Agreements with Founders and Other Shareholders/Members
What are the most important issues in connection with:
- Founder’s transfer of technology/IP?
- Founder’s purchase of shares from the Company?
- Founder’s reciprocal rights/obligations via other shareholders/members to purchase/sell shares?
- Coordination of Founder’s rights and obligations under Shareholder Buy-Sell Agreement with Founder’s Estate Plan?
These Core Legal Issues are addressed, respectively, by 4 Documented Core Legal Solutions: the Founder’s Technology/IP Assignment Agreement; the Founder/Employee Restricted Stock Purchase Agreement; the Shareholder Buy-Sell Agreement and the Founder’s Estate Plan.
What You’ll Get
Analysis and review of the nature and significance of the various issues relating (i) to the founder’s transfer of technology/IP and purchase of shares from the company and (ii) to the founder’s reciprocal rights/obligations to other shareholders/members to purchase and/or sell company shares.
Founder Technology/IP Assignment Agreement
The Founder Technology/IP Assignment Agreement is a Documented Core Legal Solution that assigns the founder’s technology and/or other intellectual property to the company in exchange for
- Shares of the company (in a way that minimizes income tax on the transfer) and certain obligations of confidentiality by the founder together with
- The following standard warranties by the founder: (i) sole ownership of the Technology/IP, (ii) no prior assignment, transfer, license, pledge or other encumbrance of the Technology/IP, (iii) full power and authority to enter into the Agreement and (iv) no knowledge of any violation, infringement or misappropriation of any third party’s rights (or any claim thereof) to the Technology/IP.
Included with the Founder Technology/IP Assignment Agreement is an abstract thereof suitable for recording in the US Copyright Office or US Patent and Trademark Office (as applicable).
Founder/Employee Restricted Stock Purchase Agreement
The Founder/Employee Restricted Stock Purchase Agreement is a Documented Core Legal Solution that places some or all of the following conditions and restrictions on shares held by the founder and other employees that are parties to the agreement:
- Establishes the fair market value and kind of consideration payable for Restricted Shares.
- Company is granted the right to repurchase portion of Restricted Shares, which lapses over time.
- Escrow of Restricted Shares subject to repurchase.
- Right of First Refusal as to all Restricted Shares and termination thereof.
- Transfer restrictions on Restricted Shares and permitted transfers of Restricted Shares.
- Purchase-for-Investment-only transfer restrictions pursuant to applicable securities laws.
- Market Stand-Off provisions applicable in the event of public offering.
- Section 83(b) election considerations.
Shareholder Buy-Sell Agreement
The Shareholder Buy-Sell Agreement is a Documented Core Legal Solution to address any and all of the following Core Legal Issues:
- Protect the integrity of a closely-held company by (i) limiting ownership to those active in the business, (ii) preventing equity interests from being transferred to competitors, (iii) preventing spouses of owners from obtaining equity interests in the event of divorce and (iv) limiting the ability of disgruntled minor to hamper business planning and opportunities.
- Prevent majority shareholders from selling control to a third party, leaving minority behind.
- Allow majority shareholders to enter into an agreement to sell the Company and bind the minority.
- Provide a mechanism for orderly succession and transfer of control.
- Provide a market and establish a price for an otherwise illiquid interest in a closely-held business.
- Facilitate estate planning goals (establishing a value for estate tax purposes, converting an illiquid asset into cash for heirs, providing an owner’s estate with funds to pay estate taxes, eliminating the need to negotiate with owner’s spouse of estate over value of the interest following death; and integrating disposition of the business with owner’s overall estate plan.
- Provide a mechanism for funding the purchase of interests.
- Prevent termination of a corporation’s Subchapter S election by prohibiting certain transfers.
- Define permitted transfers (e.g., inter vivos transfers to certain family members or to revocable trusts).
Founder Estate Plan
The Founder Estate Plan is a Documented Core Legal Solution that includes the following:
- Revocable Family Trust
- Durable General Power of Attorney
- Advance Health Care Directive
- Authorization for Use and Disclosure of Protected Health Information
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