EXHIBIT (d)(2)
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT (this "Agreement") is made and entered into
this ____ day of ________, 2002, by and among Hemet Financial Group, Inc., a
corporation organized and existing under the laws of the State of Nevada
(including any successor in interest thereto, the "Company"), and the
shareholders of the Company identified on the signature pages hereto (each
together with any transferees in accordance with this Agreement, a "Shareholder"
and collectively, the "Shareholders").
W I T N E S S E T H :
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All of the issued and outstanding shares of Common Stock of the Company,
$0.001 par value per share, (the "Common Stock") are held among the
Shareholders.
The Shareholders and the Company deem it to be in their best interests
to provide certain agreements with respect to the shares of the Common Stock now
owned or subsequently acquired by them or any other Person (as defined below),
including without limitation the transfer or other disposition of such shares.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION l
RESTRICTIONS ON TRANSFER OF COMMON STOCK
1.1 General Restrictions and Procedures.
(a) Except for Permitted Transfers (as defined below), no
Shareholder may sell, exchange, convey, assign, give, pledge, distribute to a
beneficiary, hypothecate, encumber, grant a security interest in, grant an
option to purchase, or agree to do any of the foregoing ("Transfer") with
respect to any of its Common Stock or any interest therein (including any
beneficial interest) to any natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, corporation, estate, bank, trust company,
unincorporated organization or any person acting in a representative capacity
(each a "Person") unless (i) the Shareholder desiring to make the Transfer shall
have first offered to sell the Common Stock pursuant to Section 1.2 hereof, (ii)
the Company has received evidence reasonably satisfactory to it that such
Transfer, in form and substance, will be made in compliance with all applicable
laws, including without limitation, the securities laws of the United States
(including without limitation, the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended), and all applicable state
securities laws, which evidence may include a legal opinion addressed to the
Company from counsel to the Shareholder, (iii) the transferee is permitted to
hold the Common Stock pursuant to all applicable local, state and federal laws
and as a Shareholder, the transferee
would not cause the Company to violate any local, state and federal laws, (iv)
the Company has provided written notice to the Selling Shareholder pursuant to
Section 1.2(b) hereof that the Selling Shareholder may effect the Transfer, and
(v) the transferee has executed and delivered to the Company a joinder
agreement, pursuant to which such transferee has agreed to be bound by, and
takes such Common Stock subject to, all the terms and conditions of this
Agreement. No Transfer of Common Stock in violation of this Agreement shall be
made or recorded on the books of the Company and any such Transfer shall be void
and of no force or effect.
(b) The following Transfers shall be deemed to be "Permitted
Transfers": (i) Transfers to the Company or another Shareholder (provided such
Transfer does not violate any federal or state banking laws, rules or
regulations); (ii) Transfers to a pledgee of Common Stock pursuant to a pledge
of the Common Stock made to secure (A) an obligation of the Company or (B) an
obligation of the pledgor Shareholder to another Shareholder or to the Company;
(iii) Transfers to a Shareholder's Personal Representative (as defined below)
upon the death or disability of the Shareholder; or (iv) any Transfer that
receives the prior approval of the Board of Directors of the Company so long as
such Transfer satisfies all conditions imposed by the Board of Directors,
provided that a Transfer shall not be a Permitted Transfer unless the Transfer
complies with the provisions of Section 3.3 hereof (each of these transferees a
"Permitted Transferee").
(c) "Personal Representative" shall mean the Person acting in a
representative capacity as the executor or administrator of a Shareholder's
estate or the duly appointed guardian of the property of a Shareholder.
1.2 Offer by Shareholder.
(a) If any Shareholder ("Selling Shareholder") desires to Transfer
any shares of Common Stock to any Person other than a Permitted Transferee, the
Selling Shareholder shall first make an offer to sell all of such shares that he
or she desires to Transfer (but not less than all of the shares he or she
desires to sell) to the Company (the "Company Offer") for the purchase price per
share offered to or by the proposed transferee and on the terms hereinafter set
forth. The Company Offer shall be in writing and shall specify the nature of the
proposed Transfer in which the Selling Shareholder desires to engage, including
the name or names of the other party or parties to such proposed transaction and
the terms thereof, including the purchase price and payment terms, if any, and
shall have attached a written copy of the proposed offer from or to the other
party or parties, if any, to the proposed transaction. The Company will within
30 days of its receipt of the Company Offer, by written notice to the Selling
Shareholder and each Non-Selling Shareholder (i) accept the offer as to all of
the shares of Common Stock, (ii) accept the offer as to less than all of the
shares of Common Stock and provide notice to the Non-Selling Shareholders (as
defined below) of an opportunity to purchase the Remaining Shares (as defined
below), or (iii) reject the offer as provided in paragraph (b).
(b) If the Company (i) rejects the Company Offer made by the Selling
Shareholder pursuant to Section 1.2(a) or (ii) fewer than all of the shares of
Common Stock included in the Company Offer are purchased by the Company and the
Non-Selling Shareholders,
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the Selling Shareholder may effect the proposed Transfer only if (x) the Company
determines that such proposed Transfer will not cause the Company to fail to
maintain its status as an S Corporation and provides a written notice to the
Selling Shareholder that he or she may effect the proposed Transfer and (y) the
Selling Shareholder and the transferee satisfy all the conditions to a proposed
Transfer set forth in Section 1.1(a) hereof prior to the completion of the
proposed Transfer. Any Transfer effected pursuant to this Section 1 shall be
subject to the provisions of Section 3.3 hereof. If a Selling Shareholder shall
fail to complete a Transfer that is permitted to be effected pursuant to this
Section 1.2(b) within ninety (90) days following the receipt of written notice
from the Company pursuant to this Section 1.2(b), then such shares of Common
Stock shall again be subject to all of the restrictions on Transfers set forth
in this Agreement.
(c) If the Company does not reject the Company Offer but provides
notice that it elects to purchase less than all of the shares of Common Stock
offered by the Selling Shareholder, then the Company shall, on behalf of the
Selling Shareholder, within the time period provided for in Section 1.2(a)
hereof, provide written notice to the other Shareholders (the "Non-Selling
Shareholders") that the Non-Selling Shareholders may purchase all of such shares
of Common Stock that the Company did not elect to purchase (but not less than
all of such shares) (the "Remaining Shares") for the purchase price per share to
be paid by the Company and on the terms hereinafter set forth. Each Non-Selling
Shareholder shall be entitled to purchase the product of (1) the Remaining
Shares and (2) a fraction, the numerator of such fraction being the number of
shares of Common Stock owned by such Non-Selling Shareholder and the denominator
being the total number of shares of Common Stock owned by the Non-Selling
Shareholders as a group (the ("Pro Rata Amount").
