Employment Agreement with stock options only

January 18, 2025

by a searcher from Harvard University in Toronto, ON, Canada

Anyone worked with employment agreement with only stock options and no base pay?
Throw some information about do' and don'ts most appreciated

Negotiating a GA deal with such for an extended family member of seller, who worked as a vendor but holds lot of relationships. Want to get him on vested stock option with no other base pay until exit.

TIA

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Reply by a professional
from University of Virginia in Holmes, NY 12531, USA

Definitely not uncommon in the early stage venture space - both in cases in which the employee is granted x% of the outstanding shares as of the effective date., and in others in which the grant is assigned a cash value (within these, some stay all equity, in others, the employee may have the opportunity to replace or supplement the equity consideration with cash consideration if the business hits certain thresholds). I'd be happy to discuss in detail if helpful, shoot me a note at redacted anytime. Among so very definite dos: (a) don't forget about relevant securities laws; (b) to the extent feasible, prob want to structure to offer the employee the best potential tax treatment if the equity pops; (c) ensure genuine mutual understanding re: vesting schedule (whether time-based, milestone-based, or a combo); (d) ensure genuine mutual understanding re: any dilution protection, or pro rata participation rights; (e) make sure you're not inadvertently overcomplicating your cap table; (f) crystal clear on whether the shares, by their nature, are preferred/common or performance-based/incentive. All the best, Matt

Reply by a searcher
from Grantham University in San Antonio, TX, USA

This is different. Please keep us posted as to how this works out.

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