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23-111 § 23.600 LOANS FOR UNSPECIFIED PURPOSES §23.601 To approve (a) an Employees' Loan sad Guaranty Benefit Plan under which a corporation may make loans for any purpose that the Executive Committee of the Board of Directors shall approve and (b) a specific loan to be made under the Plan (with a copy of the Employees' Loan and Guaranty Benefit Plan) ITEM 7. PROPOSED EMPLOYEES' LOAN AND GUARANTY BENEFIT PLAN On July 14, 1981, the Board of Directors considered the proposal that this Corporation adopt a loan and guaranty benefit plan ("Plan") for the benefit of employees who are officers (and/or Directors) of the Company and its subsidiaries, for the purposes of promoting flexibility and compensating such employees in order to serve as an induceme nt to new employees and to retain and attract the best possible employees. Under t he California Corporations Code, the adoption of such a plan requires the approval of shareholders. A copy of the Plan, as proposed, follows: THE FOOTHILL GROUP, INC. AND SUBSIDIARIESEMPLOYEES' LOAN AND GUARANTY BENEFIT PLAN 1. Name of the Plan. The Foothill Group, Inc., a California corporation (the "Company"), hereby establishes a plan to be known as The Foothill Group, Inc. and Subsidiaries Employees' Loan and Guaranty Benefit Plan (the "Plan"). 2. Purpose of the Plan. The purpose of this Plan is to promote flexibility in the compensation of Participating Employees and to serve as an inducement to new employees, in order to retain and attract the best possible employees. 3. The Plan. Subject to the limitations hereof, the Company will (a) make loans to and/or (b) guaranty any obligation of a Participating Employee whenever the Executive Committee of the Board of Directors determines that such loan or guaranty may reasonably be expected to benefit the Company. Such loan or guaranty may be for such purpose and may be unsecured or secured in such manner as the Executive Committee of the Board shall approve, including, without limitation, a pledge of shares of the Company. 4. Definitions. (a) "Participating Employees" shall be limited to those executive officers and other key employees of the Company or of a Subsidiary of the Company, including executive officers who are also members of the Board of Directors of the Company or of a Subsidiary. A Participating Employee shall be eligible for the benefits hereunder only for such period of time as he or she actually satisfies the requirements of this definition. (b) "Subsidiaries" shall mean those corporations in which stock representing 50% or more of the total combined voting power of all classes of stock of any such corporation is or may be owned by the Company. 5. Limitations. (a) At no time shall the aggregate of (i) the principal amount of any loans to a nd (ii) the total amount of any guarantees of the debts and obligations of any one Partici pating Employee under this Plan exceed $200,000.(b) At no time shall the total principal amount of debt and obligations guaranteed by the Company under this Plan exceed 1% of the total assets of the Company as shown on the Company's Audited Consolidated Balance Sheet, certified by this Company's independent certified public accountants, as of the fiscal year end immediate ly preceding the date of any loan or guaranty hereunder. (c) Any loan made under this Plan to any Participating Employee shall bear interest at, at least, the rate of 8% simple interest per annum. 6. Administration of the Plan. (a) The Plan shall be administered by the Executive Committee of the Board of Directors of the Company. Subject to the provisions of the Plan, the Executive Committ ee shall have authority to construe and interpret the Plan, to promulgate, amend and resci nd rules and regulations relating to its administration, and to make all other det erminations necessary or advisable for the Plan's administration. The interpretation and construction by the Executive Committee of any provisions of the Plan or of any loan agreement or guarant y granted under it shall be final. (b) Loans and guarantees under the Plan shall be granted and the terms and conditions thereof, subject in each case to the Plan, shall be established by the E xecutive Committee. 7. Effective Date of Plan. The Plan shall be effective upon approval by a majority of the outstanding shares of the Company and shall continue thereafter until terminated. 8. Termination of the Plan. The Plan shall be subject to termination at any time, by resolution of the Board of Directors or the shareholders of the Company; provided, however, that such termination shall not affect the terms of any loan or guaranty granted prior to such termination. 9. Amendment of Plan. The Plan may be amended, at any time, by resolution of the Board of Directors or the shareholders of the Company; provided, however, that no such amendment shall become effective except upon approval by the shareholders. Loan to Wayne Counts If the plan is approved, the Board of Directors has determined that the first loan to be made under such plan be made to Counts. In March, 1981, Counts, at the request of and for the benefit of the Company, was relocated from the Denver, Colorado office to headquarte r offices in Los Angeles, California as part of a plan to promote him to President of Foothi ll Capital Corporation and strengthen the overall management of the Company. This relocation, due to the higher cost of housing in Los Angeles, will, without assistance from the Company, cause a hardship to Counts. Counts is presently leasing a home ("Residence") from another wholly-owned subsidiary of the Company, Foothill Thrift and Loan ("FTL") and is paying FTL the fair market rental value for the Residence. In t he event the foregoing Plan is approved, it is anticipated that Counts will purchase the Resi dence from FTL for a fair market price of $341,000. In order to assist him in purchasing the Residence, the Company will make Counts a loan under the Plan, on the following terms and conditions: 23-113 1. The principal amount of the loan will not exceed $200,000, and shall be calculated by subtracting from the $341,000 purchase price: (a) a $20,000 downpayment to be paid by Counts for the Residence; and (b) the total principal amount of the note to be assumed by Counts when he purchases the Residence, secured by a first deed of trust on the Residence. 2. The loan shall bear interest at the rate of 8% simple interest per annum. 3. The loan shall be for ten years, payable interest only for the first 5 years of the loan with principal and interest payable over the last 5 years of the loan. 4. The loan shall be secured by a second deed of trust on the Residence. 5. The loan may be prepaid at any time, without penalty. 6. The loan shall terminate and be immediately repayable to the Company upon any sale of the Residence (such sale to be deemed made upon transfer of title, entering into a land sales contract or otherwise). 7. Upon voluntary termination of Counts' employment with the Company or any of its subsidiaries, the loan shall be repayable within 90 clays after the date of termination; provided, however, that upon the permanent disability or death of Counts, the loan shall continue in full force and effect, subject to all the other te rms and conditions thereof. Management Recommendation and Required Vote Management recommends that stockholders entitled to vote at the Annual Meeting vote "FOR" approval of the adoption of The Foothill Group, Inc. and Subsidiaries Employees' Loan and Guaranty Benefit Plan. Under the California Corporations Code, the Plan must be approved by the holders of the majority of the votes represented by the outstanding shares of the Company's Common Stock and $6.50 Preferred Stock combined, with all shares owned by Counts abstaining.