PURCHASE AGREEMENT for the Deferred Delivery Agreement (“DDA”) and Tokens to be issued by BLOCKSTACK PBC July 16, 2019 THIS PURCHASE AGREEMENT (“Purchase Agreement”), effective as of the last date on the signature page (the “Effective Date”), is...
Exhibit 6.2
PURCHASE AGREEMENT for the Deferred Delivery Agreement (“DDA”) and Tokens to be issued by BLOCKSTACK PBC July 16, 2019 THIS PURCHASE AGREEMENT (“Purchase Agreement”), effective as of the last date on the signature page (the “Effective Date”), is entered into between the party specified as purchaser on the signature page (“Purchaser”) and Blockstack PBC, a Delaware public benefit corporation (the “Token Issuer”). Please carefully review and follow the instructions to Purchaser immediately following this cover page. An incomplete Purchase Agreement will not be accepted, and as a result, a Purchaser may not be able to purchase a Deferred Delivery Agreement (“DDA”) in exchange for a payment of funds (the “Purchase”) and consequently may not receive the right to receive tokens to be issued in the future by the Token Issuer (“Tokens”) upon a distribution event (the “Token Distribution Event”). The Purchaser should seek legal, financial, and tax advice regarding its individual circumstances and objectives in determining whether to purchase the DDA. There are substantial restrictions on the transferability of the DDA. There will be no public market for the DDA. A DDA may not be offered, sold or transferred without the consent of the Token Issuer. Any transfer of a DDA made in violation of these restrictions will be treated by the Token Issuer as void. All transfers are subject to the Token Issuer’s prior approval. Tokens will only be issued to the Purchaser upon a Token Distribution Event. The timing of the Token Distribution Event will be determined at the sole discretion of the Token Issuer. If the Token Distribution Event has not occurred by the date that is 10 days after the expiration of a one-year holding period (the “Token Distribution Deadline”) or the Token Issuer determines in its sole discretion that the issuance of the Tokens would constitute a violation of any applicable law or regulation, the Token Issuer may determine to refund the Purchaser’s purchase. The Token Issuer will provide the Purchaser notice at least 21 calendar days prior to the Token Distribution Event and the Purchaser will have 14 calendar days to provide the Token Issuer with its Token digital wallet address. The Token Issuer will then, as of the Token Distribution Event, distribute Tokens to the Purchaser’s digital wallet. 1
BLOCKSTACK PBC – PURCHASE AGREEMENT Part I: Introduction and Instructions Introduction Thispurchase agreement(“Purchase Agreement”)providesimportantinformationand documentation needed to purchase a deferred delivery agreement (the “DDA”) issued by Blockstack PBC, a Delaware public benefit corporation (the “Token Issuer”). The DDA creates the right to receive tokens that are sponsored and issued by the Token Issuer (the “Token(s)”) during the Token distribution event (as defined in the DDA, the “Token Distribution Event”) sponsored by the Token Issuer. Through the DDA, the Token Issuer is offering interests in the Tokens (the “Offering”). The Tokens may be used in connection with the Token Issuer’s network, governed by the Blockstack Core software available at xxxxx://xxxxxx.xxx/xxxxxxxxxx/xxxxxxxxxx-xxxx, as referred to and further described in the Disclosure Statement as the “Blockstack network” (the “Blockstack Network”). By signing the signature page to this Purchase Agreement (“Signature Page”), you as purchaser (“Purchaser”) agree to be bound by the terms of this Purchase Agreement and the DDA. You also agree that you have reviewed the DDA, Disclosure Statement (“Disclosure Statement”) and/or any other offering materials provided to you with respect to the Tokens, and which apply through the date of your execution of this Purchase Agreement and receipt of the Tokens (collectively, and together with the DDA and Purchase Agreement, the “Offering Materials”). This Purchase Agreement includes each of the following items: • Part I, Introduction and Instructions • Part II, Purchaser Questionnaire and Signature Page • Part III, Form W-8BEN • Part IV, Additional Legally Binding Terms • Appendix A, DDA • Appendix B, Disclosure Statement The Purchaser should review the materials provided carefully and follow the steps and instructions below. Upon reading and understanding Parts II and III, Purchaser should complete all questions, filling in the necessary information. The Purchaser should read and understand Parts I and IV, and Appendix A, B and C (the “Appendices”). The terms “I,” “me,” “my” and similar terms used throughout this Purchase Agreement refer to the Purchaser. The Disclosure Statement contains statements about a potential offering under Regulation A of the Securities Act of 1933, as amended (“Regulation A”). This information is provided to you solely for purposes of providing you with what we believe could be material information about the Token Issuer and its business. No money or other consideration is being solicited with respect to any offering under Regulation A, and if sent in response for such an offering, will not be accepted. Any offer to buy securities under Regulation A will be made only pursuant to an offering statement filed with the U.S. Securities and 2
Exchange Commission (the “SEC”) pursuant to Regulation A, and the Disclosure Statement does not relate to any such offering statement or any offering under Regulation A. No offer to buy securities under Regulation A can be accepted and no part of the purchase price can be received for an offering under Regulation A until such an offering statement is qualified by the SEC. In any such future and potential Regulation A offering, any offer made pursuant to an offering statement may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date, and an indication of interest made by a prospective purchaser in any such Regulation A offering is non-binding and involves no obligation or commitment of any kind. It is possible that the Token Issuer will never engage in the Regulation A offering for many reasons. For example, the offering may never be qualified by the SEC. The Regulation A offering may also be delayed from the Token Issuer’s currently anticipated timeline, perhaps considerably. Purchasers in the offering described in the Disclosure Statement should not rely on or expect a Regulation A offering by the Token Issuer when deciding whether to purchase. Instructions to Purchaser In order to purchase a DDA, please complete the following steps. Purchaser Information: Please submit to the Token Issuer (1) a completed and signed Purchaser Questionnaire and Signature Page and (2) all requested supplemental information and documentation, including • For entity Purchasers, a copy of the applicable organizational and authority documents (e.g., trust instrument, certificate of incorporation, certificate of formation, corporate resolutions, partnership agreement, operating agreement, plan documents, etc.). • For natural person Purchasers, a copy of a driver’s license, passport or other government-issued form of identification. Please provide all requested supplemental information and documentation in portable document format (“.pdf”). When and Where to Send: The Purchaser Questionnaire, Signature Page, and supplemental materials should be signed, scanned, and emailed to the Token Issuer at the email address provided below. Failure to submit these documents will result in an incomplete Purchase Agreement and prevent you from purchasing a DDA. xxxxx@xxxxxxxxxx.xxx Once these materials are received, the Token Issuer will process the sale of the DDA and confirm execution and delivery of the DDA and Purchase Agreement. The Token Issuer reserves the right to deny any potential Purchaser, for any reason whatsoever, at its own discretion. After the Token Issuer approves the Purchase, the Token Issuer will countersign the DDA and Purchase Agreement and will provide wiring and/or cryptocurrency transfer instructions for the Purchaser’s payment. If the payment will be made in cryptocurrency, the exchange rate (from the cryptocurrency to U.S. Dollars) for the payment of the Purchase will be negotiated between the Company and the Purchaser on an individual basis. The Purchaser must send the Purchase amount to the Company within five business days, defined as Monday through Friday, exclusive of U.S. federal banking holidays (“Business Days”), of the Company sending the final executed DDA and Purchase Agreement. 3
All sales in this DDA Offering are individually offered. The potential Purchaser will complete the materials in accordance with the instructions in the DDA Purchase Agreement and return executed copies to the Company. The Company will review the materials provided by potential Purchasers and determine which Purchasers to accept. In making this determination, the Company will attempt to verify the identities of potential Purchasers through its Know-Your-Customer (“KYC”) and Anti-Money Laundering (“AML”) review and will check whether those potential Purchasers appear on the Specially Designated Nationals List administered by the Office of Foreign Assets Control (“OFAC”). Once approved as a Purchaser, it is anticipated but not guaranteed that each Purchaser will be provided DDA interests in the total amount of their requested Investment, but all allocations will be decided at the sole discretion of the Company. We will accept payment of purchase price in U.S. dollars, as well as Bitcoin and Ether (valued in US dollars by xxxxx://xxxxxxxxxxxxxx.xxx/ at the time of purchase). The xxxxx://xxxxxxxxxxxxxx.xxx/ valuation will be updated every hour starting at 9 am Eastern time each day, and payments will be valued based on the most recent update at the time when we receive payment from the purchaser. If at any time in the future, xxxxx://xxxxxxxxxxxxxx.xxx/ is no longer operational or operates with limited functionality such that the procedures set forth herein could not be applied (such as the inability to determine an accurate trading price of the applicable cryptocurrency at a precise time), or ceases to be a significant and/or reputable exchange platform for US holders of Bitcoin or Ether, such that use of xxxxx://xxxxxxxxxxxxxx.xxx/ is, in our determination, no longer a reliable method of determining the fair value of Bitcoin or Ether, we shall select a replacement source that, in the good faith judgment of management, is recognized in the market at such time, as a reputable and reliable source for such reporting purposes. The considerations to be used in selecting a replacement source shall include, whether such source has all applicable regulatory approvals to operate, the volume of cryptocurrency sales that are effected on such platform by US purchasers, and the reputation of such platform. In the event we select a replacement source, holders of Stacks Tokens will be notified of such change via electronic communication. Once submitted, a purchaser’s subscription is irrevocable. However, we reserve the right to reject any purchaser’s subscription in whole or in part for any reason, including failure of the purchaser to qualify or meet the purchaser suitability standards or the KYC/AML standards. Completeness: An incomplete Purchase Agreement will not be accepted. Additional Information: Purchaser. The Token Issuer may, in its sole discretion, request other information from the 4
BLOCKSTACK PBC – DDA PURCHASE AGREEMENT Part II: Purchaser Questionnaire and Signature Page 1. Purchaser Information _$_5_0_0_,0_0_0 Aggregate Purchase (value in U.S. Dollars): Payment Method (U.S. Dollars, Bitcoin or Ether): _S_e_rv_i_c_e_s _re_n_d_e_r_e_d_p_u_rsuant to Services Agreement entered into on or about October 3, 2019 Exchange Rate to U.S. Dollars (if applicable): Full Legal Name of Purchaser: For entities: For natural persons: _H_a_s_h_K_e_y B_l_o_c_k_c_h_ai_n In_v_e_s_tm e_n_t_F_u_nd First Name, Middle Initial, Last Name Indicate if Purchaser is: S Corporation Grantor Trust Limited Partnership Limited Liability Company Estate Trust-EIN (trust with EIN in format: 12-3456789) Trust-SSN (trust with EIN in format: 000-00-0000) Public Pension Plan Sovereign Investment Foundation C Corporation General Partnership Limited Liability Partnership Exempt Organization Nominee-EIN Nominee-SSN Natural Person Other If Purchaser is an entity (e.g., a trust, partnership, corporation, etc.), please answer the questions in this Purchaser Questionnaire from the perspective individual who will be signing for the entity. of the entity itself, rather than from the perspective of the For Entities: For Natural Persons: Date of Organization: _1_1_J_u_l_y_2_0_1_8 Date of Birth: State/Country of Organization: _C a_y_m_a_n Is_l_a_n_d_s C_h_a_o_DE_N_G Signatory Name: Dir_e_c_to_r Signatory Title: 1_9_J_u_l_y_1_9_8_3 Signatory Date of Birth: Signatory Government ID Number: _E A_2_3_3_8_6_6_2 Signatory Phone Number: _+_8_6 1_8_6_8_8_8_3_3_1_0_0 Signatory Address: _U n_it_6_1_4_-_6_1_5_, _L_e_v_e_l_6_,_C_o_r_e_D _Cy_b_e_rp_o_r_t_3_,_1_0_0 C_y_b_e_rp_o_r_t_Ro_ad_,_Ho_n_g_Ko_n_g (please submit a copy of the signatory’s driver’s license, passport, or other government-issued ID) 5 x
