I am the VP in question from a previous post (question id: 123690. "VP
Compensation". Please refer to it). I would like to state some missing
facts and get an answer with clarification.

The big piece of information missing from the original question is
that the company and i entered into an written agreement in April that
i was to receive 15% of gross sales (yes, gross sales). We have a
signed agreement in place that i am to receive 15% of gross sales on
all products in exchange for helping this company transition into a
product based software company under the title "VP of Marketing". The
company had been doing consulting for 4 years prior and had no
experience in building and selling commercial software products. They
were paid for their consulting work. This last year they paid
themselves from savings they had, and I paid myself from revenue from
another business I own. They had several ideas for products and needed
my help to bring these products to market. As the products were being
developed, I did everything to promote the software and also to
promote company to the big company that wishes to acquire us today.

In addition to this, I contributed approx. $2K in software, purchased
a $1,400 printer that we used to print product flyers, negotiated over
$8K in savings to exhibit at two key tradeshows, and gave the company
a full blown e-commerce website which i developed over several months
for my other company. The web site alone is worth $10-$15K. I
initially also agreed not start taking commissions until we made over
$5K in sales, then later increased the threshold to $20K in sales.
That's $3K in commissions i donated to the company. I have yet to see
a dime for any of my efforts in working with this company.

Now that we are in the final stages of negotiations to be acquired and
a deal seems imminent, the company feels that my efforts are not as
valuable as they were 8 months ago. We have nothing in writing with
respect to a company acquisition, only that i am to receive 15% on
gross sales. The company is offering me 6.5% of a possible company
acquisition. I feel that i am entitled to the full 15%.

The original answer to their post, which they used to offer me this
6.5% compensation, stated:

> Note that if there was any agreement, whether written or verbal, you
will
> most likely need to compensate him at the very least in line with
this agreement.

The answer is yes. We have an agreement that i am to receive 15% of
gross sales.

Going back in time to "renegotiate" my contract and give me 1-4% in
equity with a hypothetical $150K salary is unacceptable to me. I was
never offered such a deal and the company had no money to make such an
offer. The company does not owe me $150K in back wages if they go out
of business tomorrow. I took the risk to cash in on future success.
15% seemed fair everyone 8 months ago, why does it not seem fair now?

The question is: 
Am i entitled to the original 15% of a possible company acquisition? 
If not, what percentage would be fair and how did you arrive at this?

ac

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Request for Question Clarification by ragingacademic-ga on 04 Jan 2003 17:52 PST

acblue -

Thanks for seeking me out and directing this question to my attention.
 However, it would be a conflict of interest for me to provide you
with paid advice given that I had already provided advice to your
employer in this matter.

I will therefore not provide a specific reply to your request here.
However, allow me to suggest the following -
+ It sounds like you had no apriori equity agreement; basically, you
had an understanding regarding what would essentially have been a
commission on sales, at a level that is appropriate for someone with
the experience I gather you have.  Therefore, you could have ended up
with absolutely nothing - and with no claims, either, given the
structure of the written agreement you have noted (there could be more
to it than you had let on here, but that's all I know!).
+ If you still feel that the settlement you have been offered is not
fair, I suggest that you and the partners agree on a lawyer you all
respect and allow him to facilitate an arbitration process.  However,
you should all enter this process with an understanding that whatever
this individual decides will stand.  You should definitely consider
that you may end up with less than you have already been offered.

If you would like additional advice from this forum, I suggest that
one of my colleagues help you out.  They can review the previous post
and this new information and provide additional recommendations.

Please let me know if you have any questions concerning this
clarification - simply reply to the clarification request and I will
be alerted to address your additional notes.

Good luck!
thanks,
ragingacademic

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Clarification of Question by acblue-ga on 04 Jan 2003 19:00 PST

Thanks for the reply. I've been advised to remove this question until
i have a meeting with the company this week. A possible agreement may
already be in hand. Thanks again.

Acblue,
From what I understand from both question id: 123690. "VP
Compensation" and what you have said, there has not been any formal
agreement on the event of aquisation.
Normally, for both small companies and corporations, a compensation
agreement is written (which may include accelerated stock option for
executives, continuely paid salary/premiums for a given period, cash,
etc) and otherwise the company is in no obligation to pay any part of
the aquisation amount unless you own a certain share.
As you may know, normally, when executives are recruited they are
offered cash (base salary and/or commission) and stock/option to claim
a share of the company.  In this case, the only agreement has been for
the cash portion and thus the only obligation they owe is the
compensation for your work and costs.
However, the company acknowledges your efforts and value and is
willing to give a fair share; which leads to the question both you and
the company is seeking..what is the fair amount that is owed to you.
From the information given, and from experience, the following is the
step taken to calculate the what would be considered the most fair
compensation.
First, project the future revenue for the next three years and request
15% of that amount.
Second, if the company acknowledges that you were a crucial part of
this aquisition (as in it could not have happened without you), then
you can be paid the normal amount a brokerage would be paid (around
2%).
Third, add all the expense and contribution that you have paid.
Thus the fair amount would be the higher value of the total of these
three factors or the 6.5% (as offered by the company).

Normally, most software companies (small and large) pay a base salary
plus commission(5-10% of revenue) so for a relatively new/small
company, 15% can be considered appropriate.  This depends on your
rationale behind why you think 15% is reasonable...you could have
decided that the revenue projection should be for four years or five
years (it is never more than five years as most future plannings are
only done up to five years) or the aquisation amount may not be as
large as speculated.

An important point to consider in the case of being merged is what
your position will be after you are merged...whether you will remain
in the company or not.  If you are still part of the company after it
is aquired, then there will be an extensive negotiation with the
parent company.  If this is the case, please feel free to ask a
question directed to me and I will be able to provide cases and
opinions.

If you would like any clarifications or do not agree with what I've
said, please feel free to request clarification; if this is the case,
any additional information (such as describing the commitment to the
company or estimating the aquisation amount) you can provide will help
me get a better understanding.

Thank you,
Tox-ga

Not a an easy question to answer, and the response was a good effort.
Its missing concrete references and examples of how to arrive at what
may be fair. I can't point to any specifics in this answer, so our
situation is still divided. Anyway, we have a meeting this week and
we'll see how that goes. Overall, these are still good problems to
have. I think the perfect solution will play back seat to a finding a
good compromise.