The Sweat Equity Agreement is primarily used in startup and growth-stage companies operating under Austrian law, where cash resources may be limited but the need for specialized expertise is high. This document is crucial when companies want to attract talented individuals by offering ownership stakes instead of immediate cash compensation. It covers essential aspects such as service scope, equity percentage, vesting schedules, and value assessment, while ensuring compliance with Austrian corporate law (UGB, GmbH-Gesetz, or Aktiengesetz), labor regulations, and tax requirements. The agreement is particularly relevant in scenarios where companies need to formalize contributions from founders, early employees, or consultants who are willing to work for equity compensation, either partially or entirely.
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1. Parties: Identification of the company and the service provider, including full legal names and addresses
2. Background: Context of the agreement, including the company's business and the service provider's expertise
3. Definitions: Key terms used throughout the agreement, including technical and legal definitions
4. Services: Detailed description of the services to be provided, including scope, quality standards, and timeframe
5. Equity Compensation: Details of the equity stake offered, including percentage, type of shares, and vesting schedule
6. Vesting Terms: Specific conditions and timeline for the vesting of equity, including any cliff period
7. Valuation: Agreed method for valuing the services and corresponding equity
8. Tax Implications: Overview of tax treatment and responsibilities of both parties
9. Representations and Warranties: Statements of fact and promises made by both parties
10. Confidentiality: Provisions protecting company information and trade secrets
11. Intellectual Property Rights: Assignment of IP created during the service period
12. Term and Termination: Duration of the agreement and conditions for ending it
13. Governing Law: Specification of Austrian law as governing law and jurisdiction
1. Non-Competition: Restrictions on competing activities, used when the service provider might have access to sensitive business information
2. Board Observation Rights: Rights to attend board meetings, included for significant equity stakes
3. Tag-Along Rights: Rights to join in sale of shares, relevant for minority shareholders
4. Drag-Along Rights: Obligation to join in sale of shares, included for majority shareholder protection
5. Employee Status: Clarification of employment status, needed when service provider might be considered an employee
6. Performance Metrics: Specific KPIs or milestones, included when equity vesting is tied to performance
7. Dispute Resolution: Alternative dispute resolution procedures, optional when parties prefer arbitration
1. Schedule A - Service Description: Detailed scope of services and deliverables
2. Schedule B - Vesting Schedule: Detailed timeline and conditions for equity vesting
3. Schedule C - Share Capital Structure: Current and post-investment share capital structure
4. Schedule D - Valuation Methodology: Agreed method for calculating service value and equity
5. Schedule E - IP Assignment: Detailed terms of intellectual property transfer
6. Appendix 1 - Company Articles: Current articles of association
7. Appendix 2 - Shareholders Agreement: Existing shareholders agreement (if applicable)
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