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A founder stock purchase agreement is an agreement that documents ownership of a company in its beginning stages. This legal contract is not mandatory but is beneficial to establish a shareholder's stake in the company and determine the terms and conditions of that ownership.
Founder stock purchase agreements are legal contracts and often include the terms of purchase and sale of stocks and the vesting schedule. These agreements are typically used with start-ups and can be an excellent way to protect both the company's future equity and the founder's stake in the company.
Below is a list of common sections included in Founder Stock Purchase Agreements. These sections are linked to the below sample agreement for you to explore.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (“ Agreement ”) is effective as of the [ ] day of [ ], by and between [INSERT NAME] (“ Buyer ”) and Charles Rice (“ Seller ”), with reference to the following facts:
A. Seller owns all of the issued and outstanding shares of the common stock of InterMetro Communications, Inc., a California corporation (“ IMC ”).
B. Seller now wishes to sell, and Buyer wishes to purchase _______________ (______) shares of the no par value common stock of IMC (the “ Common Stock ”) pursuant to the terms and conditions set forth in this Agreement”).
In consideration of the mutual covenants and representations contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged by Buyer and Seller, Buyer and Seller agree as follows:
TERMS AND CONDITIONS
1. Purchase and Sale of Stock . Seller hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from Seller, _______________ ( ) shares (the “ Shares ”) of the Common Stock at a purchase price of $____ per Share, for an aggregate purchase price of ___________ Dollars ($______) (the “Purchase Price ”). The Purchase Price shall be paid by delivery of Buyer’s promissory note at the Closing (as defined in Section 2 of this Agreement) in the form attached to this Agreement as Exhibit A , incorporated into this Agreement by this reference (the “ Note ”).
2. Closing . The purchase and sale of the Shares shall occur at a closing (“ Closing ”) as of [ ], at the offices of IMC. At the Closing, Buyer shall deliver the Note to Seller, and Seller shall obtain from IMC a certificate or certificates for the Shares which Seller shall hold as security for the Note in accordance with the terms of a pledge agreement by and between Seller and Buyer, in the form attached to this Agreement as Exhibit B , incorporated into this Agreement by this reference (the “Pledge Agreement” ). Seller and Buyer shall each execute the Pledge Agreement and a fully executed copy of the Pledge Agreement shall be delivered to each of Seller and Buyer at the Closing. Buyer shall duly endorse a stock assignment separate from certificate or certificates representing the number of Shares to be purchased by Buyer, in the form of attached to this Agreement as Exhibit C , incorporated into this Agreement by this reference (the “Stock Assignment” ), which Seller shall also hold for the purpose of securing Buyer’s obligations under the Note.
3. Shareholders’ Agreement . At the Closing, Buyer and Seller shall each execute and deliver a shareholders’ agreement, in the form attached to this Agreement as Exhibit D , incorporated into this Agreement by this reference (the “Shareholders’ Agreement” ).
4. Market Stand-Off . In connection with any underwritten public offering by IMC of its equity securities pursuant to an effective registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), including IMC’s initial public offering, Buyer shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or contract for the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares purchased pursuant to this Agreement, without the prior written consent of IMC or its underwriters. Such restriction (the “Market Stand-Off” ) shall be in effect for such period of time following the date of the final prospectus for the offering as may be requested by IMC or such underwriters. In no event, however, shall such period exceed one year. The Market Stand-Off shall in any event terminate two years after the date of IMC’s initial public offering. In the event of the declaration of a stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting IMC’s outstanding securities without receipt of consideration, any new, substituted or additional securities that are by reason of such transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, IMC may impose stop-transfer instructions with respect Shares purchase pursuant to this Agreement until the end of the applicable stand-off period. IMC’s underwriters shall be beneficiaries of the agreement set forth in this Section 4. This Section 4 shall not apply to Shares registered in the public offering under the Securities Act, and Buyer shall be subject to this Section 4 only if the directors and officers of IMC are subject to similar arrangements.
4. Representations by Seller . Seller warrants and represents that the Shares are duly authorized, validly issued, fully paid and nonassessable, and owned by Seller free and clear of all liens, encumbrances, charges, assessments and adverse claims. The Shares are subject to no restrictions with respect to transferability to Buyer, except for those restrictions contained in the Shareholders’ Agreement, or otherwise required by federal and state securities laws. Upon transfer of the Shares by Seller, Buyer will receive good and marketable title to such Shares, free and clear of all security interests, liens, encumbrances, charges, assessments and adverse claims.