(d) Within twenty (20) days after receipt of the notice from the
Company pursuant to Section 1.2(c) hereof, each Non-Selling Shareholder who
wishes to purchase any or all of the Remaining Shares shall provide the Company
with a written notice specifying the number of Remaining Shares (up to such
Non-Selling Shareholder's Pro Rata Amount) that such Non-Selling Shareholder
desires to purchase and may, at the Non-Selling Shareholder's option, indicate
the maximum number of Remaining Shares such Non-Selling Shareholder desires to
purchase in excess of such Non-Selling Shareholder's Pro Rata Amount (the
"Excess Transfer Amount"). If one or more Non-Selling Shareholders declines to
participate in such purchase or elects to purchase less than such Non-Selling
Shareholder's Pro Rata Amount, then the Remaining Shares that the Non-Selling
Shareholders did not elect to purchase shall automatically be deemed to be
accepted by each Non-Selling Shareholder who specified an Excess Transfer Amount
in the Non-Selling Shareholder's notice of acceptance, allocated among all such
Non-Selling Shareholders (with rounding to avoid fractional shares) in
proportion to their respective Pro Rata Amounts, but in no event shall an amount
greater than a Non-Selling Shareholder's Excess Transfer Amount be allocated to
such Non-Selling Shareholder. Any excess Remaining Shares shall be allocated
among the remaining Non-Selling Shareholders whose specified Excess Transfer
Amount has not been satisfied (with rounding to avoid fractional shares) in
proportion to their respective Pro Rata Amounts, and such procedure shall be
repeated until the entire Excess Transfer Amount of each Non-Selling Shareholder
has been satisfied or all Remaining Shares have been allocated among the
Non-Selling Shareholders who desire to purchase an Excess Transfer Amount. If,
after the Excess Transfer Amount for each
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Non-Selling Shareholder has been satisfied, there are excess Remaining Shares,
the Company shall have the right to purchase the excess Remaining Shares. If all
of the shares of Common Stock offered by the Selling Shareholder pursuant to
this Section 1.2 are not purchased by the Company and the Non-Selling
Shareholders, the Selling Shareholder may effect the proposed Transfer only if
the conditions set forth in Section 1.2(b) hereof are satisfied. If there are
Remaining Shares offered to the Non-Selling Shareholders pursuant to this
Section 1.2, the Company shall notify the Selling Shareholder and each
Non-Selling Shareholder of the acceptance or non-acceptance of such offer,
specifying, in the case of acceptance, how many, if any, of the Remaining Shares
that each Non-Selling Shareholder desired to purchase have been accepted for
purchase, within forty (40) days of the date that the Company provided notice to
the Non-Selling Shareholders pursuant to Section 1.2(c) hereof.
1.3 Purchase by Company. If a Selling Shareholder offers to sell his or
her Common Stock to the Company pursuant to Section 1.2 above, then the Selling
Shareholder shall vote all of his or her shares of Common Stock in accordance
with the majority of shares of Common Stock cast by the Non-Selling Shareholders
at any meeting of shareholders of the Company in order to approve any corporate
action that may be required to be taken by the Company or its officers or
directors in order to enable the Company to accept the offer and purchase the
shares of Common Stock offered by the Selling Shareholder.
1.4 Purchase Price and Terms. The purchase price and terms of payment
set forth in the Company Offer by a Selling Shareholder shall be identical to
the offer given or received by such Selling Shareholder to or from a proposed
transferee, except that if the consideration to be paid to the Selling
Shareholder by such proposed transferee consists in whole or in part of property
other than cash, the Company and the Non-Selling Shareholders who purchase
shares of Common Stock from the Selling Shareholder pursuant to Section 1.2
hereof, may transfer cash or other property of similar kind and equivalent value
to the Selling Shareholder in payment for the shares of Common Stock purchased
by the Company and the Non-Selling Shareholders. If a Selling Shareholder (i)
desires to Transfer his or her shares of Common Stock, when there does not exist
an offer by a proposed transferee that contains purchase price and payment
terms, or (ii) breaches its covenant set forth in Section 3.2 hereof (except as
provided in Section 3.2 hereof), then (1) in the case of clause (i), if the
Company or any Non-Selling Shareholders offers to purchase any of such Selling
Shareholder's shares of Common Stock, the purchase price for each share of
Common Stock purchased by the Company or a Non-Selling Shareholder, shall be
equal to the "Adjusted Stated Value Per Share" (as defined below) or (2) in the
case of clause (ii), the Selling Shareholder shall deemed to have made a Company
Offer to the Company for a purchase price per share of Common Stock equal to the
Adjusted Stated Value Per Share. "Adjusted Stated Value Per Share" means the
difference between (a) the sum of (i) Stated Value Per Share (as defined in the
following sentence), and (ii) profits per share of Common Stock (as reasonably
estimated by the Board of Directors) and (b) the sum of (i) losses per share of
Common Stock (as reasonably estimated by the Board of Directors) and (ii)
distributions per share of Common Stock, calculated in each instance from the
date the Board of Directors of the Company last determined the Stated Value Per
Share through the last day of the month preceding the month in which the
purchase is made. "Stated Value Per Share" means the amount determined from time
to time by the Board of Directors of the Company as being the value per
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share of Common Stock for purposes of this Agreement. The Board of Directors of
the Company, no less frequently than within ninety (90) days following the end
of each fiscal year of the Company, shall determine and state in writing the
Stated Value Per Share as of a specified date and shall cause the same to be
entered in the minute book of the Company. Such Stated Value Per Share shall be
based on a good faith determination, performed with reasonable diligence, by the
Board of Directors of the fair market value of the stock of the Company. If in
any fiscal year the Board of Directors of the Company fails to determine and
state in writing a new Stated Value Per Share, in the manner described above,
then the last designated Stated Value Per Share shall continue in effect until a
new Stated Value Per Share has been determined.
1.5 Acceptance of Offers. The Company shall notify the Selling
Shareholder and each of the Non-Selling Shareholders in writing as provided in
Section 1.2 with respect to any Company Offer pursuant to Section 1.2. Unless
written notice of acceptance of the Company Offer by the Company has been
received by the Selling Shareholder prior to the applicable time period provided
in Section 1.2, such Company Offer shall be deemed not to have been accepted for
purchase.
