Bad Leaver / Good Leaver Provisions

When a founder holds rollover equity or incentive units, the buyer almost always defines what happens to that stake depending on how the founder leaves. Good-leaver categories — usually death, disability, or termination without cause — preserve vesting or trigger a fair-value buyout. Bad-leaver categories — termination for cause, quitting before a set date, or breaching a non-compete — can mean forfeiting unvested equity, and in aggressive drafting, repurchase of even vested shares at the lower of cost or formula value. The leverage lives in two places: the definitions, and who controls them. A vague or buyer-favorable "cause" definition lets the buyer manufacture a bad-leaver exit and strip the founder's equity on the way out. Founders should negotiate tight, objective cause definitions, push borderline events like resignation for good reason into the good-leaver column, and insist that vested equity is never subject to forfeiture. Read alongside vesting resets and for-cause termination, these provisions decide whether rollover equity is real or just leverage the buyer holds over you.