Synectic Ventures I, LLC v. EVI Corp.
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Plaintiffs Synectic Ventures I, LLC, Synectic Ventures II, LLC, and Synectic Ventures III, LLC, entered into a loan agreement regarding money that they had loaned to defendant EVI Corporation. The loan agreement provided that the loan, secured by a security interest in essentially all of defendant's property, would be converted to equity ownership in defendant, if defendant obtained additional financing by a certain date. Shortly before that deadline, the managing member of plaintiffs (who was also chairman of the board and treasurer of defendant and financially interested in defendant) entered into an agreement purporting to extend the loan period by an additional year. During the extension period, defendant obtained the additional financing and converted the debt to equity. Plaintiffs filed an action against defendant, asserting that they were not bound by the extension because the managing member had had a conflict of interest and defendant knew of the conflict. The trial court rejected that argument and granted summary judgment for defendant. The Court of Appeals affirmed. Upon review, the Supreme Court concluded that the trial court erred in granting defendant summary judgment, and reversed the court's judgment. The case was remanded for further proceedings.
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