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Stock Agreement is a written agreement or instrument putting forth the restrictive terms of a stock i.e.a stock that is subject to standard transfer restrictions for private company stock and repurchase or forfeiture. The two focal points of entering into restricted stock agreements are
Restricted Stocks thus may be transferred only upon fulfillment of certain conditions mentioned in the agreement mostly that includes a continuous Service for a specific time period which is known as the Vesting Schedule
The Stock Agreement is considered to be a practical agreement so as to ensure the security to the investors who consider a company to be a vehicle of income and profits. For the founders, the company is an investment in the dreams. The bailing out of one founder is usually considered to be a necessity and also to ensure equal participation in the growth of the company.
Founders use restricted stock to ensure that every founder continues to contribute to the corporation. The founders thus impose restrictions upon themselves as per a vesting schedule and a Restrictive Stock Agreement, so that the first right to repurchase the stock lies with the company.
The investors prefer such agreements to safeguard their concerns that the founders don’t bailout from the company because an investor is putting its funds into the founders. Thus investors shall consider it in their interest that the founders continue to contribute to the company and will then demand a vesting schedule.
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