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IN THE DELAWARE COUNTY OHIO COURT OF COMMON PLEAS
CIVIL DIVISION
Bradley J. Ratliff
1039 Lake Harbor Court
Westerville, Ohio 43081
Vv. Case No
Samuel J. Hill
5365 Somerset Avenue Judge
Westerville, Ohio 43082 8
and
Joshua A. Hill
5839 Crystal Court
Westerville, Ohio 43082
: JURY DEMAND ENDORSED
and : HEREON
Lisa E. Kendle
1201 Dunham Road
Delaware, Ohio 43015
and
Marianne M. Viola
6158 Jennis Road
Westerville, Ohio 43081
and
Priority Mortgage Corp.
c/o Samuel J. Hill, registered agent
5365 Somerset Avenue
Westerville, Ohio 43082
Defendants.
CLERK OF COURTS - DELAWARE COUNTY, OH - COMMON PLEAS COURT
23 CV H 01 0037 - SCHUCK, JAMES P.
FILED: 01/23/2023 02:14 PMCOMPLAINT
Now comes Plaintiff Bradley J. Ratliff (“Plaintiff”) and hereby states as follows for his
Complaint against Defendants Samuel J. Hill (“S. Hill”), Joshua A. Hill (“J. Hill”), Lisa E. Kendle
(“Kendle”), Marianna M. Viola (“Viola”) and Priority Mortgage Corp. (“Priority”)
PARTIES
1. Bradley J. Ratliff is an Ohio resident who resides at 1039 Lake Harbor Court,
Westerville, Ohio 43081 in Franklin County, Ohio. Ratliff owns twenty percent (20%) of the
outstanding shares of Priority Mortgage Corp.
2. Samuel J. Hill is an Ohio resident who resides at 5365 Somerset Avenue,
Westerville, Ohio 43082 in Delaware County, Ohio. S. Hill owns twenty percent (20%) of the
outstanding shares of Priority Mortgage Corp.
3. Joshua A. Hill is an Ohio resident who resides at 5839 Crystal Court, Westerville,
Ohio 43082 in Delaware County, Ohio. J. Hill owns thirty-five percent (35%) of the outstanding
shares of Priority Mortgage Corp
4. Lisa E. Kendle is an Ohio resident who resides at 1201 Dunham Road, Delaware,
Ohio 43015 in Delaware County, Ohio. Kendle owns twelve- and one-half percent (12.5%) of the
outstanding shares of Priority Mortgage Corp.
5 Marianne Viola is an Ohio resident who resides at 6158 Jennis Road, Westerville,
Ohio 43081 in Franklin County, Ohio. Viola owns twelve- and one-half percent (12.5%) of the
outstanding shares of Priority Mortgage Corp.
6. Priority Mortgage Corp. is an Ohio corporation whose principal place of business
was 150 E. Wilson Bridge Road, Suite 350, Worthington, Ohio 43085 in Franklin County, Ohio.JURISDICTION
7. Jurisdiction may be exercised over Defendants under R.C. 2307.382(A)(1) and (3)
because Defendants transact business in Ohio and have caused tortious injury by an act or omission
in this state.
8 Venue is proper in this Court under Ohio Civil Rule 3(C)(1) and/or (6) because
Delaware County is the county in which (a) one or more Defendants reside and (b) all or part of
the claims for relief arose there.
FACTS COMMON TO ALL CLAIMS
The Company and Shareholders
9. Priority was formed under the laws of the State of Ohio on December 14, 1983
10. Defendant S. Hill originally owned the company, but he sold portions of his shares
to J. Hill, Kendle, Viola, and Plaintiff. The new owners obtained the funds to purchase their shares
from S. Hill and notes were signed by the parties to memorialize the loans S. Hill made to the other
owners.
11 Effective January 1, 2017, Plaintiff, S. Hill, J. Hill, Kendle, and Viola executed a
close corporation agreement (“CCA”) regarding Priority. Exhibit A.
12. On the same day, the Parties, as the shareholders of Priority, adopted the CCA as a
corporate document. /d.
13 As relevant here, the CCA provides that, if a shareholder ceases to be employed by
or associated with Priority, then that individual’s shares shall be offered to the other shareholders.
Id. Art. V, § 15. If the shareholders fail to purchase the shares within 15 days, “then the Corporation
shall purchase such shares.” Jd.
14 The purchase price for the shares is set forth in Article V, Section 11. /d.15. The Closing for the purchase of the shares by either the other shareholders or
Priority shall take place no later than 270 days after the triggering event. /d. Art. V, § 10.
16. | The CCA further provides that, if the shareholders or Priority fail to perform any
of the obligations under Article V, then it is “intended, therefore, that the rights and obligations set
forth herein shall be enforceable by a decree of specific performance.” /d. Art. V, § 17. The right
to specific performance “shall be cumulative and not exclusive and shall be in addition to any other
remedy a party may have.” Jd.
Plaintiff's Resignation from Priority
7. Plaintiff was the President of Priority until April 9, 2022
8 Before his resignation, Plaintiff worked diligently to further the company’s
interests and attempted to make Priority a successful business.
9. A shareholder meeting was held on April 4, 2022. S. Hill provided three options
for Priority going forward: (1) close the company, (2) merge the company with another or be
acquired by another company, or (3) continue to operate.
20. During the shareholder meeting on April 4, 2022, S. Hill stated that if the option to
close was selected the capital of each shareholder would be distributed based on ownership
percentages and any outstanding notes for the purchase of shares would be forgiven.
21. Following the April 4, 2022, meeting, S. Hill and J. Hill began having more serious
conversations with a third party regarding a merger, but they did not inform Plaintiff of these
discussions, even though Plaintiff was the company’s president.
22 On April 6, 2022, Plaintiff and J. Hill had another informal conversation with a
third party. After the conversation, Plaintiff notified J. Hill that Plaintiff did not want to move
forward with the merger discussions with this third party.23. Despite Plaintiff clearly indicating that he did not want to move forward with the
merger discussions, on April 7, 2022, S. Hill and J. Hill called a staff meeting, during which they
revealed that they intended to pursue the potential merger.
24. Immediately after the staff meeting, a shareholder meeting was held. S. Hill and J.
Hill informed the remaining shareholders that they were in serious discussions with another
company so that Priority could be merged or acquired. During this meeting, Plaintiff reiterated that
he would not move forward with the merger involving this third party as he believed it was not in
the best interests of Priority or its employees.
25. Plaintiff’s potential resignation was also discussed at the April 7 shareholder
meeting. S. Hill indicated Priority’s attorney, Shamus Cassidy, (“Cassidy”), had advised that, if
Plaintiff was going to resign, he should resign sooner rather than later.
26. Plaintiff formally resigned on April 9, 2022. Exhibit B.
Defendants’ Failure to Purchase Plaintiff's Shares
27. Following his resignation, Plaintiff requested a stock valuation, as required by
Article V, Section 11 of the CCA, on April 9, 2022, and again on April 23, 2022, in order to
determine the sale price of his shares.
28 On April 11, 2022, S. Hill and Plaintiff agreed that S. Hill would purchase
Plaintiff's outstanding shares. Exhibit C
29. S. Hill again agreed that Priority would return Plaintiffs capital investment
30. S. Hill worked with Cassidy to draft a purchase agreement. A stock purchase offer
dated April 22, 2022, was presented to Plaintiff by Defendant S. Hill
31. The stock purchase offer presented to Plaintiff contained section 1.3, “Restrictive
Covenants Remain in Full Force and Effect. The Seller (Plaintiff) acknowledges and agrees thatany restrictive covenants set forth in any employment agreement or the Corporation’s Code of
Regulations and Close Corporation Agreement, including those related to non-competition, non-
solicitation, trade secret protection(s), and confidential information, shall remain in full force and
effect.”
32. The stock purchase offer presented to Plaintiff also contained section 1.4, “Net
Worth Requirement Account (“NWRA”). Purchaser (Defendant S. Hill) and the Corporation
(Priority) agree to effectuate the prompt return to Seller (Plaintiff) of an amount equal to Five
Hundred Thousand Dollars ($500,000.00) of Seller’s present Six Hundred Thousand Dollar
($600,000.00) NWRA balance. Seller shall receive the One Hundred Thousand Dollar
($100,000.00) remaining balance after the earlier of: One (1) year, the merger, consolidation, or
sale of all the Corporation’s stock or all or substantially all of its assets, or the dissolution of the
Corporation; provided, however, that such remaining balance shall be offset and reduced by any
losses incurred pro rata/proportionately by and amongst the remaining shareholders of the
Corporation and their respective NWRAs. Further, should Seller violate the restrictive covenants
set forth in Section 1.3, any damage(s) suffered by the Corporation may be offset by the remaining
One Hundred Thousand Dollar ($100,000.00) balance of such Seller’s NWRA.”
33 Upon information and belief, S. Hill directed Cassidy to include these provisions
in the purchase agreement.
34 Plaintiff was confused by these provisions because he did not remember ever
signing an employment agreement, let alone one that had restrictive covenants regarding non-
compete or non-solicitation. Furthermore, Plaintiff's copy of the CCA did not contain those
restrictive covenants. On April 22, 2022, Plaintiff sent a text message to S. Hill requesting a copy
of the documents that supposedly contained the restrictive covenants.35. Then on April 23, 2022, Plaintiff asked Defendant S. Hill and Cassidy for copies
of the business governance documents that contained the purported restrictive covenants. Plaintiff
and/or his prior counsel requested the documents again on May 2, 2022, June 25, 2022, and July
9, 2022
36. Also on April 23, 2022, Plaintiff demanded the immediate withdrawal of his capital.
37. On May 11, 2022, S. Hill rescinded his offer to purchase Plaintiff's shares.
38. — S. Hill also indicated to Plaintiff and the other shareholders that Priority would not
purchase Plaintiff's shares—despite the mandatory language in the CCA—because S. Hill
believed the purchase would not be in the best interests of the other shareholders or Priority
39. During this same time period, Plaintiff spoke with J. Hill regarding the return of his
capital investment. J. Hill informed Plaintiff that the CCA allegedly contained a section 18 that
restricted the return of capital. J. Hill even supposedly read from the CCA. Plaintiff's copy of the
CCA did not contain section 18 or any other section with such a restriction.
40. On July 12, 2022, Plaintiff received confirmation that the business governance
documents in his possession were accurate, had not been amended, and do not actually contain the
additional language. Defendants further conceded that no employment agreement existed
41 As of the date of this complaint, neither a shareholder nor Priority has purchased
the outstanding shares of Plaintiff.
Defendants’ Other Misdeeds
42. Between the time of Plaintiff's resignation and the filing of this complaint,
Defendants S. Hill, J. Hill, Kendle, and Viola have held multiple shareholder meetings and acted
without notifying Plaintiff of the meetings and allowing him to participate.43. Defendants S. Hill, J. Hill, Kendle, and Viola entered into a letter of intent with
International City Mortgage, dba Doorway Home Loans of Santa Ana, CA (“Doorway”) dated
April 27, 2022, and signed May 3, 2022. Exhibit D.
