Investment Contract Template

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An investment agreement is a customizable document outlining essential terms and conditions of the investment, such as the amount of money invested, the anticipated return, and any restrictions. The investor agrees to provide financial support to the company, hoping to make a financial profit in the future. Create your investment agreement template on Loio and download a ready-made PDF document in minutes.
INVESTMENT AGREEMENT

This Investment Agreement (hereinafter referred to as the "Agreement") is entered into on   (the "Effective Date") by and between  , a company incorporated under the laws of the State of  , having its registered place of business at  , duly represented by   (the "Company"), and

 , an individual having their usual place of living at   (the "Investor"), collectively referred to as the "Parties" and individually as the "Party".

WHEREAS the Company was formed with the objective of developing, commercializing, and operating the identified business concept, including any subsequent iteration of the business concept developed by the Company, and the Company is engaged in the business of   (the "Business");

WHEREAS the Company has determined that it needs additional capital to finance its Business and has decided to offer and issue shares to fundraise from the Investor, as may be applicable;

WHEREAS the Investor is interested in making the investment in the Company (the "Investment") and has agreed to subscribe for a specific number of Company shares subject to terms and conditions set forth in this Agreement to facilitate the Business;

WHEREAS the Parties intend this Agreement to be a legally binding arrangement between them, and each Party acknowledges that it has had the opportunity to review the terms of this Agreement and to seek legal counsel's advice before entering into this Agreement;

NOW, THEREFORE, in consideration of the mutual promises and obligations set forth herein, and upon other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties have agreed as follows:

SUBJECT MATTER. The Investor agrees to subscribe for the shares of the Company, and the Company agrees to issue and deliver to the Investor   of common shares in the Company with a nominal value of   per share (the "Shares") for the total subscription price of   (the "Purchase Price").

Commencing on the Effective Date of this Agreement, the Parties agree to undertake any necessary action and execute, acknowledge, and deliver any additional documents reasonably requested by the other Party to fulfill the purposes of this Agreement effectively.

If, at any point in the future, the Company proposes to sell and issue any equity securities, such as the Shares of the Company, in a single transaction or series of related transactions, resulting in gross proceeds to the Company of at least   (the "Qualified Financing"), the Company shall deliver the written notice to the Investor. This notice shall include the genuine intention of the Company to offer such Shares, the amount and type of Shares to be offered, and the price and terms upon which it proposes to offer these securities. Upon receiving such notice, the Investor shall be entitled to exercise any applicable rights specified in this Agreement.

PAYMENT TERMS AND PROCEDURE. The Investor undertakes to pay the Company the Purchase Price owed under this Agreement within   days (the "Due Date") after the Effective Date.

Payment method. The Investor shall pay the Company for the Shares by cash.

DISTRIBUTION AND FINANCIAL ISSUES

  • Determination of net profit and loss. Net profit and loss for each fiscal year of the Company shall be determined after all necessary adjustments, including depreciation, amortization, and taxes.

  • Distribution of net profit. The Company shall annually distribute net earnings exceeding   to the Investor, proportionate to the number of Shares held by the Investor. The Investor concurs with the possibility of temporary halts or delays in distributions if the Company requires retaining income to sustain a robust and favorable financial state. In such cases, any profit distribution shall occur within   days after determining the net profit for the relevant fiscal year. Such distribution shall be made proportionally to the Investors' ownership of the Shares.

  • No payment in case of default. The Company shall not make any payments to the Investor in the event of default of any obligation to the Company until such default has been resolved. Any distributions owed to the Investor shall be withheld by the Company until the resolution of the default or until the Company becomes legally obligated to pay the amount to a third party.
  • Withholding taxes. The Company may withhold taxes from any distribution to the Investor as required by law.

