token warrant agreement token warrant agreement

A SAFT (a simple agreement for future tokens) is a document that is usually signed with a startup that has already decided on the type of tokens it plans to issue, and already has detailed the tokenomics, and created a token distribution plan (including prices and stages of distribution) and a White Paper (which describes all of the above). The latter can be seen as riskier due to the unknown token allocations that have yet to be made. There are differences between token side letters and token warrants depending on the legalese. It is, however, rare for the tokenomics to be ready at such an early stage. "Token(s)" means the digital assets created and issued by the Company, or any Parent, Subsidiary, Affiliate, foundation formed for the purposes of issuing a Token native to a Protocol or Founder (provided that, with respect to a Founder, no such asset shall constitute Token(s) for purposes hereof unless such asset is (i) based on the Protocol and (ii) created prior to the three month anniversary of the termination of services of such Founder to the Company or another Token Issuer) of the Company or their respective successors or assigns (collectively, "_ Token Issuers _"), that are developed using Company Intellectual Property; provided, that Tokens shall not include any digital assets that may be implemented by the holders of the Tokens by governance proposal and votes, so long as any such tokens (x) shall be issued in accordance with the governance terms of the Protocol or any Token Issuer's network or Protocol and not in any Token Issuer's discretion and (y) that Holder shall be reasonably able to participate in any staking, rewards or inflationary or dilutive controls introduced through any such proposal to the same extent as any other similarly situated holder of the Tokens. But this promise for future tokens has run afoul of the. Disclosure: I am not a lawyer, this is not legal advice, and you should seek out independent legal counsel for your unique circumstances. 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. WebAs part of equity financing agreements that took place in 2018, the Company has obligated to issue to the investors a number of INX tokens that will be determined pursuant to the results of the Offering. In this guide, well be focusing on fundraising for Web3 projects. To read more about the differences between the token warrant and token side letter, and download a free token side letter template, visit this page.. "_ 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. Method of Exercise. Disclaimer: the information in this guide is provided for informational purposes only. The mechanics surrounding early-stage investment in company equity is a well-worn pursuit, honed over decades since HBS professor George Doriot raised a $3.5 million fund to invest in technology companies back in 1946. "_ Person _" means any individual, corporation, partnership, trust, limited liability company, association or other entity. You should consult with a legal specialist such as a lawyer, who is licensed in the country where the documents might apply. Your best option in this scenario is likely to be using a SAFE/Convertible Note + token warrant/token side letter. This commit does not belong to any branch on this repository, and may belong to a fork outside of the repository. Supporting. 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. Three main types of managing the pro-rata rights of the token supply: Each of the pro-rata right methods has its advantages and disadvantages for the company or the investors. The fully diluted supply and conversion rate method gives investors a fixed token supply guarantee based on their equity ownership, while the company allocation method is subject to future token allocation decisions by the company. Select one of the following two alternatives: Cash Exercise. WebThe lowest price paid for Lotto Arbitrum (LOTTO) is $0.064796044161 , which was recorded on Mar 03, 2023 (13 hours). For purposes of the calculation in Section 2.5(a), the fair market value of one Token shall be determined by the Company's Board of Directors in good faith. Token Warrant Agreements Free Template and Guide, By submitting this form you agree with our privacy policy. For early-stage crypto companies, theres a new fundraising document called the token side letter, that is being used to raise capital from accredited and institutional investors. These Public Warrants will be under lockup for 91 days starting from 29-NOV-2022 to 28-FEB-2023. Equity term sheets are relatively standard, and today, when funds invest in an early-stage company, they typically use an instrument such as a convertible or a SAFE note (secure agreement for future equity) the latter popularized by Y-Combinator. Hence, this sale to the investor is also called a pre-sale. * It may be hard to determine the future tokenomics or token utility model as an early-stage company without product-market fit or a large community of users. Welcome to Legal Nodes Playbook for Founders. Some investors prefer a guaranteed amount of tokens with the fully diluted supply or conversion rate method. Restrictions on Exercise. Foreword: Thank you to the Alliance DAO team and Lindsay for their insights and help in writing this article. Holder may update such network address by providing written notice in accordance with Section 7.5; provided, that the Company need not consider such updated network address to be valid until the Company has confirmed receipt of such notice and has approved such updated network address. As it is a separate entity, the Token SPV can handle these processes, shielding the DevLab from any involvement in the token distribution process. *Consult with your legal counsel on whether to use a token side letter or token warrant. LayerZero Labs issued a letter saying it has come to an agreement with FTX, FTX Ventures and Alameda for a complete equity buyout. The material terms of the TSA are almost the same as those of the SAFT, except that the TSA lacks a description of the conversion event and indicates a clear date of transfer of tokens to investors. This article covers all there is to know about token warrants and includes a free token warrant template created by the team at Legal Nodes. They reduce the time and cost of financings and free principals time to focus on high-level issues. An equity raise with a token warrant structure means startups can focus on developing their product-market fit in the short term, parking designing a token economy until later, Outlier's Burke said. 