[mrajcok]

Another option that I successfully negotiated for is purchasing shares outright at fair market value using a 51% recourse promissory note due in 10 years at the IRS minimum interest rate.

This avoids the exercise window and acquisition concerns, is pretty tax favorable, and largely aligns your treatment with the founders. It is a bit riskier even if the company agrees to offset the loan with bonuses over time, but at lower valuations I think it is worth considering.

In any case, it's worth it to have a good lawyer look over all your options paperwork to make sure you are getting a fair deal.

[ant6n]

What's a " 51% recourse promissory note"?

[mrajcok]

Instead of paying for the shares with cash now, I agree to pay for them in 10 years, paying interest at the minimum rate the IRS will allow (~2%). The 51% recourse means that the shares themselves are the only collateral for 49% of the loan amount (to limit my risk if the company goes bankrupt and a creditor tries to actually collect on the note).

[ant6n]

Interesting. Why not use the shares as 100% collateral?

[mrajcok]

The IRS will treat it as an option rather than a purchase if the shares are the only collateral, resulting in worse tax treatment.