Absolutely zero surprise on my side. VCs, and acquiring companies are always looking to maximize their return, as legally as possible during an M&A deal, even (sometimes particularly) if that means screwing over employees who are no longer with the company.<p>I actually like the honesty of this quote:<p>"Silver Lake declined to comment. When asked about Lee’s situation, Skype spokesman Brian O’Shaughnessy said, “You’ve got to be in it to win it. The company chose to include that clause in the contract in order to retain the best and the brightest people to build great products. This individual chose to leave, therefore he doesn’t get that benefit.”"<p>Most people will look at it and say "What an Asswad" - but at least he's not being a hypocrite. That's precisely what everyone in the M&A team is _thinking_ they just aren't _saying_ it.<p>This is another take on what Oracle did when they bought Oblix (I had just left Oblix in 1999) Oracle gave MegaBonuses to all the existing employees and executives, two of the founders, and paid absolutely nothing for the common shares. The acquisition price was still $100Million plus, but there was only enough money to cover the preferred options + liquidation preferences in the "on the record" purchase prices. Effectively, they wiped out all the employees who were common shareholders, but no longer with the company (or were part of the 15-20 out of 100 who were laid off during the acquisition) while taking care of the VCs and the acquired employees. (As a side bonus, they called the money they gave to the acquired employees "Retention Bonuses" - which resulted in the top people having to hang around for another year)<p>Lesson to be learned: When you leave a company, and it is still private - if they are Sold, instead of going public, there are probably any number of ways that you will get wiped out if you are no longer with them - possible exception if you are a founder with a significant percentage of the company, and you might be able to raise a stink for minority shareholder rights. Then you'll get a "consulting bonus" to shut you up.<p>This story is more common than not.
1. By no means do I want to defend Skype here, but the prose in the linked documents isn't especially incomprehensible, at least not for documents of this type.<p>I teach contract drafting to third-year law students. It's hard work to take a complex if-then-else concept and render it in plain English.[a]<p>And here's the rub: Few clients want to pay lawyers to spend extra time on readability -- "good enough" (whatever that means) is the goal.<p>2. [EDITED TO ADD THIS:] It's not unusual for a private company's employee stock plan to include a "call" option that gives the employer the right to repurchase employee-owned shares when the employee leaves the company.<p>That makes sense when you think about it -- if you're a private company, you don't want a lot of random ex-employees owning dribs and drabs of your shares, especially if you're worried about the 500-shareholder limit (under current law).<p>On the other hand, for a company with an upcoming exit to buy back the shares at the employee's cost, instead of at a good-faith estimate of the stock's then-current value -- well, that does indeed seem unusual.<p>(EDIT: Some documents like this provide that, IF: The company wants to do its buy-back EITHER: (i) after an exit is announced, OR: (ii) if an exit is announced within 30 days or so after the employee's departure; THEN: The employee is entitled to the exit pricing for the buy-back.)<p>3. Again, not to defend Skype, but conceivably they might not have had a choice about the buy-back price, at least not without jeopardizing some kind of favorable income-tax treatment.<p>If I had to guess, I'd venture that, X number of years ago, some overzealous junior lawyer decided to draft the relevant documents so as to put the company in the strongest position s/he could. Now that zealousness may be tying their hands. I stress that I'm speculating here.<p>* * *<p>[a] If you have occasion to write a complex if-then-else sentence, try using all-caps and punctuation like this: <i>IF: It rains at least one inch today but not more than two inches; AND: It doesn't rain tomorrow; THEN: You will turn on the sprinkler system tomorrow; AND: You will not do so the day after.</i>
The article leaves out some relevant context. It appears that Yee Lee was at Skype for one year one month 3/2010 - 4/2011. That entire period of time was after Silverlake had purchased Skype and more importantly after the right to repurchase vested options was in place.<p>It is difficult to see this as private equity screwing over founders or early employees (Skype was founded in 2003 and had been valued at more than $2 billion for five years when Lee Yee came aboard). Indeed given the short tenure of many of the people involved in the story, there seems to be more smoke than fire.<p>[Lee Yee on Linkedin: <a href="http://www.linkedin.com/in/yeeguy" rel="nofollow">http://www.linkedin.com/in/yeeguy</a>]<p>[Business Week article correlating Linkedin profile to article: <a href="http://www.businessweek.com/magazine/content/11_27/b4235038625596.htm" rel="nofollow">http://www.businessweek.com/magazine/content/11_27/b42350386...</a>]<p>[my comments on previous versions of story: <a href="http://news.ycombinator.com/item?id=2672786" rel="nofollow">http://news.ycombinator.com/item?id=2672786</a>]
While I understand that legalese is necessary since English is ambiguous in its best moments, the only reasons I see not to include a "plain English" version of a contract are A) to save on lawyer hours, or B) to screw someone over.<p>For most contracts I suspect that the overhead on a plain English version would be very small, as the lawyers' understanding of the topics is necessarily deep to formulate the contract (or they're just shitty lawyers, another topic).<p>Plain English versions of contracts, with their plain English meanings of clauses, should be included in any contract between two parties of vastly different bargaining power, i.e. a corporation with loads of legal resources and a non-millionaire potential employee.<p><i>Update w.r.t. comments</i>—I understand the points you're making, but I don't think it invalidates the argument. I'm racking my brain to find the examples I've seen, but there do exist in the wild "plain English" versions of contracts that are not binding (and they specify that) but instead contain comprehensible summaries of the salient parts.
