We entered into a stock purchase for my business in December. One of
the stipulations was that I would expunge a personal loan of $40,000
to the corporation. The agreement also contained a contingency that
was not fulfilled until last week. The contingency paragraph in the
agreement contained the following paragraph.
"During the contingency period, any changes to the assets or
liabilities of xyz, Inc., outside the routine and normal operating
expenses must be with prior written permission of the buyers"
Background: As a principal, I made a large personal loan to the
corporation one and one-half years ago. It was agreed that I would
charge interest and that the loan would be paid back in 24 monthly
payments. Unfortunately, the company was in such bad financial shape,
that they could not pay me anything for more than a year. Sometime
around 5 months ago, the company started making monthly payments
toward that loan, although they were 2 months behind at the time of
the agreement.
During the contingency period, the company continued making interest
payments for the loan. At the time the agreement was finalized, the
company was still behind on payments and the balance of the loan
exceeded the $40,000 that I agree to expunge.
When the new owners became aware that I had received interest payments
on the loan during the contingency period, they immediately notified
me and said that I had violated the routine and normal operating
expenses part of our agreement and that I owed them the monies I
received toward the loan during that time.
I was under the impression that payment to this and other loans were
standard operating expenses and fell within the routine and normal
operating expenses criteria. Am I wrong in my understanding? Is my
position arguable?