SUMMARY OF TERMS OF THE SIMPLE AGREEMENT FOR FUTURE TOKENS ISSUED BY BLOXABLE, INC. [Month] [Day], Background Information

Transcription

1 SUMMARY OF TERMS OF THE SIMPLE AGREEMENT FOR FUTURE TOKENS ISSUED BY BLOXABLE, INC. [Month] [Day], 2018 Background Information This Summary of Terms of the Simple Agreement for Future Tokens (the SAFT Term Sheet ) describes certain terms of your purchase of a Simple Agreement for Future Tokens ( SAFT ) that will provide the right to receive tokens (the Bloxable Tokens, BLX or Tokens ) that will be issued by Bloxable, Inc. ( The Company ) under the terms described in this SAFT Term Sheet. This SAFT Term Sheet is subject to revision and is qualified in its entirety by reference to the SAFT. To the extent that the terms set forth in this SAFT Term Sheet are inconsistent with or contrary to the terms of the SAFT, the SAFT will control. The terms described in this SAFT Term Sheet may change, possibly substantially. Before purchasing an interest in the Tokens, potential investors should review the final terms of the investment. Please note the following in connection with your potential purchase of Tokens: By submitting a purchase agreement for the SAFT ( Purchase Agreement ), you will agree to be bound by the terms and conditions set forth in the following documents, which we refer to collectively as the Offering Materials ): o This SAFT Term Sheet, o The SAFT and the Purchase Agreement, o The risk factors associated with the SAFT and the Bloxable Tokens ( Risk Factors ) (which risks include a risk of loss of all or part of your investment), and o Any other offering materials provided to you with respect to the SAFT and the Tokens, including, but not limited to, the whitepaper describing the Tokens. You are solely responsible for familiarizing yourself with the information and terms provided in the Offering Materials. If the Company accepts your investment in a SAFT, you will receive a SAFT and not any Tokens. You will receive a right to receive Tokens under certain conditions, but you may never receive any Tokens at all. Investors should consult their tax advisor regarding the federal, state, local and foreign income tax consequences of owning and disposing of an interest in a SAFT or owning and disposing of Tokens. Without limiting the generality of the foregoing, we urge you and your tax advisor to review Internal Revenue Service ( IRS ) Notice , which discusses the position of the IRS on certain Bloxable-SAFT-Term-Sheet.docx -1-

2 transactions involving cryptocurrency and may be found at the following link: The SAFT is being offered in reliance upon exemptions from the registration requirements of the U.S. Securities Act of 1933 ( Securities Act ). As a result, there are substantial restrictions on the transferability of the SAFT, which is non-transferable without the consent of the Company. After delivery of the Tokens, and until such time as the Company determines that the Tokens are not securities, the Tokens may not be offered, sold or transferred in the United States absent registration or an applicable exemption from the registration requirements. Any transfer made in violation of these restrictions will be void. Bloxable-SAFT-Term-Sheet.docx -2-

3 SUMMARY OF TERMS I. OVERVIEW Summary of the Investment Opportunity The Company The Platform As discussed in more detail below, Bloxable, Inc. (the Company ) is offering a new form of crypto asset (the Bloxable Tokens or BLX or Tokens and the offering, the SAFT Offering ) through Simple Agreements for Future Tokens (each, a SAFT ) that, in exchange for the Purchase Price, defined below, paid by investors ( Investors ) for the SAFTs, provide Investors the right to receive Bloxable Tokens on the launch date (the Launch Date ) of a blockchain-enabled platform (the Platform ) that the Company is developing for loan origination, servicing and securitization. The Tokens are designed to be the economic unit of exchange on the Platform, which will use smart contracts, recorded on the Company s blockchain, to improve the loan origination, servicing, and securitization process. Tokens will be used to initiate smart contracts and pay for services on the Platform. The purchase price ( Purchase Price ) of the Tokens paid by each Investor in the SAFT Offering will be Ether ( ETH ). Additionally, Investors may receive additional Tokens as a bonus depending on the size of the investment, as described in the Company s bonus schedule ( Bonus Schedule ) provided below. Investors will receive an amount of Tokens calculated as (i) the amount of ETH paid by each Investor ( Purchase Amount ) under the applicable SAFT divided by the Purchase Price, (ii) multiplied by one plus the bonus rate ( Bonus Rate ), if any. There is no guarantee that the Tokens will ever be distributed to Investors in the SAFTs. If, for any reason, the Company does not issue the Tokens as planned, Investors will not receive some or all of the Tokens otherwise distributable by the Company under the SAFT. In addition, the right to receive Tokens is subject to the restrictions described in this Term Sheet. For the avoidance of doubt, potential Investors should be aware that they will only receive the right to receive Tokens, and not the Tokens, when they execute a SAFT. Because the Tokens are still in development, many of the terms associated with them may change, and additional terms may apply. There is no guarantee that the Tokens will develop as planned. Investors who are considering executing a SAFT should not rely on the terms for the Tokens described in this Term Sheet as being a promise or guarantee. Bloxable, Inc., a Delaware corporation that provides a blockchain enabled Platform for loan origination, servicing, and securitization using smart contracts. Bloxable is designing the Platform to improve the loan origination, servicing, and securitization process through the use of blockchain technology and smart contracts. It is anticipated that the Platform will Bloxable-SAFT-Term-Sheet.docx -3-

