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1 | James G. Schwartz, Esq. (# 069371)
Joshua D. Brysk, Esq. (#184200)
Law Offices of James G, Schwartz
i)
A Professional Corporation
3| 7901 Stoneridge Drive, Suite 401 a
Pleasanton, California 94588 AL FILED
4| Telephone: (925) 463-1073 AMEDA COUNTY
Facsimile: (925) 463-2937
5 JUN 0 8 2009
Attorneys for Plaintiff, THE SUPRRT
6| 17 & C Holdings, Inc. Byae/ CR OURT iP
8 ‘SUPERIOR COURT OF THE STATE OF CALIFORNIA
oP CI aa
9 IN AND FOR THE COUNTY OF ALAMEDA
10
i H & C Holdi
oldings, I Inc., )
12 Case No.: VGOs45643 7%
13 Plaintiff, VERIFIED COMPLAINT FOR:
14 vs ) Breach of Contract
)
15] Ernie Altman Construction, Inc.; Ernie Altmann ) DEMAND OF COMPLAINT: $1,602,384.96 plus
aka Ernie Altman and DOES 1 through 25, ) interest
16 | inclusive, ,
17 Defendants. )
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1, Plaintiff alleges:
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20 2. Defendant, Ernie Altman Construction, Inc. (hereinafter “EACT”) is, and at all times
91 | herein mentioned was, a California corporation doing business in Alameda County.
22 3. Defendant, Emie Altmann aka Ernie Altman (hereinafter “EA”) is, and at all times herein
23 | mentioned was, an individual doing business in Alameda County.
24 4, Plaintiff is ignorant of the true names and capacities of Defendants sued herein as Does 1
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through 25, inclusive, and therefore sues these Defendants by such fictitious names. Plaintiff will seek
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57 leave to amend this complaint to allege their true names and capacities when ascertained. Plaintiff is
3 | informed and believes and thereon alleges that each of said Defendants is responsible in some manner
Law Offices of
JAMES G, SCHWARTZ
7901 Stoneridge Drive
Suite 401
Pleasanton, CA 94588
(925) 463-4073
COMPLAINT
for the events and happenings herein referred to and caused injury and damage to Plaintiff as herein
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alleged.
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5. Plaintiff is informed and believes and thereon alleges that at all times herein mentioned,
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Defendants, and each of them, were the agents, servants, and employees of their Co-Defendants, and in
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doing the things hereinafter mentioned, were acting within the scope of their authority as such agents,
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servants, and employees and with the permission and-consent of their Co-Defendants; and any reference
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hereinafter to "Defendants” is intended by Plaintiff to refer to "Defendants, and each of them.”
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6. Plaintiff is informed and believes and on that basis alleges that EACI is engaged in the
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construction business as a developer and general contractor.
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7. On or about October 30, 2005, the following documents were executed by the parties:
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Term Note (Exhibit “A”), Loan and Security Agreement (Exhibit “B”), Continuing Guarantee (Exhibit
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“C”), Peninsula Option Agreement (Exhibit “D”), Middle Baker Option Agreement (Exhibit “E”), Grant
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Deed (Exhibit “F’’), and South Baker — Real Property Sale Agreement (Exhibit “G”). A true and correct
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copy of each of these documents is attached respectively hereto and labeled as indicated in this
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paragraph and is incorporated herein by reference.
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8. In 2005, Defendants approached the principals of Plaintiff and solicited a loan for the use
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in real property acquisition and construction funding connected with three parcels of real property in
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Tuolumne and Mariposa Counties. Defendants held themselves out to be experts and professionals in
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land development and acquisition and represented that they had the necessary skill and knowledge to
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perform duties in these areas. |
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9. The parcels are referred to by the parties as “Peninsula,” “Middle Baker,” and “South
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Baker” (hereinafter collectively “Parcels”).
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10. EACI (by and through its CEO and CFO) and EA each represented that EACI had a
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contractual right to purchase the Parcels from the then current owner.
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Law Offices of
JAMES G, SCHWARTZ,
7901 Stoneridge Drive
Suite 401
COMPLAINT
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11. Additionally, Defendants represented that Plaintiffs could make substantial profits by
purchasing and developing portions of the Parcels, thereby increasing the value of the Parcels.
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12. In the Loan and Security Agreement (Exhibit “B”), EACI represented that it is a party to
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a “Renewed Agreement for Purchase and Sale of Real Property And Escrow Instructions dated March
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28, 2005 (as extended)” whereby EACI would acquire the Parcels.
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13. Each of the above representations was made by EA orally, on a continuing basis, up to
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and including the time the Exhibits A-G were executed.
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14. Pursuant to the Term Note (Exhibit “A”), Plaintiff and EACI entered into a loan
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10 transaction whereby Plaintiff loaned $1,500,000 to EACI. EA also guaranteed that obligation in the
11 Continuing Guarantee (Exhibit “C”).
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15, The Term Note (Exhibit “A”) had a maturity date of August 1, 2007 and was due and
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payable in full by that date.
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15 16. Interest on the Term Note (Exhibit “A”) was due and payable at the rate of 9% per annum|
16 through October 31, 2006, and at the rate of 15% per annum thereafter. Payment of the principal sum
17 has not been made. Accordingly, interest of $611,250 has accrued on the principal sum which remains
18 outstanding as of the filing of this complaint.
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17. Anadditional loan of $102,384.96 was extended by Plaintiff to Defendant at the time of
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the close of escrow for the transactions. Plaintiff made this second loan to Defendants by virtue of
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deposited funds in escrow on behalf of Defendants in said sum separate and apart from the loan made
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23 pursuant to the Term Note (Exhibit “A”). Evidence of the additional loan of $102,384.96 is contained in
24 the Escrow Closing Statement and Deposit By Third Party third party, a true and correct copy of which
25 is attached hereto marked as Exhibit “I” and is incorporated herein by reference.
26 18. Pursuant to the Loan and Security Agreement (Exhibit “B”), EACI promised to clear all
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indebtedness on the Middle Baker and Peninsula Properties within twenty-one months.
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Law Offices of
JAMES G. SCHWARTZ
7901 Stoneridge Drive
Suite 401
Pieasanton, CA 94588
(925) 463-1073
COMPLAINT
FEE EEE
19. Pursuant to the Loan and Security Agreement (Exhibit “B”), EACI promised to deposit
the lesser of $330,000 or the amount needed for the equivalent of five months of payments to Kennedy
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Funding, Inc. (EACI’s first position lender), or three months of payments should Kennedy Funding
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release its security interest in the Peninsula property.
20. ‘Failure to make any payment as and when it falls due under the Term Note (Exhibit “A”)
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is a default of the Term Note and is expressly a default under the Loan and Security Agreement (Exhibit
“B”),
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21. The Term Note also included a reduction in principal should Plaintiff exercise its option
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10 to purchase under the Peninsula Option Agreement (Exhibit “D”), following EACT’s fulfillment of its
11 obligations under the Loan and Security Agreement (Exhibit “B”).
12 22. Inthe Continuing Guarantee (Exhibit “C”), EA promised and guaranteed both payment
it
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and performance to Plaintiff of all monetary obligations of EACI to Plaintiff and all other related
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14 covenants and duties.
