Resources: EPP Glossary

Glossary - A

Accredited Investor

Any person or institution deemed capable of understanding and affording the financial risks associated with the purchase of Restricted Securities. The Securities and Exchange Commission ("SEC") recognizes the following entities/parties as being accredited:

Individuals

Any person who individually or jointly with their spouse has a net worth of at least $1 million.

An person who has had income in excess of $200,000 for the immediately preceding two years and has an expectation of such income in the current year, or any person and their spouse who has had a joint income in excess of $300,000 for such periods. Any director, officer or general partner of the Issuer.

Institutions

A financial institution such as bank, broker/dealer, insurance company or business development company.

A trust or business partnership, with assets in excess of $5 million, that wasn't formed for the purpose of acquiring the unregistered securities.

Any entity wholly owned by accredited investors.

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American Depositary Receipt (ADR)

A receipt for shares of foreign-based companies that entitles the holder of an ADR to all dividends and capital gains related to the Issuer. ADRs allow U.S. Investors to buy shares of foreign-based corporations' securities through U.S. stock markets and exchanges instead of having to buy shares through a foreign-based companies' primary stock exchange.

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Affiliate

A person or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with an Issuer.

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American Stock Exchange ("AMEX")

A national U.S. stock market exchange.

Glossary - B

Blank Check Preferred Stock

Preferred Stock that has been authorized, but not yet issued, by an Issuer. The specific rights and preferences of the Preferred Stock being issued, including liquidation preferences, dividend rates, and voting rights, are established by the board of directors during completion of an Equity Private Placement. Blank Check Preferred Stock lets an Issuer's board structure and negotiate terms directly with Investors without additional stockholder authorization.

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Bond (Debt: non-Convertible)

A certificate of indebtedness. The Issuer promises to pay the bondholder a specified amount of interest ("coupon") for a specified time period and to repay the debt at the end of a specified period (the "maturity of the bond").

A secured bond is one that is backed by collateral that may be sold if the Issuer fails to pay interest and principal when they are due.

An unsecured bond (a "Debenture") is only backed by the full faith and credit of the Issuer.

Glossary - C

Certificate of Incorporation (or Articles of Incorporation)

An Issuer's basic organizational document, filed with the Secretary of State in the state of incorporation. It includes the name, location, and purpose of a company; the number, classification, rights, and preferences of an Issuer's capital stock; and voting authority of the directors with respect to related party transactions and redemptions.

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Common Stock

Common stock represents an ownership stake in the Issuer. Common stock is the most junior security that may be offered by an Issuer (i.e, holders of preferred stock, subordinated debt, secured debt, and trade payables all get paid before common stockholders in the event of a liquidation of the Issuer). There can be different classes or series of common stock with different rights, including voting or dividend differences.

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Convertible Debt (Debt: Convertible)

Debt that can be converted into equity, usually at the option of the debt holder. Convertible Debt is similar to Convertible Preferred Stock, but it ranks senior to Preferred Stock in the event of a liquidation of the company.

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Convertible Preferred Stock (Preferred Stock: Convertible)

A form of Preferred Stock that grants an Investor the right (but not the obligation) to convert the Preferred Stock into the common stock of the Issuer.

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Convertible Security (Other: Convertible)

Any security - other than Preferred Stock, Debt or a Warrant - that permits an Investor to acquire an ownership stake in the Issuer by converting the original security, typically, into Common Stock (e.g., Trust Preferred Securities).

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Corporate Insiders

Officers, director, or anyone individual owning 10% or more of the outstanding securities of an Issuer.

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Covenants

Agreements made by an Issuer with specified Investors in relation to Equity Private Placements. Affirmative covenants detail positive actions that an Issuer intends to perform. Negative covenants specify actions that an Issuer will not take without consent of such Investors. If an Issuer breaches a covenant, it is considered to be in default, giving specified default rights to Investors.