4 The Tokens Simple Agreement for Future Tokens Investor Qualifications automate many tasks that have historically proven a challenge for the lending and structured finance industries. Loans will become smart contracts recorded on the Company s blockchain. These loans can then be pooled by entities that want to securitize the loan through the use of other smart contracts designed for the purpose of securitization. The above two types of smart contracts will work with a third type of smart contract that coordinates the interaction of the loan and securitized products with third party service providers Additional information on the Platform is provided below in the section entitled The Platform and in the whitepaper. Because the Platform is still in development, many of the features described below, and the details of how they operate, are subject to change. Potential Investors should be prepared for the Platform to evolve differently than described. The Bloxable Tokens are a blockchain protocol token that will be the primary economic unit on the Platform. It is anticipated that the Tokens will be used by borrowers ( Borrowers ) that wish to obtain a loan, lenders ( Lenders ) that wish to make loans to Borrowers, issuers ( Issuers ) that wish to pool and securitize the loans made between Borrowers and Lenders, and investors ( Loan Investors ) that wish to buy interests in the loans and securitized products as a medium of payment for fees and services on the Platform. More information about the Tokens is provided below under The Tokens and in the whitepapers. Because the Tokens are still in development, many of the uses described below, and the details of how the Tokens operate, are subject to change. Investors should be prepared for the Tokens and their use to evolve differently than described. The SAFT being offered to potential Investors is a contract between the Company and each Investor. The SAFT requires the Company to deliver Tokens to the Investor on the terms described below, in exchange for the Purchase Amount specified in the SAFT and the purchase agreement for the SAFT ( Purchase Agreement ). Because the SAFT provides the right to receive the Tokens in the future, this SAFT Term Sheet sometimes refers to the interests purchased in the offering described in it as interests in Tokens. However, potential Investors should be aware that they will only receive the right to receive Tokens, and not the Tokens, when they execute a SAFT. Investors may be institutions, corporations, family offices, venture capital funds of funds and private individuals (or their estate planning vehicles) that are Accredited Investors within the meaning of Regulation D under the Securities Act of 1933 ( Securities Act ). Investors will be required to provide information verifying their status as Accredited Investors before purchasing any Tokens through a SAFT. New York residents are not permitted to participate in this SAFT Offering. Bloxable-SAFT-Term-Sheet.docx -4-