44 Plaintiff was not included in any discussions regarding the letter of intent with
Doorway and was not told about it until July 28, 2022. Rather, Defendants affirmatively stated to
Plaintiff that they did not have any agreements in place, Doorway was simply hiring some of
Priority’s staff.
45 On May 25, 2022, Plaintiff, Cassidy, Plaintiff's prior attorney, and the accounting
firm met to discuss the status of Priority
46. Plaintiff was informed that the plan was for Priority to stop operating as of June 30,
2022.
47. In July 2022, Defendants decided to disburse a majority of Priority’s capital without
input from Plaintiff. However, instead of disbursing all of the funds, Defendants gave most of the
funds to S. Hill to pay the notes—a decision that was made without Plaintiff's input. Plaintiff
received the remaining portion of the disbursement.
48. On or around August 25, 2022, Plaintiff was informed that the remaining
shareholders were planning to dissolve the corporation.
49. In September 2022, Plaintiff inquired about the financials of Priority, as it appeared
to still be holding $300,000. Viola informed Plaintiff that these funds were to be used to pay the
prior two-months expenses and future expenses. Plaintiff believed this statement to be false
because the prior months expenses already had been paid.
50. On September 30, 2022, capital in the amount of two hundred and fifty thousand
dollars ($250,000) was “disbursed,” but Plaintiff did not actually receive any funds. Upon furtherinquiry, Viola informed Plaintiff that the funds were being held to supposedly pay for future
expenses.
51. On November 9, 2022, Plaintiff was provided a draft dissolution agreement by
Cassidy
52. Plaintiff has not executed or agreed to the dissolution.
OHIO FIDUCIARY DUTIES
53. Ohio common law imposes fiduciary duties on S. Hill, J. Hill, Kendle, and Viola
as shareholders of Priority. These fiduciary duties include duties of loyalty, care, good faith,
honesty, and to act in the best interests of Priority. Together S. Hill, J. Hill, Kendle, and Viola are
the majority shareholders while Plaintiff is a minority shareholder. As a closely held corporation,
the majority owners of Priority owe a heightened fiduciary duty to the minority owners. The
minority has a right to have an equal opportunity to benefit from the business as the majority
FIRST CAUSE OF ACTION-SPECIFIC PERFORMANCE
(All Defendants)
54. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs
above.
55 There is a written contract between Plaintiff and S. Hill, J. Hill, Kendle, and
Viola’s, the CCA, effective January 1, 2017. Priority adopted said agreement as a corporate
document and is bound by its terms. See R.C. 1701.591(C).
56. Plaintiff fully performed under the contract, including seeking to sell his shares
upon his resignation to the other shareholders or to the corporation at the price calculated by the
formula in the CCA.57. Defendants breached the contract because neither a shareholder nor Priority has
purchased the shares of Plaintiff as required by the CCA.
58. The Parties agreed in the CCA that “it is impossible to measure in money the
damages which will accrue to a party hereto . . . by reason of a failure to perform any of the
obligations under this Agreement.” CCA Art. V, § 17.
59. Plaintiff is entitled to an Order that Defendants be required specifically to perform
and fulfill their obligations in accordance with the terms of the CCA.
SECOND CAUSE OF ACTION-BREACH OF CONTRACT
(All Defendants)
60. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs
above.
61 As alleged in Count One, Plaintiff fulfilled all of his obligations under the
agreement. However, Defendants breached the contract because neither a shareholder nor Priority
has purchased the shares of Plaintiff.
62. As a direct and proximate result of Defendants’ breach, Plaintiff has suffered
damages in excess of $25,000.
THIRD CAUSE OF ACTION-BREACH OF FIDUCIARY DUTY
(S. Hill, J. Hill, Kendle, and Viola)
63. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs
above.
64. Plaintiff, S. Hill, J. Hill, Kendle, and Viola are all shareholders of Priority—a close
corporation.
65. — S. Hill, J. Hill, Kendle, and Viola together are the majority shareholders.
66. Plaintiff is the minority shareholder.
1067. _ As shareholders of Priority, they each owe one another and Plaintiff certain
fiduciary duties including duties of loyalty, care, good faith, honesty, and to act in the best interests
of Priority
68 Defendants S. Hill, J. Hill, Kendle, and Viola breached their fiduciary duties when
they among other things (1) excluded Plaintiff from shareholder meetings, (2) executed a letter of
intent with Doorway without Plaintiff's knowledge, (3) instructed Cassidy to prepare a purchase
agreement that misstates the terms of the CCA, (4) knowingly and deliberately violated the terms
of the CCA by refusing to buy out the Plaintiff's shares as required in the CCA, (5) negotiated the
letter of intent with Doorway for their personal benefit while excluding Plaintiff, and (6) processed
distributions to shareholders and then withheld those distributions from Plaintiff. S. Hill, J. Hill,
Kendle, and Viola’s actions were also intentional, willful, reckless, and were committed with
actual malice.
69 As a direct and proximate cause of S. Hill, J. Hill, Kendle, and Viola’s numerous
fiduciary duty breaches, Plaintiff has suffered damages in excess of $25,000.
FOURTH CAUSE OF ACTION-UNJUST ENRICHMENT
(All Defendants)
70. Plaintiffs repeat and reiterate each and every allegation contained in the paragraphs
above.
71 Plaintiff conferred a benefit on Defendants because (1) he performed his duties as
President of Priority, (2) his capital investment was used by the other shareholders for their own
benefit, and (3) distributions made in Plaintiff's name were withheld to cover other costs of the
corporation or notes payable to S. Hill
72. Defendants were aware that Plaintiff was conferring a benefit upon them by not
receiving payment he was owed timely, performing his duties to advance the interests of the
11corporation, and without his consent using his capital contributions to advance their own financial
interests
73. Defendants’ continued retention of these benefits is unjust without requiring them
to pay Plaintiff.
74. Asadirect and proximate result of Defendants’ retention of these benefits conferred
upon them by Plaintiff, he has suffered damages in excess of $25,000.
FIFTH CAUSE OF ACTION- PROMISSORY ESTOPPEL
S. Hill)
75. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs
above.
76. Defendant S. Hill personally and on behalf of Priority, made clear and unambiguous
promises to Plaintiff that he would purchase the outstanding shares of Plaintiff and/or waive or
forgive the outstanding balance for the purchase of Plaintiffs shares owed to S. Hill at the time by
Plaintiff.
77 It was reasonable and foreseeable for Plaintiff to rely on S. Hill’s promises that S
Hill would purchase Plaintiffs outstanding shares and waive or forgive the loan balance owed to
S. Hill by Plaintiff for the original purchase of the twenty (20) shares plaintiff owns.
78. Plaintiff reasonably relied on S. Hill’s promises that he would purchase Plaintiff's
outstanding shares and waive or forgive the loan balance by and return capital by resigning from
Priority
79. On May 11, 2022, S. Hill rescinded that offer and directed Cassidy and the other
shareholders that not only would he not be purchasing the outstanding shares of Plaintiff, but
indicated that the corporation could not purchase the shares either as required in the CCA because
it was in his and J. Hill, Kendle, and Viola’s best interest. (Exhibit C)
1280. Asadirect and proximate result of S. Hill’s broken promises to Plaintiff regarding
the purchase of Plaintiff's shares Plaintiff has suffered damages in excess of $25,000.
SIXTH CAUSE OF ACTION- FRAUD
(S. Hill, J. Hill, Kendle, & Viola)
81. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs
above.
82. Defendant S. Hill represented that the CCA and employment agreements contained
restrictive covenants and restrictions on capital withdrawals. Neither of which were true, and S
Hill knew that these statements were false
83 S. Hill, J. Hill, Kendle, & Viola told Plaintiff that neither they nor Priority had
entered into any agreements regarding the sale or merger of Priority
84. S. Hill, J. Hill, Kendle, and Viola’s representations to Plaintiff were material to
Plaintiff's delay in bringing action to enforce the CCA, as he was attempting to work with the
other shareholder to determine the best resolution for Priority.
85 S. Hill, J. Hill, Kendle, and Viola’s representations to Plaintiff were knowingly
false at the time that they were made to Plaintiff.
86. S. Hill, J. Hill, Kendle, and Viola’s representations to Plaintiff were made with the
intent of misleading Plaintiff that no potential mergers or acquisitions were being negotiated
87. S. Hill, J. Hill, Kendle, and Viola’s knowingly false representations were
intentional, willful, reckless, and were committed with actual malice.
88 Plaintiff reasonably and justifiably relied upon S. Hill, J. Hill, Kendle, and Viola’s
representations to him that no potential mergers or acquisitions were being negotiated caused
Plaintiff (1) to delay the enforcement of the buy-out provision; (2) incur additional costs, including
legal fees; and (3) risk the ability to recover the entire buy-out price and capital investment.
1389. Asa direct and proximate cause of S. Hill, J. Hill, Kendle, and Viola’s knowingly
false representations, Plaintiff has suffered damages in excess of $25,000.
SEVENTH CAUSE OF ACTION — CIVIL CONSPIRACY
TO COMMIT BREACH OF FIDUCIARY DUTY
(S. Hill, J. Hill, Kendle, and Viola)
90. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs
above.
91. Upon information and belief, S. Hill, J. Hill, Kendle, and Viola came to a mutual
understanding that they would work together to refuse to purchase the outstanding shares of
Plaintiff and refuse to have Priority purchase those shares as required by the CCA.
92 S. Hill, J. Hill, Kendle, and Viola knew or should have known that they would have
to breach their fiduciary duties to Plaintiff in order to accomplish the aim of their conspiracy, and
they contributed to the breaches by failing to notify Plaintiff of the letter of intent with Doorway,
failing to invite Plaintiff to multiple shareholder meetings, refusing to provide Plaintiff with
requested financial information, and causing a distribution to be made but withholding it from
Plaintiff.
93. S. Hill, J. Hill, Kendle, and Viola would not have been able to accomplish the
purpose of their conspiracy without the cooperation of the other Defendants.
94. Asa direct and proximate cause of the civil conspiracy formed by S. Hill, J. Hill,
Kendle, and Viola, Plaintiff has suffered damages in excess of $25,000.
WHEREFORE, Plaintiff demands judgment against Defendants Priority, S. Hill, J. Hill,
Kendle, and Viola individually and jointly and severally for specific performance of the Close
Corporation Agreement’s stock-purchase provisions; compensatory damages in excess of $25,000;
14punitive damages in excess of $25,000; pre- and post-judgment interest; costs and attorneys’ fees;
and for any other relief, whether legal or equitable, which the court deems just and proper.
Respectfully submitted,
/s/ Stefanie L. Coe
Stefanie Lynn Coe (0078265)
Tiffany L. Carwile (0082522)
ARNOLD & CLIFFORD, LLP
115 W. Main St., Fourth Floor
Columbus, Ohio 43215
Telephone: (614) 460-1637
Facsimile: (614) 469-1129
Email scoe@amlaw.com
Counsel for Plaintiff Bradley J. Ratliff
JURY DEMAND
Plaintiffs hereby demand a trial by jury on all counts of Plaintiffs’ Claims so triable.
