Exhibit,Appendix: SYDOW, MICHAEL D vs. MINTON, LISA (F/N/A LISA PENAFIEL)

On June 15, 2021 a Exhibit,Appendix was filed involving a dispute between Sydow, Michael D, and Minton, Lisa, Penafiel, Lisa, for SWORN ACCOUNT in the District Court of Harris County.

Preview
1/18/2023 3:31 PM
Marilyn Burgess - District Clerk Harris County
Envelope No. 71911823
By: Wanda Chambers
Filed: 1/18/2023 3:31 PM

CAUSE NO

SERIES 2 — VIRAGE MASTER LP IN THE DISTRICT COURT OF

Plaintiff,

Vv HARRIS COUNTY, TEXAS

THE SYDOW FIRM, PLLC, MICHAEL D.
SYDOW, AND DAVID FETTNER, AS
RECEIVER th JUDICIAL DISTRICT COURT

Defendant.

PLAINTIFF’S ORIGINAL PETITION

Plaintiff Series 2 — Virage Master LP files this Original Petition against The Sydow Firm,

PLLC, Michael D. Sydow, and David Fettner, as receiver (collectively, “Defendants”) as follows

I. PARTIES

1 Plaintiff Series 2 — Virage Master LP (“Virage”) is a litigation funding company

with its principal place of business in Harris County, Texas

2. Defendant The Sydow Firm, PLLC (the “Firm” or “Borrower”) is a Texas law firm

with its principal place of business in Harris County, Texas and may be served with process

through its registered agent, Michael D. Sydow, Sr. at 3355 W. Alabama Street Suite 444, Houston,

Texas 77098-1876. The Sydow Firm, PLLC is the successor in interest to The Sydow Firm L.L.P.

3 Defendant Michael D. Sydow (“Sydow” or “Attorney”) is a resident of Texas and

may be served with process at his place of business at 3355 W. Alabama Street Suite 444, Houston,

Texas 77098-1876, his residence at 21 N. Post Oak Lane Apt. 801, Houston, Texas 77024-7711,

or wherever he may be found. He may also be served by certified mail with return receipt requested
under Section 5.8(c) of the Note. The Note is the valid and enforceable agreement between Virage,

Sydow, and the Firm. Ex. 1, LitCap Business Expense Note #711.

4 Defendant David Fettner is the Receiver (“Receiver”) in the 295th Judicial District

Court appointed under the Texas Turnover Statute to “locate, marshal, and administer the

collection of the judgment” against Jose Alejandro Penafiel in Jn the Matter of the Marriage of

Lisa Penafiel & Jose Alejandro Penafiel and related case Michael D. Sydow y. Lisa Minton fk/a

Lisa Penafiel. Fettner is a resident of Texas and may be served with process at his residence at

2425 Holly Hall St. A24, Houston, Texas 77054, his place of business at 6700 Sands Point Drive,

Houston, Texas 77074, or wherever he may be found.

II. JURISDICTION AND VENUE

5 The Court has subject matter jurisdiction over Virage’s claims because the amount

in controversy is within the jurisdictional limits of the district court. See Tex. Const. Art. V, § 8;

Tex. Gov’t Code § 24.007(b)

6 This Court has personal jurisdiction over the Firm because it is organized under the

laws of Texas and has its principal office in Harris County, Texas. See TEX. CIV. PRAC. & REM

CODE § 15.002(a)(3). This Court has personal jurisdiction over Sydow and the Receiver because

they reside in Harris County, Texas. See id. at § 15.002(a)(2).

7 Personal jurisdiction and venue are proper for all Defendants in Harris County,

Texas because all or a substantial part of the events or omissions giving rise to Virage’s claims

occurred in Harris County, Texas, including, but not limited to, that: (a) the place for the

performance and payment of LitCap Business Expense Note #711 among Virage, the Firm, and

Sydow (the “Note”) is Harris County, Texas; (b) Texas law governs the Note; and (c) the Note
was executed, performed, breached, and enforced in Harris County, Texas. See id. at

§ 15.002(a)(1).
8 Personal jurisdiction and venue are proper for all Defendants in Harris County,

Texas because Section 5.3 of the Note designates Harris County, Texas as the venue for suit. See

id. at § 15.035(a)
II. DISCOVERY PLAN

9 Plaintiff intends to conduct discovery under Level 2 of Texas Rule of Civil

Procedure 190.3. Plaintiff seeks monetary relief over $1,000,000.

IV. FACTUAL BACKGROUND

10. The Firm is counsel for the “Litigation Matters” listed in Exhibit 1 (the case

collateral) for the Note. Ex. 1 at p. 22

11 Virage is a litigation funding company that lends to law firms for business purposes,

including marketing, case expenses, overhead, and growth.

12. The Note is a valid, enforceable agreement among Virage, the Firm, and Sydow.

On November 20, 2014, Virage, the Firm, and Sydow executed the Note with Virage as the lender

or “Holder,” the Firm as the “Borrower,” and Sydow as the “Attorney” and guarantor. Jd. at 1.

