue interest in an amount equal to (__%) per annum (the “Default Rate of Interest”).

8. Waivers. The Company waives demand, presentment for payment, protest, notice of protest and notice of nonpayment. Any discharge or release of any party who is or may be liable to Holder for the indebtedness represented by this Note will not have the effect of releasing any other party or parties, which will remain liable to Holder. Holder’s acceptance of payment other than in accordance with the terms of this Note, or Holder’s subsequent agreement to extend or modify the repayment terms, or Holder’s failure or delay in exercising any rights or remedies granted to Holder, will likewise not have the effect of releasing Company or any other party or parties from their respective obligations to Holder. In addition, any failure or delay on the part of Holder to exercise any of the rights and remedies granted to Holder shall not have the effect of waiving any of Holder’s rights and remedies under this Note. Any partial exercise of any rights and/or remedies granted to Holder shall furthermore not be construed as a waiver of any other rights and remedies, it being Company’s intent and agreement that Holder’s rights and remedies shall be cumulative in nature. Should any default event occur or exist under this Note, any waiver or forbearance on the part of Holder to pursue the rights and remedies available to Holder will bind Holder only to the extent that Holder agrees in writing to the waiver or forbearance.

9. Caption Headings. Caption headings of the sections of this Note are for convenience purposes only and are not to be used to interpret or to define their provisions. In this Note, whenever the context so requires, the singular includes the plural and the plural also includes the singular.

10. Notices. Any notice or other communication hereunder must be given in writing and either (i) delivered in person, (ii) transmitted by telefacsimile, provided that any notice so given is also mailed as provided in clause (iii), or (iii) mailed, postage prepaid, or by an overnight delivery service, as follows:

If to Company, addressed to:

XYZ Corporation

Address:

Phone:

Attention:

Email:

If to Holder, addressed to:
_________________________

Attention: _________________

Address: __________________
_________________________
_________________________

Email: ___________________

Phone No.: __________________

Fax No.: ________________

SSN or EIN #: _________________________

or to such other address or to such other person as any party shall have last designated such notice to the other parties. Each such notice or other communication shall be effective (i) if given by mail, three days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (ii) if given by tele-facsimile, when transmitted to the applicable number so specified in (or pursuant to) this Section 10 provided that appropriate confirmation of receipt is generated by the tele-facsimile and a duplicate copy is mailed, postage prepaid, or (iii) if given by any other means, when actually delivered at such address.

11. General. The wavier by Holder of any breach of any provision of this Note or warranty or representation herein set forth will not be construed as a waiver of any subsequent breach. The failure to exercise any right hereunder by Holder will not operate as a waiver of such night. All rights and remedies herein provided are cumulative. Company may not assign its nights or delegate its duties hereunder without Holder’s written consent. This Note may not be altered or amended except by a writing signed by all the parties hereto. This Note will be governed by and construed and interpreted in accordance with the laws of the State of Delaware. Any provision hereof found to be invalid will not invalidate the remainder. All words used herein will be construed to be of such gender and number as the circumstances require. This Note Agreement binds Company, its successors and assigns, and inures to the benefit of Holder, its successors and assigns.

12. Legend. The Holder acknowledges that the Shares or other securities acquired upon the conversion of this Note may have restrictions upon their resale imposed by state and federal securities laws. The Shares (unless registered under the Act) or other securities shall be stamped or imprinted with a legend in substantially the following form:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. COPIES OF THE OPERATING AGREEMENT COVERING THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.”

IN WITNESS WHEREOF, the Parties to this Agreement have executed the same on the date first written above.

HOLDER: ______________________________.

By: _________________________________

THE COMPANY: XYZ CORPORATION, an <State> corporation

By:
Name:
Title:

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Sample Private Placement Memorandum (PPM)

Sample Private Placement Memorandum (PPM)

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Contents

Confidential Private Placement Memorandum

CONFIDENTIAL
PRIVATE PLACEMENT MEMORANDUM

<COMPANY CONTACT INFORMATION>

[Date of PPM]

Partnership Unit Offered Offering Price Underwriting Discount and Commissions Net Proceeds to the Company*
Minimum Offering [][Class_] Units $[],000 per Unit [Class_] Unit None $[],000
Maximum Offering [][Class_] Units $[],000 per Unit [Class_] Unit None $[??],000

*The expenses of the Offering are expected to be less than $[],000 and paid from operating revenues