A big part of business is who you're in bed with. MS should cancel the Skype deal, if at all possible. That would be one sign that they've turned a corner. I will never fork over a dime for any Skype service. This, while legal, is clearly unethical on a broad scale. And its the worst kind of unethical. Apple and MS play hardball with competitors -- but you don't do that with your employees.
"It turns out the investor group...had secured a so-called repurchase right that gave them authority to buy back the shares at the grant price."<p>If this is true, it sounds like somebody didn't properly perform their due diligence before signing their options agreement. Although it's never right for a company or investor to exercise this buy back when it comes to an honest, hard-working employee, the onus really falls on the employee ensuring that this clause never sees the light of day in their contract in the first place. Perhaps in the event of "cause", one could make a case, but certainly under no other condition.<p>EDIT: It's an unethical clause to begin with - absolutely agree with the comments. Just saying that you can't count on anyone besides yourself to act on behalf of your own best interests.
This is why cash is king and "equity" is worthless.<p>Hey bizdev weenies out there that wonder why you can't find a technical cofounder/employee who will work for equity, here is your answer.
I understand that Skype is a private company, and so that when they grant options it will have some odd terms that employees of public companies don't have.<p>They shouldn't use the terms "vested" and "unvested" then. His options were vested, yet were callable. That's not what vested means. They should call all options unvested until the company goes IPO.
Silverlake is not the only investor in Skype; e.g. Andreessen Horowitz is too:<p><a href="http://a16z.com/portfolio/" rel="nofollow">http://a16z.com/portfolio/</a>
Amazing, this is the first time I see a stock options agreement where the employee is forced to enter into a partnership for his vested shares. I agree with the blog's title "upgrading Skype to evil".<p>On the other hand, you should have known Skype, incorporated in an international haven, was not your regular startup.<p>EDIT: also, the stock agreement just says "management partnership" on page 3, with no prior definition of what it might be. Later on, it gets more references, without ever being defined. A good lawyer may have a case?
What is Microsoft doing about this? As the acquirer, they may still be able to "do the right thing" and make some of these guys whole. Sure, it may cost them a few million bucks; but can you imagine the goodwill it will generate for Microsoft? You can't buy that kind of good publicity!<p>But will Microsoft do such a thing? I doubt it very much. (I would love to be proven wrong, of course)
I wonder how many of us are now scrambling to dig up a copy of our stock option agreement. This sets a terrible precedent. In case you didn't get it yet:<p>READ YOUR LEGAL DOCS (sock options, IP, etc) and negotiate sketchy terms before you sign them!
So the people who lost out here have any recourse? I hope they are talking to lawyers. I'm not typically the type of person to sue over everything but this is screaming for a lawsuit.
What's to stop a disgruntled software dev who gets treated this way from secretly using his knowledge to support an open source competitor? It doesn't have to be anything close to a line by line copy, just subtle hints here are there about better, but generic, ways of doing things.
in the other thread on this <a href="http://news.ycombinator.com/item?id=2691455" rel="nofollow">http://news.ycombinator.com/item?id=2691455</a> the article had the following line "the company's decision to repurchase would also cause a tax hit to him" - anyone know how that works?
I don't really have much to contribute on the story itself, but I suddenly realized that my former CS472 Artificial Intelligence project partner and friend from Cornell works for Silver Lake, which has led me down an interesting path of daydreaming now that I'm starting work with a Valley-based company in a few weeks.<p>It would actually make for a great short story or novelette to see former classmates on opposite sides of a deal like this. A lot of very smart engineers go straight into jobs in technology sector investment banking, private equity, etc. soon after college that could eventually put them on a collision course with erstwhile friends.
"that you will receive no value" is hardly opaque, even if the rest is. Any contract that said that would have me pouring over it with a fine-tooth comb. Or more likely, just rejected it and finding work elsewhere.<p>I wonder if that contract is subject to legal action, though? Seems to me that was a deliberate attempt to screw him over. He shouldn't have signed it, but they shouldn't have written it, either.<p>I'm now serious considering canceling my Skype subscriptions and finding alternatives, despite how useful they are to me a the moment.