The parties can elect for a single redemption trigger, but agree that the payments may be made over an agreed upon period of time. In the first two examples, the company elects whether to extend the payments over time. If it elects to extend all or some of the payments, the extended amount is subject to interest. In the second example, the extended amount is converted to a promissory note, which would provide standard creditor protections to investors. However, the parties will need to consult with a lawyer to understand whether the amount converted to a promissory note would be subject to typical limitations on corporate distributions. In the third example, the parties agree in advance to installment payments, and the payments are not subject to interest.
- Option to pay the redemption amount over an extended period of time
Sample language: At the Company’s option, the Company may elect to pay the Redemption Price in accordance with the following terms: [specify terms and schedule]. The unpaid balance of the Redemption Price shall accrue interest at a rate of X percent [specify simple interest rate or a compounding rate and frequency].
- Option to pay the redemption amount over an extended period of time in the form of debt
Sample language: At the Company’s option, the Company may elect to pay at least $ X of the Redemption Price to the Holder in cash upon redemption and then issue a promissory note providing for interest at X percent on the balance of the Redemption Price, with the Company to pay the balance of the Redemption Price and accrued interest thereon in accordance with the following terms: [specify terms and schedule].
- Paying the redemption amount in predetermined installments
- Sample language: The redemption of the Preferred Stock shall occur in X separate transactions, with the Company redeeming X percent of the outstanding Preferred Stock on a [monthly] OR [quarterly] OR [annual] basis.