OFFER TO SELL SECURITIES

[ ] Class [ ] Limited Partnership Units

Beginning on the date hereof, [Name of Issuer], LP, a [State of Domicile] limited partnership (the “Company” or the “Partnership”), is offering to sell [Class _ ] Limited Partnership Units to investors for [$??],000 for _____ (_) ownership unit (the “[Class _ ] Units,” the “Units” or the “Securities”). Each ownership Unit represents one-half of one percent of the equity of the Company. The maximum offering is ________ Units for an aggregate offering of [$??],000,000 (the “Maximum Offering”) or twenty ([??]%0) percent of the equity of the Company. The minimum offering is [_] Units for an aggregate offering of $[??],000 (the “Minimum Offering”) or __ (_%) percent of the equity of the Company. The minimum investment amount is [$??],000, provided however the General Partner may, in its discretion, accept a subscription in a lesser amount. The investor subscribing for a [Class _ ] Unit will be provided a quarterly preferred return (non-cumulative and non-guaranteed) for __________________ of the investment period in an amount up to but not exceeding __ (??%) percent per annum calculated on the amount of their capital account as of the date of the quarterly payment. The return shall be calculated as of the date the original investment, based on the beginning balance of the Limited Partner’s capital account and shall be adjusted in the event that the Limited Partner’s capital account is reduced as a result of a return of equity. The General Partner and the Class [ ] Limited Partners will be allocated the balance of the earnings in proportion their respective ownership interests. Additionally, in the event of a sale of all of the assets, the ______________ preferred annual return for __________________will be prorated on a calendar year basis calculated on the balance of the Limited Partner’s capital account as of the date of the closing of the sale. A [Class _ ] Limited Partnership Interest owner shall also have _____________ as to other Partners for repayment of the balance due of his, her or its Capital Account in the event of liquidation.

THE SECURITIES OFFERED HEREIN ARE HIGHLY SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE DILUTION, AND SHOULD BE PURCHASED ONLY BY
[NAME OF ISSUER], LP – PRIVATE PLACEMENT MEMORANDUM (DATE) PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT (SEE “INVESTOR SUITABILITY STANDARDS”). SEE “RISK FACTORS” FOR SPECIAL RISKS CONCERNING THE COMPANY.

THE SECURITIES OFFERED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THEY ARE BEING OFFERED AND SOLD IN RELIANCE UPON THE EXEMPTIONS FROM FEDERAL REGISTRATION REQUIREMENTS PROVIDED FOR UNDER SECTION 4(2) OF THE ACT, AND REGULATION D THEREUNDER RELATING TO CERTAIN LIMITED OR PRIVATE OFFERINGS, AND COMPARABLE STATE LAW PROVISIONS. THESE SECURITIES CANNOT BE RESOLD WITHOUT REGISTRATION UNDER THE ACT OR PURSUANT TO AN EXEMPTION THEREFROM.

THERE WILL BE NO ESCROW OF FUNDS, AND UPON SECURING SUBCRIPTIONS FOR THE MINIMUM OFFERING ALL SUBSCRIPTION MONEYS WILL BE IMMEDIATELY AVAILABLE TO THE COMPANY FOR ITS OPERATING EXPENSES. ALL SECURITIES ARE OFFERED ON A “BEST EFFORTS, ANY OR ALL” BASIS. THIS OFFERING WILL TERMINATE ON JUNE 30, 2012, BUT MAY BE EXTENDED LONGER OR TERMINATED EARLIER WITHOUT NOTICE TO INVESTORS. THE COMPANY RESERVES THE RIGHT TO UPDATE THIS MEMORANDUM AT ANY TIME. SEE “TERMS OF THE OFFERING”, “USE OF PROCEEDS” AND “PLAN OF DISTRIBUTION.”

* The General Partner anticipates selling all of the Units involved herein, and no commissions will be due on any sale thereof. The Company does not believe that there will be any situation in which the Company could legally pay incentive compensation (a true “finder’s fee”) to a financial consultant, and that there will not be any licensed Broker/Dealer that would underwrite or otherwise agree to sell the Company’s Units.
The proceeds to the Company are calculated after deducting direct offering expenses estimated at [$??]0,000 payable by the Company, including selling costs, legal and accounting expenses, printing, state filing fees, transportation, and other related expense which will be paid from operating revenues.

[NAME OF ISSUER], LP – PRIVATE PLACEMENT MEMORANDUM (DATE)

You should rely only on the information contained in this Memorandum. We have not authorized anyone to provide you with additional or different information. We are offering to sell, and seeking offers to buy, Units of our [Class _ ] Preferred Units only in jurisdictions where offers and sales are permitted. The information in this Memorandum is accurate only as of its date, regardless of its time of delivery or of any sale of Units of our Preferred Stock. Our business, financial condition, results of operations and prospects may have changed since that date.

– GENERAL INFORMATION AND SECURITIES LAW NOTICES –

INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK, AND INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE “RISK FACTORS” BELOW THAT MANAGEMENT BELIEVES PRESENT THE MOST SUBSTANTIAL RISKS TO AN INVESTOR IN THIS OFFERING.