DISSOLUTION

  • Restrictions on voluntary dissolution. The Company may only be dissolved at its discretion by the action of the investors holding at least   of the outstanding Shares entitled to vote. Such dissolution shall be effected in accordance with the provisions of the statutory document of the Company and applicable law.
  • Procedures upon dissolution. In the event of dissolution, the Company shall cease to exist except as may be necessary to wind up its affairs. The   shall be responsible for the winding up of the affairs of the Company.
  • Distribution of assets upon liquidation. Upon the winding up of the Company, its assets shall be distributed under applicable law or statutory documents of the Company. In the event of the dissolution of the Company before the termination of this Agreement, the Company shall reimburse the Investor an amount equivalent to the initial Purchase Price paid by the Investor to the Company. The Investor will be entitled to  % of the increased fair market value of the Company, correlating to the current shareholding of the Investor in the Company. However, the Investor shall not be eligible for payments derived from the physical assets of the Company.
RESTRICTIONS ON TRANSFERS AND PERMITTED TRANSFERS
  • Transfer of the Business. The Company agrees not to sell, assign, transfer, or convey any business assets, interest, or opportunities that are owned, held by, or owed to the Company, which are essential for the operation of the Business or materially contribute to the value of the Company, without obtaining prior written consent from the Investor.
  • Transfer restrictions. The Investor may not sell, transfer, pledge, encumber, or dispose of any Shares or any interest therein except in accordance with the terms of this Agreement. Any attempt to transfer that violates this Agreement shall be considered null and void and have no legal effect.
  • Permitted transfers. Notwithstanding the above, the Investor may transfer the Shares to the Investor's affiliates or subsidiaries, provided that they agree in writing to comply with the terms of this Agreement. The Shares may also be transferred to a trust for the benefit of the Investor or the Investor's immediate family, provided that such trust agrees in writing to abide by the conditions of this Agreement. Furthermore, the Investor may transfer the Shares to a successor of the Investor, provided that such successor consents in writing to comply with the terms of this Agreement or transfer the Shares to any other person who receives written authorization for the transfer. 
  • Priority right. If any shareholder intends to sell, transfer, or otherwise dispose of any Shares in the Company, they shall first tender such Shares to the Company and then to the other shareholders in proportion to their respective holdings of the Shares. The Company or the other shareholders shall have   days from the date of such offer to accept or reject the offer. If the Company or any other shareholders reject the offer, the Investor may sell such shares to a third party, provided that such sale complies with the terms of this Agreement.
  • Right to participate. The Investor shall have the right to participate in the Qualified Financing at the price and on the same terms and conditions specified in the notice in an amount equaling not less than 10% of the aggregate number of the Shares to be offered and sold.
  • Right of first offer (ROFO). The Investor shall have the first right to purchase all the Shares to be offered and sold in the Qualified Financing at the price and under the same terms and conditions specified in the notice.
NON-COMPETITION AND CONFIDENTIALITY
  • Non-competition. During the term of this Agreement and for a period of   following the termination of this Agreement, the Investor agrees not to directly or indirectly engage in any business that is competitive with the Business of the Company, whether as a sole proprietor, partner, member, shareholder, employee, consultant or otherwise. This provision shall apply whether or not the Investor owns the Shares of the Company.
  • Confidentiality. The Parties agree to keep all information disclosed during the validity term of this Agreement confidential and not to share such information with any third party unless required by law. "Confidential information" refers to any data utilized by the Company in the creation of trade secrets. This encompasses a variety of materials, such as documents, reports, programs, data, models, designs, financial plans, procedures, software, formulas, patents, patent applications, and general expertise, regardless of whether it was shared verbally, electronically, or in written form. "Trade secrets" are defined as proprietary information developed by the Company that possesses intrinsic economic value due to its unknown status to the public and the competitors of the Company. This category can include but is not limited to formulas, programs, data, techniques, processes, patterns, or any other type of information as identified by the Company. The Investor must maintain the utmost confidentiality of all confidential information and trade secrets, preventing any disclosure to unauthorized parties. Failure to maintain the confidentiality of this information may result in legal action initiated by the Company against the Investor. In such cases, the Investor shall be responsible for covering all legal fees incurred by the Company.
  • Return of materials. Upon termination of this Agreement or at any time upon request of the Company, the Investor shall promptly deliver to the Company all documents, records, and other materials in its possession or control containing or relating to any confidential information of the Company.
  • Injunctive relief. The Investor acknowledges that violating this clause shall inflict irreparable harm upon the Company, and monetary damages would not be an adequate remedy. The Investor agrees that in the event of any actual or threatened breach of this clause, the Company shall have the right to seek injunctive relief.

TERM AND TERMINATION. This Agreement shall commence on the Effective Date and shall continue until   unless otherwise agreed by the Parties in writing or required by specific legal provisions of the applicable law.

This Agreement may be terminated by the Investor at any time before the termination date, regardless of the cause. The Investor is required to initiate a termination request at least   days before the planned termination date. If the Investor decides to terminate this Agreement, the first opportunity to purchase the Investor's Shares will be given to the majority shareholders. If the majority shareholders decide not to acquire these Shares, the right of first refusal then transfers to the other shareholders. Following this process, the Investor may then proceed to offer the Shares to an external third party. It is prohibited for the Investor to sell the Shares to any individual or entity that operates within the same or similar Business as the Company. Furthermore, the majority shareholders of the Company retain the ultimate authority to approve any potential buyers of the Investor's Shares.

 

Upon the termination of this Agreement, the Shares shall continue to be subject to the transfer restrictions set forth in this Agreement.

GOVERNING LAW AND DISPUTE RESOLUTION. This Agreement shall be governed by and construed in accordance with the laws of the State of  , except for its conflict of laws principles. Any disputes relating to this Agreement or its breach that cannot be resolved by negotiations between the Parties shall be brought exclusively in the courts located in the State of  .

