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Promissory Note will not be paid!!
by Helmet » Sun May 23, 2010 9:30 pm
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As short as I can:
We are due a $75K promissory note on our invention soon. Payment was negotiated by us in case investors did not produce product in five years. Five years is up. They set the date, not us.
They said if we demand payment the co. will go bk.
We asked them to pay us the interest only (17K). They declined and said, sell our stake or delay the note two years!!
After five years we are done and are considering demanding the note, putting them in default and possibly bk. The company has assets in our molds and we would get paid eventually but a bk could delay our product for at least another two years.
We don't feel that the investors will let the co. go bk because they have over a half million dollars invested. We will be meeting with a contract negotiator tues. and possibly an attorney if we need to.
If anyone has experience in this situation or can give us some legal advice we would greatly appreciate it. Thank you.
We are due a $75K promissory note on our invention soon. Payment was negotiated by us in case investors did not produce product in five years. Five years is up. They set the date, not us.
They said if we demand payment the co. will go bk.
We asked them to pay us the interest only (17K). They declined and said, sell our stake or delay the note two years!!
After five years we are done and are considering demanding the note, putting them in default and possibly bk. The company has assets in our molds and we would get paid eventually but a bk could delay our product for at least another two years.
We don't feel that the investors will let the co. go bk because they have over a half million dollars invested. We will be meeting with a contract negotiator tues. and possibly an attorney if we need to.
If anyone has experience in this situation or can give us some legal advice we would greatly appreciate it. Thank you.
Re: Promissory Note will not be paid!!
by JoeWaisman » Mon May 24, 2010 12:49 am
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JoeWaisman - Green Belt
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1) That sucks (for them and for you).
2) Is there a happy middle ground? Perhaps you earn double your normal royalty until the $75k is paid? In other words you would receive double your normal royalty until $150k has been paid to you.
A few more questions:
If they choose to let the company go bankrupt and lose the 1.5 mil will the company be liquidated, or would you have some sort of controlling ownership. Does the idea default back to you if the $75k is not paid?
2) Is there a happy middle ground? Perhaps you earn double your normal royalty until the $75k is paid? In other words you would receive double your normal royalty until $150k has been paid to you.
A few more questions:
If they choose to let the company go bankrupt and lose the 1.5 mil will the company be liquidated, or would you have some sort of controlling ownership. Does the idea default back to you if the $75k is not paid?
___________________________________________
"The horse is here to stay but the automobile is only a novelty, a fad."
Fun links:
*http://www.scribd.com/doc/441708/Bad-Predictions-About-Great-Inventions
"The horse is here to stay but the automobile is only a novelty, a fad."
Fun links:
*http://www.scribd.com/doc/441708/Bad-Predictions-About-Great-Inventions
Re: Promissory Note will not be paid!!
by rather-be-golfing » Mon May 24, 2010 7:34 pm
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rather-be-golfing - Green Belt
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Helmet,
That is really tough to hear. Just when you think that nothing can delay it any more....
If you don't go after the money what are they saying about getting your product on the market now? Wasn't it supposed to be ready for December and then June?
I always hate to involve lawyers but I would guess that it is time to talk to one. They have to expect that you would be getting legal advice at this point. If this was the first delay that would be different but they are preventing you from profiting from your invention now and they need to be reminded of that by someone not direcly involved If they can't afford to market your product as agreed then maybe you need to find someone who can.
RBG
That is really tough to hear. Just when you think that nothing can delay it any more....
If you don't go after the money what are they saying about getting your product on the market now? Wasn't it supposed to be ready for December and then June?
I always hate to involve lawyers but I would guess that it is time to talk to one. They have to expect that you would be getting legal advice at this point. If this was the first delay that would be different but they are preventing you from profiting from your invention now and they need to be reminded of that by someone not direcly involved If they can't afford to market your product as agreed then maybe you need to find someone who can.
RBG
Re: Promissory Note will not be paid!!
by apapage » Tue May 25, 2010 8:26 pm
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Looks to me like you have a legal right to demand payment at this point, but doing so may mean that you delay your product to market. Do you think that this company that you are dealing with will get it to market sooner or later? The reason I ask is that you can agree not to demand payment at this point for a greater stake in the outcome. Consider also an escalating payment structure. For example you agree not to demand payment for one years time, in exchange for an additional 1% licensing fee plus 0.5% for each month delay after 6 months from the signing of the new agreement. This way, they pay you for not exercising your demand and it creates an incentive for them to get things done before they start incurring additional fees.
A Papageorgiou
http://www.patentlawforinventors.com
http://www.patentlawforinventors.com
Re: Promissory Note will not be paid!!
by Helmet » Tue May 25, 2010 9:20 pm
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Thank you guys for reading and replying! A lot of good advice.
Yes, we were told we were going to have a first quarter release. The CEO decided we needed to make changes to make our parts stronger. So the tools go back to the mold maker for changes, then back to the manufacturer (all of this by crane as our molds weigh 10 tons!) which will take a minimum of two months.
They do seem to be making progress but we are probably looking at another six month delay, which really, really sucks when we thought we were so close.
We sent a strongly worded email stating that we at least deserved the interest for our past work. They did come back with an offer of trading our note for equity in the company, which is a big leap from the original offer and made us proud that we stuck to our guns.
