Token Term Sheet
"OilXCoin Token"
2024.02.16
NOT FOR DISTRIBUTION, PUBLICATION OR RELEASE, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, CHINA, HONG KONG SAR, JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH DISTRIBUTION, PUBLICATION OR RELEASE WOULD BE PROHIBITED BY APPLICABLE LAW.
OILXCOIN TOKENS ARE NOT OFFERED IN THE UNITED STATES, AND PERSONS IN THE UNITED STATES ARE PROHIBITED FROM PURCHASING OILXCOIN TOKENS. THIS DOCUMENT IS NOT AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION.
This term sheet sets forth the material elements of the prospective terms and conditions of the OilXCoin. This term sheet is non-binding and does not constitute a legally binding commitment of the Issuer (as defined hereunder). All rights and obligations of the Issuer will have legally binding effect only after the finalisation of terms and conditions of the OilXCoin by the Issuer, which may differ from the contents of this term sheet.
General | |
| Issuer | DeXentra GmbH, Zug, Switzerland |
| Instrument | Contingent claim relating to the value of assets linked to oil / natural gas and their respective value chains (the "OilXCoin") represented by digital tokens (the "Tokens"). |
| Distributed ledger | Ethereum |
| Project overview / use of proceeds | The OilXCoin will be issued by the Issuer as part of a wider plan to finance the Issuer's business activities conducted by the Issuer and/or its affiliates ("DeXentra"). These mainly include (a) the purchase or lease of oil reserves (oil-in-place), natural gas reserves (gas-in-place), or land that has been identified as being atop of oil-in-place or gas-in-place, or (b) investments (including joint ventures) and operational expenses to extract the oil or natural gas. The OilXCoin's value is expected to be linked to the value of those of DeXentra's assets which will be used to conduct the Issuer's oil and gas business (the "Relevant Assets"). In certain circumstances, the Issuer will be required or allowed to dispose of the Relevant Assets and to distribute the net proceeds to the holders of OilXCoin, after deduction of payments due to other creditors. |
Financial rights | |
| Payment upon termination | If the holders of the OilXCoin (the "Holders") have validly passed a resolution to terminate the OilXCoin, or if a termination has otherwise been decided as described below in "Termination right" below, the Issuer will be required to pay an amount to the Holders. This amount will be, at the Issuer's option, either: 1) The net proceeds from the actual disposal of the Relevant Assets, whereby if the Issuer chooses this option, the Issuer will be required to use its best efforts to dispose of the Relevant Assets (or cause the Relevant Assets to be disposed of) within six months from the resolution. Once all or a significant portion of the Relevant Assets have been disposed of, the Issuer shall distribute the net proceeds of such disposal to the Holders. The "net proceeds" are the proceeds of the disposal of the Relevant Assets after:
2) An amount corresponding to the valuation of the Relevant Assets, whereby the Issuer will commission a reputable and independent expert to value the Relevant Assets and pay to the Holders the amount at which the expert values the Relevant Assets, after deduction of any taxes due by DeXentra in connection with such a payment. |
| Termination right | The OilXCoin can be terminated once every 15 years by decision of the Issuer, unless one or more Holders request termination of the OilXCoin six months in advance and such termination is approved by an affirmative vote of more than 90% of the outstanding OilXCoins. To calculate the 90% threshold, only those OilXCoins not held by DeXentra, its current directors, employees and shareholders will be taken into account and the principles outlined in "Voting" below will be adhered to. |
| EBIT limit | Notwithstanding the above, the Issuer will be entitled to reduce the amount of any payment due to Holders to procure that, in any financial year of the Issuer, the amount of all profits distributed to holders of tokens issued by the Issuer (including, but not limited to, the OilXCoin), does not exceed 50% of the Issuer's earnings before interest and taxes (EBIT), as reasonably determined by the Issuer in light of relevant accounting and tax guidelines (the "EBIT Condition"). |
Reporting | |
| Oil-in-place / gas-in-place | The Issuer will make available to investors:
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| Financial Statements | The Issuer will make available to investors annual financial statements. Additionally, a description of use of funds will be provided annually. The financial statements will be audited by a reputable third party. |
| Further reporting | The Issuer will make available to investors consolidated data regarding the oil-in-place and gas-in-place numbers along with other relevant KPIs. |
Offering | |
| Public Offering | The Issuer expects to publicly offer the OilXCoin in Switzerland and members of the EEA. The Issuer may conduct placements in other jurisdictions, subject to the restrictions set out below. OilXCoin tokens will not be offered in the United States. |
