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Michael Reich

A. Preparation:
a. Information:
1. I had increased his equity share in Founders equity by 9% stating that Georg and Phuc have
not contributed much to the companys progress
2. Under my new plan, I would have 45% of equity, Georg would have 28% and Phuc would
have 26%. Warren, for his contributions, would get 1%.
3. Equity split-up should be based on the one page partnership agreement signed in
November, 2006

b. ZOPA:
Equity split:
Michael 39% to 45%

Phuc Salary:
Between $70000 (with no change in founders equity) & $90000

Seed equity capital:
Max Michael: 33.33% to 50%


c. Strategy & Plan:
My strategy is to give Phuc max salary while cutting down on his equity share, as his commitment to
the company is still not sure and responsibilities were not as much as assigned to Georg and myself.

Since I am doing most of the work, I shall push for a higher equity share but not significantly higher
than Georgs.


During
a) Opening Warming up
I discussed issues regarding the companys future (angel investor etc) also , what future roles
Phuc will play as we are giving him a very high salary (with a possible increment) and he also has
a equity in the company

b) Information Confirmation
Value creation and contribution by each party was discussed. Deepak (from section 2) played
Georg for u , as we were only assigned a Group of 2.
He negotiated with us as a team and we concentrated on creating maximum value from the
beginning as every person was important to the company.

We discussed various parameters on which our negotiation will take place.






c) Value Creation
The goal was to ensure that each of us got a fair share of equity and happiness.
We started by following the technique of log rolling by discussing multiple issues simultaneously
so as to maximise the value. Our aim was to create a win-win situation for all of us. I aimed at
creating maximum value for myself, but at the same time wanted the other parties to not to
lose. The trade-off between issues was handled using scoring system by each one of us. I
attempted at identifying other partys multiple interests. Though there was some illusion of
superiority during the negotiation process, but our ability to see through each others facts
helped the negotiation to take a forward leap. Throughout the process we aimed at Pareto
improvements i.e. we kept on making changes to a deal so as to make at least one person better
off without making anyone worse off.



d) Anchoring
Phuc set the ball rolling by negotiating his equity. Intially he started with a +2 percent anchor,
but he eventually had to settle for 27 % (+1) in the end.

e) Concessions
Phuc agreed to take higher seed equity and a lower founder equity.

f) Results Vs. Relations

We created value for all of us. My results were well within my ZOPA. As we managed to create
win-win situation for all of us, our relations were intact. My score was +135 as I only lost 85
points and played well within the range.

PSN:

a) Founders Equity
a. Michael 44%
b. Georg 27%
c. Phuc 28%
d. Warren 1%

b) Phucs salary - $90,000

c) Seed Equity
a. Michael 33%
b. Georg 33%
c. Phuc 33%

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