Street Address: Mailing Address for All Communications: Same as street address Xxxx 000-000, Xxxxx 0, Xxxx X Line 1: Line 1: Line 2: Line 3: City: State: Line 2: Cyberport 0, 000 Xxxxxxxxx Xxxx Xxxx Xxxx Line 3: Hong Kong City: State: Zip Code: Zip Code: Telephone Number: x000 0000 0000 Facsimile Number (optional): E-Mail Address: xxxxx@xxxxxxx.xxxxxxx Social Security Number or Tax Identification Number: N/A For entity Purchasers, submit (1) a copy of the applicable organizational and authority documents (e.g., trust instrument, certificate of incorporation, certificate of formation, corporate resolutions, partnership agreement, operating agreement, plan documents, etc.), (2) a document listing major shareholders and percent ownership (e.g., an official government document, company agreement or schedule, or letter from a CFO, CPA, or attorney), and (3) a copy of driver’s license, passport, or other government-issued form of identification for the entity’s signatory. For natural person Purchasers, check form of ownership below, and submit a copy of driver’s license, passport, or other government-issued form of identification. Individual Ownership (One signature required) Tenants in Common (All tenants must sign) Joint Tenants with Right of Survivorship (All tenants must sign) Individual Retirement Account (“XXX”) (One signature required) Other If purchase is accepted, Tokens will be delivered to a digital wallet address when and if the Token Distribution Event, as defined in the DDA, occurs: At that point, the DDA will convert to Tokens, and the Tokens will be delivered to the digital wallet address provided by the Purchaser. The Token Issuer will provide the Purchaser notice at least 21 calendar days prior to the Token Distribution Event and the Purchaser will have 14 calendar days to provide the Token Issuer with its Token digital wallet address. The Token Issuer will then, on the first date of the Token Distribution Event, or within 10 days thereof, distribute Tokens to the Purchaser’s digital wallet. Important: Please do NOT disclose your private key to your digital wallet. The Token Issuer will never ask you for your private key. 6 x
2. Non-U.S. Person Status. I am not a “U.S. Person,” within the meaning of Rule 902(a)(k) under the Securities Act of 1933 (“Securities Act”) (please see section IV.c.3 of this Purchase Agreement for the definition of a U.S. Person). 3. Truthfulness of Information Provided; Additional Information. Purchaser represents and warrants to the Token Issuer that the answers Purchaser has provided in this Purchaser Questionnaire, including the information contained within the supplementary documents that Purchaser has delivered to the Token Issuer as Purchaser information, are current, true, correct and complete and do not omit to state any material fact necessary in order to make the statements contained in those documents not misleading. If any information provided in this Purchaser Questionnaire changes in any material respect on or after the date contained on the Signature Page, Purchaser agrees to promptly notify the Token Issuer of any change to the information provided, but in any event within thirty (30) calendar days of the change. Purchaser represents and warrants that it is not a Resident of any state or country that requires virtual currency businesses to be licensed for the type of activity contemplated in this Purchase Agreement, the DDA, or the Offering. Purchaser represents and warrants that Purchaser is NOT: (1) a Resident of a jurisdiction in which access to or use of the Blockstack Network and the Tokens is prohibited by applicable law, decree, regulation, treaty, or administrative act, (2) a Resident of, or located in, a jurisdiction that is subject to U.S. or other sovereign country sanctions or embargoes, or (3) an individual, or an individual employed by or associated with an entity, identified on the U.S. Department of Commerce’s Denied Persons or Entity List, the U.S. Department of Treasury’s Specially Designated Nationals or Blocked Persons Lists, or the U.S. Department of State’s Debarred Parties List. Purchaser agrees that if Purchaser’s country of residence or other circumstances change such that the above representations are no longer accurate, Purchaser will immediately cease using the Blockstack Network and the Tokens. Purchaser further represents and warrants that if Purchaser is purchasing the right to receive Tokens on behalf of a legal entity: (1) such legal entity is duly organized and validly existing under the applicable laws of the jurisdiction of its organization, and (2) Purchaser is duly authorized by such legal entity to act on its behalf. Purchaser represents and warrants that all of the representations and warranties Purchaser is making in this Purchase Agreement are true and accurate in all material respects as of the date of Purchaser’s affirmation on the Signature Page. If any representations and warranties are not true and accurate prior to acceptance of this Purchase Agreement, Purchaser shall give prompt written notice of this fact to the Token Issuer specifying which representations and warranties are not true and accurate and the reasons why they are not. Purchaser agrees to notify the Token Issuer promptly if there is any change with respect to any of the representations and warranties in this Purchase Agreement. Purchaser acknowledges that important information about the material terms of the DDA and Tokens is provided in the Offering Materials. Such information may include, but is not limited to, details regarding the timing and pricing of the DDA, the amount of Tokens offered, the anticipated use of the DDA Offering proceeds, and the anticipated timeframe of the Token Distribution Event. Purchaser represents and warrants that Purchaser understands and has no objection to these material terms. Purchaser acknowledges and accepts that there are risks associated with purchasing the DDA, holding the DDA, and, once the Tokens are delivered, using Tokens on the Blockstack Network, as more fully disclosed and explained in the Offering Materials. BY PURCHASING THE DDA, PURCHASER EXPRESSLY ACKNOWLEDGES AND ASSUMES THESE RISKS. 7
Purchaser represents and warrants that Purchaser has sufficient knowledge, understanding, and experience, either independently or together with its Purchaser representative(s), in financial and business matters, and of the functionality, usage, storage, transmission mechanisms, and other material characteristics of cryptographic tokens, token wallets and other token storage mechanisms, public and private key management, blockchain technology, and blockchain-based software systems, to understand the terms of this Purchase Agreement and the Offering Materials, and such knowledge, understanding, and experience enables Purchaser to evaluate the merits and risks of purchasing the Tokens. Purchaser agrees that at any time in the future at which Purchaser may acquire Tokens pursuant to the DDA, Purchaser shall be deemed to have reaffirmed, as of the date of acquisition of the additional Token, each and every representation and warranty made by Purchaser in this Purchase Agreement or any other instrument provided by Purchaser to the Token Issuer in connection with that acquisition, except to the extent modified in writing by Purchaser and consented to by the Token Issuer. Purchaser agrees on behalf of itself and Purchaser’s successors and assigns, without further consideration, to prepare, execute, acknowledge, file, record, publish and deliver any other instruments, documents and statements and to take any other reasonable actions as the Token Issuer may determine to be necessary or appropriate to comply with applicable law and to effectuate and carry out the purposes of this Purchase Agreement. Purchaser further agrees that the Token Issuer may, in its sole discretion, refuse to sell Purchaser a DDA if, among other things, Purchaser refuses to comply with this provision. By executing the Signature Page, Purchaser further incorporates into this Purchase Agreement each term and affirmation contained in the Appendices attached hereto and Purchaser agrees to be bound thereby. Purchaser agrees to be bound by any affirmation, assent or agreement that Purchaser transmits to the Token Issuer or its affiliates by computer or other electronic device, including internet, telephonic and wireless devices, including, but not limited to, any consent Purchaser gives to receive communications from the Token Issuer or any of its affiliates solely through electronic transmission. Purchaser agrees that when an authorized representative of Purchaser clicks on an “I Agree,” “I Consent,” or other similarly worded button or entry field with such representative’s mouse, keystroke or other device, Purchaser’s agreement or consent will be legally binding and enforceable against Purchaser and will be the legal equivalent of the handwritten signature of an authorized representative of Purchaser on an agreement that is printed on paper. Purchaser agrees that the Token Issuer and any of its affiliates may send Purchaser electronic copies of any and all communications associated with my purchase of Tokens. 4. Disclosures & Agreements.Purchaser has received, and understands that it should read and carefully review, the following documents in connection with submitting a Purchase Agreement, and Purchaser agrees, if its Purchase Agreement is accepted by the Token Issuer in its discretion, to be bound by the terms of the following disclosures and agreements, all as evidenced by Purchaser’s execution of the Signature Page and delivering the Signature Page to the Token Issuer: The DDA, attached to this Purchase Agreement as Appendix A. This Purchase Agreement, which sets forth the terms governing my purchase of the DDA, sets forth certain representations I am making in connection with my purchase of the DDA, and provides certain disclosures regarding the Token Issuer. The Disclosure Statement, attached hereto as Appendix B, which has been provided to Purchaser and set forth information regarding the Tokens and the Blockstack Network, among other matters. SIGNATURE PAGE FOLLOWS 8
SIGNATURE PAGE By signing this document, Purchaser agrees to comply with and be bound by all terms of the Purchase Agreement, including this Purchaser Questionnaire and all other components of the Purchase Agreement. Purchaser acknowledges and accepts that all purchases of DDAs from the Token Issuer during the Offering are final, and there are no refunds or cancellations except as may be required by this Purchase Agreement, applicable law or regulation. Purchaser further acknowledges and accepts that the Token Issuer reserves the right to refuse, cancel or accept Purchase Agreements at any time in its sole discretion. PURCHASER: HashKey Blockchain Investment Fund (Print Purchaser name) (Signature) Xxxx Xxxx (Print name of signatory, if signing for an entity) Director (Print title of signatory, if signing for an entity) The Token Issuer hereby accepts the above Purchase Agreement. Blockstack PBC: By: Name: Xxxxxx Xxx Title: Chief Executive Officer 10/4/2019 Date: 9
BLOCKSTACK PBC – DDA PURCHASE AGREEMENT Part III: Form W-8BEN
BLOCKSTACK PBC – PURCHASE AGREEMENT Part IV: Additional Legally Binding Terms The Purchaser agrees to the following additional legally binding terms in connection with its purchase of the DDA: 1. DDA Purchase. 1.1.The undersigned Purchaser hereby purchases pursuant to this Purchase Agreement the DDA sold in the Offering by the Token Issuer, for future delivery of the Tokens representing the value of the Purchase set forth in the Purchaser Questionnaire portion of this Purchase Agreement. The number of Tokens to be received will be determined as described in the DDA. 1.2. Acceptance of Agreement; Conditions. The Purchaser understands and agrees that this DDA purchase is made subject to the terms and conditions contained in this Purchase Agreement, as well as the Disclosure Statement and/or any other Offering Materials provided to you with respect to the Tokens, and that the Token Issuer shall have the right to accept or reject, in its sole discretion, the Purchaser’s DDA purchase for any reason or no reason, in whole or in part, and at any time prior to its acceptance. 2. Representations, Warranties and Covenants of the Purchaser. The Purchaser hereby represents and warrants to, and agrees with, the Sponsoring Parties (as defined below) as follows: 2.1. The Token Issuer and its respective officers, directors, principals, members, employees, agents, and other affiliates (collectively, the “Sponsoring Parties”) will be relying on the information, representations, warranties and covenants of the Purchaser in this Purchase Agreement for many purposes. 2.2. Binding Obligation. The Purchase Agreement shall become binding and enforceable against the Purchaser in accordance with its terms on the date, if any, that the Token Issuer accepts this Purchase Agreement in whole or in part on the Effective Date, as evidenced by the Token Issuer’s signature to the Purchase Agreement. The Purchaser understands that, upon acceptance by the Token Issuer, the Purchaser is not entitled to cancel, terminate or revoke this Purchase Agreement. 2.3.Regulatory Issues. (a) FDIC and SIPC Matters. The DDA is not legal tender, is not backed by the government, and accounts and value balances are not subject to Federal Deposit Corporation or Securities Purchaser Protection Corporation protections. Insurance (b) OtherFederalandStateRegulatoryMatters.The Purchaser Exchange acknowledges and understands that the DDA is not registered with the Securities and Commission, and that the Token Issuer is not registered or licensed with any federal or state regulator as an investment adviser, broker-dealer, money services business, money transmitter, or virtual currency business. As a result, the Purchaser will not be afforded the full set of protections provided to the clients and customers of such entities under the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and any similar or applicable state laws. (c) No Registration of the DDA. 11
