Patriot Scientific

Apparently you did not understand correctly.

There is no dispute about that clause in the CA. It exists, undisputed. And, to my knowledge, there exist no disputes between PTSC and TPL about the MA or CA, unless the dispute regarding the resolutions of the PDS Management Committee were so categorized. But even you categorize this as under a Partnership Agreement. Nowhere did I mention or even allude to the concurrent but unrelated (other than the parties in contest) dispute about the resolutions of the PDS Management Committee.

What I'm talking about is the court determining a way to resolve the dispute over the loan. One would think that the judge would review the MA and CA to determine the exact nature of the relationship between partners who find themselves in a dispute regarding a loan in default. The express purpose of that loan was to enable ongoing operations by Alliacense (though I don't believe it was stated in those exact terms, but clearly this was the intent of the associated statement). Assuming the judge reviewed those documents, or that PTSC's counsel directed attention to those documents and specifically that clause, a remedy toward resolution of the loan dispute would be discovered and perhaps exercised. Thus, using the terms of an existing agreement, the loan dispute could be reconciled.

You understand that the goal of the court is to find an acceptable remedy, making the injured party whole. The exercise of that clause, if agreeable to PTSC, could make PTSC whole. What alternatives available to TPL? And, assuming this conjecture is correct, PTSC will have achieved its true goal. Further, it may have set a precident should TPL default on the other loan - if a similar dispute arose. And finally, the entire cost of litigation of the loan dispute would likely be borne by TPL.

What I was doing was contrasting this approach with an approach where PTSC tried to exercise that clause in the CA instead of making the loan. They could have just not loaned TPL the money, let TPL fail in meeting its agreed obligations in the funding of PDS/Alliacense, and attempted to exercise the clause. This would have undoubtedly resulted in a dispute about the clause and/or the entire CA. The waters would likely be muddied, and therefore the associated risk increased and far greater than in the loan dispute scenario.

Also, using the latter approach, PTSC would have appeared (at least to TPL) as a making a very unfriendly gesture. It would be messy. And costly, in terms of time and money.

That in contrast with an unarguable loan in default. They owed, they didn't pay, they are unable to pay. Where is the counterargument? Any risk there? Thus, using the loan scenario, PTSC had nothing to lose, and the potential to achieve far more than just getting their money back. You do know what clause in the CA in am referring to, right? It would be the only one applicable in this situation. And its exercise would result in PTSC owning a greater percentage of PDS/MMP - to the tune of 1% per $100K. Perhaps PTSC's true ultimate goal.

Hope this helps. Having made that pitch, I'm feeling a lot drier out here on the mound!

BTW, my original request had to do with a lawyerly assessment of the advantages of using one of the above approaches to the TPL funding shortfall in contrast with the other. Perhaps, with a better understanding, you or others can now provide that assessment. Originally, I requested input more about the cost of litigation aspect. Loan > default > sue > almost certainly win > loser pays for all litigation costs VERSUS let TPL fail to meet agreed obligations > attempt exercise of CA Clause > wind up in court re: the clause/CA > risk > who pays for litigation? Here please recognize how I could envision litigation costs to be in the six figures.

Perhaps I have already answered my own question, from a logical perspective (which may or may not apply) and recognizing my attention to risk mitigation. I'm fairly convinced that this was indeed the preconceived plan behind making the unsecured, very short term loan. The only question remaining is whether it will be fully successful.

SGE