5 Use of Proceeds II. THE SAFT Rights to Tokens Pricing of the Tokens Bonus Tokens Size of Offering The Company will use the proceeds received based on the SAFT, net of any taxes, to cover its operational expenses for the Bloxable Tokens and Platform and for all other general business operations incident thereto and permitted by law. The Company plans to allocate its use of proceeds as follows: product development and research and development (65%), marketing and business development (15%), legal and accounting (5%), operations and administration (10%), and a contingency reserve (5%). The SAFT will provide Investors the right to receive Tokens on the Launch Date. More details on the Tokens are provided below under The Tokens. The amount of Tokens to be received by an Investor on the Launch Date will be calculated as (i) the Purchase Amount divided by the Purchase Price, (ii) multiplied by one plus the Bonus Rate, if any. The bonus is discussed further below. As defined above, the Purchase Price of the Tokens paid by each Investor in the SAFT Offering will be ETH per Token. Investors may receive additional Tokens as a bonus, depending on the size of the Purchase Amount, as described in the Company s Bonus Schedule below: Purchase Amounts greater than or equal to $50,000 but less than $100,000 receive a 12.5% Bonus Rate; Purchase Amounts greater than or equal to $100,000 but less than $500,000 receive a 20.0% Bonus Rate; Purchase Amounts greater than or equal to $500,000 but less than $1,000,000 receive a 28.6% Bonus Rate; Purchase Amounts greater than or equal to $1,000,000 but less than $1,500,000 receive a 38.5% Bonus Rate; Purchase Amounts greater than or equal to $1,500,000 receive a 50% Bonus Rate. The ultimate price paid by Investors for BLX, as denominated in U.S. Dollars, and the number of BLX received will vary based on the value of ETH. The Company retains the right to determine a different Bonus Rate for an Investor at its sole discretion. The SAFT Offering is not intended to exceed $8,000,000 USD. However, the SAFT Offering may exceed this limit due to volatility in ETH prices during the SAFT Offering prior to the closings. Minimum Purchase Amounts Investors must commit to a minimum Purchase Amount of $25,000 USD for the SAFTs. This minimum may be waived at the discretion of the Company. There is no aggregate minimum Purchase Amount required for the Company to close on the SAFTs. Transferability There are substantial restrictions on the transferability of the SAFTs, and there will be no public market for the SAFT for U.S. purchasers. Bloxable-SAFT-Term-Sheet.docx -5-

6 Dissolution Event or Other Failure to Issue Tokens Termination Alternative Terms Fees III. Platform Overview THE PLATFORM A SAFT may not be offered, sold or transferred in the United States absent registration or an applicable exemption from the registration requirements. In particular, a SAFT may not be transferred within the United States or to a U.S. person unless such transfer is made to an accredited investor in compliance with applicable federal securities laws, and may only be transferred in a transaction outside the United States to non-u.s. persons. Any transfer of a SAFT made in violation of these restrictions will be void. A SAFT may not be transferred without the express written consent of the Company. If there is a Dissolution Event (as defined below), or the Company for any reason does not issue Tokens, the Company will make commercially reasonable efforts to reimburse Investments received from Investors, but the Company cannot guarantee that sufficient funds will be available for any such reimbursement. If the Company determines that it will not issue Tokens, the Company will determine in its sole discretion whether to reimburse Investors in whole or in part. Investors will have no rights to Tokens or any assets of the Company. Dissolution Event means: (i) a voluntary termination of operations; (ii) a general assignment for the benefit of the Company s creditors; or (iii) any other liquidation, dissolution or winding up of the Company, whether voluntary or involuntary. A change of control and an initial public offering will not constitute a Dissolution Event. The SAFT will expire and terminate upon either (i) the issuance of Tokens to the Investor, (ii) the payment or setting aside for payment of amounts due to the Investor as a result of a Dissolution Event, (iii) any event that would render the continued existence of the SAFT unnecessary; or (iv) notice to Investors that the Company will not issue Tokens. Certain Investors may negotiate alternative terms for their SAFTs. The Company is under no obligation to amend and restate any SAFT based on subsequent agreements executed with the Company on different terms or to notify Investors of any alternative terms, including any that may be more favorable for certain Investors. Investors will not be charged any fees in connection with executing a SAFT or receiving Tokens based on the SAFT. As discussed above, the Platform is designed to improve the loan origination, servicing, and securitization process through the use of blockchain technology and smart contracts. Originally the Platform is intended for use with peer-to-peer, credit card and automotive loans provided to and by both individuals and entity borrowers and lenders. Eventually, the Company plans to provide capabilities on the Platform for more complex products such as asset-backed securities. Additional information on the Platform is provided in the whitepaper. Bloxable-SAFT-Term-Sheet.docx -6-

