SIMPLE AGREEMENT FOR FUTURE REDEMPTION (SAFR™)

Canonical Form, Version 0.06

In plain terms: in exchange for an investment, the Holder receives a claim on the Company that grows on a fixed schedule and can be settled in cash each quarter or converted into common stock. The Company is never forced to pay on any particular date; it pays what it declares it can afford each quarter, and the claim is capped. This agreement states the results and commitments; all calculations live in the SAFR Reporting Standard, pinned below.

THIS CERTIFIES THAT in exchange for the payment by the undersigned investor (the “Holder”) of $[_] (the “Purchase Amount”) on or about [] (the “Closing Date”), [____________________], a [Delaware] [corporation / limited liability company] (the “Company”), issues to the Holder the rights set forth below.

Pinned Reporting Standard: SAFR Reporting Standard, major version 0, as refined from time to time within that major version, with the version in effect at issuance identified by the content hash of its canonical spec (the “Reporting Standard”), incorporated by reference. The pinned content hash is sha256:PLACEHOLDER, a placeholder to be re-pinned to the Reporting Standard spec in effect at issuance in a later pass (TODO: re-pin); it is not recomputed or validated here. Refinements within major version 0 apply automatically. A new major version (for example, 1.x to 2.0), defined in the Reporting Standard as any change that would alter a previously issued position’s computed Ledger Base or Expected Capacity for any quarter by more than 3%, applies to this instrument only with the Holder’s and the Company’s consent. The pinned major version controls all calculations under this instrument.

Elections at issuance (check if applicable):

[ ] Graduated Position (Section 6; complete Schedule A)

1. The Position and the Schedule

(a) The Holder’s position is a contractual claim on the Company equal at any time to the Unreturned Purchase Amount times the Multiple for the current month, as set by the Schedule below. “Unreturned” means reduced proportionally by amounts redeemed and amounts converted under this instrument. The Multiple for any month between the anchors below is set by drawing a straight line between them. It never exceeds 2.50 and never decreases.

(b) This position is not a debt instrument, bears no interest, has no maturity date, and creates no payment obligation except as expressly settled under this instrument.

(c) Zero is not default. A Declared Budget of zero in any quarter, and the resulting absence of any redemption payment, is not a default, breach, or event of acceleration, and no such concepts exist in this instrument.

(d) No personal recourse. No officer, director, member, manager, founder, or equity holder of the Company has any personal liability for the Company’s obligations under this instrument, and nothing in this instrument may be amended, supplemented, or conditioned to create such liability or any obligation tied to any individual’s personal income or assets.

2. The Quarterly Cycle

This instrument runs on the Company’s fiscal quarters, ending March 31, June 30, September 30, and December 31. Three things happen each cycle: the Holder makes any elections for that quarter at least 10 days before the quarter closes; the Company issues its Quarterly Update within 45 days after the quarter closes; and settlement occurs within 10 business days after the Quarterly Update. The Quarterly Update fixes the Declared Budget and each requesting Holder’s pro rata amount, so settlement is the payment of amounts the Update has already determined. All notices, elections, and settlements under this instrument follow this cycle and occur at no other time.

3. Reporting

(a) The Feed. From the Closing Date, the Company shall maintain a live data connection or recurring submission (the “Feed”) conforming to the Reporting Standard.

(b) The Quarterly Update. Beginning with the first quarter after the position’s month 36, and earlier at the Company’s option, the Company shall issue within 45 days after each fiscal quarter-end a “Quarterly Update” containing, computed from the Feed under the Reporting Standard: Ledger Base; Expected Capacity; the Declared Budget; a written explanation when required by Section 3(c); brief commentary; and a single total of what the Company pays its owners and leaders. The Quarterly Update is delivered to each Holder. The Company may share a summary (the Company’s standardized economic base, capacity figures, revenue mix, and size band) with invited network participants by its standing grant. No Quarterly Update or summary includes personally identifiable information, customer or counterparty identities, partner names, or pipeline detail, and the underlying ledger itself is not distributed under this instrument.