1.6 Closing of Purchase. If all of the shares of Common Stock included
in the Company Offer made by the Selling Shareholder pursuant to Section 1.2 of
this Agreement are accepted for purchase, then such shares of Common Stock shall
be sold by the Selling Shareholder to the Company or the Non-Selling
Shareholders, or any combination thereof, as the case may be who have agreed to
purchase shares of Common Stock. The closing of the purchase or purchases shall
take place at the principal office of the Company or at such other place as the
Company may designate, not more than thirty (30) days after the date that the
Selling Shareholder receives a timely notice of acceptance from the Company
pursuant to Section 1.2 hereof. The purchase price for all shares of Common
Stock sold pursuant to Section 1.2 hereof shall be paid in accordance with the
terms of payment determined as set forth in Section 1.4 hereof. The Selling
Shareholder shall represent and warrant to the Company and Non-Selling
Shareholders who purchase shares of Common Stock offered by the Selling
Shareholder in the Company Offer that upon transfer of such shares of Common
Stock by it to the Company and the Non-Selling Shareholders purchasing shares of
Common Stock, the Company and such Non-Selling Shareholders shall receive all
right, title and interest in such shares of Common Stock, free and clear of any
claims, options, charges, encumbrances or rights of others, except as may be
created by this Agreement.
SECTION 2
PURCHASE AND SALE UPON DEATH OF A SHAREHOLDER
2.1 Death of a Shareholder. Promptly after (and in any event within 30
days) the death of a Shareholder, the deceased Shareholder's estate or Personal
Representative shall give written notice to the Company of such death. Upon the
death of a Shareholder, all of the shares of Common Stock of the Company owned
at the time of death by the deceased Shareholder, and all of the shares to which
the deceased Shareholder or the deceased Shareholder's estate or Personal
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Representative shall be entitled, may be Transferred to another Shareholder. In
the event such shares of Common Stock are not to be Transferred to another
Shareholder, then such shares of Common Stock shall be sold to the Company or
the other Shareholders holding shares of Common Stock immediately before the
death of such deceased Shareholder ("Surviving Shareholders"), pursuant to the
terms and conditions described in this Section 2, unless the estate or Personal
Representative of the deceased Shareholder demonstrates to the satisfaction of
the Company that a Transfer of such shares of Common Stock by the estate or
Personal Representative of the deceased Shareholder to a proposed transferee
will not cause the Company to fail to maintain its status as an S Corporation.
In the event that all of the shares of Common Stock owned by a deceased
Shareholder are not to be Transferred to another Shareholder and the estate or
Personal Representative of the deceased Shareholder demonstrates to the
satisfaction of the Company that a Transfer of such shares of Common Stock by
the estate or Personal Representative of the deceased Shareholder to a proposed
transferee will not cause the Company to fail to maintain its status as an S
Corporation pursuant to this Section 2, then such shares of Common Stock may be
Transferred by the estate or Personal Representative of the deceased Shareholder
to the proposed transferee. Any Transfer effected pursuant to this Section 2
shall be subject to the provisions of Section 3.3 hereof. Any shares of Common
Stock sold to the Company or the Surviving Shareholders pursuant to this Section
2 shall be sold at a purchase price equal to the Adjusted Stated Value Per Share
as defined in Section 1.4 hereof. The purchase price for any purchase of shares
of Common Stock pursuant to this Section 2 shall be payable, at the election of
the purchaser, either (i) all in cash at the closing of such purchase or (ii)
20% in cash at the closing of such purchase and the remainder in the form of a
promissory note delivered at the closing, which shall be substantially in the
form attached hereto as Exhibit A and which shall provide for the remaining
principal to be paid in four equal annual installments commencing on the first
anniversary of the closing and which shall bear a floating rate of interest
reset monthly, at the "Prime Rate" as reported on the first business day of each
month in the "Money Rates" section of The Wall Street Journal or, in the event
such newspaper ceases to be published, in another nationally circulated
financial newspaper, which interest shall be compounded monthly.
2.2 Purchase by the Company and Surviving Shareholders.
(a) If the estate or Personal Representative of a deceased
Shareholder fails to demonstrate to the Company, within ninety (90) days after
the Company receives notice of the death of the deceased Shareholder from such
deceased Shareholder's estate or Personal Representative pursuant to Section 2.1
hereof, that a Transfer to a proposed transferee of the shares of Common Stock
of such deceased Shareholder will not cause the Company to fail to maintain its
status as an S Corporation, the Company shall notify in writing (the "Initial
Deceased Shareholder Notice") the estate or Personal Representative of the
deceased Shareholder and each of the Surviving Shareholders, of the number of
shares of Common Stock of the deceased Shareholder that the Company intends to
purchase pursuant to this Section 2, if any.
(b) If the Company sends an Initial Deceased Shareholder Notice
pursuant to Section 2.2(a) hereof that all of the shares of Common Stock of the
deceased Shareholder will not be purchased by the Company, then the Initial
Deceased Shareholder Notice shall set forth
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the "Maximum Amount" (as defined below) of shares of Common Stock that each
Surviving Shareholder may be required to purchase. The "Maximum Amount" for each
Surviving Shareholder shall be an amount equal to (except for rounding to avoid
fractional shares) the product of (1) the aggregate amount of the deceased
Shareholder's shares of Common Stock not to be purchased by the Company and (2)
a fraction (the "Maximum Amount Percentage"), the numerator of which is the
number of shares of Common Stock owned by the Surviving Shareholder and the
denominator of which is the total number of shares of Common Stock owned by the
Surviving Shareholders as a group. Within ten (10) days after receipt of the
Initial Deceased Shareholder Notice, each Surviving Shareholder shall send a
written notice (each a "Surviving Shareholder Notice") to the Company and the
deceased Shareholder's estate or Personal Representative (as shall be identified
in the Initial Deceased Shareholder Notice) specifying the number of such
deceased Shareholder's shares that such Surviving Shareholder desires to
purchase (the "Desired Amount"). If the aggregate amount of the Desired Amounts
exceeds the number of shares of Common Stock owned by the deceased Shareholder,
then each Surviving Shareholder who provided a Surviving Shareholder Notice be
allocated their Desired Amount up to the Surviving Shareholder's Maximum Amount.
