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Equity Finders Fee Agreement
Equity finders fee agreement is a legal document that outlines the terms and conditions of a deal between an equity finder and a company. Simply put, an equity finder is an individual or a firm that connects investors with companies seeking capital.
When a company is looking to raise capital, it may reach out to an equity finder to help find investors. If the equity finder is successful in bringing in investors, they may receive a finder`s fee in the form of equity in the company rather than cash.
This is where the equity finders fee agreement comes in. The agreement is a written contract that outlines the specifics of the arrangement between the company and the equity finder. It will typically cover the following:
1. Compensation: The agreement will outline the percentage of equity that the equity finder will receive as compensation for their services. This will be calculated based on the amount of capital the equity finder brings in.
2. Timeline: The agreement will also specify the timeframe during which the equity finder is expected to bring in investors. This could be a specific date or a range of dates.
3. Termination: The agreement will also include a termination clause that outlines the circumstances under which the agreement can be terminated.
4. Confidentiality: The agreement will include a confidentiality clause that prohibits the equity finder from sharing any confidential information about the company or the investors they bring in.
5. Representations and warranties: The agreement will include representations and warranties from both parties. These will include statements about the ability of the company to issue equity and the equity finder`s ability to find suitable investors.
It`s important to note that equity finders are not licensed brokers and are not subject to the same regulations as brokers. As a result, it`s essential for both parties to ensure that all legal requirements are met, and all necessary disclosures are made. This will help to ensure that the agreement is legally binding and protects the interests of both parties.
In summary, an equity finders fee agreement is a crucial document for any company that is looking to raise capital through equity financing. It provides a clear outline of the terms and conditions of the arrangement between the equity finder and the company, ensuring that both parties are protected from any disputes or misunderstandings that may arise.