Restorative Investments: Tanka Bar Use Case

RESTORATIVE INVESTMENTS ASBC-SVC RESTORATIVE INVESTING TASK FORCE

A use case illustrating Restorative Investing for nonBIPOC funds or intermediaries to follow when investing into BIPOC communities

TANKA BAR RESTORATIVE INVESTMENT

A use case written up by the ASBC-SVC Restorative Investing Task Force to help illustrate the Restorative Investment Process for non-BIPOC funds or intermediaries to follow when investing into BIPOC Communities

COMPANY Native American Natural Foods, LLC, Tanka Bar LEAD INVESTOR Candide Group

ACKNOWLEDGMENTS It is with much gratitude that we thank Dawn Sherman, CEO of Native American Natural Foods, Tanka Bar, and Aner Ben-Ami, Co-founder of Candide Group, for creating this restorative model of investing and for agreeing to share their wisdom and term sheets for others to learn and emulate.

AUTHORS & RESTORATIVE INVESTING TASK FORCE LEADS Laina Greene, Angels of Impact Cindy Willard, KennethKing Foundation EDITOR Babbie Jacobs, ASBC-SVC Community Capital Working Group Lead Thulasi Sivalingam, ASBC-SVC Team

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an investment thesis

INTRODUCTION

Defining Restorative Investments Restorative investments build off the work of Nwamaka Agbo’s and Alfa Demmellash’s vision of Restorative Economics, which recognizes that “our current economy and political system was built to harm marginalized communities. It is time to dream bigger and build an economy that heals the harm and restores those communities creating a more just and prosperous country.” In some ways, it fills the space between traditional philanthropy and the “do good do well” impact investing. It is a way of deploying restorative capital with and to marginalized communities to address justice, equity, diversity, and inclusion (JEDI) .

The key elements of this being investing in community-driven efforts which foster selfdetermination and shared prosperity.

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- Dawn Sherman / Tanka Bar

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- Aner Ben-Ami / Candide Group

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Our mission is to heal the people and Mother Earth by building a company that innovates new food products based on traditional values of Native American respect for all living things and living in balance of mind, body and spirit. We are all related and all it takes is one person to change at a time to help restore land and community for all.

Our goal is to move capital away from an extractive economy and into businesses that create wealth in communities; that is intentional about creating more wealth than it extracts; and that are intentional about shifting power to marginalised communities through shared ownership and shared governance. The how matters as much as the what. We can’t just be happy to use traditional finance to missiondriven businesses and expect things to change; but we have to be like plumbers and go into fixing the plumbing too.

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key investment terms & principles

BACKGROUND & SUMMARY Native American Natural Foods, LLC is an Oglala Lakota enterprise that launched Tanka Bar, pioneering the first snack bar category in grocery stores for buffalo meat. It is a modern take on a traditional recipe using grass-fed buffalo meat and dried fruit, a combination that inherently makes it gluten-free and preservative-free.

It is a business based on restorative economics principles, including seven generation practices, such as not only restoring wealth into communities where resources have been extracted, but also restoring soil health and wellness for all. It was intended to create wealth and ownership for Native communities through its heritage recipe, business model, supply chain, and practices that regenerate the land for all peoples.

The company had stellar success for the first several years until it faced tough competition from large multinational food companies that appropriated the recipe and took over market share. The company struggled to survive but due to the tenacity and commitment of Tanka Bar’s founders and CEO, they were able to use innovative methods to develop a value-added product and are now creating an ecosystem to share with the caretakers of the business. Due to its resilience and innovation, TankaBar received investment that will allow the company to retain its equity, support its community, and provide a return on investment.

THE RETURN ON INVESTMENT HAS SEVERAL IMPACT PROFILES Supporting employment and health in Native communities Honoring the buffalo Expanding a successful business to provide a potential financial return to investors THE MAJOR OPPORTUNITIES TANKA BAR IS ADDRESSING Systemic extractive practices within the food industry by using Indigenous knowledge to bring the bison back and restoring the ecosystem and soil health Access to capital in Indian country by bringing in the capital in a sustainable and regenerative way to support Native entrepreneurs and companies Innovation in the food industry to create community wealth by addressing harmful practices and creating a model that other brands can use that honors people and the land This is an investment with deeply rooted values grounded in restorative investing practices that deploy capital to businesses that address justice and equity.

