Free Cafe Investment Contract

I. Introduction

A. Purpose of the Agreement

This Cafe Investment Contract (the "Agreement") is entered into as of [Date], by and between [Second Party] (the "Investor") and [Your Company Name], a [State] corporation (the "Company"). The purpose of this Agreement is to outline the terms and conditions under which the Investor will provide capital to the Company to support its growth and operational needs. The investment is intended to help the Company expand its operations, improve its facilities, and enhance its product offerings. This Agreement aims to protect the interests of both parties while fostering a mutually beneficial relationship.

B. Parties Involved

1. Investor: [Second Party], residing at [Second Party Address], is a seasoned angel investor with a background in the food and beverage industry.

2. Company: [Your Company Name], located at [Your Company Address], is a [State] corporation specializing in providing artisanal coffee and gourmet pastries in a community-focused environment. The Company is managed by [Founder's Name], who has [0] years of experience in the hospitality industry. Together, the parties aim to leverage this investment to achieve significant business milestones.

II. Definitions

A. Key Terms

1. Investment: The amount of capital provided by the Investor to the Company under the terms set forth in this Agreement, specifically aimed at funding the opening of a new location and marketing initiatives.

2. Conversion: The process by which the Investment converts into equity in the Company, occurring upon specified events such as a Qualified Financing or Liquidity Event.

3. Equity: Ownership interest in the Company that will be allocated to the Investor upon conversion, reflecting a proportional share of the Company's ownership.

4. Valuation Cap: The maximum pre-money valuation at which the Investment will convert into equity, ensuring the Investor receives a fair percentage of ownership regardless of future valuations.

5. Discount Rate: A percentage reduction applied to the valuation at which the Investment converts into equity, typically providing the Investor with a more favorable conversion rate compared to future investors.

6. Liquidity Event: An event such as a sale, merger, or initial public offering (IPO) of the Company that allows investors to realize returns on their investments.

III. Investment Details

A. Amount of Investment

The Investor agrees to invest $[00] (the "Investment Amount") in the Company, which will be transferred to the Company’s bank account within [0] days of signing this Agreement. This capital infusion is expected to significantly enhance the Company’s ability to scale its operations and meet strategic objectives. The Company will issue a receipt to the Investor confirming the transfer of funds and acknowledging the terms of this investment. The Investment Amount will be used exclusively for the purposes outlined in this Agreement and accompanying business plan.

B. Type of Investment

The Investment Amount will be provided in the form of a SAFE (Simple Agreement for Future Equity), which is designed to convert into equity at a future date upon the occurrence of certain events. This structure allows the Company to delay formal valuation until a more substantial funding round or significant milestone is achieved. The SAFE agreement ensures that the Investor receives equity in the Company without the immediate complexities and costs associated with issuing traditional equity. By choosing this investment vehicle, both parties aim to simplify the investment process and reduce administrative overhead.

IV. Conversion Terms

A. Conversion Trigger Events

1. Qualified Financing: The Investment will automatically convert into equity upon the Company’s next equity financing round of at least $[00]. This ensures that the Investor becomes a shareholder when the Company raises substantial capital from additional investors.

2. Liquidity Event: In the event of a Liquidity Event, such as a sale, merger, or IPO, the Investment will convert into equity or cash equivalent, allowing the Investor to realize returns. The specific terms of this conversion will be detailed to ensure fairness and clarity for both parties.

3. Maturity Date: If no Qualified Financing or Liquidity Event occurs within [00 days], the Investment will convert into equity on the maturity date at the agreed-upon terms. This provides a long-term commitment to the Investor while allowing the Company adequate time to achieve significant milestones.

4. Optional Conversion: The Investor may have the option to convert the Investment into equity at any time upon mutual agreement with the Company, offering flexibility to both parties.

B. Conversion Mechanics

1. Conversion into Equity: The Investment will convert into the most senior class of equity issued in the next Qualified Financing, ensuring the Investor receives the same terms as future investors. This seniority provides the Investor with additional protections and potential benefits associated with the Company’s future success.

2. Conversion Rate: The number of shares to be issued will be calculated based on the Investment Amount divided by the conversion price, which takes into account the valuation cap and discount rate. This calculation ensures a fair and transparent conversion process.

3. Valuation Cap: The Investment will convert at a valuation cap of $[00], which limits the maximum valuation for conversion purposes, providing the Investor with a favorable conversion rate. This cap is designed to reward the Investor for taking early-stage risks.

