EXHIBIT 10.2
SECURED NOTES AGREEMENT
This Secured Notes Agreement (the "AGREEMENT"), dated as of October 13,
2004, is entered by and among Xxxxxx Risk Management Services Inc., a Delaware
corporation (the "COMPANY"), the Company's stockholders listed on the
Stockholder Schedule attached hereto as EXHIBIT "A" (individually a
"STOCKHOLDER" and collectively the "STOCKHOLDERS"), LION, Inc., a Washington
corporation ("LION"), and Xxxxxxx Xxxxxx, as the Stockholders' Representative,
as defined below.
RECITALS
WHEREAS, pursuant to the Agreement of Merger, dated as of October 12,
2004, by and among LION, LION Acq., LLC, a Washington limited liability company
wholly-owned by LION ("MERGER LLC"), the Company, Xxxxxxx Xxxxxx, Xxxx
Xxxxxxxxxx, and Xxxxxxx Xxxxxx, as Stockholders' Representative (the "MERGER
AGREEMENT"; capitalized terms used herein without definition shall have the
meanings assigned to them in the Merger Agreement), LION is to acquire from the
Stockholders all of the Company's outstanding Common Stock through the merger of
Merger LLC with the Company (the "MERGER");
WHEREAS, under the Merger Agreement, it is a condition precedent to the
Merger that the Company make a distribution to the Stockholders in the form of
cash and notes (the "DISTRIBUTION NOTES") immediately prior to the closing of
the Merger;
WHEREAS, the Stockholders are willing to receive the Distribution Notes
as part of the Merger transaction, and to approve the Merger, provided that (i)
the Distribution Notes are substantially in the form of the note attached hereto
as EXHIBIT "B" (the "FORM OF DISTRIBUTION NOTE"), (ii) the Company's obligations
under the Distribution Notes are secured by a first priority security interest
in all of the Company's personal property, and (iii) LION guaranties the
Company's obligations under the Distribution Notes and the other Note Documents,
effective as of the closing of the Merger pursuant to a guaranty substantially
in the form of the guaranty attached hereto as EXHIBIT "C" (the "GUARANTY"); and
WHEREAS, LION and the Company are willing to have the Company grant
such security interest and to have the Distribution Notes be in the form of the
Form of Distribution Note and LION is willing to guaranty the Company's
obligations under the Distribution Notes and the other Note Documents pursuant
to the Guaranty, effective as of the closing of the Merger;
NOW, THEREFORE, IT IS AGREED THAT:
1. THE DISTRIBUTION NOTES.
(a) ISSUANCE OF NOTES. Pursuant to the resolutions of the
Company's Board of Directors attached hereto as EXHIBIT "D" (the "BOARD
DISTRIBUTION RESOLUTIONS"), the Company shall issue to each Stockholder a
Distribution Note in the original principal amount indicated opposite such
Stockholder's name on the Stockholder Schedule.
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(b) SECURITY INTEREST.
(i) GRANT OF SECURITY INTEREST. The Company hereby grants to
the Stockholders' Representative, on behalf of the Stockholders, a first
priority security interest in all of the Company's right, title and interest in
the presently existing and hereafter acquired personal property described in
EXHIBIT "E" attached hereto (the "COLLATERAL") to secure the payment of all of
the indebtedness under the Distribution Notes and the other Note Documents and
the performance of all the Company's obligations under the Note Documents (the
"SECURED OBLIGATIONS").
(ii) REPRESENTATIONS AND WARRANTIES AND COVENANTS REGARDING
COLLATERAL. The Company represents and warrants to the Stockholders that it is
the true and lawful owner of the Collateral, having good and marketable title
thereto, free and clear of all Liens other than the security interest granted to
the Stockholders hereunder and the Liens described in Section 3(d)(the
"PERMITTED LIENS"). The Company shall not create or assume or permit to exist
any such Lien on or against any of the Collateral except as created or permitted
hereby and the Permitted Liens, and it shall promptly notify the Stockholders of
any such other Lien against the Collateral and shall defend the Collateral
against, and take all such action as may be necessary to remove or discharge,
any such Lien.
(iii) PERFECTION OF SECURITY NTEREST. The Company shall take
all actions that the Stockholders request to perfect, to continue the perfection
of, and to otherwise give notice of, the Lien granted hereunder.
2. STOCKHOLDERS' REPRESENTATIVE.
(a) GENERAL POWER. The Stockholders' Representative shall have the
power to take all actions that the Stockholders have under the Note Documents
and by law, including the power to exercise the Stockholders' rights and
remedies under the Note Documents and by law during the continuance of an Event
of Default, provided that, absent exigent circumstances where action is
determined by the Stockholders' Representative to be necessary to protect
Collateral, the Stockholders' Representative shall not proceed to enforce the
Stockholders' rights and remedies against the Collateral or the Company by
foreclosure, judicial action or the like (each, an "ENFORCEMENT ACTION"), unless
and until directed to do so by the Requisite Holders. Unless the Stockholders'
Representative shall request further guidance or consents, any direction by the
Requisite Holders to begin an Enforcement Action shall state only that the
Stockholders' Representative shall begin enforcement, and shall not specify the
manner in which enforcement should proceed. Once the Stockholders'
Representative receives direction from the Requisite Holders to commence an
Enforcement Action, all decisions as to how to proceed to enforce the
Stockholders' rights and remedies, including the methods and timing or
proceeding, may be made by the Stockholders' Representative in his good faith
business judgment, with such consultation with the Stockholders as the
Stockholders' Representative in his sole discretion deems reasonable under the
circumstances. Notwithstanding the foregoing, if the Stockholders'
Representative requests the consent of the Stockholders as to any specific
enforcement action, and the Stockholders do not unanimously agree, in writing,
as to whether such action should be taken, then the Stockholders' Representative
may (i) rely upon the decision
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of the Requisite Holders, or (ii) in his discretion, refrain from taking such
action, unless the Requisite Holders agree to indemnify the Stockholders'
Representative expressly with respect to the specific Enforcement Action
proposed to be taken. In the event of one or more foreclosure sales, the
Stockholders' Representative shall have the right to credit bid on behalf of all
the Stockholders in respect of the Secured Obligations.
(b) LIMITATION ON INDIVIDUAL STOCKHOLDER ACTION. Except through
the Stockholders' Representative, no Stockholder shall collect, take possession
of, foreclose upon, or exercise any rights or remedies with respect to the
Collateral, the Company or LION, judicially or non-judicially, in order to
satisfy or collect any Secured Obligations or attempt to do any of the
foregoing.
(c) ACQUISITION OF COLLATERAL. If Collateral is acquired by the
Stockholders' Representative by foreclosure sale or otherwise, at the option of
the Stockholders' Representative, title may be taken in the name of the
Stockholders' Representative or in the name of a corporation affiliated with the
Stockholders' Representative or other nominee designated by the Stockholders'
Representative, in any case, for the ratable benefit of the Stockholders subject
to the terms of this Agreement. Although the Stockholders' Representative shall
consult with the Stockholders as to the general operation and disposition of any
Collateral for which title has been acquired through foreclosure or otherwise,
the Stockholders' consent shall not be required for decisions by the
Stockholders' Representative relating to the management, operation, or repair of
the Collateral so acquired.
(d) ENFORCEMENT COSTS. The costs of repossession, sale, possession
and management (including any costs of holding any Collateral the title to which
is acquired by the Stockholders' Representative on behalf of the Stockholders),
and distribution shall be borne by the Stockholders pro rata until repaid by the
Company. Each Stockholder shall reimburse the Stockholders' Representative for
his share of all such costs promptly upon demand. Without limiting any
obligations of one Stockholder to reimburse the Stockholders' Representative as
contained herein, if the Company fails to pay taxes, assessments, insurance
premiums, claims against the Collateral or any other amount required to be paid
by the Company pursuant to any of the Note Documents, the Stockholders'
Representative may (but shall not be obligated to) advance amounts necessary to
pay the same, and each Stockholder agrees to reimburse the Stockholders'
Representative promptly upon demand for his pro rata share of any such payments,
provided that the Stockholders' Representative has advanced such amounts with
the approval of the Requisite Holders.