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE PRIVATE PLACEMENT, INCLUDING THE MERITS AND RISKS INVOLVED. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH, OR APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION OR BY THE SECURITIES REGULATORY AUTHORITY OF ANY STATE. NO SUCH COMMISSION OR AUTHORITY HAS PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM, NOR IS IT INTENDED THAT THEY WILL AND ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THIS PRIVATE PLACEMENT OF SECURITIES (THE “OFFERING”) IS BEING MADE IN THE UNITED STATES OF AMERICA IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
[NAME OF ISSUER], LP – PRIVATE PLACEMENT MEMORANDUM (DATE) UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND ANALOGOUS PROVISIONS UNDER STATE SECURITIES LAWS FOR AN OFFER AND SALE OF SECURITIES THAT DOES NOT INVOLVE A PUBLIC OFFERING. THERE IS NO PUBLIC MARKET FOR THE UNITS AND NO MARKET IS LIKELY TO DEVELOP. THE COMPANY HAS NO OBLIGATION TO REGISTER THE UNITS IN ORDER TO FACILITATE TRADING. THESE SECURITIES ARE “RESTRICTED SECURITIES” UNDER AND ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

SALES OF THE UNITS WILL BE MADE ONLY TO INVESTORS WHO QUALIFY AS “ACCREDITED INVESTORS” UNDER RULE 501(A) UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT, AND TO INVESTORS WHO ARE RESIDENTS OF CAILFORNIA ACCORDING TO RULE 1001 AND CAIFORNIA CODE SECTION 25102. THE COMPANY RESERVES THE RIGHT TO DETERMINE IN ITS SOLE DISCRETION WHETHER AN INVESTOR MEETS THE SOPHISTICATION REQUIREMENTS.

THE DISTRIBUTION OF THIS MEMORANDUM AND THE OFFER AND SALE OF THE UNITS MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS. PERSONS INTO WHOSE POSSESSION THIS MEMORANDUM OR ANY OF THE UNITS COME MUST INFORM THEMSELVES ABOUT, AND OBSERVE, ANY SUCH RESTRICTIONS. THE COMPANY IS NOT MAKING ANY REPRESENTATION TO THE POTENTIAL INVESTOR OR PURCHASER OF THE UNITS REGARDING THE LEGALITY OF ANY INVESTMENT THEREIN BY THE POTENTIAL INVESTOR OR PURCHASER UNDER APPLICABLE LEGAL INVESTMENT OR SIMILAR LAWS.

THIS MEMORANDUM CONSTITUTES AN OFFER ONLY TO THE INVESTOR WHOSE NAME APPEARS IN THE APPROPRIATE SPACE ON THE COVER PAGE HEREOF AND TO WHOM THIS MEMORANDUM IS INITIALLY DISTRIBUTED AND DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANYONE IN ANY STATE OR IN ANY OTHER JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.

THE COMPANY RESERVES THE RIGHT, IN ITS SOLE DISCRETION AND FOR ANY REASON WHATSOEVER, TO MODIFY, AMEND AND/OR WITHDRAW ALL OR A PORTION OF THIS OFFERING AND/OR TO ACCEPT OR REJECT IN WHOLE OR IN PART ANY PROSPECTIVE INVESTMENT IN THE UNITS OR TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE AMOUNT OF UNITS SUCH INVESTOR DESIRES TO PURCHASE; THE COMPANY SHALL HAVE NO LIABILITY WHATSOEVER TO ANY INVESTOR AND/OR PURCHASER IN THE EVENT THAT ANY OF THE FOREGOING SHALL OCCUR. THE COMPANY, IN ITS SOLE DISCRETION, MAY WAIVE THE MINIMUM INVESTMENT REQUIREMENT.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION WITH RESPECT TO THE OFFER OR SALE OF THE UNITS IN THIS OFFERING, WHICH IS NOT CONTAINED IN THIS OFFERING MEMORANDUM, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. ANY PREDICTIONS, REPRESENTATIONS, AND/OR ANY INFORMATION, WRITTEN OR ORAL, WHICH DO NOT CONFORM TO THOSE CONTAINED IN THE OFFERING MEMORANDUM ARE NOT PERMITTED AND MUST NOT BE RELIED UPON BY ANY PROSPECTIVE INVESTOR.

THIS MEMORANDUM DOES NOT PURPORT TO BE ALL-INCLUSIVE OR CONTAIN ALL INFORMATION THAT A PROSPECTIVE INVESTOR MAY DESIRE IN INVESTIGATING THE COMPANY. EACH INVESTOR MUST RELY ON HIS OR HER OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THIS MEMORANDUM, INCLUDING THE MERITS AND RISKS INVOLVED IN MAKING AN INVESTMENT DECISION WITH RESPECT TO THE SECURITIES. PRIOR TO MAKING AN INVESTMENT DECISION REGARDING THE SECURITIES, A PROSPECTIVE INVESTOR SHOULD CONSULT HIS OR HER OWN COUNSEL, ACCOUNTANTS, INVESTMENT AND TAX CONSULTANTS, AND OTHER ADVISORS, AS TO ALL MATTERS CONCERNING THIS INVESTMENT, AND TO CAREFULLY REVIEW AND CONSIDER THIS ENTIRE MEMORANDUM.

