PROMISSORYNOTE
| | | Darin R. Pastor |
| | | Newport Beach, California |
| | | |
| | | |
| Principal LoanAmount: | | |
| $577,373.47 | Date: | October 22, 2012 |
FOR VALUE RECEIVED,the undersigned Capstone Affluent Strategies, Inc. ("Borrower") of895 Dove Street, 3rd Floor, Newport Beach, CA 92660, promises to pay to the order of Darin R. Pastor("Pastor")athisofficeat895DoveStreet,3rdFloor,NewportBeach,CA92660,oratsuchotherplaceasthe holder thereof may designate, in lawful money of the United States of America and in immediately available funds, the principal loan amount of$577,373.47("Principal"), or so much thereof as may be outstanding with interest thereon, whether before or after any breach hereof.
Subject to the obligation of Pastor to forgive the principal and interest on the Noteinaccordancewithprovisions below, Borrower will be required to repay the Principal on this Note no later thanOctober 4, 2017 (the "Maturity Date") or upon an Event of Default as described below, whichever occursfirst.The Principal balance shall bear interest at the minimum federal rate per annum published bytheInternal Revenue Service (computed on the basis of a 360-day year, actual dayselapsed).Interestshallbegin accruing on the date proceeds are advanced under thisNote.
Prepayment. Borrower may from time to time partially or wholly repay the outstanding principal.All payments under this Note shall be applied first to current interest, second to accrued and unpaid interest, and third toPrincipal.
Forgiveness of Principal and Interest. Pastor shall forgive the Principal plus calculatedaccruedinterestonthisNoteinaccordancewiththetermssetforthinExhibit Ahereto.TheforgivenessofPrincipal and interest under this Note will cease upon the occurrence of an Event of Default asdefinedbelow. Upon the occurrence of an Event of Default (defined below) this Note shall bear interest on the remaining unpaid principal balance at the default rate of interest equal to the interest rate determined as stated in the 2nd paragraph above PLUS an additional three percent(3%).
Income Taxes. Borrower hereby acknowledges responsibility for the payment of incometaxes in connection with the forgiveness of principal and interest under thisNote.
RighttoOffset.Borroweracknowledgesandagreesthatinordertocontributetothesatisfactionofthe repaymentobligationhereunder,Pastoris authorizedto the necessarydeductionsfrom Borrower'sinterest orentitlement in any commissionsorfees payablebyPastortoBorrower,or inany otheramountsowed by Pastor toBorrower. Borrower also agreesthat Pastorhasand shallhave the right toapplyanyfunds held inBorrower's accountsinwhichPastor islegallyentitledto satisfy anyamountsremaining outstanding pursuantto the terms of the Note.
BorrowerInitials _______
LenderInitials _______
Events of Default. A Default under this Note shall consist of any of the followingevents:(i)anypaymenttoPastorisnotmadewhendue(includingwhenthereisa materialdefault on any other materialobligation Borrower has with Pastor);there ismaterial failure to abide by any of the terms and conditions contained in anyagreement Borrower has with Pastor butonly afterPastor givesBorrower written notice of any such failure and a reasonable opportunity to cure; (iii) any warranty, representation or statement made or furnished to Pastor by or on behalf of the Borrower proves to have been falseinany material respect when made or furnished;(iv) thedeath,dissolution,termination of existence,merger,consolidation,insolvency,business failure,appointment of a receiver of any part of the propertyof,assignment for the benefit of creditors by,or thecommencement of any proceedings under bankruptcy or insolvency laws by or against the Borrower or anyguarantor or suretyforBorrower; (v)anyviolation or breachof any provisionor,or any defined event of defaultunder,any addendum to this note, letter agreement,guaranty,securityagreement,deed oftrust orother contract orinstrument executedin connectionwith thisnote or securing this note; or (vi) Pastorhas agood faith belief that theprospect oftimely repaymentis impaired based on Pastor's commercially reasonable assessment that Borrower's prospects of repayment are materially diminished.
UpontheoccurrenceofanyEventofDefaultdescribedunderclauses(i)through(vi)above,Pastor,at hisoption,may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment,demand,protest or advice of dishonor,all of which are expressly waived by Borrower.Inthe Event of Default,the Borroweragreesthat Pastormayoffsetany outstandingprincipal and interestdueunder thisNote againstanyamountsduefrom Pastor forBorrower,uptothemaximum amount legally permitted.
Attorney’s Fees. The Borrower shall pay Pastor the full amount of all costs andexpenses,including reasonable attorney's fees (to include outside counsel fees) incurred by the holderinconnection with the enforcement of the holder's rights and/or the collection of any amountwhichbecomes due to Pastor under this Note or the prosecution and defense of any action in any wayrelatedto thisNote,including without limitation any action to declaratoryrelief.
Binding on Heirs and Assigns. This Note inures to and binds the heirs, legalrepresentatives,successorsandassignsofBorrowerandPastor;provided,however,thatBorrowermaynotassignthis Noteor any proceeds of it or assignor delegateany of its rightsor obligationswithout Pastor'sprior written consent in each instance.Pastor,in his sole discretion,may transfer this Note and may sell or assign interest without notice to Borrower.
ChoiceofLaw.ThisnoteshallbeconstruedinaccordancewiththelawsofthestateofCalifornia.
DARIN R.PASTORCAPSTONE AFFLUENT STRATEGIES, INC
BY:____________________________________________
TITLE:____________________________________________
BorrowerInitials _______
LenderInitials _______
ExhibitA
Forgiveness of NoteTerms
Notwithstanding any other provisions of this Note to the contrary,the terms of this Exhibit A shalltake priority.
ForpurposesofthisExhibitA,thefollowingtermsshallhavethefollowingmeanings:
"Borrower" shall mean the individual or entity listed asBorrowerin the first paragraph of thisNote. "Forgiveness Amount” shall mean thefollowing:
| | End Year1 | End Year2 | End Year3 | End Year4 | End Year5 |
| Forgiveness Amount:(1/5thofP&I) | $267,954.50 PlusInterest | $267,954.50 PlusInterest | $267,954.50 PlusInterest | $267,954.50 PlusInterest | $267,954.50 PlusInterest |
Asspecifiedabove,foreachyearthatpassesfromtheAnniversaryDateofthisNote,thecorrespondingamountofprincipalandaccruedinterestshallbeforgivenassetforthabove.Foranyof thefiveyears listed above for which the Borrower is not affiliated with Pastor on the AnniversaryDate,theremaining balance of the loan will be immediately due infull.
BorrowerInitials _______
LenderInitials _______
