Threatening to cut off his API access if he doesn't acquiesce sounds, to me, more like "demand" than "offer".

To the OP: looking at the pulse of just this thread, don't underestimate the size of the PR shit-storm they'd set off by strong-arming you out of the way. Try to help them understand that.

I'll correct my statement. They're in intense negotiations.

Nice ... he should counter with an 'offer' to put suggestive pictures of not so attractive females in his app. We all know how THAT goes over in the geek community.

No. Youre being suckered to try and enter into negotiations. If you counter offer to a point it is cheaper for them to put a lawyer into the mix, you will face accusations of trying to profit - and by all precedent lose the lot. Cut and run is the only advise that will get you out with more money in your pocket than you have today.