Purple woke up that day with a great sense of foreboding, she knew this was the day they were going to do it. They had been building up to it for weeks. She looked over her contract again, knowing that she would find nothing new. She had been through the contract with her lawyer countless of times and they had explored every possible angle to fight back. There wasn’t anything she could do. Of course there wasn’t. Spectrum was nothing if not diligent about their documentation.

It was called a follow-on offering (or secondary offering) and she knew they were doing it do dilute her position in the company.

It had been a good year for her, a great year! She had brought in an unprecedented amount of business and as a result, her position in the company had grown. Spectrum was intense that year, they were constantly expanding in the field of visual technology and they were trying to position themselves as leaders in the industry. They aligned themselves with the top rainmakers and boy did the sun shine down on them! It was a very exciting time and Purple was getting accolades left and right. That’s when they offered her the Agreement.

It was a 30-page document that included the issuance of preferred convertible stock along with a number of great perks including her own office with a name plate beside her door (the site of “Purple” written in big black letters was something she could hardly resist!), her own secretary, a parking space near the elevator, comped meals if she worked past 7:00 p.m., and a paid gym membership.

Clause 32 of the Agreement stipulated that the Company had the right to issue additional shares if they so deemed it necessary in their sole discretion and that, notwithstanding her equity position, she relinquished all voting rights on the matter. Nobody liked Clause 32 but it was a non-negotiable provision and “as a matter of course, all parties to the Agreement were required to consent to this Clause,” they said. It was a sort of “take it all or leave it all” proposition. Clauses 1-31 were so flush with generosity that it was hard to refuse the arrangement.

Unfortunately, Clause 32 was the reason for her foreboding.

Soon after Purple had received her preferred equity, Spectrum was upgraded to AAA on the S&P and the company stock shot up. Purple couldn’t resist and she converted her preferred stock into common shares and anticipating her new wealth, she went out and bought a new car, put down a down-payment on a fully furnished gorgeous apartment on the east side and finally planned that vacation to Fiji she had been dreaming of for years.

Three days later, Spectrum approached her and told her they were concerned that she held too much interest in the company relative to the other employees and that they didn’t think it was good for employee morale. In addition, they had started to hear some negative feedback about her performance and it didn’t seem right that she should be more highly compensated than other people who worked harder than she did.

Purple was shocked to hear this  for she knew that she worked harder than anyone at the company. It was all slander and it was being instigated by the new guy, Red.

Red had recently transferred from The Opposite End and was flush with success. He had been their shining star and was vying for the same position at Spectrum. It didn’t help that he was bright, exuded confidence and glamour, and had the ability to literally light up any room. He had been after her since the first day he arrived and when she turned him down, he went after her job. He was behind this!

Purple tried to explain this to her boss but the heads of Spectrum refused to listen. Like everybody else, they were smitten by Red. They told her they were going to put Clause 32 into effect and that was it.

Purple slowly got ready for work that day and made a mental note to call the travel agent before lunch, Fiji would have to wait. She grabbed her car keys, relishing the feel of them for what was probably the last time. As she closed her apartment door behind her she felt the door to her future closing along with it. It was a beautiful day and Purple forced herself to enjoy the first signs of spring. She smiled as she watched children running in the park, the joy in their voices impossible to resist. She thought that perhaps it wouldn’t be so bad. She would recover from this minor set-back, she was the real star and she knew it. By the time she got up to her floor she had determined to make the most of this beautiful day and not let Clause 32 interfere with her plans.

But then, she saw it and realized that she would never recover from this dilution. Purple politely greeted her secretary and quietly walked into her office. The name plate by her door – a sad reminder of this unfortunate turn of events – now read, “Violet.”

All content is copyrighted by Karla Valenti. Unauthorized reproduction of this material is expressly forbidden.

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