Template kiwi startups agreement for future equity

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1 Templte kiwi strtups greement for future equity User notes This greement is one of three different convertile instruments on our templtes pge tht re intended to e used when recording either seed investment from third prty investor or ridge finncing from existing shreholders: this kiwi strtups greement for future equity is intended to e used when compny is rising seed cpitl from third prty investor in the form of convertile instrument. The terms of the kiwi strtups greement for future equity re compny friendly nd re sed on Y-Comintor s templte greement of the sme nme the kiwi keep investment simple security is lso intended to e used when compny is rising seed cpitl from third prty investor in the form of convertile instrument. The terms of the kiwi keep investment simple security re sed on the keep-it-simplesecurity creted y 500 Strtups nd include some of the more investor friendly provisions typiclly included in convertile notes for seed investments in the US nd s dopted for other glol mrkets the convertile shreholder lon greement is simple compny friendly greement, intended to e used when n existing shreholder lends money to compny s form of ridging finnce until n expected future finncing event tkes plce. This greement nticiptes tht the investment mount is drwn down in lump sum on one dte nd is unsecured. The mount of the investment is not lon, hs no set mturity or repyment dte nd does not ccrue interest. The investment mount remins outstnding until: it is utomticlly converted to equity on the dte of the next cpitl rise it is repid or converted (t the election of the investor on the occurrence of liquidity event The txtion of greements of this nture hs not een widely discussed or tested in New Zelnd nd we re currently seeking comment from leding tx dvisers. In the interim we do recommend tht the investor receive specilist tx dvice efore entering into this greement (noting tht ny tx oligtions will e on the ccount of the investor rther thn the compny. Under New Zelnd securities legisltion, compny my not issue (or offer to issue shres, options or other securities without providing detiled disclosure informtion to the new holders of those shres, options or other securities, unless the compny is stisfied tht n exclusion to the informtion disclosure requirements of the Finncil Mrkets Conduct Act 2013 pplies in reltion to tht offer or issue. Plese see our NZ securities lw tech compny cpitl rising guide under the cpitl rising section of the guides pge of our wesite for n explntion of the relevnt exclusions. This templte document is provided for guidnce purposes only. We recommend you otin the help of qulified lwyer to complete it. Use of

2 A compny must ensure tht n exclusion descried in tht guide pplies efore it offers to issue, or issues, shres. using this templte The User Notes nd the sttements in the footer elow (ll mrked in red re included to ssist in the preprtion of this document. They re for reference only you should delete ll user notes nd the sttements in the footer from the finl form of your document. The use of [squre rckets] round lck text mens tht: the requested detils need to e inserted there re different options for you to consider within cluse the whole cluse is optionl nd you need to consider whether to include it, sed on the compny s circumstnces nd the user notes. Before finlising your document, check for ll squre rckets to ensure you hve considered the relevnt option nd ensure tht ll squre rckets hve een deleted. If you delete ny cluses or schedules, rememer to cross reference check the document. This templte document is provided for guidnce purposes only. We recommend you otin the help of qulified lwyer to complete it. Use of

3 KIWI STARTUPS AGREEMENT FOR FUTURE EQUITY DATE PARTIES 1 [User note: Use this description if the Investor is compny.] [INSERT NAME OF COMPANY] LIMITED, compny numer [insert compny numer] (Investor [User note: Use this description if the Investor is n individul.] [INSERT] (Investor [User note: Use this description if the Investor is trust.] [INSERT], [INSERT] nd [INSERT] s trustees of [insert nme of trust] (together, the Investor 2 [User note: Use this description for the compny receiving the investment.] [INSERT NAME OF COMPANY] LIMITED, compny numer [Insert compny numer] (Compny AGREEMENT The Investor hs greed to provide to the Compny the Investment Amount on the terms set out in the Agreement. SIGNED for nd on ehlf of [INSERT NAME OF COMPANY] LIMITED y: Signture of uthorised signtory Print full nme of uthorised signtory [User note: Use the following signture lock if the Investor is compny.] SIGNED for nd on ehlf of [INSERT NAME OF COMPANY] LIMITED y: Signture of uthorised signtory Print full nme of uthorised

