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Investor Opportunity
Mikel Enterprises LLC
Term Sheet for
Proposed Investment Opportunity
January 15, 2012
Mikel Enterprises LLC is a Wisconsin Limited Liability Company ( the “Company” ) that was organized to develop, manufacture and sell the Company’s TorsoPlex exercise machine to consumers through infomercial media. The Company will contract with third-parties for the development of the infomercial campaign, telephone call center, collection of payments, manufacturing and distribution of the TorsoPlex exercise machine.
General
The Company is seeking $330,000 in funding from a limited number of accredited investors (the “investors”). The Company proposes to offer 40 investment units (“Class A Units”) at a purchase price of $8,250 per investment unit. The Class A Units to be offered will comprise 35% of the total equity of the Company. The minimum subscription will be for 1 Class A Unit, or $8,250. Investors purchasing investment Class A Units will be required to enter into an operating agreement, a subscription agreement and to complete a purchaser suitability questionnaire.
Proposed Offering
The proceeds from the offering will be used by the Company for working capital, to develop an infomercial and related advertising campaign, purchase media time for the infomercial, establish a third-party distribution network, (QVC & Home Shopping Network) purchase inventory and for other startup costs.
Use of Proceeds
This term sheet is not an offer of investment units or any other securities of the Company. The offering will be made solely to accredited investors pursuant to a Confidential Private Placement Letter containing a definitive description of the Company, certain risk factors and the investment units offered.
Disclaimer
Class A Units being offered are non-voting (except for certain major Company actions) and shall be entitled to distributions when declared or made by the Manager of the Company; provided, however, the Company will be required, to the extent of available cash flow, to make mandatory distribution to Investors to fund the Investors’ tax liabilities associated with its membership in the Company (net of previous tax benefits derived).
Description of
Investment Units
The Manager shall be Mikel Enterprises LLC, which is owned and controlled by Michael Farley (the founder of the Company and inventor of the exercise machine). The Manager will own the Class B Units of the Company comprising of 65% of the equity of the Company.
Manager
The Investors and the Company will be subject to the following provisions:
Material Terms of the
Investment
• The Class A units will be subject to customary transfer restrictions and right of first refusal provisions; estate planning transfers will be permissible.
• The Investors will have pre-emptive rights with respect to additional equity issuance’s to members of the Company which are made after the original offering to the Investors.
• The Class A units purchased by the Investors will be entitled to a priority return of 9% per year (non cumulative and non compounding) which return will either be paid currently of accrued, at the discretion of management, until Class A Investors have received a return of their initial investment.
• The Class A Investors shall be entitled to 50% of cash flow (revenue less operating expenses and debt service) until the Class A Investors receive all accrued preferred return and the initial Class A investment. After Class A Investor have received all accrued preferred return and their initial investment, cash flow shall be split 35% to Class A Investors and 65% to Class B Investors.
• The Class A Units will be subject to “come along” and “bring along” rights upon the transfer of a majority of the units of the Company to a third party purchaser.
1. Maintain its existence and assets.
• The Company will be subject to standard affirmative and negative covenants typical for equity investment arrangements of this nature, including, without limitation, requirements that the Company undertake the following:
2. Report Certain information to Investor.
3. Make mandatory distributions to cover member tax liabilities (net of previous tax benefits derived)
4. Maintain insurance.
5. Comply with an annual budgeting process.
6. Undertake strategic planing.
Also, such standard affirmative and negative covenants will require, among other things, that the Company refrain from undertaking the following actions under certain circumstances unless the majority of the Class A and Class B Investors consent to the transaction:
1. Selling its assets, merging or consolidating
2. Making certain investments in other entities
3. Paying compensation in excess of certain levels unless approved by a majority of the Member
4. Entering into unrelated types of businesses
5. Entering into transactions with certain Company insiders or related parties
6. Modifying the organizational documents of the Company