After such allocation, the remaining shares of Common Stock owned by the
deceased Shareholder shall be allocated among the Surviving Shareholders who
provided a Surviving Shareholder Notice, pro rata based on their respective
Maximum Amount Percentages; provided, however, in no event shall such Surviving
Shareholders be required to purchase shares of Common Stock in excess of their
Desired Amount. If, after receiving the Surviving Shareholder Notices, the
Company determines that there will be remaining shares of Common Stock held by
the deceased Shareholder after purchases by the Surviving Shareholders of their
respective Desired Amounts (such remaining shares being hereinafter referred to
as the "Mandatory Purchase Shares"), then the Company shall, within twenty (20)
days of providing the Initial Deceased Shareholder Notice, send a written notice
to the deceased Shareholder's estate or Personal Representative and to each
Surviving Shareholder specifying the number of Mandatory Purchase Shares
required to be purchased by each Surviving Shareholder. The Surviving
Shareholders whose Desired Amounts are less than their Maximum Amounts shall be
obligated to purchase their respective Required Amount (as defined below) of the
Mandatory Purchase Shares. The "Required Amount" for each Surviving Shareholder
shall be equal to (except for rounding to avoid fractional shares) the product
of (x) the number of Mandatory Purchase Shares and (y) a fraction, the numerator
of which is the difference between the Maximum Amount and the Desired Amount for
the Surviving Shareholder (the "Deficiency Amount") and the denominator of which
is the sum of the Deficiency Amounts for the Surviving Shareholders whose
Desired Amounts are less than their Maximum Amounts.
2.3 Closing. The closing of any purchase of shares of Common Stock
pursuant to this Section 2 shall take place at the principal office of the
Company or at such other place as the Company may designate, within forty (40)
days after the later of (i) the date that the Company sends an Initial Deceased
Shareholder Notice pursuant to Section 2.2(a) hereof or (ii) the date of the
determination of the Adjusted Stated Value Per Share.
SECTION 3
SUBCHAPTER S PROVISIONS
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3.1 Election Under Subchapter S.
(a) Effective as of January 1, 2003, the Company shall use its best
efforts to make and timely file Internal Revenue Service Form 2553 (Election by
a Small Business Corporation) ("Form 2553") to evidence its election to be
treated as an S Corporation and to be taxed under Subchapter S of the Code
("Election"), with the consent of all Shareholders, evidenced by their
signatures thereon.
(b) Each Shareholder hereby agrees to perform every act and execute
each document, including Form 2553, necessary to cause the Company to evidence
its Election to be treated as an S Corporation.
3.2 Shareholders' Covenants, Representations and Warranties. Each
Shareholder hereby covenants, represents and warrants to the Company and to
every other Shareholder, as of January 1, 2003, and continuing thereafter until
such time as the Company's S Corporation status has been terminated as permitted
in Section 3.7 hereof, that the Shareholder will be or will have Transferred its
shares of Common Stock to (i) an individual who is a citizen or lawful permanent
resident of the United States; (ii) a grantor trust, all of which is treated as
owned for federal income tax purposes by one individual, who is a citizen or
lawful permanent resident of the United States, or by a husband and wife, both
or whom are citizens or lawful permanent residents of the United States, (iii) a
trust not described in clause (ii) that, in the Company's reasonable
determination, is eligible to be a shareholder of an S Corporation pursuant to
the Code, or (iv) an employee stock ownership plan that is eligible to be a
shareholder of an S corporation pursuant to the Code. If a Shareholder that is a
grantor trust described in clause (ii) of the immediately preceding sentence
ceases to be a grantor trust as described in such clause (ii), solely as a
result of a death of a grantor, then such Shareholder shall be subject to the
provisions of Section 2 as if such Shareholder were an individual who had then
died, and as if the trustee of such grantor trust were the Personal
Representative of such individual. Any Shareholder who breaches the covenants
set forth in this Section 3.2 (except for the reason set forth in the
immediately preceding sentence) shall be subject to the provisions of Section
1.4 hereof. In the case of any Shareholder that is a trust, the individual, or
husband and wife couple, deemed to own the shares of Common Stock held by the
trust hereby agree to execute the Trust Supplement to this Agreement.
3.3 Restrictions on Transfer. Notwithstanding any other provision of
this Agreement to the contrary, so long as there is on file with the Internal
Revenue Service an Election by the Company, and no revocation or consent of
revocation has occurred as specifically permitted under this Section 3, no
Shareholder shall make any Transfer of the Common Stock, whether by sale, gift,
assignment, pledge, or other voluntary disposition or encumbrance, or by death
or involuntary disposition or encumbrance, or take any other action or refrain
from taking any other action with respect to the Common Stock, that is, in the
Company's reasonable determination, likely to cause the Company to fail to
maintain its status as an S Corporation, including but not limited to: (i)
Transferring any Shares to any Person or Persons if such Transfer would cause
the aggregate number of then-existing Shareholders to exceed the number of
shareholders permitted
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by Section 1361(b)(1)(A) of the Code and (ii) Transferring any Shares to any
individual who is not a U.S. citizen, or to any corporation, partnership,
unincorporated association, or joint venture, trust or other non-individual
Person. Any such action as may nevertheless be attempted in violation of the
foregoing shall be void ab initio. In the event of any purported or attempted
Transfer of Common Stock that does not comply with the provisions of this
Agreement, including, without limitation, this Section 3.3, the purported
transferee shall not be deemed to be a shareholder of the Company and shall not
be entitled to receive a new stock certificate or any dividends or other
distributions on or with respect to the Common Stock.
3.4 Mandatory Dividends and Distribution.
(a) Subject to any applicable local, state or federal laws, and any
restrictions contained in any agreement binding upon the Company, and unless the
holders of at least 67% of the shares of Common Stock shall determine otherwise,
for any taxable year for which the Election is in effect, the Company shall by
dividend make pro rata distributions to the Shareholders at least equal to the
estimated aggregate federal and state income taxes attributable to their pro
rata share of the Company's net income for such year. Such estimated tax
liability shall be computed by the accountant who regularly prepares the
Company's tax returns and shall be computed on the basis of the highest marginal
federal and state income tax rate applicable to Company income at individual
rates, on the assumption that the individuals reside in the State of California
for the tax year in question and assuming the deductibility of state income
taxes for the purpose of computing federal income taxes unless prohibited by
applicable federal law. Unless prevented from making any dividends under
applicable local, state or federal laws, or unless the holders of not less than
67% of the Common Stock otherwise agree, the Company shall make the total amount
of the minimum mandatory dividend required by this Section 3.4 in a timely
manner to allow the tax (including, without limitation, estimated tax payments)
attributable to the income passed through the Company to any Shareholder to be
paid when due. No provision of this Section 3.4(a) shall cause the total
dividend paid with respect to any outstanding share of Common Stock to differ
from the amounts paid with respect to any other outstanding share of Common
Stock. The Shareholders acknowledge and agree that the ability of the Company to
pay dividends to the Shareholders is subject to receipt by the Company of
dividend and other distribution payments from its subsidiaries, which
subsidiaries may be prohibited or restricted under local, state or federal laws
from making dividend or distribution payments to the Company.
