Are your options on paper? Lawyer is a good idea, and even if you have any informal documentation like emails you should be in decent shape, but having this hard on paper is the only way to be sure. In the absence of an anti-dilution clause, the wording of however you acquired your 10% will help to define the intent and whether you can actually resist the dilution.
If you feel there is a lot of potential in the stock, don't skimp on legal fees. I was involved in a bit of a complicated shares (not option) situation and $1500+USD was certainly worth it in the end.
As others have said, the rational thing to do would be pro-rata dilution.
Your real problem though is why didn't they ask for that in the first place. It looks like they want to squeeze you out and you should have a transparent discussion about that first.
What you're looking for is an anti-dilution clause. There may be one in the stock option agreement that prevents this. If not, whether they can do it is going to depend on the stock option agreement and the laws of the state where they are incorporated. I believe the best advice for you is to find a lawyer in the state where the company is incorporated and hire them. It sounds to me like you've already gotten a raw d…
On the other hand, it is standard advice in the venture-backed startup world to NEVER give an anti-dilution clause - I've heard the words "never give an anti-dilution clause to anyone unless they're God, and even then he'd better be giving you a term sheet worth its weight in gold." Unless you were aware of such a clause, it's unlikely that it's in there. At the end of the day, without a clause like that, the parties with the controlling stake in a company can issue shares to whomever they want - I'm assuming that they're issuing shares to themselves and not to you in order to implement this options-pool extension, and not literally taking away your (vested) common stock - now THAT would be illegal. My understanding is that there are some SEC regulations that prevent them from just distributing shares to a few people, but these are hard to enforce, and you'd need to basically sue your cofounders without a guarantee of success (e.g. what Savarin tried to do at Facebook).
Have you, you know, TALKED TO THE REST of the founders? I don't think they are out to get you and in the process distract the startup or get terrible press.
Seems people here are talking about lawyering up too fast, without knowing whether a proportional dilution has even been discussed.
What you're looking for is an anti-dilution clause. There may be one in the stock option agreement that prevents this. If not, whether they can do it is going to depend on the stock option agreement and the laws of the state where they are incorporated. I believe the best advice for you is to find a lawyer in the state where the company is incorporated and hire them. It sounds to me like you've already gotten a raw d…
> I believe the best advice for you is to find a lawyer in the state where the company is incorporated and hire them.
The value of this advice depends on the value of the options; but I agree. You need a lawyer to represent your interests separately from the company. It sounds like there are a few different stakeholders here: OP, the other employee shareholders, and the investors. If there are other employees who are being similarly diluted, maybe try to join up with them.
The biggest reason for this is that retaining a lawyer allows you to remove yourself from the situation and continue to be effective in your job. Let your lawyer have the nasty arguments and keep yourself out of it.
You definitely want a lawyer, but on the face of it, this is an aggressive move by your partners. The start of a fair negotiation would be equal pro-rata dilution. So if it was 45/45/10, and you want to make 12% in the options pool, you should get diluted 12%, just like them. That would mean they'd go down to 39.6% and you would go down to 8.8%. Since you're remote and the company is growing, I would personally expec…
He can exercise his options. Which means he needs to pay money right now to own actual stock of company. Which is unsellable without a buyer.
Strike price might be really really cheap, though, if he got options before they had funding.
It's a little harder for them to screw you out of ownership than out of unexercised options. But just a little.
Assume positive intent. They might not be out to fuck you -- they might just not have thought about it from your perspective.
Let them know that you think it's unfair because you're diluting much more than them proportionately.
Help them understand that you're in this for the long run (even if you're not sure, founders want to hear that: stability in senior team is something they value) and you want to be incentivised. Many founders tend towards underestimation of problems and overestimation of their own abilities, and they may interpret seed money as an opportunity to replace you. You were a guy who joined when they didn't have access to the hiring market. Now they have money they will have a bit more access.
What you're looking for is an anti-dilution clause. There may be one in the stock option agreement that prevents this. If not, whether they can do it is going to depend on the stock option agreement and the laws of the state where they are incorporated. I believe the best advice for you is to find a lawyer in the state where the company is incorporated and hire them. It sounds to me like you've already gotten a raw d…
On the other hand, it is standard advice in the venture-backed startup world to NEVER give an anti-dilution clause - I've heard the words "never give an anti-dilution clause to anyone unless they're God, and even then he'd better be giving you a term sheet worth its weight in gold." Unless you were aware of such a clause, it's unlikely that it's in there. At the end of the day, without a clause like that, the parties…
Without an anti-dilution clause, early investors can be stomped all over by later investors.
NB: I'm not disagreeing with your arguments for why anti-dilution clauses are bad. But minority shareholders are otherwise relying on the trust from the board, which has every incentive to screw them over, so it's a no-win situation.