Legal Nodes does not assume responsibility for the contents of any templates or documents in any form that are provided on the Legal Nodes website. This could be done as soon as the Token SPV is incorporated. Therefore, for our template to work for more early-stage projects, we have decided to go with a discount-based model. A token warrant is a derivative that allows the warrant holder to purchase tokens in the issuing company at a specified price on or before a specified expiration date. In some cases, token warrants may even be used in conjunction with SAFEs or other more traditional equity mechanisms. Token Warrants Investors have one alternative that, as of May 2022, is growing in popularity amongst web3 venture funds the token warrant. WebSAFE agreements, also known as simple agreements for future equity and SAFE notes , are legal contracts that startups use to raise seed financing capital and similar to a warrant. "_ Insider Reserved Percentage _" means the percentage of the Total Network Tokens, in the aggregate, reserved for issuance to Insiders in connection with the applicable Token Launch. 02/16: Freyr Battery, Finnish Minerals Group plan cathode material JV Plain-Vanilla-Warrants (Put) Underlying: FREYR BATTERY: Issuer: Citi: The regulatory landscape in the US is still under development, which causes some regulatory uncertainty, particularly concerning the legal status of tokens in the U.S., as well as the high risk of tokens being considered as securities. SAFT (Simple Agreement for Future Tokens) investing capital for the right to purchase tokens or % of token supply at a specified price or discount rate. You signed in with another tab or window. The number of tokens that they will be able to buy with the discounted price is then calculated pro-rata to the equity ownership of the investor. Also, the investor can claim the Token SPV shares to consolidate their control rights. And if you plan to give a small amount of tokens to the company, it may be better to use the company allocation methodology (so that investors get fewer tokens for the same amount of capital). https://lnkd.in/gTadru7d have the same signatory, the DevLab company; use the same formula for calculating the portion of investors tokens. As explained above, our template works with a discount and a core contributors allocation pro-rata formula, which is one of several methods suitable for a token warrant agreement. We also offer a number of tools and features with employees and other token holders in mind. Lets explore these in the next chapters of this guide.. These two documents are used in pre-seed Web3 fundraising and share a number of similarities. (please print or type complete name of entity) | The token warrant, however, requires a discount or a discounted price as one of its substantive terms to function. There are differences between token side letters and token warrants depending on the legalese. Basically, its the token equivalent of a warrant for equity, or granting share options. The Company will promptly respond in writing to an inquiry by Holder as to the then current fair market value of one Token. Similar supply-demand issues may arise if a bunch of separate warrants are exercised at the same time. In the event that legal counsel to the Company advises the Company that it is necessary or advisable for regulatory reasons, Holder shall also be required to deliver, as a condition to exercise, an accredited investor verification letter from a qualified third party verifying that Holder is an "accredited investor" within the meaning of Rule 501 of the Securities Act (as defined above). The use of Tokens in connection with the Platform may be governed by other The Token Purchase Agreement is for when tokens are just about to be issued or are already in circulation, rather than a SeedSAFT which is an advance purchase of tokens that will issued at some time in the future. Notwithstanding the foregoing, "Tokens" shall not include tokens created for testing purposes or any NFTs issued in the ordinary course of business in arms' length transactions. "Company" shall include, in addition to the Company identified in the opening paragraph of this Warrant, any corporation or other entity that succeeds to the Company's obligations under this Warrant, whether by permitted assignment, by merger or consolidation or otherwise. Depending on where the DevLab is incorporated, the following scenarios will unfold:. "_ Warrant _" means this Warrant to Purchase Tokens and any warrant(s) delivered in substitution or exchange therefor, as provided herein. You also dont have your tokenomics established yet either. Emerging Countries. "_ Deemed __ Liquidation Event " has the meaning set forth for such term in the Company's Amended and Restated Certificate of Incorporation, as amended from time to time (the " Certificate _"). Any attorney-client relations are between clients and legal providers only. After that, they manage the work, handling all communication with the service providers, quality-checking deliverables and ensuring that the fundraising and token launch are undertaken in a compliant way. Oftentimes, a projects tokenomics model develops over time, and it can be difficult to predict the future value of an individual token so early in a projects life. WebToken Warrants. Your submission has been received! Unlike SAFTs, these token warrants typically come in the form of an optional side letter and dont guarantee the deployment of tokens - therefore avoiding the legal complications faced by its predecessor. In case you need help with customizing the template, request a demo of our platform or send us a message in chat.. This might seem somewhat unfair to investors, and startups might sweeten the deal for investors by offering a sizeable discount on the price of purchasing tokens in the future. Disclosure: I am not a lawyer, this is not legal advice, and you should seek out independent legal counsel for your unique circumstances. the amount of investor allocation of tokens, the price of tokens at the time of transfer to the investor, conversion event (the moment when the SAFT is converted into tokens for the investor). |, Name: ____________________________(please print or type full name) |, Name:(please print or type full name) | This company is usually registered in a jurisdiction where the legislation permits token issuance and provides defined rules for taxation of token-sale transactions. For purposes of this calculation, any SAFE that