(b) If the Election is revoked or terminated, unless (i) the
Shareholders unanimously agree to the election authorized by Section 1371(e)(2)
of the Code, (ii) the holders of at least 67% of the Common Stock otherwise
agree, or (iii) prohibited or restricted from doing so by applicable local,
state or federal laws or the provisions of any agreement or otherwise, the
Company shall be obligated to make pro rata dividend distributions during the
post-termination transition period equal to the Company's aggregate accumulated
adjustments accounts.
3.5 State Tax Matters.
(a) Each Shareholder hereby agrees to take all such actions as may
be required
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by any state in which the Company does business to ensure recognition of the
Company's S Corporation status for state tax purposes, including without
limitation, (i) reporting, where required, the Election to the applicable state
governmental authority; and (ii) the payment, where applicable, of state income
taxes on each Shareholder's allocable pro rata share of the Company's income
attributable to each such state.
(b) Without limiting the generality of Section 3.5(a), should the
Company become (or any successor thereto be) a California corporation having
non-California resident shareholders, for any taxable year in which the Company
qualifies as an S Corporation:
(i) The Company hereby agrees to use its reasonable best
efforts:
(A) to report the Election to the California Franchise
Tax Board in the time and manner prescribed by law;
(B) to timely file Form 100S, California Franchise or
Income Tax Return (or other applicable form), including all
schedules and attachments thereto, and timely pay all franchise
and income tax due the State of California;
(C) to timely file Form FTB 3830, S Corporation's List
of Shareholders and Consents (or other applicable form); and
(D) to refrain from taking any action, including,
without limitation, a change in accounting method, that would
result in the Company becoming an "ineligible corporation"
pursuant to Cal. Rev. & Tax Code Section 23800.5(a).
(ii) Each non-California resident Shareholder hereby agrees:
(A) to execute Form FTB 3830 (or other applicable form),
including spousal signature if applicable, evidencing the
non-California resident's consent to be subject to the
jurisdiction of California to tax such Shareholder's pro rata
share of income attributable to California sources and further
agrees to file Form FTB 3830 for any taxable year during which
the non-California resident Shareholder sells all of his or
shares of Common Stock or otherwise ceases to be a Shareholder
pursuant to this Agreement; and
(B) to timely file Form 540NR, California Nonresident or
Part-Year Resident Income Tax Return (or other applicable form),
including all applicable attachments and schedules thereto, and
pay all taxes due to the State of California on such
Shareholder's pro rata share of income attributable to
California sources.
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(iii) Each California resident Shareholder hereby agrees to
timely file Form 540/540A or Form 540 2EZ, California Resident Income Tax Return
(or other applicable form), including all applicable schedules and attachments
thereto, and pay all taxes due to the State of California.
(c) If, at the time of the Election, the Company (or any successor
thereto) is other than a California corporation, then this Section 3.5 shall be
amended as necessary to comply with the requirements of the State in which the
Company is incorporated, to ensure recognition of the Company's S Corporation
status for state tax purposes.
3.6 Company's Duties. At any time there is a valid Election in effect,
the Company agrees that it shall (i) not issue more than one class of stock, and
(ii) use its best efforts to avoid a termination of the Election. Further, the
Company shall not issue any stock, any options, or any debt (other than debt
issued during its ordinary course of business) unless such issuance has been
reviewed by attorneys designated by the Company and in the opinion of such
attorneys, the issuance of such stock, options, or debt, and, in the case of
options, their exercise, will not cause the Company to fail to maintain its
status as an S Corporation.
3.7 Revocation; Termination. Upon the determination of the holders of a
majority of all outstanding shares of Common Stock at a properly called meeting
of the shareholders of which specific notice of the proposed action is properly
given, and the filing with the Company of a certificate of such determination,
signed by the holders of a majority of all outstanding shares of Common Stock:
(a) the provisions of this Section 3, but no other provisions of
this Agreement, shall be terminated; and
(b) the Shareholders shall promptly execute such documents as are
appropriate to effect a revocation of any Election.
3.8 Board Determination of Termination. If in the judgment of the Board
of Directors, in consultation with the tax advisors to the Company, it is
reasonably certain that the Election has been terminated and is not likely to be
restored or the Company is not eligible to make such Election, then the
provisions of this Section 3, but no other provisions of this Agreement, shall
be terminated.
3.9 Inadvertent Termination and Indemnity. If any Shareholder or the
Company takes any action resulting in the inadvertent termination of the
Company's S Corporation status, the Company will either seek from the Internal
Revenue Service (i) a waiver of the terminating event on grounds of inadvertence
or (ii) approval to file a new Election and to be treated as an S Corporation
before the five-year waiting period after termination of the Election. If any
Shareholder is responsible for the termination of the Company's S Corporation's
status, then such Shareholder(s) agrees to cooperate with the Company in seeking
such waiver or approval and to pay all costs and expenses of the Company in
connection with seeking such waiver or approval, including, without limitation,
attorneys' fees. If the Company is unsuccessful in
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obtaining such waiver or approval, such Shareholder(s) agrees to indemnify and
hold harmless the Company and the other Shareholders from all reasonable losses,
costs and expenses, including, without limitation, reasonable attorneys' fees
and any federal and state income taxes owing by the Company and/or the other
Shareholders in excess of the federal and state income tax liability that would
have been owed if the Election had not been terminated and any additional
interest and penalties thereon. All Shareholders agree in advance to make
necessary adjustments to income pursuant to Section 1362(f) of the Code in order
to obtain such waiver or approval. A Shareholder's obligation to make such
adjustments shall continue after the Shareholder has ceased to own Common Stock
of the Company and after this Agreement has terminated.
3.10 Election as to Distributions from Accumulated Earnings and Profits.
Each Shareholder agrees and consents to an election by the Company, pursuant to
Section 1368(e)(3) of the Code, to have Section 1368(c)(1) of the Code not apply
to all distributions made by the Company during 2003 and thereafter, if in the
judgment of the Board of Directors such election is necessary or desirable in
order to maintain the qualification of the Company as an S corporation.