4 signtory [User note: Use the following signture lock if the Investor is n individul.] SIGNED y [INSERT NAME OF INDIVIDUAL]: Signture [User note: Use the following signture lock if the Investor is trust. Ech trustee of the trust must sign the greement. Insert this signture lock for ech trustee.] SIGNED y [INSERT NAME OF TRUSTEE] s trustee of the [INSERT NAME OF TRUST]: Signture of [Insert nme of trustee]

5 TERMS OF THE AGREEMENT 1 INTERPRETATION 1.1 Definitions: In the Agreement, unless the context requires otherwise: Definition Agreement Cpitl Rise Conversion Mening this greement, including ny schedule ttched to it. the next issue y the Compny of Shres or other Securities for cpitl rising purposes fter the dte of the Agreement. the conversion of the Investment Amount into Conversion Shres under cluse 4. Conversion Price for conversion under cluse 4.1, price per Shre equl to the lower of: > the Vlution Cp divided y the Fully Diluted Cpitlistion immeditely prior to the Cpitl Rise; nd > the lowest price per Shre t which Shres or other Securities were issued under the Cpitl Rise, less discount of [20%]; nd [User note: Alterntively, the Conversion Price on Cpitl Rise could e clculted without reference to vlution cp nd/or without discount to the price per shre of the Cpitl Rise.] for conversion under cluse 4.2, price per Shre equl to the Vlution Cp divided y the Fully Diluted Cpitlistion immeditely prior to the Liquidity Event. Conversion Shres for conversion under cluse 4.1, the highest clss of Shres issued under the Cpitl Rise; nd for conversion under cluse 4.2, ordinry shres. Drwdown Dte Fully Diluted Cpitlistion [insert dte] or such other dte s the prties gree. the numer of Shres on issue t the relevnt time, including the numer of Shres to e issued on the exercise of ny options over or other rights to e issued Shres in existence t the relevnt time (excluding ny conversion of the Investment 3

6 Amount under the Agreement. Insolvency Event ny of the following events: n order is mde, resolution pssed or legl proceedings issued (other thn proceeding which, in the resonle opinion of the Investor, is vextious or frivolous, or corporte ction is tken, notice given or other step tken for the dissolution of the Compny; liquidtor, receiver, mnger, sttutory mnger, inspector, trustee or other similr person is ppointed in respect of the Compny or some or ll of its ssets; ny distress, ttchment, or execution is levied, issued, enforced or otined on or ginst ll or sustntilly ll of the Compny s ssets; or ny security over the ssets of the Compny is enforced. Intellectul Property Rights Investment Amount Liquidity Event includes copyright nd ll worldwide rights conferred under sttute, common lw or equity relting to inventions (including ptents, registered nd unregistered trde mrks nd designs, circuit lyouts, dt nd dtses, confidentil informtion, know-how, nd ll other rights resulting from intellectul ctivity. $[insert mount of the investment] or the principl mount outstnding from time to time. ny of the following events: the Compny or shreholder (or shreholders of the Compny enters into inding greement with third prty (or group of ssocited third prties on rms length terms under which the third prty is to cquire (other thn y wy of suscription for new Shres 50% or more of the voting Shres of the Compny, nd tht greement ecomes unconditionl; the Compny enters into inding greement to dispose of ssets comprising more thn hlf the vlue of the Compny s ssets, nd the shreholders of the Compny pprove the disposition of those ssets; the Compny resolves to mlgmte with ny other 4

