This is a question for your lawyer, but you'll probably want to replace the more typical "Issue X new preferred shares to the VCs" with "Issue Y new preferred shares to the VCs and, additionally, effect a secondary sale of Z shares of founders stock to the VCs in exchange for monetary consideration of $N with said shares to be converted into preferred stock on completion of the transfer."
Playing with the numbers gets you virtually any combination you guys want of:
+ money injected into the company
+ money transferred to your cofounder to buy him out
+ resulting remaining cofounder diluted ownership of the company
+ resulting VC ownership of the company
Those numbers will probably be subject to contentious and highly consequential negotiation. Again, run it by your lawyer and, if you have them, other advisors that you'd routinely tap to discuss cap tables.