LEGAL COUNSEL. The Party acknowledges that a legal counsel represents the Investor and that the Investor's legal counsel drafted this Agreement. The Parties have been advised to seek independent legal advice with respect to the transactions described in this Agreement and have had an adequate opportunity to seek legal counsel with respect to this transaction.

LIMITATION OF LIABILITY AND INDEMNIFICATION. The Company shall indemnify and hold harmless the Investor and the Investor's members, managers, employees, agents, and affiliates ("Indemnified Person") from any demands, claims, damages, liabilities, or expenses, and no Indemnified Person shall have any liability to the Company or its members, shareholders, security holders, or creditors for any damages, liabilities or expenses resulting from or related to this Investment.

PRIORITY. In the event of any contradiction between this Agreement and critical statutory documentation of the Company, including but not limited to the articles of organization or operational agreement, the statutory documentation of the Company and its respective provisions shall consistently take precedence.

NOTICE. Any notice, request, demand, or other communication required to be given under this Agreement shall be in written form. It shall be deemed duly given if delivered personally or sent by registered mail to the address set forth below. It may also be delivered to the email addresses set forth below:

If to the Company:

Email:  ;
Phone number:  .

If to the Investor:

Email:  ;

Phone number:  .

 

Either Party may change its address for receipt of notices by giving written notice to the other Party. The notices shall be deemed received on the day of delivery if sent by hand or courier service or on the third business day after the date of posting if sent by registered mail.

SEVERABILITY. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

ENTIRE AGREEMENT. This Agreement constitutes the entire understanding between the Parties and supersedes all prior or contemporaneous agreements, understandings, negotiations, or discussions, whether oral or written, relating to the subject matter of this Agreement.

AMENDMENTS. This Agreement may be amended or modified exclusively by a written agreement signed by the Parties.

ANNEXES. Any annexes, appendices, schedules, and exhibits to this Agreement are considered integral parts of this Agreement. In case of any inconsistencies between the provisions of the Agreement and its Annexes, the provisions of the Agreement shall prevail.

IN WITNESS WHEREOF, the Parties have executed this Agreement in  ,   County, State of   as of the Effective Date.

THE COMPANY

THE INVESTOR

 

 , USA

 

_________________________
(Place for signature)

  

 

 

 , USA

 

_________________________
(Place for signature)

 

 

Written by Karyna Pukaniuk - Reviewed by Jonathan McGill

Template Description

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Paper titled "Investment Agreement," laptop, graphics, money, calculator

Introduction

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An investment agreement acts as a legal paper for a money deal between two groups: the investor and the company that has the investing chance. The investment agreement template sets up an all-around plan that includes the conditions and rules guiding the investment process.

Essential elements that a typical investment contract template free of charge should encapsulate include:

  • Nature of the investment;
  • Term of the investment;
  • Objective of the investment;
  • Total sum of the investment;
  • Proportion of equity;
  • Modality of the investment;
  • Projected return on investment (ROI);
  • Rights of the involved parties.

The breadth of investment contract samples spans various formats catering to diverse investment types. Some common formats include:

  • Stock purchase agreement;
  • Convertible debt agreement;
  • Non-statutory stock option agreement;
  • Statutory stock option agreement;
  • Restricted stock agreement;
  • Royalty agreement;
  • Percentage of revenue agreements; and others.

Because of the inherent risk factor in any investment transaction, investment agreement templates become indispensable. These agreements effectively manage the potential risks that both the organization and the investor might face.

Moreover, the free investment contract template outlines the obligations, rights, and projected duties of both parties under varied circumstances. For instance, dispute resolution methods are typically addressed within investment agreements.

What Are the Main Parts of the Investment Agreement Template?

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Each part of an investment contract serves a specific purpose. Understanding these key sections positions you to negotiate effectively, identify issues quickly, and make informed decisions.

Let's explore these components to gain a comprehensive grasp of an investment contract template.

Recitals

This is a fundamental section within an investment contract agreement template. They provide context for the contract and introduce the contracting parties, their motivations, and the purpose of the agreement. Though these recitals don't directly address responsibilities or rights for either party, they essentially set the stage for the agreement. In essence, recitals function as an introductory passage, akin to a constitution's preamble for any country.

Payment terms and procedure

The payment terms and procedure section details the investment amount, the schedule for disbursement, and the accepted forms of payment. Whether the investment is a one-off or happens regularly, details are very important. For example, an investor promising $1 million might pay it all at once or spread it out over a certain period.

