Special Private Placement Agreement ("SPPA")

A Special Private Placement Agreement ("SPPA") is entered into by the investor and the Company. The SPPA gives the Company flexibility and control by allowing the Company to decide when to draw down funding and sell its shares. Since the timing of each draw down request is under the control of the Company, it can request funding by selling its shares at a time when it believes its share price is high. The amount the Company is able to draw down upon each request is subject to the volume and trading of its shares set forth in a formula that the Company and investor agree upon in advance. Under the structure, a Company receives a firm commitment from the investor to purchase an agreed dollar amount of the Company's shares. The Company has the right, but not the obligation, to draw down on the SPPA. Alternatively, in a traditional private placement financing, the Company might not raise enough capital in a first round funding and will continuously need to do subsequent rounds. Each subsequent round has its own set of costs and expenses and there is no guaranty how long it will take to raise the funding or if the funding will be raised at all. The SPPA is a more flexible financing structure compared to a debt or convertible structure in which the investor controls conversion and sales of the shares into the market, leaving the Company with little or no control.



Benefits of SPPA funding:



Control

Company retains at all times control over the amount and the timing of each draw down.

Company's funding requests are not contingent on favorable market conditions.

Company has the right to sell shares and investor has the obligation to buy shares subject to the formula agreed upon by the parties.



Funding Availability

Reduces stress on management so they can focus on business and access capital as needed to execute their business plan.



Flexibility

Structure can be custom-made to match a Company's funding needs.

Can be executed under any market condition.

The Company can draw down and take advantage of funding on a periodic basis, especially when the Company feels its stock price is high and trading volume is strong.

Company can set a minimum acceptable price as downside protection.



Definitive Terms

Company is not committed to sell any shares.

Investor is committed for the term of the SPPA to provide funding.



Controlled Share Issuance

Shares are issued as the Company determines to prevent uncertainty regarding dilution.

A Company can raise more capital using fewer shares over a period of price strength.

Lower Cost - Costs are lower than doing several separate rounds of funding each of which may have separate broker's fees, legal fees and accounting fees.

Short Selling Not Permitted - Investor and its affiliates agree not to short during the term of the SPPA.



As a result more large listed companies are now obtainin SPPA funding as it allows them to get on with the business of running their business instead of constantly having to appease investors desires.





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Alvin Donovan, Managing Director Equity Partners Fund SPC, bestselling author, hedge fund industry pioneer, completed several billion dollars transactions, consultant to fortune 500 companies, faculty member most of the world's largest management institutes, raised over USD$1.5 billion for funds

http://www.alvindonovan.com