| Price | In the public offering, the OilXCoins will be sold by the Issuer at an initial price of USD 1 per OilXCoin (or its equivalent in other currencies or cryptocurrencies, as the case may be). |
Token Details | |
| Total supply | 100 million OXC (i.e., OilXCoin tokens) of which 60 million OXC will initially be retained by DeXentra, to be sold at a later point to raise further capital or as part of incentive plans. Up to 10 million OXC have been issued to founders, partners, advisors, etc. and up to 20 million OXC are reserved for NFT Holders. |
| Vesting | OilXCoins acquired by the Holder by virtue of being the holder of any NFT are subject to a vesting schedule determined in accordance to the relevant NFT's Tier:
OilXCoins subject to such a vesting will be delivered to the Holder upon exercise of the Holder's right to obtain delivery of the OilXCoins, but will not be transferrable until the expiration of the vesting period set forth above. OilXCoins acquired by Holders of NFTs that are in the United States are subject to special transfer restrictions. Those who supported the creation of OilXCoin (e.g. Founders, partners, advisors, etc.) before its public launch will be required to adhere to a vesting of two years. 10% of OilXCoins which have been allocated to these individuals can be deemed as unvested should said individual choose this option. The above notwithstanding, the Issuer may accelerate (i) the vesting of up to 20% of the OilXCoin tokens without cause, and (ii) the entire supply of OilXCoin tokens if the Issuer deems it necessary. |
| Native transaction fees | As used herein, the "Native Transaction Fees" are fees that will be levied by the Issuer on transfers of OilXCoin tokens entered on the Ethereum blockchain (including without consideration) when the following conditions are fulfilled ("Qualifying Transfers"):
The Native Transaction Fees are in the amount of 0.75% of the OilXCoin tokens transferred in the Qualifying Transfers. The Royalty will therefore be paid in OilXCoin tokens. There can be no assurance as to the amount of the Native Transaction Fees paid to the Issuer. Large quantities of transactions may be entered into in a manner that does not allow for the collection of the Native Transaction Fees, such as (but not limited to) transactions involving certain DeFi protocols. The Issuer may, at its discretion:
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| Transfer limits | In transactions which use the OilXCoin smart contract:
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Miscellaneous | |
| Status | The OilXCoin will constitute direct, unsecured, unsubordinated obligations of the Issuer. The Issuer will not make any negative pledge or similar commitments to secure the claims of the Holder in the event the Issuer secures comparable claims. |
| Legal form | The OilXCoin tokens will be issued in the form of ledger-based securities pursuant to Article 973d of the Swiss Code of Obligations. The OilXCoin tokens will further constitute securities within the meaning of Article 3 (b) of the Swiss Financial Services Act, but notwithstanding certain governance or voting rights, are not equity in the Issuer or any of its affiliates. |
| Taxation | The Issuer expects to ask for a confirmation that the OilXCoin is to be treated as an investment-based coin with contractual basis from a Swiss tax perspective. As a consequence, no withholding tax would be due upon payments by the Issuer to the Holders and no transfer stamp duty would apply on transactions on the OilXCoins. The tax treatment of the OilXCoin and of any payment to the Holders has not yet been subject to a confirmation or ruling from the relevant Swiss tax authorities. There can be no assurance that the confirmations mentioned in the foregoing paragraphs will be obtained. In any event, the benefit of any confirmation or ruling will apply to transactions entered into after it is issued. As a result, if the Holder acquires OilXCoins before such confirmation or ruling has been obtained, the Holder will not be able to benefit from it. |
| Applicable law and jurisdiction | The OilXCoins are subject Swiss law, excluding conflicts of laws provisions. Any dispute, controversy or claim arising out or in relation to the OilXCoins is subject to the exclusive jurisdiction of the courts competent in Zug. |
IMPORTANT NOTICE
Notice to Investors in Switzerland
Neither this document nor any other offering or marketing material relating to the OilXCoins or the transaction described herein (the “Transaction Documents”) constitutes a prospectus pursuant to the Swiss Financial Services Act (“FinSA”), and the Transaction Documents have not been and will not be reviewed or approved by a Swiss prospectus review office in accordance with Article 51 FinSA. The Transaction Documents may not be distributed or otherwise made available in Switzerland in a manner that would require the publication of a prospectus in Switzerland pursuant to FinSA.
