LLC Holding Company Term Sheet

Disclaimer


This document is not an offer to sell securities, nor is it a solicitation of an offer to buy such securities.  No offer to buy securities can be accepted and no part of the purchase price can be received until definitive documents have been delivered, and any such offer may be withdrawn or revoked by either side, without obligation or commitment of any kind at any time prior to notice of its acceptance given after delivery of such documents.  An indication of interest set forth below will involve no obligation or commitment of any kind.

            [Coin Name], LLC (“CNLLC”), a newly formed limited liability company which owns all the technology related to the new virtual currency network related to [Coin Name] is in the process of exploring the level of investor interest in an equity financing (“Units”).  If you believe that you would like to hear more about an opportunity to purchase Units, please fill in your name below, and indicate the level at which you might like to participate.

Prior to the closing of any sale of Units, CNLLC will create the “genesis block” of the block chain associated with [Coin Name], and reflect therein the ownership of [2.1 million] [Coin Name] (“Tokens”) by CNLLC, and will issue Common Units to the founders.  CNLLC will then form a wholly owned corporate subsidiary (“Sub”) and contribute to it all of CNLLC’s assets other than the Tokens.


Offering
[750,000] Series A Units
Terms of Series A Units
Each Series A Preferred Unit will represent a right to a return of its liquidation preference, with a right to convert to Common Units if that would generate a greater distribution.

Note, the number of Tokens allocated to each Series A Preferred Unit is initially [0.21].  That number might increase because the number of [Coin Name] in the Network may increase as the terms of the Network are refined, or it might decrease because (a) CNLLC contributes Tokens to Sub and Sub sells Tokens in a traditional SAFT or (b) CNLLC sells additional Units.

Investors have no right to approve sales of Tokens in a traditional SAFT, but the proceeds of that sale will be assets of Sub and accrue to the investors’ benefit.
Pricing
Each Series A Unit will be sold for $1.00/ Unit
Anticipated Total Proceeds
If all Units are sold in accordance with the foregoing, total proceeds will be [$750,000].
Initial Assets of CNLLC
[2.1] million Tokens, 100% of the stock of Sub (which owns all IP related to network)
Use of Proceeds
CNLLC will use the net sales price of Series A Units to fund the purchase of common equity in Sub.  Sub will use those funds to develop and manage the [Coin Name] Network.
Ongoing Operations
CNLLC will be solely a holding company whose only assets are Tokens and stock in Sub.  CNLLC will never sell Tokens directly or through SAFTs – it will only contribute Tokens to Sub as necessary to fund the operations of Sub, and Sub will sell the Tokens or SAFTs.  That way (a) gain on Token sales is not taxed to investors until they have liquidity and (b) the risk that CNLLC is deemed to be engaged in a trade or business is minimized.
Management of CNLLC
CNLLC will be managed by a Board of Directors consisting of __________ and ___________
Pro Forma Captable
Shareholder                          Number of Units                    Percentage
                                    Common           Pref

Name                            6,500,000                                  65.0%
Name                               250,000                                    2.5%
Pool[1]                             2,500,000                                  25.0%
Investors                                                750,000               7.5%

Total:                            9,250,000          750,000             100.0%
Distributions
Distributions will generally be made first to the Preferred Unit Holders first (up to their purchase price) and then to the Common Shareholders.  However, if the Company concludes that the remaining assets after the distribution will be at least 125% of the value of the Company at which the Preferred would convert to Common, it may make distributions to the Preferred and Common at the same time on a pro rata basis.

The Company will use commercially reasonable efforts to distribute Tokens over a 24 month period starting on the network “go-live” date, but can delay that for up to 1 year if necessary to protect the integrity of the market and for up to 3 years after the Preferred has received at least 3x its investment.
Protective Provisions
The preferred will have standard protective provisions, and will also have the right to approve (a) transactions with founders and (b) changes to the percentage of total network tokens to be owned by CNLLC outside of agreed upon parameters.
Drag Along/Tag Along/ROFR, etc.
Preferred Units will be subject to standard drag along provisions, and investors who purchase at least 25% of the round (Major Investors) will be entitled to Tag Along, ROFR and participation rights.
Other Points
It is anticipated that CNLLC will distribute at least $10 mm of Tokens following the Network Go-Live Date, which would effectively convert the Series A Units to common equity.  That distribution should be tax free to investors (although the founders may be taxed on built in gain on the day of the investment.

It is anticipated that CNLLC may sell additional Units, which would dilute the interests of purchasers of Series A Units in exactly the same fashion as a dilutive financing by any other entity.




  1. All Units that remain unissued immediately before the distribution of Tokens will be issued to the Founders.  Subsequent employee/consultant issuances will reduce the interest of Holders until 2.5 mm Units have been issued to employees and consultants.



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