# Suborbital Systems - Suggested Edits

**BALANCED OWNERSHIP STRUCTURE AND ENHANCED GOVERNANCE**

## Current Distribution Analysis

**CURRENT PROBLEMATIC STRUCTURE:**
| Contract Party                      | Distribution Percentage | Issues |
| ----------------------------------- | ----------------------- | ------ |
| Suborbital-Systems.net (series) LLC | 25%                     | ❌ Unclear justification for 25% to series entity |
| {{PARTY1}}                          | 25%                     | ❌ High percentage for limited contribution |
| {{PARTY2}}                          | 50%                     | ❌ Majority burden, minority voting control |

## SUGGESTED REVISED DISTRIBUTION STRUCTURE

### Option A: Performance-Based Allocation
| Party/Entity | Initial % | Performance Vesting | Max % | Justification |
|--------------|-----------|-------------------|-------|---------------|
| {{PARTY2}} | 60% | +15% performance bonus | 75% | Primary capital, operations, development |
| {{PARTY1}} | 25% | +5% performance bonus | 30% | IP, infrastructure, advisory |
| Suborbital Series LLC | 15% | No additional vesting | 15% | Operational entity, management |

### Option B: Investment-Proportional Allocation
| Party/Entity | Ownership % | Capital Requirement | Operational Role |
|--------------|-------------|-------------------|------------------|
| {{PARTY2}} | 65% | $500K+ | Lead operations, development, funding |
| {{PARTY1}} | 20% | $150K+ | Infrastructure, IP licensing, advisory |
| Management Pool | 15% | Sweat equity | Key personnel, performance incentives |

### Option C: Hybrid Structure with Milestones
| Party/Entity | Base % | Milestone Achievements | Final Range |
|--------------|--------|----------------------|-------------|
| {{PARTY2}} | 55% | Revenue/development milestones | 55-70% |
| {{PARTY1}} | 30% | Support/infrastructure milestones | 20-30% |
| Team/Options Pool | 15% | Performance-based vesting | 10-20% |

## Enhanced Governance Structure

### Board Composition (Recommended)
- **{{PARTY2}} Representatives**: 2 seats (CEO, COO/CTO)
- **{{PARTY1}} Representatives**: 2 seats (Strategy, Technical Advisory)
- **Independent Director**: 1 seat (Industry expert, tiebreaker)
- **Employee Representative**: 1 seat (if team >10 employees)

### Key Decision-Making Authority

#### {{PARTY2}} Primary Authority
✅ **Day-to-Day Operations** (No approval needed)
- Product development and engineering decisions
- Customer acquisition and relationship management
- Marketing strategy and execution
- Hiring for non-C-level positions
- Operating expense allocation (<$25K individual, <$100K monthly)

#### Joint Approval Required (Supermajority: 67%)
🤝 **Strategic Decisions**
- Annual operating budget and major revisions
- Capital expenditures >$50K
- Strategic partnerships and major vendor agreements
- Intellectual property licensing (in/out)
- Debt financing or equity fundraising
- Major market expansion or pivot decisions
- C-level executive hiring/termination

#### {{PARTY1}} Reserved Rights (Limited Scope)
⚠️ **TSYS Group Integration**
- TSYS Group brand compliance and standards
- Inter-entity technology integration requirements
- Infrastructure security and compliance standards
- Reporting requirements for TSYS Group coordination

### Management Structure

#### Executive Leadership
- **CEO**: Typically {{PARTY2}} nominee, board-approved
- **CTO/Chief Engineer**: Best qualified candidate, jointly selected
- **CFO**: Financial management expertise, {{PARTY2}} led selection
- **VP Business Development**: Joint selection based on network and capabilities

#### Technical Leadership
- **Chief Scientist**: Based purely on technical qualifications and vision
- **Engineering Manager**: Technical expertise and team leadership focus
- **Product Manager**: Customer-focused, market-driven selection
- **Quality Assurance Lead**: Compliance and performance focus

## Performance Metrics and Accountability

### Financial Performance Targets (12-Month Horizon)
- **Revenue Milestones**: $500K Year 1, $2M Year 2, $5M Year 3
- **Development Milestones**: Prototype completion, beta testing, commercial launch
- **Customer Milestones**: Design partners, pilot customers, commercial contracts
- **Profitability Timeline**: Break-even by Month 18, 15% margins by Month 24

### Operational Excellence Metrics
- **Product Development**: On-time delivery of development milestones
- **Quality Standards**: Customer satisfaction scores, defect rates, performance metrics
- **Team Performance**: Employee retention, productivity metrics, skill development
- **Market Traction**: Customer acquisition rates, market penetration, competitive position