SECTION 4
MISCELLANEOUS
4.1 New Shareholders. Any shares of Common Stock Transferred by a
Shareholder to a Person not then a party to this Agreement after following the
procedures set forth in this Agreement, shall remain subject to the terms,
conditions and restrictions of this Agreement.
4.2 Specific Performance. In any action or proceeding to specifically
enforce the provisions of this Agreement, any party to this Agreement (including
the Company) against whom such action or proceeding is brought hereby waives the
claim or defense therein that the plaintiff or claimant has an adequate remedy
at law, and such party shall not urge in any such action or proceeding the claim
or defense that a remedy at law exists. The provisions of this Section 4.2,
however, shall not prevent any party from seeking a remedy at law in connection
with any breach of this Agreement.
4.3 Notices. Any and all notices, designations, consents, offers,
acceptances, or any other communications provided for in this Agreement shall be
given in writing by personal delivery or by registered or certified mail which
shall be addressed, in the case of the Company, to its principal office, and in
the case of a Shareholder to such Shareholder's residence address or such other
address as may be designated by such Person. Any and all notices provided
pursuant to this Agreement shall be deemed to be provided and received two
business days after a notice has been sent by registered or certified mail.
4.4 Severability. If any one or more of the provisions of this Agreement
shall be determined to be invalid, illegal, or unenforceable in any respect for
any reason, the validity, legality, and enforceability of any such provision in
every other respect and of the remaining provisions of this Agreement shall not
be impaired in any way.
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4.5 Amendments. No change, amendment, or modification of this Agreement
shall be valid unless it is in writing and signed by the Company and
Shareholders owning of record at least a majority of the issued and outstanding
shares of Common Stock, in which event such amendment or modification shall be
binding upon all Shareholders in accordance with its terms. This Agreement shall
automatically be deemed amended to add, as a party hereto, any Person who, after
the date hereof, acquires shares of Common Stock in accordance with and subject
to the terms of this Agreement (and such Person shall be deemed a
"Shareholder"), and to delete any Person who no longer owns any shares of Common
Stock (and such Person shall thereafter not be deemed a "Shareholder"), except
as specifically provided to the contrary with respect to obligations continuing
after a Person ceases to be a Shareholder.
4.6 Legend on Stock Certificates. Upon the execution of this Agreement,
any certificates representing the shares of Common Stock subject hereto shall be
endorsed (in addition to any other applicable endorsements or legends)
substantially as follows:
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS,
AND MAY NOT BE TRANSFERRED, NOR WILL ANY ASSIGNEE OR ENDORSEE HEREOF BE
RECOGNIZED AS AN OWNER HEREOF BY THE ISSUER FOR ANY PURPOSE, UNLESS A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
ANY APPLICABLE STATE SECURITIES LAWS WITH RESPECT TO SUCH SHARES SHALL
THEN BE IN EFFECT OR UNLESS THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION WITH RESPECT TO ANY PROPOSED TRANSFER OR DISPOSITION OF
SUCH SHARES SHALL BE ESTABLISHED TO THE SATISFACTION OF COUNSEL FOR THE
ISSUER. IN ADDITION, THE SHARES EVIDENCED BY THIS CERTIFICATE ARE
SUBJECT TO THE RESTRICTIONS ON TRANSFERABILITY CONTAINED IN A
SHAREHOLDERS AGREEMENT DATED THE ____ DAY OF __________, 2002, BETWEEN
AND AMONG THE ISSUER AND THE HOLDERS OF COMMON STOCK THEREOF, A COPY OF
WHICH IS ON FILE IN THE OFFICE OF THE ISSUER. NO TRANSFER OR ENCUMBRANCE
OF THE SHARES REPRESENTED HEREBY MAY BE MADE EXCEPT IN ACCORDANCE WITH
SUCH AGREEMENT.
All certificates for Common Stock hereafter newly issued or Transferred during
the term of this Agreement shall bear the same endorsement.
4.7 Waivers. Nothing contained in this Agreement shall prevent the
waiver of the provisions of this Agreement by the parties hereto. No party to
this Agreement, however, shall
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be deemed to have waived any of its rights under this Agreement unless such
waiver shall be in writing and signed by such party. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right on any future
occasion.
4.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
4.9 Benefit. All of the terms, covenants, agreements and conditions
contained in this Agreement shall be binding upon and inure to the benefit of
all of the parties hereto, and their respective heirs, executors,
administrators, successors and assigns.
4.10 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California. If the
Company (or any successor in interest thereto) shall cease to be a corporation
organized and existing under the laws of California and shall become a
corporation organized and existing under the laws of another State, then at such
time this Agreement shall be governed by and construed and enforced in
accordance with the laws of the State in which the Company (or any successor)
shall be incorporated.
4.11 Conflict with Bylaws. In the event of any conflict between the
terms and provisions of this Agreement and the terms and provisions of the
Bylaws of the Company, the terms and provisions of this Agreement shall control.
4.12 Gender. As used in this Agreement, the masculine or neuter gender
shall be construed to mean the masculine, feminine or neuter gender, as
appropriate.
4.13 Applicability of Laws. Any Transfer of shares of Common Stock made
pursuant to and in accordance with the terms of this Agreement shall be subject
to applicable state and federal securities and other laws, notwithstanding its
permissibility under this Agreement.
4.14 Certain Acknowledgments and Waivers. Each Shareholder employed by
the Company hereby acknowledges and agrees that neither the issuance of shares
of Common Stock to such Shareholder nor anything contained in this Agreement
shall give such Shareholder any right to be retained in the employ of the
Company, affect the right of the Company to discharge or discipline such
Shareholder at any time, or affect such Shareholder's right to terminate his
employment with the Company at any time.
4.15 Applicability to Stock Subject to Forfeiture. For purposes of
Sections 1 and 2 of this Agreement, a Shareholder or the estate or Personal
Representative of a Shareholder is deemed not to own shares of Common Stock that
are non-transferable and subject to a substantial risk of forfeiture (within the
meaning of Section 83(a) of the Code), unless the restrictions with respect
thereto have lapsed and the ownership of the shares of Common Stock has vested
in the Shareholder; provided, however, that the Transfer restrictions and
options established by this Agreement shall not create a "substantial risk of
forfeiture" for purposes of this Section 4.15.