7 Use of Smart Contracts on the Platform Bloxable Originator Smart Contract Bloxable Structured Finance Smart Contracts Bloxable Servicing and Payments Smart Contracts Oracles Because the Platform is still in development, many of the features described below, and the details of how they operate, are subject to change. There is no guarantee that any of the features below will be successfully integrated into the Platform as described, and potential Investors should be prepared for the Platform to evolve differently than described. It is anticipated that the Platform s smart contracts will use blockchain technology to allow Borrowers, Lenders and Issuers to quickly and securely prepare transactions and record contract history. As discussed above, the Platform will incorporate three types of smart contracts: (1) a smart contract that represents loans originated on the Platform, which are recorded on the Company s blockchain; (2) a smart contract that pools loans for securitization; and (3) a smart contract that coordinates services provided by third party service providers to the loans and securitized products. When a Borrower and a Lender want to create a loan, they will access the Platform and create a smart contract ( Originator Smart Contract ) that verifies the data provided by the Borrower and Lender for data accuracy and completeness. After this review, the smart contract will create a new electronic asset representing the loan on Bloxable s private blockchain. As the loan goes through its life, the history of the loan will be recorded on the blockchain. Recorded activities will include loan payment history, defaults and ownership transfers. When Issuers want to pool loans to create a structured finance product, they will create a second smart contract ( Structured Finance Smart Contract ) that pools the loans and transfers them to a special purpose vehicle ( SPV ). This transfer, like all loan history, will be recorded on the Company s private blockchain for the electronic asset. The Structured Finance Smart Contract will also record the transactions terms for the SPV. Together, the Originator Smart Contracts and a Structured Finance Smart Contract will be used to ensure that loans are not committed to more than one securitized product. A third type of smart contract will be created to govern the various services (described below under Oracles ) provided with respect to the loans and structured finance products created on the Platform (the Servicing and Payments Smart Contracts ). This third type of smart contract will be designed to automatically read the terms of the other relevant smart contracts and, based on those terms, collect and distribute payments. It will also manage the fees paid by Lenders and Issuers to the service providers described below. The Platform will facilitate the ability of third party service providers such as market data providers, credit rating agencies, auditors and legal providers ( Oracles ) to provide their respective services to Lenders and Issuers. The Company will develop a plug-and-play application program interface ( API ) that allows these Oracles to use their existing computer systems to interact with the Platform and the Bloxable-SAFT-Term-Sheet.docx -7-

8 Borrowers, Lenders, Issuers, and Loan Investors that have loans and other contracts on the Platform, in order to provide these services. Trading Module No Rights to Platform Profits IV. TOKENS Overview of the Tokens The Company plans to develop a trading module on the Platform that will allow parties to easily trade loans back and forth on the Platform. Eventually, the Company plans to extend this functionality to allow the trading of externally originated loans on the Platform as well. The Tokens will not give holders the rights to any of the profits or revenue of the Company or any merchant or other participant using the Platform. Holders of Tokens also will not have any right to vote on any aspect of how the Company, Platform, or any Platform participant is governed. As discussed above, the Bloxable Tokens are a blockchain protocol token. It is anticipated that the Tokens will be used by Borrowers, Lenders, Issuers, Loan Investors and service providers as a medium of payment on the Platform. The Tokens will be used to pay the following fees: Loan servicing fees, whereby Borrowers will use Tokens to pay the various fees related to their loan, including origination fees, broker fees, and other fees. Access fees, through which Issuers that wish to securitize loans on the Platform will pay for the creation of their securitized SPV on the Platform. Oracle fees, through which Borrowers, Lenders and Issuers will pay Oracles for their services. Development fees, through which Bloxable will pay developers for the creation of generic smart contracts for the Platform, and through which Lenders and Issuers will pay developers to create tailored versions of those smart contracts. Additionally, the Tokens may be used to provide incentives for use of and behavior on the Platform. It is also possible that Loan Investors will earn their return in Tokens. More information about the Tokens is provided in the whitepaper available at Projected Timing for Receipt of Tokens and Development of The Platform As noted above, Investors will receive Tokens on the Launch Date. It is anticipated that the Launch Date will occur in Q2 of However, Tokens will be issued only after they have been fully developed and are fully functional on the Platform. There are no guarantees as to the timing of the Launch Date, which is dependent on many factors, including many outside the Company s control. It is anticipated that not all of the planned functionality of the Platform will be in place as of the Launch Date. Additional information on Bloxable-SAFT-Term-Sheet.docx -8-

