Mocama, LLC

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Terms for Proposed Private Placement

of Series A Preferred Units

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January 1, 2018

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Except for the provisions contained below entitled “Legal Fees and Expenses,” “No Shop Agreement,” “Confidentiality” and “Governing Law” which are explicitly agreed by the Investors and the Company to be binding upon execution of this term sheet, this summary of terms, including the accompanying terms and conditions, is not intended as a legally binding commitment by the Investors, and any obligation on the part of the Investors is subject to the following conditions precedent: completion of legal documentation satisfactory to the prospective Investors, satisfactory completion of due diligence by the prospective Investors, and delivery of all closing deliverables described in the definitive agreements.

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Valid for acceptance until February 15, 2018

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Issuer:  Mocama LLC, a Florida LLC (the “Company”)

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Amount of Financing:  $3,250,000

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Investors:  Various Individuals and Investor Members (“Investors”)

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Closing: Sale of the Series A Preferred Units (the “Closing”) is anticipated to take place on or before March 1, 2018.   

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Price: $1 per Series A Preferred Unit (the “Purchase Price”)

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Type of Security:  Units (the “Preferred” or “Series A Preferred Units”)

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Founders: Derek Imes, Michael Oliveri, and others collectively holding a number of Common Units (“Common” or “Series B Units”) equal to 53.6% of the total issued and outstanding equity of the Company on a fully diluted basis post-Closing (or 3,754,310 Series B Units)

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Board of Managers: The size of the Company’s Board of Managers shall be set at Closing at 5 persons. Investors shall have the right to appoint two (2) members of the Board and the Founders shall have the right to appoint three (3) members of the Board. The initial Investor appointees are Hamp Tanner and another individual to be selected by a vote of all Investors post-closing. The initial Founders appointees are Kyle Cureton, Chris Farmand, and an individual to be announced post-closing.

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TERMS AND CONDITIONS OF SERIES A UNITS

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Capitalization: A capitalization table showing the Company’s capital structure immediately following the Closing is attached as Exhibit A

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Annual Operating Budget:   Until such time as Investors have received their aggregate unreturned capital contributions, Board of Managers members appointed by INVESTORS shall have the right to review and approve an “Annual Operating Budget” set forth by the Founders that clearly details the total amount of funds needed to keep the business running in a smooth and effective manner, achieve production and sales growth targets, purchase any equipment, hire additional employees, and maintain adequate working capital.

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Available Cash:  For purposes hereof “Available Cash” means all cash of the Company on hand as of any given time that is not needed for the continuing operations of the Company as detailed in the most recently approved Annual Operating Budget and is available for distribution to Members after the payment of all then due debts and liabilities of the Company, and after any prepayments of any debts and liabilities of the Company that the Board deems appropriate to cause the Company to make. 

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Distributions:  Until such time as INVESTORS have received 100% of their aggregate unreturned capital contributions, Board of Managers members appointed by INVESTORS shall exclusively control the timing and amount of Distributions of Available Cash. Distributions of Available Cash from Operations and from Capital Events shall be distributed in the following order of priority:

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1.             first, 100% to the members holding Preferred Units, until such time as all members holding Preferred Units have received                    50% of their aggregate unreturned capital contributions ; and

2.             second, 75% to the members holding Preferred Units and 25% to the members holding Common Units until such time as all              members holding Preferred Units have received their aggregate unreturned capital contributions; and

3.             third, as per ownership recorded in the Company’s then current capitalization table

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Tax Distributions:  The Company shall make cash distributions to each Member in an amount which, taken together with other cash distributions made to such Member, are sufficient to pay such Member's income taxes on taxable income allocated to such Member under this Agreement.  For purposes of the preceding sentence, all calculations of anticipated taxes shall utilize the Assumed Income Tax Rate.  A Member may elect to receive less than the full amount of any distribution to which such Member would otherwise be entitled. Any amount distributed to any Member pursuant to this clause shall be credited against future distributions to which such Member would otherwise be entitled under this Agreement.  For purposes hereof, “Assumed Income Tax Rate” means the highest effective marginal combined federal, state and local income tax rate for a Fiscal Year applicable to any Member, taking into account (a) the deductibility of state and local income taxes for federal income tax purposes and (b) the character (e.g., long term or short term capital gain or ordinary or exempt) of the applicable income, as such rate shall be reasonably determined by the Board of Managers.

 

Voting Rights: The Series A Preferred will vote together with the Common Units and not as a separate class except as specifically provided herein or as otherwise required by law.  

