--- name: safe-agreement title: Simple Agreement for Future Equity (SAFE) description: Drafts Simple Agreements for Future Equity (SAFE) for early-stage venture capital financing with valuation cap/discount mechanics, investor qualifications, and securities compliance. Use when drafting SAFEs, pre-seed investment documents, convertible equity instruments, or YC-style SAFE notes. author: CaseMark author_url: https://github.com/CaseMark/skills/tree/main/skills/legal/safe-agreement license: Apache-2.0 version: 0.1.0 execution_mode: open jurisdiction: us practice: securities language: en tags: [agreement, corporate, drafting] --- # Simple Agreement for Future Equity (SAFE) Drafts a SAFE granting investors future equity rights upon triggering events — no immediate ownership, no debt. ## Quick Start Gather before drafting: 1. **Company** — legal name per certificate of incorporation, jurisdiction, state of formation 2. **Investor** — legal name, entity type, accredited investor basis 3. **Economics** — purchase amount, valuation cap, discount rate (if any) 4. **Cap table** — existing SAFEs, convertible notes, fully-diluted share count 5. **Special terms** — MFN clause, pro rata rights, side letters ## Document Structure ### Header & Recitals | Element | Requirement | |---|---| | Company ID | Full legal name matching certificate of incorporation, entity type, jurisdiction | | Investor ID | Legal name, entity type, capacity to contract | | Purchase amount | Exact dollar figure | | Core exchange | Capital → contractual right to future equity; state explicitly: no debt, no interest, no current stockholder status | ### Conversion Mechanics Three triggering events: **1. Equity Financing (automatic)** - Converts into preferred stock of same series issued to new investors - Conversion price = lesser of: - **Cap price**: Valuation Cap ÷ Pre-money fully-diluted capitalization - **Discount price**: Price per share × (1 − Discount Rate) - Shares = Purchase Amount ÷ Conversion Price - Include worked numerical example **2. Liquidity Event (acquisition/merger/IPO)** - Investor elects: cash = Purchase Amount OR common stock = Purchase Amount ÷ Liquidity Price - Specify election timeline and default **3. Dissolution** - Cash = Purchase Amount, pre-dissolution - Priority: senior to common, subordinate to creditors/debt ### Valuation Terms | Term | Function | |---|---| | Valuation Cap | Ceiling on conversion valuation; larger stake if valuation exceeds cap | | Discount Rate | Reduction from new investor price; rewards early risk | | Interaction | Cap and discount are **alternative** (not additive); investor gets better result | ### Representations **Investor:** - [ ] Investment purpose (not for resale — supports private placement exemption) - [ ] Accredited status — individual (income/net worth) or entity (assets/equity owner/institutional) - [ ] Risk acknowledgments: speculative, total loss, illiquid, indefinite hold - [ ] Sophistication or qualified advisors **Company:** - [ ] Valid incorporation and good standing - [ ] Corporate power and authority - [ ] Board/stockholder approvals obtained - [ ] Binding obligation (standard bankruptcy/equitable exceptions) - [ ] No conflict with charter, material contracts, or law ### Rights & Restrictions **Pre-conversion** — no stockholder rights (no voting, dividends, distributions, preemptive rights). **Transfer** — no transfer without written consent; unauthorized = void. Optional exceptions for affiliates, estate planning, retirement accounts. **Securities** — unregistered; restrictive legends required; investor acknowledges illiquidity. ### Administrative Provisions | Provision | Standard | |---|---| | Governing law | State of incorporation or principal place of business | | Disputes | Litigation venue OR arbitration (rules, count, seat, costs) | | Amendments | Written, signed by both parties | | Waivers | Explicit, written; no implied waiver | | Integration | Entire agreement; supersedes prior negotiations | | Notices | Email, certified mail, or courier; specify addresses; deemed-received rules | | Severability | Reform invalid provisions; remainder survives | ### Signature Blocks Both Company and Investor: signature, printed name, title (entities), date. ## Checks 1. **Defined terms** — capitalize consistently; define before first use 2. **Math precision** — conversion formulas unambiguous to any financial professional 3. **Cross-references** — verify all internal section references 4. **No placeholders** — replace all `[brackets]` before finalizing 5. **YC compatibility** — if referencing YC SAFEs, align with applicable template version (post-money vs. pre-money) and flag deviations 6. **Securities exemptions** — confirm federal exemption (Reg D 506(b)/506(c)) and state blue sky requirements 7. **MFN conflicts** — check prior SAFEs for MFN clauses that could trigger 8. **Missing info** — identify gaps and request from user before finalizing