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by dragonwriter 1120 days ago
So, assuming that the section prohibits transfer without approval (you left out that part), the agreement explicitly includes a forward contract, so what you are looking for is advice on how to break the contract without getting caught, right?
1 comments
stock-throwaway 1120 days ago
I'm asking if anyone else has had experience with this.

After talking to several credible people, apparently forward sales are not uncommon even though they do violate the contract. The reason being that (1) the company doesnt have to know about it so (2) they don't need to revalue the company and (3) its not going to be widely available to employees so they can start slacking off. Also (4) they say that a company has never sued an employee over this kind of this and probably will never because it would look bad for the company to sue their own early employee.

So I'm just wondering: who are these people and are they willing to talk about the experience? I'm told that these deals do happen.

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timssopomo 1120 days ago
They happen.

The company has no mechanism for determining that a person has entered into a contract unless someone tells them. Prohibitions on transfers prevent the cap sheet from growing, and the company from getting marked to market when they don't want to. Also makes it easier to create golden handcuffs.

There is always a nonzero chance that the deal falls through because the you are the first to get sued and lose their shares. If it were me, I'd want the contract to eliminate my liability in that scenario. If it were to happen, the buyer would very likely litigate on their own behalf rather than lose the shares that they paid for. These contracts are much more of a negotiation than a straightforward asset purchase on a stock exchange.

Tl;dr the options agreement is a private contract and so is the forward sale. If you're going to enter a forward contract and take hundreds of thousands or millions of dollars, you need a competent lawyer to scrutinize the contract and limit your downside liability. Then it's up to you and the buyer if the risk/reward is worth it.

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