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Ownership Agreements > Transferability of Ownership - Pg. 40

First Steps 40 All other option grants are non-qualifying. When the grantee exercises, she recognizes OI on the spread, subject to income and employment withholding. Any additional gain in security is treated as capital gains. Ownership Agreements Ownership agreements are contracts that govern relations among owners of an enterprise including what owners can do with their shares/membership interests/partnership interests, how an owner leaves the company, and so forth. These are extremely important contracts as they set many of the ground rules for resolving conflict and allocating power, so be sure you have experienced counsel helping you. Transferability of Ownership All founders and founder-employees should sign a shareholders' agreement--sometimes referred to as a stock purchase agreement or buy-sell agreement --granting the company the ability to main- tain ownership with the ship's current crew and to provide liquidity in particular situations as nec- essary. This agreement lays out the valuation methodology, order of purchaser priority (to whom the share is offered first, second, and so forth), and to whom a shareholder may sell in the event she leaves the company. The three primary means of regulating share ownership are the right of first refusal, the buy/sell, and the co-sale agreement. · Under a right of first refusal, the company has first pick of any shares sold by the founder/ employee at the price being offered to the founder/employee by a third party. This has the func- tional effect of parking the stock; no buyer wants to negotiate a price knowing that it will be offered to an outside party. · The buy/sell agreement generally stipulates that: