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To further clarify, there was a 1 year cliff for vesting, then 2.08333% per month for 4 years. So if you leave inside a year you get nothing. But if you leave after you vest 100% before a transaction you basically get nothing too. Slave for life.I think it's best, though, that we just make up our own questions and answer them while he just enjoys reading all this after his drop-in.
Nope, I'm done. If the words, Property Settlement Agreement, alimony, adultery, TEVIS or other similar words, I'm right back in there WWE tag team style.
Exactly the set-up we had at my last company (private equity owned, now in midst of its IPO). It was just your use of "clawback" that confused me as that is not really what a securities lawyer would call this. But yes, in the context of a private equity company, extremely common to have this repurchase right. They don't want ownership outside of the company at that point. In my case, most people liked it because the stock price had gone up significantly and they got to take their increased value in terms of the stock that they had bought. Where it was tricky was the exercise of options, since they would have to exercise and then hold for six months before the repurchase, hoping the stock didn't crash in the meantime, or just let the options expire. About half did one and half did the other (I let mine expire when I left, which turned out to be the right answer at that time).
Are they not doing routine re-evaluations of the share price? They certainly should be. If so, then as I just outlined in my last post, you should be able to exercise the options and then be subject to the repurchase, which in most cases (depending upon whether the company has made a certain accounting election) might entail a six-month and a day waiting period but you would still get the delta between the exercise price and current value. Or maybe you're saying the stock value has been assumed to stay the same?To further clarify, there was a 1 year cliff for vesting, then 2.08333% per month for 4 years. So if you leave inside a year you get nothing. But if you leave after you vest 100% before a transaction you basically get nothing too. Slave for life.I think it's best, though, that we just make up our own questions and answer them while he just enjoys reading all this after his drop-in.
So I'm completely hosed. Pissed. It doesn't even matter if I "purchase" my vested shares. That's just loaning them money. They can buy it back. When you get options all you think about is vesting, and with stock option calculators fantasize about life changing events. I wrongfully thought that those that were vested, if I put in the time and performed were mine. Nope. Bitter. And I may very well end up walking away from all of it.
"Bad Leaver" means the Manager becoming a Leaver:(a) by virtue of the Manager's own resignation as an employee of, or a
Pretty much every stock option program will provide that if you leave the company, your vested options will be exercisable for a period of time (30-90 days) and then terminate (and of course the unvested go away immediately). If you were in a public company, you could exercise and hold, but yes, I'd venture that in 95+% of PE they will have a repurchase right.
Well, as a matter of fact they are doing a valuation right now of the company as we have to issue new shares. In that case, maybe exercising the options then would allow me to get current fair market value even if I am technically a "bad leaver"?Are they not doing routine re-evaluations of the share price? They certainly should be. If so, then as I just outlined in my last post, you should be able to exercise the options and then be subject to the repurchase, which in most cases (depending upon whether the company has made a certain accounting election) might entail a six-month and a day waiting period but you would still get the delta between the exercise price and current value. Or maybe you're saying the stock value has been assumed to stay the same?To further clarify, there was a 1 year cliff for vesting, then 2.08333% per month for 4 years. So if you leave inside a year you get nothing. But if you leave after you vest 100% before a transaction you basically get nothing too. Slave for life.I think it's best, though, that we just make up our own questions and answer them while he just enjoys reading all this after his drop-in.
ETA: Noticed your "bad leaver" definition. Make sure that's really correct.
I have to be very careful with what I say since I have represented so much PE in the past. Just trying to give you some facts and personal experience, but not advice.
If they wanted me to sign something. I wouldn't be going to a competitor, so maybe. That being said, even current valuation is nothing compared to the multiples we are talking with a sale or IPO in a hot market. We're talking 3X+ more in valuation, and higher multiples than that in net proceeds.
Got it Counselor. Point noted. Thanks. I do have my own attorneys looking into it, but I know the outcome.I have to be very careful with what I say since I have represented so much PE in the past. Just trying to give you some facts and personal experience, but not advice.
Good. I have some ideas and think they will, too.Got it Counselor. Point noted. Thanks. I do have my own attorneys looking into it, but I know the outcome.I have to be very careful with what I say since I have represented so much PE in the past. Just trying to give you some facts and personal experience, but not advice.
Typical "Bad Leaver" defnition in PE EAs is (a) terminated by the Company without Cause; or (b) resignation by the Executive without Good Reason.
And you bring value to the Company in terms of marketing it for sale or doing an IPO. The incentive is working as deisgned.
I know you're the employment expert, but we are talking about executive compensation in PE, not an employment agreement. In having seen literally hundreds of them, I haven't seen the stock options affected by the (b) in your example. In employment agreements, of course, but not in the option component or in the option plan itself.
I agree with this. It sucks not to have realized that this is how the provisions worked, but it's not an unfair result IMO. What I find unusual is that he doesn't get the delta between price then and price now, which he already has put in the work for. That is the point I'm making in my earlier posts, bb.
Maybe I should take one more stab at it since I think you've misunderstood, which likely means I haven't written it well. I'm not surprised at the distinction in terms of what happens when he leaves EXCEPT that he is penalized in the repurchase price for his shares. That is not a provision I've seen. In 100% of instances I've seen or drafted these, the repurchase price "penalty" only applies if you're fired for cause.
I heard it's night and day between language with VC backed companies vs. PE. I'm finding that out now. I do agree incentive is working as planned and as it should. But it still doesn't make it easier to swallow.
And I'm saying that the Bad Leaver provision that Smails is under is exceedingly common. I don't want to get into a #### measuring contest, but I do exec comp work and most of it is with PE. This valuation structure is common - if you're a bad leaver, the repurchase right is exercised at the whatever he bought in at (rather than FMV - or sometimes even the lower of buy-in and FMV). And if you quit without "Good Reason," that is typically a bad leaver situation. Otherwise, if the company was about to fire you for Cause, you could simply tender your resignation and circumvent the bad leaver provision.
Your last sentence has some flaws, but I'm not interested in a #### measuring contest since I don't have one. I realize what you do, but perhaps you should realize what I do as well. Apparently our experiences are very different for whatever reason, but the reason is not "I'm right and you're wrong" in either direction.
I think you might be taking this personally. I know your pedigree and your credentials. I'm not trying to tell you your job or say you're wrong. I'm simply saying that this structure is not as unusual as it has been in your experience.
Not taking it personally--kind of thought you were based on your listing of your credentials. You made a blanket statement that having voluntary resignation as a "bad leaver" is "typical"; my comment is that it is not typical based on my experience.
Not at all. Didn't mean to come across that way and I apologize. I only mentioned my work in response to you doing the same (and suggesting that this wasn't my area). Wanted you to understand that I wasn't talking out my ### in contradicting you. I have 5 such deals on my desk at the moment, and 4 of them have similar bad leaver structures. Maybe PE is just getting more nasty these days.
It has been a year since I put one together or had our outside counsel put together the 124-company survey the GC insisted on.
Seriously, he really did.
Yeah, I was off when I used the EA reference. It's just that I'm usually working on a family of agreements in any of these deals, which include not only EAs, but other incentive comp agreements (Unit Purchase Agreements, Option Award Agreements and Option Plans, Restricted Unit Agreements, Phantom Stock awards, etc., etc.).It has been a year since I put one together or had our outside counsel put together the 124-company survey the GC insisted on.
BTW, didn't mean to suggest this wasn't your area, but only that you referenced employment agreements when this was not an EA issue. Unless your practice has changed, I know it very well since there was a time I was hoping to send you some business.
Deposition fights are heated and boring at the same time.
It's the thing in this world I'm most suited to do. And it just so happens that my professional goals (winning) generally align with my personal goals (helping people who deserve it.)
To what?"Objection, your honor, my client feels so awful about himself and what he's done that the jury can't help but agree with him that he's responsible"
There has to be a legal basis to object--relevance, leading, foundation. If someone is losing their composure you can ask the judge for a break and often you will get it. This was probably not a jury trial so a judge will give you a lot more leeway.That's why you're the lawyer and I'm asking questions.
What about "badgering the witness?"
People will cry without being harassed on the stand.
