Buy-Sell Clause

Summary

This clause is a buy-sell provision, commonly found in joint venture, partnership, limited liability company (LLC), and other securityholders agreements, to address situations in which one party may either force the sale of its interest to the other parties or force the other parties to sell their interests to that party. This provision contemplates a buy-sell between two members of an LLC and is triggered when the two members cannot agree upon an "Extraordinary Business Decision." The provision can be modified to work among stockholders or other stakeholding parties. A buy-sell provision can take a number of different forms, including: • Russian roulette, in which the party initiating the buy-sell must sell its interest, or buy the interest of the other parties, at a stipulated price; • Texas shootout, in which a party submits a price, and the other party can choose to sell its interest to the first party or buy the interest of the first party, in either case with a price based on the submitted price (the example below uses a Texas shootout provision in Section 2.01 (b)); and • Dutch auction, in which each party submits the minimum amount at which it would be willing to sell its stake, and the bidder with the highest minimum bid wins the right to buy out the others at the amount each of the "losers" submitted. For further discussion about various forms of buy-sell agreements, see Current Legal Forms with Tax Analysis § 18A.23. For information about buy-sell provisions in the context of a management deadlock, see Management Deadlock Resolutions. For further discussion about minority securityholder protections, see Minority Securityholder Rights Protections. For a template joint venture agreement, see Limited Liability Company Agreement (Joint Venture, DE). For a full listing of related stockholders' agreement content, see Stockholders' Agreement Resource Kit.