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Protective Provisions: For so long as Investors have not received 100% of their aggregate unreturned capital contributions, consent of the Board of Managers members appointed by Investors shall be required for any action, whether directly or through any merger, recapitalization or similar event, that (i) alters or changes the rights, preferences or privileges of the Series A Preferred, (ii) increases or decreases the outstanding or authorized number of Common or Preferred units, (iii) creates (by reclassification or otherwise) any new class or series of units having rights, preferences or privileges senior to or on a parity with the Series A Preferred, (iv) results in the redemption or repurchase of any units (other than pursuant to equity incentive agreements with employees or service providers giving the Company the right to repurchase units upon the termination of services, or pursuant to the Company’s right of first offer (as set forth below)), (v) results in any merger, other corporate reorganization, sale of control, or any transaction in which all or substantially all of the assets of the Company are sold, (vi) amends or waives any provision of the Company’s Articles of Formation or Operating Agreement, (vii) increases or decreases the authorized size of the Company’s Board of Directors, (viii) results in the payment or declaration of any distribution on any Common or Preferred Units, (ix) issues debt in excess of (a) amounts prescribed in an operating budget for the Company previously approved by the Board of Managers members appointed by Investors, or (b) $25,000 (x) makes any voluntary petition for bankruptcy or assignment for the benefit of creditors, or (xi) enters into any exclusive license, lease, sale, distribution or other disposition of its products or intellectual property.

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Information Rights: The Company shall deliver customary reviewed annual financial statements to each of the Founders and Investors. The Annual Budget will accompany the reviewed financial statements. Quarterly reports from accounting and brewery management software used by the company will be delivered within 30 days of the close of the quarter. Investors shall also be entitled to standard inspection and visitation rights. Board of Manager members appointed by the Investors have the right to audit the books of the Company at the expense of the Company in their sole discretion.

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Preemptive Rights: Members of the Company shall have the right to purchase their pro rata portion of any future issuances of equity securities (or equivalents) by the Company, standard exceptions excluded.

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Restrictions on Sales: The Company’s Operating Agreement shall contain a Company right of first offer on all proposed transfers of Common and Preferred, subject to normal exceptions for permitted transfers (e.g., for estate planning purposes). If the Company elects not to pursue its right, the Company shall assign its right to the Founders and the Investors (excluding any transferor Founder or Investor, as applicable), who may exercise those rights, pro rata in accordance with the number of Series A Preferred and Common Units held by such members, relative to the total number of Units held by such members.

 

Drag Along: After such time as members holding Preferred Units have received their aggregate unreturned capital contributions, in the event the Founders receive and accept an offer to sell their units of the Company, Investors shall automatically, and without any separate approvals, be bound to sell their units in the Company for the same consideration as the Founders. Investors shall be deemed to have waived their appraisal, dissenters and similar rights.

 

Use of Proceeds: Strictly in accordance with the budget presented by Founders and accepted by Investors.

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Member Guaranty: None. Founders Michael Oliveri and Derek Imes will personally guarantee the Company’s lease of the brewery located at 629 South 8th Street, Fernandina Beach, Florida 32034.

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OTHER MATTERS

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Closing Deliverables: The Company shall provide prior to the Closing: (i) an updated, post-closing capitalization chart, (ii) a detailed budget for the twelve months following closing, acceptable to Investors.

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Agreements: The parties shall prepare and execute a mutually agreeable Operating Agreement reflecting the terms herein.

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Finders:  None. The Company and the Investors shall each indemnify the other for any broker’s or finder’s fees for which such party is responsible.

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Legal Fees and Expenses: Each party shall pay their own fees and expenses.

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No Shop Agreement: The Company agrees to work in good faith expeditiously towards a closing. The Company and the Founders agree that until the 30th day from the date first set forth above they will not, directly or indirectly, (i) take any action to solicit, initiate, encourage or assist the submission of any proposal, negotiation or offer from any person or entity other than Investors relating to the sale or issuance, of any of the equity of the Company or the acquisition, sale, lease, license or other disposition of the Company or any material part of the equity or assets of the Company, or (ii) enter into any discussions, negotiations or execute any agreement related to any of the foregoing, and shall notify Investors promptly of any inquiries by any third parties in regards to the foregoing. Should both parties agree that definitive documents shall not be executed pursuant to this term sheet, then the Company shall have no further obligations under this section.

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Confidentiality: This term sheet and any related discussions and correspondence are to be held in strict confidence by the Company and may not to be disclosed by the Company to any party (other than counsel to, and the accountants of, the parties to the extent reasonably necessary for such persons to render advice in connection with the proposed transaction) without the prior written approval of Investors.

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Governing Law: This summary of terms shall be governed in all respects by the laws of the State of Florida, without regard to conflicts of laws principles.

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Company Counsel: Trevor Brewer, Brewer Long PLLC (general counsel and alcohol/licensing counsel).