Under the Note, Virage agreed, among other things, to loan the principal sum of $2,060,000 to the

Firm in exchange for, among other things: (a) prepayment of “at least 50% of Borrower’s interest”

in any “Recovery” and 100% of Expenses included in such Recovery; (b) repayment of the

principal sum with interest; (c) a security interest in any “Recovery” on a “Litigation Matter” listed

in Appendix 2 of the Note; and (d) Sydow’s execution of a personal guarantee of the Note that

unconditionally guarantees payment. /d. at 1; id. §§ 2.2(a), 2.2(e), 2.3(a), 2.9; id. at 15. After

Virage, the Firm, and Sydow executed the Note, Virage advanced $2,060,000 to the Firm
13. Virage’s security interest attached upon: (a) Virage agreeing to advance the

principal sum under the Note; (b) Virage, the Firm, and Sydow executing the Note, which describes

the collateral as each Recovery; and (c) the Firm and Sydow obtaining rights in each Litigation

Matter. See Tex. Bus. & Com. Code § 9.203(a). Virage’s security interest in each Recovery

automatically perfected upon execution. /d. § 9.309(2).

14. Virage also perfected its security interest in each Recovery by filing a UCC-1

financing statement on September 4, 2018. Ex. 2 (UCC-1 Financing Statement). Subsequently,

Virage filed a UCC-3 Financing Statement Amendment on December 1, 2022. Ex. 3 (Amended

UCC-1 Financing Statement). The amended statement served only to correct the borrower’s name

from “The Sydow Firm, LLP” to “The Sydow Firm, PLLC.” /d. On December 11, 2022, the Texas

Secretary of State’s office acknowledged receipt and filing of the corrected UCC-1 Financing

Statement and Annex A that describes Virage’s collateral. Ex. 4 (UCC Filing Acknowledgement).

15 Under the Note, the collateral for Virage’s attached, perfected security interest

includes, for each “Recovery, me any recovery of payment (whether in cash or other property) of

any amount, nominal or otherwise, to or for the account of Borrower or his/her Client in such

Litigation Matter arising from or in connection with any recovery, settlement, release or dismissal

of, verdict, judgment or entry in connection with, or other disposition of, such Litigation Matter

(other than amounts paid to Borrower pursuant to this Note or amounts paid or advanced by

Borrower’s attorneys in connection with such Litigation Matter), whether such payment is made

by any party to such Litigation Matter or by a third-party, an insurer or by any other person or

entity, and notwithstanding the existence of any right to appeal or appeal of any such payment,

and excludes [a client’s] share.” Ex. 1 at 17. Under Sections 9.203(f) and 9.315(a) of the Texas

Business and Commerce Code, the collateral for Virage’s attached, perfected security interest also
includes, for each “Recovery 2, : (A) whatever is acquired upon the sale, lease, license, exchange,

or other disposition of collateral; (B) whatever is collected on, or distributed on account of,

collateral; (C) rights arising out of collateral; (D) to the extent of the value of the collateral, claims

arising out of the loss, nonconformity, or interference with the use of, defects or infringement of

rights in, or damage to the collateral; [and] (E) to the extent of the value of collateral and to the

extent payable to the debtor or the secured party, insurance payable by reason of the loss or

nonconformity of, defects or infringement of rights in, or damage to the collateral.” See TEX. BUS.

& COM. CODE §§ 9.203(f), 9.315(a), 9.102(65).
16. Virage performed its obligations under the Note, including, but not limited to,

advancing $2,060,000 to the Firm. Since 2014, Sydow has only repaid $22,425 to Virage.

17. The Firm and Sydow materially breached and defaulted under the Note by: (a)

failing to pay to Virage all Expenses included in such Recovery and at least 50% of each Recovery;

(b) failing to act as the Attorney of Record and remain responsible for the Litigation Matters; and

Litigation Matter.” Ex. 1 §§ 2.3(a), 3.1(b), 3.2(b), 4.1(a)-(b). Sydow’s counsel, Robin Ziek, also

repudiated Sydow’s obligations under the Note by claiming that Sydow did not sign the Note.

Sydow also repudiated Sydow’s personal guarantee under the Note by maintaining that Sydow has

no personal obligation to pay the Note even after default. Sydow and the Firm also repudiated their

obligations to pay the Note by maintaining that the Note is non-recourse debt.

18. Sydow advised that the Firm had received a default judgment of $5M on the

Excelaw/HPT y. Statoil, Morgan Oil, Crest, and HydroPure Litigation Matter. Because the

Defendant’s assets were in the Bahamas, the Firm was required to domesticate the order in the

Bahamas. Sydow referenced issues with collecting on default judgments in the Bahamas. The
Bahamian court heard the case before a major hurricane. Sydow stated that the court filings had

been lost and/or destroyed during the hurricane and that no further action towards Recovery would

be taken. This is another default. Ex. 1 § 3.1(b).

19. In the Stone v. SMG & ARA Litigation Matter, Sydow claims he did not recover due

to a dispute with co-counsel over his entitlement to attorneys’ fees because he was not the attorney

of record. This is another default. Ex. 1 § 3.1(b).

20. Because of these defaults, on September 8, 2022, Virage accelerated the

$5,561,699.58 balance of the Note and demanded payment from the Firm and Sydow. Note. Ex

3, Notice of Acceleration at 1. The Firm and Sydow did not respond to the notice of acceleration

or pay the balance. The Firm’s and Sydow’s failure to pay the accelerated balance are material

breaches and defaults under the Note. Ex. 1 § 4.1(a).