9 Vesting Transfers Future Valuation of Tokens Relationship to Third-Party Blockchain Networks projected development of the Platform is available in the whitepaper. All projected timing is subject to change. Upon the Launch Date all Tokens received by Investors will become fully vested. All Tokens, even those that are fully vested, are subject to the transfer restrictions described below. Because the Platform will still be in development as of the Launch Date, the Company will initially treat all Tokens as securities. Until the time that Bloxable determines that the Tokens may be treated as nonsecurities, the Tokens may not be transferred within the United States or to a U.S. person, unless such transfer is made to an Accredited Investor in compliance with the U.S. federal securities laws, and may only be transferred in a transaction outside the United States to non- U.S. persons. Any transfer made in violation of these provisions will be void. If and when Bloxable reasonably determines and notifies holders that the Tokens are not securities and are freely tradeable, holders will be able to freely sell or exchange them. In general, based on anticipated use of the Tokens and the Platform, Bloxable believes that over time, the Tokens may reasonably be treated as non-securities for purposes of U.S. law, at which point Bloxable will notify holders of the finding and that the Tokens are freely tradeable. There is no guarantee that this will occur, however. It is anticipated that the value of the Tokens will fluctuate over time. After delivery, the value of the Tokens will be determined based on current pricing on third-party exchanges. The Company will not provide any Token valuations to Investors in the SAFTs. Over the longer term, Bloxable anticipates that the Tokens can grow in value based on increasing demand resulting from, among other things, increased activity on the Platform. However, there can be no guarantee that the Tokens will hold their value or increase in value. Many factors will influence this outcome. The Company expects that the Tokens will be built on the Ethereum blockchain system, using the ERC20 standard as the backbone for many of their functions. ERC20 is a standardized mechanism for exchanges and other forms of smart contracts. Additionally, ETH is the protocol layer token for Ethereum that is expected to be used to purchase the Tokens. ETH is a virtual currency and is widely viewed in the crypto asset community as an alternative to Bitcoin as a medium of exchange for goods and services. Because the Company expects that the Tokens will be built on the Ethereum blockchain and ERC20, they may be in part dependent on Ethereum s effectiveness and success, as well as the success of other blockchain and decentralized data storage systems that are incorporated Bloxable-SAFT-Term-Sheet.docx -9-

10 Additional Offerings and Distributions of Tokens V. INVESTMENT PROCESS Investment Process into the Platform. There is no guarantee that any of these systems or their sponsors will continue to exist or be successful, in which case Bloxable would need to modify its protocols to adapt to a new way of providing its services. This could lead to disruptions of the Platform and use of the Tokens. It is not guaranteed that the Company will use the ERC20 standard. If the Tokens are built on some other blockchain and/or blockchain standard, that system may pose its own additional risks. It is not anticipated that there will be any public offering of Tokens other than the Tokens available through the SAFT Offering. It is anticipated that 33.3% of all Tokens generated by the Company will be distributed to Investors on the Launch Date according to the SAFT Offering. Another 33.3% will be allocated to the Bloxable core team, including the founders. Additionally, there will be 16.66% reserved and subsequently allocated as a developer pool and 16.66% reserved and subsequently allocated for a user growth pool. These are designed to assist with the development and promotion of the Platform. The SAFTs are being offered privately by the Company. Potential Investors can indicate their interest by submitting basic information about themselves and providing a non-binding indication of their potential investment amounts through a form on the Company s website. Offering Materials, one finalized, will be made available by the Company to those who have provided the Company with indications of interest. When the SAFT and the Purchase Agreement are finalized and available, each potential Investor must submit signed copies of these documents to the Company via HelloSign by a date to be set by the Company and provided to potential Investors. The Company will then review the information from potential Investors to determine whether they may invest in the offering and will notify Investors of their allocation in the SAFT Offering. Once the documents are executed, the Investor must send payment to the Company with 15 days of confirmation by the Company. Throughout this process, representatives of the Company will be available by for purposes of discussing the SAFT Offering. Closings Cancellation and Modifications It is anticipated but not guaranteed that each Investor will be provided interests in a SAFT in the total amount of their requested Purchase Amount, but all allocations will be decided at the sole discretion of the Company. Closings on the SAFTs will occur at the discretion of the Company, when the company executes, by countersignature, the SAFT Purchase Agreement of an Investor. If potential Investors wish to modify their Purchase Amount or cancel their purchase of a SAFT, they must notify the Company prior to Bloxable-SAFT-Term-Sheet.docx -10-