4. Discount Rate: The Investment will convert at a discount rate of [00]%, offering the Investor a reduced price per share compared to new investors in the next financing round. This discount compensates the Investor for the additional risk associated with early-stage investment.

V. Investor Rights

A. Information Rights

The Investor will have the right to receive quarterly financial statements and an annual report from the Company, including detailed updates on financial performance, strategic initiatives, and key operational metrics. These reports will provide transparency and enable the Investor to monitor the Company’s progress and financial health. Additionally, the Company will provide access to its financial records and other pertinent documents upon reasonable request by the Investor. This level of access is intended to foster trust and ensure that the Investor is well-informed about the Company’s activities.

B. Voting Rights

The Investment does not confer any voting rights until it converts into equity, ensuring that the Company’s management retains decision-making control during the early stages. Upon conversion, the Investor will receive voting rights proportional to their equity stake, allowing them to participate in significant company decisions. This structure balances the need for management autonomy with the Investor’s right to influence the Company’s direction once they become a shareholder. The specifics of these voting rights will be aligned with the terms of the equity class issued during conversion.

C. Participation Rights in Future Rounds

The Investor will have the right to participate in future financing rounds, subject to standard terms and conditions, enabling them to maintain their ownership percentage and support the Company’s growth. This right ensures that the Investor can continue to invest in the Company under favorable terms and avoid dilution. Participation rights will be offered on the same terms as those extended to new investors in subsequent rounds. This provision demonstrates the Company’s commitment to building a long-term partnership with the Investor.

D. Transferability of Investment

The Investor may not transfer the Investment without the prior written consent of the Company, ensuring that the Company retains control over its ownership structure. Any unauthorized transfer will be considered null and void. The Company may, however, allow transfers under specific conditions, such as to affiliates or for estate planning purposes. This clause is designed to protect the integrity and stability of the Company’s shareholder base.

VI. Representations and Warranties

A. By the Company

1. Authority and Power: The Company has the full power and authority to enter into this Agreement and perform its obligations hereunder. All necessary corporate actions have been taken to authorize the execution and delivery of this Agreement. The execution and performance of this Agreement do not violate any applicable laws or regulations. The Company is duly organized, validly existing, and in good standing under the laws of [State].

2. Financial Statements: The Company has provided accurate and complete financial statements to the Investor. These financial statements fairly present the financial condition of the Company as of their respective dates. There have been no material adverse changes in the Company's financial condition since the date of the most recent financial statements. The Company maintains accurate books and records in accordance with generally accepted accounting principles (GAAP).

3. Compliance with Laws: The Company is in compliance with all applicable federal, state, and local laws, regulations, and ordinances. The Company holds all necessary licenses, permits, and approvals required for the operation of its business. There are no pending or threatened legal actions, claims, or proceedings against the Company. The Company has filed all required tax returns and has paid all applicable taxes.

4. Intellectual Property: The Company owns or has the right to use all intellectual property necessary for the conduct of its business. There are no claims or proceedings pending or threatened against the Company regarding its intellectual property rights. The Company's intellectual property does not infringe upon the intellectual property rights of any third party. The Company has taken reasonable measures to protect its intellectual property.

B. By the Investor

1. Investment Intent: The Investor is investing for their own account, not with a view to distribution or resale, and has no present intention of selling or distributing the Investment. The Investor acknowledges that the Investment has not been registered under federal or state securities laws and must be held indefinitely unless it is subsequently registered or an exemption from registration becomes available. The Investor understands the speculative nature of the investment and the potential for a complete loss of capital. The Investor has the financial capability to sustain a complete loss of the Investment.

2. Accredited Investor Status: The Investor is an accredited investor as defined by applicable securities laws. The Investor has provided documentation or other evidence of their accredited status as requested by the Company. The Investor acknowledges that the Company is relying on their representation of accredited status to comply with applicable securities laws. The Investor will promptly notify the Company if they cease to be an accredited investor at any time before the conversion of the Investment.

3. Knowledge and Experience: The Investor has sufficient knowledge and experience in financial and business matters to evaluate the risks and merits of this investment. The Investor has conducted their own due diligence and analysis of the Company and its prospects. The Investor has had the opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the Investment. The Investor acknowledges that they have not relied on any representations or warranties from the Company or its representatives other than those expressly set forth in this Agreement.

4. Legal Compliance: The Investor's execution and delivery of this Agreement and the performance of their obligations do not and will not violate any applicable laws or regulations. The Investor has obtained all necessary consents and approvals to enter into this Agreement. The Investor is not subject to any legal or regulatory restrictions that would prevent them from making the Investment. The Investor agrees to comply with all applicable securities laws and regulations in connection with the Investment.

