EXHIBIT (b)(2)
PROMISSORY NOTE
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PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL/COLL ACCOUNT OFFICER INITIALS
$50,000.00 05-24-2002 10-05-2002 836607659 74 491348 084 [Illegible]
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References in the shaded area are for Lender's use only and do not limit the applicability of this document to
any particular loan or item. Any item above containing ***** has been omitted due to text length limitations.
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</Table>
BORROWER: HEMET FINANCIAL GROUP, INC., LENDER: FEATHER RIVER STATE BANK
a Nevada Corporation COMMERCIAL AND
3715 Sunnyside Drive AGRICULTURAL LOAN CENTER
Riverside, CA 92506 995 Tharp Road
P.O. Drawer D
Yuba City, CA 95993
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PRINCIPAL AMOUNT: $50,000.00 INITIAL RATE: 6.000% DATE OF NOTE: MAY 24, 2002
PROMISE TO PAY. HEMET FINANCIAL GROUP, INC., a Nevada Corporation ("Borrower")
promises to pay to FEATHER RIVER STATE BANK ("Lender"), or order, in lawful
money of the United States of America, the principal amount of Fifty Thousand &
00/100 Dollars ($50,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance of each advance. Interest
shall be calculated from the date of each advance until repayment of each
advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on October 5, 2002. Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges. Interest on this Note is computed on a 365/365 simple
interest basis; that is, by applying the ratio of the annual interest rate over
the number of days in a year, multiplied by the outstanding principal balance,
multiplied by the actual number of days the principal balance is outstanding.
Borrower will pay at Lender's address shown above or at such other place as
Lender may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the FEATHER RIVER STATE
REFERENCE RATE (the "Index"). The index is not necessarily the lowest rate
charged by Lender on its loans and is set by Lender in its sole discretion.
Lender will tell Borrower the current index rate upon Borrower's request. The
interest rate change will not occur more often than each DAY, Borrower
understands that Lender may make loans based on other rates as well. The Index
currently is 5.000% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 1.000 percentage point over
the Index, resulting in an initial rate of 6.000% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to be Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments. Rather, early payments will
reduce the principal balance due. Borrower agrees not to send Lender payments
marked "paid in full", "without recourse", or similar language. If Borrower
sends such a payment, Lender may accept it without losing any of Lender's rights
under this Note, and Borrower will remain obligated to pay any further amount
owed to Lender. All written communications concerning disputed amounts,
including any check or payment instrument that indicates that the payment
constitutes "payment in full" of the amount owed or that is tendered with other
conditions or limitations or as full satisfaction of a disputed amount must be
mailed or delivered to: FEATHER RIVER STATE BANK, COMMERCIAL AND AGRICULTURAL
LOAN CENTER, 995 Tharp Road, P.O. Drawer D, Yuba City, CA 95993.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment or $10.00, whichever is greater.
INTEREST AFTER DEFAULT. Upon Borrower's failure to pay all amounts declared due
pursuant to this section, including failure to pay upon final maturity, Lender,
at its option, may, if permitted under applicable law, increase the variable
interest rate on this Note to 6.000 percentage points over the Index.
DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:
PAYMENT DEFAULT. Borrower fails to make any payment when due under this
Note.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Note or in any of the
related documents or to comply with to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Borrower or any Grantor defaults under
any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's ability
to repay this Note or perform Borrower's obligations under this Note or any
of the related documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note or
the related documents is false or misleading in any material respect,
either now or at the time made or furnished or becomes false or misleading
at any time thereafter.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the Insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the loan. This includes
a garnishment of any of Borrower's accounts, including deposit accounts,
with Lender. However, this Event of Default shall not apply if there is a
good faith dispute by Borrower as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding and if
Borrower gives Lender written notice of the creditor or forfeiture
proceeding and deposits with Lender monies or a surety bond for the
creditor or forfeiture proceeding, in an amount determined by Lender, in
its sole discretion, as being an adequate reserve or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or any Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or liability
under, any guaranty of the Indebtedness evidenced by this Note. In the
event of a death, Lender, at its option, may, but shall not be required to,
permit the Guarantor's estate to assume unconditionally the obligations
arising under the guaranty in a manner satisfactory to Lender, and, in
doing so, cure any Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of
this Note is impaired.
CURE PROVISIONS. If any default, other than a default in payment is curable
and if Borrower has not been given a notice of a breach of the same
provision of this Note within the preceding twelve (12) months, it may be
cured (and no event of default will have occurred) if Borrower, after
receiving written notice from Lender demanding cure of such default: (1)
cures the default within fifteen (15) days; or (2) if the cure requires
more than fifteen (15) days, immediately initiates steps which Lender deems
in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonable practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.
ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect
this Note if Borrower does not pay. Borrower will pay Lender that amount. This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals. Borrower also
will pay any court costs, in addition to all other sums provided by law.
GOVERNING LAW. THIS NOTE WILL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH FEDERAL LAW AND THE LAWS OF THE STATE OF CALIFORNIA. THIS NOTE
HAS BEEN ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of SUTTER County, State of California.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $21.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
COLLATERAL. This loan is unsecured.