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4.16 Voting, Cooperation. Each Shareholder agrees to vote its shares of
Common Stock now owned or hereinafter acquired at all times in such a manner as
to, and to take such other actions as may be necessary or appropriate to,
effectuate the agreements, covenants, restrictions and intent of this Agreement.
4.17 Effectiveness of Agreement. This Agreement shall be effective
immediately following the delivery of stock certificates representing shares of
Common Stock to the Shareholders pursuant to the terms of those certain
Subscription Agreements.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
HEMET FINANCIAL GROUP, INC.
By:_____________________________
President
Attest:_____________________________
Secretary
[CORPORATE SEAL]
SHAREHOLDER:
________________________________
Name:___________________________
________________________________
Name:___________________________
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TRUST SUPPLEMENT TO SHAREHOLDERS AGREEMENT
THIS TRUST SUPPLEMENT TO SHAREHOLDERS AGREEMENT (this "Supplement") is
made and entered into this ____ day of ________, 2002, by and among Hemet
Financial Group, Inc., a corporation organized and existing under the laws of
the State of Nevada (including any successor in interest thereto, the
"Company"), the trust identified on the signature pages hereto that is a
shareholder of the Company (the "Trust"), and the individual (or husband and
wife couple) that is deemed to be the owner of the Trust for federal income tax
purposes (the "Grantor" or "Grantors").
W I T N E S S E T H :
- - - - - - - - - -
The Trust is a Shareholder of the Company, and has executed, or shall
execute contemporaneously with this Supplement, the Shareholders Agreement, made
and entered into the ____ day of ________, 2002, by and among the Company and
the Shareholders of the Company;
The Trust, the Company, and the Grantors deem it to be in their best
interests to provide certain additional agreements with respect to the shares of
the Common Stock now owned or subsequently acquired by the Trust.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. The Grantor or Grantor shall be subject to all the terms, conditions, and
restrictions of the Shareholders Agreement, as if Grantor or Grantors were a
Shareholder, including without limitation the right of the Company and the
Surviving Shareholders to purchase shares of the Company owned by the Grantor or
Grantors upon the death of the Grantor or Grantors.
2. The Trust may not be amended in any way without the prior written consent of
the Company, which consent may not be unreasonably withheld. Any purported
amendment of the Trust that would make such trust ineligible to hold shares of
an S Corporation within the meaning of the Code shall be void ab initio.
3. If there is more than one Grantor, the Grantors agree to file joint returns,
within the meaning of Section 6013 of the Code, as amended, and not separate
returns, for any federal income tax returns filed on or after the date of this
Supplement.
4. If there is more than one Grantor, if the marriage between the Grantors
terminates for any reason other than the death of either or both, the Trust
shall be revoked, and the Shares returned to one of the Grantors. The Grantors
shall notify the Company no less than ninety (90) days prior to such
termination.
5. Grantor or Grantors agree to take any actions necessary to maintain the
Company's status as an S Corporation within the meaning of the Code.
6. All terms and conditions of the Shareholder Agreement are incorporated by
reference herein, as if set forth in full herein.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
HEMET FINANCIAL GROUP, INC.
By:_____________________________
President
Attest:_____________________________
Secretary
[CORPORATE SEAL]
GRANTOR:
_____________________________
_____________________________
TRUST:
_____________________________
By: Trustee
_____________________________
By: Trustee
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EXHIBIT A
FORM OF PROMISSORY NOTE
$______________________ Date:__________
FOR VALUE RECEIVED, ____________ (the "Debtor"), hereby unconditionally
promises to pay to the order of _______________________________ (hereafter,
together with any holder hereof, called "Holder") at the offices of the Holder
located at _____________________________, or at such other place as the Holder
may designate in writing to the Debtor, in lawful money of the United States of
America, and in immediately available funds, the principal sum of
___________________________ DOLLARS ($__________________) together with a
floating rate of interest on the principal balance from time to time outstanding
hereunder (computed on the basis of a 365-day year and actual number of days
elapsed), reset monthly, from the date hereof until paid in full at a per annum
rate equal to the "Prime Rate" as reported on the first business day of each
month in the "Money Rates" section of The Wall Street Journal or, in the event
such newspaper ceases to be published, in another nationally circulated
financial newspaper, which interest shall be compounded monthly.
Unless due earlier pursuant to the terms hereof, principal shall be
payable in four equal annual installments of $_________ each, due and payable on
the anniversaries of the date of this Promissory Note. Accrued interest shall be
due and payable on the date on which each principal payment is due and on any
other date on which the principal balance is due (whether by acceleration,
maturity or otherwise).
Interest shall accrue on any amount past due hereunder at a rate equal
to five percent (5%) per annum in excess of the interest rate otherwise payable
hereunder. All such interest shall be due and payable on demand.
Notwithstanding any terms or provisions contained herein or elsewhere,
in no event shall the aggregate amount of Interest (as defined below) contracted
for, reserved, charged, collected, taken or received by the Holder pursuant to
this Note exceed the maximum amount permissible (the "Maximum Rate") under the
Usury Laws (as defined below). Neither the exercise by the Holder of its rights
to accelerate the payment or the maturity of any indebtedness evidenced by this
Note, nor the prepayment by the Debtor of any of the indebtedness evidenced by
this Note, nor the occurrence of any other event or contingency whatsoever,
shall entitle the Holder to charge, collect or receive Interest in excess of the
Maximum Rate and in no event shall the Debtor be obligated to pay Interest
exceeding the Maximum Rate. All agreements, conditions or stipulations, if any,
which may in any event or contingency operate to bind, obligate or compel the
Debtor to pay Interest exceeding the Maximum Rate shall be without binding force
or effect, at law or in equity, but only to the extent of the excess of Interest
over such Maximum Rate. If any Interest is contracted for, charged, collected,
taken or received in excess of the Maximum Rate ("Excess"), the Debtor
acknowledges and agrees that any such obligation, charge,
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collection or receipt shall be the result of a bona fide error, and such Excess,
to the extent received, shall be applied first to reduce the principal hereof
and the balance of such Excess, if any, shall be returned to the Debtor; it
being the express intent of the Debtor and the Holder that the Debtor not pay
and the Holder not receive, charge or collect, directly or indirectly, interest
in excess of the Maximum Rate. By the execution of this Note, the Debtor
covenants and agrees that (i) the credit or return of any Excess shall
constitute the acceptance by the Debtor of such Excess, and (ii) the Debtor
shall not seek or pursue (and hereby waives to the fullest extent permitted by
law) any other remedy, legal or equitable, against the Holder, based in whole or
in part upon contracting for, charging, collecting or receiving any Interest in
excess of the Maximum Rate. For the purpose of determining whether or not any
Excess has been contracted for, charged, collected or received by the Holder,
all Interest at any time contracted for, charged, collected or received from the
Debtor in connection with the indebtedness evidenced by this Note shall, to the
extent permitted by the Usury Laws, be amortized, prorated, allocated and spread
in equal parts throughout the full term of this Note. The Debtor and the Holder
agree, to the maximum extent permitted under the Usury Laws, to (i) characterize
any non-principal payment as an expense rather than as Interest and (ii) exclude
voluntary prepayments and the effects thereof. For purposes hereof, the term
"Interest" shall mean any and all interest, fees, premiums and other charges for
the use of money or the extension of credit and shall include any "interest" (or
any amount or sum deemed to be "interest") under and as defined in the Usury
Laws; and the term "Usury Laws" shall mean any applicable laws, statutes, rules,
regulations or ordinances limiting, governing or otherwise regulating the rate
or amount of Interest or the manner which Interest may be calculated, charged,
collected, paid, contracted for or disclosed.