RISK FACTORS
The OilXCoins involve a number of significant risks. Before purchasing OilXCoins, the Holder must carefully consider the risks of such a purchase. The below risks are presented in an order that does not reflect their likelihood of occurrence or magnitude. Further, the risks below are some, but not all, the risks associated with the OilXCoins. Investment decisions should not be made solely on the basis of the risk warnings set out below since such information cannot serve as a substitute for individual advice and information which is tailored to the requirements, objectives, experience, knowledge and circumstances of each investor individually.
Holders of OilXCoins will not be shareholders
The OilXCoin's value is expected to be linked to the value of assets (i.e. the Relevant Assets) used to conduct certain business activities in the oil and gas sector. The Holders will not own, directly or indirectly, the Relevant Assets but will be granted a limited right to terminate the OilXCoins and receive a payment that is tied to the value of the Relevant Assets. Such a termination right bears certain similarities to the right of shareholders to receive the liquidation proceeds of a company. However, by virtue of holding OilXCoins, the Holders will not be shareholders of the Issuer or of any other entity. The OilXCoins will further not entitle the Holders to governance and other rights typically enjoyed by shareholders. Although the OilXCoin's value may be linked to the Relevant Assets, the Holders will have no way to influence the management of these Relevant Assets.
The payment in case of termination of the OilXCoins is highly uncertain and may not correspond to the value of the Relevant Assets
The OilXCoins will only be entitled to receive a payment in the event of a termination of the OilXCoins. The amount of the payment will be either the net proceeds from the sale of the Relevant Assets, or an amount determined after conducting a valuation of the Relevant Assets. There can be no assurance as to the amount of such payment, as it depends not only on the value of the Relevant Assets, but also on the Issuer's ability to sell them (if the Issuer has elected to sell them) or on an assessment of a third party regarding their value, which may not correspond to the Issuer or the Holder's view on the value of the Relevant Assets. Any projection regarding the value of the Relevant Assets communicated by the Issuer or otherwise is therefore to be understood as indicative only and subject to significant caveats. Further, the Relevant Assets are a combination of assets that may be difficult to sell, it may not be possible to sell them all at once and any sale may therefore be entered into at a price that materially undervalues the Relevant Assets.
In addition, if the Issuer elects to sell the Relevant Assets, the payment to the Holders will be made after payment of all other creditors of DeXentra (including employees, directors and officers). After payment to such other creditors, there may be few or no remaining proceeds to distribute to the Holders.
The EBIT Condition may severely limit the amount payable to Holders
Pursuant to the EBIT Condition, the Issuer may refrain from making any payment to holders of tokens it has issued if, following such payment, the Issuer will have paid more than 50% of the Issuer's EBIT. The Issuer expects to apply the EBIT Condition insofar as necessary to comply with applicable accounting and tax requirements. If the Issuer deems it necessary to apply the EBIT Condition on a yearly basis (i.e. that payments to token holders in a given financial year should not exceed 50% of the Issuer's EBIT), this may materially impact the Holders, as the payment in the event of termination of the OilXCoins may vastly exceed the Issuer's EBIT in a given financial year.
DeXentra may incur significant debt and encumber the Relevant Assets
The Issuer will not agree towards the Holders to any negative pledge or similar undertaking. The Issuer can therefore (a) issue significant debt, and (b) encumber the Relevant Assets, thereby materially affecting the situation of the Holders by increasing the amounts due to other creditors.
DeXentra may not be required to reinvest all of the proceeds from its activities
The final terms of the OilXCoin may provide that DeXentra is not required to reinvest all the net proceeds of its activities in the oil and gas sector. If the proceeds of these activities are not reinvested by acquiring Relevant Assets, the Holders will not benefit from these proceeds.
No representation on tax treatment and no tax ruling
The OilXCoins are a complex and novel instruments. Their treatment under applicable tax laws is untested and generally subject to a level of uncertainty considerably higher than traditional financial instruments such as equity securities or bonds. The Issuer does not make any representation as to the tax treatment of the OilXCoins, whether from a Swiss or foreign perspective. The Holder is responsible for assessing, as the case may be with the advice of a tax advisor or counsel, the consequences of purchasing and holding OilXCoins.
The Issuer has not obtained any confirmation or "ruling" from any tax authority regarding the treatment of the OilXCoins under Swiss tax law. Even if the Issuer later obtains such a ruling (something the Issuer does not undertake to do), the Holder should expect this ruling to apply only to transactions entered into after the issuance of the ruling, meaning that the Holder and any person acquiring the OilXCoins before such ruling has been issued will not be able to benefit from the ruling.
