Sample Founder Stock Repurchase Agreement between MachOne Communications, Inc. and Michael Solomon
Overview of this form
The Sample Founder Stock Repurchase Agreement is a legal document that outlines the terms under which MachOne Communications, Inc. repurchases shares from its key founder, Michael Solomon. This agreement is crucial for defining the specifics of the repurchase transaction, including share price, vesting conditions, and any obligations of the parties involved. Unlike other stock agreements, this document focuses specifically on founder stock and the rights and responsibilities of both the company and the founder.
Form components explained
- Date and parties involved, including MachOne Communications, Inc. and Michael Solomon.
- Description of the shares to be repurchased and the associated purchase price.
- Conditions for the company to exercise the repurchase option.
- Representations and warranties from the founder regarding the ownership and transfer of shares.
- Procedures for the transfer of shares and payment upon repurchase.
- Details about vesting and unvested shares, including termination conditions.
Common use cases
This founder stock repurchase agreement is typically used when a company needs to buy back shares from a founding member or key employee. Common scenarios include restructuring ownership to reflect changes in roles, handling the departure of a founder, or adjusting equity stakes for business operational needs. This agreement aids in clarifying the financial implications and legal binding between the involved parties in these situations.
Who can use this document
- Startups or corporations engaging key founders as equity holders.
- Founders looking to formalize the repurchase of their shares for personal or business reasons.
- Corporations aiming to restructure equity ownership for operational efficiency.
- Legal professionals assisting clients in managing equity agreements.
Completing this form step by step
- Identify the parties involved, including the company and the founder.
- Specify the number of shares being repurchased and the price per share.
- Fill in the effective date of the agreement and other relevant dates.
- Include representations and warranties, ensuring accuracy in ownership and transferability of shares.
- Sign and date the agreement to execute the terms legally.
Does this document require notarization?
This form usually doesn’t need to be notarized. However, local laws or specific transactions may require it. Our online notarization service, powered by Notarize, lets you complete it remotely through a secure video session, available 24/7.
Common mistakes
- Failing to clearly specify the number of shares being repurchased.
- Omitting representations or warranties, which can lead to disputes later.
- Not understanding the implications of unvested shares and their potential repurchase conditions.
- Neglecting to have the document signed by all relevant parties.
Benefits of completing this form online
- Convenience of downloading and filling out the agreement at any time.
- Editable templates allow for customization based on specific needs.
- Access to forms created by licensed attorneys for assurance of legal validity.
- Easy to store and print copies for your records.
Form popularity
FAQ
It's normal to have let a co-founder go. In fact, over 50% of co-founder relationships end in failure. Your other employees and co-founders will be relieved that you took action.
Under a typical vesting schedule, the stock vests in monthly or quarterly increments over four years; if the Founder leaves the company before the stock is fully vested, the company has the right to buy back the unvested shares at the lower of cost or the then fair market value.
A Chief Executive Officer (CEO) is the highest-ranking executive in the business.Some founders are also CEOs. For example, Steve Jobs was a co-founder of Apple, but also a CEO.
Vesting is the process of accruing a full right that cannot be taken away by a third party. In the context of the founders' equity, a startup initially grants a package of stock to each founder.Over a period of time called a vesting schedule, a founder acquires a full ownership that cannot be forfeited by the company.
And the answer is pretty simple it's yes. Founders must pay for their own stock under corporate statutes like the Delaware General Corporation Law, Section 152. When a corporation issues stock to a founder, the stock must be what's called fully paid and non-assessable.
Wrap Up. Founders stock refers to the shares issued to the originators of a company. Often, the stock does not receive any returns up to the point that a dividend is payable to the common stockholders. Founders stock comes with a vesting schedule, which determines when the shares are exercisable.
Founder vesting, is a process by which you earn your stock over a period of time depending on your performance and commitment to the startup. The company gets the right to buy back the stock if one or more of the co-founders leave.
Heed the warning signs. The members of a good team like one another. Ask your advisers and mentors for council. Talk out options with your legal council. Check in with advisers again (this is not an easy decision). Bite the bullet. Be open with your company's stakeholders.
What happens if a founder leaves before fully vesting? In most cases, the company will elect to exercise the remaining portion of its repurchase right against any unvested shares the departing founder has purchased.