(c) Expected Capacity and the Declared Budget. “Expected Capacity” is the amount the Reporting Standard computes that the Company could prudently apply to redemptions this quarter, after reserving a working-capital floor. The “Declared Budget” is the amount the Company declares in the Quarterly Update that it will apply to redemption settlements that quarter; it is the Company’s decision and may be any amount, including zero. If the Declared Budget is less than Expected Capacity, the Quarterly Update includes a written explanation of the reasons capital is being retained.

(d) Reporting Lapse. If the Company has not issued a Quarterly Update within 45 days after a fiscal quarter-end, a “Reporting Lapse” begins and continues until a conforming Quarterly Update issues. During a Reporting Lapse, the Company may not issue Buyout Notices, give the early-opening notice under Section 5(a), close new positions under this form, or settle Graduated Positions; conversions under Section 5(b) are priced using the most recent reported Ledger Base; and the lapse is disclosed in the next Quarterly Update. The Multiple continues to accrue during any lapse. A Reporting Lapse is not a default and accelerates nothing.

4. Ledger Base

(a) “Ledger Base” is the Company’s standardized economic base for purposes of this instrument, computed each quarter from the Feed under the Reporting Standard. It is one additive formula applied to every venture with no election, Tangible Net Assets plus the Qualified Development Asset plus Forward Revenue Value, valuing what the Company owns, the product development it has funded, and its revenue by quality on uniform terms. Ledger Base gates Expected Capacity, anchors the Quarterly Update, and sets the conversion price. Ledger Base is not a valuation and is never negotiated. Where a bona fide priced equity round exists, that price governs; the measure sets the conversion basis only in the absence of a market price.

(b) Ledger Base is self-attested unless the Quarterly Update notes third-party attestation, which is required where Section 6(a) provides.

5. Resolution Events

(a) Redemption. Beginning with the first quarter after the position’s month 60, the Holder may submit, at least 10 days before the quarter closes, a standing redemption request for all or part of the position. The Company may open the queue earlier, beginning with the first quarter after the position’s month 36, by an irrevocable notice issued with any Quarterly Update; early opening creates no payment obligation. Standing requests persist across quarters until filled or withdrawn. At settlement, the Declared Budget is applied pro rata across all standing requested amounts, valued at the Unreturned Purchase Amount times the Multiple. Partial fills carry forward automatically. Each payment reduces the Unreturned Purchase Amount proportionally, and redeemed amounts are permanently extinguished. Positions held by officers, directors, or holders of 10% or more of the Company’s equity participate on identical pro rata terms and are flagged in the Quarterly Update.

(b) Conversion. Beginning with the first quarter after the position’s month 36, the Holder may elect, at least 10 days before the quarter closes, to convert up to 1/8 of the original position per quarter. The amount converting equals the elected portion of the Unreturned Purchase Amount times the Multiple. The conversion price is Ledger Base per fully diluted share of common stock, from the most recent reported Ledger Base, computed under the Reporting Standard. The Company issues the converted amount divided by that price in shares of common stock (or, for an entity not organized as a stock corporation, the equivalent ownership units carrying the same economic rights, with governance as provided by that entity’s organizing documents). Conversion never produces preferred stock, liquidation preference, or special voting or blocking rights beyond those of common-equivalent ownership. Conversion reduces the Unreturned Purchase Amount proportionally, and the claim on the converted amount is extinguished.

Conversion at the Ledger Base price is suspended for any quarter in which converting the position’s full remaining claim (the Unreturned Purchase Amount times the Multiple) would issue shares carrying more than 25% of the Company’s fully diluted equity (the dilution cap, the Reporting Standard’s max_conversion_ownership). Because the conversion price is Ledger Base per fully diluted share, that condition is equivalent to Ledger Base per fully diluted share standing at or below the floor the cap implies for the full remaining claim, and it also covers any quarter in which Ledger Base is zero or negative. During a suspension the Multiple continues to accrue and the redemption path under Section 5(a) is unaffected; a suspended conversion election may be made again in a later quarter.