21 As a result of these material breaches and defaults, Virage suffered financial injury.

22. The Penafiel litigation is a Litigation Matter and is collateral for the Note. Ex. 1

at 22. The Penafiel litigation involves a dispute between former spouses over the validity of a

premarital agreement and the division of marital assets. The Firm and Sydow represented Lisa

Penafiel Minton in the original lawsuit (/n the Matter of the Marriage of Lisa Penafiel & Jose

Alejandro Penafiel) and secured a judgment of $249,600,000. After this judgment, Minton

disputed the Firm’s and Sydow’s right to a one-third contingency fee under the contract with

Minton. Sydow and Minton arbitrated the dispute. The arbitration panel found that the one-third

contingency interest under the contract was valid and awarded this one-third interest to Sydow.

The 295th District Court confirmed the arbitration award on October 4, 2021. Ex. 6 (Final

Judgement Confirming Arbitration Award) at 1-3. The 295th District Court then issued a limited

turnover order and appointed David Fettner as Receiver to “locate, marshal, and administer the
collection of the judgment.” Ex. 7 (Limited Order for Appointment of Receiver and Turnover,

March 21, 2022).

23. Virage’s collateral for the Note includes any Recovery in the Penafiel case, any

proceeds of the Firm’s or Sydow’s dispute with Minton, and any proceeds of the Receiver’s

collections or related efforts.

24. Under Sections 9.406 and 9.607 of the Texas Business and Commerce Code, Virage

provided authenticated notification to the Receiver on August 1, 2022 to direct funds owed to

Sydow in connection with the Penafiel matter to Virage. Ex. 8 (Letter of Direction to David

Fettner) at 1. In response to the Receiver’s request, under Section 9.406 of the Texas Business and

Commerce Code, Virage provided the Receiver with copies of the Note and corresponding UCC-1

financing statement. The Receiver refused to comply with Virage’s notification and disputed

Virage’s rights as a perfected secured creditor. Ex. 9 (Email from David Fettner, August 22, 2022)

at 1. The Firm and Sydow also refused to acknowledge Virage’s security interest to the Receiver

for collection purposes. See Ex. 8 at 1

V. CONDITIONS PRECEDENT

25 All conditions precedent have been met, have occurred, or have been waived.

VI. CAUSES OF ACTION

A, CLAIM FOR DECLARATORY JUDGMENT

26. Virage fully incorporates the preceding paragraphs as if stated herein.

27. An actual and justiciable controversy exists: (a) among Virage, the Firm, and

Sydow regarding the validity of the Note and regarding Virage’s security interest, (b) among

Virage, the Firm, and Sydow regarding whether a default occurred under the Note; (c) among

Virage, the Firm, and Sydow regarding whether the balance of the Note is recourse or non-recourse
debt; (d) between Virage and Sydow regarding the validity, application, and scope of Sydow’s

personal guarantee; and (e) among Virage, the Firm, Sydow, and the Receiver regarding Virage’s

rights as a perfected, secured creditor to obtain payment directly from the Receiver for the

Receiver’s collections related to the Penafiel matter.

28. Under Chapter 37 of the Texas Civil Practice and Remedies Code, Virage seeks

declarations that

a. Virage’s security interest in the Firm’s and Sydow’s right to payment

regarding any Litigation Matter listed in Appendix 2 of the Note is attached, perfected,

and has priority over any claim from the Firm, Sydow, or Robin Ziek regarding

payment for any Litigation Matter.

b The Firm’s handling of Litigation Matter Stone v. SMG & ARA isa violation

of Section 3.1(b) of the Note and a default under Section 4.1(b). Ex. 1 §§ 3.1(b), 4.1(b).

C. The Firm’s handling of Litigation Matter Excela/HPT y. Statoil, Morgan

Oil, Crest, and HydroPure is a violation of Section 3.1(b) of the Note and a default

under Section 4.1(b). Ex. 1 §§ 3.1(b), 4.1(b).

d The Receiver’s collections regarding the Penafiel matter are proceeds of

Virage’s collateral and are subject to Virage’s attached and perfected security interest.

e. Sydow’s personal guarantee of the Note is an unconditional guarantee of

payment.

f. The Firm’s and Sydow’s obligations to pay the balance of the Note are

recourse debt.

g The Receiver must pay to Virage 100% of any collections regarding the

Penafiel matter otherwise owed to the Firm or Sydow under the Limited Order for
Appointment of Receiver and Turnover (March 21, 2022) until the balance of the Note

(including all principal, interest, fees, and costs) is paid in full

29. Because awarding attorney’s fees and costs to Virage is equitable and just under

Chapter 37 of the Texas Civil Practice and Remedies Code, Virage is entitled to costs and

attorney’s fees. Virage also is entitled to attorney’s fees and expenses under Section 9.607(d) of

the Texas Business and Commerce Code and under Section 5.3 of the Note.

B. CLAIM FOR BREACH OF CONTRACT AGAINST THE FIRM

30. Virage fully incorporates the preceding paragraphs as if stated herein.

31. The Note between Virage and Sydow is a valid, enforceable contract under which

the Firm must repay the accelerated loan balance to Virage.

32. Virage has performed, tendered performance of, or is excused from performing all

obligations under the Note.

