Event of a sale prior to vesting schedule completion


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Starting to work with our legal team and its time to expand the team. A few questions on the vesting schedule.

Employee 1: CFO position
I am bringing in a CFO from a financial background with other talents. He will be given a 10% equity position vested over a period of 1 year. In the event of a sale prior to the vesting cycle, will he be given the promised 10% (less dilution) or the % position at the time of the sale?

What language needs to be included in the event of a termination, should the company have the right to buy our the position on termination?

What are the thoughts on including a cliff (1month) to serve as a "tryout period"

Equity Stock Options Vesting

asked Oct 21 '11 at 12:11
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Eric Littleton
107 points

2 Answers


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A one-year vesting schedule is a fast schedule. What's more typical is 3-4 years with a cliff after the first year.

Whether your vesting schedule "accelerates" is a decision you and you co-founders need to make. It's a confusing subject and companies treat it differently. Here's a good post
from Venture Hacks and another from Brad Feld's blog that'll help get you up the learning curve.

answered Oct 22 '11 at 00:00
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Dmiller Conj
156 points
  • Our business is kind of a boom or bust, we will know one way or another in 6 months (the reason for the schedule). – Eric Littleton 8 years ago

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Your proposal seems very generous both in terms of vesting and percentage. A typical vesting schedule is 4 years with a 1 year cliff. 10% seems huge for a non-founder. It seems like a bad idea to give away so much in just one year. This CFO may not work out at all.

For senior management, it is fairly typical to have an acceleration of vesting of stock options in the event of a sale. So if you were acquired six months after hiring him, he would be fully vested at that point even if it was a typical 4 year vesting plan.

Regarding, buyout in the event of termination, ask your legal counsel. I suspect that this is not allowed as it would be too easily abused.

answered Oct 21 '11 at 23:10
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Kekito
1,936 points

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Equity Stock Options Vesting