és/ Stefanie Lynn Coe
Stefanie Lynn Coe
15My
ACTIONS WITHOUT A MEETING
BY THE SHAREHOLDERS
OF
Priority Mortgage Corp.
(Made effective as of January 1, 2017)
‘The undersigned, being the Shareholders of Priority Mortgage Corp. (the “Corporation”),
do take and adopt the following initial actions without a meeting, pursuant to the authority of the
Ohio Revised Code Section 1701.54:
1. That the Corporation's Code of Regulations / Close Corporation Agreement
attached hereto is hereby adopted.
2. That the CEO is authorized and has always been authorized to pay the expenses
relating to the incorporation of the Corporation, including but not limited to, filing fees paid to the
Secretary of State, and to pay legal fecs and further, the CEO is authorized to reimburse any
persons who have advanced monies for any such expenses.
3. That the CEO is hereby authorized and has always been authorized to execute on
behalf of the Corporation any and all deeds, mortgages, notes (with or without cognovit clauses),
contracts, settlement statements, and any and all other documents or instruments, and to do any
and all other things which may be necessary or convenient to permit the Corporation to acquire,
lease, purchase and improve, finance, refinance, renovate, remodel, own, hold, manage, develop,
encumber, sell, exchange, and dispose of any and all real property and interests and any personal
property, tangible or intangible, incident to any real property interest.
4, That any payments made to an officer of the Corporation such as a salary,
commission, bonus, interest or rent, or entertainment expense incurred by him or her, which shall
be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall
be reimbursed by such officer of the Corporation to the full extent of such disallowance. ft shall
be the duty of the Shareholders to enforce payment of each amount disallowed. In lieu of payment
by the officer, subject to the determination of the Shareholders, proportionate amounts may be
withheld from the officer's future compensation payments until the amount owed to the
Corporation has been recovered.
This writing constitutes a complete record of actions taken without a meeting by the
Shareholders of the Corporation, as of the date first written above.
{Signature Page Follows Immediately]
EXHIBIT
A
tabblerSHAREHOLDERS:
EZ A. Hill, Shareholder
. u
Bradley J. Ratliff, Shareholder Lisa E. Kendle, Shareholder
brn”
Marianne M, Viola, Shareholder
Samuel J. Hill, Sharého!PRIORITY MORTGAGE CorP.
CODE OF REGULATIONS
AND CLOSE CORPORATION AGREEMENT
(Made effective as of January 1, 2017)
ARTICLEI
CLOSE CORPORATION AGREEMENT
Section 1. Capital Structure
As of the date of this Code of Regulations and Close Corporation Agreement (the
“Regulations”), the authorized capital stock of Priority Mortgage Corp. (the “Corporation”)
consists of 300 common shares, with no par value. All of the total authorized shares are
outstanding. Ownership of shares is as follows:
Shareholder ercent Number of Shares
Samuel J. Hill 20.00% 60.00 shares
Joshua A. Hill 35.00% 105.00 shares
Bradley J. Ratliff 20.00% 60.00 shares
Lisa E. Kendle 12.50% 37.50 shares
Marianne M. Viola 12.50% 37.50 shares
Section 2. Close Corporation Agreement
These Regulations were adopted as of the date first written above by the Shareholders and
constitute a “close corporation agreement” as provided for in Ghio Revised Code 1701.591 or any
successor provision of the Ohio General Corporation Law.Section 3. Regulations Supersede AH Prior Codes of Regulations, Bylaws and Close
Corporation Agreements
By adopting these Regulations, the Shareholders repeal all codes of regulation, directives
or other bylaws, close corporation agreements of the Corporation, or other agreements affecting
the shares or the management of the business and affairs of the Corporation, if any, in effect as of
the date of these Regulations.
ARTICLE I
SHAREHOLDERS
Section 1. Shareholders Meetings
‘The Corporation will not be required to hold any regular or special Shareholders meetings.
Subject to the provisions of the Ohio General Corporation Law limiting the scope of the rights,
votes or other actions to be exercised or taken by the Shareholders, any actions required or
permitted to be taken by the Shareholders will be taken by the Shareholders in the same manner
as if the Shareholders were directors of the Corporation. Such Shareholder’s actions will be taken
only in writing as provided for under the Ohio General Corporation Law.
Section 2, Shareholders Actions
To the full extent permitted by R.C. § 1701.591 or any successor provision of the Ohio
General Corporation Law and in addition to the authorities, rights and privileges vested in the
Shareholders pursuant to Article I, § 1 of these Regulations, all of the authorities, rights and
privileges of the Shareholders of the Corporation with respect to the management of the
Corporation’s business and affairs will be vested in the Shareholders, and all of the rights, votes
or other actions required or permitted to be exercised or taken by the shareholders of a corporation
under the Ohio General Corporation Law will or may be taken by the Shareholders for and on
behalf of themselves, as provided for by Article TI of these Regulations. Salaries and other
compensation to officers, if any, shall be determined by the majority vote of the Shareholders,
except as provided in Article V1, Section 2.
Section 3. Voting Requirements
Unless and to the extent expressly provided to the contrary herein, acts may be taken on
behalf of the Corporation only by a majority vote of the common voting stock of the Corporation
entitled to vote with respect to the subject matter thereof, and any act requiring by statute the
affirmative vote of greater than a majority may be taken by a majority vote of such stock.
4AARTICLE OI
BOARD OF DIRECTORS
Section 1. No Board of Directors
As permitted by Ohio Revised Code § 1701.59] or any successor provision of the Ohio
General Corporation Law, the Corporation will not have any directors,
Section 2. Action in Lieu of Board of Directors
Notwithstanding the provisions of Article IL, § 1 of these Regulations, the Shareholders
may, to the extent necessary to give effect to any action, take any action for or in the name of the
“board of directors” of the Corporation.
Section 3. Management Without Board of Directors
To the full extent permitted by R.C. § 1701.91 or any successor provisions of the Ohio
General Corporation Law and in addition to the authorities, rights and privileges vested in the
Shareholder pursuant to Article II, § 2 of these Regulations, all of the authorities, rights and
privileges of the directors of a Corporation under the Ohio General Corporation Law with respect
to the management of the business and affairs of the Corporation will be vested in the Shareholders.
In addition to the rights, votes or other actions which may be exercised or taken by the Shareholders
pursuant to Article Il, § 2 of these Regulations, all of the rights, voles or other actions required or
permitted to be exercised or taken by the directors of a Corporation under the Ohio General
Corporation Law will be exercised or taken by the Shareholders.
Section 4. Certificates
Any certificate signed by the Shareholders acting within the scope of their authority, stating
that an action has been taken by the Corporation, will in and of itself be deemed to be a written
action of the Corporation, to such effect in lieu of or in addition to a prior written action of the
Shareholders.
ARTICLE IV
FINANCIAL MATTERS
Section 1. Tax Matters; Distributions
The Corporation shall be taxed as an $ Corporation under subchapter S of the Internal
Revenue Code and all distributions to Shareholders shall be made in the discretion of the CEO;
—_ neprovided, however, the Corporation shall distribute cash to the Shareholders in an amount equal
to the lesser of all available Net Cash Flow ora percentage of Corporate net taxable income equal
to the highest marginal tax effected state and federal income tax rates applicable to any
Shareholder, subject to the restrictions and conditions imposed upon certain Shareholders as a
condition of their purchase of their Shares as set forth in a Stock Purchase Agreement of even date
herewith, by and between Samuel J. Hill as Seller and Joshua A. Hill, Bradley J. Ratliff, Lisa E,
Kendle, and Marianne M. Viola as Purchasers (“Stock Purchase Agreement”), Such distribution
shail be made no later than March 30 of the following year. “Net Cash Flow” shall be defined as
all cash funds derived from operations of the Corporation (including interest received on reserves),
or from any sales or dispositions of Corporate assets or refinancing of Corporate assets without
reduction for any non-cash charges, but less cash funds used to pay current operating expenses and
to pay or establish reasonable reserves for future expenses, debt payments, capital improvements,
and replacements as determined by the CEO. Net Cash Flow shall be increased by the reduction
of any reserve previously established. No distributions shall be made that would cause the
Corporation to fall below the net worth requirement then dictated by any or all of HUD, the VA,
warehouse lenders and investor HUD requirement(s), which is currently $2,500,000.00 as of
December 31, 2016.
ARTICLE V
RESTRICTIONS ON TRANSFER
Section 1. Restriction During Life
So long as each Shareholder shall live, cach shall not sell, assign, convey, encumber,
pledge, give, or otherwise transfer or dispose of the Shareholder’s Shares of the Corporation which
he or she may own or may hereafter acquire, including any new or additional classes of Shares,
except as permitted by the terms of this Agreement.
Section 2. Authorized Transfers
Any Shareholder may transfer all or any part of the Shareholder’s Shares by gift, sale,
assignment, devise or otherwise without the consent of the Corporation and without compliance
with any restrictions upon such transfer set forth herein, only to the other shareholders. In such
cases, the transferee of such Shares shall receive and hold the Shares subject to the terms and
conditions of this Agreement applicable to them. Subject to the foregoing exception, no
Shareholder shall sell, assign, convey, encumber, pledge, give or otherwise transfer or dispose of
the Shareholder’s Shares. either voluntarily or involuntarily, without first complying with the
provisions of this Agreement; provided, however, a Shareholder may Transfer such Shareholder’s
Shares to a revocable, inter vivos trust in which the Shareholder transferring said Shares is the sole
Grantor/Settlor and initial Trustee (“Grantor Trust”) and provided that such Shareholder shall act
independently as the initial Trustee pursuant to the terms of said Grantor Trust. Each Shareholder
expressly agrees that such transfer of said Shares to the Shareholder’s Grantor Trust is subject to,
*conditioned upon, and restricted and limited by all the restrictions, conditions, limitations and
terms of this Agreement. No successor trustee shall be deemed a Shareholder as set forth herein
without satisfying all the conditions thereof. Any triggering events set forth herein, including the
death and Permanent Disability of any Shareholder as weil as any other triggering events, shall
continue to relate to the individual Shareholder as transferor to said Grantor Trust and, by way of
example and not limiting the foregoing, shall not be construed as being triggered by the “death”
or “Permanent Disability” of said Grantor Trust.
Section 3. Option to Corporation
Except as provided herein, if any Shareholder at any time desires to sell, assign, convey,
encumber, pledge, give, or otherwise transfer or dispose of his Shares of the Corporation, the
Shareholder shall first offer the same to the Corporation by giving written notice thereof to the
Corporation, which notice shall set forth the following:
5.3.1. The number of Shares proposed to be sold, assigned, conveyed,
encumbered, pledged or otherwise transferred (hereinafter referred to as the
“Offered Shares");
5.3.2, The identity of'the person, firm, or corporation to which the Shareholder’s
Offered Shares are proposed to be sold, assigned, encumbered, pledged,
signed, given or otherwise transferred; and
5.3.3. The proposed terms and conditions under which such sale, assignment, ’
encumbrance, pledge, or transfer is to take place. Such notice shall i
constitute an offer by the Shareholder to sell all, but not less than all, of the
Offered Shares to the Corporation at the lower of the offer price or the price
set forth in Article V, Section 1] hereof.
