Meaning
Contract under which an individual purchases shares that are subject to vesting or repurchase rights by the issuing company. Signing a restricted stock purchase agreement means the buyer does not fully own the shares until certain conditions are met. This document is used to ensure that employees and founders stay with the company for several years.
It is a standard tool in early stage finance.
Vesting Requirement
Requirement for staying at the company for a fixed time is the most common restriction. In a restricted stock purchase agreement, the record of the vesting schedule shows when each share becomes the property of the employee. If the employee leaves early, they lose the unvested shares.
Repurchase Right
Right of the company to buy back the shares is a key feature of the agreement. Under a restricted stock purchase agreement, the company can buy back unvested shares at the original price if the person leaves. This protects the company’s equity.
Ownership Restriction
Restriction on the sale or transfer of the shares is also part of the contract. Within a restricted stock purchase agreement, the owner cannot sell their shares to a third party without the company’s permission. This keeps the ownership group small.
The agreement is binding.