I can't speak to the legalities, am just offering comments on fairness and my perception of precedent.
-I agree early founder should get something extra for initial sweat equity. Has he/she received salary for that yet? If not, how about having the S corp provide some back pay until the founder has been compensated. After that, pay salaries according to ongoing contribution.
-I thought the purpose of equity was not just to share profits in the event of sale, but also to distribute profits in the event of earning more than the amount that would normally be awarded as salary. If you now have excess, the logical thing would be to pay fair market salary for current work, and divide the additional income as profits (more technically dividends, I think), which naturally would be divided by equity %. If the founder has more equity, this profit, not back pay, is their compensation for early work.
-If you can legally do so, to me it seems that using either option above (back pay or dividends) is acceptable as long as you're both satisfied.
-Great case in the sense that it shows why you're suppossed to be clear on examples like this beforehand. Since it's too late for that, my suggestion is find an implementation of the existing agreement that would be satisfactory to both parties, or agree to rewrite the agreement in a way both feel is fair. If you can't do this, the aggrieved party has to decide whether to stay or go, and both parties have to deal with the consequences.
Are you the founder or the joiner? If the joiner, do you want more compensation than the agreement entitles you to? If the founder, do you feel guilty about the prospect of getting a bigger % than the joiner?