Section 4, Acceptance of Offer
The Corporation shall have a period of thirty (30) days next following the date of mailing
of Shareholder’s notice within which to accept the Shareholder’s offer to sell the Offered Shares.
If the Corporation elects to purchase the Offered Shares, written notice shall be given to the
Shareholder on or before the expiration of the said thirty (30) day period. At the closing, the selling
Shareholder shall be obligated to deliver to the Corporation the certificates evidencing the Offered
Shares properly endorsed for transfer, and the Corporation shall be obligated to accept the Offered
Shares and pay the Purchase Price therefore as herein provided,
Section 5. Offer to Shareholders
in the event the Corporation shall not purchase any or all of the Offered Shares, then the
Shares not so purchased shall be offered for sale and shall be subject to an option on the part ofeach of the other Shareholders for an additional thirty (30) day period following the thirty (30) day
period set forth in Article V, Section 4 hereof, to purchase a “proportionate share” of the Offered
Shares not purchased by the Corporation at the lower of the offered price or the Price set forth in
Article V, Section 11 hereof. Such “proportionate share” shall be equal to that percentage such
Shareholder’s Shares bears to the total number of Shares that are outstanding, excluding the selling
Shareholder’s Shares; provided, however, that if any such Shareholder fails to accept the offer,
either in whole or in part, the other Shareholders may purchase the Shares not so accepted. Notice
of such option shall be in the form and manner set forth in Article V, Section 3 above, except the
notice should now be given to the other Shareholders.
Section 6. Closing of Purchase
The closing of the purchase shall take place at the principal office of the Corporation at a
date which will not be more than thirty (30) days following the acceptance of the offer, and the
Purchase Price shall be paid in full in cash at Closing. Notwithstanding the foregoing, if the
Purchase Price exceeds $25,000.00, the purchaser may pay the Purchase Price by paying twenty
five percent (25%) of the Purchase Price in cash and the balance in equal quarterly installments
over a period of five (5) years, together with interest on the unpaid principal balance at the then
Minimum Applicable Federal Rate per annum; or upon such other terms and conditions as
purchaser and the selling Shareholder(s) may agree in writing. The obligation of the Corporation
or the purchasing Shareholders, as the case may be, shall be evidenced by a negotiable promissory
note that shall be secured by a security agreement in due form under the Uniform Commercial
Code, which shall have the selling Shareholder’s stock pledged as security. The said negotiable
promissory note and the security agreement shall contain the standard acceleration clauses for both
principal and interest, and the said promissory note shall give the purchaser the option of
prepayment in whole or in part at any time without penalty.
Section 7. Release from Restrictions
If the offer to sell is not accepted by the Corporation or the other Shareholders, the offering
Shareholder may make a bona fide sale, assignment, conveyance, encumbrance, pledge or other
transfer of the Offered Shares to the prospective purchaser, lienor, or donee named in the notice of
offer; provided, however, that if the offering Shareholder fails to make such transfer within thirty
(30) days following the expiration of the time hereinabove provided for the election by the
Corporation or the other Shareholders, such Shares shall become again subject to all the restrictions
of this Agreement. Notwithstanding anything contained herein to the contrary, any transfer of
Shares hereunder shall continue to be subject to this Agreement in the hands of the transferee and
the restrictions set forth herein with respect to such Shares shal! continue in full force and effect
following any transfer hereunder.Section 8,
Upon the death of a Shareholder, the Shares owned by the deceased Shareholder shall be
Purchase Upon Death
subject to the following terms:
5.8.1.
5.8.2.
3.8.3.
Authorized Transfers, A deceased Shareholder may transfer all or any part
of the Shareholder’s Shares by bequest or devise or operation of law upon
his death to or for the benefit of the other Shareholders in their proportionate
interests, In the event of such transfer hereunder, the transferee or
transferees shall receive and hold such Shares subject to the terms of this
Agreement.
Offer to Corporation. Except as provided herein, if a deceased Shareholder
or the representative or fiduciary of his or her estate or trust attempt(s) to
transfer any Shares by will or operation of law, the Corporation shall
purchase all of said Shares; provided, however, that in the event of the death
of Samuel J. Hill, Kimberly M. Hill or the then acting Trustee of The Hill
Family Trust shell have the right and option to receive the Shares held and
owned by Samuel J. Hill and such transfer shall be deemed a transfer in
compliance with Article V hereof. Should Kimberly M, Hill or the then
acting Trustee of The Hill Family Trust decline to exercise such
right/option, Joshua A. Hill shal! have the right and option to purchase the
Shares held and owned by Samuel J, Hill. Should Joshua A. Hill then
decline to exercise such righVoption, the Corporation shall purchase all of
said Shares. Life insurance owned by the Corporation and having the
deceased Sharcholder as insured thereof may be used to purchase said
Shares.
Purchase Price. The Purchase Price for Shares of the Corporation
purchased hereunder shall be determined in accordance with the provisions
of Article V. Section 11 hereof. Ifthe Purchase Price exceeds $25,000.00,
the purchaser may, at the purchaser's option, pay the Purchase Price by
paying twenty-five percent (25%) of the Purchase Price in cash and the
balance in monthly payments of at least $5,000.00 until fully paid. The
obligation of the Corporation or the purchasing Shareholders, as the case
may be, shall be evidenced by a negotiable promissory note that shall be
secured by a security agreement in duc form under the Uniform Commercial
Code, which shall have the deceased Shareholder's Shares pledged as
security. The said negotiable promissory note and the security agreement
shall contain the standard acceleration clauses for both principal and
interest, and the said promissory note shall give the purchaser the option of
prepayment in whole or in part at any time without penalty.Section 9. Purchase upon Disability.
Upon the disability (as defined below) of any Shareholder, the Corporation shall have the
right to purchase all or any part of the shares of the Corporation owned by the disabled Shareholder,
The Corporation shall have a period of sixty (60) days following a determination of disability
within which to exercise its right to buy any or all of the shares of the disabled Shareholder, If the
Corporation elects to purchase all or any part of said shares, written notice thereof shall be given
to the disabled Shareholder or his personal representative. In the event the Corporation does not
purchase all or any part of the shares of the disabled Shareholder, then the shares not so purchased
shall be subject to a right of each of the remaining non-disabled Shareholders to purchase a
"proportionate share” of the shares not purchased by the Corporation. Such “proportionate share"
shall be equal to that percentage which the remaining Sharehalders’ shares bear to the total number
of Shares that are outstanding, excluding the disabled Shareholder's shares; provided, however,
that if any such Shareholder fails to purchase his "proportionate share," either in whole or in part,
the other Shareholders may purchase the shares not so accepted. The Purchase Price of such shares
shall be as determined in accordance with the provisions of Article V, Section 11 hereof. If the
Purchase Price exceeds $25,000.00, the purchaser may, at the purchaser's option, pay the Purchase
Price by paying twenty five percent (25%) of the Purchase Price in cash and the balance in monthly
payments of at least $5,000.00 until fully paid. The obligation of the Corporation or the purchasing
Shareholders, as the case may be, shall be evidenced by a negotiable promissory note that shall be
secured by a security agreement in due form under the Uniform Commercial Code, which shall
have the disabled Sharsholder’s Shares pledged as security. The said negotiable promissory note
and the security agreement shall contain the standard acceleration clauses for both principal and
interest, and the said promissory note shall give the purchaser the option of prepayment in whole
or in part at any time without penalty.
5.9.1, Disability Defined. A Shareholder is disabled if the Shareholder: (i) Is
under a legal decree of incompetency (the date of such decree being deemed to be
the date on which such disability is determined); (ii) Submits any claim for
disability insurance benefits or for early distribution of any amounts from a
qualified pension or profit sharing plan maintained by the Corporation on account
of more than fifty percent (50%) mental disability (the date of the earliest of such
claims shall be the date on which such disability shall be determined); (iii) Qualifies
for disability insurance benefits and/or coverage, in whole or in part, under any
insurance policy of disability coverage; or iv) Js, subject to a medical determination
that the Shareholder, because of a medically determinable physical or mental
disability, is unable to perform substantially all of his regular duties or manage his
affairs, and that such disability is determined or reasonably expected to last at least
twelve (12) months, based on then available medical information. Each
Shareholder hereby consents to such examination, to furnish any medical
information requested by any examining physician, and to waive any applicable
physician-patient privilege that may arise because of such examination.
5.9.2. Option Upon the Disability of Samuel J. Hill. In the event of the disability
of Samuel J. Hill, Kimberly M. Hill or the then acting Trustee of The Hill Family
Trust shall have the right and option to receive the Shares held and owned bySamuel J. Hill and such transfer shail be deemed a transfer in compliance with
Article V hereof. Should Kimberly M. Hill decline to exercise such right/option,
Joshua A. Hill shall have the right and option to purchase the Shares held and owned
by Samuel J. Hill, Should Joshua A. Hill then decline to exercise such right/option,
the Corporation shall purchase all of said Shares.
Section 10. Closing
The Closing of any purchase under Article V, Sections 8, 9, and 15 shall take place at the
principal office of the Corporation on a date the parties may agree but in no event later than two
hundred seventy (270) days following the date determined in each of the above-referenced
Sections,
Section 11. Purchase Price
The Purchase Price shall be determined as follows: The Corporation’s accounting firm,
HHH CPA Group, shall review and use the audited financial statements for the most recent seven
(7) year period, then ascertain, determine, and calculate the discretionary cash flows for those
seven (7) years, The average annual discretionary cash flow(s) from those seven (7) years shall
then be multiplied by a multiple of 2.0 to determine the total value of the Corporation. The value
of the selling Shareholder’s Shares shall then be determined by dividing the selling Shareholder’s
Shares by the total outstanding Shares, with the selling Shareholder’s Shares as the numerator and
total outstanding Shares as the denominator, and then multiplying the resulting quotient by the
total value of the Corporation set forth above (“Purchase Price”), Any selling Sharcholder that has
not attained the age of sixty five (65) shall only be entitled to payment of sixty peroent (60%) of
said Purchase Price. The Corporation shall provide such data as the CPA deems necessary or
useful to make such determination. The fees and reimbursed expenses charged by the CPA in the
valuation under this section shall be borne equally by the selling Sharcholder (one-half (1/2)) and
the other Shareholders (in the aggregate, one-half (1/2)). If the Corporation shall not have
sufficient surplus to permit it lawfully to purchase the Shares of any deceased Sharcholder
hereunder, the deceased Shareholder’s personal representative’ and the surviving Shareholders
shall vote their respective Shares to reduce the stated capital of the Corporation or to take such
other steps, other than revaluation of assets or dissolution of the Corporation, as may be appropriate
or necessary in order to enable the Corporation lawfully to purchase and pay for the Shares of the
deceased Shareholder.
