Sometimes the Other Side Hands You Your Out.
Thirteen months of broken promises — the one angry email that changed everything.
I have worked with C for the better part of a decade.
In that time, I have helped C send and respond to cease and desist letters, navigate impromptu funding rounds, M&A efforts, joint-ventures, and partnerships, explore emerging markets, and structure the financing for a PPE factory in China, at the height of a global pandemic — all while teetering in and out of solvency. C never says uncle. Never quits. Always finds a way to keep going.
Which is both a strength and a liability.
By the time the pandemic wound down, C was out of moves. The PPE factory was a bust. The market needed the pandemic to hold for six more months — it didn’t. C called a past interested buyer with an offer: buy us for our debt. Merge with us. We can provide the logistics back-end and software development services your business is missing. It was desperate. It was a back-of-the-napkin parachute. But it was a parachute.
When I mentioned diligence — let’s make sure BailoutCo can actually do what they’re claiming — C said we can’t wait. The landlord was knocking. Creditors were knocking. Everyone was knocking. So, we’re damned if don’t and maybe not damned, if we do.
So we drafted a bailout acquisition. BailoutCo would acquire C’s company for $300,000, due thirty days after diligence.
Seven months passed. No money. Diligence had been completed and signed off forty-five days after the acquisition. The agreement was clean and simple: we sell, you do 30-days of diligence, you pay.
BailoutCo kept promising. C kept pushing. BailoutCo sent miniature payments — small enough to signal intent, not nearly enough to constitute performance. $20,000 here, $30,000 there, a co-signed lease. Meanwhile C was holding off creditors with the promise of a bailout that only existed on paper.
C would call me after each new excuse. I listened. I started keeping a mental tally. By month three it was obvious: either BailoutCo didn’t have the money, they were never going to pay, or they hadn’t read the agreement they had negotiated and signed and didn’t understand it was their turn to perform.
Thirteen months in, nothing had changed. C was attending c-suite meetings, impressing BailoutCo’s clients, doing the work of integration, all the while suspending any independent efforts to save or wind down his company because the acquisition for debt agreement had been signed. After every round of glowing feedback, C would ask about payment to complete performance on the acquisition. BailoutCo would produce another excuse or go silent. Every time C pushed hard enough, BailoutCo would send an angry email, an angry text, an angry voicemail that terminated the agreement — then walk it back when C pushed back. C, being C, kept trying to save the relationship. C kept hoping. That’s what C does.
I had had enough. The knocking was getting louder and BailoutCo was nowhere to be found.
Once an agreement is breached, it’s breached. BailoutCo was in breach – they failed to perform. They had sent incidental payments too small to constitute performance and repeated termination notices that C kept ignoring. They had been in breach of the agreement for months. And every time C kept performing after a termination, C was handing BailoutCo cover.
I told C: next time BailoutCo sends something that amounts to termination — we accept it.
They did. We did.
BailoutCo came back. They demanded the payments returned.
We had seen this coming. From the first small payment, I had insisted on documenting each one as a discrete payment for a scope of work, deliverables, sign-off. At the time it felt like overkill. It wasn’t. We were preparing the exit strategy.
There was nothing to return.
C walked away clean.
Sometimes the relationship is already dead. Sometimes the other side breaches, threatens, and blusters — and in doing so, they give you exactly the grounds you need to walk away.
The hard part is recognizing when it’s time to take it.
Eugene Kim is a seasoned operator and transactional & corporate attorney in San Francisco. This is Eugene, Unplugged — what your lawyer would tell you if they weren’t afraid of being sued. Not legal advice. Attorney Advertisement. Subscribe for more.
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