VII. Covenants

A. Company Covenants

1. Use of Proceeds: The Company will use the Investment Amount for the specific purposes outlined in this Agreement and accompanying business plan, including opening a new location, purchasing equipment, and marketing initiatives. The Company will not use the proceeds for any purpose not disclosed to the Investor without the Investor's prior written consent. The Company will maintain records of how the proceeds are used and provide these records to the Investor upon request. The use of proceeds will align with the Company's strategic goals and business plan.

2. Conduct of Business: The Company will conduct its business in a lawful and proper manner, maintaining its good standing in all jurisdictions where it operates. The Company will adhere to best practices in its industry and uphold high standards of customer service and product quality. The Company will make reasonable efforts to protect its assets, including intellectual property, and to maintain a positive reputation in the market. The Company will promptly inform the Investor of any material changes in its business operations or financial condition.

3. Reporting Obligations: The Company will provide the Investor with quarterly financial statements, including balance sheets, income statements, and cash flow statements. The Company will also provide an annual report summarizing the Company's performance and key achievements over the past year. In addition, the Company will notify the Investor of any significant events, such as major contracts, partnerships, or regulatory changes, that may impact the business. The Company will ensure that all reports and notifications are accurate, complete, and delivered in a timely manner.

4. Maintain Insurance: The Company will maintain adequate insurance coverage for its business operations, including property, liability, and workers' compensation insurance. The Company will ensure that its insurance policies are kept in force and that premiums are paid on time. The Company will provide the Investor with proof of insurance upon request. The Company will promptly notify the Investor of any material changes to its insurance coverage.

B. Investor Covenants

1. Non-Disparagement: The Investor agrees not to disparage the Company, its management, or its products and services in any public or private communications. This covenant extends to all forms of communication, including social media, online reviews, and conversations with third parties. The Investor will support the Company’s reputation and brand image to the best of their ability. This provision is intended to foster a positive and constructive relationship between the Investor and the Company.

2. Confidentiality: The Investor agrees to maintain the confidentiality of non-public information received from the Company. This includes financial data, business plans, customer information, and other proprietary information. The Investor will not disclose such information to any third party without the Company’s prior written consent. This obligation will survive the termination of this Agreement and will continue for as long as the information remains confidential.

3. Compliance with Securities Laws: The Investor will comply with all applicable securities laws and regulations in connection with the Investment. The Investor will not engage in any transactions or activities that would violate these laws or regulations. The Investor will promptly provide the Company with any information required to comply with reporting obligations under securities laws. This includes providing information for filings with the Securities and Exchange Commission (SEC) or other regulatory bodies.

4. Support for the Company: The Investor agrees to support the Company’s efforts to achieve its business objectives. This may include providing introductions to potential customers, partners, or additional investors. The Investor will make reasonable efforts to assist the Company in its growth and development. This provision is intended to leverage the Investor's network and expertise for the benefit of the Company.

VIII. Termination

A. Termination Events

1. By Mutual Agreement: This Agreement may be terminated at any time by mutual written consent of both parties. Termination by mutual agreement will result in the immediate cessation of all obligations under this Agreement, except as otherwise provided herein. The parties will cooperate to ensure an orderly wind-down of their relationship. Any funds already invested will be subject to the terms of this Agreement regarding repayment or conversion.

2. By Breach of Contract: Either party may terminate this Agreement upon a material breach by the other party, provided the breach is not cured within [00] days of receiving written notice of the breach. A material breach includes, but is not limited to, failure to perform any significant obligation under this Agreement. Upon termination for breach, the non-breaching party may pursue any legal remedies available. The breaching party will be liable for any damages resulting from the breach.

3. By Insolvency: Either party may terminate this Agreement if the other party becomes insolvent, files for bankruptcy, or is placed under receivership. Termination under this provision will be effective immediately upon written notice to the insolvent party. The terminating party will have the right to recover any damages resulting from the insolvency. The parties will cooperate to minimize any adverse effects of the insolvency on the ongoing business operations.

4. By Change of Control: The Company may terminate this Agreement upon a change of control, such as a merger or acquisition, with [00] days' prior written notice to the Investor. The Investor will have the right to convert the Investment into equity or receive a cash equivalent before the termination becomes effective. This provision ensures that the Investor's interests are protected in the event of a significant corporate transaction. The Company will provide the Investor with all relevant information regarding the change of control.