Section 12. Insurance
The Shareholders recognize that the Corporation may have insufficient surplus to purchase
shares under this Section. Any Shareholders or the Corporation may, in his, her, or its discretion,
insure the life or disability of each Shareholder, naming himself, herself, or itself as owner and
beneficiary of the policy. The insurance policies and any proceeds received thereunder shall be
held by such Sharcholders or the Corporation in Trust for the purposes of this Agreement. Anyinsurance policies purchased by the Corporation shall be continued by the Corporation unless the
Corporation and ali Shareholders governed by this Agreement agree otherwise. Any Shareholders
or the Corporation shall have the right to take out additional insurance on the life or disability of
any other Shareholders, whenever, in the opinion of the o
Preview
IN THE DELAWARE COUNTY OHIO COURT OF COMMON PLEAS CIVIL DIVISION Bradley J. Ratliff 1039 Lake Harbor Court Westerville, Ohio 43081 Vv. Case No Samuel J. Hill 5365 Somerset Avenue Judge Westerville, Ohio 43082 8 and Joshua A. Hill 5839 Crystal Court Westerville, Ohio 43082 : JURY DEMAND ENDORSED and : HEREON Lisa E. Kendle 1201 Dunham Road Delaware, Ohio 43015 and Marianne M. Viola 6158 Jennis Road Westerville, Ohio 43081 and Priority Mortgage Corp. c/o Samuel J. Hill, registered agent 5365 Somerset Avenue Westerville, Ohio 43082 Defendants. CLERK OF COURTS - DELAWARE COUNTY, OH - COMMON PLEAS COURT 23 CV H 01 0037 - SCHUCK, JAMES P. FILED: 01/23/2023 02:14 PMCOMPLAINT Now comes Plaintiff Bradley J. Ratliff (“Plaintiff”) and hereby states as follows for his Complaint against Defendants Samuel J. Hill (“S. Hill”), Joshua A. Hill (“J. Hill”), Lisa E. Kendle (“Kendle”), Marianna M. Viola (“Viola”) and Priority Mortgage Corp. (“Priority”) PARTIES 1. Bradley J. Ratliff is an Ohio resident who resides at 1039 Lake Harbor Court, Westerville, Ohio 43081 in Franklin County, Ohio. Ratliff owns twenty percent (20%) of the outstanding shares of Priority Mortgage Corp. 2. Samuel J. Hill is an Ohio resident who resides at 5365 Somerset Avenue, Westerville, Ohio 43082 in Delaware County, Ohio. S. Hill owns twenty percent (20%) of the outstanding shares of Priority Mortgage Corp. 3. Joshua A. Hill is an Ohio resident who resides at 5839 Crystal Court, Westerville, Ohio 43082 in Delaware County, Ohio. J. Hill owns thirty-five percent (35%) of the outstanding shares of Priority Mortgage Corp 4. Lisa E. Kendle is an Ohio resident who resides at 1201 Dunham Road, Delaware, Ohio 43015 in Delaware County, Ohio. Kendle owns twelve- and one-half percent (12.5%) of the outstanding shares of Priority Mortgage Corp. 5 Marianne Viola is an Ohio resident who resides at 6158 Jennis Road, Westerville, Ohio 43081 in Franklin County, Ohio. Viola owns twelve- and one-half percent (12.5%) of the outstanding shares of Priority Mortgage Corp. 6. Priority Mortgage Corp. is an Ohio corporation whose principal place of business was 150 E. Wilson Bridge Road, Suite 350, Worthington, Ohio 43085 in Franklin County, Ohio.JURISDICTION 7. Jurisdiction may be exercised over Defendants under R.C. 2307.382(A)(1) and (3) because Defendants transact business in Ohio and have caused tortious injury by an act or omission in this state. 8 Venue is proper in this Court under Ohio Civil Rule 3(C)(1) and/or (6) because Delaware County is the county in which (a) one or more Defendants reside and (b) all or part of the claims for relief arose there. FACTS COMMON TO ALL CLAIMS The Company and Shareholders 9. Priority was formed under the laws of the State of Ohio on December 14, 1983 10. Defendant S. Hill originally owned the company, but he sold portions of his shares to J. Hill, Kendle, Viola, and Plaintiff. The new owners obtained the funds to purchase their shares from S. Hill and notes were signed by the parties to memorialize the loans S. Hill made to the other owners. 11 Effective January 1, 2017, Plaintiff, S. Hill, J. Hill, Kendle, and Viola executed a close corporation agreement (“CCA”) regarding Priority. Exhibit A. 12. On the same day, the Parties, as the shareholders of Priority, adopted the CCA as a corporate document. /d. 13 As relevant here, the CCA provides that, if a shareholder ceases to be employed by or associated with Priority, then that individual’s shares shall be offered to the other shareholders. Id. Art. V, § 15. If the shareholders fail to purchase the shares within 15 days, “then the Corporation shall purchase such shares.” Jd. 14 The purchase price for the shares is set forth in Article V, Section 11. /d.15. The Closing for the purchase of the shares by either the other shareholders or Priority shall take place no later than 270 days after the triggering event. /d. Art. V, § 10. 16. | The CCA further provides that, if the shareholders or Priority fail to perform any of the obligations under Article V, then it is “intended, therefore, that the rights and obligations set forth herein shall be enforceable by a decree of specific performance.” /d. Art. V, § 17. The right to specific performance “shall be cumulative and not exclusive and shall be in addition to any other remedy a party may have.” Jd. Plaintiff's Resignation from Priority 7. Plaintiff was the President of Priority until April 9, 2022 8 Before his resignation, Plaintiff worked diligently to further the company’s interests and attempted to make Priority a successful business. 9. A shareholder meeting was held on April 4, 2022. S. Hill provided three options for Priority going forward: (1) close the company, (2) merge the company with another or be acquired by another company, or (3) continue to operate. 20. During the shareholder meeting on April 4, 2022, S. Hill stated that if the option to close was selected the capital of each shareholder would be distributed based on ownership percentages and any outstanding notes for the purchase of shares would be forgiven. 21. Following the April 4, 2022, meeting, S. Hill and J. Hill began having more serious conversations with a third party regarding a merger, but they did not inform Plaintiff of these discussions, even though Plaintiff was the company’s president. 22 On April 6, 2022, Plaintiff and J. Hill had another informal conversation with a third party. After the conversation, Plaintiff notified J. Hill that Plaintiff did not want to move forward with the merger discussions with this third party.23. Despite Plaintiff clearly indicating that he did not want to move forward with the merger discussions, on April 7, 2022, S. Hill and J. Hill called a staff meeting, during which they revealed that they intended to pursue the potential merger. 24. Immediately after the staff meeting, a shareholder meeting was held. S. Hill and J. Hill informed the remaining shareholders that they were in serious discussions with another company so that Priority could be merged or acquired. During this meeting, Plaintiff reiterated that he would not move forward with the merger involving this third party as he believed it was not in the best interests of Priority or its employees. 25. Plaintiff’s potential resignation was also discussed at the April 7 shareholder meeting. S. Hill indicated Priority’s attorney, Shamus Cassidy, (“Cassidy”), had advised that, if Plaintiff was going to resign, he should resign sooner rather than later. 26. Plaintiff formally resigned on April 9, 2022. Exhibit B. Defendants’ Failure to Purchase Plaintiff's Shares 27. Following his resignation, Plaintiff requested a stock valuation, as required by Article V, Section 11 of the CCA, on April 9, 2022, and again on April 23, 2022, in order to determine the sale price of his shares. 28 On April 11, 2022, S. Hill and Plaintiff agreed that S. Hill would purchase Plaintiff's outstanding shares. Exhibit C 29. S. Hill again agreed that Priority would return Plaintiffs capital investment 30. S. Hill worked with Cassidy to draft a purchase agreement. A stock purchase offer dated April 22, 2022, was presented to Plaintiff by Defendant S. Hill 31. The stock purchase offer presented to Plaintiff contained section 1.3, “Restrictive Covenants Remain in Full Force and Effect. The Seller (Plaintiff) acknowledges and agrees thatany restrictive covenants set forth in any employment agreement or the Corporation’s Code of Regulations and Close Corporation Agreement, including those related to non-competition, non- solicitation, trade secret protection(s), and confidential information, shall remain in full force and effect.” 32. The stock purchase offer presented to Plaintiff also contained section 1.4, “Net Worth Requirement Account (“NWRA”). Purchaser (Defendant S. Hill) and the Corporation (Priority) agree to effectuate the prompt return to Seller (Plaintiff) of an amount equal to Five Hundred Thousand Dollars ($500,000.00) of Seller’s present Six Hundred Thousand Dollar ($600,000.00) NWRA balance. Seller shall receive the One Hundred Thousand Dollar ($100,000.00) remaining balance after the earlier of: One (1) year, the merger, consolidation, or sale of all the Corporation’s stock or all or substantially all of its assets, or the dissolution of the Corporation; provided, however, that such remaining balance shall be offset and reduced by any losses incurred pro rata/proportionately by and amongst the remaining shareholders of the Corporation and their respective NWRAs. Further, should Seller violate the restrictive covenants set forth in Section 1.3, any damage(s) suffered by the Corporation may be offset by the remaining One Hundred Thousand Dollar ($100,000.00) balance of such Seller’s NWRA.” 33 Upon information and belief, S. Hill directed Cassidy to include these provisions in the purchase agreement. 34 Plaintiff was confused by these provisions because he did not remember ever signing an employment agreement, let alone one that had restrictive covenants regarding non- compete or non-solicitation. Furthermore, Plaintiff's copy of the CCA did not contain those restrictive covenants. On April 22, 2022, Plaintiff sent a text message to S. Hill requesting a copy of the documents that supposedly contained the restrictive covenants.35. Then on April 23, 2022, Plaintiff asked Defendant S. Hill and Cassidy for copies of the business governance documents that contained the purported restrictive covenants. Plaintiff and/or his prior counsel requested the documents again on May 2, 2022, June 25, 2022, and July 9, 2022 36. Also on April 23, 2022, Plaintiff demanded the immediate withdrawal of his capital. 37. On May 11, 2022, S. Hill rescinded his offer to purchase Plaintiff's shares. 38. — S. Hill also indicated to Plaintiff and the other shareholders that Priority would not purchase Plaintiff's shares—despite the mandatory language in the CCA—because S. Hill believed the purchase would not be in the best interests of the other shareholders or Priority 39. During this same time period, Plaintiff spoke with J. Hill regarding the return of his capital investment. J. Hill informed Plaintiff that the CCA allegedly contained a section 18 that restricted the return of capital. J. Hill even supposedly read from the CCA. Plaintiff's copy of the CCA did not contain section 18 or any other section with such a restriction. 40. On July 12, 2022, Plaintiff received confirmation that the business governance documents in his possession were accurate, had not been amended, and do not actually contain the additional language. Defendants further conceded that no employment agreement existed 41 As of the date of this complaint, neither a shareholder nor Priority has purchased the outstanding shares of Plaintiff. Defendants’ Other Misdeeds 42. Between the time of Plaintiff's resignation and the filing of this complaint, Defendants S. Hill, J. Hill, Kendle, and Viola have held multiple shareholder meetings and acted without notifying Plaintiff of the meetings and allowing him to participate.43. Defendants S. Hill, J. Hill, Kendle, and Viola entered into a letter of intent with International City Mortgage, dba Doorway Home Loans of Santa Ana, CA (“Doorway”) dated April 27, 2022, and signed May 3, 2022. Exhibit D. 44 Plaintiff was not included in any discussions regarding the letter of intent with Doorway and was not told about it until July 28, 2022. Rather, Defendants affirmatively stated to Plaintiff that they did not have any agreements in place, Doorway was simply hiring some of Priority’s staff. 45 On May 25, 2022, Plaintiff, Cassidy, Plaintiff's prior attorney, and the accounting firm met to discuss the status of Priority 46. Plaintiff was informed that the plan was for Priority to stop operating as of June 30, 2022. 