Swarm City Token Creation and Swarm City Project Creation Conditions:

Explanatory Note & Governance Terms

1. Principles

1 The Swarm City Project emerged from the Arcade City Project. Therefore, Arcade City Tokens (“ARC”) may be swapped into Swarm City Tokens (“SWT”) according to the Provisions of these Terms (see para 5).

A total of 9’525’397 ARC have been created, including the 16% ARC created in addition to the ARC Token Sale. All ARC are exchangeable.                                        

The following Terms (see para 5) will be issued by the Swarm City Hives (“Swarm City Hives”) as an amendment to the Swarm City Token Exchange Whitepaper and the Arcade City Project Whitepaper.

2 By exchanging ARC Tokens to the Smart Contract System and the Smart Contract System creating SWT, the User understands and accepts that the User makes a contribution into a Smart Contract System for the development of the Swarm City Project and/or the Swarm City Ecosystem, as described in the Swarm City Project Token Exchange Whitepaper and the Arcade City Project Whitepaper (“Swarm City Project”). For the Whitepaper and/or further information on the Swarm City Project and/or the Smart City Ecosystem, visit: https://swarm.city. The information contained in the Whitepaper and on the website are of descriptive nature only, are not binding and do – unless explicitly referred to herein – not form part of the Terms as set forth under para 5 below.

3 The User understands and accepts that while the individuals and entities, assigned to this task will make reasonable efforts to develop and complete the Swarm City Project and the Swarm City Ecosystem, it is possible that such development may fail and User’s SWT become useless and/or valueless due to technical, commercial, regulatory or any other reasons (see also Chapter 7 regarding Risks). The User is also aware of the risk that even if all or parts of the Swarm City Project and/or Swarm City Ecosystem are successfully developed and released in full or in parts, due to a lack of public interest, the Swarm City Project could be fully or partially abandoned, remain commercially unsuccessful or shut down for lack of interest or other reasons. The User therefore understands and accepts that the exchange of ARC to the Smart Contract System and the creation of SWT by the Smart Contract System carry significant financial, regulatory and/or reputational risks (including the complete loss of value of created SWT, if any, and attributed features of the Swarm City Project and/or Swarm City Ecosystem).

4 The User furthermore understands and accepts that - as the creation of the SWT, any implemented governing rights of the User as well as the assignment of the execution of the Swarm City Project are smart contract based - the terms and conditions applicable thereon are set forth in the Smart Contract System Code, consisting of two interconnected software codes, existing on the Ethereum blockchain at 0xb9e7f8568e08d5659f5d29c4997173d84cdf2607 ( the SWT token contract ) and 0x69e5da6904f73dfa845648e1991ad1dcc780f874 ( The ARC to SWT conversion contract ). To the extent the terms contained herein or in any other document or communication contradict to the ones set forth in the Smart Contract System, the terms of the Smart Contract System prevail. Furthermore, neither this document nor any other document or communication may modify or add any additional obligations or covenants to Swarm City Hives or publisher of these terms or developer of the Smart Contract System functions and/or any other person, entity and/or affiliates involved with the deployment of the Smart Contract System and the setting up of the Swarm City Project beyond those set forth in the Smart Contract System.

5 By exchanging ARC to the Smart Contract System, the User expressly agrees to all of the terms and conditions set forth in Smart Contract System Code existing on the Ethereum blockchain (at the addresses set forth under para 4) and in this document (together the “Terms”), which is incorporated by reference herein. The User further confirms to have carefully reviewed the Smart Contract System Code, its functions and these Terms and to fully understand the risks and costs of creating SWT and contributing into a Smart Contract System for the development of the Swarm City Project.

6 This document does not constitute a prospectus of any sort, is not a solicitation for investment and does not pertain in any way to an offering of securities in any jurisdiction. It is a description of the functionality of a Smart Contract System.

7 By exchanging ARC to the Smart Contract System and/or receiving SWT, no form of partnership, joint venture or any similar relationship between the Users and/or other individuals or entities involved with the deployment of the Smart Contract System and the setting up of the Swarm City Project is created.

