NOT FOR RELEASE, PUBLICATION, CIRCULATION OR DISTRIBUTION IN OR INTO THE UNITED STATES. IN THE EUROPEAN ECONOMIC AREA, THE NOTES WILL ONLY BE OFFERED TO QUALIFIED INVESTOR AS DEFINED IN THE PROSPECTUS DIRECTIVE.
SwissRealCoin (SRC) Token - Indicative Notes Term Sheet
(the "Term Sheet")
Terms and Conditions Concerning the Swiss Law Governed Note (Anleihensobligation),
Terms and Conditions relating to the Placement and Commitments
Crypto Real Estate Ltd. (the "Issuer")
A SwissRealCoin ("SRC") represents a Swiss Law governed Note (Anleihensobligation).
Up to CHF 150'000'000
The ICO will be terminated if less than 30 million Notes are sold by the end of the Offering (including during the Pre-ICO) (Soft Cap) (see "Modification, Amendments and Termination" below)
Issue Price during period prior to the beginning of the Offering ("Pre-ICO"):
Refundable Commitments (see "Commitment" below) can be made (subject to the Issuer's right to accept or decline Commitments in its sole discretion) according to the following bonus scheme:
- Price 1 CHF, with 25% bonus for each of the first 25'000'000 Notes;
- Price 1 CHF, with 15% bonus for each of the next 25'000'000 Notes; and
- Price 1 CHF, with 7% bonus for each of the next 25'000'000 Notes.
Issue Price during the ICO:
The issue price during the Offering will be CHF 1.00 for each Note.
Envisaged Issue Date
23 May 2018
The offering (the "Offering" or "ICO") consists of (i) a public offering of Notes to investors in Switzerland and (ii) private placements of the Notes to certain selected qualified investors outside Switzerland in accordance with applicable securities laws. The Issuer will conduct a Pre-ICO with certain selected investors.
Up to additional 7% of the Notes sold in the Offering (i.e. of up to 150'000'000 Notes) can be allocated to the Issuer's team partners, advisors and to persons making a referral to buy SRCs.
Subject to prior completion of the KYC and AML procedures described below, potential investors may agree with the Issuer to transfer a commitment (each a "Commitment"), which is subject to a possible Refund, to an escrow account designated for such purposes by the Issuer in order to benefit from a discounted Issue Price. While the funds are credited to the escrow account, they will not bear any interest. The Issuer reserves the right to accept or decline Commitments in its sole discretion.
A potential investor may request a repayment (a "Refund") of its Commitment from the Issuer at any time for any reason until 23:59 (CEST) on the fifth business day following the publication of the Prospectus on the website of the Issuer (the "Cut-Off Time"). If a potential investor has not submitted a Refund request to the Issuer by the Cut-Off Time, it will be deemed to have read and agreed to the final terms and conditions and other sections of the Prospectus (in particular the section on risk factors).
Commitments can be made in CHF, EUR, ETH or BTC. Prior to the Cut-Off Time, Commitments will not be converted into CHF. In case an Investor requests a Refund, its Commitment will be repaid in the same amount and currency or crypto currency as the Commitment was made (subject to the deduction of negative interests (if any)).
The Issuer will publish a prospectus (the "Prospectus") describing the final terms and conditions of the Notes and the Offering and setting out risk factors which should be considered by investors before making an investment decision. The holders of the Notes (the "SRC Holders") which do not request a Refund (see above) by the Cut-Off Time will be deemed to have reviewed the Prospectus and in particular the section on risk factors.
Each potential investor is aware that the Issuer is a start-up company and an investment in the Notes entails financial risks. Investors may lose part or all of their investment. Potential investors are urged to carefully review the Prospectus and in particular the section on risk factors before making an investment decision.
Each SRC Holder represents that it is familiar with the Blockchain technology.
Terms and Conditions relating to Notes
No interest is payable on the Notes.
Maturity / Redemption
The Notes will not have a maturity date, but will become redeemable in case of a Liquidation Event if and to the extent the Liquidation Proceeds are sufficient.
The Notes will be issued in uncertificated form as tokens on the Ethereum-Blockchain which represent a contract (the "Contract") between the Issuer and the SRC Holders in accordance with 1156 et seq. of the Swiss Federal Code of Obligations of 30 March 1911, as amended. The Bonds will be immediately upon their issuance released as digital tokens to be exclusively registered and transferred on the Ethereum-Blockchain.