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23. In the Peninsula Option Agreement (Exhibit “D”), EACI granted an exclusive right to
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Plaintiff for the purchase of the Peninsula property for the agreed sum of $600,000. Pursuant to section
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27 of the Peninsula Option Agreement (Exhibit “D”), EACI also promised to provide Plaintiff with an
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executed quitclaim deed for the Peninsula parcel.
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24. Inthe Middle Baker Option Agreement (Exhibit “E”), EACI granted an exclusive right to
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Plaintiff for the purchase of the Middle Baker property for the agreed sum of $3,610,500. EACI
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reserved the right to sell the property prior to phase I parcel mapping, provided EACI gives Plaintiff
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15% of the net profit in any sale by EACI to a third party.
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24 25. The Grant Deed (Exhibit “F”) transferred the South Baker Property to Plaintiff and was
25 duly recorded in Tuolumne and Mariposa Counties.
26 26. Defendants breached their obligations under the Exhibits A-G in that they made no
27 payment of the loan under the Term Note (Exhibit “A”), did not deposit funds in a blocked account as
Law Offices of
28 required under the Loan and Security Agreement (Exhibit “B”), did not clear the Parcels of security
JAMES G. SCHWARTZ
7901 Stoneridge Drive
Suite 404
Pleasanton, CA 94588
(825) 463-1073
COMPLAINT
1 | interests, including but not limited to the interests of Kennedy Funding, Inc., and did not provide a
2 | quitclaim deed for Peninsula.
3 27. | Onor about May 22, 2007, the property securing the Term Note (Exhibit “A”) was
4 | foreclosed upon and sold by the senior lienholder without any payment of proceeds to Plaintiff.
5 Consequently, the Term Note is now unsecured.
6 28. On or about February 24, 2008, Plaintiff notified Defendants of their default. A copy of
7 said notice is attached hereto marked as Exhibit “J” and incorporated herein by this reference.
8 29, On or about February 28, 2008, Plaintiff notified Defendants of Plaintiff's intent to sell
° South Baker. A copy of said notice is attached hereto marked as Exhibit “K” and incorporated herein by.
" this reference.
" 30. Defendants then recorded a claim of lien (a true and correct copy of which is attached
hereto as Exhibit “H”), thereby clouding title to the property.
14 31.
FIRST CAUSE OF ACTION
IS BREACH OF CONTRACT
16 (against all Defendants)
17 32. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove.
18 33. Onor about October 30; 2005, pursuant to the Term Note (Exhibit “A”), EACI agreed to
19 repay Plaintiff $1,500,000 in principal plus interest at the applicable rate under the Term Note, to
20 Plaintiff in consideration for the loan of $1,500,000.
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34. Pursuant to the Continuing Guarantee (Exhibit “C”), EA guaranteed each and every
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73 obligation of EACI under the Term Note (Exhibit “A”).
24 35. Defendants have not made any repayment of the principal or interest due under the Term
25 | Note (Exhibit “A”).
26 36. Defendants have breached their obligations under the Term Note (Exhibit “A”’) and the
27 Loan and Security Agreement (Exhibit “B”) in that payment has not been made timely thereunder.
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Law Offices of
JAMES G, SCHWARTZ
7901 Stoneridge Drive
Suite 401
Pleasanton, CA 94588
(925) 463-1073
COMPLAINT
36. | Any breach of any agreement to which the collateral for the Loan and Security
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Agreement (Exhibit “B’”) is subject constitutes a breach of the Loan and Security Agreement and is a
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default thereunder.
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37. Upon default of the Loan and Security Agreement (Exhibit “B”), the Term Note (Exhibit
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“A”) is accelerated and becomes immediately due and payable.
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38. Plaintiff is informed and believes and thereon alleges that Defendants have defaulted on
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payment obligations to senior lienholders on the Parcels and thereby have caused the foreclosure of
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senior liens whereby Plaintiffs security for the loan under the Loan and Security Agreement (Exhibit
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“B”) has been impaired.
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39. Pursuant to the Term Note (Exhibit “A”) and the Continuing Guarantee (Exhibit “C”),
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Defendants jointly and severally owe Plaintiff $1,500,000 principal together with accrued interest of
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$611,250 as of the filing of this complaint, and interest thereafter continuing at the rate of 15% per
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annum until judgment.
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40. Defendants have also failed and refused to repay the additional loan in the amount of
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$102,384.96.
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41, Asa proximate result of the breaches of contract alleged hereinabove, Plaintiff has been
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damaged and may be further damaged, all in an amount to be proved at trial, but which is not less than
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$2,213,634.96.
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WHEREFORE, Plaintiff prays for judgment as set forth below.
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SECOND CAUSE OF ACTION
BREACH OF FIDUCIARY DUTY
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(against all Defendants)
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42. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove.
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Law Offices of
JAMES G, SCHWARTZ
7901 Stoneridge Drive
Suite 401
Pleasanton, CA 94588
{925) 463-1073
COMPLAINT
44. Defendants held themselves out to be professionals in the field of property acquisition
and development. Defendants also claimed to be licensed general contractors in the state of California.
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As professionals, Defendants promised to use the utmost care and skill and their professional knowledge
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and abilities to develop the Parcels and maximize the potential return to Plaintiff on the exercise of the
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Peninsula Option and Middle Baker Option.
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45. Due to Defendants’ representations, Plaintiff believed it could trust Defendants.
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46. . Plaintiff reposed trust and confidence in Defendants, and had no reason to doubt
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Defendants representations concerning Defendants’ abilities or capabilities or how they would be
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10 employed.
11 47. Plaintiff entered into the transactions and agreements detailed herein, and were induced
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to make the loan on the basis of the trust and confidence placed in Defendants.
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48. Defendants betrayed Plaintiffs trust and used the trust and confidence to gain an unfair
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advantage over Plaintiff.
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16 49. Defendants breached their fiduciary duty owed to Plaintiff by engaging in the acts and
17 omissions alleged hereinabove, including but not limited to, failing to utilize the loaned funds to acquire
18 and develop the Parcels, failing to protect Plaintiffs interest by allowing the security to be impaired,
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failing to deposit funds in a blocked account to secure future payment, and failing to make any payment
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of principal or interest on the loaned funds.
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50. Asa proximate result of the acts and omissions of Defendants hereinabove described,
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23 Plaintiff has been damaged and may be further damaged, all in an amount to be proved at trial, but
24 which is believed to exceed $2,213,634.96.
25 51. In doing the acts and omissions, as more fully alleged above, Defendants acted with
26 fraud, oppression, and malice, thus entitling Plaintiff to an award of punitive damages.
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WHEREFORE, Plaintiff prays for judgment as set forth below.
Law Offices of
28
JAMES G. SCHWARTZ
7901 Stoneridge Drive
Sue 401
Pleasanton, CA 94588
(925) 463-1073
COMPLAINT
THIRD CAUSE OF ACTION
CONVERSION
(against all Defendants)
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52. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove.
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53. Atall times herein mentioned, Plaintiff was and is entitled to possession of the loaned
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funds, profits and increases as more fully alleged above.