2. SWT Creation Function

8 During the Creation Period, up to a total of 9’525’397 SWT (Maximal Launch Quantity) are planned to be created and exchanged by the Smart Contract System, all of equal value and functionality. This amount corresponds to all ARC created. There will be only an exchange and no creation of further tokens.        

9 Creation Period: The Creation Period starts with the deployment of the Smart Contract System and will be indefinite.

10 Creation of SWT by exchange: The creation and allocation of SWT by the Smart Contract System will be initiated by the User using the swarm.city terminal app, which triggers a smart contract operation. Advanced Users may perform the token exchange manually, following the instructions of the Token Exchange Whitepaper. The Smart Contract System creates the same amount of SWT as ARC transferred (1:1 exchange rate) and allocates the corresponding SWT to the User’s wallet address, from where the ARC were sent from. User therefore shall assure to make his contribution using a wallet address to which the Smart Contract System can send back SWT to (e.g. not an address of a currency exchange and not a wallet that is technically incompatible with the SWT). It is not possible to send ARC directly to the new token address, they will not be converted into SWT and will be lost. Issuance of SWT (meaning that respective entries of the Public Key (PUK) of User) are made by the Smart Contract System on the blockchain according to the allocation information in the Smart Contract System.

11 Destruction of ARC: The Smart Contract System will burn the exchanged ARC by sending them directly to a 0x0 address. A further use of the burned ARC is not possible.

12 Maximum SWT Quantity: There will be only an exchange of the existing ARC into SWT. Consequently, a maximum of 9’525’397 ARC may be exchanged and the same amount of SWT created.

13 Exchange Rate: The Exchange Rate during Creation Period will be one SWT for one ARC (1:1 exchange rate).

3. Functionality of SWT

14 SWT are only for use in connection with the Swarm City Project under the terms of the Smart Contract System and under the terms of the Swarm City Ecosystem (to be released), and only constitute a transferable representation of attributed functions of the Smart Contract System. SWT will have at least the same functionality as the ARC according to the Arcade City Project Whitepaper. SWT shall facilitate peer-to-peer transactions in the Swarm City Ecosystem. They will be the only means of paying for services within the Swarm City Ecosystem. To improve the transferability of the SWT, an in app exchange with credit card may be provided. User can buy, sell and trade SWT on cryptocurrency exchanges and peer-to-peer, just like any other cryptocurrency.                                

15 User understands and accepts, that the open design of SWT enables adaptations and changes regarding the SWT functionality. Such changes will not affect the initial functionality of SWT.

16 Ownership of SWT carries no rights expressed or implied other than the right to use SWT as a means to enable usage of and interaction with the Swarm City Ecosystem, if successfully completed and deployed (see para 3). In particular, User understands and accepts that he has no right to claim as holder of SWT any intellectual property rights, equity or equivalent rights or any other form of participation in or relating to the Swarm City Project and/or the Swarm City Ecosystem and/or Swarm City Hives. The Swarm City Ecosystem shall be released under an open source license and anyone shall have the right to further develop and suggest modifications to the Swarm City Ecosystem.                                

17 Through the allocation of SWT to a User, the User receives no right to receive any revenues generated by the intellectual property rights developed as part of the Swarm City Project or any other assets. The User understands and hereby agrees that the sole and exclusive usage rights of these IPR are assigned to an external entity (to be named) by the Swarm City Hives. This entity shall register any trademarks and domain names relating to the Swarm City Project and the Swarm City Ecosystem under its name and at its own discretion defend these rights in the interest of the Swarm City Project and the Swarm City Ecosystem. Beyond this, the User understands and accepts that SWT do not represent or constitute any ownership right or stake, share or security or equivalent right in or relating to the Swarm City Project, the entity holding the IPR the Swarm City Ecosystem and/or any software, any public or private company, corporation, entity or property.

