The Co-Founder Vesting Agreement is a crucial document for startups and new businesses in Saudi Arabia, particularly those seeking to establish clear equity arrangements among founding members. This agreement becomes essential when multiple founders are involved in establishing a company and want to ensure long-term commitment and fair distribution of ownership. It details how and when co-founders earn their equity stakes, typically through a combination of time-based and performance-based vesting schedules. The document must comply with Saudi Arabian legal requirements, including the Companies Law of 2015 (as amended) and Shariah principles, while addressing specific scenarios such as founder departure, company sale, or termination. It serves as a protective mechanism for both the company and individual founders, ensuring that equity is earned through demonstrated commitment and contribution to the business.
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1. Parties: Identification of all co-founders and the company, including their full legal names, addresses, and registration details
2. Background: Context of the agreement, including company formation details and the purpose of the vesting arrangement
3. Definitions: Key terms used throughout the agreement, including technical terms related to vesting, shares, and triggering events
4. Vesting Schedule: Detailed timeline and conditions for share vesting, including cliff periods and monthly/quarterly vesting provisions
5. Share Allocation: Initial share distribution and final intended share ownership post-vesting
6. Founder Commitments: Required commitments, responsibilities, and time dedication from each founder
7. Transfer Restrictions: Limitations on share transfers during the vesting period and right of first refusal provisions
8. Termination Events: Circumstances that trigger accelerated vesting or share forfeiture
9. Company's Rights to Repurchase: Terms under which the company can repurchase unvested shares
10. Representations and Warranties: Founders' confirmations regarding their capacity to enter the agreement and ownership of shares
11. Confidentiality: Protection of company and co-founder confidential information
12. Governing Law and Jurisdiction: Specification of Saudi Arabian law as governing law and relevant courts for dispute resolution
1. Intellectual Property Assignment: Required when founders are bringing existing IP to the company or developing new IP
2. Non-Competition: Restrictions on founders engaging in competing businesses, used when there's significant risk of competitive activities
3. Tag-Along Rights: Minority shareholder protections, included when there's potential for majority stake sales
4. Drag-Along Rights: Majority shareholder rights to force minority participation in sale, used for potential exit scenarios
5. Death and Disability Provisions: Special vesting treatment in case of founder death or disability
6. Dispute Resolution Mechanism: Detailed arbitration or mediation procedures, included when parties prefer alternative dispute resolution
7. Good/Bad Leaver Provisions: Different treatment of vesting based on circumstances of founder departure
8. Shariah Compliance Declaration: Specific declaration of Shariah compliance, included when required by Saudi authorities or investors
1. Schedule 1: Vesting Schedule Details: Detailed breakdown of vesting dates, percentages, and milestones
2. Schedule 2: Share Capitalization Table: Current and post-vesting share ownership structure
3. Schedule 3: Company Information: Detailed company registration information and corporate structure
4. Schedule 4: Founder Information: Detailed background information on each founder and their initial contributions
5. Schedule 5: Key Performance Indicators: Specific performance metrics tied to vesting conditions, if applicable
6. Appendix A: Share Transfer Forms: Template forms for executing share transfers
7. Appendix B: Deed of Adherence: Template for new shareholders to join the agreement
8. Appendix C: Regulatory Compliance Checklist: List of Saudi Arabian regulatory requirements and compliance steps
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