B. Effects of Termination

1. Repayment Obligations: Upon termination, the Company may be required to repay the Investment Amount, subject to the terms of this Agreement. If the termination occurs due to a breach by the Company, the repayment amount may include additional damages. If the termination occurs due to a change of control, the repayment amount will be determined based on the terms of the change of control event. The Company will provide the Investor with a detailed repayment schedule.

2. Survival of Certain Provisions: Provisions relating to confidentiality, dispute resolution, and other obligations will survive termination and remain in effect. These provisions will continue to bind the parties for the duration specified in the respective clauses. The surviving provisions ensure ongoing protection of the parties' interests. The parties agree to honor these obligations even after the termination of this Agreement.

3. Return of Confidential Information: Upon termination, the Investor agrees to return or destroy all confidential information received from the Company. The Investor will certify in writing that all confidential information has been returned or destroyed. This provision ensures the continued protection of the Company’s proprietary information. The Investor’s confidentiality obligations will continue to apply to any retained information.

4. Final Accounting: The Company will provide the Investor with a final accounting of the Investment Amount, including a detailed report on the use of proceeds and any remaining funds. The final accounting will be delivered within [00] days of termination. The Investor has the right to audit the Company’s records to verify the accuracy of the final accounting. This provision ensures transparency and accountability in the handling of the Investment Amount.

IX. Miscellaneous

A. Governing Law

This Agreement will be governed by and construed in accordance with the laws of the State of [State], without regard to its conflict of law principles. Any disputes arising from this Agreement will be resolved in the courts located in [State]. The parties consent to the jurisdiction and venue of these courts. This provision ensures that any legal proceedings are conducted in a predictable and consistent legal environment.

B. Dispute Resolution

1. Mediation: The parties agree to first attempt to resolve any disputes through mediation. A neutral third-party mediator will be selected by mutual agreement. Mediation sessions will be confidential and conducted in good faith. The costs of mediation will be shared equally by the parties.

2. Arbitration: If mediation fails, disputes will be resolved by binding arbitration in [Location]. The arbitration will be conducted under the rules of [Arbitration Organization], and the arbitrator's decision will be final and binding. The costs of arbitration will be borne by the losing party unless otherwise determined by the arbitrator. This provision ensures a fair and efficient resolution of disputes.

3. Exclusions: The requirement for mediation and arbitration does not apply to claims for injunctive relief or specific performance. These claims may be brought directly in a court of competent jurisdiction. This provision allows for immediate legal remedies in cases where time is of the essence. The parties agree that any such court proceedings will be limited to the specific relief sought.

4. Attorney's Fees: In any dispute arising from this Agreement, the prevailing party will be entitled to recover its reasonable attorney's fees and costs. This provision incentivizes fair dealing and discourages frivolous litigation. The amount of attorney's fees will be determined by the court or arbitrator. This provision applies to all stages of dispute resolution, including appeals.

C. Entire Agreement

This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter hereof. Any amendments or modifications to this Agreement must be in writing and signed by both parties. This provision ensures that the Agreement reflects the complete understanding of the parties. The parties acknowledge that they have not relied on any representations or warranties not expressly set forth in this Agreement.

D. Amendments and Waivers

No amendment or waiver of any provision of this Agreement will be effective unless in writing and signed by both parties. A waiver of any term or condition of this Agreement will not be construed as a waiver of any subsequent breach or default. This provision ensures that any changes to the Agreement are mutually agreed upon and documented. The parties agree that any such amendments or waivers will be limited to the specific terms and conditions stated.

E. Notices

Notices required under this Agreement will be in writing and sent to the respective addresses of the parties as set forth in this Agreement. Notices may be delivered by hand, by certified mail, return receipt requested, or by a nationally recognized overnight courier service. Notices will be deemed given when received. The parties agree to promptly notify each other of any changes to their contact information.

F. Severability

If any provision of this Agreement is found to be invalid or unenforceable, the remaining provisions will continue in full force and effect. The invalid or unenforceable provision will be reformed to reflect the original intent of the parties as closely as possible. This provision ensures that the Agreement remains functional and enforceable. The parties agree to cooperate in any such reformation efforts.

X. Signatures

Before signing below, the parties acknowledge that they have read and understood this Agreement in its entirety, including all terms and conditions, representations, and warranties. By signing below, the parties agree to be bound by the terms of this Agreement and to fulfill all obligations outlined herein.

[Your Name]

[Your Job Title]

[Your Company Name]

[Date]

[Name]

[Second Party]

[Date]

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