Model Email:

Hi Alice,

I hope you are doing well. It was so nice meeting you last week and hearing all about the exciting
things Cool Corp. is working on.

It is really important to think through how to allocate the initial shares between you and Bill now rather
than waiting to address this in the future.

We would recommend that we incorporate Cool Corp. with 10,000,000 authorized shares of common
stock. Of these 10,000,000 shares, we would advise allocating 8,000,000 shares between you and
Bill. From what we discussed at our meeting, it sounds like you and Bill are both working on Cool
Corp. full time and are carrying the same weight. If that is still the case, then we would recommend
allocating 4,000,000 shares each to both you and Bill, this way your equity ownership in the company
reflects the fact that you came up with idea together and are both devoting equal time to the
endeavour.

As far as vesting, most new founders have the same thought as you – why should I subject my shares
to vesting when we own the company and are devoting all of our efforts to it? While this is all true, it is
almost always in the best interest of both the founders and the company to apply vesting on founder
shares at the time of issuance.

Subjecting the founder shares to vesting can actually avoid future conflicts. While you and Bill are
both working on Cool Corp. full time today and are getting along great– if you have disagreements in
the future or if one of you is no longer able to work full time for the company – if there is no vesting in
place, then the person who decides to leave the company would still own the same amount of shares
as the founder who is still working full time. This outcome would give the departing founder an unfair
windfall. By contrast, if the shares were subject to vesting – then the departing founder would only be
entitled to the shares that have vested over the time they were actually working on the company and
the remaining shares would forfeit back to the company and be available for future grants.

Not only does vesting protect the founders from unfair windfalls, it also makes a company more
attractive to VCs.

All VCs want to invest in companies where the founders have ‘skin in the game’ and are motivated to
work towards the company’s success and can’t simply resign and retain their large equity stake. For
this reason, VCs almost always require founder shares to be subject to vesting. If the shares are
subject to a standard vesting schedule at incorporation (as we describe below), most VCs will respect
this. However, if founder shares are not subject to vesting, VCs will typically require the company to
amend the founder grant documentation to add vesting as a condition to their investment. When
vesting is applied at this later time, the investors will typically dictate the vesting terms and they will be
less favourable to the founders. As a result, we strongly advise applying vesting at issuance rather
than delaying this decision.

As far as what vesting schedule to apply, we would recommend applying the standard vesting
schedule, which is a 4-year vesting schedule with a 1-year cliff. What this means is that all of the
shares will be vested 4 years from the vesting commencement date, but the first 25% of the shares
will not vest until the 1-year anniversary of the vesting commencement date (which is the cliff) and
then the remaining 75% of the shares vest in equal monthly installments over the remaining 3 years.
We can set the vesting commencement date to a date prior to the date of issuance to give you credit
for the time you have already spent on the company. So since you mentioned you and Bill started
working in earnest on Cool Corp. about 6 months ago, we would use that as our vesting
commencement date.

Lastly, we wanted to let you know about another vesting feature we would recommend including in
the founder grant documents, which is called acceleration. Acceleration provisions provide that if
certain events occur, the stock you hold that would not have otherwise been vested at that time, will
accelerate and become vested as a result of the triggering event.
The two most common forms of acceleration provisions are single trigger and double trigger. In each
case, the main triggering event is typically the sale or change of control of the company.

Single-trigger acceleration provisions provide that, upon a sale or change of control, all or some
portion of the unvested stock will immediately become vested.

By contrast, double-trigger acceleration provisions provide that two conditions must occur in order for
acceleration to occur (the two “triggers” of the “double trigger”). The vesting will only accelerate if (i)
there is a sale or change of control (i.e., the first trigger) and (ii) the founder is then terminated without
“cause” or leaves the company for “good reason” within some set time period (typically six months to
one year following the sale or change of control) (i.e., the second trigger).

Most VCs do not want to invest in companies that have single-trigger acceleration as that means the
founders the VC believes are critical to the success of the business can walk away from the company
with fully vested shares following a sale or change of control. By contrast, VCs typically are
comfortable with double-trigger acceleration, because the founders are still incentivized to stay on and
help make the company a continued success following the sale or change of control as they only
receive acceleration if they are terminated or their position is changed such that they have good
reason to leave the company.

For these reasons, we will plan to include double trigger acceleration provisions in your founder grant
documents.

I know this is a lot to digest, so let’s plan to set up a call later today or tomorrow so I can answer any
questions you may have.

Best,

[Name of Attorney in Video]