47. In July 2022, Defendants decided to disburse a majority of Priority’s capital without input from Plaintiff. However, instead of disbursing all of the funds, Defendants gave most of the funds to S. Hill to pay the notes—a decision that was made without Plaintiff's input. Plaintiff received the remaining portion of the disbursement. 48. On or around August 25, 2022, Plaintiff was informed that the remaining shareholders were planning to dissolve the corporation. 49. In September 2022, Plaintiff inquired about the financials of Priority, as it appeared to still be holding $300,000. Viola informed Plaintiff that these funds were to be used to pay the prior two-months expenses and future expenses. Plaintiff believed this statement to be false because the prior months expenses already had been paid. 50. On September 30, 2022, capital in the amount of two hundred and fifty thousand dollars ($250,000) was “disbursed,” but Plaintiff did not actually receive any funds. Upon furtherinquiry, Viola informed Plaintiff that the funds were being held to supposedly pay for future expenses. 51. On November 9, 2022, Plaintiff was provided a draft dissolution agreement by Cassidy 52. Plaintiff has not executed or agreed to the dissolution. OHIO FIDUCIARY DUTIES 53. Ohio common law imposes fiduciary duties on S. Hill, J. Hill, Kendle, and Viola as shareholders of Priority. These fiduciary duties include duties of loyalty, care, good faith, honesty, and to act in the best interests of Priority. Together S. Hill, J. Hill, Kendle, and Viola are the majority shareholders while Plaintiff is a minority shareholder. As a closely held corporation, the majority owners of Priority owe a heightened fiduciary duty to the minority owners. The minority has a right to have an equal opportunity to benefit from the business as the majority FIRST CAUSE OF ACTION-SPECIFIC PERFORMANCE (All Defendants) 54. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs above. 55 There is a written contract between Plaintiff and S. Hill, J. Hill, Kendle, and Viola’s, the CCA, effective January 1, 2017. Priority adopted said agreement as a corporate document and is bound by its terms. See R.C. 1701.591(C). 56. Plaintiff fully performed under the contract, including seeking to sell his shares upon his resignation to the other shareholders or to the corporation at the price calculated by the formula in the CCA.57. Defendants breached the contract because neither a shareholder nor Priority has purchased the shares of Plaintiff as required by the CCA. 58. The Parties agreed in the CCA that “it is impossible to measure in money the damages which will accrue to a party hereto . . . by reason of a failure to perform any of the obligations under this Agreement.” CCA Art. V, § 17. 59. Plaintiff is entitled to an Order that Defendants be required specifically to perform and fulfill their obligations in accordance with the terms of the CCA. SECOND CAUSE OF ACTION-BREACH OF CONTRACT (All Defendants) 60. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs above. 61 As alleged in Count One, Plaintiff fulfilled all of his obligations under the agreement. However, Defendants breached the contract because neither a shareholder nor Priority has purchased the shares of Plaintiff. 62. As a direct and proximate result of Defendants’ breach, Plaintiff has suffered damages in excess of $25,000. THIRD CAUSE OF ACTION-BREACH OF FIDUCIARY DUTY (S. Hill, J. Hill, Kendle, and Viola) 63. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs above. 64. Plaintiff, S. Hill, J. Hill, Kendle, and Viola are all shareholders of Priority—a close corporation. 65. — S. Hill, J. Hill, Kendle, and Viola together are the majority shareholders. 66. Plaintiff is the minority shareholder. 1067. _ As shareholders of Priority, they each owe one another and Plaintiff certain fiduciary duties including duties of loyalty, care, good faith, honesty, and to act in the best interests of Priority 68 Defendants S. Hill, J. Hill, Kendle, and Viola breached their fiduciary duties when they among other things (1) excluded Plaintiff from shareholder meetings, (2) executed a letter of intent with Doorway without Plaintiff's knowledge, (3) instructed Cassidy to prepare a purchase agreement that misstates the terms of the CCA, (4) knowingly and deliberately violated the terms of the CCA by refusing to buy out the Plaintiff's shares as required in the CCA, (5) negotiated the letter of intent with Doorway for their personal benefit while excluding Plaintiff, and (6) processed distributions to shareholders and then withheld those distributions from Plaintiff. S. Hill, J. Hill, Kendle, and Viola’s actions were also intentional, willful, reckless, and were committed with actual malice. 69 As a direct and proximate cause of S. Hill, J. Hill, Kendle, and Viola’s numerous fiduciary duty breaches, Plaintiff has suffered damages in excess of $25,000. FOURTH CAUSE OF ACTION-UNJUST ENRICHMENT (All Defendants) 70. Plaintiffs repeat and reiterate each and every allegation contained in the paragraphs above. 71 Plaintiff conferred a benefit on Defendants because (1) he performed his duties as President of Priority, (2) his capital investment was used by the other shareholders for their own benefit, and (3) distributions made in Plaintiff's name were withheld to cover other costs of the corporation or notes payable to S. Hill 72. Defendants were aware that Plaintiff was conferring a benefit upon them by not receiving payment he was owed timely, performing his duties to advance the interests of the 11corporation, and without his consent using his capital contributions to advance their own financial interests 73. Defendants’ continued retention of these benefits is unjust without requiring them to pay Plaintiff. 74. Asadirect and proximate result of Defendants’ retention of these benefits conferred upon them by Plaintiff, he has suffered damages in excess of $25,000. FIFTH CAUSE OF ACTION- PROMISSORY ESTOPPEL S. Hill) 75. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs above. 76. Defendant S. Hill personally and on behalf of Priority, made clear and unambiguous promises to Plaintiff that he would purchase the outstanding shares of Plaintiff and/or waive or forgive the outstanding balance for the purchase of Plaintiffs shares owed to S. Hill at the time by Plaintiff. 77 It was reasonable and foreseeable for Plaintiff to rely on S. Hill’s promises that S Hill would purchase Plaintiffs outstanding shares and waive or forgive the loan balance owed to S. Hill by Plaintiff for the original purchase of the twenty (20) shares plaintiff owns. 78. Plaintiff reasonably relied on S. Hill’s promises that he would purchase Plaintiff's outstanding shares and waive or forgive the loan balance by and return capital by resigning from Priority 79. On May 11, 2022, S. Hill rescinded that offer and directed Cassidy and the other shareholders that not only would he not be purchasing the outstanding shares of Plaintiff, but indicated that the corporation could not purchase the shares either as required in the CCA because it was in his and J. Hill, Kendle, and Viola’s best interest. (Exhibit C) 1280. Asadirect and proximate result of S. Hill’s broken promises to Plaintiff regarding the purchase of Plaintiff's shares Plaintiff has suffered damages in excess of $25,000. SIXTH CAUSE OF ACTION- FRAUD (S. Hill, J. Hill, Kendle, & Viola) 81. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs above. 82. Defendant S. Hill represented that the CCA and employment agreements contained restrictive covenants and restrictions on capital withdrawals. Neither of which were true, and S Hill knew that these statements were false 83 S. Hill, J. Hill, Kendle, & Viola told Plaintiff that neither they nor Priority had entered into any agreements regarding the sale or merger of Priority 84. S. Hill, J. Hill, Kendle, and Viola’s representations to Plaintiff were material to Plaintiff's delay in bringing action to enforce the CCA, as he was attempting to work with the other shareholder to determine the best resolution for Priority. 85 S. Hill, J. Hill, Kendle, and Viola’s representations to Plaintiff were knowingly false at the time that they were made to Plaintiff. 86. S. Hill, J. Hill, Kendle, and Viola’s representations to Plaintiff were made with the intent of misleading Plaintiff that no potential mergers or acquisitions were being negotiated 87. S. Hill, J. Hill, Kendle, and Viola’s knowingly false representations were intentional, willful, reckless, and were committed with actual malice. 88 Plaintiff reasonably and justifiably relied upon S. Hill, J. Hill, Kendle, and Viola’s representations to him that no potential mergers or acquisitions were being negotiated caused Plaintiff (1) to delay the enforcement of the buy-out provision; (2) incur additional costs, including legal fees; and (3) risk the ability to recover the entire buy-out price and capital investment. 1389. Asa direct and proximate cause of S. Hill, J. Hill, Kendle, and Viola’s knowingly false representations, Plaintiff has suffered damages in excess of $25,000. SEVENTH CAUSE OF ACTION — CIVIL CONSPIRACY TO COMMIT BREACH OF FIDUCIARY DUTY (S. Hill, J. Hill, Kendle, and Viola) 90. Plaintiff repeats and reiterates each and every allegation contained in the paragraphs above. 91. Upon information and belief, S. Hill, J. Hill, Kendle, and Viola came to a mutual understanding that they would work together to refuse to purchase the outstanding shares of Plaintiff and refuse to have Priority purchase those shares as required by the CCA. 92 S. Hill, J. Hill, Kendle, and Viola knew or should have known that they would have to breach their fiduciary duties to Plaintiff in order to accomplish the aim of their conspiracy, and they contributed to the breaches by failing to notify Plaintiff of the letter of intent with Doorway, failing to invite Plaintiff to multiple shareholder meetings, refusing to provide Plaintiff with requested financial information, and causing a distribution to be made but withholding it from Plaintiff. 93. S. Hill, J. Hill, Kendle, and Viola would not have been able to accomplish the purpose of their conspiracy without the cooperation of the other Defendants. 94. Asa direct and proximate cause of the civil conspiracy formed by S. Hill, J. Hill, Kendle, and Viola, Plaintiff has suffered damages in excess of $25,000. WHEREFORE, Plaintiff demands judgment against Defendants Priority, S. Hill, J. Hill, Kendle, and Viola individually and jointly and severally for specific performance of the Close Corporation Agreement’s stock-purchase provisions; compensatory damages in excess of $25,000; 14punitive damages in excess of $25,000; pre- and post-judgment interest; costs and attorneys’ fees; and for any other relief, whether legal or equitable, which the court deems just and proper. Respectfully submitted, /s/ Stefanie L. Coe Stefanie Lynn Coe (0078265) Tiffany L. Carwile (0082522) ARNOLD & CLIFFORD, LLP 115 W. Main St., Fourth Floor Columbus, Ohio 43215 Telephone: (614) 460-1637 Facsimile: (614) 469-1129 Email scoe@amlaw.com Counsel for Plaintiff Bradley J. Ratliff JURY DEMAND Plaintiffs hereby demand a trial by jury on all counts of Plaintiffs’ Claims so triable. és/ Stefanie Lynn Coe Stefanie Lynn Coe 15My ACTIONS WITHOUT A MEETING BY THE SHAREHOLDERS OF Priority Mortgage Corp. (Made effective as of January 1, 2017) ‘The undersigned, being the Shareholders of Priority Mortgage Corp. (the “Corporation”), do take and adopt the following initial actions without a meeting, pursuant to the authority of the Ohio Revised Code Section 1701.54: 1. That the Corporation's Code of Regulations / Close Corporation Agreement attached hereto is hereby adopted. 2. That the CEO is authorized and has always been authorized to pay the expenses relating to the incorporation of the Corporation, including but not limited to, filing fees paid to the Secretary of State, and to pay legal fecs and further, the CEO is authorized to reimburse any persons who have advanced monies for any such expenses. 3. That the CEO is hereby authorized and has always been authorized to execute on behalf of the Corporation any and all deeds, mortgages, notes (with or without cognovit clauses), contracts, settlement statements, and any and all other documents or instruments, and to do any and all other things which may be necessary or convenient to permit the Corporation to acquire, lease, purchase and improve, finance, refinance, renovate, remodel, own, hold, manage, develop, encumber, sell, exchange, and dispose of any and all real property and interests and any personal property, tangible or intangible, incident to any real property interest. 