33 The Firm breached the Note by failing to pay Virage 50% of each Recovery and

100% of Recovered Expenses, failing to perform its reporting obligations, failing to maintain

responsibility and attorney-of-record status over each Litigation Matter, failing to pay the loan

balance when it became due, and repudiating the Firm’s and Sydow’s obligations under the Note.

34 These breaches caused Virage injuries, including, but not limited to, actual

damages, direct damages, indirect damages, incidental damages, consequential damages, and

special damages.

35. Virage presented its claim to the Firm for payment and the Firm refused to pay

Virage now seeks attorney’s fees under Chapter 38 of the Texas Civil Practice & Remedies Code.

Virage is entitled to default interest, legal fees, costs, and expenses under Section 5.3 of the Note.
Virage is entitled to all reasonable expenses of collection and enforcement, including attorney's

fees and expenses under Section 9.607(d) of the Texas Business and Commerce Code.

C. CLAIM FOR BREACH OF CONTRACT AGAINST SYDOW

36. Virage fully incorporates the preceding paragraphs as if stated herein.

37. The personal guarantee clause of the Note is a valid, enforceable contract under

which Sydow unconditionally guarantees payment of the Note.

38. Virage has performed, tendered performance of, or is excused from performing all

obligations under the Note.

39. Sydow breached the Note by failing to pay the loan balance when it became due

and by repudiating Sydow’s and the Firm’s obligations under the Note.

40. These breaches caused Virage injuries, including, but not limited to, actual

damages, direct damages, indirect damages, incidental damages, consequential damages, and

special damages.

41. Virage presented its claim to Sydow, and Sydow refused to pay. Virage now seeks

attorney’s fees under Chapter 38 of the Texas Civil Practice & Remedies Code. Virage also is

entitled to default interest, legal fees, costs, and expenses under Section 5.3 of the Note. Virage

also is entitled to all reasonable expenses of collection and enforcement, including attorney’s fees

and legal expenses under Section 9.607(d) of the Texas Business and Commerce Code.

VII. JURY DEMAND

42. Virage demands a trial by jury.

10
VIII. TEXAS RULE OF CIVIL PROCEDURE 47(c) STATEMENT

43 Virage seeks monetary relief over $1,000,000 in the form of declarations, actual

damages, direct damages, indirect damages, incidental damages, consequential damages, special

damages, interest, attorney’s fees, and costs.

IX. RULE 193.7 NOTICE

44 Under Rule 193.7 of the Texas Rules of Civil Procedure, Virage gives notice to

Defendants that Virage intends to use all documents exchanged and produced between the parties

(including, but not limited to, correspondence, pleadings, records, and discovery responses) during

the trial in this matter

X. PRAYER FOR RELIEF

45. For these reasons, Virage asks for the foregoing declarations, actual damages, direct

damages, indirect damages, incidental damages, consequential damages, special damages, interest,

attorney’s fees, costs, and all other relief to which Virage is entitled in law or equity.

11
Respectfully Submitted,

AHMAD, ZAVITSANOS & MENSING, PLLC

/s/Todd Mensing
Todd Mensing
Texas Bar No. 24013156
Cameron Byrd
Texas Bar No. 24097444
Alexander M. Dvorscak
Texas Bar No. 24120461
Kaitlin Hopkins
Texas Bar No. 24129227
1221 McKinney Street, Suite 2500
Houston, Texas 77010
Telephone: 713-655-1101
Facsimile: 713-655-0062
Tmensing@azalaw.com
ebyrd( azalaw.com
LOVE aZa aw COM.
ady CATE
khopkins@azalaw.com

ATTORNEYS FOR PLAINTIFF
SERIES 2 — VIRAGE MASTER LP

12
NOTE NUMBER: 713 AMOUNT:$2,868,008.06
LITCAP BUSINESS EXPENSE NOTE

Contract Electronically Formed on: November 20, 2014
Houston, Texas

FOR VALUE RECEIVED, The Sydew Fieri (“Borrower”), a law firm having an address at 5328 Montrose
Boulevard Houston, Texas, 458, 77886, of which Michael D. Sydow(“Attorney”), licensed in the State of Texas,
who are equity partners, equity members, owners, and/or persons with authority to bind the Borrower, upon the
terms and subject to the conditions herein, hereby promises to pay to the order of Series 2- Vieage Master LP (“
Holder’) generated by authorized person for Holder,Martin Shellist having an address at 1786 Post Gak Blvd. 2
BLVD Place, 6th Floor, Houston, Pexas, 77856, the principal sum of hve mor sixty thousand and sero
hundredth DOLLARS ($2,060,860.96), together with interest thereon at a rate of interest per annum equal to
twenty-oge aed twesty-five haadredil: (21.25%) (the “Interest Rate”), and otherwise in strict accordance with
the terms and provisions hereof. This Note has been negotiated and executed by Attorney, Borrower and Holder
through the attorney litigation financing services offered by Affiliated Solutions LLC, doing business as LitCap (“
LitCap”), and in accordance with each of the User Agreement between Attorney (on behalf of Borrower) and
LitCap (as such agreement may be modified from time to time, the “Attorney’s User Agreement’) and the User
Agreement between Holder and LitCap (as such agreement may be modified from time to time, the “Holder’s User
Agreements”).In the event of a conflict between the terms of the Attorney’s User Agreement and this Note, the
terms of the Note shall prevail. However, to the extent the Attorney’s User A greement contains additional terms not
contained in this Note does not mean that there is a conflict, and those additional terms are incorporated herein
mutatis mutandi. In the event the terms of the Attommey’s User Agreement are amended, modified, or changed, such
changes shall not retroactively alter the terms of this note, to the extent the changes to the Attorney’s User
Agreement are in conflict with this note. The borrowings represented by this Note were deposited into operating
Account of Borrower at Assegy Bask, account number 8869099511, with ABA routing number 113011258.
Capitalized terms that are used in this Note but are not defined in the text of this Note have the meanings ascribed
thereto in “Appendix 1”.