7 compny (whether or not it is the continuing compny, in trnsction tht is in sustnce the sme s those descried ove; or the Compny enters into listing greement with the New Zelnd stock exchnge, or other ntionl stock exchnge of similr or etter stnding. Purpose Securities Shreholders Agreement Shres Vlution Cp [insert the purpose of the Investment Amount, i.e. wht the Compny is rising the Investment Amount for]. ny Shre nd ny security tht my e converted into Shres or tht gives the holder of the security the right to hve Shres issued to it (including options nd wrrnts. shreholders greement etween the Compny nd ll of the shreholders of the Compny. shres in the Compny. $[insert vlution cp on conversion]. [User note: Consider the pproprite vlution cp crefully. The mount of the vlution cp divided y the numer of shres on issue in the Compny t the relevnt time is the price per shre t which the Investment Amount will convert to Conversion Shres on the occurrence of Liquidity Event (if the Investor elects to convert. On the occurrence of Cpitl Rise the price per shre determined y the vlution cp is the highest price t which the Investment Amount will utomticlly convert to Conversion Shres (noting tht the Investment Amount will utomticlly convert t lower price per shre if the Cpitl Rise is undertken t vlution tht is lower thn the vlution cp, fter pplying the discount set out in the definition of Conversion Price.] 1.2 Interprettion: A reference to: i ii cluse or schedule is to cluse in or schedule to the Agreement; person includes ody corporte, n ssocition of persons (whether corporte or not, trust, governmentl or other regultory ody, uthority or entity, in ech cse whether or not hving seprte legl personlity; 5

8 iii iv v vi including nd similr words do not imply ny limittion; sttute includes references to tht sttute s mended or replced from time to time; prty is reference to prty to the Agreement, nd includes tht prty s permitted successors nd permitted ssigns; nd $ or dollrs re to New Zelnd currency. c The hedings in the Agreement re for convenience only nd hve no legl effect. The singulr includes the plurl nd vice vers. 2 CONDITIONS The Agreement is conditionl on: the Compny delivering to the Investor resolutions of the directors of the Compny uthorising the execution of the Agreement nd the issue of the Conversion Shres on conversion of the Investment Amount in ccordnce with the Agreement; nd [User note: See Simmonds Stewrt templte resolutions uthorising the execution of convertile instruments for directors resolution pproving the execution of this greement nd the issue of shres under it.] the Compny eing stisfied tht n exclusion to the informtion disclosure requirements of the Finncil Mrkets Conduct Act 2013 pplies in reltion to the issue of the Conversion Shres. [User note: See NZ securities lw tech compny cpitl rising guide for n explntion of the relevnt exclusions. A compny must ensure tht one of the exclusions descried in tht guide pplies efore it tkes the Investment Amount.] 3 THE INVESTMENT AMOUNT AND TERMS OF THE AGREEMENT 3.1 Investment Amount: The Investor must mke the Investment Amount ville to the Compny in one drwing only on the terms set out in the Agreement. 3.2 Drwdown: The Investor must py the full mount of the Investment Amount to the Compny on the Drwdown Dte in clered funds into the nominted ccount of the Compny. 3.3 Purpose: The Compny must use ll mounts drwn down only for the Purpose or for ny other purpose pproved y the Investor. 4 CONVERSION AND REPAYMENT OF INVESTMENT AMOUNT 4.1 Cpitl Rise: On the dte of Cpitl Rise, the Investment Amount is to utomticlly convert into Conversion Shres y pplying tht mount to suscrie for Conversion Shres t the Conversion Price. 6

9 4.2 Liquidity Event: If Liquidity Event occurs, the Investor my elect to convert the Investment Amount into Conversion Shres on the dte of the Liquidity Event y pplying tht mount to suscrie for Conversion Shres t the Conversion Price. If the Investor does not elect to convert the Investment Amount to Conversion Shres, the Compny must repy to the Investor the Investment Amount within 20 Business Dys of the dte of the Liquidity Event. 4.3 Insolvency Event: If n Insolvency Event occurs, the Compny must immeditely repy to the Investor the Investment Amount. 4.4 Insufficient funds on Liquidity Event or Insolvency Event: If there re insufficient funds to py the Investor nd ny other person tht hs entered into n greement with the Compny on terms tht re sustntilly the sme s the Agreement (except for the Investment Amount nd the Drwdown Dte (Prticipting Investors ny mount pyle under cluse 4.2 or 4.3, then the Compny s ville funds must e distriuted mongst the Prticipting Investors in proportion to their Investment Amounts. If ny prt of n Investment Amount remins unpid following tht distriution, the remining Investment Amount is to utomticlly convert into Conversion Shres y pplying tht mount to suscrie for Conversion Shres t the relevnt Conversion Price. 4.5 Notice of Cpitl Rise, Liquidity Event or Insolvency Event: The Compny must provide the Investor with written notice of: c the terms of Cpitl Rise t lest 5 Business Dys prior to the closing of the Cpitl Rise; Liquidity Event t lest 10 Business Dys prior to the occurrence of the Liquidity Event; nd n Insolvency Event promptly following the occurrence of the Insolvency Event. 4.6 Issue of Conversion Shres: The Conversion Shres re to e credited s fully pid nd rnk pri pssu with ll other Shres of the sme clss then in issue. The Conversion Shres re to e issued suject to the terms of ny constitution of the Compny nd ny Shreholders Agreement in-force s t the dte of issue of the Conversion Shres. Immeditety following the issue of ny Conversion Shres, the Investor must execute either the in-force Shreholders Agreement or deed of ccession to the in-force Shreholders Agreement, greeing to e ound y its terms. 4.7 Frctionl entitlements: The numer of Conversion Shres to e issued to the Investor must e rounded up to the nerest whole numer if there is frctionl entitlement. 4.8 Adjustment: If there is ny onus issue, consolidtion or sudivision of ny Shres or ny reduction or cncelltion of shre cpitl (or ny similr reorgnistion of the cpitl of the Compny, the Conversion Price must e djusted y the Compny, if ncessry, to ensure tht the economic effect of the Conversion remins the sme. 7

