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founders-agreement

FOUNDERS AGREEMENT

 

This Founder Agreement (the “Agreement”) is made among the founders of [PROJECT NAME] and effective [DATE],

The following individuals are hereby admitted as partners in the Project (“Founders”)

[FOUNDER 1], (the "First Founder"), an individual with his main address located at [SPECIFY]

[FOUNDER 2] (the "Second Founder"), an individual with his main address located at [SPECIFY]

[FOUNDER 3] (the "Third Founder"), an individual with his main address located at [SPECIFY]

WHEREAS the undersigned individuals (each a “Founder”, has and collectively, the “Founders”) are collaborating as a team with a view to developing a business concept and related product or service substantially as described at Schedule 1 attached hereto (the “Product or Service” or the “Startup”). Founders agree that all related technology to the business concept is also owned by the Founders pursuant to this Agreement.

AND WHEREAS it is the intention of the Founders that once the Product or Service is developed, or substantially developed to their satisfaction, the Founders shall form a corporation, upon the earliest of the following circumstances: [SPECIFY].

NOW THEREFORE in consideration of the covenants contained herein, and in connection with such collaboration of the business concept and technology, and in consideration for a mutually agreeable framework which shall serve as the foundation for the Founders to successfully develop the Business Concept and Technology, the undersigned hereby agree as follows:

CAPITAL CONTRIBUTIONS AND EXPENSES

Capital Contribution.

Each Founder hereby commits to contribute up to

[SPECIFY

AMOUNT]

 toward Company expenses when called by the Company, as non-refundable capital contributions. The Company must make capital calls of Founders on a 

pro rata

 basis.

Each Founder has contributed such amounts as set-out at

Schedule

4

attached hereto towards the expenses of the Startup prior to incorporation

.

Additional Capital Contribution

. The Founders may make additional capital contributions in the form of cash and prepaid expenses from time to time to fund the Company’s ongoing capital and operating needs. The written consent of all Founders is required for any Founder to make a capital contribution. No Founder may be required to make a capital contribution except pursuant to such mutual written consent.

Expenses and budgeting:

The Founders will budget for Company expenses on a rolling basis. All budgets must be approved by all Founders in writing. Any Founder may pay budgeted expenses on the Company’s behalf

.

Each Founder shall reimburse any Founder that incurs an expense related to the Startup proportionately to such Founder’s

Equity Distribution pursuant to Section

4

.1

.

ROLES AND RESPONSIBILITIES

Founder’s Contribution.

The Founders shall, using best efforts, contribute to the development of the Product or Service pursuant to each Founder’s “Role and Responsibility” description as set-out at

Schedule

2

attached hereto.

INCORPORATION AND FORMATION OF CORPORATION

Actions Required.

Once it is determined by a Simple Majority that the Corporation will be incorporated and formed, each Founder shall grant and assign to the Corporation immediately upon its incorporation all of his or her right, title, and interest in and to the Product or Service (including all right, title and interest to intellectual property and all applications thereto), including waiving all moral rights, and assigning all patents, designs, industrial designs, trade-marks, copyrights, trade secrets, ideas (however formed or unformed) and labor and/or work product that results from any task or work performed by the Founder that relates to the Product or Service for the full term of such rights (the “

Transfer

”).

Ownership of the Company:

Each Founder will have an equal ownership interest in the Company. The Founders’ ownership interests need not be represented by a certificate or any other evidence beyond that contained in this agreement. If a Founder requests, the Company will issue a certificate evidencing the Founder’s interest. The certificate must contain a legend noting that the ownership interest is subject to legal and contractual restrictions on transfer.

Transfer to Corporation.

 The Founders acknowledge and agree that any discovery, invention, secret process or improvement in procedure made or discovered by any of the Founders in connection with or in any way affecting or relating to the Product or Service or capable of being used or adapted for use in the Product or Service shall immediately be disclosed to the Corporation and shall belong to and be the absolute property of the Corporation immediately as of and following the Incorporation Date.

EQUITY DISTRIBUTION & VESTING

Equity Distribution.

Subject to this

Section

4

,

on the Incorporation Date,

the Shares of the Corporation shall be issued to the Founders according to the distribution chart below (the “

Founder

Equity

”):

Name

Equity Distribution (%)

[FOUNDER NAME]

[EQUITY PERCENTAGE]

[FOUNDER NAME]

[EQUITY PERCENTAGE]

[FOUNDER NAME]

[EQUITY PERCENTAGE]

[FOUNDER NAME]

[EQUITY PERCENTAGE]

[FOUNDER NAME]

[EQUITY PERCENTAGE]

 

Should the Founders wish to reserve any portion of the shares for future employees or for an option share pool, any such portion of shares reserved will dilute all Founders equally

Ordinary Distribution

.

The Company may (but is not required to) make ordinary distributions to the Founders out of cash received by the Company (excluding new capital contributions or loans), less all accounts payable and reserves against anticipated expenses from time to time as determined by a majority of Founders. All distributions must be made in the following order:

First, in equal proportion to all Founders who have contributed cash that has not been repaid, until each Founder has been paid out to the extent of such contributions in full;

Second, to all Founders in equal proportion.

Vesting.

The Founder Equity to be issued pursuant to

point 4.1

shall vest to each Founder over

[SPECIFY NUMBER OF YEARS FOR VESTING]

, and each Founder shall enter into a customary stock restriction agreement on the Incorporation Date outlining such vesting:

Issuance of shares.

The shares issued to each Founder shall come from the same series and class of shares, such that there are no differences in the rights (including but not limited to voting and distribution rights) accorded to the shares issued to each Founder.

RESTRICTIONS

Restrictions.

The Founders may not transfer, pledge or otherwise encumber any Shares or any ownership or entitlement to ownership of the Corporation or of the Product or Service described herein without the unanimous written consent of the Founders.

MANAGEMENT AND APPROUVAL RIGHTS

Management of the company.

The Company will be managed by the Founders, and a majority of Founders may take any action on behalf of the Company except where explicitly stated otherwise in this agreement. The unanimous written approval of all Founders is required to:

incur any debt on the Company’s behalf or employ its credit, other than receivables to trade creditors in the ordinary course of business not to exceed $250 individually and $500 in aggregate;

initiate any voluntary bankruptcy proceeding;

liquidate or dissolve the Company, or distribute substantially all of its assets and business;

enter into any inbound or outbound license, transfer, or other assignment of protectable intellectual property used in the Project, including any patentable inventions, copyrights, trade secrets, or trademark rights (except for inbound end user licenses for software applications in the ordinary course of business);

approve any contract with a Founder, or an immediate family member or domestic partner of a Founder, or an affiliate of any of the foregoing persons;

raise any equity capital in any amount from any person;

admit any partner to the Company; and

amend this agreement.

OPPORTUNITIES AND

DUTIES TO THE COMPANY

Opportunities

.

The Founders must refer to the Company, in writing, all opportunities to participate in a business or activity that is directly competitive with the Project within

[GEOGRAPHIC REGION]

, whether as an employee, consultant, officer, director, advisor, investor, or partner. The Company will have

[SPECIFY]

days to decide whether to pursue any referred opportunity, and to notify the referring Founder of its decision in writing. If the Company elects not to pursue the opportunity, or if it does not notify the referring Founder of its intent in writing within the

[SPECIFY]

day

s

period, then the referring Founder will be free to pursue the opportunity independently. If the Company elects to pursue the opportunity, but later abandons it, then the referring Founder will be free to pursue the opportunity independently at such time.

Duties

.

Other than as explicitly provided herein, no Founder will have any duty to the other Founders or to the Company, including any fiduciary duty, and including any duty to refer business opportunities to the Company, or to refrain from engaging in activity that is competitive with that conducted or planned by the Company.

CONFIDENTIALITY AND NON-COMPETE

Confidentiality.

The Founders agree to keep all non-public information with respect to Project intellectual property (IP) confidential and not to disclose it to any other party, except (

i

) to attorneys and advisors who need to know in connection with performing their duties, (ii) to potential business development partners and/or investors approved by the Company in writing, and who are bound by a confidentiality agreement in writing, and (iii) in response to an inquiry from a legal or regulatory authority.

The Founders agree to keep the Product or Service confidential; disclosure of the Product or Service will occur only on an as-needed basis and only upon consent of all Founders. Notwithstanding such unanimous consensual disclosures, the Founders shall take all necessary steps to keep the Product or Service confidential until the formation of the Corporation, at which time the Founders shall further detail and define any confidentiality obligations

.

Non-Competition.

