Sweat Equity Agreement

Share Investment Agreement (Services)

CO.SI.04

 This Share Investment Agreement for Services is an alternative investment arrangement to the traditional provision of an equity (share) stake in a company in return for a cash investment into the company. In this Agreement the investor agrees to “invest” his time and expertise in the provision of a particular service to the company, following the successful completion of which, the investor will receive shares in the company.

Particularly for start-ups, a business may want/need to bring someone into the business in order to provide a particular skill or expertise; however the business may not be in a position to provide that person with their usual cash fee. One way around this is to offer that person the opportunity to “invest” in the company in return for the provision of the particular service. This is often known as a “sweat equity” arrangement. Shares are awarded to the “investor” in consideration of their time, knowledge and skill contributed. Unlike financial equity, whereby the participant or investor pays for the shares in cash, this arrangement reflects the person’s human contribution to the company – the value of which will need to be agreed by the parties concerned.

This sweat equity arrangement is structured so that the investor provides the service to the company in return for the allotment of new shares only once the company is satisfied that the performance of the services has been properly carried out. This agreement also anticipates that the parties will look to enter into a full shareholders’ agreement at the end of the term of the services.

This template has been drafted with a new/start-up business in mind and does not consider the potential tax or accounting implications of making such an investment.

This Share Investment Agreement for Services includes the following clauses:

1. Definitions & Interpretation

2. Services

3. Fees & Expenses

4. Subscription Shares & Completion

5. Other Activities

6. Confidential Information

7. Data Protection

8. Intellectual Property

9. Termination

10. Obligations on Termination

11. Status

12. General

13. Entire Agreement

14. Counterparts

15. No partnership

16. Miscellaneous

17. Disputes

18. Governing law & jurisdiction

Schedule 1 The Existing Shareholders

Schedule 2 The Investor

Schedule 3 Particulars of the Company

Schedule 4 Service Milestones

This document is in open format. Fields should be completed and wording in square brackets is optional and can be deleted or retained according to requirements.

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