(i) The Purchaser acknowledges and understands that (i) the DDA has not been registered under the Securities Act, the securities laws of any state or the securities laws of any other jurisdiction, nor is that registration contemplated, (ii) the DDA is being offered and sold under an exemption from registration provided under Regulation S under the Securities Act, (iii) the offering of these securities is being made only in those jurisdictions and to those persons where and to whom they may lawfully be offered for sale, and is not, and under no circumstances is to be construed as, a prospectus, an advertisement or a public offering of these securities in the United States, (iv) no securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise, and (v) the transactions contemplated in the Offering Materials have not been reviewed by, passed on or submitted to any federal or state agency or self-regulatory organization. The Purchaser will not be afforded the full set of protections provided under the Securities Act or comparable state law. The Purchaser acknowledges that the Token Issuer is entering into this Purchase Agreement in reliance upon the Purchaser’s representations, warranties and covenants made in this Section. (ii) The Purchaser represents and warrants that: (i) it is domiciled and has its principal place of business outside the United States; (ii) it is a not a U.S. person (as defined in Regulation S under the Securities Act) or is deemed not to be a U.S. person under Rule 902(k)(2) of Regulation S (a “Non-U.S. person”), and (iii) it is not acquiring the DDA and any Tokens deliverable pursuant to the DDA for the account or benefit of any U.S. person. (iii) As used herein, the term “United States” means the United States of America, its territories and possessions, any State of the United States, and the District of Columbia, and the term “U.S. person” (as defined in Regulation S) means: (1) (2) a natural person resident in the United States; any partnership or corporation organized or incorporated under the laws of the United States; (3) any estate of which any executor or administrator is a U.S. person; (4) any trust of which any trustee is a U.S. person; (5) any agency or branch of a foreign entity located in the United States; (6) any nondiscretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (7) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated and (if an individual) resident in the United States; and (8) a corporation or partnership organized under the laws of any foreign jurisdiction and formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Securities Act) who are not natural persons, estates or trusts. (iv) The Purchaser agrees that it has not engaged, nor is it aware that any party has engaged, and the Purchaser will not engage or cause any third party to engage, in any 12
directed selling efforts (as such term is defined in Regulation S) in the United States with respect to the DDA and any Tokens deliverable pursuant to the DDA. (v) At the time of offering to the Purchaser and communication of the Purchaser’s order to purchase the DDA and any Tokens deliverable pursuant to the DDA, and at the time of the Purchaser’s execution of this Purchase Agreement, Purchaser or the persons acting on the Purchaser’s behalf in connection therewith were located outside the United States. (vi) The Purchaser is not a “distributor” (as defined in Regulation S) or a “dealer” (as defined in the Securities Act). (vii) The Purchaser hereby represents that Purchaser is satisfied as to the full observance of the laws of Purchaser’s jurisdiction in connection with any invitation to subscribe for the DDA and any Tokens deliverable pursuant to the DDA, including (i) the legal requirements within the Purchaser’s jurisdiction for the purchase of the DDA and any Tokens deliverable pursuant to the DDA, (ii) any foreign exchange restrictions applicable to such purchase, (iii) any governmental or other consents that may need to be obtained and (iv) the income tax and other tax consequences (including withholding), if any, that may be relevant to the purchase, holding, redemption, sale or transfer of such securities. The Purchaser’s subscription and payment for, and Purchaser’s continued beneficial ownership of, the DDA and any Tokens deliverable pursuant to the DDA will not violate any applicable securities or other laws of Purchaser’s jurisdiction. (d) Confidentiality of Disclosure Statement. The Purchaser understands and agrees that the Offering Materials are confidential documents that may not be shared with any other person without the consent of the Token Issuer and that any such sharing could be a violation of the U.S. securities laws. Further, the Purchase agrees that the Offering Materials will be deemed “Proprietary Information” as defined in, and kept confidential pursuant to the terms of the previously executed Confidentiality Agreement. (e) Exchange Act Matters. The Purchaser understands that no Sponsoring Party is registered with the SEC or with the securities commission of any state or other jurisdiction as a broker-dealer under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Purchaser will not be afforded the full set of protections provided under the Exchange Act or comparable state law. (f) Money Transmission and Money Services Business Matters. The Sponsoring Parties believe that the Token Issuer is not a money transmitter (“MT”) or a money services business (“MSB”). If the Token Issuer was deemed to be an MT and/or MSB, it would be subject to significant additional regulation. This could lead to significant changes with respect to the Blockstack Network, how the Tokens are structured, how they are purchased and sold, and other issues, and would greatly increase the Token Issuer’s costs in creating and facilitating transactions in the Tokens. It could lead to the termination of the Tokens. Further, a regulator could take action against the Token Issuer and Sponsoring Parties if it views the Tokens and the Blockstack Network as a violation of existing law. Any of these outcomes would negatively affect the value of the Tokens and/or could cause the Token Issuer to cease operations. (g) Virtual Currency Business Matters. (i) The Token Issuer does not intend to operate in any state that requires an applicable license to conduct a virtual currency business. The Sponsoring Parties believe the Token Issuer is not engaged in unlicensed virtual currency business activity in states where such conduct is prohibited. If a Purchaser is a resident of a state that requires an applicable license to conduct a virtual 13
APPENDIX A DEFERRED DELIVERY AGREEMENT 27
THIS DEFERRED DELIVERY AGREEMENT (“DDA”) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THIS DDA MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION THEREFROM. THE ISSUER OF THIS DDA MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. DEFERRED DELIVERY AGREEMENT Issued By BLOCKSTACK PBC For TOKENS THIS DEFERRED DELIVERY AGREEMENT (the “Agreement”) certifies that in exchange for services by HashKey Blockchain Investment Fund (the “Purchaser”) of the purchase listed above (the “Purchase”) on or about October 3, 2019, Blockstack PBC, a Delaware public benefit corporation (the “Token Issuer”), hereby issues to the Purchaser the right, in the future, to receive a number of tokens issued by the Token Issuer (the “Tokens”) equal to the amount listed above under the “Token Amount.” This right to receive Tokens is subject to the terms set forth below, in the Disclosure Statement for this Agreement (the “Disclosure Statement”), and in the purchase agreement for this Agreement (the “Purchase Agreement”) to which this Agreement is attached. Delivery of the Tokens will provide the Purchaser with the ability to use the Tokens on the Token Issuer’s network, governed by the Blockstack Core software available at xxxxx://xxxxxx.xxx/xxxxxxxxxx/xxxxxxxxxx-xxxx, as referred to and further described in the Disclosure Statement provided with the Purchase as the “Blockstack network” (the “Blockstack Network”). 1. Definitions 1 Purchase (value in U.S. Dollars):$500,000 Services rendered pursuant to Services Payment Method (U.S. Dollars, Bitcoin or Ether):Agreement entered into on or about October 3, 2019 Exchange Rate to U.S. Dollars (if applicable)N/A Purchase Price:$0.25 per token Token Amount:2,000,000
“Agreement” shall have the meaning given to it in the opening paragraph of this document. “Blockstack Network” shall have the meaning given to it in the opening paragraph of this document. “Business Days” shall mean Monday through Friday, exclusive of U.S. federal banking holidays. “Disclosure Statement” shall have the meaning given to it in the opening paragraph of this document. “DDA” means an instrument containing a right to receive units of Tokens in the future, similar in form and content to this Agreement. “DDA Purchasers” means all holders of all other deferred delivery agreements purchased in this offering. “Dissolution Event” means (i) a voluntary termination of operations, (ii) a general assignment for the benefit of the Token Issuer’s creditors or (iii) any other liquidation, dissolution, or winding up of the Token Issuer, whether voluntary or involuntary. A change of control and any public offering will not constitute a Dissolution Event. “Distribution Compliance Period” shall mean a one-year holding period that begins on the last date on the signature page of the Purchase Agreement. “Purchase” shall have the meaning given to it in the opening paragraph of this document. “Purchase Agreement” shall have the meaning given to it in the opening paragraph of this document. “Purchase Price” shall have the meaning given to it in the opening table on the first page of this document. “Purchaser” shall have the meaning given to it in the opening paragraph of this document. “Returned Purchase” shall have the meaning given to it in Section 2(b)(ii). “Token Amount” means the amount listed under “Token Amount” on the first page of this Agreement, calculated as the Purchase divided by the Issue Price. “Token Distribution Event” means the date on which the Token Issuer will provide Tokens to the Purchaser under this Agreement. The timing of the Token Distribution Event will be determined at the sole discretion of the Token Issuer; provided, however, that if the Tokens are not delivered by the date of the expiration of the Distribution Compliance Period, the Token Distribution Event shall be no later than 10 days after the expiration of the Distribution Compliance Period (the “Token Distribution Deadline”), subject to Section 2(b). The Token Issuer will provide 21 days’ notice prior to the Token Distribution Event. “Token Issuer” shall have the meaning given to it in the opening paragraph of this document. “Tokens” shall have the meaning provided in the opening paragraph of this document. For the avoidance of doubt, the meaning shall be inclusive of the singular form, “Token.” “Use Restriction” means the general prohibition on the Purchaser’s ability to sell, transfer, spend, exchange or otherwise make use of the Tokens on the Blockstack Network. 2
laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity. To the knowledge of the Token Issuer, it is not in violation of (i) its current certificate of incorporation or bylaws, (ii) any material statute, rule or regulation applicable to the Token Issuer or (iii) any material indenture or contract to which the Token Issuer is a party or by which it is bound, where, in each case, such violation or default, individually, or together with all such violations or defaults, could reasonably be expected to have a material adverse effect on the Token Issuer. (c) The performance and consummation of the transactions contemplated by this Agreement do not and will not: (i) violate any material judgment, statute, rule or regulation applicable to the Token Issuer; (ii) result in the acceleration of any material indenture or contract to which the Token Issuer is a party or by which it is bound; or (iii) result in the creation or imposition of any lien upon any property, asset or revenue of the Token Issuer or the suspension, forfeiture, or nonrenewal of any material permit, license or authorization applicable to the Token Issuer, its business or operations. (d) No consents or approvals are required in connection with the performance of this Agreement, other than: (i) the Token Issuer’s corporate approvals; and (ii) any qualifications or filings under applicable securities laws. (e) To its knowledge, the Token Issuer owns or possesses (or can obtain on commercially reasonable terms) sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, processes and other intellectual property rights (collectively, “IP Rights”) necessary for its business as now conducted and as currently proposed to be conducted, without any conflict with, or infringement of the rights of, others. To the extent that the Token Issuer develops additional intellectual property in the future, it will make reasonable efforts to secure IP Rights for that intellectual property. (f) The Token Issuer incorporates and restates in this Agreement by reference all representations and warranties made by the Token Issuer contained in the Purchase Agreement. 4. Purchaser Representations (a)The Purchaser has full legal capacity, power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes a valid and binding obligation of the Purchaser, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity. (b) The Purchaser is not a “U.S. person” as such term is defined in Rule 902 of Regulation S under the Securities Act. The Purchaser has been advised that this Agreement is a security that has not been registered under the Securities Act, or any state securities laws and, therefore, cannot be resold unless registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. The Purchaser is purchasing this security instrument for its own account for investment, not as a nominee or agent, and not with a view to, or for resale in connection with, the distribution thereof, and the Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the same. The Purchaser has such knowledge and experience in financial and business matters that the Purchaser is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment without impairing the Purchaser’s financial condition, and is able to bear the 5
economic risk of such investment for an indefinite period of time. The Purchaser further represents that it has been provided the opportunity to ask the Token Issuer questions, and where applicable, has received answers from the Token Issuer, regarding this Agreement and the offering of this Agreement. (c) The Purchaser incorporates and restates in this Agreement by reference all representations and warranties made by the Purchaser in the Purchase Agreement. The Purchaser further represents that it has read the Purchase Agreement, understands and agrees to be bound by its terms, and has been provided the opportunity to ask the Token Issuer questions, and where applicable, has received answers from the Token Issuer, regarding the Purchase Agreement. (d) The representations and warranties of the Purchaser set forth in this DDA, including those incorporated and restated by reference, shall be deemed repeated and reaffirmed by the Purchaser to the Token Issuer as of each date the Token Issuer issues Tokens to the Purchaser pursuant to this Agreement. If at any time prior to the termination of this DDA, the representations and warranties set forth in this DDA, including those incorporated and restated by reference, cease to be true in any material respect, the Purchaser shall promptly so notify the Token Issuer in writing. (e) The Purchaser’s signature on the Signature Page of the Purchase Agreement constitutes delivery and execution of both the DDA and the Purchase Agreement. 5. Payment Instructions. (a) Wire and/or Cryptocurrency Transfer Instructions. The Token Issuer’s wire and/or cryptocurrency transfer instructions will be provided to the Purchaser after the Token Issuer has approved the Purchaser’s Purchase. Payment is required within three (3) Business Days of receipt of the final executed DDA and Purchase Agreement. 6. Miscellaneous (a) Any provision of this Agreement may be amended, waived or modified only upon the written consent of the Token Issuer and the Purchaser. (b) Any notice required or permitted by this Agreement will be deemed sufficient when sent by email to the relevant address listed in the Purchase Agreement, as subsequently modified by written notice. (c) The purchase of DDAs and ultimate ownership of Tokens (i) does not provide Purchaser with rights of any form with respect to the Token Issuer or its revenues or assets, including, but not limited to, any voting, distribution, redemption, liquidation, proprietary (including all forms of intellectual property), or other financial or legal rights in the Token Issuer; (ii) is not a loan to Token Issuer; and (iii) does not provide Purchaser with any ownership or other interest in Token Issuer. (d) Each of the Token Issuer and the Purchaser agree to treat this instrument as a prepaid forward contract for U.S. federal, state and local income tax purposes, and will not take any position on any tax return, report, statement or other tax document that is inconsistent with such treatment, unless otherwise required by a change in law occurring after the date hereof, a closing agreement with an applicable tax authority or a final non-appealable judgment of a court of competent jurisdiction. 6
(e) Neither this Agreement nor the rights contained herein may be assigned, by operation of law or otherwise, by either party without the prior written consent of the other; provided, however, that this Agreement and/or the rights contained herein may be assigned without the Token Issuer’s consent by the Purchaser to any other entity who directly or indirectly, controls, is controlled by or is under common control with the Purchaser, including, without limitation, any general partner, managing member, officer or director of the Purchaser, or any venture capital fund now or hereafter existing which is controlled by one or more general partners or managing members of, or shares the same management company with, the Purchaser; and provided, further, that the Token Issuer may assign this Agreement in whole, without the consent of the Purchaser, in connection with a reincorporation to change the Token Issuer’s domicile. (f) In the event any one or more of the provisions of this Agreement is for any reason held to be invalid, illegal or unenforceable, in whole or in part or in any respect, or in the event that any one or more of the provisions of this Agreement operate or would prospectively operate to invalidate this Agreement, then and in any such event, such provision(s) only will be deemed null and void and will not affect any other provision of this Agreement and the remaining provisions of this Agreement will remain operative and in full force and effect and will not be affected, prejudiced, or disturbed thereby. (g) The Purchaser shall, and shall cause its affiliates to, execute and deliver any additional documents and take any further actions requested by Token Issuer to give effect to this Agreement and the transactions contemplated by this Agreement, including, without limitation, to enable the Token Issuer or the transactions contemplated by this Agreement to comply with applicable laws. (h) The Token Issuer shall not be liable or deemed to have defaulted under or breached this Agreement for any failure or delay in performing any obligation under this Agreement, including without limitation any failure to deliver or delay in delivery of Tokens, to the extent the failure or delay is caused by or results from acts beyond the Token Issuer’s reasonable control, including, without limitation: (a) acts of God; (b) flood, fire, earthquake or explosion; (c) war, invasion, hostilities (whether war is declared or not), terrorist threats or acts, or other civil unrest; (d) the application or change of any law; or (e) action by any governmental authority. (i) All rights and obligations hereunder will be governed by the laws of Delaware, without regard to the conflicts of law provisions of such jurisdiction. 7
APPENDIX B DISCLOSURE STATEMENT 8
THIS DISCLOSURE STATEMENT FOR A REGULATION S OFFERING OF STACKS TOKENS (THIS “DOCUMENT”) IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this Document or as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser who specialises in advising on similar investments or another appropriately qualified person. PRIVATE AND CONFIDENTIAL DISCLOSURE STATEMENT FOR REGULATION S OFFERING OF STACKS TOKENS BLOCKSTACK PBC (a Delaware public benefit corporation) Address: 000 Xxxx 00xx Xx Xxx 000 Xxx Xxxx, Xxx Xxxx 00000 XXX xxx.xxxxxxxxxxx.xxx (000) 000-0000 DATED: July 13, 2019 1. 1.1 General This Document is relevant only to purchasers that are not “U.S. persons” (as such term is defined in Rule 902(k) of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)) that are potential purchasers in the offering described in Section 2 below for Deferred Delivery Agreements (collectively, “DDAs,” and each such agreement a “DDA”) for Stacks Tokens (such offering, the “Regulation S Offering”). Any purchasers that are U.S. persons or purchasing in an offering of the Stacks Tokens other than the Regulation S Offering should disregard this Document. This Document comes in two parts: (1) this supplement, containing information specific to the Regulation S Offering set forth in sections 1 through 8 herein (the “Supplement”) and (2) a US Form 1-A Offering Circular dated 11 July 2019 in relation to the offering (the “Regulation A Offering”) of up to 180,333,333 Stacks Tokens (as it may be amended by further filings, the "US Offering Circular") under Tier 2 of Regulation A (“Regulation A”) under the United States Securities Act of 1933 (the “Securities Act”), as filed with the United States Securities and Exchange Commission (the "SEC"), containing information related to Blockstack PBC (the “Company”), its affiliates, its network and the Stacks Tokens. The US Offering Circular also contains information describing the terms to the Regulation A Offering as well as information specific to the Regulation A Offering. If you purchase a DDA or Stacks Tokens in the Regulation S Offering, you will not be purchasing in the Regulation A Offering. Except as otherwise provided herein, capital listed terms used in this Document have the meanings assigned to them in the US Offering Circular. Where this Supplement, a DDA or the Purchase Agreement for the DDA (the “Purchase Agreement” and, together with this Document, including both the Supplement and the incorporated US Offering Circular, and the DDA, the “Offering Materials”) conflicts with the US Offering Circular, each of this Supplement, a DDA and the Purchase Agreement will govern. For avoidance of doubt, all terms specific to this offering of DDAs (the “Regulation S Offering”) are set forth in this Supplement, the DDA, and Purchase Agreement; the terms of the offering set forth in the US Offering Circular refer to a separate offering conducted by the Company. 1.2 1
1.3 There is no consistent approach to the regulatory treatment of the Stacks Tokens in the jurisdictions where they may be offered to purchasers. The US Offering Circular states that the Stacks Tokens are treated as securities in the US. If the Stacks Tokens would not be treated as securities outside the US, any references to the Stack Tokens as securities in the US Offering Circular should be disregarded to the extent such references are not relevant outside the US. Prior to making any decision as to whether to purchase the Stacks Tokens, prospective purchasers should read this Document in its entirety. In making a purchase decision, each prospective purchaser must rely on their own examination, analysis and enquiry of the Company, the DDAs, the Stacks Tokens and the terms of this Regulation S Offering, including the merits and risks involved. No money or other consideration is being solicited with respect to the Regulation A Offering, and if sent in response for such offering, will not be accepted. Any offer to buy securities in the Regulation A Offering will be made only pursuant to an offering statement filed with the SEC pursuant to Regulation A. No offer to buy securities under Regulation A can be accepted and no part of the purchase price can be received for the Regulation A Offering until such an offering statement is qualified by the SEC. In the Regulation A Offering or any other future and potential offering under Regulation A, any offer made pursuant to an offering statement may be withdrawn or revoked, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date, and an indication of interest made by a prospective purchaser in any the Regulation A Offering or any other such offering is non-binding and involves no obligation or commitment of any kind. It is possible that the Company will never engage in the Regulation A Offering for many reasons. For example, the Regulation A Offering may never be qualified by the Securities and Exchange Commission. The Regulation A Offering may also be delayed from the Company’s currently anticipated timeline, perhaps considerably. Purchasers in the offering described in these Offering Materials should not count on the Regulation A Offering when deciding whether to purchase. Important Information: If the Company accepts your purchase of a DDA, you will receive a DDA. For the avoidance of doubt, at the time of execution of the DDA you will not receive Tokens. You will receive a right to the deferred delivery of Tokens under certain conditions. These conditions may never occur and you may never receive the Tokens. Purchasers should consult their tax advisor regarding the tax consequences of owning and disposing of a DDA or owning and disposing of Tokens. The DDA is being offered in reliance upon exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended (“Securities Act”). As a result, there are substantial restrictions on the transferability of the DDA, which is non-transferable without the consent of the Company. The Company’s consent is unlikely to be granted. The Company anticipates that the Tokens will typically not be tradable for a year and a day after execution of the DDA to any U.S. Person as defined under Regulation S of the Securities Act. Any transfer made in violation of these restrictions will be void. Terms of this Offering 1.4 1.5 1.6 1.7 2. This offering summary highlights material information regarding the DDAs and Stacks Tokens, our business and this offering. Because it is a summary, it may not contain all of the information that is important to you. To understand this offering fully, you should read the Offering Materials carefully before making a decision to purchase. The Offering Materials use certain technical terms. These technical terms are defined in the “Glossary” beginning on page 16 of the US Offering Circular and are rendered in bold in their first use below. Summary The Company is currently offering the right to receive Stacks Tokens through DDAs to purchasers (“Purchasers”). Subject to the restrictions 2
described in this Disclosure Statement and the DDA, a DDA provides Purchasers the right to receive an amount of Tokens (the “Token Amount”), which will be equal to (i) the Purchaser’s purchase amount (“Purchase Amount”) divided by (ii) the Purchase Price per Stacks Token (the “Purchase Price”) under the DDA sold in this Regulation S Offering, which will be $0.25 per Token. The DDA creates the right to receive Stacks Tokens when the Company determines, in its sole discretion, to deliver the Stacks Tokens (the “Token Distribution Event”), provided that the Token Distribution Event will occur no later than 10 days after the expiration of a one-year holding period beginning on the date that a DDA is issued (the “Token Distribution Deadline”). The Company will provide the Purchaser notice at least 21 calendar days prior to the Token Distribution Event and the Purchaser will have 14 calendar days to provide the Company with its Token digital wallet address. If the Token Distribution Event has not occurred by the Token Distribution Deadline or the Company determines in its sole discretion that the issuance of the Tokens would constitute a violation of any applicable law or regulation, the Company may refund the Purchaser’s Purchase Amount in a DDA and terminate the DDA. Controlling Documents This Document is qualified in its entirety by reference to the DDA. To the extent that the terms set forth in this Document are inconsistent with or contrary to the terms of the DDA, the DDA will control. Deferred Delivery Agreement Each DDA currently being offered to potential Purchasers is a security under U.S. federal securities law in the form of an investment contract between the Company and each Purchaser that requires the Company to deliver the Tokens to the Purchaser on the terms described in this Document, in exchange for a payment of the Purchaser’s Purchase Amount in connection with the execution of the DDA. Transfer Restrictions There are substantial restrictions on the transferability of the DDAs. All transfers of the DDA are subject to the Company’s prior approval. Further, the DDAs will be “restricted securities” under the U.S. federal securities law. Any transfer of a DDA made in violation of these restrictions will be treated by the Company as void. In addition, any Stacks Tokens issued pursuant to the DDAs within a year and a day from the date of the DDA’s issuance will also be “restricted securities” under U.S. federal securities law. After the expiration of the year and a day holding period, Stacks Tokens will be usable without restriction on the Blockstack network and freely tradeable under the federal securities laws of the United States for non-commercial purposes by non-affiliates pursuant to Rule 144 under the Securities Act. In order to ensure compliance by holders of these Stacks Tokens, a transfer lock will be placed on these Stacks Tokens for that one-year period. However these Stacks Tokens may be burned on the Blockstack network prior to the end of the one-year period, provided that they have been released from additional applicable “time locks,” as described under “—Unlocking of Stacks Tokens.” In the future, the Stacks Tokens issuable pursuant to DDAs sold in this offering may be tradeable on exchanges operating outside the United States that only allow sales to non-U.S. Persons, as defined under Regulation S of the Securities Act, provided that we are able to list the Stacks Tokens on those exchanges after determining that doing so will be in compliance with U.S. federal regulations. Holders of Stacks Tokens that 3
wish to transfer these Stacks Tokens on any exchange will be required to make their own determination as to whether such transfer is in compliance with state securities laws. Dates of the Regulation S Offering It is anticipated that the Regulation S Offering described in this Document will occur from May 2019 to June 2019. The Company reserves the right to extend the Offering Period at its sole discretion. Purchaser Qualifications Purchasers may not be “U.S. Persons” within the meaning of Regulation S under the Securities Act and, in addition, must be able to purchase in compliance with local law. Each Purchaser will be required to provide information verifying her, his or its status as a non-U.S. person before entering into a DDA. The Company may, in its sole discretion, reject or approve any Purchaser and will, in its sole discretion, determine the non-U.S. jurisdictions where potential Purchasers may purchase. The Stacks Tokens Each Token that may eventually be distributed under a DDA will be a security under U.S. federal securities law in the form of a cryptoasset based on blockchain technology. Stacks Tokens are the “native” tokens of the Blockstack network. By “native” token, we mean that the Stacks Tokens are the default currency used to obtain control over digital assets on the Blockstack network. Currently, Stacks Tokens are burned as “fuel” to create or “register” a new digital asset or smart contract on the Blockstack network. They are also used as the default currency should developers require payment of Stacks Tokens to download or access their applications and, further, as the default form of payment for in-app payments for digital assets to application developers and other users. In addition, holders of Stacks Tokens will also be permitted to participate in non-binding polling regarding potential upgrades to the Blockstack network. Blockstack may also use the Stacks Tokens to provide incentives to users and developers of the Blockstack network and its employees, including through the “App Mining” program (the “App Mining program”) in exchange for the development of well-reviewed applications on the Blockstack network as well as for the review of those applications. Additional functions may be added to the Stacks Tokens in the future. See the section of US Offering Circular captioned “The Blockstack Network— The role the Stacks Tokens will play on the Blockstack network” for further details. The Tokens do not confer ownership or equity rights in the Company, profit or revenue sharing rights in the Company’s operations, or the right to vote on how the Company is operated. The current supply of Stacks Tokens, including those that will eventually be issued pursuant to a DDA, was introduced in November 2018 onto the Blockstack network as part of an initial block of 1.32 billion Stacks Tokens, which we refer to as the genesis block. Additional Stacks Tokens may only be introduced through hard forks or through mining activities following their introduction to the Blockstack network (as described in the section of the US Offering Circular captioned “—Future Development of the Blockstack Network”). Unlocking of Stacks Tokens Stacks Tokens received upon a Token Distribution Event will be subject to a temporary “time lock”, a general restriction that prevents a Stacks Token from being used for any purpose on the Blockstack network, such that the Stacks Token cannot be burned or transferred. 1/24th of the amount of Stacks Tokens purchased will be released from this time lock on the date of distribution of the Stacks Tokens, and an additional 1/24th will be 4
released for every 4,320 blocks that are processed on the blockchain used by our network (which will initially be Bitcoin, and then the Stacks blockchain, once the mining mechanisms described in the section of the US Offering Circular captioned “The Blockstack Network” are introduced). Prior to their release from the time lock, Stacks Tokens cannot be burned, or otherwise used or transferred on the Blockstack network. We estimate that this will result in the automatic release of an additional 1/24th of your Stacks Tokens approximately every month without any further action on the part of the Company, and the release of all your Stacks Tokens one year and eleven months after the date of distribution of the Stacks Tokens). Notwithstanding the time lock, payment for DDAs sold through the offering will be required and accepted in full on a rolling basis during the offering. Minimum Purchase Requirements Purchasers in this offering must commit to a minimum purchase amount of $50,000 for the DDA in this offering. This minimum may be waived at our discretion. Maximum Purchase Amount Purchasers in this offering may commit up to a maximum purchase amount of $3,000,000 for the DDA in this offering. However, submitting a DDA Purchase Agreement does not guarantee that you will receive a DDA or that you will receive your desired purchase amount in a DDA. The maximum may be waived at our discretion. Method of Payment We will accept payment of the Purchase Amount in U.S. dollars, as well as Bitcoin and Ether (valued in U.S. dollars). The valuation of Bitcoin and Ether will be updated every hour starting at 9 am Eastern Time each day, and payments will be valued based on the most recent update at the time when we receive payment from the Purchaser. In order to value Bitcoin and Ether we shall select an exchange platform or aggregation of exchange platforms that, in the good faith judgment of management, is recognized in the market at such time as a reputable and reliable source for such reporting purposes. Recordation of Token Ownership Ownership of the Stacks Tokens potentially distributed pursuant to a DDA will be recorded on the blockchain used by the Blockstack network at the time when those Stacks Tokens are delivered. the US Offering Circular captioned “The Development of the Blockstack Network” for blockchains that the Blockstack network uses. Please see the section of Blockchain Network — further discussion of the Use of Proceeds We intend to use the proceeds of this offering, net of any federal and state income taxes, in conjunction with the proceeds from other sales described in the US Offering Circular under “Business—Development of the Business—Token Sales,” for working capital and other general corporate purposes, including but not limited to development of the Stacks Tokens and the Blockstack network and Stacks blockchain, payment of salaries, hiring employees and consultants, supporting the application ecosystem, and organizing and hosting educational and developer events. We may also use the net proceeds of this offering to make investments in developers of applications for the Blockstack network. See the section of the US Offering Circular captioned “Use of Proceeds.” No Debt or Equity Provisions We do not believe that the DDAs or the Stacks Tokens should be characterized as either debt or equity under the securities laws. We believe that the DDAs and the Tokens should currently be characterized as investment contracts. Holders will not receive a right to any repayment of principal or interest, as might be expected under a traditional debt instrument; nor will they receive an interest in the profits or losses of any 5
