Bearcatbob.
Discussions are very sensitive now, and a public forum is not the place to outline what will happen. I can outline part of what may have happened in the following.
The fact that an operation produces an operating profit doesn't mean it should be operated.
Consider the hypothetical case of Bob and Jim, a partnership that form a farming company called BAT. They figure that they can invest $200,000 in corn, and make $300,000 in 8 months. They both agree to put $100,000 into BAT which is to rent land, buy seed and fertilizer, then harvest and market the corn. Jim explains to Bob that he will provide his $100,000 once he sells his corn from last year's harvest….sometime in the next month. Once the first $100,000 is spent and the land is rented and the seed and fertilizer is purchased, Jim explains to Bob that he'll be a bit short, but that he'll cover all costs including harvest and marketing. He points out that he's lived in this town all his life, and can call on favours from old friends. As winter approaches, and Jim drops the ball again, Bob digs deep into his contingency funds and advances the funds according to the BAT operating agreement which provides for dilution of a deficient party's interest, or a penalty clause. Jim opts for the penalty clause in a letter to Bob. BAT makes the harvest. The $300,000 from the corn sale is terrific, and the $100,000 profit is as expected, but Jim is adamant that he owns 50% of BAT, points out that he has opted for the penalty clause in the agreement, and will pay that from next year's harvest. Jim claims $150,000 from the pool. Jim is ecstatic, Bob is furious, and the manager of BAT is asking for $200,000 to do it again next year. BAT is asking for funds, Bob doesn't trust Jim, and Jim now owes Bob $100,000 plus interest and penalties. Looks like Jim will be short again. What should Bob do? BAT operated according to plan, it was profitable, and should have been a great deal. In fact, if Bob owned 100%, or the partnership worked as it should have, it is a wonderful money-making machine…. but the smart thing for Bob would be to say no. Not another nickel into BAT until Jim comes clean.
Stay tuned…this story could continue.
Dave
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