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 In cases where the investor expects to get not only the future tokens, but also the shares of the company, founders should consider using a simple agreement for future tokens and equity (SAFTE) instead of a SAFT. This is why its generally a smart idea for web3 startups to think twice before offering a massive token warrant to an early-stage investor.. Webtoken undertaking vow warrant warranty word word of honor guarantees nounpledge, promise agreements assurances attestations bails bargains bonds certainties certificates certifications charters collaterals contracts covenants 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). 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. "_ Insider _" means any current or former investors, stockholders, Founders, employees, officers, directors and advisors or other consultants of the Company and any Token Issuer (if other than the Company). This Warrant shall be exercised by submitting a copy of the exercise notice attached hereto as Exhibit 1, duly executed by Holder, and by payment in a form specified in Section 2.2 hereof of an amount equal to the Warrant Exercise Price or, if applicable, an election to net exercise this Warrant as provided in Section 2.5 hereof for the number of Tokens to be acquired in connection with such exercise. 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. Web[Meta] Sticky Comment. The terms and additional documents you require may depend on whether you plan to launch a DAO or not. You also dont have your tokenomics established yet either. VLOs analyze all the legal tasks needed to structure the fundraising, prepare cost estimates and then select the best legal providers from the Legal Nodes Network for each task. ContraFect has agreed to issue 128,000 shares of common stock and pre-funded warrants to purchase 2,372,000 shares of common stock. A SAFE is a sort of investment contract that an early-stage startup makes with an investor, in which the investor agrees to pay money now and receive shares of company stock later. "_ 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. In case you need help with customizing the template, request a demo of our platform or send us a message in chat.. This agreement is not suitable for retail investors or the general public. "_ Warrant _" means this Warrant to Purchase Tokens and any warrant(s) delivered in substitution or exchange therefor, as provided herein. 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. For example, if youre raising at $10M equity valuation for just the company, and you have tokens involved, you may also value the token network at $20M based on comparable companies. If you plan to allocate a large percentage of the tokens to the company, it may be better to use the conversion rate methodology. WebManage your legal agreements (SAFTs, token warrants, token grants) and communicate the value of your future token. Schedule a call and we'll discuss your equity and see how we can help. The Token Warrant will be for companies who might wish to issue tokens to investors as a sweetener for making an equity investment in a funding round, or perhaps to an advisor in return for services. Investors mint warrant tokens when they deposit capital into the aggregate pool. 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. See below for an illustrative example where the method used can result in different outcomes for investors depending on the token allocation. Choosing a Web3 Fundraising Document in 2023: a Playbook for Founders. When it comes to fundraising, the big question often is which Web3 fundraising document should I use?. Subject to the terms and conditions of this Warrant, Holder may exercise this Warrant, at any time or from time to time, on any Business Day on or after the date the Tokens are generated and available for issuance and delivery (the "_ Token Launch _") and before the Expiration Date, for Holder's Portion. Your existing traction, team, strategy, industry (DeFi, DAO tooling, NFT, P2E gaming) may all result in different valuations, and comparable companies in your specific industry can be used as a part of your negotiation. When we say tokens, were referring broadly to blockchain-based digital assets. Jonathan Chan is a partner in the corporate practice at Wilson Sonsini Goodrich & Rosati. For startups in the early stage of development, many investors will suggest or even expect the startup to structure their investment by signing a SAFE or other regular equity convertible instrument (Convertible Note, Advanced Subscription Agreement, etc.). Token Warrants Investors have one alternative that, as of May 2022, is growing in popularity amongst web3 venture funds the token warrant. At this stage, founders wont usually have a detailed White Paper with developed tokenomics, or any kind of token distribution plan, although these steps may have been preliminarily mapped out in the startup's Web3 roadmap. 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. As a condition to each exercise of this Warrant, Holder shall execute a copy of the exercise notice attached hereto as Exhibit 1, confirming and acknowledging that the representations and warranties set forth in Section 6 of this Warrant as they apply to Holder are true and complete as of the date of exercise. "_ Common Stock _" means the Company's Common Stock, par value [$0.00001] per share. in Europe or elsewhere), then they have more flexibility in choosing between the token side letter and the token warrant to sign along with SAFE.. Make sure to be clear with the investors on the value of the equity and the tokens together so that you dont end up with the wrong token side letter terms, or delay closing the deal because of misalignment on valuations. is the founder of community-owned web3 accelerator and venture fund, Time Rich: Do Your Best Work, Live Your Best Life. 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. | Date: | Date: | This allows investors to receive company shares as well as tokens, and its becoming an increasingly popular way to invest in web3 startups., If you dont plan ahead, you could quickly run into the complication of using separate systems to manage equity and tokens. 