[samsheen]

Few questions for you before any advice can be given

1. Do you have any official documentation over the ownership of startup?

2. If so, how much do you and the other founder each own and what are the vesting periods?

3. Does the CEO have any equity and if so, what is his vesting period?

4. When you voiced your concern with your founder, what else did he say? Did he brush aside your concerns or adequately address them, while saying that keeping the CEO in place is important for the business.

[temp123aa]

1- Papers are on the way. The corporation is done but not signed. The assets and IP are still owned by our current partnership (50/50) and need to be transferred when the time comes.

2- 37.5, reverse vesting for 4 years with a 1 year cliff. Which I disagree at the moment as I feel we should have something already as we worked 2 years on it already.

3- 25, reverse vesting for 4 years with a 1 year cliff.

4- I would say brushed them aside, but it's more complicated than that.

Ex:

We had an advisor prior to the CEO that we promised some equity in exchange for his council. When the CEO came in and met him, his intentions were to get rid of him from the start, but he was never clear about it. He's the type of person who won't speak his mind directly in order to avoid confrontation.

Our relationship with the previous advisor totally fizzled last friday as he finally understood that he's not going to get anything except stock options of a future value of 20/30k for his previous services.

The way the CEO handled the whole thing raised a big red flag for me as I considered his behavior very dishonest. While my co-founder said to me that the way he handled everything wasn't dishonest and that was the only way he could have handled it without causing more fuss.

As I understand it, the reason why he chose not to keep the previous advisor were:

1- He was asking for a lot of equity. I agree with this.

2- He didn't have any previous background with startups, but had run 3 successful companies in the past. As I call it, he had a lot of business wisdom.

3- Their values and style were totally opposite, as the advisor was more upfront, like me. He didn't like him from the start.

[sohax]

IMO the reverse vesting is unjustified. You typically see it after raising a round, as a way for investors to protect against founders immediately leaving a newly funded company with shares that have "real" value now. Bringing on your CEO isn't that kind of event; the reverse vesting only protects the new CEO, and he's not putting in a real investment up front (an investor is putting in $X dollars today; your new CEO is building equity over time like you guys).

You and your technical cofounder should be compensated in equity for the two years' work you put in. If you get pushed out of the company before your cliff, you will have nothing to show for your efforts. I'd really fight for two years' vested stock up front.

[temp123aa]

How is that protecting him if he has a cliff too? I'm sincerely asking. I'm a total noob when it comes to lawyer stuff and I'm learning everything on the spot right now.

In fact, I'm not signing anything until my lawyer approves.

[sohax]

Sorry, I meant to say that it only benefits him. It's great that you're consulting a lawyer! I'd definitely talk to him/her about the reverse vesting.

A cliff generally protects shareholders against someone leaving with shares before spending a meaningful enough amount of time at the company to add value.

Imagine if you incorporated two years ago, and you started your cliff clock and vesting schedule then. Ask yourself and your co-founders: would it be fair to you to allow reverse vesting now, when your new CEO joined? To give up all your vested shares up to this point, and start from scratch with no vested shares and a new cliff?