has not yet converted to equity will be considered to convert at its valuation cap. in early 2022 regulates crypto investing in a way that amplifies rather than destroys its potential. In exercising its Portion of the Warrant, the undersigned Holder hereby confirms and acknowledges that the representations and warranties set forth in Section 6 of the Warrant as they apply to the undersigned Holder are true and complete in all respects as of the date on which Holder exercises this instrument. If youre the founder of a web3 startup looking to attract venture capital investors, issuing token warrants could help you translate your protocol or dApps tokens into equity that fuels your startups growth. To do that, it first receives the allocated number of tokens from the token-issuing company, the Token SPV. This, in turn, helps the DevLab (which may be registered in the US as an American company) to avoid any involvement with the process of selling and distributing tokens. We'll be glad to chat with you. | This is possible thanks to the token warrant assignment by the DevLab to the Token SPV at the time it is created or before the token generation event. Decide which token pro-rata right method you want to use by comparing outcomes with your token allocation and the three types of token pro-rata right methods. The Holder hereby agrees that, without the prior written consent of the Company, the Holder will not: (a) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any Locked Tokens, or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Locked Tokens; provided, however, that Holder may stake, vote or otherwise participate in the Network with respect to all of its Locked Tokens. Heres why: in the case of the token warrant, its signatory is NOT responsible for the conversion event and thus does not sell tokens. Delivery of Tokens. As of the Issue Date, the Holder shall deliver to the Company payment in cash equal to the Purchase Price. SAFE (Simple Agreement for Future Equity), track both traditional equity and tokens in the same place. Consequently, the DevLab is not involved in token sale (the paid token transfer) but instead it covers only the distribution of tokens previously received from Token SPV. Just as a stock warrant allows the holder to buy shares of stock in the issuing company at a specified price in the future, a token warrant allows the holder to buy a certain amount of the companys tokens at a specified price in the future. Item 1.01 Entry into a Material Definitive Agreement. WebTHIS SIMPLE AGREEMENT FOR FUTURE TOKENS ( SAFT ) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT ), OR UNDER THE A SAFT is a security issued for the eventual transfer of tokens from web3 startups to investors. This space will no doubt evolve over coming years as more regulatory clarity is offered. To learn more about how Pulley can help your startup usher in its Web3 future, schedule a call with us today. The latest industry news, updates and info. Rival messaging app Kik was also ordered to pay a $5 million penalty because its native KIN tokens were also found to violate securities laws. WebEfficient and speed After both stakeholders have signed, the SAFT token warrant agreement can be developed as a smart contract and accomplished automatically. Upon each exercise of this Warrant and subject to the restrictions provided in Section 3.2 hereof, Holder may elect to make such exercise without the payment by Holder of any additional consideration, by submitting a copy of the exercise notice attached hereto as Exhibit 1 with the net exercise election selected, duly executed by Holder, for the number of Tokens that is obtained under the following formula: where X = the number of Tokens to be issued to Holder pursuant to a net exercise of this Warrant effected pursuant to this Section 2.5. This is not the same for token warrants, where their value is already included in the value of the SAFE, to which the former is signed as an annex. A Token company (also referred to as a Token SPV) is a company within a project's legal wrapper that is responsible for the initial token release and distribution. In order to determine the best approach of how to structure it, it is necessary to assess the readiness of the projects tokenomics. In particular, both the token warrant and the token side letter: Despite being related, appearing at the same point of the Web3 fundraising process, and having similar sounding names, the token warrant and the token side letter are sisters, not twins. On the terms and conditions set forth in the Warrant, the undersigned Holder hereby elects to purchase its Portion of the Total Network Tokens (the "Warrant Tokens"), pursuant to the terms of the attached Warrant, and tenders herewith payment of the Warrant Exercise Price in full. The proceeds of the Note may be drawn in a single instance within five (5) business days after the date thereof. Fortunately, Pulley makes it easy to track both traditional equity and tokens in the same place., With Pulley, you can create a single source of truth that allows you to issue, track, and record all token agreements and token sales the same way you do with your equity agreements. As a part of this process, investors are also pricing the equity valuation in a scenario where there is no token launch to make sure that their investment is protected. Web[Meta] Sticky Comment. (secure agreement for future tokens) is one such mechanism. If the DevLab is registered in a non-US jurisdiction (in Hong Kong, the UK, and some European countries) and, in addition to using a standard SAFE, also plans to issue to its investors the rights to tokens, the DevLab will have more flexibility in choosing between the token warrant and a token side letter. Any Tokens issued hereunder will be subject to such restrictions on transferability as required by applicable laws and regulations as determined by the Company's Board of Directors and as set forth in Section 3.3 hereto; provided, however, that such restrictions shall be no more stringent than those applicable to Tokens owned by or allocated to any Insider and shall be adjusted, as applicable, to accelerate or otherwise align with any such less stringent restrictions. They reduce the time and cost of financings and free principals time to focus on high-level issues. WebRepresented Deconet in drafting the first blockchain-transferable software license, the Deconet Software License Agreement; Advising the founders of a top 10 token by market