The Debtor, and the Holder by accepting this Note, each agree and
stipulate that the only charge imposed upon the Debtor for the use of money in
connection with this Note is and shall be the interest described in the first
paragraph hereof.
Each of the following events shall constitute an "Event of Default"
under this Note: (i) failure of the Debtor to pay any principal, interest or
other amount due hereunder when due; (ii) the failure of the Debtor to comply
with any term, covenant or condition contained in this Note; (iii) a final
judgment or order for the payment of money, or any final order granting
equitable relief, shall be entered against the Debtor and such judgment or order
has or will have a materially adverse effect on the financial condition of the
Debtor; (iv) the Debtor shall (a) commence a voluntary case under the Bankruptcy
Code of 1978, as amended or other federal bankruptcy law (as now or hereafter in
effect); (b) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition for adjustment of debts; (c) consent to or fail to contest in
a timely and appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws; (d) apply for or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator of itself
or of a substantial part of its property, domestic or foreign; (e) be unable to,
or admit in writing its inability to, pay its debts as they become due; (f) make
a general
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assignment for the benefit of creditors; or (g) make a conveyance fraudulent as
to creditors under any state or federal law; or (v) a case or other proceeding
shall be commenced against the Debtor in any court of competent jurisdiction
seeking (a) relief under the Bankruptcy Code of 1978, as amended or other
federal bankruptcy law (as now or hereafter in effect) or under any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or adjustment of debts or (b) the appointment of a trustee, receiver,
custodian, liquidator or the like for the Debtor or all or any substantial part
of the assets, domestic or foreign, of the Debtor.
Upon the occurrence of an Event of Default (other than an Event of
Default described in clauses (iv) or (v) of the definition thereof), any and all
of the loans and the Debtor's other obligations hereunder, at the option of the
Holder, and without demand or notice of any kind, may be immediately declared,
and thereupon shall immediately become in default and due and payable and the
Holder may exercise any and all rights and remedies available to it at law, in
equity or otherwise. Upon the occurrence of an Event of Default described in
clauses (iv) or (v) of the definition thereof, any and all of the loans and the
Debtor's other obligations hereunder, without demand or notice of any kind,
shall immediately become in default and due and payable and the Holder may
exercise any and all rights and remedies available to it at law, in equity or
otherwise.
The Debtor shall pay all expenses incurred by the Holder in the
collection of this Note, including, without limitation, the reasonable fees and
disbursements of counsel to the Holder, if this Note is collected by or through
an attorney-at-law.
Both the Debtor and the Holder acknowledge that time is of the essence
of this Note.
THE DEBTOR, AND THE HOLDER BY ACCEPTING THIS NOTE, EACH ACKNOWLEDGES
THAT ANY DISPUTE OR CONTROVERSY BETWEEN THE DEBTOR AND THE HOLDER WOULD BE BASED
ON DIFFICULT AND COMPLEX ISSUES OF LAW AND FACT. ACCORDINGLY, THE HOLDER AND THE
DEBTOR HEREBY WAIVE (TO THE EXTENT PERMITTED BY APPLICABLE LAW) TRIAL BY JURY IN
ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR TRIBUNAL IN WHICH
AN ACTION MAY BE COMMENCED BY OR AGAINST THE DEBTOR ARISING OUT OF THIS NOTE OR
BY REASON OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE DEBTOR AND THE
HOLDER OF ANY KIND OR NATURE.
THE DEBTOR, AND THE HOLDER BY ACCEPTING THIS NOTE, HEREBY AGREE THAT THE
UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA SHALL HAVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE DEBTOR AND
THE HOLDER PERTAINING DIRECTLY OR INDIRECTLY TO THIS NOTE OR ANY OTHER CAUSE OR
DISPUTE WHATSOEVER BETWEEN THE DEBTOR AND THE HOLDER OF ANY KIND OR NATURE. THE
DEBTOR EXPRESSLY
A-3
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING
COMMENCED IN SUCH COURTS.
THE FOREGOING WAIVERS AND CONSENTS HAVE BEEN MADE WITH THE ADVICE OF
COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES THEREOF.
No delay or failure on the part of the Holder in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Holder of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy.
All amendments to this Note, and any waiver or consent of the Holder,
must be in writing and signed by the Holder and the Debtor.
The Debtor hereby waives presentment, demand, notice of dishonor,
protests and all other notices whatever.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF CALIFORNIA.
This Note shall be binding upon the successors and assigns of the Debtor.
A Holder of this Note may assign or transfer this Note to any person or entity
without notice to, or the consent of, the Debtor. The Debtor may not assign any
of its obligations hereunder to any person or entity.
Any notice to be given hereunder shall be in writing, shall be sent to
the Holder's address as specified in the first paragraph hereof or the Debtor's
addresses set forth below its signature hereto, as the case may be, and shall be
deemed received (i) on the earlier of the date of receipt or the date three
business days after deposit of such notice in the United States mail, if sent
postage prepaid, certified mail, return receipt requested or (ii) when actually
received, if personally delivered.
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IN WITNESS WHEREOF, the Debtor has executed and delivered this
Promissory Note under seal as of the date and year first written above.
[DEBTOR]
By:_____________________________
Title:_____________________
ATTEST:
By:_____________________________
Title:_____________________
[CORPORATE SEAL]
Address for Notices:
Hemet Bancorp
3715 Sunnyside Drive
Riverside, CA 92506
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