Use of Proceeds
The Issuer plans using the net proceeds from the sale of the Notes to finance the development of know how regarding the administration of real estate using the Blockchain technology ("Prop Tech") (c. 5% of net proceeds) and to finance the identification and acquisition of a real estate portfolio in Switzerland as a test environment for the new technology (c. 92% of net proceeds) (together with any further real estate acquired by reinvesting profits of the Issuer: "Real Estate"). The remaining c. 3% of net proceeds shall be used to cover expenses and for general corporate purposes.
The transfer of Notes will be effected by a transfer of a token on Ethereum-Blockchain which represents a transfer of Contract (Vertragsübernahme). No written instrument will document such a transfer.
Votes / Acquisition
It is foreseen that each SRC Holder shall receive the right to vote on whether a certain real estate property shall be added to the Real Estate portfolio:
Once the relevant internal approvals for the acquisition of a certain real estate property have been obtained, the Issuer shall propose the acquisition to the SRC Holders ("Proposal"). A Proposal will be notified to the SRC Holders using a specially designed platform (the Issuer's Blockchain real estate robot). SRC Holders may then vote on such Proposal for a period of five business days via such platform. If one or more SRC Holder holding more than 50% of outstanding Notes reject the Proposal, the Proposal will not be pursued. Otherwise, the Issuer may pursue the acquisition. SRC Holders not participating in the vote will be deemed to have approved the Proposal. For the avoidance of doubt: Even if a Proposal has been approved by the SRC Holders, there is no guarantee that the acquisition can be successfully completed by the Issuer.
An independent accredited appraiser (which is expected to be one of the big four audit firms) shall determine the Inner Value of the Notes on a semi-annual basis. In addition, an external algorithm shall permanently monitor the market price of the Notes on major exchanges and compare the Market Capitalization with the Inner Value. If the Market Capitalization of the Notes exceeds the Inner Value by 2:1 (i.e. if the Market Capitalization of the Notes exceeds the Inner Value of the Notes by two times), the Issuer will (subject to the Cap) issue additional Notes at the market price either (a) for a period of 72 hours or (b) (if earlier) until the amount of Notes outstanding as at the beginning of such offering has been doubled. This will dilute the voting rights of the existing SRC Holders and is indented to increase the Inner Value of the Notes. The proceeds from issuing such additional Notes shall be invested in additional Real Estate.
The total possible amount of Notes is capped at 1'000'000'000 ("Cap").
The Issuer will determine on a case by case basis if an updated prospectus needs to be published in connection with the issuance of Additional Notes.
"Inner Value" means the value of the Real Estate minus liabilities, plus non-invested cash, as determined by an independent accredited appraiser (which is expected to be one of the big four audit firms).
"Market Capitalization" means the number of outstanding Notes multiplied by the average market price of the Notes on major exchanges, as determined by an external monitoring algorithm.
Status / Subordination / Negative Pledge
The Notes will constitute direct, unconditional, subordinated and unsecured obligations of the Issuer and will rank pari passu among themselves but junior to all other unsecured and unsubordinated obligations of the Issuer.
The Issuer will not incur any additional financing other than:
Application of Net Rental Income/Net Profits
Net profits / Net rental income of the Issuer (if any) shall be applied as follows:
80% of net rental income resulting from Real Estate shall be reinvested while 20% of net rental income resulting from Real Estate will be available to the Issuer for further investment into the technology and/or distributions to its shareholders (if permitted under Swiss law). Net rental income from Real Estate is the income resulting from the Real Estate minus all directly related costs (including capex & maintenance, taxes, insurance costs, management costs and salaries) and proportional overhead costs.
50% of net profits resulting from Prop Tech shall be reinvested into Real Estate for the benefit of the SRC Holders while 50% of net profits resulting from Prop Tech will be available to the Issuer for further investment into the technology and/or distributions to its shareholders (if permitted under Swiss law). Net profits from Prop Tech are profits resulting from Prop Tech services such as licensing fee income, consulting fees and any other income related to the Prop Tech minus proportionate overhead costs, salaries and other Prop Tech related costs.
The Issuer may repurchase Notes at any time for any price in the open market.
Votes / Liquidation Event
Upon request from the SRC Holders' Relevant Majority during a Voting Window, the Issuer will be required to divest all the Real Estate within a period of 12 months from the last Voting Window day ("Liquidation Event") and apply the proceeds resulting from such divestitures ("Liquidation Proceeds") as set out below under "Application of the Liquidation Proceeds".