capitalization on fund formation and investment matters; Advising a leading entertainment company on all aspects of the development and minting of NFTs is ongoing, then for the purposes of Web3 fundraising, founders should consider the private token sale agreement (TSA) as a fundraising document. FTX TOKEN. You should not construe any such information as legal, tax, investment, trading, financial, or other advice., If youre considering fundraising options for your Web3 projects, youll most likely find yourself in one of the three following, rather common, scenarios:, Scenario 1: Youre at the beginning of developing your project and havent yet registered a token company (i.e. Depending on the state of your tokenomics (is it ready or is it still in the works?) This could influence which token pro-rata right method you negotiate for. The token side letter or warrant represents a right, but not the obligation, to receive or purchase future tokens. The token side letter represents the option to receive future tokens, alongside the equity, of these early-stage crypto companies. Restrictions on Tokens. "_ Total Network Tokens _" means the total number of Tokens ever to be issued on (i) the Protocol, or (ii) any Token Issuer's network or protocol. A growing number of web3 startups are turning toward mechanisms that allow them to issue equity to investors in the form of their native tokens. If you and your investors have agreed to value the token warrant/side letter rights and equity together at some value, the formula for token allocation should reflect that. Homepage. You will have: To learn more about tokenomics and how it influences the legal structure of your Web3 project, read more in our dedicated guide on tokenomics. WebThis Token Purchase Agreement (this Agreement ) contains the terms and conditions that govern your purchase of the INX Tokens, an ERC20 blockchain asset that is programmed Rankings and News. This eradicates the need for the agreement to be validated by a lawyer. See photos and more auction details on AuctionZip.com Now. But, as with all things crypto (and equity, for that matter), you wont want to dive in blindly. To read more about the SAFT, how to use it, and to get a free SAFT template from Legal Nodes, visit this page. A Token company (also referred to as a Token SPV) is a company within a project's legal wrapper that is responsible for the initial token release and distribution. 2. during the twelve months following the Cliff, 1/12th of 25% of the total number of the Tokens of Holder shall become unlocked on each monthly anniversary of the Cliff; In such cases, classic corporate equity investment documents are also signed in addition to the token sale agreement, namely, the subscription (share purchase) agreement and the shareholders agreement. Find him on Twitter at @steveglaveski., This site requires JavaScript to run correctly. Nestor is a Co-founder & Head of Web3 Legal at Legal Nodes. Here's an easy flow to use to figure out which option may work best for your project.. If it is not ready yet and depending on where the DevLab is registered, then, in addition to standard equity instruments, the DevLab can also sign a token warrant in the U.S. or can sign either a token warrant and a token side letter if the DevLab is a non-U.S. entity., When the tokenomics is finalized, the Token SPV signs either a SAFT or a token sale agreement, where the choice depends on whether the tokens have already been issued before.. Schedule a call and we'll discuss your equity and see how we can help. In connection with each exercise pursuant to this Section 2, the Holder will provide to the Company with a network address to allocate Holder's Tokens to upon such exercise (or otherwise upon the applicable date of delivery, as described herein), and the Company shall deliver, or cause to be delivered, such Tokens to such network address, subject to the requirements of Section 3.2, and delivery and release pursuant thereto. But this promise for future tokens has run afoul of the. For example, say 20% of all tokens are allocated to investors. 12/ Token warrants are a mechanism for equity holders to exercise the warrant to get tokens. Thank you! WebWe are engaging several investors who have asked for an offer and agreement for fundraising for our web3 product in development. "_ Company Intellectual Property _" means all patents, patent applications, registered and unregistered trademarks, trademark applications, registered and unregistered service marks, service mark applications, tradenames, copyrights, trade secrets, domain names, information and proprietary rights and processes, similar or other intellectual property rights, subject matter of any of the foregoing, tangible embodiments of any of the foregoing, and in any and all such cases that are owned by the Company. WebSeedSAFT is the SeedLegals automated version of a SAFT (Simple Agreement for Future Tokens). What a token warrant agreement is and how it actually works, When a token warrant agreement is typically signed, Similarities and differences between the token warrant and the, How to choose between a token warrant and a token side letter, What the terms of the token warrant (and the token purchase right terms) include, the token warrant is not used for automatic (unconditional) issuances: the, the price at which the investor buys the tokens in the future is fixed by the token warrant. - 10X jurisdictions. Understand how much negotiating leverage you have when fundraising, and whether you need founder-friendly terms or investor-preferred terms for the token side letter to close the deal. In this case, the best option may be to sign a simple agreement for future tokens (SAFT).. Mentioning any of the assets in this article is not an endorsement to purchase them. (To be completed and signed only upon each exercise of the Warrant). To get help with structuring a fundraising process and to learn more about how our VLOs could help you, request a demo with our team. When something like this occurs, it's typically an indicator that the joint parties expect the stock price to rise significantly (otherwise, there is no point in issuing such an agreement). Steve Glaveski is the founder of community-owned web3 accelerator and venture fund, Metarise, founder of innovation accelerator Collective Campus, and author of Time Rich: Do Your Best Work, Live Your Best Life.He hosts the Future Squared and Metarise podcasts, and frequently contributes to Harvard Business Review.