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Terms from our VCs provide for the company's right to repurchase for fair value all of an employee's vested stock upon his resignation. How should we respond?
Founders should resist this provision. Employees are willing to accept risks associated with start-up companies because of the long-term value of the stock they receive. Recruitment will be harmed because the risk that vested stock will be repurchased at a price below its value upon the company's IPO or sale will be unacceptable to savvy employees. Vested stock should not be subject to repurchase because an employee resigns for health, family or lifestyle concerns. In addition, these provisions often trigger disputes concerning fairness and self-dealing.
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