"SRC Holders' Relevant Majority" means, initially, one or more SRC Holder holding 80% or more of outstanding Notes. The relevant percentage threshold will be gradually reduced by 2.0 percentage points per year, but not lower than to 66%.
"Voting Window" means the period from 1 December to 23 December of each calendar year if one or more SRC Holders holding 10% or more of outstanding Notes requested a vote on a Liquidation Event in the period from 15 September to 29 September of such calendar year ("Request"). A Request can only be made once at least 80% of the net proceeds of the Offering have been invested.
Application of the Liquidation Proceeds
In case of a Liquidation Event, the proceeds resulting from the divestment of the Real Estate ("Liquidation Proceeds") will be, subject to the prior repayment of bank loans incurred to partially finance the Real Estate (if any), applied in the following order:
The "Excess Amount" shall be the remaining Liquidation Proceeds once each SRC Holder has received CHF 1.00 per Note held by such SRC Holder.
The remaining part of the Excess Amount (i.e. 20%) shall be available to the Issuer.
For the avoidance of doubt: If the Liquidations Proceeds are not sufficient to pay CHF 1.00 to each SRC Holder per Note held by such SRC Holder, all Liquidation Proceeds shall be distributed to the SRC Holders on a pro rata basis.
Swiss Tax Aspects
There is no published practice of the Swiss tax authorities on the tax treatment of comparable tokens or ICOs. The issuance, holding and trading of SRC therefore follows the general Swiss tax rules, and is expected to follow the tax treatment of comparable financial instruments in the market.
Based on a preliminary understanding, the SRC is expected to constitute a derivative instrument in the form of an open end tracker certificate. The Issuer intends to confirm the Swiss tax treatment in tax rulings with the Swiss tax authorities.
In assimilating the SRC to an open-end tracker certificate, the tax treatment of the SRC could be as follows:
Potential investors in the Notes are individually responsible for their compliance with all applicable tax laws and regulations. Potential investors in the Notes are advised to consult their own professional advisers on the implications of making an investment in, holding or disposing of, Notes under the laws of the jurisdictions in which they are liable to taxation and in light of their particular circumstances.
The Issuer and the Notes are not and will not be rated.
KYC and AML Procedures
Potential investors will only be allowed to participate in the Offering and/or to make any Commitments once they have conducted a KYC/AML procedure performed by Intrum AG Switzerland. For this purpose a video connection between the potential investor and an Intrum ident specialist is established, through which the investor's ID card/passport and identity are verified. The process includes the following steps:
After a successful video identification an Intrum supervisor reviews the results and grants the final approval.
The Issuer retains all right, interest and title in all of the intellectual property regarding SCR. The SRC Holder may not use any of the intellectual property of the Issuer, whether or not patentable, copyrightable or protectable in trademark, for any reason, except upon express, prior, written consent by the Issuer.
Modification, Amendments and Termination
Each potential investor understands that the terms and conditions set out in this Term Sheet are indicative and are subject to changes because the regulatory and tax assessment is still ongoing.
Therefore, each potential investor expressly acknowledges and agrees that the Issuer can, in its sole discretion, amend the terms and conditions or terminate the Offering at any time for any reason. The final terms and conditions will be set out in the Prospectus.
The issuer will communicate any amendments made to this Term Sheet by sending a revised version to the potential investor's e-mail, if previously provided to the Issuer.
The ICO will be terminated if less than 30 million Notes are sold by the end of the Offering (including during the Pre-ICO) (Soft Cap). In this case investors will be reimbursed (subject to a deduction of transaction costs).
Not for distribution in the United States of America or to United States Persons. No sales to retail investors in the European Economic Area ("EEA") (no PRIIPs key information document (KID) has been prepared as Bonds not available to retail investors in the EEA). Further restrictions apply, in particular in the United Kingdom.
Confidentiality and Publicity
The information provided by the SRC Holder to the Issuer will be held under regard of the Swiss Data Protection Law Rules.
Governing Law and Jurisdiction
This Term Sheet is governed by and construed in accordance with Swiss substantive laws (i.e. without regard to conflict of laws rules). Any dispute arising out of or in connection with this Term Sheet shall be submitted to the exclusive jurisdiction of the courts of the City of Zug, Switzerland.