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cornerstones of term sheet &

GUIDING PRINCIPLES

This is done through terms that honor the ownership and governance of the founding community and return the most value to those with personal investment into the land, buffalo, and people. The terms of the investment are vastly different from mainstream, extractive venture capital term sheets; primarily these terms are entrepreneur and community-centric, as opposed to investor centric. The Native community was at the center of the discussions and term sheet development in this process.

An initial investment was made by a group of investors led by Candide Group on behalf of the Libra Social Investment Fund, a Donor Advised Fund at ImpactAssets. This financing was used to re-launch the product into the market with new packaging and branding. Tanka Bar will now proceed to raise a second tranche of capital, which will enable the business to build more capacity and capture sales growth to achieve profitability in the next two years.

The Guiding Principles and the Key Financing Terms that exemplify the restorative nature of this investment are included below. These are made available so other non-BIPOC investors can learn from and adapt these ideas into their own investments and offerings. These are meant to be used alongside trusted BIPOC intermediaries that can bridge the cultural gaps that exist between BIPOC communities and many investors.

GUIDING PRINCIPLES Character-based investing Values alignment partnership Sharing wealth (along the supply chain as opposed to profit maximization for only investors and shareholders) CORNERSTONES OF TERM SHEET Native leadership Native employee ownership Native American override for any liquidation or distribution proceeds Cap on closing costs and technical assistance offered Redemption and cap on returns for investors* Right of first refusal to ensure Indigenous ownership

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GUIDING PRINCIPLES OF INVESTMENT TERMS

These key principles represent the

VALUES ALIGNMENT PARTNERSHIP

values and priorities of the partners

This was a clearly restorative

that informed the terms in the deal

economic-based business that a

that followed. The shared

venture capitalist would not normally

understanding of these ideals made

consider for investment. Investors, in

the investment possible and also

this case, were clearly aligned with

defined it as a restorative

the restorative economic model of

investment.

the business and were willing to support investment terms using

CHARACTER-BASED INVESTING

restorative economics principles.

Candide stressed that it was the perseverance and values alignment of

SHARING WEALTH

the company team that was key to

There was intentional sharing of

their investment in this business. The

wealth along the supply chain as

team had proven its tenacity to

opposed to profit maximization for

survive competition despite the big

only investors and shareholders.

players appropriating their recipe.

These investors were not looking at

The CEO, Dawn, had the

profit maximization at the expense of

determination to go back to Candide,

the different stakeholders including

which was involved in the previous

supply chain stakeholders such as the

stalled funding round. She was able

ranchers. A traditional investor

to demonstrate that despite their

would have only considered a

struggles, the company was now able

financial return for itself and not the

to take on new partners, new

many impact stakeholder profiles

suppliers, and new advisors and the

that an investment such as this

only thing the company lacked was

offers.

the capital to succeed. The investors were impressed with the commitment and dedication of the team to the community and the company.

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INVESTMENT TERMS This is an equity investment with a couple of meaningful departures from convention. Below are some of the key terms and financing structure that demonstrate its restorative nature: NATIVE LEADERSHIP. A key component of the agreement is to grow Indigenous leadership. Currently, 75% of the company is led by Native people, and 50% of the Board are Native. The goal is to have 100% Native leadership and Board representation.

TERM SHEET LANGUAGE: The Class E units (current round) will be entitled to elect two members to the board, provided that such board nominees will be reasonably acceptable to the Company.

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INVESTMENT TERMS NATIVE EMPLOYEE OWNERSHIP Prior to this investment, there was already a scheme to ensure Indigenous employees had ownership, and this was kept intact and built upon. A new class D-I was added to the final term sheet to ensure these shares didn’ t get diluted.

TERM SHEET LANGUAGE:

finance growth

In connection with the closing of the Class E Financing, the Company shall grant Class D-1 Units (consisting of profits interests) to the NANF Employee Ownership, LP, which currently holds and will hold the profits-interest on behalf of some of the Company’s employees (the “Employee LP”) in order to maintain the percentage ownership of employees’ profits interest (aggregating the outstanding Class D Units and newly issued Class D-1 Units) at 5% of the Company’s outstanding Units post-Class E Financing with such additional Units receiving no capital account increase. In addition to the foregoing, the Company shall grant Class D-1 Units (consisting of profits interests) to the Employee LP (on behalf of Dawn Sherman) in an amount equal to 3% of the Company’s outstanding units (with a capital account of zero) post-Class E Financing.

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INVESTMENT TERMS NATIVE AMERICAN OVERRIDE FOR LIQUIDATION OR DISTRIBUTION There is another Native override clause that in liquidation or profit distribution, a majority of that distribution, at least 51%, must go to Native owners first. This is the opposite of the usual preferred shares approach where investors take all profit first before any sharing to business owners or stakeholders. In this case, Indigenous stakeholders get the windfall first, protecting the value of wealth creation for the community and stakeholders over that of the investors.

TERM SHEET LANGUAGE a. NATIVE AMERICAN OVERRIDE: With the intent of returning as much wealth as practicable generated by the Company to the Company’s Native American owners, including the Company’s employees (who hold Class D and Class D-1 Units), the Transaction Documents will provide that: (1) in any “deemed liquidation” transaction of the Company, at least 51% of the proceeds must be allocated to Native American owners of the Company, and (2) at least 51% of net operating profits of the Company, if distributed, will be distributed to Native American owners (collectively, the “Native American Override”). b. DISTRIBUTIONS: Subject to the Native American Override, Class E units will receive a preferred return prior to existing unit classes, equal to an 8% annual rate of return (on a non- accrued basis) (the “Class E Distribution Preference”), and will participate in any other distributions based on their ownership percentage, when and as declared by the board. The Class E Distribution Preference will be payable upon any distributions, other than distributions made solely to address members’ potential tax liabilities resulting from the allocation of operating profits.

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C. LIQUIDATION PREFERENCE: In a liquidation of the Company, subject to the Native American Override, Class E units will receive, prior and in preference to the holders of existing unit classes, the greater of (1) the Original Issue Price per unit (as adjusted for any unit splits, unit dividends, recapitalizations, etc.) plus a 8% annual accrued rate of return thereon (the “Class E Liquidation Amount”), taking into consideration any distributions of preferred return

finance growth previously paid, or (2) the amount the Class E units would receive based on their ownership percentage.

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INVESTMENT TERMS CAP ON CLOSING COSTS AND TECHNICAL ASSISTANCE OFFERED In traditional deals, financing costs are usually borne by the business at the closure of funding, but in this case, the investors bore most of the costs (which were considerably higher due to the need to draft unconventional documents rather than relying on standard terms) so as not to pass the burden onto the company. Also, technical assistance in the form of a CFO consultant was offered to support preparing and reviewing financial projections and the pre-investment work. As such, costs are lowered for the entrepreneur by the investors taking on some of these expenses and offering technical assistance. In some cases, all parties use the same lawyers, as this can cut costs by the sharing of resources.

TERM SHEET LANGUAGE The Company to reimburse following the initial closing ImpactAssets Inc. fbo Libra Social Investment Fund (“Libra Investor”) for all legal and administrative including reasonable fees and expenses of Libra Investor counsel not to exceed $25,000 in the aggregate.

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INVESTMENT TERMS REDEMPTION AND CAP ON RETURNS FOR INVESTORS* Investors have a right to have their shares redeemed, but there is a ceiling, or cap, on the returns if they choose to do so. If investors choose to have their shares redeemed, their returns will be capped at 2x their original investment amount. *The investors referred to here are the external, nonNative investors.

TERM SHEET LANGUAGE:

finance growth

T h e C l a s s E u n i t s w i l l b e r e d e e m a b le , e x c e p t fo r a n y C la ss E u n i t h o l d e r s t h a t o p t - o u t o f s u c h r e d e m p t i o n , fr o m fu n d s le g a lly a v a i la bl e fo r d i s t r i b u t i o n , a t t h e o p t i o n o f t h e h o ld e r s h o ld i n g a m a j o r i ty o f th e Cl a ss E u n i t s , a f t e r t h e s e v e n t h a n n i v e r s a r y o f t h e i n i t i a l c lo s i n g o f th e Cl a ss E F i n a n c i n g , a t a p r i c e p e r u n i t e q u a l t o t h e g r e a t e r o f: ( 1 ) F a i r M a r k e t V a l u e p e r u n i t n o t t o e x c e e d t w o - t i m e s ( 2 x ) t h e O r i g i n a l I s s u e P r i ce (a s a d j u ste d f o r a n y u n i t s p l i t s , u n i t d i v i d e n d s , r e c a p i t a li z a t i o n s , e t c . ) , o r (2 ) th e Cl a ss E L i q u i d a t i o n A m o u n t . F a i r M a r k e t V a lu e fo r t h i s p u r p o s e w i l l be d e fi n e d a s t w o - t i m e s ( 2 x ) t h e C o m p a n y ’ s a v e r a g e a n n u a l g r o s s s a le s fo r th e p r i o r 2 4 m o n t h p e r i o d . T h e r e d e m p t i o n p r i c e i s t o b e p a y a b le o v e r a p e r i o d o f th r e e years from the redemption date.

