Your start-up company has been funded as follows:

	Investment	% ownership	Preference	Cap
Family Loans (Yr 0)	$ 1,250,000	0	na	na
Founders Investment (YR 0)	$ 500,000	40%	(0)	na
Round #1 Investment (YR 2)	4,000,000	35%	(2X)	None
Round #2 Investment (YR 3)	5,000,000	25%	(1X)	2X

The family loans carry a 14% coupon cumulative simple interest rate; however the company was only able to pay $50,000 interest in Year 1 and $ 80,000 interest in Year 3.

In Year 6 the company is considering a $31,000,000 purchase offer from larger competitor. Round #1 and Round #2 investors hold CONVERTIBLE, fully PARTICIPATING Preferred Stock.

Participation is in the %s indicated above. Round #1 Shares earn 8% CUMULATIVE annual Dividends; and Round #2 Shares earn 6% CUMULATIVE annual Dividends. No Dividends have been paid prior to the Sales Transaction. Assume preference will be paid in order of investment (i.e Round 1 gets paid first)

How will the net sale proceeds be distributed to each stakeholder and what are their rates of returns assuming the deal closes during Year 6?

Family lenders:

Round 1 Investors:

Round 2 Investors:

Founders: