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Sweat Equity Agreement
"I need a Sweat Equity Agreement for my technology startup to bring on a senior software developer, offering 5% equity vesting over 3 years with a 6-month cliff, in exchange for leading our product development and building our core platform."
1. Parties: Identification of the company and the service provider entering into the sweat equity arrangement
2. Background: Context of the agreement, including the company's business and the service provider's expertise
3. Definitions: Key terms used throughout the agreement
4. Services: Detailed description of the work/services to be provided by the service provider
5. Equity Compensation: Details of the equity being offered, including type of shares and total amount
6. Vesting Schedule: Timeline and conditions for the equity to vest
7. Valuation: Method for determining the value of the equity for tax and other purposes
8. Representations and Warranties: Statements of fact and promises by both parties
9. Confidentiality: Protection of company and project confidential information
10. Intellectual Property Rights: Assignment of IP created during the service period
11. Term and Termination: Duration of the agreement and conditions for ending it
12. General Provisions: Standard legal clauses including governing law, notices, and amendments
1. Non-Competition: Restrictions on competing activities, used when service provider has access to sensitive information
2. Non-Solicitation: Restrictions on soliciting employees or customers, used for senior roles
3. Board Observation Rights: Rights to attend board meetings, typically for significant equity holders
4. Tag-Along Rights: Right to join in sale of shares, useful for minority shareholders
5. Drag-Along Rights: Obligation to join in sale of shares, useful for company exit scenarios
6. Tax Provisions: Specific tax treatment and obligations, important for complex arrangements
7. Dispute Resolution: Specific procedures for resolving disputes, useful for international agreements
1. Schedule A - Description of Services: Detailed scope of work and deliverables
2. Schedule B - Vesting Schedule: Detailed breakdown of vesting timeline and milestones
3. Schedule C - Share Rights and Restrictions: Detailed terms of the share class being issued
4. Schedule D - Existing IP: List of pre-existing intellectual property excluded from assignment
5. Appendix 1 - Share Transfer Form: Template for transferring shares upon vesting
6. Appendix 2 - Tax Election Forms: Required tax forms for equity issuance
7. Appendix 3 - Shareholders Agreement: Company's existing shareholders agreement to be signed
Authors
Technology
Startups
Professional Services
Consulting
Software Development
Creative Industries
Financial Services
Healthcare
E-commerce
Digital Media
Biotechnology
Clean Technology
Legal
Human Resources
Executive Leadership
Finance
Corporate Development
Operations
Administration
Compliance
Founder
Co-Founder
Chief Technology Officer
Chief Marketing Officer
Software Developer
Product Manager
Business Development Executive
Creative Director
Technical Architect
Strategy Consultant
UX Designer
Financial Advisor
Marketing Strategist
Operations Manager
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