N o t w i t h s t a n d i n g t h e f o r e g o i n g , a ll p a y m e n t s t o w a r d r e d e m p ti o n o f th e C l a s s E U n i t s m a d e b y t h e C o m p a n y p u r s u a n t t o t h e a b o ve w o u l d be s u b j e c t t o t h e C o m p a n y h a v i n g fu n d s r e a s o n a b ly a v a i la b le to a cco m m o d a te r e d e m p t i o n r e q u e s t s w i t h o u t m a t e r i a lly a n d a d v e r s e ly i m p a cti n g th e C o m p a n y ’ s a b i l i t y t o c o n t i n u e t o fu n d o p e r a t i o n s a n d n o rm a l bu si n e ss g r o w t h , a s d e t e r m i n e d i n g o o d fa i t h b y t h e B o a r d o f D i r e cto r s, i n cl u d i n g a t least one Class E Director.

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I f t h e B o a r d d e t e r m i n e s t h a t t h e C o m p a n y d o e s n o t h a v e fu n d s a va i l a bl e to a c c o m m o d a t e t h e f u l l a m o u n t o f a n y r e d e m p t i o n r e q u e s t s, (i ) a n y h o l d e r o f C l a s s E U n i t s m a y p r o p o s e t o t h e C o m p a n y a t h i r d - p a r t y p u r ch a se r fo r th e u n i t s t o b e r e d e e m e d , a n d ( i i ) t h e C o m p a n y w i ll h a v e t h e r i gh t to a r r a n ge f o r t h e p u r c h a s e v i a a t h i r d - p a r t y p u r c h a s e r , i n c lu d i n g ( bu t n o t l i m i te d to ) t h e T a n k a R e s i l i e n t A g r i c u l t u r a l C o o p e r a t i v e ( “T R A C” ) o r a n y o t h e r N a t i v e A m e r i c a n o w n e d p u r c h a s e r , p r o v i d e d t h a t s u c h t h i r d - p a rty p u r ch a se r i s

finance growth

r e a s o n a b l y a c c e p t a b l e t o t h e C o m p a n y a n d t h e C la s s E U n i t h o l d e r s, ta k i n g i n t o a c c o u n t m i s s i o n a l i g n m e n t a n d t h e p r e fe r e n c e fo r m a i n ta i n i n g a t l e a st 51% Native American ownership.

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INVESTMENT TERMS RIGHT OF FIRST REFUSAL TO ENSURE INDIGENOUS OWNERSHIP T o e n s u r e l o n g - t e r m i n d i g e n o u s o w n e r s h i p , w h e n t h e i n v e sto r s se e k to se l l t h e i r s h a r e s , t h e y m u s t a l l o w t h e fi r s t r i g h t o f r e fu s a l t o In d i ge n o u s b u s i n e s s e s a n d t r i b a l e n t i t i e s o f t h e c o m p a n y b e fo r e o ffe r i n g to 3 r d p a r t i e s . T h i s t r a n s a c t i o n n e e d s t o b e a p p r o v e d b y t h e B o ar d , w h i ch i s a m a j o r i t y I n d i g e n o u s B o a r d . T h i s s t r u c t u r e i s t o e n s u r e lo n g- te r m m i ssi o n a l i g n e d o w n e r s h i p a n d t o g u a r a n t e e t h a t t h e b e n e fi t s a n d su cce ss o f th e b u s i n e s s f l o w s t o c o m m u n i t i e s a n d s t a k e h o ld e r g r o u p s i n a j u st a n d equitable way rather than be extracted back to investors.

