Learn About Red Rock DAO

As set forth in the operating agreement, and except as otherwise provided under Wyoming law, no member (or former member) of Red Rock DAO will be liable for the obligations of Red Rock DAO for any amounts in excess of the amount of the member’s contributions to Red Rock DAO, plus:

• the member’s share of the undistributed profits of Red Rock DAO, if any; and
• any amounts distributed by Red Rock DAO to such members.

What are the fiduciary obligations between members?

To the fullest extent permitted by applicable law, members shall not have any fiduciary duty to Red Rock DAO or any other member. Under the operating agreement, members agree to interact in good faith and to engage in fair dealing.

Can members make separate investments in or provide services to projects that receive investments from Red Rock DAO?

Yes.

Can members vary the operating agreement or the ways in which Red Rock DAO operates?

The terms and provisions of the operating agreement may be amended if 50% or more of Red Rock DAO members, or their delegates, vote to approve the amendment. Voting will be based on the number of ROCS Units held by the members at the time of the vote.

What are the tax issues with Red Rock DAO?

Each member of Red Rock DAO must rely on the member’s own tax and legal representatives as to the tax consequences of joining Red Rock DAO or making investments through Red Rock DAO.

How can I contribute to Red Rock DAO and become a member?

Membership in Red Rock DAO is currently limited to approved investors. The total number of members will be capped at a maximum of 99 members.

Members have the opportunity to contribute Ether to Red Rock DAO by purchasing units representing ownership in Red Rock DAO (“ROCS Units”). The members reserve the right to create a ROCS Token to represent ROCS Units via Member votes.

Units are sold in blocks. Each block of ROCS Units (or 100,000 units) is currently being sold for ETH and provides a member with 0.9% of the voting rights in Red ROCK DAO, along with 0.9% pro-rata rights to any proceeds from investments. The per-unit number to buy units into Red Rock DAO will increase incrementally after every investment Red Rock DAO makes.

Each member is permitted to purchase up to eight blocks of ROCS Units (or 7.2% in total).

The sale will be denominated in Ether. Ether to US dollar calculations will be provided via a real-time oracle feed from Chainlink.

Are The ROCS Units securities?

Red Rock DAO Units have not been approved or disapproved by the U.S. Securities and Exchange Commission, any state securities commission in the United States, or any other global regulatory authority.

Can I contribute Bitcoin, USDT, or other assets to Red Rock DAO?

All contributions are currently only limited to Ether, unless the members agree otherwise.

Why is membership in Red Rock DAO limited to approved investors and 99 members?

As noted above, the U.S. Securities and Exchange Commission and/or equivalent government bodies in other jurisdictions have not determined whether membership interests in Red Rock DAO (represented as units) are securities.

In an abundance of caution, the limits in membership for U.S. contributors are put in place to:

• comply with U.S. securities law;
• prevent any one party from controlling a disproportionate amount of Red Rock DAO; and
• limit the risk of issues for Red Rock DAO Members that are organized as funds or other legal entities.

Are there any other requirements needed to become a member?

To contribute Ether to Red Rock DAO, anti-money laundering (“AML”), Know Your Customer (“KYC”), and Office of Foreign Assets Control (“OFAC”) checks as defined under U.S. law and as discussed further below. A joining member will need to deposit a sufficient amount of Ether from the member’s Ethereum address to complete the membership process.

A member will also need to submit sufficient information to verify the potential member’s identity for AML, KYC, and OFAC checks, including:

• uploading a passport or a state-issued license;
• providing a social security number or Tax ID; and
• providing proof of the member’s primary residence.

Concerning legal entities:

• Funds and trusts, with total assets in excess of $5 million, which were not formed specifically to purchase the subject securities, whose purchase is directed by someone who has sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment.
• Any entity in which all of the equity owners are accredited investors.

In order to register and validate members, a potential member will need to supply Red Rock DAO with sufficient information to assess whether the member meets these legal requirements, which will be confirmed by Red Rock DAO’s service provider.

==Post Contribution== Once a Member makes a contribution, Red Rock DAO’s underlying smart contracts will need to whitelist the Member’s applicable Ethereum address. The process for validating and whitelisting the Member’s Ethereum address will be done in order of contribution and will take at least 14 total days to complete. The process takes 7 days to process the proposal and another 7 days to provide Members the right to “rage quit” if they so choose.

