sns-network-solutions/businesses/sns-hospitality-group/docs/kiowa-equity-framework.md

Kiowa Equity & Vesting Framework — Legal / Paperwork / Business-Scout Role

Draft / template — not legal advice. Working draft for LegalShield / an Indiana-licensed attorney and a CPA to review before granting any equity or having Kiowa sign anything. Items in [brackets] need confirmation. This framework is meant to be applied fresh, per venture — it is not a Holdings-level equity grant. Kiowa is not a Member of SnS Network Solutions Holdings LLC; Samuel S. James remains its sole owner (see docs/operating-agreement.md).

1. Purpose and Scope

This framework governs the Membership Interest granted to [Kiowa's full legal name] ("Kiowa") in any subsidiary LLC of SnS Network Solutions Holdings LLC ("Holdings") that Kiowa originates, sources, or brings to Samuel S. James ("Sam") for launch, starting with Foodtruck1 LLC. It is designed to be reused, with fresh numbers, for every future venture Kiowa brings — each venture gets its own independent grant and vesting clock; performance on one venture has no effect on any other.

Kiowa's role per venture is legal/paperwork (entity formation, EIN applications) and business sourcing/scouting. Sam's role is to secure and contribute the venture's capital.

2. The Grant

• Interest granted: 15% Membership Interest in the specific subsidiary LLC.
• Cash contribution required: $0. Kiowa contributes no capital; the interest is granted for services (formation work + sourcing the venture).
• Holdings' interest: the remaining 85% of that subsidiary is held by Holdings, preserving Sam's ownership inside the holding structure (see ../04-foodtruck1/requirements.md for how this applies to Foodtruck1 specifically).
• Membership status: Kiowa is admitted as a full Member (voting + economic rights) of that subsidiary as of the Formation Date, subject to the vesting and forfeiture terms in §3–§4 below.
• Formation Date vs. Opening Date: the subsidiary's Formation Date (Articles of Organization filed) may precede its Opening Date (the day the venture actually begins revenue-generating operations — e.g., the day Foodtruck1 first serves a paying customer). The vesting clock in §3 runs from the Opening Date, not the Formation Date. [TODO: record the actual Opening Date for each venture in that venture's own requirements/planning doc as soon as it occurs — this date controls the entire vesting schedule below.]

3. Vesting Schedule

Measured from the Opening Date, cumulative net profit is tracked against Sam's total invested capital in that specific venture (see §5 for both definitions).

Milestone	Vests	Condition
3 months	3.75% (cumulative 3.75%)	Time-based, unconditional
6 months	3.75% (cumulative 7.50%)	Time-based, unconditional
9 months	3.75% (cumulative 11.25%)	Time-based, unconditional
12 months	final 3.75% (cumulative 15.00%)	Conditional — only vests if cumulative net profit has reached 2x Sam's invested capital by month 12

Acceleration. If cumulative net profit reaches 2x Sam's invested capital at any point before the 12-month mark, Kiowa's interest immediately vests in full (15%), regardless of which quarter has or hasn't passed.

Forfeiture. If cumulative net profit has not reached 2x Sam's invested capital by the 12-month mark, the final 3.75% tranche is permanently forfeited and reverts to Holdings. Kiowa retains whatever vested through month 9 (up to 11.25%, depending on how many quarterly milestones had passed). There is no later opportunity to earn the forfeited tranche back for that venture. [TODO: confirm this is intended to be final/permanent, with no cure period — that is the current design.]

4. Per-Venture Independence

Each venture Kiowa brings gets its own grant, its own Opening Date, its own invested-capital figure, and its own 12-month vesting clock, entirely independent of every other venture. Underperformance (or over-performance) on one venture has no bearing on her interest in any other.

5. Definitions

• "Sam's invested capital" — cumulative cash Sam or Holdings contributes to that specific subsidiary, as recorded in that subsidiary's own capital account (same mechanism as Holdings §6). Only actual contributed capital counts — not the value of Sam's time, brand, or other in-kind contributions, unless the parties agree in writing to value and include those.
• "Cumulative net profit" — the venture's net profit from the Opening Date forward. [TODO — CPA review: define precisely — GAAP accrual vs. cash basis, whether Kiowa's own compensation/draws (if any) are expensed before or after this calculation, and how it's measured/certified (e.g., monthly bookkeeping close) so there's no dispute at the 12-month checkpoint.]

6. Tax Treatment

[TODO — CPA/attorney review, before any grant is made:]

• This is intended to qualify as a profits interest (not a capital interest) for federal tax purposes under Rev. Proc. 93-27 / 2001-43, so that Kiowa does not recognize taxable income upon grant. This is most straightforward for a brand-new venture with no existing value at grant (e.g., Foodtruck1 pre-launch); confirm the analysis separately for any future venture that already has value by the time Kiowa joins.
• Because the interest carries a real forfeiture condition (§3), it likely has a "substantial risk of forfeiture" for tax purposes regardless of it being called a full grant on day one. Recommend Kiowa file a protective Section 83(b) election within 30 days of each grant date — this is a hard IRS deadline with no extensions, and it is the single highest-stakes item in this entire arrangement if missed.
• Confirm whether the subsidiary needs its own EIN/partnership return implications once Kiowa is admitted (same multi-member consequences already flagged in Holdings' own operating agreement §8).

7. Relationship to Other Documents

• Kiowa's confidentiality obligations (including access to Sam's personal information during formation/EIN work) are governed separately by nda-formation-partner.md — that NDA applies regardless of which ventures she ends up vesting into.
• Each subsidiary's own operating agreement (e.g., Foodtruck1's, still to be drafted) should incorporate this framework's specific numbers for that venture as the basis of Kiowa's Membership Interest, rather than repeating bespoke terms — this doc is the source of truth for the deal logic.
• "Maintaining her value" as a legal/paperwork/scout resource is not itself a condition on the equity — it's deliberately left out of the vesting/forfeiture mechanics because it isn't an objective, enforceable standard. The 2x/12-month profit test is the sole trigger. If ongoing service expectations need to be enforced separately, that belongs in a services description, not the equity terms.

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[TODO — attorney review: confirm this entire framework, especially the repurchase/forfeiture mechanics and the 83(b) election timing, before granting any interest under it.]