4 ms·

I'm not quite sure I understand. The owner signed a deal giving the lender the power to place people in the company, and prevent any recourse. > A bank can leg

I'm not quite sure I understand. The owner signed a deal giving the lender the power to place people in the company, and prevent any recourse. > A bank can legally make you sign a release of any wrongdoing the bank may ever undertake in the future (!!) as a condition of their loan. Crazy? Not to rub salt in, but I think the "make you" wording is telling here. No one made anyone take this loan. This is not crazy; it makes sense that one party might want to protect themselves from lawsuits. What's "crazy" is accepting such a deal, giving them access to the company. In essence, the owner put himself at complete odds with the lender. Indeed, it sounds like the lender had a huge incentive: loan X, if default, gain 2X. No one should have accepted it, but that doesn't mean it should be illegal. I suppose it's assumed that as a business owner, you'll have a lawyer or be careful when signing things, unlike payday loans and such. On a personal level though, it does suck and it is really terrible when you have to work with someone that's trying to undermine you. It's incredibly frustrating.

ChuckMcM 10y ago
And he mentions that in the article, he was very naive. The sad truth is that this stuff doesn't get taught well (or conversely its the only good reason for getting an executive MBA where you learn from other executives). One of the random events that can make you a better entrepreneur is to interact with someone who is sociopathic early in your career. To experience the feeling that this person is totally on your side and then experience them ripping you to pieces for their own gain really helps add perspective to your future dealings.
- danielvf 10y ago
  I agree. Though the cheapest way to get this pricless experience is to play a few game of Diplomacy online.
- cortesoft 10y ago
  If I were a naive business owner, I sure as hell would hire a lawyer to look at any giant load contract I was signing.
  - brudgers 10y ago
    Hiring a lawyer would imply less than maximum naiveté.
- MichaelGG 10y ago
  More generally though: read everything you sign. Expect it to all be used. If you can never see a clause being needed, then remove it. If the other side insists then you need to figure out the real motives why.
  - ChuckMcM 10y ago
    If anyone comes away from this discussion with one thing to remember, remember Michael's words. If it is in the contract, it can happen. This is a true story, but I've changed the names to protect the parties, they read HN so they can out themselves if they want to :-) There was a really egregious clause added to the BigCorp Employee contract and one of the new employees objected to it explaining how it could be used. That kicked off a really interesting conversation with HR at the employee intake session which went like this .. "Oh we would never do that!", said HR. So He said, "Well fine, lets remove it." And then HR said, "Well we really can't change it." "Why not? If it isn't what you meant, why did you say it?", responded this employee. "Oh it is just boilerplate." HR said. "Then remove it if you don't care one way or another.", employee responds. "But that would take so long to get done." HR said. "Not a problem! I retyped it in and changed it and printed it out again we can use this one." said the employee. "Oh but we have to have legal review all of it to make sure nothing else changed." says HR. "Great, let them review it, I'm happy to wait.", they said. "But we can't let you work if you don't have the signed paperwork." says HR. "Ok, how long will legal take, a week? two weeks? Lets just move my start date back to then." offered the employee. "We'll go see how long it will take." says the HR person, "In the mean time can you wait in the lobby?" "Sure" says the employee. The HR person returns, "I'm sorry, we've decided that you aren't a good fit for BigCorp. You can go now." Security escorts our now non-employee to the door and watches them leave silently. Every line in a contract has a reason for existing, who ever wrote the contract will have a number of them in there which can be used against who ever is signing the contract. A judicious person will identify those lines and have them removed, or develop strategies that will nullify them later. But you really do have to put yourself into the frame of mind that the other person is out to get you, or you might miss them.
    - r00fus 10y ago
jrochkind1 10y ago
> A bank can legally make you sign a release of any wrongdoing the bank may ever undertake in the future (!!) as a condition of their loan. That may or may not be legally enforceable. I haven't seen the contract, and I'm not a lawyer. But, beyond this particular term in the contract, if he didn't have a lawyer of his own, if not from the start before he signed any contract at all, then certainly as soon as Comvest started to look sketchy, that's the biggest mistake of all. I am curious to learn how a lender wound up with the ability to force operational decisions in the absence of a default, that doesn't seem right to me. Either something else is going on, he let the lender force things he didn't have to, or he signed a very very bad loan without legal counsel or bad legal counsel.
JackFr 10y ago
> Indeed, it sounds like the lender had a huge incentive: loan X, if default, gain 2X. I don't know the terms of the deal, but I very much doubt they had an incentive to drive the company to bankruptcy. If the company were a prize, thet would have been picked up by someone else in bankruptcy. The fact that Comvest were 'undermining' other deals smells more to me like they were intent on preserving their place in the capital structure, and not having the value of any warrants they owned diluted. My understanding is that following the bankruptcy Comvest provided debtor-in-possession financing, and at the auction there was only one bidder.

