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.

---

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