ARTICLE I - USE OF PROCEEDS

11 Use of Proceeds. The proceeds of this Note shall be used exclusively to (i) pay the fee payable by Borrower
to LitCap upon issuance of this Note pursuant to Attorney’s User Agreement, and (ii) finance the Expenses that are
described below with respect to the Litigation Matters.

Business Expenses: See the definition of Expenses in “Appendix 1 ind the itemized list of
Business Expenses in “Appendix 3” (collectively the “Business
Expense”).

The Borrower and Attorneys each represent and warrant that (i) Borrower will use the proceeds of this Note for
Business Expenses unless otherwise agreed by the Holder in writing in its sole discretion, and (ii) Borrower will not
use any proceeds of this Note for personal, household or family purposes. Each of Borrower, Attorney and
Holder acknowledge and agree that Holder does not have a contingent or other interest in the outcome of any
Litigation Matter, Holder shall have no direct contact with the Borrower’s Client, and Holder shall have no
influence or control over the litigation strategy with respect to any Litigation Matter.

1 of 22 CONFIDENTIAL V1.2
ARTICLE I - PAYMENT TERMS

2. Payment of Principal and Interest. The outstanding principal balance of this Note shall be finally due and
payable in full on the Maturity Date (whether such Maturity Date occurs because of acceleration or otherwise);
together with all interest that has accrued hereon and has not been paid as of such Maturity Date. The fact that any
amount received by or on account of Borrower in connection with a Recovery may be less than the amount of
principal and interest due and payable on this Note shall not affect the obligation of Borrower to pay this Note in
full or reduce the amount payable hereunder, except as provided in Section 2.2. No principal amount repaid
may be reborrowed under this Note. Borrower agrees to make payment(s) under this Note as follows: Within ten
calendar days following the end of the month in which any Recovery(ies) is received by Borrower, Borrower will
pay to Holder, in accordance with Section 2.3, Borrow interest in such amounts until Holder has received
payments of such Recovery(ies) such that the principal and interest due under this Note has been paid in full.

2.2 Recourse.

(a) Subject to the other provisions of this Section 2.2, repayment of the amounts borrowed under this
Note (plus accrued interest) shall be secured by all amounts received by Borrower in connection with a
Recovery in each of the cases listed on “Appendix 2.2” for which Borrower and Attorney are the law
firm and attorney of record and which cases are identified collectively as United States v. Under seal -
docket on the LitCap Platform. The Litigation Matters listed on “Appendix 2” reflect Borrower’s and
Attorney’s complete docket of existing cases related to Medicare Billings

(b) Notwithstanding any other provision of this Note, in the event of a Final Adverse Disposition of 90%
or more of the number of Litigation Matters listed on “Appendix 2”, recourse on this Note is limited to
the amount equal to any portion of the principal balance that has not been used by Borrower to fund
Business Expense listed on “Appendix 3” plus the aggregate amount recovered pursuant to a Recovery
a”
(if any) under all Litigation Matters listed on “Appendix 2’ , capped at the amount equal to the
outstanding principal balance of this Note plus accrued but unpaid interest. In the event of a Final
Adverse Disposition of less than 90% of the number of Litigation Matters listed on “Appendix 2”, then
the entire outstanding principal balance of this Note plus unpaid interest shall remain due and payable by
Borrower.

(c) Recourse Examples: By way of example, assume the outstanding principal under this Note is
$2,000,000 and Borrower lists 1,000 Litigation Matters on “Appendix 2” and upon the Final Adverse
Disposition Date Borrower has obtained a Recovery in 80 of the matters (8%). Presume further that the
80 resolved Litigation Matters result in a Recovery, after the Client’s share is deducted, of $1,200,000. In
this case, the Borrower’s liability under the Note is limited to: (1) repayment of the portion of the
proceeds not used to fund the Business Expenses on Appendix 3, if any; and (2) $1,200,000. In a second
example, Borrower lists 1,000 Litigation Matters on “Appendix 2”,and upon the Final Adverse
Disposition Date Borrower has obtained a Recovery in 500 of the matters (50%). The 500 resolved
Litigation Matters result in a Recovery, after the Client’s share is deducted, of $6,800,000. In this case,
the Borrower's liability under the Note is the principal of $2,000,000 plus accrued interest until the Note
is paid in full. In a third example, Borrower lists 1,000 Litigation Matters on “Appendix 2”,and upon the
Final Adverse Disposition Date Borrower has obtained a Recovery in 250 of the matters (25%). The 250
resolved Litigation Matters result in a Recovery, after the Client's share is deducted, of $1,500,000. In
that case, the Borrower’s liability under the Note is the principal of $2,000,000 plus accrued interest until
the Note is paid in full.