Blockstack affiliate, any rights to distributions from any Blockstack affiliate, or any legal or contractual right to exercise control over the operations or continued development of any Blockstack affiliate, as might be expected for a traditional equity instrument. 3. Description of the DDAs This section contains a summary of the material terms of the DDAs. For a description of the terms of the Stacks Tokens, please see the section of the offering circular “Description of the Stacks Tokens” in the US Offering Circular. Summary The DDA is a forward contract providing the holder the right to potentially receive Tokens in the future, subject to the conditions in this Document and the DDA. If the Company accepts your Purchase Amount in a DDA, you will receive a DDA and not any Tokens. You will only receive a right to receive Tokens under certain conditions. Consequently, if those conditions do not occur, you may never receive any Tokens at all. Pricing of the Tokens The Purchase Price per Token under DDAs sold in this Regulation S Offering will be $0.25 per Token. Token Distribution Event and Projected Timing for Receipt of Tokens The DDA creates the right to receive Tokens after a Token Distribution Event sponsored by the Company. The timing of the Token Distribution Event will be determined at the sole discretion of the Company, provided that the Token Distribution Event will occur no later than the Token Distribution Deadline. The Company will provide the Purchaser notice at least 21 calendar days prior to the Token Distribution Event, and the Purchaser will have 14 calendar days to provide the Company with its Token digital wallet address. The Company will then, as of the Token Distribution Event, distribute Tokens to the Purchaser’s digital wallet. Token Distribution Deadline The Token Distribution Event will occur no later than the date that is 10 days after the expiration of a one-year holding period beginning on the date that a DDA is issued (the “Token Distribution Deadline”). If the Token Distribution Event has not occurred by the Token Distribution Deadline or the Company determines in its sole discretion that the issuance of the Tokens would constitute a violation of any applicable law or regulation, the Company may refund the purchaser’s Purchase Amount in a DDA. If the assets of the Company legally available for distribution to the Purchaser and all holders of all other DDAs purchased in this offering (the “DDA Purchasers”), as determined in good faith by the Company’s board of managers, are insufficient to permit the payment to the DDA Purchasers of 100% of their respective Purchase Amounts, then the entire assets of the Company legally available for distribution will be distributed with equal priority and pro rata among the DDA Purchasers in proportion to their Purchase Amounts as a percentage of all Purchase Amounts in DDAs, and the DDA will terminate. This right expires upon a Token Distribution Event, and the Purchasers will have no rights to any of the assets of the Company at any time or any return of their Purchase Amounts after the Token Distribution Event. For the avoidance of doubt, if there is no Token Distribution Event, the provision of the DDA related to a Distribution Event also terminates at the termination of the DDA. Dissolution Event If there is a Dissolution Event, as defined below, before any Token Distribution Event, the Company will pay an amount equal to 100% of the Purchase Amount, due and payable to the Purchaser immediately prior to, or concurrent with, the consummation of the Dissolution Event. As an obligation to a general unsecured creditor, the Purchase Amount will be paid prior and in preference to any distribution of any of the assets of the Company to holders of outstanding preferred and common stock by reason of their ownership thereof. If immediately prior to the 6
consummation of the Dissolution Event, as defined below, the assets of the Company legally available for distribution to the Purchaser and all holders of all other DDAs purchased in this offering (the “Dissolving Purchasers”), as determined in good faith by the Company’s board of managers, are insufficient to permit the payment to the Dissolving Purchasers of 100% of their respective Purchase amounts, then the entire assets of the Company legally available for distribution will be distributed with equal priority and pro rata among the Dissolving Purchasers in proportion to their Purchase Amount as a percentage of all Purchase Amounts in DDAs. This right expires upon a Token Distribution Event, and the Purchasers will have no rights to any of the assets of the Company at any time or any return of their Purchase Amounts after the Token Distribution Event, whether or not there is a Dissolution Event. For the avoidance of doubt, if there is no Token Distribution Event, the provision of the DDA related to a Distribution Event also terminates at the termination of the DDA. A “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 or a public offering will not constitute a Dissolution Event. Termination A DDA will expire and terminate upon: (i) the issuance of Tokens to the Purchaser following the Token Distribution Event or (ii) the payment or setting aside for payment of amounts due to the Purchaser, or the determination that no payments will be made to the Purchaser, as a result of a Dissolution Event or the non-occurrence of a Token Distribution Event by the Token Distribution Deadline, or (iii) any breach of the representations and warranties of the Purchaser in, or the other provisions of, the DDA by the Purchaser. Transfers of DDAs There are substantial restrictions on the transferability of the DDAs. There will be no public market for the DDAs and a DDA may not be offered, sold or transferred without the consent of the Company. Any transfer of a DDA made in violation of these restrictions will be treated by the Company as void. All transfers of the DDA are subject to the Company’s prior approval. Incorporation by Reference The DDA is for the future delivery of the Tokens and its provisions and representations are incorporated by reference into the DDA Purchase Agreement. Purchasers will be provided the DDA Purchase Agreement at the same time as the DDA. By executing the DDA Purchase Agreement, the Purchaser agrees to incorporate by reference and restate the provisions and representations in the DDA under the DDA Purchase Agreement. Further, the Purchaser agrees to restate and affirm all representations made under the DDA Purchase Agreement with respect to the Tokens each time it receives a Token. Risk Factors A purchase of a DDA is speculative and is subject to a number of risks that should be carefully reviewed and considered by prospective purchasers. See the section headed "Risk Factors" starting on page 19 of the US Offering Circular, which describes risks related to a purchase of the Stacks Tokens underlying the DDAs, the Blockstack Network, and our business, among other things. In addition, the following additional risk factors relate to a purchase of a DDA specifically: 4. There is no assurance that your purchase of a DDA will result in the actual receipt of Stacks Tokens, and you may lose your purchase amount in the DDA in whole or in part. Purchasing a DDA involves a significant amount of risk. You should only purchase a DDA if you are a sophisticated purchaser of substantial means who has no immediate need for liquidity in the amount purchased and for whom such purchase amount does not constitute a complete investment program. In addition, you should fully understand, are willing to assume and have the financial resources necessary to withstand, the risks involved in purchasing a DDA. The DDA may not hold its value or increase in value. There is no assurance that your purchase of a 7
DDA will result in your actual receipt of Stacks Tokens. In addition, there is no assurance that your purchase of a DDA will result in any profit or will allow you to achieve your investment objective and you may lose part or all of your purchase amount in a DDA. Prior to taking part in this offering, you should ask questions about this offering and should not participate in the offering until you have received answers that are satisfactory to you. You should also seek out independent accounting, financial, legal and tax advice before participating in this offering. Until your DDA Purchase Agreement has been accepted by us, you are under no obligation to participate in this offering. The Blockstack network and Stacks Tokens are still under development, and many of the terms associated with these and our other businesses, products, development strategy and business model may change. We have not completed the development of our Blockstack network. Consequently, many details about these projects and our other businesses, products, development strategy and business model are not yet known, are uncertain and are subject to change without any notice to you. You should carefully review the Offering Materials. However, many details in the Offering Materials may change after you execute the DDA Purchase Agreement, and may, in some circumstances, change quite significantly. Terms associated with the Blockstack network, the Stacks Tokens and our other businesses or products may change or other terms may apply. There is no guarantee that the Blockstack network, Stacks Tokens or our other businesses, products, development strategy or business model will develop as described in these documents. You should not rely on the terms for the Blockstack network and Stacks Tokens as described in the Offering Materials as being a promise or guarantee of how these products will function or how you will be able to utilize these products. Under the DDA, you will receive only the right to receive Stacks Tokens in the future, if and when a Token Distribution Event occurs, which may never occur. If a Token Distribution Event does not occur, you will never receive Stacks Tokens, and we may not return the full amount of your purchase amount in the DDA. The DDA is a purchase of only the right to receive Stacks Tokens in the future, pursuant to certain conditions specified in the Document and the DDA. You will not receive Stacks Tokens immediately after executing the DDA. We anticipate delivering Stacks Tokens on the date of our Token Distribution Event. The occurrence of the Token Distribution Event is dependent on a variety of factors, many of which are outside of our control. If the Token Distribution Event does not occur by 10 days after the expiration of a one-year holding period, or if we determine in our sole discretion that to issue the Stacks Tokens would constitute a violation of law or regulation we may choose to return your purchase amount in the DDA. We cannot guarantee that the Token Distribution Event will occur at all. We may determine that the Stacks Tokens promised to you are not legally tradeable, or that we cannot distribute the Stacks Tokens to you in compliance will all applicable laws or regulations. In addition, if we cease operations, agree to assign our assets and liabilities to a third party for the benefit of creditors in the case of insolvency, or engage in a liquidation or winding up, we may not be able to issue Stacks Tokens to you. If the Token Distribution Event does not occur, you will not receive any Stacks Tokens. In the event that a Token Distribution Event does not occur, we will make commercially reasonably efforts to return your purchase amount, however, there is no guarantee that funds will be available for such reimbursement. Therefore, any reimbursement could be less than the full amount you provided in making your purchase of the DDA. As a result of the factors described above, your purchase in this offering will grant you only a future right to receive Stacks Tokens, which you may never receive, and if you do not receive Stacks Tokens, you may not receive reimbursement of the full purchase amount you provided in this offering. 8
