I'm doing some work with an early stage start-up. Things are going well and will be reaching the phase of prototyping in the next month or so. Currently we are self funded with enough cash/access to cash to get us to the Series A financing phase.

Right now we are looking for a local legal partner to act as General Counsel. Ideally one with good connections with VC's and the military. After meeting with one individual a few times we've come to really respect his opinion and believe he has the network to help us move forward. Just got his engagement letter with his terms... seems very steep and I'm having second thoughts. Just feels harsh even with his start-up experience and connections.

I'd be interested in opinions and stories of those who have been through a similar phase. Below is the letter:

***, it was good to meet with you this week and to hear about the progress you’ve made. I am pleased to assist you with providing legal services for ******. (the “Company”) and otherwise as we may agree. The following is my firm’s engagement letter. Please excuse the formality of this but I routinely require an engagement letter to comply with Virginia’s legal ethics requirements and to help prevent any misunderstandings. If this accurately reflects the terms of our engagement, please sign on page three and return a copy to me via e-mail or fax ******. An electronic signature is fine. ***** includes any successors in interest or entities with a controlling interest in the Company.

1. My usual hourly rate is $500/hr. which is substantially below the rate for firm partners with my experience; but because you are a startup company I will provide my services to you at a discounted rate of $300/hr. This rate is below what some firms charge for their junior associates. I also will waive any retainer and will not charge for short phone calls. To help you save money, we can also agree to a fixed price for various services if that makes more sense under the circumstances. In return for providing this fee discount, I will receive a 3% equity share in **** upon execution of this Letter (fully vested and non-diluted). If, in the future, you would like my assistance in raising capital, my finder’s fee is 3% of the equity or financing received, paid at closing; and if you would like me to assist in sales, my commission is 6% of gross receipts received by *****, payable within 10 days of receipt.

2. I will make every effort to handle the work efficiently. You and your partners, employees, and agents will provide me with the necessary cooperation as needed in order to effectively represent you. I have made no guarantee regarding the outcome of this representation. This representation applies to the companies named below and their successors in interest if any.

3. Regarding my out of pocket expenses, I would not expect that there would be much of those, If you wish me to travel outside of the Wash., DC area my travel would only be with your prior approval and limited to coach class. I will bill you monthly for reasonable fees and expenses and payment of those and unless you raise any questions about them, payment is due within 30 days and there is a 1.5% fee per month for invoices due over 30 days. It is expected that expenses will be minimal for the time being (such as filing fees and copying documents, etc.) - I will get prior approval from you for any substantial expenses and I will stay in contact with you regarding what they might be to help conserve your funds.

4. I will keep you informed about the status of my representation and the course of action I may recommend. I will make all written material sent or received by me reasonably available to you, such as providing you with a copy, or you may examine the originals in my office at reasonable times. I will own my work product and may keep a copy of all documents, etc. for my files and will be an independent contractor.

5. I also reserve the right to withdraw l at any time and from any engagement if: (i) you fail to honor the engagement letter or (ii) for any just reason permitted or required under the applicable Code of Professional Responsibility or by the rules of any court of competent jurisdiction. If any dispute arises between us we will attempt in good faith to resolve that within thirty (30) days. If it is not resolved then either party may pursue a judicial remedy. Either party may bring an action to enjoin if there is a reasonable anticipation of a breach of this agreement or otherwise. Any judicial actions or arbitration will be held in Arlington, VA. The terms of this agreement are binding on ***** Sound and you personally. If I am representing multiple clients and I determine in my sole discretion that a conflict of interest exists, I will notify all affected clients of such conflict and may withdraw from representing any or all of them to the extent that such a withdrawal would be permitted or required under the applicable Code of Professional Responsibility. Notification of my right to withdraw per the above will be provided you in advance and in writing. As a condition to agreeing to this engagement, you hereby consent to any such withdrawal and shall execute to me any necessary written confirmation thereof upon your receipt of a request therefor. In the event of any such withdrawal, you shall promptly pay my fees and disbursements incurred prior to the date of such withdrawal.

Just let me know if you have any questions regarding this Letter. So much for the formalities! I look forward to working with you.