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The Founder Stock Restriction Agreement is a fundamental document used when establishing ownership structures in Canadian startups and emerging companies. It is typically implemented at company formation or during early-stage financing rounds when founders receive their equity stakes. The agreement serves multiple crucial purposes: it protects the company by ensuring founder commitment through vesting provisions, maintains control over share transfers, and establishes clear mechanisms for share repurchase if a founder departs. The document must comply with Canadian federal and provincial corporate laws, securities regulations, and tax requirements. Key elements include vesting schedules, transfer restrictions, repurchase rights, and tag-along/drag-along provisions. The agreement is particularly important in scenarios involving multiple founders or when external investors require founder equity to be subject to vesting and transfer restrictions.

1. Parties: Identifies the company, the founder(s), and any other relevant parties to the agreement

2. Background: Sets out the context of the agreement, including the company's incorporation details and the founder's relationship

3. Definitions: Defines key terms used throughout the agreement, including types of shares, vesting periods, and trigger events

4. Share Issuance: Details of the shares being issued to the founder, including class, number, and par value

5. Vesting Provisions: Specifies the vesting schedule, including cliff period and monthly/quarterly vesting thereafter

6. Transfer Restrictions: Outlines restrictions on the founder's ability to transfer, sell, or encumber the shares

7. Company's Right of Repurchase: Details the company's rights to repurchase unvested shares upon certain trigger events

8. Repurchase Price: Specifies how the repurchase price will be calculated in different scenarios

9. Founder Representations: Founder's warranties regarding capacity, understanding, and compliance with securities laws

10. Company Representations: Company's warranties regarding authority, share issuance, and corporate approvals

11. Tag-Along Rights: Provisions allowing the company or other shareholders to participate in any sale of shares

12. Drag-Along Rights: Provisions requiring the founder to participate in a company sale if approved by specified shareholders

13. Confidentiality: Obligations regarding confidential information and trade secrets

14. General Provisions: Standard clauses including notices, amendments, governing law, and dispute resolution