Sample Private Placement Memorandum
C:\2002 REG D SEMINAR\MODEL POM.DOC 2
The Offering
Securities Offered
We are offering a minimum of 500,000 and a maximum of 1,250,000 Shares at $2.00 per share. The
minimum purchase per investor is 10,000 Shares, or $20,000.
The Shares will be convertible into Common Stock on a one-for-one basis, subject to adjustments to reflect
any stock splits, stock dividends, and recapitalizations (the "Conversion Ratio"). At the option of the holders, the
Shares will be convertible into Common Stock at the then Conversion Ratio at any time prior to redemption. The
Shares will be converted automatically into Common Stock at the Conversion Ratio then in effect upon the closing
of an initial public offering.
The Shares will have a Liquidation Preference over the Existing Preferred Stock (as defined below) and the
Common Stock in an amount equal to the purchase price per share plus any accrued and unpaid dividends. Unless
previously converted, the Shares will be redeemable at our option at a price equal to the Liquidation Preference, and
at the option of the holders at a price equal to the Liquidation Preference plus 4% per annum, commencing four and
ten years, respectively, after the completion of this offering. In the event of any liquidation, dissolution, or winding
up of our company, the Shares will have a preference over our Common Stock and any outstanding Existing
Preferred Stock in an amount equal to the Liquidation Preference of the Shares. For this purpose, a merger or
consolidation that results in the stockholders of our company owning 50% or less of the voting power of the
surviving entity or a sale of substantially all of our assets (each a "Change in Control") will be treated as a
liquidation. However, holders of the Shares may elect to convert the Shares into Common Stock immediately prior
to any such event, in which case they would receive consideration upon the event as holders of Common Stock in
lieu of a Liquidation Preference.
The holders of the Shares will have voting rights equal to the same proportion of Common Stock to be
owned after conversion and will have certain registration rights as described herein and, voting as a class, will be
entitled to vote upon certain matters that would adversely affect their rights and preferences as holders of Shares and
to elect no less than one member of our Board of Directors. See "Description of Securities - Series 1 Convertible
Shares."
Use of Proceeds
The net proceeds of this offering will be used to expand our marketing, sales, and distribution capabilities;
purchase or lease touch screen terminals for the electronic ordering and sale of our products and services; implement
our ordering system; provide funding for strategic acquisitions; and provide working capital. We believe that the net
proceeds will be sufficient to fund our operations for approximately 12 to 15 months in the event of the Maximum
offering.
Shares Outstanding
There are currently outstanding 150,000 shares of our Common Stock; 700,000 shares of our Series A
Convertible Preferred Stock, 200,000 shares of our Series B Convertible Preferred Stock, 400,000 shares of our
Series C Convertible Preferred Stock, 800,000 shares of our Series D Convertible Preferred Stock, and 400,000
shares of our Series E Convertible Preferred Stock (the "Existing Preferred Stock"). The Existing Preferred Stock is
convertible into Common Stock on a one-for-one basis, subject to adjustments to reflect any stock splits, stock
dividends, and recapitalizations. Assuming completion of this offering and the conversion of the Shares and the
Existing Preferred Stock, we would have outstanding 3,150,000 shares of Common Stock (if the minimum number
of Shares is sold) or 3,900,000 shares of Common Stock (if the maximum number of Shares is sold). In addition, we
will issue to the Placement Agent five-year warrants to purchase up to 125,000 Shares at a price of $2.40 per share.
Furthermore, we have the right to grant stock options to acquire up to 800,000 shares of Common Stock under our
1999 Stock Option Plan. There are options outstanding to purchase 200,000 shares of Common Stock at this time.
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