SAFE (Simple Agreement for Future Equity)

The document titled 'SAFE (Simple Agreement for Future Equity)' is a legal instrument that outlines the terms and conditions for the issuance of shares of a company's capital stock to an investor. The document begins by highlighting the importance of the agreement, which is to provide the investor with the right to certain shares of the company's stock in exchange for a payment.

 

The document is divided into several sections, each serving a specific purpose. In Section 1, titled 'Events', the document outlines the different scenarios in which the investor will be entitled to receive shares of the company's stock. These scenarios include equity financing, liquidity events, and dissolution events.

 

Section 2 provides definitions for key terms used throughout the document, such as 'change of control', 'equity financing', and 'liquidity event'. These definitions help clarify the meaning of these terms and ensure a common understanding between the parties involved.

 

Section 3 contains representations made by the company regarding its legal status, authority to enter into the agreement, and compliance with applicable laws and regulations. These representations assure the investor that the company is a valid and legally operating entity.

 

Section 4 includes representations made by the investor, such as its legal capacity to enter into the agreement and its status as an accredited investor. These representations help establish the investor's eligibility and suitability for participating in the agreement.

 

Finally, Section 5 covers miscellaneous provisions, including the amendment and assignment of the agreement, notice requirements, and the limitations of the investor's rights as a holder of the agreement.

 

Overall, the document provides a comprehensive framework for the issuance of shares to the investor, ensuring that both parties are aware of their rights, obligations, and the conditions under which the shares will be issued.

How to use this document?

To use the 'SAFE (Simple Agreement for Future Equity)' document, follow these steps:

1. Familiarize yourself with the document: Read through the entire document to understand its purpose, terms, and conditions.

2. Identify the parties involved: Determine the names and addresses of the contracting parties, referred to as 'Party 1' and 'Party 2' in the document.

3. Determine the purchase amount: Determine the amount that Party 2 will pay to Party 1 in exchange for the right to certain shares of the company's capital stock.

4. Understand the events triggering share issuance: Familiarize yourself with the different events outlined in Section 1 that would entitle the investor to receive shares, such as equity financing, liquidity events, and dissolution events.

5. Comply with transaction requirements: Ensure that all necessary transaction documents related to equity financing are executed and delivered by the investor, as outlined in Section 1(a). This may include signing agreements and providing representations and warranties.

6. Consider pro rata rights: If applicable, discuss and execute a pro rata rights agreement with the company, as mentioned in Section 1(a)(ii).

7. Prepare for liquidity events: Understand the options available to the investor in the event of a liquidity event, as described in Section 1(b). Decide whether to receive a cash payment or shares of ordinary shares.

8. Prepare for dissolution events: Familiarize yourself with the provisions related to dissolution events in Section 1(c). Understand the payment obligations of the company and the distribution of assets to the investor.

9. Monitor termination conditions: Be aware of the conditions under which the agreement will expire or terminate, as outlined in Section 1(d).

10. Seek legal advice if necessary: If you have any questions or concerns about the document or its implications, consult with a legal professional to ensure you fully understand your rights and obligations.

By following these steps, you can effectively use the 'SAFE (Simple Agreement for Future Equity)' document and navigate the process of issuing shares to the investor.