The Simple Agreement For Equity (SAFE) has become increasingly popular in the Canadian startup ecosystem as a straightforward investment instrument that bridges the gap between initial funding and formal equity rounds. This document is typically used when a company seeks early-stage investment but wants to defer valuation discussions until a later financing event. The agreement includes essential terms such as conversion mechanics, valuation caps or discounts, and investor rights, while ensuring compliance with Canadian securities regulations. It's particularly suitable for startups looking to raise capital quickly without the complexity and immediate dilution of a priced equity round, or the interest payments and maturity dates associated with convertible notes. The document addresses both federal and provincial regulatory requirements while maintaining the flexibility that makes SAFEs attractive to both companies and investors.
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1. Parties: Identifies the company issuing the SAFE and the investor making the investment
2. Background: Explains the context of the agreement - that the investor wishes to invest in the company using a SAFE instrument
3. Definitions: Defines key terms used throughout the agreement, including 'Equity Financing', 'Liquidity Event', 'Dissolution Event', and 'Conversion Price'
4. Investment Amount: Specifies the amount being invested and when/how it will be paid
5. Events and Conversion: Details the circumstances under which the SAFE converts to equity and how the conversion is calculated
6. Company Representations: Company's warranties about its legal status, authority to issue the SAFE, and other material facts
7. Investor Representations: Investor's warranties about their status, investment understanding, and compliance with securities laws
8. General Provisions: Standard legal clauses including notices, amendments, governing law, and assignment restrictions
1. Most Favored Nation: Optional provision ensuring the investor gets the benefit of more favorable terms if offered to subsequent investors
2. Pro-rata Rights: Gives the investor the right to participate in future equity financing rounds
3. Information Rights: Grants the investor rights to receive certain company information and financial statements
4. Board Observer Rights: Provides the investor with the right to attend board meetings as an observer
5. Transfer Restrictions: Additional restrictions on the transfer of SAFE rights beyond standard assignment provisions
6. Dispute Resolution: Specific procedures for resolving disputes, such as mandatory mediation or arbitration
1. Schedule A - Capitalization Table: Current capitalization structure of the company
2. Schedule B - Form of Conversion Notice: Template notice to be used when converting the SAFE to equity
3. Schedule C - Investor Qualification Certificate: Certification of investor's status under applicable securities laws
4. Appendix 1 - Calculation Examples: Examples showing how conversion calculations work in different scenarios
5. Appendix 2 - Required Corporate Actions: List of corporate actions required to implement the SAFE conversion
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