Immediately after the incorporation of the Company, the Founders shall not at any time during their term as Founders and for a period of 12 months after they have ceased (

i

) to be a Founder; (ii) to provide services to the Company, whether as a partner, employee, contractor, officer, director or otherwise; or (iii) to hold Shares, whichever is later, alone or jointly or in any capacity whatsoever, directly or indirectly, of

[PROVINCE/STATE

] of

[COUNTRY]

, in connection with any of these transactions, either at a time when they became Shares or at any other time.

pursue, participate, assist, be engaged, concerned or interested in any business competing with the Product or Service;

interfere or seek to interfere or take such steps as may interfere with the continuance of supplies to the Startup (or the terms relating to such supplies) from any suppliers who have been supplying materials, components, products, goods or services to the Startup;

solicit or attract or offer employment or attempt to solicit or attract or offer employment to any person who was a founder, employee, officer or manager of the Corporation at any time without the express prior written consent of the founders; or

use or adopt or purport to use or adopt the name or any trade or business name of the Corporation for any purpose.

 

EXTENSION OF AGREEMENT

Shareholder Agreement.

Upon the formation of the Corporation, the Founders will enter into a Unanimous Shareholder Agreement to formalize all terms of this Agreement, unless otherwise agreed to by all the Shareholders.

New Founders.

Written consent of all Founders is required to approve any additional party to this Agreement.

If a person not named as a Founder hereto joins the Founders in the Startup prior to formation of the Corporation on the basis that such person shall hold an equity interest in the Corporation when formed (a “

New Founder

”), the Founders shall require such New Founder to execute a counterpart signature page and acknowledgement substantially in the form set out at

Schedule

3

attached hereto so that such person is a party to and bound by this Agreement and shall appropriately amend this Agreement.

Additional Investment

.

The written consent of all Founders is required to approve any additional investment in the Company from any party, including a Founder, and to issue any equity securities or rights convertible into the Company’s equity to any party.

Any Founder who receives an offer from any party to invest in the Company will notify the other Founders of the same and provide each Founder an opportunity to participate meaningfully in the negotiations surrounding the potential investment in the Company.

DISSOLUTION OF STARTUP

Agreement Timetable.

Within

[SPECIFY

NUMBER

]

calendar months

of the date of this Agreement, if the Founders have not yet incorporated the Corporation, the Founders agree to discuss the benefits of continued collaboration related to the Product or Service and will discuss a mutually agreeable timetable for the incorporation of the Corporation.

Dissolution.

If only one Founder remains a partner of the Company at any time, then the Company shall continue as a sole proprietorship of the remaining Founder until he resigns, without affecting any rights due to any Founder or former Founder under this agreement.

In the event

t

h

at

no Founder remains as a partner of the Company at any point in time, then the Company will dissolve, and this agreement will terminate immediately upon completion of the winding up of the Company and distribution of its assets and liabilities in accordance with this agreement.

Resignation and Removal of Founders

.

Any Founder may resign from partnership in the Company for any reason or no reason at all by giving written notice to the other Founders. A majority of Founders may remove a Founder from the partnership at any time, for any reason or no reason at all, by giving written notice to such Founder. Upon a Founder’s resignation or removal, the Company will continue and will not dissolve, so long as at least one Founder remains as a member of the Company. The Company will pay out to the resigning or removed Founder his positive capital account balance (if any) within 180 days of resignation, either in cash or with an unsecured note payable within

[SPECIFY]

years and bearing interest at

[SPECIFY]

per year.

Dispute Resolution.

In the event that the Founders are unable to agree on a mutually acceptable separation pursuant to this Section 10, the Founders agree to submit to a binding confidential arbitration to be held in

[CITY]

and conducted by a mutually agreed arbitrator. The Founders agree and acknowledge that all provisions of this Agreement, including the confidentiality provisions, will be binding until the end of the arbitration process. The costs of the arbitration shall be borne equally by all the Founders.

 

 

GENERAL PROVISIONS

Good Faith.

All actions taken pursuant to this Agreement shall be made in good faith without intention to unduly deprive a Founder of any interests, rights or benefits.

Representations and Warranties.

Each Founder represents and warrants that he or she is not a party to any other agreement that would restrict such Founder’s ability to perform its obligations as set forth in this Agreement. Each Founder represents and warrants that no third party can claim any rights to any intellectual property or other proprietary right possessed by that Founder as it relates to the Product or Service.

Unjust Enrichment.

Nothing in this Agreement prevents, blocks or eliminates in any way the ability of a Founder to bring an action against the other Founders or the Corporation for unjust enrichment or for any other similar cause of action.

Corporation to Enforce.

The Founders hereby agree that after incorporation, the Corporation shall enforce the rights and obligations of the Founders hereunder.

Assignment.

This Agreement shall not be assigned by any Founder without the written consent of all other Founders.

Successors / Assigns

. This agreement shall be binding upon and inure to the benefit of the Founders, the Company, their successors, and their permitted assigns.

Notices.

Any notice, consent or approval required or permitted with respect to this Agreement (referred to in this section as a "Notice") shall be in writing and shall be sufficiently given if delivered (in person, by courier or other personal delivery method) or transmitted by facsimile to each Founder at the address indicated beside the name of each Founder in

Schedule 2

attached hereto.

Governing Law and Jurisdiction.

This Agreement shall be governed by and interpreted in accordance with the laws of

[STATE/PROVINCE]

and the laws of

[COUNTRY]

applicable therein.

Severability

. If any provision in this agreement is held to be invalid or unenforceable in any jurisdiction, the validity and enforceability of all remaining provisions contained herein shall not in any way be affected or impaired thereby, and the invalid or unenforceable provisions shall be interpreted and applied so as to produce as near as may be the economic result intended by the parties hereto.

Amendment

/ Waiver

.

This agreement may only be amended with the written consent of all Founders, and none of its provisions may be waived except with the written consent of the party waiving compliance.

Currency.  

Except as otherwise stated herein, all amounts are stated in

[COUNTRY]

currency.

Entire Agreement.

This agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof

and supersedes all prior arrangements or understandings (whether written or oral) with respect thereto.

Agreement Confidential.

The Parties shall keep the terms and conditions of this Agreement confidential except as may be required to enforce any provision of this Agreement or as may otherwise be required by any law, regulation or other regulatory requirement. Notwithstanding the generality of the foregoing, the Parties may disclose this Agreement to his legal and/or financial advisors.

Counterparts.

This Agreement may be executed by the Founders in counterparts and may be executed and delivered by fax or other electronic means, and all such counterparts and facsimiles together constitute one agreement.

SIGNATURE

Acceptance.

By signing below

, each Founder indicates acceptance of the terms of this agreement in their entirety as of the date first written above, and represents and warrants to the Company and each other Founder that he has fully read and understood this agreement, and that to each Founder’s knowledge, no law or third-party obligation would prevent each such Founder from entering into and performing this agreement in full. For the convenience of the parties, this agreement may be executed electronically and in counterparts. Each counterpart shall be binding, and all of them shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the day and year set forth below.

 

 

FIRST FOUNDER SECOND FOUNDER

 

Authorized Signature Authorized Signature

 

Print Name and Title Print Name and Title

 

 

THIRD FOUNDER

 

Authorized Signature

 

Print Name and Title

 


SCHEDULE 1

Description of the Product or Service

[STARTUP-NAME]

Business Model

[ENTER DESCRIPTION]

Product / Service

[ENTER DESCRIPTION]

 

 


SCHEDULE 2

Description of Founders Roles and Responsibilities

Name and Address

Role/Title

Responsibility

[FOUNDER NAME]

Address:

[TITLE]

[RESPONSIBILITY]

[FOUNDER NAME]

Address:

[TITLE]

[RESPONSIBILITY]

[FOUNDER NAME]

Address:

[TITLE]

[RESPONSIBILITY]

[FOUNDER NAME]

Address:

[TITLE]

[RESPONSIBILITY]

[FOUNDER NAME]

Address:

[TITLE]

[RESPONSIBILITY]

 

 


SCHEDULE 3

Form of Counterpart Signature Page

 

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement with effect on the [ day of, 20__]. 





[ENTER NAME OF ADDITIONAL FOUNDER]


 

This does not need to be filled out until or if a new founder is added.


SCHEDULE 4

Initial Capital Contribution of the Founders  

Name

Contribution

[FOUNDER NAME]

[DOLLAR AMOUNT]

[FOUNDER NAME]

[DOLLAR AMOUNT]

[FOUNDER NAME]

[DOLLAR AMOUNT]

[FOUNDER NAME]

[DOLLAR AMOUNT]

[FOUNDER NAME]

[DOLLAR AMOUNT]