THIS MEMORANDUM HAS BEEN PREPARED FOR INFORMATIONAL PURPOSES IN ORDER TO ASSIST PROSPECTIVE INVESTORS IN UNDERSTANDING THE COMPANY AND SPEAKS AS OF THE DATE HEREOF. BY ACCEPTING DELIVERY OF ANY PRIVATE PLACEMENT MATERIAL, THE PROSPECTIVE INVESTOR AGREES: (1) TO KEEP THE CONTENTS CONFIDENTIAL AND NOT TO DISCLOSE THE SAME TO ANY THIRD PARTY OR OTHERWISE USE THE SAME FOR ANY PURPOSE OTHER THAN EVALUATION BY SUCH INVESTOR OF A POTENTIAL PRIVATE INVESTMENT IN THE COMPANY AND (2) AGREES TO RETURN THE SAME TO THE COMPANY, IF (A) THE INVESTOR DOES NOT AGREE TO PURCHASE ANY UNITS, (B) THE INVESTOR’S PURCHASE AGREEMENT IS NOT ACCEPTED BY THE COMPANY, OR (C) THE OFFERING IS TERMINATED OR WITHDRAWN BY THE COMPANY.

NASAA Information.

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING INCLUDING THE MERITS AND RISKS INVOLVED. NO FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY HAS RECOMMENDED THESE SECURITIES. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THESE SECURITIES MAY BE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE UNDER APPLICABLE UNITED STATES LAWS AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER FEDERAL AND STATE SECURITIES LAWS.

INVESTORS SHOULD BE AWARE THAT THEY MIGHT BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

Retirement Plan Information.

THE FIDUCIARY OF THE ERISA PLAN REPRESENTS THAT HE/SHE/IT HAS BEEN INFORMED OF AND UNDERSTANDS THE COMPANY’S INVESTMENT OBJECTIVES, POLICIES AND STRATEGIES, AND THAT THE DECISION TO INVEST PLAN ASSETS (AS SUCH TERM IS DEFINED IN ERISA) IN THE COMPANY IS CONSISTENT WITH THE PROVISIONS OF ERISA THAT REQUIRE DIVERSIFICATION OF PLAN ASSETS AND IMPOSE OTHER FIDUCIARY RESPONSIBILITIES. THE PURCHASER FIDUCIARY OR PLAN (A) IS RESPONSIBLE FOR THE DECISION TO INVEST IN THE COMPANY, (B) IS INDEPENDENT OF THE COMPANY MANAGER OR ANY OF ITS AFFILIATES, (C) IS QUALIFIED TO MAKE SUCH INVESTMENT DECISION, AND (D) IN MAKING SUCH DECISION, THE PURCHASER FIDUCIARY OR PLAN HAS NOT RELIED PRIMARILY ON THE ADVICE OR RECOMMENDATION OF THE COMPANY OR ANY OF ITS AFFILIATES.

State Information.

This Memorandum will not be distributed to, nor will an offer, solicitation or sale be made to, any person unless the Company has reasonable grounds to believe, and does believe, immediately prior to making the offer, solicitation or sale, that such person is either an Accredited Investor, or a Non-Accredited Investor able to understand this Memorandum and bear the entire economic risk of this investment. The [Class _ ] Preferred Units (the “Units”) offered hereby may not be resold or otherwise transferred by the purchaser in the absence of qualification under any applicable state securities laws, or an opinion of counsel, which opinion of counsel must be acceptable to the Company, to the effect that such qualification is not required.

Except as otherwise provided by certain state laws, once a subscriber has tendered his/her subscription amount, he/she will have no right to the return of such funds.

Other Information.

Offerees are entitled and encouraged to ask questions of the Company or its representatives concerning the business and financial condition of the Company and the terms and conditions of this Offering, and to request such data as may be necessary to enable them to make an informed investment decision. Therefore, the Company will make available, prior to consummation of any sale, to each prospective investor and/or such investor’s representatives and advisors, if any, the opportunity to ask questions and receive answers concerning the terms and conditions of this private placement and to obtain any additional information which the Company may possess or can obtain without unreasonable effort or expense that is necessary to verify the accuracy of the information furnished to each prospective investor. Any such questions should be directed to the Managers of the General Partner, ________________________, who can be contacted at the address on the cover page of this Memorandum.