4. Representations and Warranties

18 By exchanging ARC to the Smart Contract and creating SWT, the User represents and warrants that:

§ the User has a deep understanding of the functionality, usage, storage, transmission mechanisms and intricacies associated with cryptographic tokens, like bitcoin (BTC) and Ether (ETH), and blockchain-based software systems;

§ the User has carefully reviewed the code of the Smart Contract System located on the Ethereum blockchain at the addresses set forth under para 4 and fully understands and accepts the functions implemented therein;

§ the User is legally permitted to exchange ARC to the Smart Contract System, to create and obtain SWT in the User’s jurisdiction;

§ the User is legally permitted to receive software and contributing to the Smart Contract System for the development of the Swarm City Project;

§ User transfers ARC only from a wallet or wallet service provider that technically supports the SWT. User understands and accepts, that failure to assure this may have the result that User will not gain access to his SWT;

§ the User is of a sufficient age to legally create and obtain SWT;

§ the User will take sole responsibility for any restrictions and risks associated with the creation of SWT by the Smart Contract System as set forth below;

§ the User is not exchanging ARC to the Smart Contract System to obtain SWT for the purpose of speculative investment;

§ the User is not obtaining or using SWT for any illegal purposes;

§ the User is purchasing the functionality of the SWT issued by the Smart Contract System primarily to support the development, testing, deployment and operation of the Swarm City Project, being aware of the commercial risks associated with the Swarm City Project;

§ the User waives the right to participate in a class action lawsuit or a classwide arbitration against any entity or individual involved with the creation of SWT;

§ the User understands the creation of SWT does not involve the purchase of shares or any equivalent in any existing or future public or private company, corporation or other entity in any jurisdiction;

§ the User understands that the exchange of ARC to the Smart Contract System, the creation of SWT and the development of the Swarm City Project carries significant financial, regulatory and reputational risks as further set forth in the Terms;

§ the User understands and expressly accepts that there is no warranty whatsoever on SWT, the Smart Contract System and/or the success of the Swarm City Project, expressed or implied, to the extent permitted by law, and that the Smart Contract System is used and SWT are created and obtained at the sole risk of the User on an “as is” and “under development” basis and without, to the extent permitted by law, any warranties of any kind, including, but not limited to, warranties of title or implied warranties, merchantability or fitness for a particular purpose;

§ the User understands that the User has no right against any other party to request any refund of the ARC exchanged to the Smart Contract System for the creation of the SWT under any circumstance;

§ the User understands with regard to SWT no market liquidity may be guaranteed and that the value of SWT over time may experience extreme volatility or depreciate in full;

§ the User understands that the User bears the sole responsibility to determine if the User’s contribution to the Smart Contract System for the development of the Swarm City Project, the exchange of ARC to the Smart Contract System, the creation, ownership or use of SWT, the potential appreciation or depreciation in the value of SWT over time, the sale and purchase of SWT and/or any other action or transaction related to the Swarm City Project have tax implications for him; by creating, holding or using SWT, and to the extent permitted by law, the User agrees not to hold any third party (including developers, auditors (e.g. contractors or founders) liable for any tax liability associated with or arising from the creation, ownership or use of SWT or any other action or transaction related to the Swarm City Project.

19 As part of the creation process the User will use own account (address) on the Ethereum Network, with a private key associated to this address and password. The password is used to encrypt the User’s private key. Following the creation of SWT by the Smart Contract System, the SWT will be transferred to the User's address by the Smart Contract System. The User understands that the User must keep his password and private key safe and that the User may not share them with anybody. The User further understands that if his private key and/or password is lost or stolen, the User will not be able to generate a new password or recover his private key, and if the User also loses his private keys and password, the SWT associated with the User's account (address) will be unrecoverable and will be permanently lost. Furthermore, the User understands that there is no recovery mechanism for lost keys and passwords, so no one will be able to help the User retrieve or reconstruct a lost password and private keys and provide the User with access to any lost SWT.

5. Swarm City Project Execution

20 The User understands and accepts that the development and execution of the Swarm City Project will be released by the Swarm City Hives. The Swarm City Hives have the right to engage subcontractors to perform the entire or partial development and execution of the Swarm City Project. The scope of the development work will be triggered by the amount of contribution received during the Arcade City Token Sale, as set forth in the Arcade City Project Whitepaper.