Why is there a fixed amount of Ether upon submitting an application?

How do I establish my accreditation status?

If you’re acting on behalf of a legal entity, you may need to provide:

• verification of that entity’s assets; and
• verification of your sophistication.

I’m a foreign investor interested in becoming a member of Red Rock DAO. Are non-U.S. investors able to become a member in Red Rock DAO?

Non-U.S. based investors are permitted to become members of Red Rock DAO. Non-U.S. based contributors must verify their identity in order to contribute.

How long does it take to verify my application?

Accreditation and verification of Members will take several business days to be processed by Red Rock DAO. We will notify you during the verification, with any questions or concerns. After this point, the current members of Red Rock DAO will approve your application based on social media profile.

Who will see the accreditation and other documents that I upload?

The documentation that you upload as evidence of your accreditation status are kept private and are used to verify that you meet the definition of an accredited investor.

How do you transfer funds into Red Rock DAO?

Using a digital wallet, such as MetaMask, or a wallet compatible with WalletConnect members can contribute to Red Rock DAO after they have been approved (i.e., passed KYC/AML checks, etc., as applicable and as further outlined in the operating agreement.

Why are my contributions in Ether converted to wrapped Ether?

Ether contributions will be wrapped as ERC-20 tokens (wETH) to allow for seamless interaction with Red Rock DAO’s smart contracts. The ERC-20 standard streamlines how tokens are tracked and transferred between parties. Ether itself predates the ERC-20 standard, and it did not come with a built-in standard of how to track and trade tokens amongst parties. The conversion from Ether to wETH addresses this concern.

Will all contributions be held in Ether or can they be converted to other digital assets?

The members, acting by majority vote, have the right to elect to invest capital contributions to Red Rock DAO in either Ether, Bitcoin, and/or fee or interest-bearing cryptocurrencies or other digital assets.

What is Red Rock DAO’s Monetary Policy?

The members control the overall money supply to achieve sustainable economic growth.  Assets are controlled in a multi-signature wallet, New tokens can be created and distributed by  51% yes vote of our community and executed by a smart contract. Our monetary policy can be broadly classified as either expansionary or contractionary. Some of the available tools include revising membership fees up or down and establishing new DAO Ethereum reserve requirements.

How are voting rights determined?

Voting rights will be based on the total number of ROCS Units that each member holds for any relevant vote posed to members.

How do members vote?

Members will be prompted to vote via Red Rock DAO DApp (or, over time, other online services) at various points during the lifecycle of Red Rock DAO, including to evaluate investment decisions, weigh in on the structure and form of Red Rock DAO, and/or other strategic decisions related to Red Rock DAO.

Voting is primarily facilitated by blockchain-based smart contracts and all voting records will be searchable via the DApp and recorded to the Ethereum blockchain.

For governance-related decisions, Red Rock DAO has implemented Snapshot-like voting (which is gasless) and also has implemented processes to make investment decisions using gasless voting tools available via the Dapp.

Can a member transfer their voting rights for purposes of making investment decisions?

Members are not required to vote on all matters. At any point in time, a member can transfer or “delegate” the member’s right to vote on investment decisions by designating via the DApp an Ethereum address to which such right is delegated to. Decisions to delegate any voting rights are entirely up to each member and members cannot delegate to another member.

Does delegating rights to vote on investment decisions impact a member’s right to proceed?

No.

Can a member cancel and/or re-delegate their voting rights?

A member can cancel and/or re-delegate its voting rights through the DApp at any time.

How do members of Red Rock DAO make investment decisions?

Red Rock DAO is entirely member-directed and managed and any blockchain-based project can apply for funding from Red Rock DAO. As a member, you should have some experience in evaluating and investing in startups relying on digital assets.

Each member will have the opportunity to nominate any applicant for funding through the DApp. Once nominated, members or their delegates will have the right to vote on whether to invest in a project through the DApp.

If more members agree to vote for investment than reject an investment during the applicable voting period, The Members will authorize the investment. After a seven-day period to enable Members to “rage quit,” Red Rock DAO DApp will generate the necessary legal agreements and send them to a designated representative for signature. Once digitally signed, The LAO will transfer the investment to the project.

