Describes the succession of Issuer payment preferences. When one is satisfied, further payments are made to the next level preference. For example, in Participating Preferred Stock, Preferred dividends (which accrue over time) are paid first, followed by payment of the Investors’ invested capital, followed by distributions to common equity holders. Pertains to equity and real estate investments. Often structured in one of 3 different formats:
• Alternative 1 (non-participating Preferred Stock): First pay [__ times] the Original Purchase Price [plus [accrued and] declared and unpaid dividends] on each share of Series A Preferred (or, if greater, the amount that the Series A Preferred would receive on an as-converted basis). The balance of any proceeds shall be distributed pro-rata to holders of Common Stock.
• Alternative 2 (full participating Preferred Stock): First pay [___ times] the Original Purchase Price [plus accrued and declared and unpaid dividends] on each share of Series A Preferred. Thereafter, the Series A Preferred participates with the Common Stock pro-rata on an as-converted basis.
• Alternative 3 (cap on Preferred Stock participation rights): First pay [___ times] the Original Purchase Price [plus accrued and declared and unpaid dividends] on each share of Series A Preferred. Thereafter, Series A Preferred participates with Common Stock pro rata on an as-converted basis until the holders of Series A Preferred receive an aggregate of [_____] times the Original Purchase Price (including the amount paid
pursuant to the preceding sentence).
