appraisal process for stipulation of value in private companies

LLC stipulation of value

Stipulation of Value.  If it becomes necessary to determine the fair market value of the Units, the Company shall choose an independent third party appraiser to determine the fair market value of the Units (the “Stipulation of Value”). The methodology to be employed by the appraiser to establish the Stipulation of Value shall be reasonably agreed upon by the Company and the appraiser. If a Member disputes the Stipulation of Value prepared for the Company, such Member may retain, at such Member’s expense, an independent financial advisor experienced in valuing closely held companies similar to the Company to provide a valuation (a “Supplemental Valuation”). Such Member must submit any Supplemental Valuation within 30 days of the announcement of the Stipulation of Value prepared for the Company. Upon the earlier of the submission of all such Supplemental Valuations or the day after the Supplemental Valuations are due for submission, the Company shall compare the Stipulation of Value prepared for the Company and any properly submitted Supplemental Valuation. If the lowest valuation (the “Floor Valuation”) is at least 80% of the highest valuation (the “Cap Valuation”), then the arithmetic mean of all the compared valuations will be the final Stipulation of Value, which will be binding on the Members and the Company. If the Floor Valuation is less than 80% of the Cap Valuation, then the persons who prepared the Floor and Cap Valuations shall together select an independent financial advisor experienced in valuing closely held companies similar to the Company to provide a valuation (the “Independent Valuation”). If the Independent Valuation is higher than the Cap Valuation, the Company shall set the Stipulation of Value at the Cap Valuation; if the Independent Valuation is lower than the Floor Valuation, the Company shall set the Stipulation of Value at the Floor Valuation; otherwise, the Company shall set the Stipulation of Value at the Independent Valuation. This determination of the Stipulation of Value will be binding on the Members and the Company. The value per Unit shall be determined by taking the total number of Units issued to all of the Members and dividing it by the Stipulation of Value (“Per Unit Stipulation of Value”). Each Member’s portion of the Stipulation of Value will be determined by multiplying the total number of Units held by such Member by the Per Unit Stipulation of Value.