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This document outlines a Simple Agreement for Future Equity (SAFE) between a corporate investor and a start-up company. A SAFE is a flexible investment instrument that provides investors with an option to convert their investment into equity in the future, based on certain triggering events, such as an equity financing, a liquidity event, or a dissolution event.
This investment agreement outlines the terms and conditions of the investment, including the purchase amount, valuation cap, and the events that trigger conversion into equity. The document covers the following events: Equity Financing, Liquidity Event, Dissolution Event, and Termination. In the case of an equity financing, the company will issue shares of Standard Ordinary Shares or Safe Ordinary Shares based on pre-money valuation, and the investor will execute transaction documents and a Pro Rata Rights Agreement. If there is a liquidity event, the investor may receive a cash payment or shares of Ordinary Shares based on the Liquidity Price.
In the event of a dissolution event, the company will pay the Purchase Amount to the investor before distributing any assets to holders of outstanding Ordinary Shares. This early-stage investment agreement will terminate upon either the issuance of stock to the investor, payment of amounts due, or expiration of the agreement. The agreement also includes a list of defined terms, including Valuation Cap, Safe Price, and Liquidity Price.
A SAFE agreement is a type of funding agreement for start-ups, similar to a seed funding agreement or convertible note agreement, and is often used by early-stage companies that are not yet ready for a traditional equity financing round. This corporate investor agreement provides a straightforward way for investors to invest in a start-up and provides flexibility for both parties to determine the terms of their investment. The investment term sheet is structured to provide clarity and protection for investors and can be customised to meet the needs of the parties involved.
1. Start by reading the document and making sure you understand the terms and conditions. The document is a legal agreement between two parties, and it is essential to know your rights and responsibilities as a party.
2. The agreement outlines the terms for issuing shares to an investor in exchange for a purchase amount. The investor has the right to receive either Standard Ordinary Shares or Safe Ordinary Shares, subject to the pre-money valuation.
3. If an Equity Financing occurs before the expiration or termination of this instrument, the investor will receive a number of shares of Standard Ordinary Shares or Safe Ordinary Shares. The investor needs to execute and deliver all transaction documents related to the Equity Financing, including a Pro Rata Rights Agreement.
4. If a Liquidity Event occurs before the expiration or termination of this instrument, the investor has the option to receive a cash payment equal to the Purchase Amount or receive a number of shares of Ordinary Shares. The Purchase Amount will be due and payable by the Company to the Investor immediately prior to, or concurrent with, the consummation of the Liquidity Event.
5. If there is a Dissolution Event before this instrument expires or terminates, the Company will pay an amount equal to the Purchase Amount, due and payable to the Investor immediately prior to, or concurrent with, the consummation of the Dissolution Event.
6. The instrument will expire and terminate upon the issuance of stock to the Investor or the payment, or setting aside for payment, of amounts due the Investor.
7. Make sure to understand the definitions in the agreement, including "Change of Control" and "Liquidity Event," as they play a crucial role in the instrument.
8. Consult with a legal expert if you have any questions or concerns about the agreement.
By following these steps, you can effectively use this document and ensure that you comply with the terms and conditions outlined in the agreement. It is essential to understand the legal and financial implications of the agreement, and seek legal advice if necessary.