54. Defendants willfully interfered with the right of Plaintiff to possession of the loaned
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funds and accrued interest, profits, properties and benefits and Defendants have converted same for their
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own use and benefit. This includes but may not be limited to the diversion of funds and assets to their
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own benefit and to the detriment of Plaintiff, and the withholding of Plaintiffs property from Plaintiff.
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55. The value of the loaned funds and accrued interest, profits, properties and benefits
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converted is in an amount to be proved at trial, but is believed to be at least $2,213,634.96.
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56. Asa proximate result of the foregoing, Plaintiff has been damaged in an amount equal to
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the value of the converted assets, plus interest and the costs of recovery including but not limited to
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SPEER PLSD RE
reasonable attorney’s fees and legal costs.
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57. Defendants’ acts, as alleged above, were willful, wanton, malicious, and oppressive, and
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were undertaken with the intent to defraud, and therefore justify the awarding of exemplary and punitive
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damages.
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WHEREFORE, Plaintiff prays for judgment as set forth below.
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21 FOURTH CAUSE OF ACTION
22 , FRAUD
(against all Defendants)
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58. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove.
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25 59. Defendants EACI (by and through its CEO and CFO) and EA each made the following
26 representations: that represented that EACI had a contractual right to purchase the Parcels from the then
27 current owner; that EAC] it is a party to a “Renewed Agreement for Purchase and Sale of Real Property
_, S oI
JAMES G, SCHWARTZ
7901 Stoneridge Drive
Sl ute 404
And Escrow Instructions dated March 28, 2005 (as extended)” whereby EACI would acquire the
Pleasanton, CA 94588
(825) 463-1073
8
COMPLAINT
Parcels; that Plaintiffs could make substantial profits by purchasing portions of the Parcels which
Defendants would develop, thereby increasing the value of the Parcels; that Defendants were licensed
general contractors, skilled and experienced professionals in the fields of property acquisition and
development; that Defendants would use the utmost care and skill and their professional knowledge and
abilities to develop the Parcels and maximize the potential return to Plaintiff on the exercise of the
Peninsula Option and Middle Baker Option.
60. Each of the above representations was made by EA orally, on a continuing basis, up to
and including the time the Exhibits A-G were executed.
61. Each of the representations by Defendants alleged above was false.
62. Defendants knew these representations were false at the time they were made.
Defendants made the foregoing false statements intentionally and with the intent to deceive, and to and
induce Plaintiffs reliance thereon.
63. Plaintiff did not know or have reason to know of the falsity of these representations when
made by Defendants.
64. Plaintiff placed reasonable reliance on the representations made by Defendants, and
justifiably relied on the representations to Plaintiff's detriment.
65. Asaresult of the misrepresentations and concealments of Defendants, Plaintiff has been
damaged in an amount to be proved at trial, and believed to exceed $2,213,634.96.
66. Defendants’ acts and omissions as more fully alleged above, were done with fraud,
oppression, and malice. The acts described herein were undertaken with the intent to defraud, and
therefore justify the awarding of exemplary and punitive damages.
WHEREFORE, Plaintiff prays for judgment as set forth below.
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Law Offices of
JAMES G. SCHWARTZ
7901 Stoneridge Drive
Suite 401
Pieasanton, CA 94588
(625) 483-1073
COMPLAINT
FIFTH CAUSE OF ACTION
NEGLIGENT MISREPRESENTATION OF FACT
(As to all Defendants)
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42. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove.
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43. Defendants made false representations to Plaintiff as described hereinabove.
44, Defendants made the false representations hereinabove without any reasonable basis to
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believe that the representations were true.
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45. Defendants made the false representations hereinabove with the intent to induce
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Plaintiff's reliance thereon.
10 46. Defendants knew or reasonably should have known that Plaintiff would rely upon the
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representations made and indeed Plaintiff did reasonably rely on the representations made.
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47, Asa proximate result of said reliance on these false representations, Plaintiff was
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injured in a sum to be proven at trial, and believed to exceed $2,213,634.96, plus interest at the legal
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rate.
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16 WHEREFORE, Plaintiff prays for judgment as set forth below.
17 SIXTH CAUSE OF ACTION
CIVIL CONSPIRACY
18 (As to all Defendants)
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59. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove.
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60. Atall times relevant herein, Defendants knowingly and willfully conspired and agreed
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among themselves to conceal the fraudulent acts and omissions and other wrongful acts, as more fully
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alleged above.
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61. Asa proximate result of this conspiracy, Plaintiff has been damaged as alleged herein and
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in an amount to be proved at trial, and believed to exceed $2,213,634.96.
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62. In doing the acts and omissions as more fully alleged above, Defendants acted with fraud,
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oppression, and malice and thus entitling Plaintiff to an award of punitive damages.
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28
Law Offices of
JAMES G, SCHWARTZ
7961 Stoneridge Drive
‘Suite 401 WHEREFORE, Plaintiff prays for judgment as set forth below.
Pleasanton, CA 945388
(925) 463-1073
10
COMPLAINT
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1 SEVENTH CAUSE OF ACTION
UNFAIR BUSINESS PRACTICES UNDER B & P CODE §17200 ET. SEQ
2 (against all Defendants)
3 67. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove.
‘ 68. In engaging in the acts and omissions as alleged hereinabove, Defendants engaged in
unlawful, unfair and/or fraudulent business acts and practices in violation of Business and Professions
4 Code §17200 et seq. B & P Code §17200 has been violated in that, inter alia, one or more Defendants
g | have engaged in the following unlawful, unfair and/or fraudulent acts and practices:
9 e The promise to perform work requiring a license from the state of Californnia without the
10 possession of the necessary license
iu e Engaging in the occupation of general contractor without the necessary and appropriate
licenses as required by the state of California
14 e The diversion of funds to Defendants for the benefit of Defendants and to the detriment of
15 | Plaintiff
16 69. The unlawful, unfair and/or fraudulent business acts and practices in which Defendants
17) have engaged have damaged Plaintiff in an amount to be proved at trial, but which is believed to exceed
18 $2,213,634.96. .
19
00 70. In doing the acts and omissions that constituted unlawful, unfair and/or fraudulent
71 business practices as more fully alleged above, Defendants acted with fraud, oppression, and malice and
99 | thus Plaintiff is entitled to an award of punitive damages.
23 WHEREFORE, Plaintiff prays judgment as follows:
24 1. For payment over to Plaintiff of the amount due from Defendants as a result of the breach of
25 their contracts herein, together with interest at the applicable rate;
26 2. That Plaintiff be awarded full compensatory damages, with interest at the legal rate;
27 3. For consequential damages according to proof;
mete 8 4, For exemplary and punitive damages;
COMPLAINT
5. For reasonable attorney fees incurred herein;
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6. For costs of suit herein;
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7. For such other and further relief as the Court may deem just and proper.
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Dated this <2? day of May, 2009.
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The Law Offices of James G. Schwartz
A Professional Corporation
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Shua D. Brysk
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Attorneys for Plaintiff
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Law Offices of
JAMES G. SCHWARTZ
COMPLAINT 12
VERIFICATION
STATE OF CALIFORNIA
COUNTY OF ALAMEDA
I, Ravi Cherukuri, CEO of H & C Holdings, Inc., California corporation, hereby declare:
I have read the document(s) entitled:
VERIFIED COMPLAINT FOR: Breach of Contract
and know the contents thereof, and the same is true of my own knowledge, except as to the matters
10 therein stated to be alleged upon information and belief, and as to those matters I believe it to be true.
11
Declared under penalty of perjury according to the Laws of the State of California. Executed in
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Pleasanton, California.
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DATED: May 3 , 2009 —
16 Ravi Cherukuri, CEO
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25 F:\Clients\H & C Holdings\verification\Verified Complaint\.doc #7162.0001
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Exhibit A
TERM NOTE
$1,500,000 ; Alameda County, California
October3 0, 2005
FOR VALUE RECEIVED, the undersigned, Ernie Altman Construction, Inc., a
California corporation with its principal place of business at 4047 First Street, Suite 109,
Livermore, California 94550 (“Borrower”), hereby promises to pay to the order of H&C
Holdings, Inc., a California corporation with its principal place of business at 8614 White Oak
Court, Pleasanton, California 94588 (“Lender”), the principal sum of One Million Five Hundred
Thousand Dollars and No cents ($1,500,000.00) (the “Loan Amount”), together with interest on
. the outstanding balance of the principal sum at the rates and commencing at the times and
pursuant to the terms hereinafter provided until this Term Note is paid in full. This Term Note
shal] mature on the Term Loan Maturity Date.
1. Terms. Capitalized terms used herein without definition have the meanings
ascribed to them in the Loan and Security Agreement of even date herewith (as amended from
time to time in accordance with the terms thereof, the “Loan Agreement’), by and between
Borrower and Lender. Provided, however, that:
Subject to Section 3 hereof, “Applicable Interest Rate” means:
A. through and including October 31, 2006, the Applicable Interest Rate shall be a fixed rate of
Nine Percent (9%) per annum paid monthly at Three Quarters of One Percent (3/4%) per month;
B. on and after November 1, 2006, the Applicable Interest Rate shall be a fixed rate of Fifteen
Percent (15%) per annum paid monthly at One and One Quarter Percent (1 4%) per month.
“Term Loan Maturity Date” means Aug 1, 2007.
2. Principal and Interest Payments. Subject to Section 3 hereof, this Term Note
shall bear interest from the date of issuance (computed on the basis of a 360-day year, for the
actual number of days occurring in the period for which interest is payable) at a rate per annum
equal to the Applicable Interest Rate on the principal amount from time to time remaining
unpaid. For a period of 21 months from the date of the execution of this Note no payments for
principal, interest or points shal] be due or payable by Borrower to Lender. If Borrower fulfills
its obligations under section 5.2 of the Loan and Security of even date herewith between
Borrower and Lender, and Lender exercises its option to purchase real property pursuant to the
Peninsula Option Agreement of even date herewith between the parties, the Note shall be
reduced by $600,000 and the Borrower shall owe no points or interest on this amount as
Lender’s payment under said option agreement in its capacity as Optionee. If Borrower fulfills
its obligations under section 5.5 of the Loan Agreement, then it will not owe Lender any points
or interest on the balance of the Note, namely, $900,000. The amount of the Note not used as a
credit to purchase the Peninsula Property shall become due and owing on August 1, 2007.
3. Prepayment. Borrower may, upon at least three (3) Business Days’ prior written
notice to Lender stating the proposed date and amount of the prepayment, and if the notice is
4853-1935-9744.1
(EP
given Borrower shall, rel outstanding balance of principal G= of this Term Note
in whole or in part, withot*premium or penalty except there sh e no refund for the fee,
points, fees and the like. The unused portion of any Monthly Prepaid Interest is refundable. In
the event of prepayment, there shall become due and payable an amount equal to all accrued
interest attributable to that portion of the outstanding principal balance of the Term Note being
prepaid at that time. Principal prepayments shall be of an amount not less than $10,000.
'
4. Payments and Computations. All payments on account of indebtedness
evidenced by this Term Note shall be made not later than 11:00 A.M. (California time) on the
day when due in lawful money of the United States. All computations of interest shall be made
by Lender on the basis of a 360-day year for the actual number of days occurring in the period
for which interest is payable. Payments are to be made at such place as Lender or the legal
holders of this Term Note may, from time to time, in writing appoint, and in the absence of such
appointment, then at the principal place of business of Lender as set forth on the first page of this
Term Note. .
5. Applicable Law. Borrower represents and agrees that this instrament and the
rights and obligations of all parties hereunder shall be governed by and construed under the laws
of the State of California without regard to the conflicts of law principles.
6. Severability. The parties hereto intend and believe that each provision in this
Term Note comports with all applicable local, state and federal laws and judicial decisions.
However, if any provision or provisions, or if any portion of any provision or provisions, of this
Term Note is found by a court of law to be in violation of any applicable local, state or federal
ordinance, statute, law, administrative or judicial decision, or public policy, and if the court
should declare that portion, provision or provisions to be illegal, invalid, unlawful, void or
unenforceable as written, then it is the intent of Borrower and Lender that such portion, provision
or provisions be given force to the fullest possible extent that they are legal, valid and
enforceable, that the remainder of this Term Note shall be construed as if the illegal, invalid,
unlawful, void or unenforceable portion, provision or provisions were not contained herein, and
that the rights, obligations and interest of Borrower and Lender or the legal holders hereof under
the remainder of this Term Note shall continue in full force and effect.
7. Maximum Interest. Notwithstanding any other provision of this Term Note or
any other agreement between Borrower and Lender, nothing herein shall require Borrower to
pay, or the holder of this Term Note to accept, interest in an amount which subjects the holder to
any penalty or forfeiture under applicable Jaw, and in no event shall the total of all charges
payable hereunder (whether of interest or of such other charges which may or might be.
characterized as interest) exceed the maximum rate permitted to be charged under applicable
law. If Lender or any other holder of this Term Note receives any payment which is or would be
in excess of that permitted to be charged under applicable Jaw, the payment shal] have been, and
shall be deemed to have been, made in error and shal] be held as additional cash coJJateral for the
indebtedness evidenced by this Term Note.
8. Incorporation by Reference. This Term Note is the Term Note referred to in the
Loan Agreement and, as such, has been executed and delivered pursuant to, is entitled to the
4853-1935-9744.1
benefits of, and shall be @...: by, the terms and conditions o Loan Agreement, which
are expressly incorporated herein by this reference.
9. Waiver. Borrower and all parties now or hereafter liable for the payment hereof,
whether as endorser, guarantor, surety or otherwise, generally waive demand, presentment for
payment, notice of dishonor, protest and notice of protest, notice of intent to accelerate and
notice of acceleration, diligence in collecting or bringing suit against any party hereto, and all
other notices other than as expressly provided in the Loan Agreement, and agree to all
extensions, renewals, indulgences, releases or changes which from time to time may be granted
by the holder hereof and to all partial paym
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eo © @ eta a 1 | James G. Schwartz, Esq. (# 069371) Joshua D. Brysk, Esq. (#184200) Law Offices of James G, Schwartz i) A Professional Corporation 3| 7901 Stoneridge Drive, Suite 401 a Pleasanton, California 94588 AL FILED 4| Telephone: (925) 463-1073 AMEDA COUNTY Facsimile: (925) 463-2937 5 JUN 0 8 2009 Attorneys for Plaintiff, THE SUPRRT 6| 17 & C Holdings, Inc. Byae/ CR OURT iP 8 ‘SUPERIOR COURT OF THE STATE OF CALIFORNIA oP CI aa 9 IN AND FOR THE COUNTY OF ALAMEDA 10 i H & C Holdi oldings, I Inc., ) 12 Case No.: VGOs45643 7% 13 Plaintiff, VERIFIED COMPLAINT FOR: 14 vs ) Breach of Contract ) 15] Ernie Altman Construction, Inc.; Ernie Altmann ) DEMAND OF COMPLAINT: $1,602,384.96 plus aka Ernie Altman and DOES 1 through 25, ) interest 16 | inclusive, , 17 Defendants. ) 18 1, Plaintiff alleges: 19 20 2. Defendant, Ernie Altman Construction, Inc. (hereinafter “EACT”) is, and at all times 91 | herein mentioned was, a California corporation doing business in Alameda County. 22 3. Defendant, Emie Altmann aka Ernie Altman (hereinafter “EA”) is, and at all times herein 23 | mentioned was, an individual doing business in Alameda County. 24 4, Plaintiff is ignorant of the true names and capacities of Defendants sued herein as Does 1 25 through 25, inclusive, and therefore sues these Defendants by such fictitious names. Plaintiff will seek 26 57 leave to amend this complaint to allege their true names and capacities when ascertained. Plaintiff is 3 | informed and believes and thereon alleges that each of said Defendants is responsible in some manner Law Offices of JAMES G, SCHWARTZ 7901 Stoneridge Drive Suite 401 Pleasanton, CA 94588 (925) 463-4073 COMPLAINT for the events and happenings herein referred to and caused injury and damage to Plaintiff as herein NO alleged. Ww 5. Plaintiff is informed and believes and thereon alleges that at all times herein mentioned, FSP Defendants, and each of them, were the agents, servants, and employees of their Co-Defendants, and in NH doing the things hereinafter mentioned, were acting within the scope of their authority as such agents, WD servants, and employees and with the permission and-consent of their Co-Defendants; and any reference NY hereinafter to "Defendants” is intended by Plaintiff to refer to "Defendants, and each of them.” O&O 6. Plaintiff is informed and believes and on that basis alleges that EACI is engaged in the Oo construction business as a developer and general contractor. ee OO KF 7. On or about October 30, 2005, the following documents were executed by the parties: ee NO Term Note (Exhibit “A”), Loan and Security Agreement (Exhibit “B”), Continuing Guarantee (Exhibit ee WO “C”), Peninsula Option Agreement (Exhibit “D”), Middle Baker Option Agreement (Exhibit “E”), Grant Re FP Deed (Exhibit “F’’), and South Baker — Real Property Sale Agreement (Exhibit “G”). A true and correct RO A copy of each of these documents is attached respectively hereto and labeled as indicated in this DB Re paragraph and is incorporated herein by reference. NA Be FB ee 8. In 2005, Defendants approached the principals of Plaintiff and solicited a loan for the use Oo Ke in real property acquisition and construction funding connected with three parcels of real property in DT HN Tuolumne and Mariposa Counties. Defendants held themselves out to be experts and professionals in KF KN land development and acquisition and represented that they had the necessary skill and knowledge to NO HN perform duties in these areas. | WO NHN 9. The parcels are referred to by the parties as “Peninsula,” “Middle Baker,” and “South FP bb Un Baker” (hereinafter collectively “Parcels”). wo Nn NO 10. EACI (by and through its CEO and CFO) and EA each represented that EACI had a 27 contractual right to purchase the Parcels from the then current owner. 28 Law Offices of JAMES G, SCHWARTZ, 7901 Stoneridge Drive Suite 401 COMPLAINT @ ® 11. Additionally, Defendants represented that Plaintiffs could make substantial profits by purchasing and developing portions of the Parcels, thereby increasing the value of the Parcels. WN YH 12. In the Loan and Security Agreement (Exhibit “B”), EACI represented that it is a party to Fe a “Renewed Agreement for Purchase and Sale of Real Property And Escrow Instructions dated March An 28, 2005 (as extended)” whereby EACI would acquire the Parcels. Dn 13. Each of the above representations was made by EA orally, on a continuing basis, up to NHN and including the time the Exhibits A-G were executed. eo 14. Pursuant to the Term Note (Exhibit “A”), Plaintiff and EACI entered into a loan oO 10 transaction whereby Plaintiff loaned $1,500,000 to EACI. EA also guaranteed that obligation in the 11 Continuing Guarantee (Exhibit “C”). 12 15, The Term Note (Exhibit “A”) had a maturity date of August 1, 2007 and was due and 13 payable in full by that date. 14 15 16. Interest on the Term Note (Exhibit “A”) was due and payable at the rate of 9% per annum| 16 through October 31, 2006, and at the rate of 15% per annum thereafter. Payment of the principal sum 17 has not been made. Accordingly, interest of $611,250 has accrued on the principal sum which remains 18 outstanding as of the filing of this complaint. 19 17. Anadditional loan of $102,384.96 was extended by Plaintiff to Defendant at the time of 20 the close of escrow for the transactions. Plaintiff made this second loan to Defendants by virtue of 21 deposited funds in escrow on behalf of Defendants in said sum separate and apart from the loan made 22 23 pursuant to the Term Note (Exhibit “A”). Evidence of the additional loan of $102,384.96 is contained in 24 the Escrow Closing Statement and Deposit By Third Party third party, a true and correct copy of which 25 is attached hereto marked as Exhibit “I” and is incorporated herein by reference. 26 18. Pursuant to the Loan and Security Agreement (Exhibit “B”), EACI promised to clear all 27 indebtedness on the Middle Baker and Peninsula Properties within twenty-one months. 28 Law Offices of JAMES G. SCHWARTZ 7901 Stoneridge Drive Suite 401 Pieasanton, CA 94588 (925) 463-1073 COMPLAINT FEE EEE 19. Pursuant to the Loan and Security Agreement (Exhibit “B”), EACI promised to deposit the lesser of $330,000 or the amount needed for the equivalent of five months of payments to Kennedy bd WwW Funding, Inc. (EACI’s first position lender), or three months of payments should Kennedy Funding Bh release its security interest in the Peninsula property. 20. ‘Failure to make any payment as and when it falls due under the Term Note (Exhibit “A”) “WN is a default of the Term Note and is expressly a default under the Loan and Security Agreement (Exhibit “B”), CO 21. The Term Note also included a reduction in principal should Plaintiff exercise its option o 10 to purchase under the Peninsula Option Agreement (Exhibit “D”), following EACT’s fulfillment of its 11 obligations under the Loan and Security Agreement (Exhibit “B”). 12 22. Inthe Continuing Guarantee (Exhibit “C”), EA promised and guaranteed both payment it 13 Ri and performance to Plaintiff of all monetary obligations of EACI to Plaintiff and all other related OS BR IRAE 14 covenants and duties. 15 23. In the Peninsula Option Agreement (Exhibit “D”), EACI granted an exclusive right to br ESL 2S 16 Plaintiff for the purchase of the Peninsula property for the agreed sum of $600,000. Pursuant to section 17 27 of the Peninsula Option Agreement (Exhibit “D”), EACI also promised to provide Plaintiff with an 18 executed quitclaim deed for the Peninsula parcel. 19 24. Inthe Middle Baker Option Agreement (Exhibit “E”), EACI granted an exclusive right to 20 Plaintiff for the purchase of the Middle Baker property for the agreed sum of $3,610,500. EACI 21 reserved the right to sell the property prior to phase I parcel mapping, provided EACI gives Plaintiff 22 15% of the net profit in any sale by EACI to a third party. 23 24 25. The Grant Deed (Exhibit “F”) transferred the South Baker Property to Plaintiff and was 25 duly recorded in Tuolumne and Mariposa Counties. 26 26. Defendants breached their obligations under the Exhibits A-G in that they made no 27 payment of the loan under the Term Note (Exhibit “A”), did not deposit funds in a blocked account as Law Offices of 28 required under the Loan and Security Agreement (Exhibit “B”), did not clear the Parcels of security JAMES G. SCHWARTZ 7901 Stoneridge Drive Suite 404 Pleasanton, CA 94588 (825) 463-1073 COMPLAINT 1 | interests, including but not limited to the interests of Kennedy Funding, Inc., and did not provide a 2 | quitclaim deed for Peninsula. 3 27. | Onor about May 22, 2007, the property securing the Term Note (Exhibit “A”) was 4 | foreclosed upon and sold by the senior lienholder without any payment of proceeds to Plaintiff. 5 Consequently, the Term Note is now unsecured. 6 28. On or about February 24, 2008, Plaintiff notified Defendants of their default. A copy of 7 said notice is attached hereto marked as Exhibit “J” and incorporated herein by this reference. 8 29, On or about February 28, 2008, Plaintiff notified Defendants of Plaintiff's intent to sell ° South Baker. A copy of said notice is attached hereto marked as Exhibit “K” and incorporated herein by. " this reference. " 30. Defendants then recorded a claim of lien (a true and correct copy of which is attached hereto as Exhibit “H”), thereby clouding title to the property. 14 31. FIRST CAUSE OF ACTION IS BREACH OF CONTRACT 16 (against all Defendants) 17 32. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove. 18 33. Onor about October 30; 2005, pursuant to the Term Note (Exhibit “A”), EACI agreed to 19 repay Plaintiff $1,500,000 in principal plus interest at the applicable rate under the Term Note, to 20 Plaintiff in consideration for the loan of $1,500,000. 21 34. Pursuant to the Continuing Guarantee (Exhibit “C”), EA guaranteed each and every 22 73 obligation of EACI under the Term Note (Exhibit “A”). 24 35. Defendants have not made any repayment of the principal or interest due under the Term 25 | Note (Exhibit “A”). 26 36. Defendants have breached their obligations under the Term Note (Exhibit “A”’) and the 27 Loan and Security Agreement (Exhibit “B”) in that payment has not been made timely thereunder. 28 Law Offices of JAMES G, SCHWARTZ 7901 Stoneridge Drive Suite 401 Pleasanton, CA 94588 (925) 463-1073 COMPLAINT 36. | Any breach of any agreement to which the collateral for the Loan and Security Fe NYO Agreement (Exhibit “B’”) is subject constitutes a breach of the Loan and Security Agreement and is a YH default thereunder. FF 37. Upon default of the Loan and Security Agreement (Exhibit “B”), the Term Note (Exhibit OA “A”) is accelerated and becomes immediately due and payable. DH 38. Plaintiff is informed and believes and thereon alleges that Defendants have defaulted on NY payment obligations to senior lienholders on the Parcels and thereby have caused the foreclosure of Aa senior liens whereby Plaintiffs security for the loan under the Loan and Security Agreement (Exhibit Co “B”) has been impaired. & 39. Pursuant to the Term Note (Exhibit “A”) and the Continuing Guarantee (Exhibit “C”), eee YH Defendants jointly and severally owe Plaintiff $1,500,000 principal together with accrued interest of eRe BO $611,250 as of the filing of this complaint, and interest thereafter continuing at the rate of 15% per ee annum until judgment. A Re 40. Defendants have also failed and refused to repay the additional loan in the amount of AA $102,384.96. BR 41, Asa proximate result of the breaches of contract alleged hereinabove, Plaintiff has been OHM RR damaged and may be further damaged, all in an amount to be proved at trial, but which is not less than FS NO $2,213,634.96. &— HN NHN YS WHEREFORE, Plaintiff prays for judgment as set forth below. HN WO Ob se SECOND CAUSE OF ACTION BREACH OF FIDUCIARY DUTY wo a (against all Defendants) DA Oo 42. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove. 27 28 Law Offices of JAMES G, SCHWARTZ 7901 Stoneridge Drive Suite 401 Pleasanton, CA 94588 {925) 463-1073 COMPLAINT 44. Defendants held themselves out to be professionals in the field of property acquisition and development. Defendants also claimed to be licensed general contractors in the state of California. WY WwW As professionals, Defendants promised to use the utmost care and skill and their professional knowledge bk and abilities to develop the Parcels and maximize the potential return to Plaintiff on the exercise of the WN Peninsula Option and Middle Baker Option. HD 45. Due to Defendants’ representations, Plaintiff believed it could trust Defendants. SN 46. . Plaintiff reposed trust and confidence in Defendants, and had no reason to doubt S&S Defendants representations concerning Defendants’ abilities or capabilities or how they would be Oo 10 employed. 11 47. Plaintiff entered into the transactions and agreements detailed herein, and were induced 12 to make the loan on the basis of the trust and confidence placed in Defendants. 13 48. Defendants betrayed Plaintiffs trust and used the trust and confidence to gain an unfair 14 advantage over Plaintiff. 15 16 49. Defendants breached their fiduciary duty owed to Plaintiff by engaging in the acts and 17 omissions alleged hereinabove, including but not limited to, failing to utilize the loaned funds to acquire 18 and develop the Parcels, failing to protect Plaintiffs interest by allowing the security to be impaired, 19 failing to deposit funds in a blocked account to secure future payment, and failing to make any payment 20 of principal or interest on the loaned funds. 21 50. Asa proximate result of the acts and omissions of Defendants hereinabove described, 22 23 Plaintiff has been damaged and may be further damaged, all in an amount to be proved at trial, but 24 which is believed to exceed $2,213,634.96. 25 51. In doing the acts and omissions, as more fully alleged above, Defendants acted with 26 fraud, oppression, and malice, thus entitling Plaintiff to an award of punitive damages. 27 WHEREFORE, Plaintiff prays for judgment as set forth below. Law Offices of 28 JAMES G. SCHWARTZ 7901 Stoneridge Drive Sue 401 Pleasanton, CA 94588 (925) 463-1073 COMPLAINT THIRD CAUSE OF ACTION CONVERSION (against all Defendants) N Ww 52. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove. Fe 53. Atall times herein mentioned, Plaintiff was and is entitled to possession of the loaned A funds, profits and increases as more fully alleged above. 54. Defendants willfully interfered with the right of Plaintiff to possession of the loaned DN funds and accrued interest, profits, properties and benefits and Defendants have converted same for their oOo own use and benefit. This includes but may not be limited to the diversion of funds and assets to their Oo own benefit and to the detriment of Plaintiff, and the withholding of Plaintiffs property from Plaintiff. 10 55. The value of the loaned funds and accrued interest, profits, properties and benefits Be 11 pak ei converted is in an amount to be proved at trial, but is believed to be at least $2,213,634.96. 12 a de 56. Asa proximate result of the foregoing, Plaintiff has been damaged in an amount equal to be Ue 13 iG at st ES Sa the value of the converted assets, plus interest and the costs of recovery including but not limited to 14 SPEER PLSD RE reasonable attorney’s fees and legal costs. 15 57. Defendants’ acts, as alleged above, were willful, wanton, malicious, and oppressive, and 16 were undertaken with the intent to defraud, and therefore justify the awarding of exemplary and punitive 17 damages. 18 19 WHEREFORE, Plaintiff prays for judgment as set forth below. 20 21 FOURTH CAUSE OF ACTION 22 , FRAUD (against all Defendants) 23 58. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove. 24 25 59. Defendants EACI (by and through its CEO and CFO) and EA each made the following 26 representations: that represented that EACI had a contractual right to purchase the Parcels from the then 27 current owner; that EAC] it is a party to a “Renewed Agreement for Purchase and Sale of Real Property _, S oI JAMES G, SCHWARTZ 7901 Stoneridge Drive Sl ute 404 And Escrow Instructions dated March 28, 2005 (as extended)” whereby EACI would acquire the Pleasanton, CA 94588 (825) 463-1073 8 COMPLAINT Parcels; that Plaintiffs could make substantial profits by purchasing portions of the Parcels which Defendants would develop, thereby increasing the value of the Parcels; that Defendants were licensed general contractors, skilled and experienced professionals in the fields of property acquisition and development; that Defendants would use the utmost care and skill and their professional knowledge and abilities to develop the Parcels and maximize the potential return to Plaintiff on the exercise of the Peninsula Option and Middle Baker Option. 60. Each of the above representations was made by EA orally, on a continuing basis, up to and including the time the Exhibits A-G were executed. 61. Each of the representations by Defendants alleged above was false. 62. Defendants knew these representations were false at the time they were made. Defendants made the foregoing false statements intentionally and with the intent to deceive, and to and induce Plaintiffs reliance thereon. 63. Plaintiff did not know or have reason to know of the falsity of these representations when made by Defendants. 64. Plaintiff placed reasonable reliance on the representations made by Defendants, and justifiably relied on the representations to Plaintiff's detriment. 65. Asaresult of the misrepresentations and concealments of Defendants, Plaintiff has been damaged in an amount to be proved at trial, and believed to exceed $2,213,634.96. 66. Defendants’ acts and omissions as more fully alleged above, were done with fraud, oppression, and malice. The acts described herein were undertaken with the intent to defraud, and therefore justify the awarding of exemplary and punitive damages. WHEREFORE, Plaintiff prays for judgment as set forth below. // 27 // 28 Law Offices of JAMES G. SCHWARTZ 7901 Stoneridge Drive Suite 401 Pieasanton, CA 94588 (625) 483-1073 COMPLAINT FIFTH CAUSE OF ACTION NEGLIGENT MISREPRESENTATION OF FACT (As to all Defendants) bd Ww 42. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove. & 43. Defendants made false representations to Plaintiff as described hereinabove. 44, Defendants made the false representations hereinabove without any reasonable basis to ED) believe that the representations were true. ot 45. Defendants made the false representations hereinabove with the intent to induce oO Plaintiff's reliance thereon. 10 46. Defendants knew or reasonably should have known that Plaintiff would rely upon the 11 representations made and indeed Plaintiff did reasonably rely on the representations made. 12 47, Asa proximate result of said reliance on these false representations, Plaintiff was 13 injured in a sum to be proven at trial, and believed to exceed $2,213,634.96, plus interest at the legal 14 rate. 15 16 WHEREFORE, Plaintiff prays for judgment as set forth below. 17 SIXTH CAUSE OF ACTION CIVIL CONSPIRACY 18 (As to all Defendants) 19 59. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove. 20 60. Atall times relevant herein, Defendants knowingly and willfully conspired and agreed 21 among themselves to conceal the fraudulent acts and omissions and other wrongful acts, as more fully 22 alleged above. 23 61. Asa proximate result of this conspiracy, Plaintiff has been damaged as alleged herein and 24 in an amount to be proved at trial, and believed to exceed $2,213,634.96. 25 62. In doing the acts and omissions as more fully alleged above, Defendants acted with fraud, 26 oppression, and malice and thus entitling Plaintiff to an award of punitive damages. 27 28 Law Offices of JAMES G, SCHWARTZ 7961 Stoneridge Drive ‘Suite 401 WHEREFORE, Plaintiff prays for judgment as set forth below. Pleasanton, CA 945388 (925) 463-1073 10 COMPLAINT ET @ @ 1 SEVENTH CAUSE OF ACTION UNFAIR BUSINESS PRACTICES UNDER B & P CODE §17200 ET. SEQ 2 (against all Defendants) 3 67. Plaintiff hereby re-alleges each and every paragraph alleged hereinabove. ‘ 68. In engaging in the acts and omissions as alleged hereinabove, Defendants engaged in unlawful, unfair and/or fraudulent business acts and practices in violation of Business and Professions 4 Code §17200 et seq. B & P Code §17200 has been violated in that, inter alia, one or more Defendants g | have engaged in the following unlawful, unfair and/or fraudulent acts and practices: 9 e The promise to perform work requiring a license from the state of Californnia without the 10 possession of the necessary license iu e Engaging in the occupation of general contractor without the necessary and appropriate licenses as required by the state of California 14 e The diversion of funds to Defendants for the benefit of Defendants and to the detriment of 15 | Plaintiff 16 69. The unlawful, unfair and/or fraudulent business acts and practices in which Defendants 17) have engaged have damaged Plaintiff in an amount to be proved at trial, but which is believed to exceed 18 $2,213,634.96. . 19 00 70. In doing the acts and omissions that constituted unlawful, unfair and/or fraudulent 71 business practices as more fully alleged above, Defendants acted with fraud, oppression, and malice and 99 | thus Plaintiff is entitled to an award of punitive damages. 23 WHEREFORE, Plaintiff prays judgment as follows: 24 1. For payment over to Plaintiff of the amount due from Defendants as a result of the breach of 25 their contracts herein, together with interest at the applicable rate; 26 2. That Plaintiff be awarded full compensatory damages, with interest at the legal rate; 27 3. For consequential damages according to proof; mete 8 4, For exemplary and punitive damages; COMPLAINT 5. For reasonable attorney fees incurred herein; FR 6. For costs of suit herein; YN 7. For such other and further relief as the Court may deem just and proper. WO BP pr Hn Dated this <2? day of May, 2009. HD The Law Offices of James G. Schwartz A Professional Corporation ANA © Oo Shua D. Brysk OD Attorneys for Plaintiff eet NYO KFWY FF OH DH mw ODO DODDB A DN KY DN NO HN WHO KN FP NO ON NO NH NO 27 28 Law Offices of JAMES G. SCHWARTZ COMPLAINT 12 VERIFICATION STATE OF CALIFORNIA COUNTY OF ALAMEDA I, Ravi Cherukuri, CEO of H & C Holdings, Inc., California corporation, hereby declare: I have read the document(s) entitled: VERIFIED COMPLAINT FOR: Breach of Contract and know the contents thereof, and the same is true of my own knowledge, except as to the matters 10 therein stated to be alleged upon information and belief, and as to those matters I believe it to be true. 11 Declared under penalty of perjury according to the Laws of the State of California. Executed in 12 Pleasanton, California. 13 14 15 DATED: May 3 , 2009 — 16 Ravi Cherukuri, CEO 17 18 19 20 21 22 23 24 25 F:\Clients\H & C Holdings\verification\Verified Complaint\.doc #7162.0001 26 27 28 n Exhibit A TERM NOTE $1,500,000 ; Alameda County, California October3 0, 2005 FOR VALUE RECEIVED, the undersigned, Ernie Altman Construction, Inc., a California corporation with its principal place of business at 4047 First Street, Suite 109, Livermore, California 94550 (“Borrower”), hereby promises to pay to the order of H&C Holdings, Inc., a California corporation with its principal place of business at 8614 White Oak Court, Pleasanton, California 94588 (“Lender”), the principal sum of One Million Five Hundred Thousand Dollars and No cents ($1,500,000.00) (the “Loan Amount”), together with interest on . the outstanding balance of the principal sum at the rates and commencing at the times and pursuant to the terms hereinafter provided until this Term Note is paid in full. This Term Note shal] mature on the Term Loan Maturity Date. 1. Terms. Capitalized terms used herein without definition have the meanings ascribed to them in the Loan and Security Agreement of even date herewith (as amended from time to time in accordance with the terms thereof, the “Loan Agreement’), by and between Borrower and Lender. Provided, however, that: Subject to Section 3 hereof, “Applicable Interest Rate” means: A. through and including October 31, 2006, the Applicable Interest Rate shall be a fixed rate of Nine Percent (9%) per annum paid monthly at Three Quarters of One Percent (3/4%) per month; B. on and after November 1, 2006, the Applicable Interest Rate shall be a fixed rate of Fifteen Percent (15%) per annum paid monthly at One and One Quarter Percent (1 4%) per month. “Term Loan Maturity Date” means Aug 1, 2007. 2. Principal and Interest Payments. Subject to Section 3 hereof, this Term Note shall bear interest from the date of issuance (computed on the basis of a 360-day year, for the actual number of days occurring in the period for which interest is payable) at a rate per annum equal to the Applicable Interest Rate on the principal amount from time to time remaining unpaid. For a period of 21 months from the date of the execution of this Note no payments for principal, interest or points shal] be due or payable by Borrower to Lender. If Borrower fulfills its obligations under section 5.2 of the Loan and Security of even date herewith between Borrower and Lender, and Lender exercises its option to purchase real property pursuant to the Peninsula Option Agreement of even date herewith between the parties, the Note shall be reduced by $600,000 and the Borrower shall owe no points or interest on this amount as Lender’s payment under said option agreement in its capacity as Optionee. If Borrower fulfills its obligations under section 5.5 of the Loan Agreement, then it will not owe Lender any points or interest on the balance of the Note, namely, $900,000. The amount of the Note not used as a credit to purchase the Peninsula Property shall become due and owing on August 1, 2007. 3. Prepayment. Borrower may, upon at least three (3) Business Days’ prior written notice to Lender stating the proposed date and amount of the prepayment, and if the notice is 4853-1935-9744.1 (EP given Borrower shall, rel outstanding balance of principal G= of this Term Note in whole or in part, withot*premium or penalty except there sh e no refund for the fee, points, fees and the like. The unused portion of any Monthly Prepaid Interest is refundable. In the event of prepayment, there shall become due and payable an amount equal to all accrued interest attributable to that portion of the outstanding principal balance of the Term Note being prepaid at that time. Principal prepayments shall be of an amount not less than $10,000. ' 4. Payments and Computations. All payments on account of indebtedness evidenced by this Term Note shall be made not later than 11:00 A.M. (California time) on the day when due in lawful money of the United States. All computations of interest shall be made by Lender on the basis of a 360-day year for the actual number of days occurring in the period for which interest is payable. Payments are to be made at such place as Lender or the legal holders of this Term Note may, from time to time, in writing appoint, and in the absence of such appointment, then at the principal place of business of Lender as set forth on the first page of this Term Note. . 5. Applicable Law. Borrower represents and agrees that this instrament and the rights and obligations of all parties hereunder shall be governed by and construed under the laws of the State of California without regard to the conflicts of law principles. 6. Severability. The parties hereto intend and believe that each provision in this Term Note comports with all applicable local, state and federal laws and judicial decisions. However, if any provision or provisions, or if any portion of any provision or provisions, of this Term Note is found by a court of law to be in violation of any applicable local, state or federal ordinance, statute, law, administrative or judicial decision, or public policy, and if the court should declare that portion, provision or provisions to be illegal, invalid, unlawful, void or unenforceable as written, then it is the intent of Borrower and Lender that such portion, provision or provisions be given force to the fullest possible extent that they are legal, valid and enforceable, that the remainder of this Term Note shall be construed as if the illegal, invalid, unlawful, void or unenforceable portion, provision or provisions were not contained herein, and that the rights, obligations and interest of Borrower and Lender or the legal holders hereof under the remainder of this Term Note shall continue in full force and effect. 7. Maximum Interest. Notwithstanding any other provision of this Term Note or any other agreement between Borrower and Lender, nothing herein shall require Borrower to pay, or the holder of this Term Note to accept, interest in an amount which subjects the holder to any penalty or forfeiture under applicable Jaw, and in no event shall the total of all charges payable hereunder (whether of interest or of such other charges which may or might be. characterized as interest) exceed the maximum rate permitted to be charged under applicable law. If Lender or any other holder of this Term Note receives any payment which is or would be in excess of that permitted to be charged under applicable Jaw, the payment shal] have been, and shall be deemed to have been, made in error and shal] be held as additional cash coJJateral for the indebtedness evidenced by this Term Note. 8. Incorporation by Reference. This Term Note is the Term Note referred to in the Loan Agreement and, as such, has been executed and delivered pursuant to, is entitled to the 4853-1935-9744.1 benefits of, and shall be @...: by, the terms and conditions o Loan Agreement, which are expressly incorporated herein by this reference. 9. Waiver. Borrower and all parties now or hereafter liable for the payment hereof, whether as endorser, guarantor, surety or otherwise, generally waive demand, presentment for payment, notice of dishonor, protest and notice of protest, notice of intent to accelerate and notice of acceleration, diligence in collecting or bringing suit against any party hereto, and all other notices other than as expressly provided in the Loan Agreement, and agree to all extensions, renewals, indulgences, releases or changes which from time to time may be granted by the holder hereof and to all partial paym