A Red Rock DAO member should understand and acknowledge that they must bear the economic risk of this investment.

Will Red Rock DAO have a general partner?

No, unless the Members make such a decision to appoint a general partner (but that wouldn’t be in the spirit of things).

What are the terms of investments made by Red Rock DAO?

Members will have the right to set the terms of any investment into projects. Red Rock DAO works with teams to structure the investment and initially makes investments and acquisitions that range from $25k-$1mil (in ether).

What happens if there are multiple proposals for investment? How do Red Rock DAO members make decisions?

Proposals are voted on sequentially to ensure that every funding application is actually voted on. It also gives Red Rock DAO members time to withdraw their undeployed capital if they do not want to participate in the investment.

What is the investment period for Red Rock DAO?

Red Rock DAO has no express investment period. Members can make investments until all contributed capital has been allocated or withdrawn, as discussed further in these FAQs.

Does Red Rock DAO’s service provider have any rights to make investment decisions?

The service provider has no role in making investment decisions apart from the normal course of voting based on representation in units. The service provider works to activate the allocation of investment funds and represent P&L statements to the DAO.

What information will members receive from projects?

Projects apply for investment through Red Rock DAO’s DApp. However, members can also make proposals for other forms of investment using the DApp’s governance mechanisms or less formally through Red Rock DAO-specific communication channels. Applicants are expected to submit relevant information about their project, including a background of founders, pitch deck, and relevant financial information.

If members believe that additional information should be collected from an applicant, the member may contact the project directly or ask the service provider to obtain the information on Red Rock DAO’s behalf.

Will members have the opportunity to conduct due diligence on the various startups applying for funding?

Members are free to contact projects and conduct due diligence on any startups that have applied to receive financing from Red Rock DAO.

Red Rock DAO will maintain various ways to interact with applicants and projects, such as Telegram, Discord, and Reddit channels. If requested by the members, The Red Rock DAO’s service provider can schedule meetings or facilitate other interactions with any applicants that are being considered by members for investment.

Can members request that additional or different types of information be collected from projects?

Members have the right to control all investment operations of Red Rock DAO and any changes are expected to be implemented by the service provider.

Should Red Rock DAO members expect to receive any profit by contributing to Red Rock DAO?

Investments contemplated by Red Rock DAO are inherently speculative and are made by Red Rock DAO members or their express designees and agents. The results of Red Rock DAO’s investments will likely vary from period to period, and investments made by Red Rock DAO will involve a high degree of financial and market risk that can result in a complete loss of any member’s contribution to Red Rock DAO.

If I’m a member of Red Rock DAO, what interest do I receive in any projects that receive financing from Red Rock DAO?

Red Rock DAO will be the record holder of all securities and/or any other rights secured via Red Rock DAO-related investments. Members, acting via a majority vote, will have the right to determine the amount, timing, and form of all distributions related to proceeds from those investments.

How will proceeds be distributed?

Members will receive proceeds, if any, on a pro-rata basis based on the number of ROCS Units each member holds.

If a member rage quits, the member will be entitled to receive proceeds from any investments made by Red Rock DAO prior to the member’s withdrawal of capital to the extent permitted by law or the terms of an investment (e.g., if Red Rock DAO makes an investment in securities with transfer restrictions, Red Rock DAO itself will be the record holder until those restrictions lift). However, the member will not be entitled to distribution with respect to any investments made by Red Rock DAO after the date the member quits Red Rock DAO.

Please note, that prior to proceed distribution, members must provide a copy of the applicable Form W-9 or Form W-8, when requested by the service provider.

Will proceeds be paid in Ether or cash?

Members have the right to determine how proceeds will be paid.

Can Red Rock DAO recycle or reinvest proceeds?

Members acting by a majority vote may reinvest or retain for investment any proceeds to effect Red Rock DAO investments, pay expenses (outlined here or otherwise provided for in Red Rock DAO’s Operating Agreement), or create reserves.

If a member votes against a proposed deal, but does not “rage quit,” will he or she still benefit from possible future profits? In other words, are all projects’ possible future returns shared equally amongst the members?

Yes, the member would benefit from the future profits even if the member voted against the investment.  In effect, you’re agreeing to the will of the voting members and if you don’t like the decision you have the right to rage quit all or part of your undeployed Ether.