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. Comparatively, the current price is 215.40% higher than the all-time low price. |, Title:(please print or type full title) | 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. We refer to that certain Warrant to Purchase Tokens of the Company issued on _________, 2022 (the "Warrant"). LiquiFi provides examples of Token Side Letters with the most commonly used token pro-rata rights. This, in turn, can be reflected in the token sale agreement in the process of structuring the investment round or specified in the DAO Constitution, which is similar to a shareholders agreement in traditional Web2 investing. So the equity and the probability of not launching a token has to be valued accordingly and will be reflected in the token side letter terms. Investors may also expect to sign a token warrant (or a token side letter), which guarantees the investor the right to receive tokens in the future should any be released. Homepage. 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. Investors have one alternative that, as of May 2022, is growing in popularity amongst web3 venture funds the token warrant. Notice of Expiration. WebAll Ember Tokens issued by the Company upon the proper exercise of an Ember Warrant in conformity with this Warrant Agreement shall be validly issued, fully paid and non Given the shifting nature of regulation in this space, we recommend consulting with your legal counsel before moving forward with any type of token-based equity.. One key distinction is that a token warrant represents a right, not an obligation, to purchase future tokens. These warrants are often detachable, meaning that they can be separated from the tokens and sold on the secondary markets before expiration. Automatic vesting ensures that tokens are seamlessly moved to connected wallet addresses upon vesting, and token holders can access advanced views that help them track the projected future value of their tokens. Something went wrong while submitting the form. Therefore, a detailed White Paper with a description of token use cases, tokenomics, and token distribution plans is necessary to prepare a fully-fledged SAFT. WebWARRANT tokens can be issued in conjunction with any tokens, which in turn are called warrant-linked tokens. Use valuation benchmarks to get a sense of what valuation range makes sense. (To be completed and signed only upon each exercise of the Warrant). A usable or near finalized (i.e., not just a draft) White Paper with detailed tokenomics, a ready-made Token SPV, on whose behalf the SAFT will be signed, and which, based on the results of the conversion of the SAFT, will issue tokens to the investor. 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). This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Basically, its the token equivalent of a warrant for equity, or granting share options. WebDuring this most recent bull market in 2021, the spirit of the SAFT has made a comeback in the form of token warrants or token rights agreements, but theyre now typically attached to either a SAFE or an equity investment. WebWarrant tokens are ERC-20 tokens which give investors a claim on the portfolio of assets that were financed using their capital. The token purchase right is the right to buy tokens in the future. 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. With it, the purchaser pre-pays for tokens that havent been released yet and the company uses that money to develop the tokens. Similarly, a SAFT is an agreement in which an investor pays money upfront for the right to own a certain number of tokens once the network is completed., SAFTs act somewhat like token warrants, in the sense that both entitle the holder to future tokens. If Holder Transfers any Token in contravention of this Section 3.3 (such Tokens "Transferred Tokens"), as liquidated damages and not as a penalty, Holder shall promptly (and, in any event, within five (5) days thereof) deliver and surrender to the Company a number of Tokens equal to the number of Transferred Tokens. SAFE (Simple Agreement for Future Equity), track both traditional equity and tokens in the same place. Please, The mechanics surrounding early-stage investment in company equity is a well-worn pursuit, honed over decades since HBS professor. DISCLOSURE: This publication contains general information only and LiquiFi, Inc. is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. The number of tokens issued to the holder upon exercise of the warrant is typically commensurate with the holders investment stake in the company, though it may also be affected by the total allocation of tokens for investors. It held $11.5 million on crypto exchange FTX and has written that down to zero, but expects to receive some sort of compensation in the future. 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. Unlike SAFTs, token warrants are essentially an informal agreement that is not registered with the SEC and 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. In summary, it is also worth noting that when a SAFT is used as a tool to attract investment for a Web3 startup, it should be used in conjunction with three additional tools: If any of these three criteria are missing, Web3 founders may wish to consider the SAFE + token warrant/token side letter option described above. 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. 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. raised a $3.5 million fund to invest in technology companies back in 1946. You signed in with another tab or window. |. The token side letter provides an additional advantage for investors, as no additional payments are required to receive tokens. Ultimately, the decision will come down to a few factors, which we will explore further on in this guide., Scenario 2: You have finalized your White Paper, registered a Token SPV company, and know when you plan to issue tokens. The token warrant provides investors with a right to purchase tokens in the future at a predetermined price or with a predetermined discount, while also specifying when the Token SPV will be formed. 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. |, Name: ____________________________(please print or type full name) |, Name:(please print or type full name) |