Founder's Agreement
Summary
This document is a Founders' Agreement dated June 18, 2024, between Sam Haltman and Elong Musk, outlining their cooperation principles in developing a research lab for Artificial General Intelligence. The agreement covers interpretation of key terms, incorporation and transfer of ownership, titles and responsibilities of the founders, time commitment, initial capital contribution, business and ownership structure, expenses, term and termination clauses, non-competition, confidentiality, intellectual property rights, and dispute resolution. It specifies the roles and responsibilities of each founder, their time commitment, initial capital contributions, equity percentages, and outlines the procedures for termination, share transfers, and dispute resolution in case of disagreements. The document is governed by the laws of California and provides a comprehensive framework for the founders' collaboration and business development efforts.
Key clauses
- The Founders must be aware of the obligations outlined in the Agreement, including the commitment to execute necessary documents (Clause II).
- Founders need to understand the time commitment required, with Sam Haltman committing fulltime and Elong Musk committing parttime (Clause IV).
- Each Founder must contribute an initial capital amount and agree to potential additional contributions (Clause V).
- The ownership structure upon formation of the Company, including share percentages and management by a Board, should be carefully noted (Clause VI).
- The process and conditions for termination, including voluntary termination and exclusion for cause, need to be understood by all parties (Clause VIII).
- The clauses regarding noncompetition, no solicitation, confidentiality, and intellectual property rights impose important restrictions and obligations on the Founders (Clause IX).
Action items
- Sam Haltman commits to fulltime work for five days a week, nine hours a day.
- Elong Musk commits to parttime work for one day a week, nine hours a day.
- Founders agree to make initial capital contributions of $200,000 each.
- Founders must not transfer shares to third parties before twelve months from executing the Shareholders' Agreement.
- The Agreement may be terminated in writing by all parties or will expire after five years.
Potential red flags
- Be cautious about the noncompetition clause as it restricts Founders from competing with the Operating Company for a period of two years after leaving, even indirectly.
- Pay attention to the Buy Back Option that restricts Founders from transferring shares to third parties within twelve months of executing the Shareholders' Agreement for the first time.
- Note the clause on Intellectual Property Rights which states that all IP developed for the Project belongs exclusively to the Operational Company, potentially limiting Founder's rights to their own creations.
Financial terms
- Sam Haltman's initial capital contribution: $200,000.00
- Elong Musk's initial capital contribution: $200,000.00
- Total value of initial contributions from both founders: $400,000.00
- Shares held by Sam Haltman: 200,000
- Equity Percentage of Sam Haltman: 50%
- Shares held by Elong Musk: 200,000
- Equity Percentage of Elong Musk: 50%
Questions for your attorney
- What are the key obligations of each founder according to the Founders' Agreement?
- How is the ownership structure of the company determined among the founders?
- What are the conditions under which a founder can be excluded or terminated from the company?
- Can a founder voluntarily terminate their services with the company, and if so, what are the procedures they need to follow?
- What are the restrictions and requirements related to intellectual property rights as outlined in the Agreement?
Glossary
- Board: The group of directors overseeing the Operational Company.
- Shareholder: A Founder who owns at least one share in the company.
- Exit Date: The date a Founder stops being part of the Project by transferring all their shares.
- Noncompetition: Prohibition for Founders to compete with the Operating Company for a period after leaving the company.
- Intellectual Property Rights: Rights to creations, ideas, and inventions developed for the Project belong to the company.