LINE OF CREDIT. This Note evidences a straight line of credit. Once the total
amount of principal has been advanced, Borrower is not entitled to
PROMISSORY NOTE
LOAN NO: 836607259 (CONTINUED) PAGE 2
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further loan advances. Advances under this Note may be requested orally by
Borrower or as provided in this paragraph. All oral requests shall be confirmed
in writing on the day of the request. All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office shown above. Borrower agrees to be liable for all sums either; (A)
advanced in accordance with the instructions of an authorized person or (B)
credited to any of Borrower's accounts with Lender. The unpaid principal balance
owing on this Note at any time may be evidenced by endorsements on this Note or
by Lender's internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Notes if: (A) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (B) Borrower or any guarantor ceases
doing business or is insolvent; (C) any guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such guarantor's guarantee of this Note or
any other loan with Lender; or (D) Borrower has applied funds provided pursuant
to this Note for purposes other than those authorized by Lender.
ARBITRATION. BORROWER AND LENDER AGREE THAT ALL DISPUTES, CLAIMS AND
CONTROVERSIES BETWEEN THEM WHETHER INDIVIDUAL, JOINT, OR CLASS IN NATURE,
ARISING FROM THIS NOTE OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT AND
TORT DISPUTES, SHALL BE ARBITRATED PURSUANT TO THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION IN EFFECT AT THE TIME THE CLAIM IS FILED, UPON REQUEST
OF EITHER PARTY. NO ACT TO TAKE OR DISPOSE OF ANY COLLATERAL SECURING THIS NOTE
SHALL CONSTITUTE A WAIVER OF THIS ARBITRATION AGREEMENT OR BE PROHIBITED BY THIS
ARBITRATION AGREEMENT. THIS INCLUDES, WITHOUT LIMITATION, OBTAINING INJUNCTIVE
RELIEF OR A TEMPORARY RESTRAINING ORDER; INVOKING A POWER OF SALE UNDER ANY DEED
OF TRUST OR MORTGAGE; OBTAINING A WRIT OF ATTACHMENT OR IMPOSITION OF A
RECEIVER; OR EXERCISING ANY RIGHTS RELATING TO PERSONAL PROPERTY, INCLUDING
TAKING OR DISPOSING OF SUCH PROPERTY WITH OR WITHOUT JUDICIAL PROCESS PURSUANT
TO ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE. ANY DISPUTES, CLAIMS, OR
CONTROVERSIES CONCERNING THE LAWFULNESS OR REASONABLENESS OF ANY ACT, OR
EXERCISE OF ANY RIGHT, CONCERNING ANY COLLATERAL SECURING THIS NOTE, INCLUDING
ANY CLAIM TO RESCIND, REFORM, OR OTHERWISE MODIFY ANY AGREEMENT RELATING TO THE
COLLATERAL SECURING THIS NOTE, SHALL ALSO BE ARBITRATED, PROVIDED HOWEVER THAT
NO ARBITRATOR SHALL HAVE THE RIGHT OR THE POWER TO ENJOIN OR RESTRAIN ANY ACT OF
ANY PARTY. BORROWER AND LENDER AGREE THAT IN THE EVENT OF AN ACTION FOR JUDICIAL
FORECLOSURE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 728, OR ANY
SIMILAR PROVISION IN ANY OTHER STATE, THE COMMENCEMENT OF SUCH AN ACTION WILL
NOT CONSTITUTE A WAIVER OF THE RIGHT TO ARBITRATE AND THE COURT SHALL REFER TO
ARBITRATION AS MUCH OF SUCH ACTION, INCLUDING COUNTERCLAIMS, AS LAWFULLY MAY BE
REFERRED TO ARBITRATION. JUDGMENT UPON ANY AWARD RENDERED BY AN ARBITRATOR MAY
BE ENTERED IN ANY COURT HAVING JURISDICTION. NOTHING IN THIS NOTE SHALL PRECLUDE
ANY PARTY FROM SEEKING EQUITABLE RELIEF FROM A COURT OF COMPETENT JURISDICTION.
THE STATUTE OF LIMITATIONS, ESTOPPEL, WAIVER, LACHES, AND SIMILAR DOCTRINES
WHICH WOULD OTHERWISE BE APPLICABLE IN AN ACTION BROUGHT BY A PARTY SHALL BE
APPLICABLE IN ANY ARBITRATION PROCEEDING, AND THE COMMENCEMENT OF AN ARBITRATION
PROCEEDING SHALL BE DEEMED THE COMMENCEMENT OF AN ACTION FOR THESE PURPOSES. THE
FEDERAL ARBITRATION ACT SHALL APPLY TO THE CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT OF THIS ARBITRATION PROVISION.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and its successors and assigns.
NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES.
Please notify us if we report any inaccurate information about your account(s)
to a consumer reporting agency. Your written notice describing the specific
inaccuracy(ies) should be sent to us at the following address: FEATHER RIVER
STATE BANK P.O. Box 929004 YUBA CITY, CA 95992.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waiver
any applicable statute of limitations, presentment, demand for payment, and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made. The obligations under this
Note are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
HEMET FINANCIAL GROUP, INC., A NEVADA CORPORATION
By: /s/ JAMES B. JAQUA
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JAMES B. JAQUA, President of HEMET FINANCIAL
GROUP, INC., a Nevada Corporation
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