casemark/private-placement-memorandum

Private Placement Memorandum (PPM)

Draft a Regulation D-compliant PPM delivering full-and-fair disclosure with a defensible liability record.

Quick Start

Collect before drafting:

1. Issuer profile — legal name, formation state/date, addresses, prior names/reorgs.
2. Offering terms — security type, price/valuation, min/max raise, use of proceeds, timeline, escrow.
3. Cap table — authorized/outstanding classes, options/warrants/convertibles, major holders.
4. Financials — historical statements, burn, runway, audit status.
5. Business materials — deck, plan, key contracts, IP, regulatory posture.
6. Management bios — roles, tenure, relevant history.
7. Compliance inputs — 506(b) vs 506(c), investor eligibility plan, blue sky scope.

Core Workflow

1. Determine Exemption

| Factor | 506(b) | 506(c) | |---|---|---| | General solicitation | Prohibited | Permitted | | Investors | Accredited + ≤35 sophisticated non-accredited | Accredited only | | Verification | Reasonable belief | Reasonable steps to verify | | Disclosure | Enhanced if non-accredited present | Accredited-only package |

Record the exemption choice and its disclosure implications in the PPM.

2. Intake & Gap Log

Audit available documents against required inputs:

• Governing docs (charter, bylaws/operating agreement, investor rights, ROFR/co-sale)
• Security terms (dividend/interest, liquidation, conversion, voting, protective provisions)
• Material contracts (top customers/suppliers, IP licenses, debt)
• Litigation/regulatory (claims, investigations, sanctions)
• Financials (last 2–3 years or since inception; audited vs unaudited)

Track gaps in a single table:

| Section | Missing Data | Source | Owner | Deadline | |---|---|---|---|---|

3. Cover Page + Legends

Required elements:

• Issuer name, security type, max amount, date
• Confidentiality legend — restrict distribution; require return/destroy
• Securities legend — not registered under the 1933 Act or state laws; offered under exemptions; no government approval
• Transfer restrictions — restricted securities; no public market; must hold indefinitely

4. Executive Summary

Structured fields: issuer identity and state, offering terms (security, valuation, min/max, closings, escrow), key investor rights (dividend, liquidation preference, conversion, voting), top 3–5 use-of-proceeds categories with percentages, 3–5 highest-impact risks, investor eligibility and verification approach.

5. Risk Factors

Minimum categories — each with bold heading and 2–5 sentences (what, why material, consequence):

• Financial/capital (losses, burn, dilution)
• Business/market (adoption, competition, market assumptions)
• Regulatory/compliance (licensing, investigations)
• Technology/IP (development risk, obsolescence, disputes)
• Key personnel (dependence, recruiting)
• Customer/supplier concentration
• Securities-specific (illiquidity, transfer limits, no dividends, management discretion)

6. Use of Proceeds

| Category | Min Raise | Max Raise | Description | |---|---|---|---| | Product/Engineering | $ | $ | Milestones, hires, infra | | Sales/Marketing | $ | $ | Channels, headcount | | Working Capital | $ | $ | Ops, inventory, receivables | | Debt Repayment | $ | $ | Lender, rate, maturity | | Fees/Offering Costs | $ | $ | Legal, accounting, escrow |

Include discretion disclaimer and conditional allocations if max not reached.

7. Business Description

Cover: company history/milestones, products/services and roadmap, market size and customer profile, competitive landscape, go-to-market, operations/supply chain, regulatory framework, intellectual property.

8. Management & Board

| Name | Role | Tenure | Relevant Experience | Education | Equity/Comp | |---|---|---|---|---|---|

9. Capitalization

Provide pre-offering cap table, post-offering cap table (min and max scenarios), fully diluted schedule, and notes on options/warrants/convertibles with conversion assumptions.

10. Securities Terms

Term-sheet format covering: dividends/interest, liquidation preference (multiple, participation, deemed liquidation events), conversion (ratio, adjustments, auto-triggers), voting/protective provisions, redemption, transfer restrictions (ROFR, co-sale, lock-ups, legends), registration rights, preemptive rights, information and board rights.

11. Distribution & Subscription

• Direct vs placement agent; fees
• Offering timeline, closings, escrow terms
• Form D filing within 15 days of first sale [VERIFY]
• State blue sky notice filings and timing [VERIFY]
• Subscription steps: (1) review PPM + exhibits → (2) execute subscription agreement + questionnaire → (3) accredited verification if 506(c) → (4) wire funds → (5) acceptance notice and issuance

12. Legal Matters & Disclaimers

Counsel and accountant identification, audit status disclaimer, forward-looking statements cautionary language, no-update obligation.

13. Investor Qualifications

• Accredited investor definition with current thresholds [VERIFY]
• Net worth test excludes primary residence [VERIFY]
• Sophistication and illiquidity warning
• Company discretion to reject subscriptions

Final QA Checklist

• [ ] Defined terms consistent throughout
• [ ] Numbers reconcile across all sections
• [ ] Risk factors match issuer-specific facts
• [ ] All three legends present and prominent
• [ ] No general solicitation language if 506(b)
• [ ] Exhibits attached and cross-referenced
• [ ] All [VERIFY] items confirmed against current law

Pitfalls

• No puffery — neutral language only; no unsupported projections or absolute guarantees.
• Tailor risks — issuer-specific; never use generic boilerplate lists.
• Gap discipline — every missing item goes in the Gap Log; do not draft around holes.
• Blue sky variance — confirm state-specific notice filing requirements and deadlines.
• Mark uncertainties — tag any unconfirmed citations or thresholds with [VERIFY].