The final terms of the OilXCoins may differ significantly from those presented in this term sheet
Terms of the OilXCoin have not been set and this term sheet is non-binding. The Issuer expects to issue the final terms of the OilXCoin after the date hereof. The final, binding terms of the OilXCoin may materially diverge from the terms outlined in this term sheet.
The OilXCoins are complex and involve a high degree of risk
The OilXCoins are innovative and complex instruments. The purchase of OilXCoins involves a high degree of risk, including the risk that the OilXCoins may become valueless. Potential purchasers should be prepared to suffer a total loss of the capital invested in the purchase of the OilXCoin under certain circumstances. The value of OilXCoins is difficult to assess and may be extremely volatile.
The OilXCoins may be prone to fraud
The characteristics of the OilXCoins (e.g., they only exist virtually on a computer network, transactions in OilXCoins are usually not reversible and are done largely anonymously) make them an attractive target for fraud, theft and cyber-attacks. Each purchaser is therefore urged to make its own independent investigation and to make its own decisions with respect to the purchase of OilXCoins. Prospective OilXCoin holders are expected to consult a blockchain specialist, counsel, accountant and/or tax advisor, as necessary, to understand the risks involved. Potential purchasers that are not satisfied with their understanding of the risks associated with OilXCoins should refrain from acquiring OilXCoins.
Legislative and regulatory changes may impact the OilXCoins
Cryptocurrencies have been in existence for only a few years and have been under scrutiny from various regulatory bodies in Switzerland and globally. The regulatory regimes relating to cryptocurrencies and blockchain technology may be subject to rapid legislative and regulatory change, which could impact OilXCoins, be in conflict with the current design of OilXCoins, and/or lead to their loss. There is a risk that OilXCoins may be subject to additional regulations in Switzerland or in other jurisdictions, and that OilXCoins may be adversely qualified or re-qualified by a court or a supervisory authority under the applicable legislation. If the OilXCoin Tokens are deemed to be securities in any jurisdiction, they will be subject to applicable securities laws and owners of such OilXCoins will have to comply with such laws.
Blockchain technology and smart contracts are associated with risks
Distributed ledger technology (i.e. blockchains) and the smart contract concept underlying OilXCoins are still at an early stage of development and have not yet been sufficiently tested. The functioning of blockchains relies on the collaboration and consensus of various stakeholders ("miners" or "validators") that may exercise control on the relevant blockchain and may be empowered to make changes to its content or to block certain transactions. Blockchains are vulnerable to mining attacks, including but not limited to double-spend attacks, majority attacks, "selfish mining" attacks, timestamp manipulation and race condition attacks. Successful attacks lead to risks relating to the OilXCoins, the expected orderly execution and sequencing of transactions involving OilXCoins, and the expected orderly execution and sequencing of contract calculations, and may result in the loss of OilXCoins. It is possible that hacker attacks and other unexpected activities may occur that could result in the theft or loss of OilXCoins. Smart contracts are nontrivial pieces of computer code and their interactions with the relevant blockchain are complex. There is no guarantee that the process of creating, receiving, holding, using and storing OilXCoins will be uninterrupted or error-free and there is an inherent risk that the smart contract may contain weaknesses, vulnerabilities or bugs that could lead to, among other things, the complete loss of OilXCoins.
NFTs and OilXCoins may have a “bug” or other technical defect
While the Issuer intends to take commercially reasonable efforts to ensure the functionality of the NFTs and the OilXCoin token, it is possible that the NFT or the tokens have a technical defect that may enable others to “exploit” the NFTs and/or the OilXCoin token, which could lead to a partial or complete loss of a purchaser’s investment.
OilXCoins may be lost or stolen
OilXCoins may be lost or become inaccessible if the holder of OilXCoins loses the respective private key allowing access to OilXCoins, or due to malfunctions or incompatibilities of the wallet in which the OilXCoins are stored. This can also lead to the loss of the OilXcoins. In addition, it is the responsibility of the OilXCoin holder not to lose the key or password that enables access to the wallet. OilXCoins can also be stolen or lost if the private keys or necessary (computer) addresses are stolen.
OilXCoins are exposed to risks associated with cryptocurrencies
OilXCoins are stored on blockchain, and therefore in a relationship of interdependence with their associated cryptocurrencies. Potential purchasers may have to pay transaction fees denominated in cryptocurrencies or associated units of account. The fair value of cryptocurrencies is subjective, extremely difficult to assess and therefore highly volatile. Their market price may also be inflated by temporary bouts of speculation, and they may lose all of their market value very quickly. There is no guarantee that cryptocurrencies will be liquid or that services allowing OilXCoins holders to exchange them for fiat currency will continue to be accessible.