21 The User understands and accepts that for the purpose of the development and execution of the Swarm City Project, any third party contractor may receive, upon decision of the Swarm City Hives, ETH, which were contributed within the Arcade City Token Sale. These ETH are now stored on a multi signature wallet and are under the control of the Swarm City Hives. The ETH from the Arcade City Token Sale cover expenses, charges and other costs that may arise by subcontractors as part of the development and execution of the Swarm City Project. It remains at the Swarm City Hives’s sole discretion to decide how to allocate the funds in order to develop and execute the Swarm City Project.

22 The User understands and accepts that the User may not have any expectation of influence over governance on the Swarm City Project.

23 The User understands and accepts that the Swarm City Project and/or Swarm City Ecosystem will need to go through substantial development works as part of which they may become subject of significant conceptual, technical and commercial changes before release. User understands and accepts that as part of the development, an upgrade of the SWT Token may be required (hard-fork of SWT Token) and that, if User decides not to participate in such upgrade, he may no longer use his SWT token on the Swarm City Ecosystem and that non upgraded SWT may lose their functionality in full.

6. Audit of the Smart Contract System

24 The Smart Contract System has been, on a reasonable effort basis, audited and approved by technical experts with regard to the conformity of the Smart Contract System’s functionality to the content of these Terms. The technical experts have further confirmed that the Smart Contract System has, with regard to both accuracy and security, been programmed according to the current state of the art. The source code of the contracts used are available for further review at https://github.com/swarmcity/sc- token/blob/master/contracts/MiniMeToken.sol and https://github.com/swarmcity/sc- token/blob/master/contracts/SWTConverter.sol The source code can be compared with the deployed version on these urls : https://etherscan.io/address/0xb9e7f8568e08d5659f5d29c4997173d84cdf2607#code  and https://etherscan.io/address/0x69e5da6904f73dfa845648e1991ad1dcc780f874#code

25 However, the User understands and accepts that smart contract technology is still in an early development stage and its application of experimental nature which carries significant operational, technological, financial, regulatory and reputational risks. Accordingly, while the audit conducted raises the level of security and accuracy, the User understands and accepts that the audit does not amount to any form of warranty, including direct or indirect warranties that the Smart Contract System and the SWT are fit for a particular purpose or do not contain any weaknesses, vulnerabilities or bugs which could cause, inter alia, the complete loss of exchanged ARC and/or SWT.

7. Risks

26 The User understands and accepts the risks in connection with exchanging ARC to the Smart Contract System and creating SWT as exemplary set forth above and hereinafter. In particular, but not concluding, the User understands the inherent risks listed hereinafter:

§ Risk of software weaknesses: The User understands and accepts that the Smart Contract System concept, the underlying software application and software platform (i.e. the Ethereum blockchain) is still in an early development stage and unproven, why there is no warranty that the process for creating SWT will be uninterrupted or error-free and why there is an inherent risk that the software could contain weaknesses, vulnerabilities or bugs causing, inter alia, the complete loss of exchanged ARC and/or SWT.

§ Regulatory risk: The User understands and accepts that the blockchain technology allows new forms of interaction and that it is possible that certain jurisdictions will apply existing regulations on, or introduce new regulations addressing, blockchain technology based applications, which may be contrary to the current setup of the Smart Contract System and which may, inter alia, result in substantial modifications of the Smart Contract System and/or the Swarm City Project, including its termination and the loss of SWT for the User.

§ Risk of abandonment / lack of success: The User understands and accepts that the creation of the SWT and the development of the Swarm City Project may be abandoned for a number of reasons, including lack of interest from the public, lack of funding, lack of commercial success or prospects (e.g. caused by competing projects). The User therefore understands that there is no assurance that, even if the Swarm City Project is partially or fully developed and launched, the User will receive any benefits through the SWT held by him.

§ Risk associated with other applications: The User understands and accepts that the Swarm City Project and/or particular Swarm City Projects may give rise to other, alternative projects, promoted by unaffiliated third parties, under which SWT will have no intrinsic value.

§ Risk of loss of private key: SWT can only be accessed by using an Ethereum wallet with a combination of User’s account information (address), private key and password. The private key is encrypted with a password. The User understands and accepts that if his private key file or password respectively got lost or stolen, the obtained SWT associated with the User's account (address) or password will be unrecoverable and will be permanently lost.