4, That any payments made to an officer of the Corporation such as a salary, commission, bonus, interest or rent, or entertainment expense incurred by him or her, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer of the Corporation to the full extent of such disallowance. ft shall be the duty of the Shareholders to enforce payment of each amount disallowed. In lieu of payment by the officer, subject to the determination of the Shareholders, proportionate amounts may be withheld from the officer's future compensation payments until the amount owed to the Corporation has been recovered. This writing constitutes a complete record of actions taken without a meeting by the Shareholders of the Corporation, as of the date first written above. {Signature Page Follows Immediately] EXHIBIT A tabblerSHAREHOLDERS: EZ A. Hill, Shareholder . u Bradley J. Ratliff, Shareholder Lisa E. Kendle, Shareholder brn” Marianne M, Viola, Shareholder Samuel J. Hill, Sharého!PRIORITY MORTGAGE CorP. CODE OF REGULATIONS AND CLOSE CORPORATION AGREEMENT (Made effective as of January 1, 2017) ARTICLEI CLOSE CORPORATION AGREEMENT Section 1. Capital Structure As of the date of this Code of Regulations and Close Corporation Agreement (the “Regulations”), the authorized capital stock of Priority Mortgage Corp. (the “Corporation”) consists of 300 common shares, with no par value. All of the total authorized shares are outstanding. Ownership of shares is as follows: Shareholder ercent Number of Shares Samuel J. Hill 20.00% 60.00 shares Joshua A. Hill 35.00% 105.00 shares Bradley J. Ratliff 20.00% 60.00 shares Lisa E. Kendle 12.50% 37.50 shares Marianne M. Viola 12.50% 37.50 shares Section 2. Close Corporation Agreement These Regulations were adopted as of the date first written above by the Shareholders and constitute a “close corporation agreement” as provided for in Ghio Revised Code 1701.591 or any successor provision of the Ohio General Corporation Law.Section 3. Regulations Supersede AH Prior Codes of Regulations, Bylaws and Close Corporation Agreements By adopting these Regulations, the Shareholders repeal all codes of regulation, directives or other bylaws, close corporation agreements of the Corporation, or other agreements affecting the shares or the management of the business and affairs of the Corporation, if any, in effect as of the date of these Regulations. ARTICLE I SHAREHOLDERS Section 1. Shareholders Meetings ‘The Corporation will not be required to hold any regular or special Shareholders meetings. Subject to the provisions of the Ohio General Corporation Law limiting the scope of the rights, votes or other actions to be exercised or taken by the Shareholders, any actions required or permitted to be taken by the Shareholders will be taken by the Shareholders in the same manner as if the Shareholders were directors of the Corporation. Such Shareholder’s actions will be taken only in writing as provided for under the Ohio General Corporation Law. Section 2, Shareholders Actions To the full extent permitted by R.C. § 1701.591 or any successor provision of the Ohio General Corporation Law and in addition to the authorities, rights and privileges vested in the Shareholders pursuant to Article I, § 1 of these Regulations, all of the authorities, rights and privileges of the Shareholders of the Corporation with respect to the management of the Corporation’s business and affairs will be vested in the Shareholders, and all of the rights, votes or other actions required or permitted to be exercised or taken by the shareholders of a corporation under the Ohio General Corporation Law will or may be taken by the Shareholders for and on behalf of themselves, as provided for by Article TI of these Regulations. Salaries and other compensation to officers, if any, shall be determined by the majority vote of the Shareholders, except as provided in Article V1, Section 2. Section 3. Voting Requirements Unless and to the extent expressly provided to the contrary herein, acts may be taken on behalf of the Corporation only by a majority vote of the common voting stock of the Corporation entitled to vote with respect to the subject matter thereof, and any act requiring by statute the affirmative vote of greater than a majority may be taken by a majority vote of such stock. 4AARTICLE OI BOARD OF DIRECTORS Section 1. No Board of Directors As permitted by Ohio Revised Code § 1701.59] or any successor provision of the Ohio General Corporation Law, the Corporation will not have any directors, Section 2. Action in Lieu of Board of Directors Notwithstanding the provisions of Article IL, § 1 of these Regulations, the Shareholders may, to the extent necessary to give effect to any action, take any action for or in the name of the “board of directors” of the Corporation. Section 3. Management Without Board of Directors To the full extent permitted by R.C. § 1701.91 or any successor provisions of the Ohio General Corporation Law and in addition to the authorities, rights and privileges vested in the Shareholder pursuant to Article II, § 2 of these Regulations, all of the authorities, rights and privileges of the directors of a Corporation under the Ohio General Corporation Law with respect to the management of the business and affairs of the Corporation will be vested in the Shareholders. In addition to the rights, votes or other actions which may be exercised or taken by the Shareholders pursuant to Article Il, § 2 of these Regulations, all of the rights, voles or other actions required or permitted to be exercised or taken by the directors of a Corporation under the Ohio General Corporation Law will be exercised or taken by the Shareholders. Section 4. Certificates Any certificate signed by the Shareholders acting within the scope of their authority, stating that an action has been taken by the Corporation, will in and of itself be deemed to be a written action of the Corporation, to such effect in lieu of or in addition to a prior written action of the Shareholders. ARTICLE IV FINANCIAL MATTERS Section 1. Tax Matters; Distributions The Corporation shall be taxed as an $ Corporation under subchapter S of the Internal Revenue Code and all distributions to Shareholders shall be made in the discretion of the CEO; —_ neprovided, however, the Corporation shall distribute cash to the Shareholders in an amount equal to the lesser of all available Net Cash Flow ora percentage of Corporate net taxable income equal to the highest marginal tax effected state and federal income tax rates applicable to any Shareholder, subject to the restrictions and conditions imposed upon certain Shareholders as a condition of their purchase of their Shares as set forth in a Stock Purchase Agreement of even date herewith, by and between Samuel J. Hill as Seller and Joshua A. Hill, Bradley J. Ratliff, Lisa E, Kendle, and Marianne M. Viola as Purchasers (“Stock Purchase Agreement”), Such distribution shail be made no later than March 30 of the following year. “Net Cash Flow” shall be defined as all cash funds derived from operations of the Corporation (including interest received on reserves), or from any sales or dispositions of Corporate assets or refinancing of Corporate assets without reduction for any non-cash charges, but less cash funds used to pay current operating expenses and to pay or establish reasonable reserves for future expenses, debt payments, capital improvements, and replacements as determined by the CEO. Net Cash Flow shall be increased by the reduction of any reserve previously established. No distributions shall be made that would cause the Corporation to fall below the net worth requirement then dictated by any or all of HUD, the VA, warehouse lenders and investor HUD requirement(s), which is currently $2,500,000.00 as of December 31, 2016. ARTICLE V RESTRICTIONS ON TRANSFER Section 1. Restriction During Life So long as each Shareholder shall live, cach shall not sell, assign, convey, encumber, pledge, give, or otherwise transfer or dispose of the Shareholder’s Shares of the Corporation which he or she may own or may hereafter acquire, including any new or additional classes of Shares, except as permitted by the terms of this Agreement. Section 2. Authorized Transfers Any Shareholder may transfer all or any part of the Shareholder’s Shares by gift, sale, assignment, devise or otherwise without the consent of the Corporation and without compliance with any restrictions upon such transfer set forth herein, only to the other shareholders. In such cases, the transferee of such Shares shall receive and hold the Shares subject to the terms and conditions of this Agreement applicable to them. Subject to the foregoing exception, no Shareholder shall sell, assign, convey, encumber, pledge, give or otherwise transfer or dispose of the Shareholder’s Shares. either voluntarily or involuntarily, without first complying with the provisions of this Agreement; provided, however, a Shareholder may Transfer such Shareholder’s Shares to a revocable, inter vivos trust in which the Shareholder transferring said Shares is the sole Grantor/Settlor and initial Trustee (“Grantor Trust”) and provided that such Shareholder shall act independently as the initial Trustee pursuant to the terms of said Grantor Trust. Each Shareholder expressly agrees that such transfer of said Shares to the Shareholder’s Grantor Trust is subject to, *conditioned upon, and restricted and limited by all the restrictions, conditions, limitations and terms of this Agreement. No successor trustee shall be deemed a Shareholder as set forth herein without satisfying all the conditions thereof. Any triggering events set forth herein, including the death and Permanent Disability of any Shareholder as weil as any other triggering events, shall continue to relate to the individual Shareholder as transferor to said Grantor Trust and, by way of example and not limiting the foregoing, shall not be construed as being triggered by the “death” or “Permanent Disability” of said Grantor Trust. Section 3. Option to Corporation Except as provided herein, if any Shareholder at any time desires to sell, assign, convey, encumber, pledge, give, or otherwise transfer or dispose of his Shares of the Corporation, the Shareholder shall first offer the same to the Corporation by giving written notice thereof to the Corporation, which notice shall set forth the following: 5.3.1. The number of Shares proposed to be sold, assigned, conveyed, encumbered, pledged or otherwise transferred (hereinafter referred to as the “Offered Shares"); 5.3.2, The identity of'the person, firm, or corporation to which the Shareholder’s Offered Shares are proposed to be sold, assigned, encumbered, pledged, signed, given or otherwise transferred; and 5.3.3. The proposed terms and conditions under which such sale, assignment, ’ encumbrance, pledge, or transfer is to take place. Such notice shall i constitute an offer by the Shareholder to sell all, but not less than all, of the Offered Shares to the Corporation at the lower of the offer price or the price set forth in Article V, Section 1] hereof. Section 4, Acceptance of Offer The Corporation shall have a period of thirty (30) days next following the date of mailing of Shareholder’s notice within which to accept the Shareholder’s offer to sell the Offered Shares. If the Corporation elects to purchase the Offered Shares, written notice shall be given to the Shareholder on or before the expiration of the said thirty (30) day period. At the closing, the selling Shareholder shall be obligated to deliver to the Corporation the certificates evidencing the Offered Shares properly endorsed for transfer, and the Corporation shall be obligated to accept the Offered Shares and pay the Purchase Price therefore as herein provided, Section 5. Offer to Shareholders in the event the Corporation shall not purchase any or all of the Offered Shares, then the Shares not so purchased shall be offered for sale and shall be subject to an option on the part ofeach of the other Shareholders for an additional thirty (30) day period following the thirty (30) day period set forth in Article V, Section 4 hereof, to purchase a “proportionate share” of the Offered Shares not purchased by the Corporation at the lower of the offered price or the Price set forth in Article V, Section 11 hereof. Such “proportionate share” shall be equal to that percentage such Shareholder’s Shares bears to the total number of Shares that are outstanding, excluding the selling Shareholder’s Shares; provided, however, that if any such Shareholder fails to accept the offer, either in whole or in part, the other Shareholders may purchase the Shares not so accepted. Notice of such option shall be in the form and manner set forth in Article V, Section 3 above, except the notice should now be given to the other Shareholders. Section 6. Closing of Purchase The closing of the purchase shall take place at the principal office of the Corporation at a date which will not be more than thirty (30) days following the acceptance of the offer, and the Purchase Price shall be paid in full in cash at Closing. Notwithstanding the foregoing, if the Purchase Price exceeds $25,000.00, the purchaser may pay the Purchase Price by paying twenty five percent (25%) of the Purchase Price in cash and the balance in equal quarterly installments over a period of five (5) years, together with interest on the unpaid principal balance at the then Minimum Applicable Federal Rate per annum; or upon such other terms and conditions as purchaser and the selling Shareholder(s) may agree in writing. The obligation of the Corporation or the purchasing Shareholders, as the case may be, shall be evidenced by a negotiable promissory note that shall be secured by a security agreement in due form under the Uniform Commercial Code, which shall have the selling Shareholder’s stock pledged as security. The said negotiable promissory note and the security agreement shall contain the standard acceleration clauses for both principal and interest, and the said promissory note shall give the purchaser the option of prepayment in whole or in part at any time without penalty. Section 7. Release from Restrictions If the offer to sell is not accepted by the Corporation or the other Shareholders, the offering Shareholder may make a bona fide sale, assignment, conveyance, encumbrance, pledge or other transfer of the Offered Shares to the prospective purchaser, lienor, or donee named in the notice of offer; provided, however, that if the offering Shareholder fails to make such transfer within thirty (30) days following the expiration of the time hereinabove provided for the election by the Corporation or the other Shareholders, such Shares shall become again subject to all the restrictions of this Agreement. Notwithstanding anything contained herein to the contrary, any transfer of Shares hereunder shall continue to be subject to this Agreement in the hands of the transferee and the restrictions set forth herein with respect to such Shares shal! continue in full force and effect following any transfer hereunder.Section 8, Upon the death of a Shareholder, the Shares owned by the deceased Shareholder shall be Purchase Upon Death subject to the following terms: 5.8.1. 5.8.2. 3.8.3. Authorized Transfers, A deceased Shareholder may transfer all or any part of the Shareholder’s Shares by bequest or devise or operation of law upon his death to or for the benefit of the other Shareholders in their proportionate interests, In the event of such transfer hereunder, the transferee or transferees shall receive and hold such Shares subject to the terms of this Agreement. Offer to Corporation. Except as provided herein, if a deceased Shareholder or the representative or fiduciary of his or her estate or trust attempt(s) to transfer any Shares by will or operation of law, the Corporation shall purchase all of said Shares; provided, however, that in the event of the death of Samuel J. Hill, Kimberly M. Hill or the then acting Trustee of The Hill Family Trust shell have the right and option to receive the Shares held and owned by Samuel J. Hill and such transfer shall be deemed a transfer in compliance with Article V hereof. Should Kimberly M, Hill or the then acting Trustee of The Hill Family Trust decline to exercise such right/option, Joshua A. Hill shal! have the right and option to purchase the Shares held and owned by Samuel J, Hill. Should Joshua A. Hill then decline to exercise such righVoption, the Corporation shall purchase all of said Shares. Life insurance owned by the Corporation and having the deceased Sharcholder as insured thereof may be used to purchase said Shares. Purchase Price. The Purchase Price for Shares of the Corporation purchased hereunder shall be determined in accordance with the provisions of Article V. Section 11 hereof. Ifthe Purchase Price exceeds $25,000.00, the purchaser may, at the purchaser's option, pay the Purchase Price by paying twenty-five percent (25%) of the Purchase Price in cash and the balance in monthly payments of at least $5,000.00 until fully paid. The obligation of the Corporation or the purchasing Shareholders, as the case may be, shall be evidenced by a negotiable promissory note that shall be secured by a security agreement in duc form under the Uniform Commercial Code, which shall have the deceased Shareholder's Shares pledged as security. The said negotiable promissory note and the security agreement shall contain the standard acceleration clauses for both principal and interest, and the said promissory note shall give the purchaser the option of prepayment in whole or in part at any time without penalty.Section 9. Purchase upon Disability. Upon the disability (as defined below) of any Shareholder, the Corporation shall have the right to purchase all or any part of the shares of the Corporation owned by the disabled Shareholder, The Corporation shall have a period of sixty (60) days following a determination of disability within which to exercise its right to buy any or all of the shares of the disabled Shareholder, If the Corporation elects to purchase all or any part of said shares, written notice thereof shall be given to the disabled Shareholder or his personal representative. In the event the Corporation does not purchase all or any part of the shares of the disabled Shareholder, then the shares not so purchased shall be subject to a right of each of the remaining non-disabled Shareholders to purchase a "proportionate share” of the shares not purchased by the Corporation. Such “proportionate share" shall be equal to that percentage which the remaining Sharehalders’ shares bear to the total number of Shares that are outstanding, excluding the disabled Shareholder's shares; provided, however, that if any such Shareholder fails to purchase his "proportionate share," either in whole or in part, the other Shareholders may purchase the shares not so accepted. The Purchase Price of such shares shall be as determined in accordance with the provisions of Article V, Section 11 hereof. If the Purchase Price exceeds $25,000.00, the purchaser may, at the purchaser's option, pay the Purchase Price by paying twenty five percent (25%) of the Purchase Price in cash and the balance in monthly payments of at least $5,000.00 until fully paid. The obligation of the Corporation or the purchasing Shareholders, as the case may be, shall be evidenced by a negotiable promissory note that shall be secured by a security agreement in due form under the Uniform Commercial Code, which shall have the disabled Sharsholder’s Shares pledged as security. The said negotiable promissory note and the security agreement shall contain the standard acceleration clauses for both principal and interest, and the said promissory note shall give the purchaser the option of prepayment in whole or in part at any time without penalty. 5.9.1, Disability Defined. A Shareholder is disabled if the Shareholder: (i) Is under a legal decree of incompetency (the date of such decree being deemed to be the date on which such disability is determined); (ii) Submits any claim for disability insurance benefits or for early distribution of any amounts from a qualified pension or profit sharing plan maintained by the Corporation on account of more than fifty percent (50%) mental disability (the date of the earliest of such claims shall be the date on which such disability shall be determined); (iii) Qualifies for disability insurance benefits and/or coverage, in whole or in part, under any insurance policy of disability coverage; or iv) Js, subject to a medical determination that the Shareholder, because of a medically determinable physical or mental disability, is unable to perform substantially all of his regular duties or manage his affairs, and that such disability is determined or reasonably expected to last at least twelve (12) months, based on then available medical information. Each Shareholder hereby consents to such examination, to furnish any medical information requested by any examining physician, and to waive any applicable physician-patient privilege that may arise because of such examination. 5.9.2. Option Upon the Disability of Samuel J. Hill. In the event of the disability of Samuel J. Hill, Kimberly M. Hill or the then acting Trustee of The Hill Family Trust shall have the right and option to receive the Shares held and owned bySamuel J. Hill and such transfer shail be deemed a transfer in compliance with Article V hereof. Should Kimberly M. Hill decline to exercise such right/option, Joshua A. Hill shall have the right and option to purchase the Shares held and owned by Samuel J. Hill, Should Joshua A. Hill then decline to exercise such right/option, the Corporation shall purchase all of said Shares. Section 10. Closing The Closing of any purchase under Article V, Sections 8, 9, and 15 shall take place at the principal office of the Corporation on a date the parties may agree but in no event later than two hundred seventy (270) days following the date determined in each of the above-referenced Sections, Section 11. Purchase Price The Purchase Price shall be determined as follows: The Corporation’s accounting firm, HHH CPA Group, shall review and use the audited financial statements for the most recent seven (7) year period, then ascertain, determine, and calculate the discretionary cash flows for those seven (7) years, The average annual discretionary cash flow(s) from those seven (7) years shall then be multiplied by a multiple of 2.0 to determine the total value of the Corporation. The value of the selling Shareholder’s Shares shall then be determined by dividing the selling Shareholder’s Shares by the total outstanding Shares, with the selling Shareholder’s Shares as the numerator and total outstanding Shares as the denominator, and then multiplying the resulting quotient by the total value of the Corporation set forth above (“Purchase Price”), Any selling Sharcholder that has not attained the age of sixty five (65) shall only be entitled to payment of sixty peroent (60%) of said Purchase Price. The Corporation shall provide such data as the CPA deems necessary or useful to make such determination. The fees and reimbursed expenses charged by the CPA in the valuation under this section shall be borne equally by the selling Sharcholder (one-half (1/2)) and the other Shareholders (in the aggregate, one-half (1/2)). If the Corporation shall not have sufficient surplus to permit it lawfully to purchase the Shares of any deceased Sharcholder hereunder, the deceased Shareholder’s personal representative’ and the surviving Shareholders shall vote their respective Shares to reduce the stated capital of the Corporation or to take such other steps, other than revaluation of assets or dissolution of the Corporation, as may be appropriate or necessary in order to enable the Corporation lawfully to purchase and pay for the Shares of the deceased Shareholder. Section 12. Insurance The Shareholders recognize that the Corporation may have insufficient surplus to purchase shares under this Section. Any Shareholders or the Corporation may, in his, her, or its discretion, insure the life or disability of each Shareholder, naming himself, herself, or itself as owner and beneficiary of the policy. The insurance policies and any proceeds received thereunder shall be held by such Sharcholders or the Corporation in Trust for the purposes of this Agreement. Anyinsurance policies purchased by the Corporation shall be continued by the Corporation unless the Corporation and ali Shareholders governed by this Agreement agree otherwise. Any Shareholders or the Corporation shall have the right to take out additional insurance on the life or disability of any other Shareholders, whenever, in the opinion of the o