The value of the Stacks Tokens may decrease after your purchase of a DDA, and the valuation of the price per Stacks Token as described in these Offering Materials may not be correct. The price of the Stacks Tokens may be determined based on transactions that occur on third-party exchanges. As a result, the market price of the Stacks Tokens may decrease, and may fall below the purchase price that you paid for the Stacks Tokens. The number of Stacks Tokens you will receive in a Token Distribution Event will be determined by dividing the purchase amount by the price per Stacks Token (the “Purchase Price”), as described in these Offering Materials. The valuation of the Purchase Price may not be correct, as the actual value of the Stacks Tokens will be determined by a wide range of factors, many of which are outside of our control. There is no guarantee that the Purchase Price will reflect the actual value of the Stacks Tokens at any time, including, without limitation, when they are distributed in the Token Distribution Event and/or when and if they are freely tradeable. The Purchase Price may be significantly above or below the actual value of the Stacks Tokens. You may not be able to offer, sell or transfer your DDA without our approval or at all. The DDAs are being offered in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Regulation S. As a result, the DDAs may not be resold or transferred within the United States or to a “U.S. person” unless the DDAs are registered or an exemption from registration under the Securities Act is available for such resale or transfer. In addition, the DDAs may not be offered, sold or transferred without approval by us, which we are unlikely to provide. Any transfer of a DDA made in violation of the Securities Act restrictions, or made without our approval, will be treated by us as void. You should be prepared to hold your DDA until the Token Distribution Event and may never be able to transfer your DDA. For representations and terms regarding resale, see “Description of the DDA—Transfers of DDAs.” If you receive Stacks Tokens pursuant to a DDA, you will be subject to additional restrictions on your ability to sell or transfer your Stacks Tokens. Stacks Tokens sold pursuant to a DDA will have different rules regarding transferability and resale than Stack Tokens purchased in a registered offering or a Regulation A offering. Stacks Tokens sold pursuant to a DDA will have been sold in an offering exempt from registration under the Securities Act pursuant to Regulation S. As a result, such Stacks Tokens may not be resold or transferred within the United States or to a “U.S. person” unless the Stacks Tokens are registered or an exemption from registration under the Securities Act is available for such resale or transfer. It is anticipated that the Stacks Tokens sold in this offering will be transferable under the U.S. securities laws a year and a day after a purchaser’s initial purchase of a DDA, subject to additional lockups based on the release schedule described in this Document. In contrast, Stacks Tokens purchased in a public offering that is either registered or conducted in accordance with Regulation A will not have this restriction on their resale or transfer. If you purchase a DDA and receive Stacks Tokens pursuant to that DDA, you will have more restrictions on your ability to transfer or resell your Stacks Tokens than someone who purchased Stacks Tokens in such a public offering. This could have a negative effect on your ability to obtain liquidity or achieve your investment objectives through the purchase of a DDA. For representations and terms regarding resale of Stacks Tokens, see “Description of the Stacks Tokens—What Stacks Tokens are eligible for future sale?” in the US Offering Circular. The terms in the DDA may be customized to particular purchasers, and purchasers of DDAs in this offering will have no protection if we choose to offer DDAs with different terms at a future date. We anticipate that there will be a number of purchasers in this offering. Certain purchasers in this offering may be able to negotiate specific, alternative and customized terms for their DDAs. These terms may or may not be available to all purchasers, and you may not receive any notification regarding differences in terms between the various DDAs. Terms in other DDAs may 9
be more or less favorable than the terms in your DDA. We may engage in additional DDA offerings in the future, and the terms of such future offerings may be different than the terms in this offering. We are under no obligation to amend and restate any DDA, whether issued as part of this offering or any future or past offering, based on agreements executed with us on different terms, or to notify you of any alternative terms, including those that may be more favorable to you than the terms in your DDA. There is no limit to the number of DDAs or Stacks Tokens we may issue, and the value of your DDA could decline due to additional DDA offerings. The number of Stacks Tokens available through DDA offerings is not restricted, and we are not limited in how many DDAs we may issue, either during this offering or during a future offering. As a result, we may hold additional DDA or Stacks Tokens offerings, which could dilute the value of your DDA and/or the value of the Stacks Tokens that you would receive following a Token Distribution Event. Submission of a DDA Purchase Agreement does not guarantee that you will receive a DDA, and our acceptance of your DDA Purchase Agreement does not guarantee that you will receive your desired purchase amount. Submitting a DDA Purchase Agreement does not guarantee that you will receive a DDA or that you will receive your desired purchase amount in a DDA. In addition to submitting your DDA Purchase Agreement, you must verify that you are a “non-U.S. person” (as defined under Regulation S under the Securities Act), verify your identity and represent that you are not a resident of the State of New York. We reserve the right to reject potential purchasers for any reason or no reason at all. In your DDA Purchase Agreement, you will indicate the amount you would like to purchase in the DDA. We will determine, at our discretion, whether you will receive the full amount of your requested purchase amount, or any purchase amount at all. Therefore, you may submit a DDA Purchase Agreement, but may not receive a DDA or may not receive your requested purchase amount. There can be no assurance that the Stacks Tokens will not be deemed to be securities by other jurisdictions and, if the Stacks Tokens are deemed to be securities in such jurisdictions, you could be subject to additional restrictions on the sale and/or transfer of the Stacks Tokens. We intend to sell the Stacks Tokens into a variety of jurisdictions. As of the date of the US Offering Circular, we believe that not all of those jurisdictions will treat the Stacks Tokens as securities. We have received opinions from counsel located in certain jurisdictions that indicate their belief that such jurisdictions will not view the Stacks Tokens as securities (the “Non-Security Jurisdictions”). Based upon these opinions, we have chosen not to structure our offerings of Stacks Tokens as securities offerings for purposes of the securities laws of the Non-Security Jurisdictions. However, the opinions we receive regarding the Non-Security Jurisdictions may not be valid and may be incorrect. In addition, even if these opinions are correct and valid at the time they are received by us, the Non-Security Jurisdictions may change their laws, regulations or interpretations of existing laws and regulations regarding the definition of securities or pass new laws or regulations, any of which could result in the Stacks Tokens being deemed securities in the Non-Security Jurisdictions. Should any of the Non-Security Jurisdictions deem the Stacks Tokens to be securities, you may have additional compliance obligations specified by that Non-Security Jurisdiction and, among other things, you may not be able to sell and/or transfer the Stacks Tokens or may be able to do so only after complying with additional obligations, which may be expensive and burdensome. In addition, Blockstack may have additional regulatory obligations that restrict our operations, cause us to incur additional compliance costs and/or cause us to change our business plans, all of which could negatively affect Blockstack and the Stacks Tokens. The tax treatment of the Stacks Tokens is uncertain and there may be adverse tax consequences for purchasers, miners and other holders upon certain future events. 10
The tax characterization of the Stacks Tokens is uncertain, and each purchaser must seek its own independent legal and tax advice with respect to the United States and non-U.S. tax treatment of a purchase of Stacks Tokens. A purchase of Stacks Tokens may result in adverse tax consequences to purchasers that are not U.S. persons (as defined in the Code), including withholding taxes and tax reporting requirements. In general, such a purchaser should not be subject to U.S. federal income tax or, subject to the discussion below under “Certain United States Federal Income Tax Considerations—Backup Withholding Tax and Information Reporting Requirements,” U.S. federal withholding tax on any gain recognized on a sale or other disposition of Tokens issued pursuant to a DDA unless such purchaser is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the sale or disposition, and certain other requirements are met. The Company intends to treat the DDA as a prepaid forward contract for the purchase of the Company’s Tokens, to be delivered to a purchaser upon the Token Distribution Event, as more fully described in the DDA. The DDA should not constitute either an equity or debt interest in the Company. Upon the Token Distribution Event, the Company shall issue Tokens to each holder of a DDA pursuant to the terms of the applicable DDA. The issuance of Tokens to a purchaser under a DDA should be treated for purposes of United States federal tax law as a closing of the prepaid forward contract resulting in a taxable sale of property by the Company to the purchaser. A purchaser that is not a U.S. person (as defined in the Code) should not have U.S. taxable income as the result of the acquisition of Tokens pursuant to the DDA. Such a purchaser should generally have a tax basis for U.S. federal income tax purposes in the Tokens it acquires from the Company equal to the amount of money such purchaser advanced under the DDA. The purchaser’s holding period in the Tokens for purposes of United States federal tax law should begin on the day the Tokens are issued to the purchaser. We may never qualify the Stacks Tokens for registration under the United States securities laws, and we may never be permitted to distribute the Stacks Tokens though a Regulation A offering or any form of registered offering, which could have a damaging effect on our business model, development strategy and financial condition. We anticipate that the qualification of an offering of Stacks Tokens under Regulation A or the registration of an offering of Stacks Tokens will be a necessary step in allowing us to continue to develop the Blockstack network as planned. The qualification or effectiveness of such a public offering may, for example, allow us to distribute Stacks Tokens that are freely transferrable under federal securities laws to miners and other key participants in the Blockstack network, and our plans to introduce certain of our mining mechanisms in 2019 or 2020, and to otherwise issue additional Stacks Tokens, are subject to our ability to qualify, register or find a suitable exemption from registration for the issuance of mined and other Stacks Tokens in all applicable jurisdictions. It is possible, however, that we may not be able to engage in a Regulation A offering or a registered offering. Such an offering may never be qualified under Regulation A or declared effective by the SEC, or there may be other reasons why we would not be able to engage in such a public offering. In addition, even if we were qualified to engage in a Regulation A or a registered offering, such an offering may be delayed from our anticipated timeline, perhaps considerably. If we fail to qualify or register a public offering of Stacks Tokens with the SEC, we may not be able to conduct our business as planned, and we may have to fundamentally rework the structure of our network. Should this situation occur, it would provide our competitors with the opportunity to gain a stronger market position while we attempt to restructure our network. Further, there is no guarantee that we could restructure the network successfully in a manner that is compliant with law or which is capable of attracting users and developers; if we are unable to do so, Blockstack’s development and maintenance of the Blockstack network may permanently cease. In addition, we will have invested significant resources into our attempt to qualify an offering with the SEC, and likely will not be able to recoup that investment, which could have a material negative impact on Blockstack’s financial condition. Further, if we fail to qualify or register a public offering of Stacks Tokens with the SEC, our ability to conduct our business as planned and/or raise capital may be severely negatively impacted, and if we cannot raise capital we may not be able to continue as a going concern. 11
