A Draft Agreement For A Leaving Founding Team Member

A man with a beard wearing a gray shirt
Mark Ridgeon
April 14, 2024
5 min read
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A Draft Agreement For A Leaving Founding Team Member

A Draft Agreement for a Leaving Founding Team Member

Introduction

The departure of a founding team member can be a challenging and emotional experience for both the company and the individual. It is important to handle this transition smoothly and professionally to minimize disruption and protect the interests of all parties involved. A well-crafted departure agreement can help to facilitate this process and ensure a fair and equitable outcome.

Key Considerations

Before drafting a departure agreement, it is essential to consider the following key issues:

  • Reason for departure: Determine the reason for the team member's departure, whether it is voluntary or involuntary.
  • Equity and ownership: Address the distribution of the departing team member's equity and ownership interests.
  • Intellectual property: Establish clear ownership and rights to any intellectual property created by the team member during their tenure.
  • Non-compete and non-disclosure: Consider whether non-compete and non-disclosure clauses are necessary to protect the company's interests.
  • Severance and benefits: Determine the terms of any severance package or continuation of benefits for the departing team member.

Drafting the Agreement

The following sections provide a detailed outline of the key provisions to include in a departure agreement:

1. Introduction

  • State the purpose of the agreement and the names of the parties involved.
  • Specify the date of the team member's departure.

2. Equity and Ownership

  • Determine the percentage of equity or ownership interest held by the departing team member.
  • Outline the terms for the transfer or sale of the team member's equity, including the purchase price and payment schedule.
  • Consider whether any restrictions or conditions apply to the transfer of equity.

3. Intellectual Property

  • Assign all intellectual property created by the team member during their tenure to the company.
  • Specify any exceptions or limitations to the assignment.
  • Grant the team member a non-exclusive license to use the intellectual property for personal or non-commercial purposes.

4. Non-Compete and Non-Disclosure

  • Include a non-compete clause to restrict the team member from competing with the company for a specified period of time.
  • Define the scope of the non-compete clause, including the geographic area and industry sector.
  • Include a non-disclosure clause to protect the company's confidential information.

5. Severance and Benefits

  • Specify the terms of any severance package, including the amount of compensation and the payment schedule.
  • Determine whether the team member is entitled to continue receiving benefits, such as health insurance or retirement contributions.
  • Outline the conditions for termination of the severance package.

6. Release of Claims

  • Include a mutual release of claims to protect both the company and the team member from future legal actions.
  • Specify the scope of the release, including any known or unknown claims.

7. Governing Law and Dispute Resolution

  • State the governing law that will apply to the agreement.
  • Specify the venue for any disputes or arbitration proceedings.

8. Signatures

  • The agreement must be signed by both the company and the departing team member.
  • Consider having the agreement witnessed or notarized for added legal protection.

Additional Considerations

  • Negotiation: Be prepared to negotiate the terms of the departure agreement with the team member.
  • Legal advice: It is advisable to seek legal advice from an experienced corporate lawyer to ensure that the agreement is legally binding and protects the interests of all parties.
  • Confidentiality: Maintain the confidentiality of the departure agreement and the terms of the settlement.

Conclusion

A well-drafted departure agreement can provide a clear and equitable framework for the departure of a founding team member. By addressing key issues such as equity, intellectual property, and non-compete clauses, the agreement can help to minimize disruption and protect the interests of both the company and the individual. It is important to approach the drafting process with professionalism, transparency, and a commitment to fair treatment for all parties involved.

A Draft Agreement For A Leaving Founding Team Member
A man with a beard wearing a gray shirt
Mark Ridgeon
March 30, 2024
5 min read
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