Table of Contents
About the case
In November 2024, I received a late-night call from a tech entrepreneur (for the sake of client confidentiality, let’s call him “Max”) in Pennsylvania. Breathless and on edge, Max explained that he was just days away from closing a $2.4mm equity deal with an overseas firm (let’s call them the “Investors”).
The Investors approached Max seeking a stake in the company because of Max’s work in scaling the company in a unique sector of the economy. His proprietary methodology, coupled with his strong marketing acumen, made him a rich target for investor support.
Being an entrepreneur who is a jack-of-all-trades, Max engaged in negotiations with the Investors from the moment they contacted him. He even signed a letter of intent (LOI) without any attorney oversight. He was confident that he could “keep the lawyers out” of the deal to make it close faster, even though the Investors had a team of lawyers questioning his every move.
Max’s dream of avoiding hiring an attorney was shattered when the Investors’ legal team dropped the following documents in his inbox:
- 30-page Class C Purchase Agreement;
- Revised Partnership Agreement;
- Members’ Resolution;
- Disclosure Schedule;
- Consulting agreement;
- Restricted Ownership Interest Repurchase Agreement;
- Executive Search Agreement; and
- Use of Proceeds Guidelines.
He paged through the documents, unsure of where to begin. “I can do this,” he said to himself, confident that a combination of his uncle’s legal acumen (who is a DUI attorney), Google, and ChatGPT could give him all of the answers he needed.
He faced just one major problem: he didn’t know what questions to ask. Furthermore, the draft agreements left him reeling with questions.
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What did “Class C voting capital” really mean?
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What representations was he guaranteeing to the buyers?
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Would the proposed board structure leave him powerless?
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Was he disclosing the correct information?
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Did he have the correct consulting terms in place?
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Under what circumstances could the Investors buy out his shares?
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How many years did he have to achieve the profitability goals?
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How was the Investor’s money to be allocated?
The clock was ticking, and he had four days to make sense of it all before the deal deadline. Now he faced a conundrum—take a risk and sign everything “as is” or seek legal counsel to ensure his rights were protected. He chose the latter.
That’s when I met Max.
“I need your help,” he said. “I don’t know where else to go. We need to have everything ready by Friday.”
I immediately cleared my calendar and got to work. Together, we tore through the documents: the operating agreement, capitalization table, stock certificates, disclosure schedules, and repurchase agreements. And what we found was alarming: the draft agreements lacked basic protective provisions, failed to define dilution terms, and were silent on termination rights and records requirements. Furthermore, they relied on many default terms under state law, which put him at a disadvantage if anything were to be litigated in the future.
We marked up the documents and sent them to opposing counsel. Over the next four days, we worked around the clock with them to discuss and settle hundreds of individual contractual provisions. The result was a purchase agreement that gave Max more flexibility in his financial matters, a partnership agreement that protected his rights as a now minority shareholder, a consulting agreement that guaranteed a certain salary for a period of time as the founder of the company, and an overall stronger position from which he could operate with relative autonomy.
Results
If Max had simply signed without review, he would have ceded critical control to his investors and boxed himself into a legally vulnerable position. Through non-stop negotiations with overseas counsel and a consulting firm involved in pricing, we reshaped the agreement. The result was a structure that preserved his autonomy, attracted foreign investment, and positioned his company for sustainable growth.
“I want to thank you for your help,” Max said. “Not only did you negotiate better terms, but you educated me on what areas to look for in the future. Now I have a lot of confidence in how I can manage this company to success.”
Following the closing of the deal, Max invited me to serve as his general counsel, where I now advise him on everything relating to contracts, trademarks, government compliance, acquisitions, and more.
Max’s lesson? By retaining experienced legal counsel, he turned what could have been a disaster into a launchpad for growth.