5. Representations by Buyer . Buyer represents and warrants to Seller as follows:
(a) Buyer is purchasing the Shares solely for his own account for investment and not with a view to or for sale in connection with any distribution of the Shares or any portion thereof and not with any present intention of selling, offering to sell or otherwise disposing of, or distributing the Shares or any portion thereof in any transaction other than a transaction exempt from registration under the Securities Act of 1933. The entire legal and beneficial interest in the Shares is being purchased, and will be held, for his account only, and neither in whole or in part for any other person.
(b) Buyer has the capacity to evaluate the merits and risks of an investment in IMC and to protect his own interests in connection with this transaction. Without limiting the generality of the foregoing, Buyer is knowledgeable about the plans, operations and financial condition of IMC and has all the information he deems necessary and appropriate to enable him to evaluate the financial risk inherent in making an investment in the Shares.
(c) Buyer realizes that the purchase of the Shares will be a speculative investment and involves a degree of risk, and he is able, without impairing his financial condition, to hold the Shares for an indefinite period of time and suffer a complete loss on his investment.
(d) Buyer hereby releases Seller from any and all damages or liability related to the Shares covered by this Agreement, included, but not limited to the value of the Shares, any tax consequences incurred by Buyer as a result of the purchase of Shares pursuant to this Agreement, or the transferability of the Shares subject to this Agreement.
(e) The sale of the Shares has not been registered under the Securities Act of 1933, and the Shares must be held indefinitely unless subsequently registered under the Securities Act of 1933 or an exemption from such registration is available; and
(f) The certificates representing the Shares will be stamped with legends restricting the sale or transfer of the Shares except in compliance with the Securities Act of 1933 and applicable California blue sky law.
6. General Provisions .
(a) This Agreement contains the entire agreement between Buyer and Seller (sometimes collectively referred to in this Agreement as the “Parties,” and, individually as a “Party” ) pertaining to the subject matter of this Agreement and supersedes any and all prior agreements, representations and understandings of the Parties, written or oral, including, but not limited to the Founder’s Stock Option Agreement by and between Seller and Buyer and dated as of _____, 2004 (the “Founders Stock Option Agreement” ). The Parties agree that neither Party has any right or obligation under the Founder’s Stock Option Agreement. This Agreement is intended by the Parties to be an integrated and final expression of this Agreement and also is intended to be a final, complete and exclusive statement of the terms of their agreement concerning this Agreement. In the course of any prior dealings between the Parties, no uses of trade, and no parole or extrinsic evidence of any nature, shall be used to supplement, modify or vary any of the terms of this Agreement. There are no conditions to the full effectiveness of this Agreement, and there are no oral or other written representations or agreements between the Parties concerning the subject matter of this Agreement except as so expressly set forth in this Agreement. Any representation, promise or condition, whether oral or written, not specifically incorporated in this Agreement, shall be of no valid or binding effect upon the Parties. Each Party further represents, warrants and agrees that he or she is not relying, and have not relied, upon any representation, warranty or statement, oral or written, made by any other Party to this Agreement with respect to this Agreement, except as expressly set forth in this Agreement.
(b) This Agreement shall be deemed to be made in, and in all respects shall be interpreted, construed and governed by and in accordance with the laws of, the State of California, without regards to principles of conflicts of law. Any legal proceeding arising out of this Agreement will be brought only in a state or federal court of competent jurisdiction sitting the County of Los Angeles, State of California. All Parties agree that venue will lie in those courts and submit themselves to the personal jurisdiction of such courts.
(c) No consent or waiver, express or implied, by any Party to, or of any breach or
default by any other Party in, the performance of its obligations under this Agreement shall be deemed or construed to be a consent to or waiver of any other breach or default in the performance by such other Party of the same or any other obligations under this Agreement. Failure on the part of a Party to complain of any act of the other Party or to declare a Party in default, irrespective of how long such failure continues, shall not constitute a waiver of such Party of its rights under this Agreement.
(d) If any provision of this Agreement or the application of any provision to any person or circumstance shall be invalid or unenforceable, but the extent of such invalidity or unenforceability does not destroy the basis of the bargain between the Parties as contained in this Agreement, the remainder of this Agreement and the application of such provision or provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law.
(e) This Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, executors, administrators, personal representatives, successors and assigns. This Agreement, or any right or interest under this Agreement, shall not be assignable by any Party without the written consent of all the other Parties.
(f) This Agreement may be executed in one or more counterparts, any one of which, if originally executed, shall be binding upon each of the Parties, and all of which taken together shall constitute one and the same instrument. One or more photostatic copies of this Agreement may be originally executed by the Parties, and such photostatic copies shall be deemed originals and shall be valid, binding and enforceable in accordance with their terms. Delivery of an executed signature page to this Agreement by facsimile, e-mailed .pdf .gif or similar complete image file of a signed original counterpart shall be effective to the same extent as if such Party had delivered a manually executed counterpart.
(g) The Parties represent and warrant that they have full power, authority and legal right to execute and deliver, and to perform and observe the provisions of, this Agreement and to carry out the transactions contemplated by this Agreement. The execution, delivery and performance by the Parties of this Agreement have been duly authorized by all necessary legal action and the Parties have obtained any necessary consent, approval of, notice to, or any action by, any person, firm, corporation or governmental entity or agency necessary or appropriate to consummate the transaction contemplated by this Agreement.
(h) Each Party agrees and covenants that it will at any time and from time to time, upon the request of the other Party, execute, acknowledge, deliver or perform all such further acts, deeds, assignments, transfers, conveyances and assurances as may be required to carry out the terms and provisions of this Agreement.
(i) The rights and remedies of the Parties under this Agreement shall not be mutually exclusive, and the exercise by any Party of any right to which he, she or it is entitled shall not preclude the exercise of any other right he or she may have.
(j) Each Party represents and warrants that in executing this Agreement such Party has had the opportunity to obtain independent accounting, financial, investment, legal, tax and
other appropriate advice; that the terms of the Agreement have been carefully read by such Party and its consequences explained to such Party by his or their independent advisors, and that such Party fully understands the terms and consequences of this Agreement. Each Party further represents and warrants that, in executing this Agreement, such Party has not relied on any inducements, promises or representations made by the other Party (except those expressly set forth in this Agreement) or the accountants, attorneys or other agents representing or serving the other Party. Each Party represents and warrants that his or their execution of this Agreement is free and voluntary.
(k) No provision of this Agreement or any of the documents referred to in this Agreement may be amended, modified, supplemented, changed, waived, discharged or terminated, except by a writing signed by or on behalf of each Party.
(l) Any notice to be given under this Agreement must be addressed to Seller at the principal office of IMC or at such other address as Seller may specify in writing to Buyer. Any notice to be given to Buyer must be addressed to Buyer at the address appearing as the home address of Buyer in IMC’s books and records or at such other address as Buyer may specify in writing to Seller.
(m) Any dispute under this Agreement will be resolved by binding arbitration conducted in accordance with the rules and procedures of the American Arbitration Association as they are then in effect in the County of Los Angeles, State of California. In order to select an arbitrator, each Party will select an arbitrator of its choice, and those two selected arbitrators will then select will then select by mutual agreement a single arbitrator for the proceeding. The decision of the arbitrator shall be final and binding on the Parties, and judgment may be entered on the decision in the Superior Court of the County of Los Angeles, or any other court having jurisdiction. Each Party will advance on-half of the arbitrator’s fees; however, all costs of the arbitration proceeding to enforce this Agreement, including attorneys’ fees and witness expenses shall be paid by the Party against whom the arbitrator rules. It is expressly agreed that the Parties to any such arbitration may take discovery as contemplated and provided for by California Code of Civil Procedure Section 1283.05. Notwithstanding anything provided in this Agreement to the contrary, the Parties will not be required to submit a claim to arbitration if the claim is for temporary or preliminary equitable or injunctive relief that could not practicably be heard in a timely fashion through the arbitration process.
(n) This Agreement shall be construed in accordance with its fair meaning as if prepared by all Parties and shall not be interpreted against either Party on the basis that it was prepared by one Party or the other. The captions, headings, and subcaptions used in this Agreement are for convenience only and do not in any way affect, limit, amplify or modify the terms and provisions of this Agreement. Words used in the masculine gender shall include the neuter and feminine gender, words used in the neuter gender shall include the masculine and feminine, words used in the singular shall include the plural, and words used in the plural shall include the singular, wherever the context so reasonably requires.
IN WITNESS WHEREOF, the parties have executed this Agreement as of January 1, 2006, to be effective the day and year first set forth above.
| “ SELLER” |
| Charles Rice |
| “ BUYER ” |
| [INSERT NAME] |