Distributions and financial issues

The section is a fundamental part of an investment agreement contract that provisions the financial transactions between the company and the investor. Let's unpack the key takeaway points from this part and structure it according to its main subsections:

  • Working out net profit and loss
    This part goes into detail about how the company figures out its net profit and loss for each financial year. It includes needed adjustments like lowering value over time (depreciation), spreading out costs over time (amortization), and taxes, among other things.
  • Distribution of net profit
    Here, the agreement clarifies how and when the company will distribute its net earnings to the investor. It outlines the proportion of distributed profits relevant to the investor's shareholding and sets forth the conditions and timeline for distribution. It also accounts for potential circumstances that might affect profit distribution.
  • Conditions for non-payment
    This facet of the agreement mentions scenarios when the company may withhold payments to the investor. It states that if the investor fails to fulfill any duties to the company, any money or assets shared will be held back until the issue is sorted out.
  • Withholding taxes 
    This part of the agreement emphasizes that the company can withhold taxes from any distribution made to the investor as required by the law.

Dissolution

The dissolution clause discusses what happens if the company ceases to operate. It typically stipulates that investors should receive their initial investment amount along with accrued gains. Companies must stress that investor payouts shouldn't be tied to the physical assets of the company to avoid potential issues.

Key subsections can be identified in a sample investment agreement as follows:

  • Restrictions on voluntary dissolution: This subsection outlines the conditions under which the company may be voluntarily dissolved, detailing the portion of voting shareholders required to action the dissolution and adherence to the company's statutory documents and applicable law.

  • Procedures on dissolution: This part lays out the course of action upon dissolution. It specifies the responsible parties for winding up the affairs of the company and highlights the continuity of certain existence aspects for wrap-up necessities.

  • Dividing up assets when closing: This portion explains how the company's assets will be divided if the business ends, based on the proper laws and the company's legal documents. It also specifies the conditions for refunding the investor if the company shuts down prematurely and notes that physical assets are not part of these repayments.

Restrictions on transfers and permitted transfers

The transfer restrictions portion of an investment agreement sample governs the movement of shares or business interests between parties. The following subsections can detail these restrictions and permissions:

  • Business asset transfer
    Here the contract outlines the company's commitment not to sell, transfer, or assign any business assets, opportunities, or interests that are fundamental to the business operation or significantly contribute to the company's value without the investor's prior written consent.
  • Restrictions on share transfer
    This subsection stipulates that the investor cannot sell, transfer, or otherwise dispose of any shares or interests unless following the agreement's terms. It further highlights that any breach of these terms will render the transfer null and void.
  • Permitted transfers
    Notwithstanding the set restrictions, the agreement makes allowances for certain share transfers. These include the movement of shares to the investor's affiliates, subsidiaries, or trusts, given they agree to adhere to the agreement's stipulations.
  • Priority rights
    This part focuses on the right of first refusal. It elaborates that if a shareholder plans to sell their shares, they must first offer these to the company or other shareholders. If declined, the shares can then be sold to a third party under the agreement's conditions.
  • Rights to participate and rights of first offer (ROFO)
    These are defined as the investor's rights to participate in qualified financing and the right of first offer. This subsection outlines the conditions under which the investor can weigh their investment during qualified financing and how ROFO functions.

Non-competition and confidentiality

The non-competition and confidentiality parts set the rules for how an investor can deal with possible competitors and handle private information. Usually, investors are not allowed to work for or make money from competing businesses while they are investing, and sometimes even after that time. They are also required to maintain the confidentiality of strategic company information.

Term and termination

This part specifies how long the agreement lasts and the steps to take if the investor or the company wants to end the contract. It may include points like the main shareholder getting the first chance to buy back the investor's shares should they decide to leave.

Governing law and dispute resolution

Every investment agreement contract needs a means to manage potential conflicts. The part of the agreement that talks about solving disagreements usually advises trying mediation or arbitration before expensive and public court trials. Also, it's essential to mention the governing law — the area whose rules will be used to explain and make the agreement happen.

Legal counsel

Considering the complexity of the investment agreement template free, getting legal advice is crucial for all involved parties. A skilled lawyer can ensure that the agreement's terms are fair, follow local laws, and benefit everyone involved.

Limitation of liability and protection against loss

This clause helps manage risk. The limitation of liability clause sets a cap on the amount one party may have to pay the other in case of a breach, while the indemnification clause ensures one party compensates the other for any losses or damages they might suffer due to agreed-upon circumstances.

Severability

A severability clause protects or keeps the whole deal safe, even if a court finds one part of it wrong or not legally okay. It emphasizes that the remaining parts continue to be effective, lending resilience to the investment agreement.

Conclusion

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Whether you're an investor or a company representative, it's crucial to understand all these parts, adjust the vocabulary and tone to your company's specifications, and seek professional advice. It's also crucial to review the investment document multiple times for clarity, coherence, and any possible revisions.

Remember, a well-structured, clear, and free investment contract template can be the basis of a successful, conflict-free investment journey.

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