ChuckMcM 10y ago

And he mentions that in the article, he was very naive. The sad truth is that this stuff doesn't get taught well (or conversely its the only good reason for getting an executive MBA where you learn from other executives). One of the random events that can make you a better entrepreneur is to interact with someone who is sociopathic early in your career. To experience the feeling that this person is totally on your side and then experience them ripping you to pieces for their own gain really helps add perspective to your future dealings.

danielvf 10y ago
I agree. Though the cheapest way to get this pricless experience is to play a few game of Diplomacy online.
cortesoft 10y ago
If I were a naive business owner, I sure as hell would hire a lawyer to look at any giant load contract I was signing.
- brudgers 10y ago
  Hiring a lawyer would imply less than maximum naiveté.
MichaelGG 10y ago
More generally though: read everything you sign. Expect it to all be used. If you can never see a clause being needed, then remove it. If the other side insists then you need to figure out the real motives why.
- ChuckMcM 10y ago
  If anyone comes away from this discussion with one thing to remember, remember Michael's words. If it is in the contract, it can happen. This is a true story, but I've changed the names to protect the parties, they read HN so they can out themselves if they want to :-) There was a really egregious clause added to the BigCorp Employee contract and one of the new employees objected to it explaining how it could be used. That kicked off a really interesting conversation with HR at the employee intake session which went like this .. "Oh we would never do that!", said HR. So He said, "Well fine, lets remove it." And then HR said, "Well we really can't change it." "Why not? If it isn't what you meant, why did you say it?", responded this employee. "Oh it is just boilerplate." HR said. "Then remove it if you don't care one way or another.", employee responds. "But that would take so long to get done." HR said. "Not a problem! I retyped it in and changed it and printed it out again we can use this one." said the employee. "Oh but we have to have legal review all of it to make sure nothing else changed." says HR. "Great, let them review it, I'm happy to wait.", they said. "But we can't let you work if you don't have the signed paperwork." says HR. "Ok, how long will legal take, a week? two weeks? Lets just move my start date back to then." offered the employee. "We'll go see how long it will take." says the HR person, "In the mean time can you wait in the lobby?" "Sure" says the employee. The HR person returns, "I'm sorry, we've decided that you aren't a good fit for BigCorp. You can go now." Security escorts our now non-employee to the door and watches them leave silently. Every line in a contract has a reason for existing, who ever wrote the contract will have a number of them in there which can be used against who ever is signing the contract. A judicious person will identify those lines and have them removed, or develop strategies that will nullify them later. But you really do have to put yourself into the frame of mind that the other person is out to get you, or you might miss them.
  - r00fus 10y ago

jrochkind1 10y ago

> A bank can legally make you sign a release of any wrongdoing the bank may ever undertake in the future (!!) as a condition of their loan. That may or may not be legally enforceable. I haven't seen the contract, and I'm not a lawyer. But, beyond this particular term in the contract, if he didn't have a lawyer of his own, if not from the start before he signed any contract at all, then certainly as soon as Comvest started to look sketchy, that's the biggest mistake of all. I am curious to learn how a lender wound up with the ability to force operational decisions in the absence of a default, that doesn't seem right to me. Either something else is going on, he let the lender force things he didn't have to, or he signed a very very bad loan without legal counsel or bad legal counsel.

JackFr 10y ago

> Indeed, it sounds like the lender had a huge incentive: loan X, if default, gain 2X. I don't know the terms of the deal, but I very much doubt they had an incentive to drive the company to bankruptcy. If the company were a prize, thet would have been picked up by someone else in bankruptcy. The fact that Comvest were 'undermining' other deals smells more to me like they were intent on preserving their place in the capital structure, and not having the value of any warrants they owned diluted. My understanding is that following the bankruptcy Comvest provided debtor-in-possession financing, and at the auction there was only one bidder.