§ Risk of theft: The User understands and accepts that the Smart Contract System concept, the underlying software application and software platform (i.e. the Ethereum blockchain) may be exposed to attacks by hackers or other individuals that could result in theft or loss of SWT or ARC, impacting the ability to develop the Swarm City Project.

§ Risk of Ethereum mining attacks: The User understands and accepts that, as with other cryptocurrencies, the blockchain used for the Smart Contract System is susceptible to mining attacks, including but not limited to double-spend attacks, majority mining power attacks, “selfish-mining” attacks, and race condition attacks. Any successful attacks present a risk to the Smart Contract System, expected proper execution and sequencing of SWT transactions, and expected proper execution and sequencing of contract computations.

8. Taxation

27 The User bears the sole responsibility to determine if his contribution into the Smart Contract System for the development of the Swarm City Project, the creation, ownership or use of SWT, the potential appreciation or depreciation in the value of SWT over time, the sale and purchase of SWT and/or any other action or transaction related to the Swarm City Project have tax implications for him.

28 By creating, holding or using SWT, and to the extent permitted by law, the User agrees not to hold any third party (including developers, auditors, the Swarm City Hives, contractors or founders) liable for any tax liability associated with or arising from the creation, ownership or use of SWT or any other action or transaction related to the Swarm City Project.

9. No Liability

28 The User acknowledges and agrees that, to the fullest extent permitted by any applicable law, the User will not hold any developers, auditors, contractors, or founders of the SWT, the Smart Contract System and/or the Swarm City Hives and/or any other third party contractors liable for any and all damages or injury whatsoever caused by or related to the use of, or the inability to use, SWT or the Smart Contract System under any cause or action whatsoever of any kind in any jurisdiction, including, without limitation, actions for breach of warranty, breach of contract or tort (including negligence) and that developers, auditors contractors, the Swarm City Hives, any other third party contractors or founders of the Smart Contract System, the SWT and/or the Swarm City Project shall not be liable for any indirect, incidental, special, exemplary or consequential damages, including for loss of profits, goodwill or data, in any way whatsoever arising out of the use of, or the inability to use of the Smart Contract System, the Swarm City Project and/or SWT.

29 The User further specifically acknowledges that developers, auditors, contractors, the Swarm City Hives, any other third party contractors or founders of the SWT, Smart Contract System and/or the Swarm City Project are not liable, and the User agrees not to seek to hold them liable, for the conduct of third parties, including other creators of SWT, and that the risk of creating, holding and using SWT rests entirely with the User.

30 By creating, holding or using SWT, and to the extent permitted by law, the User agrees not to hold any third party (including developers, auditors, contractors, the Swarm City Hives, any other third party contractors or founders) liable for any regulatory implications or liability associated with or arising from the creation, ownership or use of SWT or any other action or transaction related to the Swarm City Project.

10. Miscellaneous

31 The User understands and accepts that the Network of miners will be ultimately in control of the Smart Contract System. The User understands that a majority of these miners could agree at any point to make changes to the official Smart Contract System and to run the new version of the Smart Contract System. Such a scenario could lead to SWT losing intrinsic value.

32 The Smart Contract System is located in Alderney. Consequently, the SWT creation and allocation and the assignment of the development and execution of the Swarm City Project to Swarm City Hives are considered to be executed in Alderney.

33 The User agrees that if any portion of these Terms is found illegal or unenforceable, in whole or in part, such provision shall, as to such jurisdiction, be ineffective solely to the extent of such determination of invalidity or unenforceability without affecting the validity or enforceability thereof in any other manner or jurisdiction and without affecting the remaining provisions of the Terms, which shall continue to be in full force and effect.

34 The Terms govern the creation, ownership and use of SWT and supersede any public statements about the launch of SWT and/or the Smart Contract System made by anyone in the past, present and future.

35 The applicable law is Swiss law. Any dispute arising out of or in connection with the creation of the SWT and the development and execution of the Swarm City Project shall be finally settled by the ordinary courts of Zug, Switzerland.

Version 08.02.2017