Neither the delivery of this Memorandum nor any sale made in connection with this Memorandum shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this Memorandum. You should not assume that the information appearing in this Memorandum is accurate as of any date other than the date on the front cover of this Memorandum, regardless of the time of delivery of this Memorandum or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.

SUITABILITY REQUIREMENTS

Investor Representations. The potential investor represents that, he/she or it:

1. Are acquiring the Securities for investment purposes only and not with a view to resale or distribution;
2. Are able to bear the economic risk of losing the entire amount of their investment in the Securities;
3. Have an overall commitment to investments that are not readily marketable and which are not disproportionate to their net worth, and the investment in the Securities will not cause such overall commitment to become excessive;
4. Have adequate means of providing for current needs and personal contingencies and have no need for liquidity in the investment in the Securities;
5. Have substantial experience in making investment decisions of this type or are relying on their own professional representative in making this investment decision; and
6. Their own investment goals are compatible with the objectives of an investment in the Securities.

The suitability standards referred to above and below represent minimum suitability requirements for prospective investors, and the satisfaction of such standards by a prospective investor does not necessarily mean that the Securities are a suitable investment for a prospective investor. The Company reserves the right to reject the subscription of any prospective investor the Company believes, in its sole discretion, does not meet the standards for investment in the Securities. In addition, the Company reserves the right to waive the suitability standards in certain cases. In the Subscription Agreement provided in conjunction herewith, (the “Subscription Agreement”), potential investors must represent that they satisfy the suitability standards provide for herein.

Investor Suitability Standards.

The Company makes this offer for investment in the Units (the “Offering”) only to those individuals who meet certain investor suitability standards regarding both their financial ability to absorb loss of their investment and their investment sophistication. Rule 504 of Regulation D provides that the Company may offer the securities solely for investment purposes to investors who meet certain suitability standards established either by the Company or, in certain circumstances, by the laws of the investors’ domicile. Rule 1001 allows an additional exemption in [State of Domicile] according to Section 25102 (n)(2)(E). Therefore, unless the requirements of a particular state demand a higher amount, the suitability standards established by the Company for non-[State of Domicile] residents will be those of an “Accredited Investors” according to Rule 501.

The most common ways to meet the definition of an Accredited Investor are as follows:

1. Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his or her purchase exceeds [$??],000,000;
2. Any natural person who had an individual income in excess of $__,000 in each of the two most recent years or joint income with that person’s spouse in excess of $____,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
3. Any trust, with total assets in excess of $_______,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated 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; or
4. An entity in which all of the equity owners are Accredited Investors.

For [State of Domicile] residents the prospective investor must, during the year in which the investment is being made, have an estimated annual gross income of at least One Hundred Thousand U.S. Dollars ([$??]00,000) and a net worth, exclusive of personal residence, furnishings and automobiles, of at least ______________ U.S. Dollars ([$??]0,000) or, in the alternative, have a net worth of at least ____________________U.S. Dollars ($??],000).

The Company is offering the securities pursuant to available exemptions from registration under federal and state securities laws. The securities will be restricted securities and must be held indefinitely according to their terms. They may not be transferred unless pursuant to an effective registration statement or an available exemption from registration with an opinion from legal counsel to that effect, satisfactory to the company. The company is under no obligation, and has no intention, to register the securities and is under no obligation to attempt to secure an exemption for any subsequent sale.

FORWARD-LOOKING STATEMENTS

Some of the statements under “Executive Summary,” “Risk Factors,” “Use of Proceeds,” “Financial Information,” and elsewhere in this Private Placement Memorandum constitute forward-looking statements. These statements involve risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the Company to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. In some cases, potential investors can identify forward-looking statements by terms, such as “may,” “intends,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “proposed,” “continue,” or the negative of these terms.

Since these Securities are not subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, we currently are ineligible to rely on the safe harbor for forward-looking statements provided in Section 27A of the Securities Act of 1933, as amended.

Although forward-looking statements in this Memorandum reflect the good faith judgment of management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Memorandum. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Memorandum, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us herein, especially in the section titled Risk Factors, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation, and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include but are not limited to:

  • Internet sales depend on a commitment to internet marketing which is expensive and sales do not always correlate to the volume of marketing performed.
  • Competitor’s response in the market.
  • Due to the absence of any operating history, the Company may have overlooked other trends and conditions that could affect its business.
  • Ability to control costs in general.
  • The ability to market unique nutritional supplements according to the Company’s business strategy.
  • General economic conditions in the United States and other parts of the world.
  • Lower levels of consumer confidence, consumer spending and purchases of discretionary items, including nutritional supplements.
  • Continued restrictions in the credit and capital markets, which would impair our ability to access additional sources of liquidity, if needed.
  • Changes in the availability and cost of raw materials which could impact prices of our products.
  • Our ability to anticipate and respond to constantly changing consumer demands.
  • Our ability to attract and retain talented, highly qualified executives and employees.
  • Our ability to adequately establish, defend and protect our proprietary rights.
  • Our ability to successfully develop or acquire new product lines or enter new markets or product categories, and risks related to such new lines, markets or categories.
  • The ability of our principal unit-holders to exercise significant influence over the Company.