TERM SHEET LANGUAGE: B e f o r e a n y o f t h e C l a s s E u n it h o ld e r s m a y s e ll t h e i r C la s s E u n i ts to a n y t h i r d - p a r t y p u r c h a s e r , t h e C o m p a n y w i ll h a v e t h e r i g h t o f fi r st r e fu sa l to p u r c h a s e s u c h u n i t s w i t h r e s p e c t t o a n y C la s s E u n i t s p r o p o se d to be t r a n s f e r r e d b y t h e C l a s s E u n i t h o ld e r s . T h e C o m p a n y m a y a ssi gn th i s r i gh t t o T R A C o r a n y o t h e r N a t i v e A m e r i c a n o w n e d p u r c h a s e r re a so n a bl y a c c e p t a b l e t o t h e C l a s s E u n it h o ld e r s .

I f t h e r i g h t o f f i r s t r e f u s a l i s n o t e x e r c i s e d w i t h r e s p e c t t o a n y Cl a ss A o r C l a s s D u n i t s , t h e C l a s s E h o l d e r s w i ll h a v e a n o p p o r t u n i t y to p a r ti ci p a te i n s u c h s a l e o n a b a s i s p r o p o r t io n a t e t o t h e n u m b e r o f u n i t s h e l d by th e se l l e r a n d t h o s e h e l d b y t h e p a r t i c ip a t i n g C la s s E h o ld e r s .

D R A G A L O N G : H o l d e r s o f a l l c la s s e s o f u n i t s s h a ll e n t e r i n to a n a gr e e m e n t t h a t p r o v i d e s t h a t s u c h h o l d e r s w i ll v o t e t h e i r u n i t s i n fa v o r o f a sa l e o f th e C o m p a n y o r t r a n s a c t i o n i n w h i c h 5 0 % o r m o r e o f t h e v o t i n g p o w e r o f th e C o m p a n y i s t r a n s f e r r e d a n d w h i c h i s a p p r o v e d b y t h e b o ar d a n d th e h o l d e r s o f a m a j o r i t y o f t h e o u t s t a n d i n g C la s s E u n i t s , s o lo n g a s (1 ) su ch tr a n sa cti o n m e e t s c u s t o m a r y s t a n d a r d s f o r s e v e r a l ( a n d r a t a t r e a t m e n t o f u n i t h o l d e r s, a n d ( 2 ) t h e p u r c h a s e r i n s u c h t r a n s a c t i o n i s N a t i v e A m e r i ca n o w n e d ).

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Class of shares

Class E

Class C Units

Description

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Pre-Class E Financing Unit

The Company is offering Class E units of the Company aggregate proceeds, which includes the Class C Roll-Over amount and Debt Conversion amount (each as defined below) and the in-kind contribution of an investor, of at least $1,861,852 and no more than $3.5 million, which includes the originally contemplated aggregate offering amount of $2.5 million plus the Class C Unit Roll-Over amount and Debt Conversion amount (as defined and discussed below) (the “Class E Financing”).

Clearinghouse CDFI

Post-Class E Financing Unit 18,842

500

(Note: Clearinghouse CDFI agreed to participate in the Class E Financing by “rolling-over” its Class C Units into Class E Units in connection with the Class E Financing.

Class D

NANF Employer Ownership

792

792

Class D-1

Class D-1 Units (consisting of profits interests) to the CEO and NANF Employee Ownership, LP

Class B

Second round investors: Indian Land Tenure Foundation, Oglala Oyate Woitanean Empowerment Zone, Swift Foundation

5,036

5,036

Class A

Founder shares and first round investor: The Lakota Fund

10,000

10,000

16,328

36,828

Total

2158

The 18,842 Class E Units reflect in this Exhibit Aassumes the Class E Financing is fully-subscribed.This Exhibit A will be updated by the Company inconnection with the consummation of the initial closing and anysubsequent closings. If the Class E Financing isnot fully-subscribed, the number of Class E Unitsand corresponding Unit Ownership Percentages for the ClassE Unit holders and the holder of the other classesof units will be adjusted accordingly.

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CONCLUDING REMARKS Overall, what can be said for these investment terms was summarised by Aner from Candide, who said that they are looking to intentionally create more wealth than is extracted and work to shift power to marginalized communities.

Dawn from Tanka Bar reminded us that it takes a herd and a tribe to bring back knowledge and food. The buffalo is a relative and a part of Indigenous people and when the buffalo come back so will people. When anyone buys a Tanka bar they become a part of the conservation story. We are all related and all it takes is one person to change at a time to help restore land and people for all.

Dawn Sherman, CEO, Native American Natural Foods, Tanka Bar

Aner Ben-Ami, Co-Founder, Candide Group