10 5 COMPANY S UNDERTAKINGS While the Investment Amount is outstnding, the Compny must not, unless pproved in writing y the Investor: mke ny mteril chnge to the usiness crried on y it t the dte of the Agreement; or py ny dividend or mke ny other distriutions in respect of its Shres. 6 WARRANTIES 6.1 Mutul wrrnties: Ech prty represents nd wrrnts to the other tht the following is true s t the dte of the Agreement: c if it is compny, it is duly incorported nd vlidly existing under the lws of New Zelnd; it hs the power, nd, if it is compny, hs tken ll necessry ction (including the pssing of ll resolutions nd otining ny necessry consents to enter into, execute nd deliver, nd exercise its rights, nd perform its oligtions, under the Agreement; nd it hs vlidly executed nd delivered the Agreement nd its oligtions under the Agreement re legl, vlid nd inding nd the Agreement is enforcele ginst it in ccordnce with its terms. 6.2 Compny wrrnties: The Compny wrrnts to the Investor tht the following is true s t the dte of the Agreement: c d s fr s the Compny is wre, the Compny owns or is leglly entitled to use ll Intellectul Property Rights used in the conduct of its usiness; s fr s the Compny is wre, the usiness of the Compny does not infringe ny Intellectul Property Rights of ny other person nd, s fr s the Compny is wre, no clims relting to Intellectul Property Rights used y the Compny re pending or thretened y ny third prty; the Compny is not prty to ny legl proceedings, ritrtion, or sttutory or governmentl inquiry of ny kind, nor is the Compny wre of ny such legl proceedings, ritrtion or inquiry, pending or thretened ginst the Compny; nd s fr s the Compny is wre, there is not ny existing cuse of ction, or fcts or circumstnces tht could e used for commencing legl proceedings, either civil or criminl, ginst the Compny tht could prevent or mterilly lter or dely ny of the trnsctions contemplted y the Agreement. 8

11 6.3 Exclusions from wrrnty clims: No fcts or circumstnces will give rise to clim y the Investor ginst the Compny under cluse 6.2 to the extent tht those fcts or circumstnces: c were firly disclosed in writing to the Investor y or on ehlf of the Compny prior to the dte of the Agreement; were ville on pulic register, file or record mintined y the New Zelnd Compnies Office, the Intellectul Property Office of New Zelnd or the Personl Property Securities Register s t the dte of the Agreement; or rose ecuse of n ction tken y the Compny with the Investor's prior written consent. 6.4 Timing: The Compny will hve no oligtion to the Investor in respect of ny clim under cluse 6.2 unless written notice of tht clim is given to the Compny within 24 months of the dte of the Agreement. 6.5 Aggregte mximum liility: The Compny s ggregte liility to the Investor in respect of rech of ny of the wrrnties set out in cluse 6.2 will e limited to the Investment Amount. 7 INDEPENDENT TRUSTEES The liility of ny independent trustee under the Agreement is not n unlimited or personl liility nd insted is limited to the funds from time to time elonging to the trust on ehlf of which he hs entered into the Agreement, in the proper course of the dministrtion of tht trust. In this cluse, n independent trustee is ny prty who hs signed the Agreement in his cpcity s the trustee of trust nd who is not eneficiry of the trust nor hs ny right to, or interest in, ny of the ssets of the trust except in his cpcity s trustee of tht trust. 8 GENERAL 8.1 Confidentility: Ech prty must keep the Agreement nd informtion it receives out the Compny nd its usiness in connection with the Agreement (Confidentil Informtion confidentil, nd must not use or disclose tht Confidentil Informtion without the prior written consent of the other prty except to the extent tht: c d disclosure is required y lw; the relevnt informtion is lredy in the pulic domin; it is resonly required to otin professionl dvice; or it is resonly necessry in connection with ny proposed: finncing of tht prty; sle of tht prty s interest in the Compny; or sle of ll or prt of the usiness of, or the shres in, tht prty, 9