The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable law. Because of these risks, uncertainties and assumptions, the forward-looking events discussed in this Private Placement Memorandum might not occur. To the extent that the Company uses market data and industry standards in this Private Placement Memorandum, such information shall have been obtained from internal surveys, market research, publicly available information and industry publications. Industry publications generally state that the information they have provided has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed.

We caution you that actual results or business conditions may differ materially from those projected or suggested in forward-looking statements as a result of various factors including, but not limited to, those described above and in the Risk Factors section of this Memorandum. We cannot assure you that we have identified all the factors that create uncertainties. Moreover, new risks emerge from time to time and it is not possible for us to predict all risks, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. You should not place undue reliance on forward-looking statements. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly release the result of any revision of these forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events

RISK FACTORS

INVESTING IN THE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE RISK FACTORS AND ALL OTHER INFORMATION DISCLOSED IN THIS MEMORANDUM MUST BE CAREFULLY CONSIDERED BEFORE MAKING AN INVESTMENT DECISION REGARDING THE SECURITIES. ONE OR MORE OF THESE RISK FACTORS COULD CAUSE A LOSS OF PART OR ALL FUNDS INVESTED IN THE SECURITIES.

The purchase of the Units offered hereby involves a high degree of risk and is suitable only for persons with the financial capability of making and holding long-term investments not readily reducible to cash. Prospective investors must, therefore, have adequate means of providing for their current needs and personal contingencies. Only those investors who can bear the risk of loss of their entire investment should participate in this Offering. In addition to the general risks described in this Memorandum and the related Exhibits, prospective investors should consider the risks set forth below. Investors should recognize that the risk factors set forth below are those that, at the date of this Memorandum, seem to the Company the most likely to be significant. Prospective purchasers must realize, however, that factors other than those set forth below may ultimately affect the investment offered pursuant to this Memorandum in a manner and to a degree that cannot be foreseen at this time. The order in which the following risks are presented is not intended to represent the magnitude of the risks described.

Financial Risks

New entity; no prior operations; no cash flow from operations.
[Copy]

Projections may not be relied upon by Investors.
[Copy]

The Offering proceeds provide limited operating capital which could adversely affect the Company’s ability to achieve its business plan; leverage with borrowed funds.
[Copy]

Business Risks

Costs of Products and materials.
[Copy]

Competition.
[Copy]

Inability to gain market acceptance for products or establish a market presence.
[Copy]

Inability to implement business strategy; impact on earnings.
[Copy]

Limited control and dependence upon individuals as management.
[Copy]

Retaining a qualified and competent management team.
[Copy]

Defending proprietary rights.
[Copy]

Regulatory issues.
[Copy]

General economic conditions in the United States.
[Copy]

Offering Risks

Illiquidity and restrictions on Limited Partnership Units.
[Copy]

The pricing, terms and conditions of the Securities were arbitrarily determined by the Company.
[Copy]

The Company may not raise sufficient funds to close the Minimum Offering and the investor may miss other investment opportunities while his, her or its funds are held by the Company.
[Copy]

The offering without an underwriter; all Units may not be sold.
[Copy]

Dilution in the book value of investment.
[Copy]

Financial projections.
[Copy]

Management has the discretion to use the proceeds from the offering.
[Copy]

No established exit strategy.
[Copy]

THE COMPANY IS OFFERING THE SECURITIES PURSUANT TO AVAILABLE EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS. THE SECURITIES WILL BE RESTRICTED SECURITIES AND GENERALY MUST BE HELD INDEFINATELY. THEY MAY NOT BE TRANSFERRED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN AVAILABLE EXEMPTION FROM REGISTRATION WITH AN OPINION FROM LEGAL COUNSEL TO THAT EFFECT SATISFACTORY TO THE COMPANY. THE COMPANY IS UNDER NO OBLIGATION AND HAS NO INTENTION, TO REGISTER THE SECURITIES AND IS UNDER NO OBLIGATION TO ATTEMPT TO SECURE AN EXEMPTION FOR ANY SUBSEQUENT SALE.’

Additional disclosures may have been required if this Agreement had been reviewed by federal or state securities regulators.
[Copy]

No independent review.
[Copy]

No separate legal representation.
[Copy]

ERISA
[Copy]

Investment in the Securities involves complex tax consequences; no tax opinion has been secured.
[Copy]

INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES OR TO SECURE THEIR OWN TAX OPINIONS.