If there are expenses associated with operating Red Rock DAO, who is responsible for them?

Red Rock DAO and its members are responsible for the costs and expenses related to Red Rock DAO’s activities, operations, and maintenance, as detailed in the operating agreement. This includes any fees charged by the service provider.

Are there any fees associated with Red Rock DAO?

As noted in these FAQs, Red Rock DAO’s organizational documents expressly contemplate the use of a service provider to help facilitate, on behalf of the members, activity by Red Rock DAO. As compensation for these services, the service provider will initially charge the following fees.

All fees are payable on a quarterly basis to the service provider and will begin to accrue once Red Rock DAO launches. Members have the right to terminate the services of the service provider at any time.

Does Red Rock DAO charge a carry?

Notably, because Red Rock DAO is member-managed, it does not have any general partner. No member of Red Rock DAO, only the service provider will be entitled to a carry unless otherwise agreed to by the members.

When will Red Rock DAO launch?

Red Rock DAO will Launched initial fundraising in March of 2022.

When will Red Rock DAO accept applications?

Red Rock DAO will accept projects prior to the launch date. You can begin the application process here: https://www.redrockdao.com/apply-for-funding/

What rights do members have if they are not happy with the direction of Red Rock DAO?

Red Rock DAO has certain strong rights for members to withdraw their capital if they are unhappy with the performance or administration of Red Rock DAO. This right—often called “rage quitting”—gives members a degree of control as to their participation in Red Rock DAO and the use of any contributed capital.

What happens if I do not want to participate in an investment?

Even though Red Rock DAO is member directed and managed, members are not obligated to participate in any proposed investment. Once an investment is authorized by a majority vote of the members, all members will have the right to opt out of the investment and receive any undeployed capital that they contributed to Red Rock DAO back (i.e., “rage quit”).

The right to rage quit is accounted for in the operating agreement and facilitated via the DApp and underlying smart contracts.

If I rage quit can I sell my interests in Red Rock DAO?

If a member rage quits, the member’s original unallocated capital contribution will be returned to the member. The member’s ROCS Units are retired (i.e., “burned”) and the member loses any right to participate in future investments.

The member will retain any previous rights to proceeds from investments that occurred before rage quitting.

When can a member rage quit?

A member can rage quit Red Rock DAO at any time, including after any funding proposal. The only restriction is that any proposal that the particular member voted “YES” for is processed by Red Rock DAO smart contract initially.

Will ROCS Units be transferrable?

With limited exception, as detailed in the operating agreement, members cannot transfer ROCS Units or Tokens, if created, unless otherwise agreed to by the members, by majority vote.

If a member “rage quits” and leaves Red Rock DAO can new members join?

Members by a majority vote can accept new capital commitments from new joining members and admit them into Red Rock DAO. Any new member (or, if applicable, group of members) must provide the same initial contribution as an exiting member.

Can a member be forced out of Red Rock DAO?

Members of Red Rock DAO may be required to leave if members of Red Rock DAO vote to remove the respective member. The board can also remove any Red Rock DAO member unless otherwise overturned by a vote by a majority of the members.

How do projects get funded?

Once a funding proposal is submitted for your project, the proposal will be submitted to the Red Rock DAO members to decide whether to nominate your project for funding.

If your funding proposal is nominated, Red Rock DAO members will then vote on whether the project will receive financing from Red Rock DAO. If approved by a majority quorum of Red Rock DAO Members, the project will then receive financing in the form of a convertible note. All project financing will be allocated to Red Rock DAO projects in the form of the cryptocurrency ether.

How does my project receive funding from Red Rock DAO?

Potential Red Rock DAO projects are asked to apply through an application process that includes the following materials:

• Project name and contact information
• Project description
• Existing investors
• Incorporation information (including Articles of Incorporation)
• Project smart contract address

Once your application is submitted, Red Rock DAO members will have the option to nominate a project to receive financing from Red Rock DAO. If more than 50% of Red Rock DAO members approve a funding proposal, the project will receive financing.

What entity type should be created for my project in order to submit a funding proposal?

We ask that projects who wish to submit a proposal be an entity registered in a U.S. jurisdiction. Red Rock DAO  members may, however, elect to invest in projects organized outside the US.