No money or other consideration is being solicited with respect to any offering under Regulation A or any other form of registered offering, and if sent in response for such an offering, will not be accepted. Any offer to buy securities under Regulation A or any other form of registered offering must be made only pursuant to an offering statement filed with the SEC pursuant to the appropriate regulation, and these Offering Materials do not relate to any such offering statement or any such registered offering. Even if we were qualified by the SEC to engage in a Regulation A or other form of registered offering, such an offering may never occur or may be delayed from our anticipated timeline. Should we, in the future, be qualified to engage in any registered offering, any offer we made pursuant to an offering statement may be withdrawn or revoked by us, without obligation or commitment of any kind, at any time before notice of its acceptance given after the qualification date, and an indication of interest made by a prospective purchaser in any such registered offering is non-binding and involves no obligation or commitment of any kind. Due to the circumstances described above, it is possible that we would never be able to qualify an offering of Stacks Tokens under Regulation A or hold any form of registered offering for Stacks Tokens. Purchasers in the offering described in these Offering Materials should not count on our ability to qualify Stacks Tokens for Regulation A offering or any other form of registered offering when deciding whether to purchase. Certain United States Federal Income Tax Considerations Set forth below is a discussion, in summary form, of certain United States federal income tax consequences relating to a purchase of a DDA and the acquisition, ownership, and disposition of Tokens issued pursuant to a DDA. This summary does not attempt to present all aspects of the United States federal income tax laws or any state, local, or foreign laws that may affect a purchase of a DDA or Tokens. In particular, financial institutions, insurance companies, tax-exempt entities, purchasers subject to the alternative minimum tax, and other purchasers of special status must consult with their own professional tax advisors regarding a prospective purchase. This summary is general in nature and should not be construed as tax advice to any prospective Purchaser. No ruling has been or will be requested from the Internal Revenue Service (the “IRS”) and no assurance can be given that the IRS will agree with the tax consequences described in this summary. The following discussion assumes that each prospective Purchaser will acquire Tokens as a capital asset (generally, property held for investment). This description is based on the U.S. Internal Revenue Code of 1986, as amended, (the “Code”), existing, proposed and temporary U.S. Treasury Regulations and judicial and administrative interpretations thereof, in each case as available on the date hereof. All of the foregoing is subject to change, which change could apply retroactively and could affect the tax consequences described below. The following discussion is limited to prospective Purchasers who are non-U.S. holders (as defined below). Each prospective Purchaser should consult with its own tax adviser in order to fully understand the United States federal, state, local, and foreign tax consequences of a purchase of a DDA or Tokens. No formal or legal tax advice is hereby given to any prospective Purchaser. Transactions involving a DDA and similar instruments, as well as initial coin offerings (“ICOs”) and Token transactions, are relatively new and it is more than likely that the IRS will issue guidance, possibly with retroactive effect, impacting the taxation of Purchasers in a DDA, participants in an ICO, and holders of Tokens. Future tax guidance from the IRS (or guidance resulting from future judicial decisions) could negatively impact Purchasers in the DDA and holders of Tokens. Non-U.S. Holder For the purposes of this discussion, a “non-U.S. holder” means a beneficial owner of Tokens issued pursuant to a DDA that is neither a U.S. holder nor a partnership (or an entity or arrangement treated as a partnership) for U.S. federal income tax purposes. 5. 12
For the purposes of this discussion, the term “U.S. holder” means a beneficial owner of Tokens issued pursuant to a DDA that is, for U.S. federal income tax purposes: • • an individual who is a citizen or resident of the United States; a corporation (or other entity that is classified as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the United States, any State thereof or the District of Columbia; an estate the income of which is subject to U.S. federal income tax regardless of its source; or a trust (i) if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes. a partnership, including for this purpose any entity or arrangement that is treated as a • • If partnership for U.S. federal income tax purposes, holds Tokens issued pursuant to a DDA, the U.S. federal income tax treatment of a partner in such partnership generally will depend on the status of the partner and the activities of the partnership. A holder that is a partnership and the partners in such partnership should consult their tax advisors with regard to the U.S. federal income tax consequences of the ownership and disposition of Tokens issued pursuant to a DDA. In general, a Purchaser should not be subject to U.S. federal income tax or, subject to the discussion below under “—Backup Withholding Tax and Information Reporting Requirements,” U.S. federal withholding tax on any gain recognized on a sale or other disposition of Tokens issued pursuant to a DDA unless the Purchaser is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the sale or disposition, and certain other requirements are met. A Purchaser that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable tax treaty) on its effectively connected earnings and profits for the taxable year, as adjusted for certain items. Purchasers should consult their tax advisors regarding any applicable tax treaties that may provide for different rules. Tax Treatment of DDA The Company intends to treat the DDA as a prepaid forward contract for the purchase of the Company’s Tokens, to be delivered to a Purchaser upon the Token Distribution Event, as more fully described in the DDA. The DDA should not constitute either an equity or debt interest in the Company. Tax Treatment of Token Sale Upon the Token Distribution Event, the Company shall issue Tokens to each holder of a DDA pursuant to the terms of the applicable DDA. The issuance of Tokens to a Purchaser under a DDA should be treated as a closing of the prepaid forward contract resulting in a taxable sale of property by the Company to the Purchaser. A Purchaser should not have taxable income as the result of the acquisition of Tokens pursuant to the DDA. A Purchaser should generally have a tax basis for U.S. federal income tax purposes in the Tokens it acquires from the Company equal to the amount of money such Purchaser advanced under the DDA. The Purchaser’s holding period in the Tokens for purposes of United States federal tax law should begin on the day the Tokens are issued to the Purchaser. Backup Withholding Tax and Information Reporting Requirements Information returns may be filed with the IRS in connection with, and Purchasers may be subject to backup withholding on, amounts received in respect of their disposition of Tokens, unless the Purchaser furnishes to the applicable withholding agent the required certification as to its non-U.S. status, such as by providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-8ECI, as applicable, or the Purchaser otherwise establishes an exemption. Proceeds from the sale or other disposition of Tokens received in the United States by a Purchaser 13
through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding unless such Purchaser provides proof an applicable exemption or complies with certain certification procedures described above, and otherwise complies with the applicable requirements of the backup withholding rules. EACH PURCHASER SHOULD SEEK, AND MUST DEPEND UPON, THE ADVICE OF HER, HIS OR ITS TAX ADVISOR WITH RESPECT TO THEIR PURCHASE, AND EACH PURCHASER IS RESPONSIBLE FOR THE FEES OF SUCH ADVISOR. NOTHING IN THIS DOCUMENT IS OR SHOULD BE CONSTRUED AS LEGAL OR TAX ADVICE TO A PURCHASER. PURCHASERS SHOULD BE AWARE THAT THE INTERNAL REVENUE SERVICE MAY NOT AGREE WITH ALL TAX POSITIONS TAKEN BY THE COMPANY AND THAT CHANGES TO THE INTERNAL REVENUE CODE OR THE REGULATIONS OR RULINGS THEREUNDER OR COURT DECISIONS AFTER THE DATE OF THIS DOCUMENT MAY CHANGE THE ANTICIPATED TAX TREATMENT TO A PURCHASER. THE COMPANY WILL NOT OBTAIN ANY RULING FROM THE INTERNAL REVENUE SERVICE WITH REGARD TO THE TAX CONSEQUENCES OF A PURCHASE OF A DDA. THE TAX TREATMENT OF THE DDA, THE PURCHASE RIGHTS CONTAINED THEREIN, AND THE TOKEN DISTRIBUTION IS UNCERTAIN. A PURCHASE PURSUANT TO THE DDA AND THE PURCHASE OF TOKENS PURSUANT THERETO MAY RESULT IN ADVERSE TAX CONSEQUENCES TO PURCHASERS, INCLUDING WITHHOLDING TAXES, AND TAX REPORTING REQUIREMENTS. EACH PURCHASER SHOULD CONSULT WITH AND MUST RELY UPON THE ADVICE OF ITS OWN PROFESSIONAL TAX ADVISORS WITH RESPECT TO THE UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX TREATMENT OF A PURCHASE OF THE DDA AND THE RIGHTS CONTAINED THEREIN. Notices to prospective purchasers Notice to prospective purchasers in the European Economic Area: Prospective purchasers in the European Economic Area should be aware that the Stacks Tokens are not considered "transferable securities" for the purposes of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU ("MiFID II"). Accordingly, there is no requirement to produce a prospectus in relation to their offering and prospective purchasers will not be afforded the same protections they would have been afforded had a prospectus been approved by the competent authority of the applicable member state of the European Economic Area. Notice to prospective purchasers in the United Kingdom: Prospective purchasers in the United Kingdom should be aware that as the Stacks Tokens are not considered to be a controlled investment this Document does not constitute a financial promotion for the purposes of FSMA. Accordingly, this Document has not been approved by an "Authorised Person" under Section 21 of FSMA and nor has it been authorised by the Financial Conduct Authority. Accordingly, prospective purchasers will not be afforded the same protections they would have been afforded had this been an approved financial promotion. Notice to prospective purchasers in Singapore: 6. 6.1 6.2 6.3 Prospective purchasers of Stacks Tokens in Singapore should be aware that Stacks Tokens are not considered to be “securities,” units in a “collective investment scheme” or “business trusts,” in each case as defined under Singapore’s Securities and Futures Act (Cap. 289) (the “SFA”). Accordingly, the offer of Stacks Tokens is not regulated under the SFA and there is no requirement for the offer of Stacks Tokens to be accompanied by any prospectus or for any prospectus to be lodged with the Monetary Authority of Singapore (“MAS”). Neither of the Stacks Tokens nor this Document has been reviewed, approved or authorized by MAS. Prospective purchasers in Singapore also should be aware that investor protection safeguards that apply to purchasers of investment products that are authorized by MAS will not be available to purchasers of Stacks Tokens. 14
6.4 Notice to prospective purchasers in Hong Kong: Prospective purchasers of Stacks Tokens in Hong Kong should be aware that the Stacks Tokens are not considered "securities" for the purposes of the Securities and Futures Ordinance (Cap. 571) and are not considered “shares” or “debentures” for the purposes of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32). Accordingly, neither of the Stacks Tokens nor this Document has been reviewed, approved or authorized by the Hong Kong Securities and Futures Commission (“SFC”). Prospective purchasers in Hong Kong also should be aware that investor protection safeguards that apply to purchasers of investment products that are authorized by the SFC will not be available to purchasers of Stacks Tokens. Notice to prospective purchasers in other jurisdictions The distribution of this Document in certain jurisdictions may be restricted by law and therefore persons into whose possession this Document comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. No advice The contents of this Document and any other communications are not to be construed as legal, financial or tax advice. Each prospective purchaser should consult a legal adviser, an independent financial adviser duly authorised under the relevant regulatory regime in the jurisdiction in which such prospective purchaser is located or a tax adviser for legal, financial or tax advice in relation to any purchase or holding of Stacks Tokens. Each prospective purchaser should consult with such advisers as needed to make its purchase decision and to determine whether it is legally permitted to hold the Stacks Tokens under applicable investment laws or regulations. Prospective purchasers should be aware that they may be required to bear the financial risks of this purchase for an indefinite period of time. No incorporation of website information Unless expressly stated otherwise, the contents of the Company's website or any hyperlinks accessible from the Company's website do not form part of this Document and prospective purchasers should not rely on them. 6.5 7. 8. 15