(d) Recourse & Attorney User Agreement: The terms contained within the Attorney’s User Agreement
that relate to recourse are incorporated herein by reference, and shall have full force and effect as if

2 of 22 CONFIDENTIAL V1.2
specifically set forth herein. Notwithstanding the foregoing, the signatories to this Note acknowledge and
agree that Sections 1 1(a), (b) and (d) of the Attorney’s User Agreement do not apply to this Note.

(e) NOTWITHSTANDING ANY LIMITATIONS ON RECOURSE CONTAINED HEREIN OR
IN THE ATTORNEY’S USER AGREEMENT, BORROWER SHALL PAY IMMEDIATELY TO
HOLDER IN FULL ALL OBLIGATIONS (DEFINED BELOW) IN THE EVENT OF (I) ANY
BREACH OF THE REPRESENTATIONS, WARRANTIES OR COVENANTS OF BORROWER
OR ATTORNEY CONTAINED IN SECTION 3.1 OR SECTION 3.2, (II) ANY EVENT OF
DEFAULT UNDER SECTION 4.J, OR (11) ANY OTHER DEFAULT UNDER THIS NOTE
ARISING AS A RESULT OF A DELIBERATE, INTENTIONAL OR WILLFUL ACTION
TAKEN IN BAD FAITH OR AS A RESULT OF FRAUD OR INTENTIONAL
MISREPRESENTATION BY OR ON BEHALF OF BORROWER OR ATTORNEY OR ANY
MISAPPROPRIATION OF FUNDS REQUIRED TO BE DELIVERED TO HOLDER. As used in
this Note, “Obligations” means all principal and accrued but unpaid interest on this Note, all fees and
charges payable hereunder, and all other payment obligations of Borrower arising under or in connection
with this Note, in each case whether now existing or hereafter arising, due or to become due, direct or
indirect, absolute or contingent, and howsoever evidenced, held or acquired.

(f) Referrals: This Section
2.2 is personal to the Borrower and Attorney and may not be transferred or
assigned to any other person or entity. In the event that Borrower or Attorney refers one or more of the
Litigation Matters to another person or entity, this Section
2.2 shall no longer have any force or effect
and the outstanding principal balance of this Note shall be finally due and payable in full as Recoveries
are made or, at the latest, on the Maturity Date irrespective of any Final Adverse Disposition on any or
all of the Litigation Matters.

2.3 Treatment of Funds and Required Notices.

(a) Recovery. Any amounts recovered by Borrower or a Client pursuant to a Recovery shall be
immediately placed in Borrower’s IOLTA compliant trust account. Attorney (or Borrower's bank on
behalf of Borrower and Attorney) shall notify Holder and LitCap of the receipt of such payment(s) by
providing to Holder no later than five calendar days following the end of each month a claims
administrator's, court-issued, or similar document reflecting payments made for any Litigation Matter.
Borrower shall transfer its interest in such Recoveries to its operating account as soon as practicable, and
in any event within 45 days after such Recovery is received. Borrower shall thereafter immediately
pre-pay Holder the amount borrowed under this Note (plus accrued by unpaid interest), in at least an
amount equal to the sum of{i) Expenses included in such Recovery (the “Recovered Expenses”),
and (ii) at least 50% of Borrower’s interest in such Recovery. “Borrower’s interest” in any
Recovery is defined as sums received from any Recovery(ies), less the Client’s share, and local or
co-counsel fees due. The repayment process contemplated by this Section 2.3(a) shall repeat for
each Litigation Matter until the entire principal balance of this Note, plus interest, has been repaid by
Borrower (subject, however, to Section 2.2(b)).

For example, if the following were true:

Principal Borrowed: $5,000,000

Interest Rate: 20% per annum or $1,000,000

Number of Litigation

3 of 22 CONFIDENTIAL V1.2
Matters: 500

Business Expenses: $5,000,000

Recovered Expense per
$10,000
Litigation Matter:

150 of 500 cases settled on the first anniversary of this
Recoveries:
Note for $50,000 each:

33% of Borrower's Interest or $6,600 per case;
Local Counsel Fees:
$990,000 in the aggregate

40% of $50,000 or $13,400 per case ($20,000 - $6,600
Borrower’s Interest in the
deduction paid for Local Counsel Fees); or $2,010,000
Recoveries:
($13,400 x (times) 150 cases) in the aggregate

Amount Paid to Client
After Expenses, local $20,000 per case ($50,000 - $10,000 case expense -
counsel fees and $20,000 attorney's fees)
Borrower’s Interest:

then the Borrower would repay the following amounts:

$10,000 per case: $1,500,000 in the aggregate, plus At
Pre-Payment Amount: least 50% of Borrower’s Interest in Recovery: $6,700
per case (50% of $13,400); $1,005,000 in the aggregate

Total Balance of Loan at the time of Repayment:
Application of Payment: $6,000,000 ($5,000,000 principal and $1,000,000
accrued interest), /ess $2,505,000

Outstanding Balance
$3,495,000
Remaining:

(b) Partial Recovery Event. Any amounts recovered by Borrower or the Client pursuant to a Partial
Recovery Event shall be immediately placed in Borrower’s IOLTA compliant trust account. Attorney (or
Borrower's bank on behalf of Attorney) shail notify Holder and LitCap of the receipt of such
payment(s)by providing to Holder no later than five calendar days following the end of each month a
claims adi ‘ator’s, court-issued, or similar document reflecting payments made for any Litigation
Matter. Borrower shall transfer its interest in such Partial Recovery Event to its operating account as
soon as practicable, and in any event within 45 days after the proceeds of such Partial Recovery Event
are received. Borrower shall thereafter immediately pre-pay Holder the amount borrowed under this Note
(plus accrued by unpaid interest), up to an amount equal to 50% of Borrower’s interest in the proceeds of
such Partial Recovery Event. “Borrower’s interest” is defined as sums received from any Partial Recover

4 of 22 CONFIDENTIAL V1.2
Event, less the client’s share, monies paid to and local or co-counsel fees due. The repayment process
contemplated by this Section 2.3(b) shall repeat for each Litigation Matter until the entire principal
balance of this Note, plus interest, has been repaid by Borrower (subject, however, to Section
2.2(b)).

(c) Final Adverse Disposition. Attorney on behalf of Borrower shall notify Holder and LitCap of the
Final Adverse Disposition of a Litigation Matter no later than two Business Days after the date on which
such Final Adverse Disposition has occurred. Unless Section 2.2(b) applies, Borrower shall pay to
Holder, within ten calendar days following the end of the month in which one or more Final Adverse
Disposition(s) of one or more Litigation Matter(s) occurs, an amount equal to the the sum of (1) the
outstanding principal amount borrowed under this Note plus accrued but unpaid interest at the time of
such Final Adverse Disposition, divided by (2) the aggregate number of Litigation Matters listed on “
Appendix2”. The repayment process contemplated by this Section 2.3(c) shall repeat for each
Litigation Matter for which there is a Final Adverse Disposition until the earlier of (i) repayment of the
entire principal balance of this Note, plus interest, or (ii) a Final Adverse Disposition of 90% or more of
the number of Litigation Matters listed on “Appendix 2” in which event the repayment provisions
of Section 2.2(b) shall apply.

24 Application. Except as expressly provided herein to the contrary, all payments on this Note shall be applied
in the following order of priority: (i) the payment or reimbursement of any expenses, costs or obligations (other than
the outstanding principal balance hereof and interest hereon) for which either Borrower shall be obligated or Holder
shall be entitled pursuant to the provisions of this Note, (ii) the payment of accrued but unpaid interest hereon, and
(iii) the payment of all or any portion of the principal balance hereof then outstanding hereunder. In the event an
Event of Default or any unanticipated statutory encumbrance to disbursement exists under this Note, then Holder
may, at the sole option of Holder, allow Borrower to apply any such payments, at any time and from time to time, to
any of the items specified in clauses (i). (i ) or (iii) above without regard to the order of priority otherwise
specified in this Section 2.4 and any application to the outstanding principal balance hereof may be made in
either direct or inverse order of maturity. Payments on this Note will be made before payments of any other costs,
fees and expenses of the Litigation Matters.

2.5 Payments. All payments under this Note shall be made to Holder when required under Section 2.1, but no
later than the Maturity Date, and shall be made by wire transfer of immediately available funds to the account
specified by Holder on or before the due date of such payment, without offset, in lawful money of the United States
of America, which shall at the time of payment be legal tender in payment of all debts and dues, public and private.
Payments in immediately available funds received by Holder in the place designated for payment on a Business Day
prior to 4:00 p.m. Houston, Texas time shall be credited prior to the close of business on the Bus ss Day received,
while payments received by Holder on a day other than a Business Day or after 4:00 p.m. Houston, Texas time on a
Business Day shall be credited on the next succeeding Business Day. If any payment of principal or interest on this
Note becomes due and payable on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day. Any such extension of time for payment shall be included in computing interest which
has accrued and shall be payable in connection with such payment. Borrower shall notify LitCap of any repayment
of this Note on the date of such repayment in accordance with the terms of the Attorney’s User Agreement.

2.6 Computation Period. Interest on the indebtedness evidenced by this Note shall be computed on the basis of
a 365 or 366 day year, as applicable, and shall accrue on the actual number of days elapsed for any whole or partial
month in which interest is being calculated. For purposes of this Note, each day begins at 12:00 a.m. Houston, Texas
time and ends at 11:59 p.m. Houston, Texas time. In computing the number of days during which interest accrues,
the last day of the Funding Period (as defined in the Attorney’s User Agreement) shall be deemed to be the date on
which this Note is made and shall be included in the interest calculation regardless of the date or time of day that
this Note is executed, and the day on which amounts are paid hereunder shall be included.

5 of 22 CONFIDENTIAL V1.2
2.7 Prepayment.

(a) Total Prepayment: Borrower may prepay all of the outstanding principal balance of this Note, at
any time and from time to time, without fee, premium or penalty; provided. however, that such
prepayment shall include any and all accrued and unpaid interest on such amount being so prepaid
through and including the date of prepayment, plus any other sums which have become due to Holder
hereunder on or before the date of prepayment, but which have not been fully paid. If Borrower elects to
prepay this Note (plus accrued and unpaid interest) in full, Attorney on Borrower's behalf shall
contemporaneously close all Litigation Matters on the LitCap Platform in accordance with the
instructions set forth in the Attorney’s User Agreement.