Please seek legal counsel regarding any incorporation documents or questions on entity choice.

How much of my project (in terms of equity) will be transferred to the members of the Red Rock DAO?

Red Rock DAO members will have the opportunity to vote on the amount of financing that is provided to approved projects and Red Rock DAO’s service provider works with the project to settle the investment.

After a potential Red Rock DAO project submits an application, can the project change the information that was submitted?

Yes! If a project wishes to change any information that was submitted during the application process, it can do so by contacting us at support@redrockdao.com

How does a project withdraw from Red Rock DAO?

During the voting period (prior to being sponsored by a Red Rock DAO member) potential Red Rock DAO projects will have the ability to withdraw their funding proposal from Red Rock DAO.

Through a smart contract cancel Proposal function, potential Red Rock DAO projects are able to remove their application from consideration for funding.

Who can view information included in project funding proposals?

Red Rock DAO project proposals can be set to be private. Project proposals including all materials that are submitted to Red Rock DAO are restricted to applicants who submitted a funding proposal and members of Red Rock DAO.

Should potential projects have additional questions regarding privacy concerns, please email us at support@redrockdao.com

Under what circumstances will Red Rock DAO wind down?

Members of Red Rock DAO can vote by majority to wind down Red Rock DAO. Other circumstances include a judicially ordered dissolution or disposition of all the assets of Red Rock DAO.

If dissolution were to occur, a person appointed by the members via a majority vote will handle the wind-down of Red Rock DAO based on the terms of the operating agreement.

What happens if there are expenses related to the dissolution?

At the time of dissolution, members of Red Rock DAO are responsible for the expenses associated with the liquidation.

Any additional losses or liabilities incurred will be in accordance with the terms of the operating agreement and the service provider reserves the right to set aside funds to facilitate dissolution activities.

What happens if members of Red Rock DAO want to transfer all of the Red Rock DAO assets?

In the operating agreement, members agree to tag- and drag-along provisions to deal with the possibility that members may want to transfer all of Red Rock DAO assets to another entity or party. These rights will only be triggered if a super-majority of the members vote to effectuate such a transfer.

What smart contracts are being used for Red Rock DAO?

Red Rock DAO uses various smart contracts to administer its activity. Primarily, the smart contracts are used to facilitate:

• collecting members’ initial contributions to The LAO;
• voting;
• delegating voting to third parties;
• funding investments;
• distributing proceeds; and
• rage quitting.

Red Rock DAO currently uses Aragon and Open Law smart contracts, which can be found here.

Will The Red Rock DAO smart contracts be audited?

Will the smart contract code be publicly available?

Red Rock DAO smart contract code will be publicly available on Etherscan and GitHub when it is complete.

Accredited Investor

Accredited Investors are defined in Rule 501 of U.S. Securities and Exchange Commission (SEC) Regulation D.

DAO

DAO is shorthand for a decentralized autonomous organization. More information about decentralized organizations can be found here.

DApp

A DApp is an online portal or other interactive software that enables direct interaction between end-users and providers (e.g., connecting buyers and sellers in some marketplace, owners and stores in file storage).

Digital Asset

A digital asset is any set of unique digital information—including, for example, programs, decentralized programs, isolated chunks of programming code, collections of data, e-mail or web addresses, or cryptocurrency tokens—that is capable of being stored and uniquely tracked on a computer network such as the Ethereum network, and over which a user can maintain control through that network.

Ether

Ether is a digital asset that is native to the Ethereum blockchain.

Ethereum

Ethereum is a global, open-source platform for decentralized organizations.

Operating Agreement

The rights and obligations of members of Red Rock DAO are defined in a legal document formally referred to as a Limited Liability Company Agreement or an Operating Agreement.

Rage Quitting

“Rage quitting” is a function built into Red Rock DAO’s smart contracts that allows a member to take its unallocated capital contribution and leave Red Rock DAO.

Smart Contract

A smart contract is a computer program written to a blockchain which defines the various network operations that can be performed on the digital assets on a blockchain.

Subscription Agreement

When members join Red Rock DAO, they will subscribe to membership interests in Red Rock DAO represented as ROCS Units.

Wallet

A wallet is software that is used to store, receive, and transfer cryptocurrencies and digital assets between parties.