(c) Buyback. In any quarter for which the Company has issued a conforming Quarterly Update, the Company may issue, with that Update, a “Buyout Notice” for all or part of any outstanding positions at the Unreturned Purchase Amount times the Multiple. Each noticed Holder may, at least 10 days before the quarter closes, elect to convert all or part of the noticed amount under Section 5(b) instead of accepting cash, without regard to the per-quarter fraction. Partial Buyout Notices apply pro rata across all positions of the class. Budget released by such conversion elections is reallocated pro rata to remaining noticed positions in the same quarter, and any residue carries to the next quarter. Settled amounts are permanently extinguished.

(d) Qualified Financing and priced-round resolution.

(i) Round-price conversion, available on any priced round. Upon the closing of any bona fide priced equity round of the Company, the Holder may elect, by the next quarter’s election date, to convert the entire position, without regard to the per-quarter fraction in Section 5(b), into common stock (or, for an entity not organized as a stock corporation, the equivalent ownership units described in Section 5(b)) at the round’s effective price per share of common stock, less a 20% discount. The dilution cap in Section 5(b) is defined against the Ledger Base conversion price and does not apply to this round-price conversion.

(ii) Cash election, available only on a Qualified Financing. A “Qualified Financing” is a bona fide priced equity financing of the Company whose proceeds, aggregated with the proceeds of other bona fide priced equity financings of the Company closing in the trailing four quarters, are at least 1.0 times the aggregate claims then outstanding under this form (the sum across the class of each position’s Unreturned Purchase Amount times its Multiple), the aggregate claims measured excluding positions held by affiliates of the Company and positions issued within six months before the financing. Upon the closing of a Qualified Financing, the Holder may instead elect, by the next quarter’s election date, redemption of the position at the Unreturned Purchase Amount times the Multiple, funded from the proceeds. The cash election arises only when a financing clears this fundability bar.

(iii) Change of control. A change of control, a sale of substantially all of the Company’s assets, or a merger, in any form including a debt-funded transaction, gives the Holder the cash election in Section 5(d)(ii) only, at the Unreturned Purchase Amount times the Multiple, funded from the proceeds or consideration, with no round-price conversion under Section 5(d)(i), because a non-equity event has no per-share price. [FOR COUNSEL: Adrian to word the precise definition of change of control, sale of substantially all assets, and merger for this subsection.]

(iv) Substance over form. A transaction or series of transactions undertaken with the purpose or effect of recapitalizing the Company while avoiding the triggers in this Section 5(d) is treated as a Qualified Financing for purposes of the cash election in Section 5(d)(ii). [FOR COUNSEL: Adrian to word the precise anti-avoidance standard.]

(v) Section 6(e) applies to Graduated Positions.

6. Graduated Positions

(a) Creation. A position under this instrument may be created by novation of a prior instrument (a “Graduated Position”) only if, as of the novation: (i) the Company has issued 4 consecutive conforming Quarterly Updates, each showing positive Expected Capacity and each carrying third-party attestation of Ledger Base; (ii) the graduation offer was extended to all holders of the same prior instrument class on identical terms and remained open for 2 consecutive quarters; and (iii) the graduation documents disclose what conversion economics the prior instrument surrenders and what Section 5(d) provides in their place.

(b) Entry value and clock. A Graduated Position’s “Entry Value” equals the unreturned claim value of the prior instrument under its own terms as of the novation. The position’s month for Schedule purposes is set as follows: for prior instruments that grew in value over time, the clock runs from the earliest funding under the prior instrument, weighted by funding dates if there was more than one, and no extension, amendment, or restatement of the prior instrument ever resets it; for prior instruments that did not grow in value over time, the clock runs from the novation. The position enters so that the Unreturned Purchase Amount times the Multiple at entry equals the Entry Value, and for all purposes of this instrument the Unreturned Purchase Amount of a Graduated Position is read to produce that result, except that the dissolution claim in Section 7(b)(i) is the Entry Value as reduced by later redemptions and conversions.

(c) Clean entry. All side letters, information rights, and ancillary rights attached to the prior instrument extinguish at novation. Any equity component of the prior instrument is untouched by the novation, persists per its own terms, and sits entirely outside the claim under this instrument.

(d) Rights at entry. A Graduated Position holds the rights of its entry month under Sections 5(a) and 5(c).

(e) Lookback. If a Qualified Financing or a change-of-control event (as described in Section 5(d)(iii)) closes within 4 quarters after a Graduated Position’s novation, that position’s settlement under Section 5(d) is capped at its Entry Value as then reduced.

7. Covenants and Dissolution

(a) Distribution Priority. While any position under this instrument is outstanding, the Company shall not pay dividends, make distributions in respect of equity, or repurchase equity (other than repurchases from departing service providers at cost) unless, in the same quarter, standing redemption requests are settled under Section 5(a) at least pro rata with the proposed distribution or repurchase.

(b) Dissolution. (i) Upon a dissolution or winding up in which the Company’s assets are insufficient to satisfy its liabilities, the Holder’s claim equals the Unreturned Purchase Amount (for a Graduated Position, the Entry Value as then reduced), pari passu with all other positions under this form, senior to all equity of the Company, and junior to the Company’s indebtedness and statutory claims. (ii) Upon a dissolution or winding up elected while the Company is solvent, each outstanding position settles from net proceeds at the Unreturned Purchase Amount times the Multiple before any distribution in respect of equity.

(c) Filings. The Company shall make all filings required in connection with the issuance of this instrument, including a Form D where applicable.

8. Representations and Miscellaneous

(a) This instrument and any shares issued upon conversion have not been registered under the Securities Act of 1933 and may not be transferred except in compliance with applicable securities laws and with notice to the Company.

(b) The Holder represents that it is an accredited investor and is acquiring this instrument for its own account for investment.

(c) Amendment. This instrument may be amended only in a writing signed by the Company and the Holder; no amendment may create personal recourse contrary to Section 1(d) or be conditioned on any holder’s graduation, redemption, or conversion decision.

(d) The name. This form may be used and adapted under its open license; modified terms may not be designated “SAFR,” and conforming use of the name requires the unmodified canonical terms on a conforming Feed pinned to a published Reporting Standard version.

(e) Governing law. This instrument is governed by the laws of the State of [Delaware], without regard to conflicts of law principles.

(f) Notices. Notices are delivered through the Reporting Standard’s notice mechanism or in writing to the addresses on the signature page.

(g) Severability, entire agreement, and counterparts provisions apply; this instrument and its pinned Reporting Standard are the entire agreement of the parties with respect to its subject matter.

Signatures

The Company: [____________________]

By: ______________________ Name: ______________ Title: ______________

The Holder: [____________________]

By: ______________________ Name: ______________ Title: ______________

Schedule A: Graduated Position Particulars (if applicable)

Prior instrument: [] Original funding date(s): [] Unreturned claim value at novation (Entry Value): $[] Entry month: [] Multiple at entry: [] Equity component of prior instrument (untouched, persists per its own terms): [********] Disclosure of conversion economics surrendered and replaced: [________]

Form Notice

This is an open canonical form, version 0.06, provided without warranty and without legal advice; parties should consult their own counsel. The form is free to use under its open license. The SAFR™ name is reserved for unmodified canonical terms maintained on a conforming Feed pinned to a published Reporting Standard version. The pinned Reporting Standard, identified by version and content hash above, controls all calculations.