Conclusion.

GENERALLY, IN ADDITION TO THE ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT. IN REVIEWING THIS INVESTMENT, POTENTIAL INVESTORS SHOULD KEEP IN MIND OTHER POSSIBLE RISKS THAT COULD BE IMPORTANT.

EXECUTIVE SUMMARY

Beginning on the date hereof, [Name of Issuer], LP, a [State of Domicile] limited partnership (the “Company” or the “Partnership”), is offering to sell [Class _ ] Limited Partnership Units to investors for [$??],000 for _____ (_) ownership unit (the “[Class _ ] Units,” the “Units” or the “Securities”). Each ownership Unit represents one-half of one percent of the equity of the Company. The maximum offering is ________ Units for an aggregate offering of [$??],000,000 (the “Maximum Offering”) or twenty ([??]%0) percent of the equity of the Company. The minimum offering is [_] Units for an aggregate offering of $[??],000 (the “Minimum Offering”) or __ (_%) percent of the equity of the Company. The minimum investment amount is [$??],000, provided however the General Partner may, in its discretion, accept a subscription in a lesser amount. The investor subscribing for a [Class _ ] Unit will be provided a quarterly preferred return (non-cumulative and non-guaranteed) for _______________of the investment period in an amount up to but not exceeding __ (??%) percent per annum calculated on the amount of their capital account as of the date of the quarterly payment. The return shall be calculated as of the date the original investment, based on the beginning balance of the Limited Partner’s capital account and shall be adjusted in the event that the Limited Partner’s capital account is reduced as a result of a return of equity. The General Partner and the Class [ ] Limited Partners will be allocated the balance of the earnings in proportion their respective ownership interests. Additionally, in the event of a sale of all of the assets, the ______________ preferred annual return for __________________will be prorated on a calendar year basis calculated on the balance of the Limited Partner’s capital account as of the date of the closing of the sale. A [Class _ ] Limited Partnership Interest owner shall also have _____________ as to other Partners for repayment of the balance due of his, her or its Capital Account in the event of liquidation.

BUSINESS DESCRIPTION

Background and Industry.
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The [Company] Business and Products.
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MARKET ANALYSIS

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MARKETING STRATEGY

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OPERATIONS

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MANAGEMENT SUMMARY

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FINANCIAL INFORMATION

Note: the information provided herewith includes Management’s estimates and projections; they are not calculated according to generally accepted accounting principles.
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DESCRIPTION OF THE OFFERING

Beginning on the date hereof, [Name of Issuer], LP, a [State of Domicile] limited partnership (the “Company” or the “Partnership”), is offering to sell [Class _ ] Limited Partnership Units to investors for [$??],000 for _____ (_) ownership unit (the “[Class _ ] Units,” the “Units” or the “Securities”). Each ownership Unit represents one-half of one percent of the equity of the Company. The maximum offering is ________ Units for an aggregate offering of [$??],000,000 (the “Maximum Offering”) or twenty ([??]%0) percent of the equity of the Company. The minimum offering is [_] Units for an aggregate offering of $[??],000 (the “Minimum Offering”) or __ (_%) percent of the equity of the Company. The minimum investment amount is [$??],000, provided however the General Partner may, in its discretion, accept a subscription in a lesser amount. The investor subscribing for a [Class _ ] Unit will be provided a quarterly preferred return (non-cumulative and non-guaranteed) for ______________of the investment period in an amount up to but not exceeding __ (??%) percent per annum calculated on the amount of their capital account as of the date of the quarterly payment. The return shall be calculated as of the date the original investment, based on the beginning balance of the Limited Partner’s capital account and shall be adjusted in the event that the Limited Partner’s capital account is reduced as a result of a return of equity. The General Partner and the Class [ ] Limited Partners will be allocated the balance of the earnings in proportion their respective ownership interests. Additionally, in the event of a sale of all of the assets, the ______________ preferred annual return for __________________will be prorated on a calendar year basis calculated on the balance of the Limited Partner’s capital account as of the date of the closing of the sale. A [Class _ ] Limited Partnership Interest owner shall also have _____________ as to other Partners for repayment of the balance due of his, her or its Capital Account in the event of liquidation.

All proceeds raised from the Offering will be held by the Company in a segregated bank account but not with an independent escrow agent until the “minimum offering” has been subscribe to at which time the Company may draw out the investment funds to use according to the uses described herein. Investors must complete and forward to the Company a Subscription Agreement and signature page to the Limited Partnership Agreement, as well as wire transfer the subscription price for the [Class _ ] Units to the Company in accordance with the instructions set forth in the Subscription Agreement. The Company has the right in its sole and absolute discretion to reject or accept subscriptions. Any questions regarding the Offering should be directed to ___________________.