We met with a contract negotiator who said we should take the equity deal (depending on the percentage) but try to get them committed to a timeline with cash payouts to us if deadlines are not met. He said we basically have no standing as far as collecting a cash payment.
I personally still want to demand payment, put them in default and try to at least get the interest but my partner is losing confidence so we will look at the equity deal and decide from there.
Yes, we were told we were going to have a first quarter release. The CEO decided we needed to make changes to make our parts stronger. So the tools go back to the mold maker for changes, then back to the manufacturer (all of this by crane as our molds weigh 10 tons!) which will take a minimum of two months.
They do seem to be making progress but we are probably looking at another six month delay, which really, really sucks when we thought we were so close.
We sent a strongly worded email stating that we at least deserved the interest for our past work. They did come back with an offer of trading our note for equity in the company, which is a big leap from the original offer and made us proud that we stuck to our guns.
We met with a contract negotiator who said we should take the equity deal (depending on the percentage) but try to get them committed to a timeline with cash payouts to us if deadlines are not met. He said we basically have no standing as far as collecting a cash payment.
I personally still want to demand payment, put them in default and try to at least get the interest but my partner is losing confidence so we will look at the equity deal and decide from there.
Re: Promissory Note will not be paid!!
by Helmet » Tue May 25, 2010 10:09 pm
- Helmet
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- Joined: Mon Dec 14, 2009 8:25 pm
After reading back I realized I didn't answer a few of your questions:
In the case that the co. goes bk, the assets would be sold off and we would be paid our note and our intellectual property and patent would be reassigned to us. We would then have to sell our idea to another company who would purchase the molds and accept our royalty structure. This should not be difficult because we already have the patent, the molds and a great product that is near completion. The bk process is what would take up a lot of time.
They have lost us potentially hundreds of thousands of dollars because of their delays. Not to mention 3 years of our patent life which makes me more upset than the money.
Do to our not backing down and the requests we have made, I think that they do believe we have obtained legal counsel.
apapage: I think that the escalating payment structure is an excellent idea and I am going to take a look at it - Thank you!
As I am writing this I am getting more p.o.'d and thinking we should just take them down. It has become a matter of principle to us. Remember "Flash of Genius?" Once my principles are challenged, it's game on.
In the case that the co. goes bk, the assets would be sold off and we would be paid our note and our intellectual property and patent would be reassigned to us. We would then have to sell our idea to another company who would purchase the molds and accept our royalty structure. This should not be difficult because we already have the patent, the molds and a great product that is near completion. The bk process is what would take up a lot of time.
They have lost us potentially hundreds of thousands of dollars because of their delays. Not to mention 3 years of our patent life which makes me more upset than the money.
Do to our not backing down and the requests we have made, I think that they do believe we have obtained legal counsel.
apapage: I think that the escalating payment structure is an excellent idea and I am going to take a look at it - Thank you!
As I am writing this I am getting more p.o.'d and thinking we should just take them down. It has become a matter of principle to us. Remember "Flash of Genius?" Once my principles are challenged, it's game on.
Re: Promissory Note will not be paid!!
by rather-be-golfing » Tue May 25, 2010 11:00 pm
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rather-be-golfing - Green Belt
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I was just going to say that the most important thing is to try and take the emotion out of this but of course that is next to impossible at this stage!
It is unfortunate that the agreement was not written so that everything immediately reverted back to you if they failed to meet their obligations.
You could just go to a competitor and get a much sweeter deal.
I imagine that if they really had to do it they could come up with the money however this may be the first time that you have some power in this relationship. If you use it wisely, perhaps the playing field can be levelled a bit.
It is unfortunate that the agreement was not written so that everything immediately reverted back to you if they failed to meet their obligations.
You could just go to a competitor and get a much sweeter deal.
I imagine that if they really had to do it they could come up with the money however this may be the first time that you have some power in this relationship. If you use it wisely, perhaps the playing field can be levelled a bit.
Re: Promissory Note will not be paid!!
by rather-be-golfing » Wed Jan 26, 2011 10:56 am
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rather-be-golfing - Green Belt
- Posts: 204
- Joined: Mon Feb 25, 2008 12:25 pm
Hi Helmet,
I am always curious to see if you have made progress on this. It's a great example of how a 'sure thing' can go sideways.
Hopefully things are heading in the right direction now?
RBG
I am always curious to see if you have made progress on this. It's a great example of how a 'sure thing' can go sideways.
Hopefully things are heading in the right direction now?
RBG
Helmet wrote:After reading back I realized I didn't answer a few of your questions:
In the case that the co. goes bk, the assets would be sold off and we would be paid our note and our intellectual property and patent would be reassigned to us. We would then have to sell our idea to another company who would purchase the molds and accept our royalty structure. This should not be difficult because we already have the patent, the molds and a great product that is near completion. The bk process is what would take up a lot of time.
They have lost us potentially hundreds of thousands of dollars because of their delays. Not to mention 3 years of our patent life which makes me more upset than the money.
Do to our not backing down and the requests we have made, I think that they do believe we have obtained legal counsel.
apapage: I think that the escalating payment structure is an excellent idea and I am going to take a look at it - Thank you!
As I am writing this I am getting more p.o.'d and thinking we should just take them down. It has become a matter of principle to us. Remember "Flash of Genius?" Once my principles are challenged, it's game on.
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