### Strategic Value Creation
- **IP Development**: Patent applications, trade secrets, proprietary technology
- **Partnership Development**: Strategic alliances, joint ventures, distribution partnerships
- **Market Position**: Brand recognition, competitive differentiation, market share
- **Ecosystem Contribution**: Value creation for other TSYS Group entities

## Investment and Capital Structure

### Initial Capital Requirements
| Investment Type | {{PARTY2}} Contribution | {{PARTY1}} Contribution | Total Required |
|----------------|------------------------|------------------------|----------------|
| **Development Capital** | $400K (80%) | $100K (20%) | $500K |
| **Working Capital** | $150K (75%) | $50K (25%) | $200K |
| **Infrastructure** | $75K (50%) | $75K (50%) | $150K |
| **Marketing/Sales** | $200K (80%) | $50K (20%) | $250K |
| **TOTAL INITIAL** | **$825K (73%)** | **$275K (27%)** | **$1.1M** |

### Future Funding Rounds
- **Series A Planning**: Joint fundraising with external investors
- **Anti-Dilution Protection**: Pro-rata rights for both parties in future rounds
- **Valuation Methodology**: Professional third-party valuation for all funding rounds
- **Control Provisions**: Maintenance of joint control through investor rounds

## Intellectual Property Framework

### IP Ownership Structure
- **Core Platform IP**: Joint ownership between {{PARTY1}} and {{PARTY2}}
- **Development IP**: Owned by Suborbital Systems entity, licensed back to parties
- **Background IP**: Each party retains ownership, grants necessary licenses
- **Customer IP**: Customer-specific developments owned by customer with platform licensing

### IP Protection and Development
- **Patent Strategy**: Joint patent filing and prosecution for core innovations
- **Trade Secret Protection**: Comprehensive confidentiality and protection protocols
- **Licensing Framework**: Clear licensing terms for internal and external use
- **IP Committee**: Joint oversight of IP strategy and protection decisions

## Market Development and Go-to-Market Strategy

### Market Focus and Positioning
- **Primary Markets**: [Define specific target markets and applications]
- **Value Proposition**: [Clearly articulated unique value and competitive advantages]
- **Customer Segments**: [Specific customer types and use cases]
- **Competitive Strategy**: [Differentiation and competitive positioning]

### Sales and Marketing Approach
- **Sales Strategy**: Direct sales, channel partners, or hybrid approach
- **Marketing Investment**: Brand development, lead generation, customer education
- **Partnership Development**: Strategic alliances and distribution partnerships
- **Customer Success**: Ongoing customer support and relationship management

## Exit Strategy and Liquidity Planning

### Exit Mechanisms
- **Strategic Acquisition**: Sale to strategic buyer in aerospace/defense industry
- **Financial Buyer**: Private equity or venture capital exit
- **IPO Preparation**: Public offering track for high-growth scenarios
- **Management Buyout**: Internal acquisition by management team

### Valuation and Distribution
- **Valuation Methodology**: Multiple professional valuations using industry-standard methods
- **Distribution Waterfall**: Preferred returns, return of capital, then pro-rata distribution
- **Tax Optimization**: Structure to minimize tax impact for all parties
- **Transition Planning**: Orderly transition of operations and relationships

## Risk Management and Mitigation

### Technical and Development Risks
- **Technology Risk**: Diversified technology approach, prototype validation
- **Development Risk**: Phased development with clear milestones and checkpoints
- **Regulatory Risk**: Early engagement with regulatory bodies and compliance planning
- **Competitive Risk**: Strong IP protection and rapid market development

### Business and Market Risks
- **Market Risk**: Diversified customer base and multiple market applications
- **Customer Risk**: Multiple design partners and pilot customers
- **Financial Risk**: Staged capital deployment and milestone-based funding
- **Operational Risk**: Strong management team and operational controls

### Partnership and Relationship Risks
- **Partner Risk**: Clear agreements and performance metrics for all partnerships
- **Key Person Risk**: Management succession planning and cross-training
- **Dependency Risk**: Diversified vendor base and alternative sourcing options
- **Integration Risk**: Clear interfaces and integration protocols with TSYS Group

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**SUMMARY OF KEY CHANGES:**
1. ✅ Rebalanced ownership to reflect actual contributions and risks
2. ✅ Created performance-based vesting and milestone achievements
3. ✅ Implemented balanced governance with clear decision-making authority
4. ✅ Established proportional capital contribution requirements
5. ✅ Added comprehensive IP protection and development framework
6. ✅ Created detailed performance metrics and accountability structures
7. ✅ Developed exit strategy and liquidity planning mechanisms
8. ✅ Implemented comprehensive risk management and mitigation strategies

**IMPACT**: This transforms Suborbital Systems from an imbalanced structure into a professional, performance-driven joint venture with clear governance, balanced risk-reward allocation, and comprehensive business planning.