11 Recordation of Ownership Delivery of Tokens closing by at The Company will attempt to honor requests for modifications or cancellations, but is under no obligation to do so. There will be no modifications or cancellations after the Offering Materials have been countersigned by the Company. Ownership of the Tokens purchased through the SAFTs will be recorded on the genesis block for the blockchain of the Tokens at the point when those Tokens are delivered. The Tokens will be delivered to each Investor s digital wallet on the Launch Date (if such date is achieved) or within five days of the Launch Date. The Company will provide at least ten days notice to Investors, so that each Investor can provide the address of a digital wallet address for purposes of delivery. Upon delivery, the Company will update the genesis block for the Tokens to indicate that the address provided owns the Tokens. Additional Terms of the Tokens Because the Tokens are still in development, many of the terms associated with them may change, and additional terms may apply. There is no guarantee that the Tokens will develop as planned. Investors who are considering executing a SAFT should not rely on the terms for the Tokens described in this Term Sheet as being a promise or guarantee. VI. ERISA Taxation Indemnification and Exculpation: LEGAL & MISCELLANEOUS The Company will not accept funds from benefit plan investors, as that term is defined by the Employee Retirement Income Security Act of 1974 ( ERISA ), as amended (including individual retirement accounts). The Company can waive this prohibition at its sole discretion. Any returns you receive based on the SAFT, based on any appreciation of the Tokens, or as a result of transactions on the Platform could be taxable. Holders of the Tokens should discuss these issues with their tax advisers. The SAFT Purchase Agreement will require that Investors agree to indemnify and hold harmless the Company and its officers, directors, principals, members, employees, agents, and other affiliates, and each other person, if any, who controls, is controlled by, or is under common control with any of them (each, an Indemnified Party ), from and against any and all loss, claim, damage, liability or expense whatsoever (including reasonable attorneys fees and disbursements) due to or arising out of or based upon (i) any inaccurate representation or warranty made by the Investor, or breach or failure by the Investor to comply with any covenant or agreement made by the Investor in the SAFT (including without limitation the purchase agreement for the SAFT) or in any other document furnished by the Investor in connection with a purchase of the SAFT or the Tokens, (ii) any action for securities, commodities, or money transmission law violations instituted by the Investor that is finally resolved by judgment against the Investor, or (iii) any action instituted by or on behalf of the Investor Bloxable-SAFT-Term-Sheet.docx -11-

12 against an Indemnified Party that is finally resolved by judgment against the Investor or in favor of an Indemnified Party. The liabilities associated with these indemnification provisions may be material to Investors, and investors may incur significant costs as a result of their indemnification obligations. Risk Factors Legal Counsel Instruments like the SAFTs and the Tokens entail a high degree of risk, and Investors may lose some or all of their Purchase Amount. A potential Investor should execute a SAFT or purchase Tokens only if able to withstand a total loss of the Purchase Amount. Potential Investors are urged to consult with their investment, legal and tax advisors before executing a SAFT or purchasing Tokens. Additional risks associated with the SAFT and the Tokens are described in the Risk Factors. Wilson Sonsini Goodrich & Rosati P.C. ( Wilson Sonsini ) will serve as legal counsel to the Company. Wilson Sonsini does not represent any current or prospective Investor or purchaser of the Tokens with respect to an investment in the Company, the organization of the Company, or the preparation of the SAFT. No separate counsel has been engaged by the Company or any of its respective affiliates to represent any current or prospective Investors or purchasers of Tokens with respect to an investment in the Company or preparation of the SAFT. Bloxable-SAFT-Term-Sheet.docx -12-