
Shotgun clause - niyazpk
http://en.wikipedia.org/wiki/Shotgun_clause
======
steveplace
The "Mexican Standoff" variation of this is much more fun.

In the case of two parties, you both come to the table with sealed envelopes,
and inside those envelopes is a document saying how much you think the company
is worth, and how much you will pay for the other parties' equity.

You then open the envelopes and whoever has the highest number will then buy
out the other according to their valuation.

~~~
DenisM
It's not about fun, it's about establishing fair value when there is no open
market.

------
electromagnetic
This is a clause you have to be very careful with. I know of a case where
Partner B made an offer to sell his shares at a low price in order to get
Partner A's shares at a low price, what he didn't consider was that Partner A
(who travels a lot, and whom was expected to spend a lot) actually had almost
$200K in the bank and took the offer. Partner B had to beg and grovel to get
the deal dumped.

Partner A needed a partner at the time more than he needed control of the
company, so B got extremely lucky.

~~~
DenisM
That's the whole point of the clause - the threat of counteroffer is there to
prevent low-baling.

On a related note, A should should have kicked B out - or B will eventually
find another way to take advantage of A.

~~~
electromagnetic
A really should have but, with no children and he's already on retirement, I
believe B would be getting the company anyway as they are old friends (this
happened during a dispute). I believe they do have a clause in their agreement
that should one of them pass on the remaining partner can buy out the others
shares, opposed to them passing on to spouses.