USE OF PROCEEDS

THE AMOUNTS SET FORTH BELOW ARE ESTIMATES. THERE MAY BE DIFFERENCES BETWEEN THE ESTIMATED USES AND THE ACTUAL USES OF THE PROCEEDS. THE COMPANY DOES NOT EXPECT THE DIFFERENCES TO BE OF A MATERIAL NATURE.

The Company estimates using the proceeds from the Offering as follows:

Partnership Unit Offered Offering Price Underwriting Discount and Commissions Net Proceeds to the Company
Minimum Offering [$??],000 per Unit [Class_] Units None [Class_] Units $[??],000
Maximum Offering 40 Class B Units [$??],000 per Unit [Class_] Units None $[??],000

Use of Funds
Funding according to Business Plan (see also Schedule below) $[??],000
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Assuming that all [Class _ ] Preferred Units offered by the Company are sold, of which there is no assurance, the net proceeds to the Company will be approximately $______________, after deduction for expenses of approximately [$??]0,000 for this Offering. The Company, for this purpose, is assuming that all sales of the Units will be made by the Company’s General Partner, who will receive no commission or fee from such sales, and that no placement fees will be paid.

The investment proceeds will be used for the creation and acquisition of product inventory sold by the Company, operating expenses, and marketing costs for a period of one year from the date of closing of the offering. See Use of Funds schedule below. If the Minimum Offering is fully subscribed, management does not anticipate that additional equity or other sources of financing will be required to operate the Company. If the lesser amount of subscription is received from the offering, then the marketing strategy and execution will be impaired in proportion to the amount of money raised. Any costs or expenses in creating the Offering including legal and registration fees will be paid by the Company from operating revenues. The Company is not currently in breach or default of any note, loan, lease or other indebtedness. The Company has no judgments, liens or settlement obligations.

After reviewing the use of funds allocation a potential investor should consider whether the remaining portion of his/her/its investment is adequate to fund the future development of the business and operations of the Company. The following represents management’s current best estimate of the manner in which net proceeds from the Offering would be utilized:

Description of Use of Funds Amount Estimated Date
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Note: The uses, amounts and dates of use above are speculative and estimates only. Management reserves the right to change any use, amount and date of use in is sole and unfettered discretion.

CAPITALIZATION

The following chart sets forth the capitalization of the Company as of ___________ and the capitalization of the Company assuming it receives the full Offering Amount.

Capitalization
Upon Funding of the Offering
Total Debt $0 $0
Equity [$?],000 [$?],000
Retained Earnings $0 $0
Total Capitalization [$?],000 [$?],000

DESCRIPTION OF THE SECURITIES

Operating Distributions.
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[Class _ ] Preferred Distributions.
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Dilution.

As a result of the arbitrary decision by the Company to sell the [Class _ ] Units at an effective price of _______________ in in the Company, the value of the investors’ [Class _ ] Units are in effect diluted on a price per percentage ownership, in relation to the book value of Company. The __________ Units outstanding prior to this Offering were acquired at a substantially lower price than the offering price. The book value of the Company will increase after the offering, and the value of the [Class _ ] Unit-holder percentage will be diluted while the value of the ________________. Under Generally Accepted Accounting Principles (“GAAP”), the current assets of the company, except for inventory, equipment, cash and receivables, are, not considered to be tangible assets. They are intangible assets such as intellectual property rights, good will, and the time and effort put into developing business. For accounting purposes therefore, the book value of the Company is effectively zero prior to the Offering.

Restrictions on Transfer.
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ADDITIONAL INFORMATION

Subscription Process.

In order to subscribe to this Offering please follow the process below:

1. Carefully review and complete the Information and Document Package.
2. Sign the Receipt for this Memorandum.
3. Complete and sign the Investor Suitability Questionnaire.
4. Sign the Non-Solicitation Declaration.
5. Sign the signature page of the Subscription Agreement.
6. Sign the signature page of the Limited Partnership Agreement.
7. Wire funds or provide a check or money order for the subscription amount of your investment.

The Company reserves the right to accept or reject any subscription for Units for any reason whatsoever. If a subscription is rejected by the Company all funds tendered for the investment will be returned to the subscriber, without interest or deduction.

Documents and Questions.

Copies of all documentation which is material to the Company and this offering are available for inspection by qualified investors at the offices of the Company upon request. In addition, the Company will make available to qualified investors any other information concerning the Company that an investor requests to evaluate the investment. Representatives of the Company are available to answer any questions or inquiries from qualified investors concerning the Company and the investment.

Inquiries may be directed to:

A list of available Partnership documents include:

1. Articles of Limited Partnership.
2. Form of Limited Partnership Agreement.
3. Form of Subscription Agreement.
4. Investor Suitability Questionnaire.
5. Declaration of Non-Solicitation.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com