(b) Partial Prepayment: Borrower may prepay any portion of the outstanding principal balance of
this Note, at any time and from time to time upon one Business Day prior written notice to Holder,
without fee, premium or penalty; provided, however, that such prepayment shall include any and all
accrued and unpaid interest on such amount being so prepaid through and including the date of
prepayment. All partial prepayments shall apply first to accrued but unpaid interest and second to the
outstanding principal balance. Attorney shall on Borrower’s behalf notify LitCap of any prepayment of
this Note on the date of such repayment.

2.8 Partial or Incomplete Payments. Remittances in payment of any part of the outstanding principal balance
of this Note other than in the required amount in immediately available funds at the place where this Note is payable
shall not, regardless of any receipt or credit issued therefor, constitute payment until the total amount required is
actually received by Holder in full in accordance with this Note. Acceptance by Holder of any payment in an
amount less than the full amount then due shall be deemed an acceptance on account only, and the failure to pay the
entire amount then due shall be and continue to be an Event of Default in the payment of this Note.

2.9 Unconditional Payment. Borrower is and shall be obligated (subject to the limited circumstances outlined
in Section 2.2) to pay all principal, interest and any and all other amounts which become payable under this
Note absolutely and unconditionally and without any abatement, postponement, diminution or deduction whatsoever
and without any reduction for counterclaim or setoff whatsoever. If at any time any payment received by Holder
hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent
conveyance under Title 11 of the United States Code, as now or hereinafter in effect, or any other applicable law, as
now or hereafter in effect, relating to bankruptcy, insolvency, liquidation, receivership, reorganization, arrangement
or composition, extension or adjustment of debts, or imilar laws affecting the rights of creditors, then the obligation
to make such payment shall survive any cancellation or satisfaction of this Note or return thereof to Borrower and
shall not be discharged or satisfied with any prior payment thereof or cancellation of this Note, but shall remain a
valid and binding obligation enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand.

2.10 Default Interest. If Borrower does not timely pay the outstanding principal balance of this Note, together
with all accrued but unpaid interest, when due, the outstanding amounts shall accrue interest at the lower of: (i) the
Interest Rate plus 5%, or (ii) the highest default interest rate permitted under applicable law (theDefault
Interest Rate”) from the date of such payment default until the outstanding principal balance plus all accrued
but unpaid interest is paid in full. Borrower acknowledges that it would be extremely difficult or impracticable to
determine Holder’s actual damages resulting from any late payment, and such accrued interest at the Default Interest
Rate is a reasonable estimate of those damages and does not constitute a penalty.

ARTICLE III - REPRE! TATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF BORROWER

34 Representations, Warranties and Covenants. Borrower and Attorney hereby represent, warrant and

6 of 22 CONFIDENTIAL V1.2
covenant that, so long as this Note remains unpaid or any other obligation is due and payable to Holder under this
Note, each of the following is true and correct in all respects:

(a) Authorization. Borrower has full power and authority to enter into and perform this Note, and
Attorney has full power and authority to enter into and perform this Note on behalf of Borrower. The
execution, delivery, and performance by Borrower and Attorney of this Note has been duly and validly
authorized and approved by all necessary action on the part of Borrower. This Note is the valid and
binding obligation of Borrower and Attorney and enforceable against Borrower and Attorney in
accordance with its terms.

(b) Attorney
of Record. Attorney is the attorney-in-charge or the attorney of record for each
Litigation Matter and Attorney signed the file stamped copy of the lawsuit for each Litigation Matter.
Attorney shall remain responsible for each Litigation Matter; Attorney or Attorney’s firm shall be on the
Power of Attorney for each Litigation Matter; and, Attorney or Attormey’s co-counsel signed the file
stamped copy of the lawsuit for each Litigation Matter.

(c) No
Conflicts. The execution, delivery, and performance by Borrower and Attorney of this Note
does not violate, conflict with or result in a breach of any provisions of Federal, State or local attorney

Case Info

Judge

DONNA ROTH Track Judge’s New Case

Case No.

(Subscribe to View)

Document Filed Date

May 09, 2023

Case Filing Date

June 15, 2021

County

Parties

DAUGHTRY, ALAN BRANDT Attorney for the Plaintiff
MINTON, LISA (F/N/A LISA PENAFIEL) Defendant
PENAFIEL, LISA Defendant
SYDOW, MICHAEL D Plaintiff
Catherine Bratic Attorney
Todd Mensing Attorneys for Plaintiffs
Cameron Byrd Attorneys for Plaintiffs
Alexander Dvorscak Attorneys for Plaintiffs
Robin Ziek Attorney
Bruce Oakley Attorney
Jillian Beck Attorney
David Fettner Attorney
James Thompson Attorney
Stephen Jackson Attorney
Kaitlin Hopkins Attorneys for Plaintiffs
Justin Kenney Attorneys for Plaintiffs

For full print and download access, please subscribe at https://www.trellis.law/.

Exhibit,Appendix: SYDOW, MICHAEL D vs. MINTON, LISA (F/N/A LISA PENAFIEL)

Preview

Related Topics

Case Info

Parties