Price fluctuations of crude oil and natural gas can impact DeXentra's business and the value of OilXCoins
Relevant Assets will be used to conduct the business activities of DeXentra in the oil and natural gas sector. The value of the Relevant Assets (and indirectly that of the OilXCoins) is therefore expected to be correlated, to an extent, to the price of crude oil and natural gas. In addition, in the event of a price drop affecting crude oil or natural gas, the revenues derived from the Relevant Assets by DeXentra should be expected to decrease, thereby affecting DeXentra's ability to reinvest the proceeds from its activities by acquiring new or improving existing Relevant Assets. If new Relevant Assets are not acquired, and if existing Relevant Assets are not improved, the value of the OilXCoins may cease to increase or even decrease.
Legislative and regulatory changes may impact DeXentra's business activities
The oil and gas industry is subject to both legislative and regulatory changes surrounding issues such as oil exploration, extraction, storage, transportation, etc. with respect to permitting, environmental, taxation and other aspects. Energy is considered a national priority in a number of jurisdiction, rendering potentially drastic changes more likely. Any negative developments affecting the oil and gas industry may impact DeXentra's business, the value of the Relevant Assets and of the OilXCoins. In addition, in certain jurisdiction, oil and gas assets may be temporarily or permanently nationalized, which may – in a worst case scenario – lead to a total loss of value for the previous owners of assets that have been nationalized. Depending on the jurisdictions in which DeXentra will conduct its business, the Relevant Assets may face a risk of nationalization.
Geological uncertainty or previous reservoir mismanagement can impact volumes of oil-in-place and gas-in-place
Oil-in-place and gas-in-place are expected to constitute an important part of the Relevant Assets. Due to the nature of oil-in-place and gas-in-place reservoirs, both geological uncertainty and previous reservoir mismanagement can lead by to an adjustment of previously audited reservoir volumes. Any downward adjustment of previous oil-in-place or gas-in-place assessments will negatively affect the OilXCoin's business activities and the value of the Relevant Assets and may negatively affect the value of OilXCoins.
Loss of key suppliers / service providers may affect DeXentra's oil and gas operations
DeXentra relies heavily on third-party suppliers and service providers for auditing, exploration, extraction, storage, transportation, maintenance, etc. Should said partners no longer be able to fulfil their contractual obligations, this may result in delays or decreases in DeXentra's business activities. Such decrease should be expected to affect DeXentra's ability to reinvest the proceeds from its activities by acquiring new or improving existing Relevant Assets. If new Relevant Assets are not acquired, and if existing Relevant Assets are not improved, the value of the OilXCoins may cease to increase or even decrease.
The Issuer is an early stage company with no operating history or historical financial information
The Issuer is an early stage company in a very competitive field and has no operating history or historical financial information. This makes it difficult for investors to evaluate the Issuer’s business and future prospects. The Issuer’s success will depend in part on its ability to deal with the problems, expenses and delays frequently associated with establishing a new business venture and the extraction of oil and gas.
In addition, although the Issuer’s management has significant experience in the area of oil exploration, the past performance of the management is no indication of its ability to continue to successfully manage the Issuer. If the experience of the management is inadequate or unsuitable, the operations of the Issuer may be adversely affected.
The Issuer can make no assurances that it will be successful in addressing these risks, and the failure to meet these challenges could have a material adverse effect on the performance of the Issuer, the value of the NFTs, OilXCoins and your investment.
Investments in startups involve a high degree of risk. Financial and operating risks confronting startups are significant, and establishing new operations brings a significant number of challenges. The startup market in which the Issuer competes is highly competitive and the percentage of companies that survive and prosper is small. Startups often experience unexpected problems in the areas of product development, marketing, financing, and general management, among others, which frequently cannot be solved. Failure to overcome such problems may mean that the Isser will not be able to successfully operate OilXCoins or extract oil and gas, and it is possible that the OilXCoins may not be minted. Even if the Issuer is successful in operating and extracting oil and gas, it may not be able to operate at a profit, which may affect the long-term viability of the Issuer and the value of the NFTs and OilXCoins.
It is possible that, due to any number of reasons, including, but not limited to, failure to successfully extract oil and gas, unfavorable market prices for oil and gas, the inability by the Company to establish a viable financial ecosystem for the utility of OilXCoins, the failure of commercial relationships, or regulatory issues, the Issuer may no longer be viable to operate, and may dissolve or take actions that result in a dissolution event.