Including an investor in your company’s funding picture is open to many different options, following are a few scenarios a company might consider.

Dividends

Starting in the third year following the investment, the company will pay to the investor a dividend. Dividends will be shared among all investors on a prorated basis. The amount of the dividend will be determined by the board of directors, but in no event will total dividends issued reduce the fiscal year end cash ratio to less than .75.

Investor Redemption

Investor redemption is based on a pre-

Redemption can be based on the following schedule.

Year One

125% of original investment which is equal to a 10% internal rate of return

Year Four

190% of original investment which is equal to an 18% internal rate of return

Year Five

250% of original investment which is equal to a 21% internal rate of return

Enterprise Buyout

Enterprise buyout of investors is based on a pre-

Buy back will be based on the following schedule.

Year Three

400% of original investment, equal to a 60% internal rate of return

Year Four

600% of original investment, equal to a 57% internal rate of return

Year Five

800% of original investment, equal to a 52% internal rate of return.

Convertible Note

An alternative to a direct investment is a loan from an investor. A specified interest
rate would be defined with payments due at regular intervals over the term of the
loan. The investor would have the option to convert the loan to a percentage interest
in the company for a pre-