12 nd the prty receiving the Confidentil Informtion hs entered into confidentility undertkings sustntilly the sme s those set out in this cluse. 8.2 Notices: All notices nd communictions given under the Agreement must e in writing nd must e delivered personlly, sent y post or sent y emil to the ddress or emil ddress set out in the Schedule (or t such other ddress s notified from time to time y the prty chnging its ddress. 8.3 Time of service: Any notice given under the Agreement will e deemed to e vlidly given: c in the cse of delivery, when received; in the cse of posting, on the second dy following the dte of posting; or if emiled, one hour fter the emil is sent unless return emil is received y the sender within tht one hour period stting tht the ddressee s emil ddress is wrong or tht the messge cnnot e delivered, provided tht ny notice received fter 5 pm on Business Dy or on ny dy tht is not Business Dy will e deemed to hve een received on the next Business Dy. 8.4 Entire greement: The Agreement contins ll of the terms, representtions nd wrrnties mde etween the prties relting to the mtters delt with in the Agreement nd supersedes nd cncels ll prior discussions nd greements covering the suject mtter of the Agreement. The prties hve not relied on ny representtion, wrrnty or greement relting to the mtters delt with in the Agreement tht is not expressly set out in the Agreement, nd no such representtion, wrrnty or greement hs ny effect from the dte of the Agreement. Without limiting the previous sentence, the prties gree to contrct out of sections 9, 12A, 13 nd 14(1 of the Fir Trding Act Further ssurnces: The prties must ech sign ll further documents, pss ll resolutions nd do ll further things s my e necessry or desirle to give effect to the Agreement. 8.6 Amendment: The Agreement my only e mended y greement of the prties in writing. 8.7 Wiver: No exercise or filure to exercise or dely in exercising ny right or remedy will constitute wiver y tht prty of tht or ny other right or remedy ville to it. 8.8 No ssignment: No prty my ssign ny of its rights or oligtions under the Agreement without the prior written consent of the other prty. 8.9 Costs: Except s otherwise provided in the Agreement, the prties will meet their own costs relting to the negotition, preprtion nd implementtion of the Agreement Prtil invlidity: If ny provision of the Agreement ecomes invlid or unenforcele to ny extent, the reminder of the Agreement nd its ppliction will not e ffected nd will remin enforcele to the gretest extent permitted y lw. 10

13 8.11 Signture: The Agreement my e executed in two or more counterprts, ech of which is deemed n originl nd ll of which constitute the sme Agreement. A prty my enter into the Agreement y signing nd sending (including y emil counterprt copy to ech other prty Governing lw nd jurisdiction: The Agreement will e governed y New Zelnd lw, nd the prties sumit to the non-exclusive jurisdiction of the New Zelnd courts. 11

14 SCHEDULE 1 Detils for notices Compny Contct Nme: Address: Emil ddress: Investor Contct Nme: Address: Emil ddress: This templte document is provided for guidnce purposes only. We recommend you otin the help of qulified lwyer to complete it. Use of 12

Template co-founder agreement long

Template co-founder agreement long Templte co-founder greement long User notes This document is intended for use y the founders of new strt up who wish to provide for some level of clw-ck of cofounder s initil shreholding if he or she: