Future Equity Security Agreement

• Secured Party (Investor/Lender):
  [Investor/Lender’s Name], a [business entity type] organized and existing under the laws of the state of [State], with its principal place of business located at [Investor/Lender’s Address].

• Debtor (Company/Issuer):
  [Company’s Name], a [business entity type] organized and existing under the laws of the state of [State], with its principal place of business located at [Company’s Address].

Both parties, having the legal capacity to enter into this Agreement, agree as follows:

1. Purpose and Scope

1.1. The purpose of this Agreement is to secure the future issuance of equity in the Debtor’s company in exchange for financial support provided by the Secured Party.

1.2. The Secured Party agrees to provide capital to the Debtor, and in return, the Debtor grants the Secured Party a security interest in future equity, convertible securities, or other ownership rights under specified conditions.

1.3. This Agreement serves as a legally binding commitment ensuring the Secured Party receives shares, stock, or equity interests in the Company at a future date upon the occurrence of certain conditions.

2. Grant of Security Interest

2.1. Equity Interest as Collateral – The Debtor grants the Secured Party a security interest in the following (“Collateral”) to secure repayment and obligations under this Agreement:

• Future issuance of preferred or common stock, convertible notes, SAFE (Simple Agreement for Future Equity), or other equity interests.
• Equity interests in the event of a financing round, liquidity event, or default.

2.2. Secured Obligations – The security interest is granted to secure:

• All amounts owed under this Agreement, including principal, interest, or future consideration.
• Any rights to participate in future funding rounds or ownership dilution protection.
• Other contractual obligations outlined in a promissory note, convertible debt, or SAFE agreement.

2.3. Perfection of Security Interest – The Secured Party is authorized to file a UCC-1 Financing Statement, execute an equity pledge, and take other necessary legal steps to perfect its interest in the future equity securities of the Company.

3. Representations and Warranties

3.1. The Debtor represents and warrants that:

• It has the legal authority to grant a security interest in future equity and issue stock or convertible instruments.
• No prior agreements prevent the Secured Party from obtaining future equity.
• Any shares issued under this Agreement will be legally valid, fully paid, and non-assessable.
• The execution of this Agreement does not violate any other contractual or regulatory obligations.

3.2. The Secured Party represents and warrants that:

• It has the necessary authority to invest in the Company’s future equity.
• It understands the potential risks associated with investing in an early-stage or growth-stage company.
• It acknowledges that future equity conversion is subject to applicable securities laws and corporate governance provisions.

4. Future Equity Conversion Events

4.1. Triggering Events – The future equity security interest shall convert into shares or stock ownership upon the occurrence of any of the following:

• A qualified financing round, where the Company raises a minimum amount of capital.
• A liquidity event, including acquisition, merger, or initial public offering (IPO).
• A default event, where the Company fails to fulfill financial obligations under this Agreement.
• A maturity date, if applicable under a convertible note or similar agreement.

4.2. Conversion Terms – Upon a triggering event:

• The Secured Party shall receive equity at a valuation agreed upon in this Agreement or based on the terms of future financing rounds.
• The conversion price shall be [describe pricing mechanism, such as a discount to future valuation or a fixed share price].
• The Secured Party retains anti-dilution rights to prevent excessive dilution of its ownership stake.

5. Covenants of the Debtor (Company)

5.1. The Debtor agrees to:

• Maintain corporate records and ensure compliance with applicable securities regulations.
• Provide the Secured Party with periodic financial reports and updates on equity issuance.
• Not grant conflicting security interests or pledges over the same future equity.
• Notify the Secured Party of any material events that could impact future equity issuance.

6. Default and Remedies

6.1. Events of Default – The Debtor shall be in default if:

• It fails to issue the agreed-upon equity upon a triggering event.
• It becomes insolvent or files for bankruptcy.
• It attempts to sell or transfer a significant portion of its assets without consent.
• It breaches any terms of this Agreement.

6.2. Remedies Upon Default – If default occurs, the Secured Party may:

• Claim immediate equity ownership in the Company based on agreed terms.
• Demand repayment of the investment, plus applicable interest or penalties.
• Take legal action to enforce the security interest and prevent improper asset transfers.

7. Regulatory Compliance

7.1. Both parties acknowledge that issuance of equity securities must comply with applicable securities laws, including:

• U.S. Securities and Exchange Commission (SEC) rules.
• State securities regulations.
• Company bylaws, shareholder agreements, and board approval requirements.

7.2. Any modifications required for legal compliance shall be made in good faith between the parties.

8. Governing Law and Dispute Resolution

8.1. Governing Law – This Agreement shall be governed by and construed in accordance with the laws of the state of [State].

8.2. Dispute Resolution – Any disputes shall be resolved through:

• Negotiation between the parties.
• Binding arbitration in [City, State], under the rules of the American Arbitration Association (AAA).
• Litigation in the courts of [State], if arbitration is unsuccessful.

9. Miscellaneous Provisions

9.1. Amendments – Any modifications to this Agreement must be in writing and signed by both parties.

9.2. Severability – If any provision of this Agreement is deemed invalid, the remaining provisions shall remain in full force and effect.

9.3. Waiver – Failure to enforce any provision shall not constitute a waiver of future enforcement rights.

9.4. Entire Agreement – This Agreement constitutes the complete understanding between the parties and supersedes all prior agreements regarding future equity security interests.

10. Notices

All notices under this Agreement shall be in writing and sent to the following addresses via certified mail, email, or in person:

• Secured Party:
  [Investor/Lender’s Name]
  [Investor/Lender’s Address]
  [Email Address]

• Debtor (Company):[Company’s Name]
  [Company’s Address]
  [Email Address]

11. Signatures

IN WITNESS WHEREOF, the parties have executed this Future Equity Security Agreement as of the date first written above.

Secured Party (Investor/Lender):
By: ___________________________
Title: __________________________
Date: __________________________

Debtor (Company):
By: ___________________________
Title: __________________________
Date: __________________________