(e) POWER OF ATTORNEY. The Company appoints the Stockholders'
Representative, and any agent of the Stockholders' Representative, with full
power of substitution, as the Company's true and lawful attorney-in-fact,
effective as of the date hereof, with power, in his own name or in the name of
the Company, (A) at any time, at the Company's expense, to take such actions as
are necessary to perfect or to continue the perfection of the Stockholders'
security interest in any of the Collateral and (B) during the continuance of an
Event of Default, (i) to endorse any notes, checks, drafts, money orders, or
other instruments of payment in respect of the Collateral that may come into the
Stockholders' possession, (ii) to sign and endorse any drafts against debtors,
assignments, verifications and notices in connection with accounts, and other
documents relating to Collateral, (iii) to pay or discharge taxes or Liens
levied or placed on or threatened against the Collateral, (iv) to demand,
collect, issue receipt for,
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compromise, settle and xxx for monies due in respect of the Collateral, (v) to
notify Persons obligated with respect to the Collateral to make payments
directly to the Stockholders' Representative, and (vi) generally, to do, at the
Stockholders' Representative's option and at the Company's expense, all acts and
things which the Stockholders' Representative deems necessary to protect,
preserve and realize upon the Collateral and the Stockholders' security interest
therein to effect the intent of the Note Documents, all as fully and effectually
as the Company might or could do; and the Company hereby ratifies all that said
attorney shall lawfully do or cause to be done by virtue hereof. This power of
attorney shall be irrevocable as long as any of the Secured Obligations are
outstanding.
(f) EXERCISE OF RIGHTS AND REMEDIES. During the continuance of an
Event of Default, the Stockholders' Representative shall have the right, himself
or through any of his agents, with or without notice to the Company (as provided
below), as to any or all of the Collateral, by any available judicial procedure,
or without judicial process (provided, however, that it is in compliance with
the UCC), to exercise any rights afforded to a secured party under the UCC or
other applicable law. Without limiting the generality of the foregoing, the
Stockholders' Representative shall have the right to sell or otherwise dispose
of all or any part of the Collateral, either at public or private sale, in lots
or in bulk, for cash or for credit, with or without warranties or
representations, and upon such terms and conditions, all as the Stockholders'
Representative, in his sole discretion, may deem advisable, and it shall have
the right to purchase at any such sale on behalf of the Stockholders. The
Company agrees that a notice sent at least fifteen (15) days before the time of
any intended public sale or of the time after which any private sale or other
disposition of the Collateral is to be made shall be reasonable notice of such
sale or other disposition. The proceeds of any such sale, or other Collateral
disposition shall be applied, first to the expenses of retaking, holding,
storing, processing and preparing for sale, selling, and the like, and to the
Stockholders' reasonable attorneys' fees and legal expenses, and then to the
Secured Obligations and to the payment of any other amounts required by
applicable law, after which the Stockholders shall account to the Company for
any surplus proceeds. If, upon the sale or other disposition of the Collateral,
the proceeds thereof are insufficient to pay all amounts to which the
Stockholders are legally entitled, the Company shall be liable for the
deficiency and the reasonable fees of any attorneys the Stockholders'
Representative employs to collect such deficiency; PROVIDED, HOWEVER, that the
foregoing shall not be deemed to require the Stockholders' Representative to
resort to or initiate proceedings against the Collateral prior to the collection
of any such deficiency from the Company. To the extent permitted by applicable
law, the Company waives all claims, damages and demands against the
Stockholders' Representative and the other Stockholders arising out of the
retention or sale or lease of the Collateral or other exercise of the
Stockholders' rights and remedies with respect thereto. All of the Stockholders'
rights and remedies with respect to the Collateral, whether established hereby
or by any other agreements, instruments or documents or by law shall be
cumulative and may be exercised singly or concurrently.
(g) COMPANY WAIVERS. To the extent permitted by law, the Company
covenants that it will not at any time insist upon or plead, or in any manner
whatever claim or take any benefit or advantage of, any stay or extension law
now or at any time hereafter in force, nor claim, take or insist upon any
benefit or advantage of or from any law now or hereafter in force providing for
the valuation or appraisal of the Collateral or any part thereof, prior to any
sale or sales thereof to be made pursuant to any provision herein contained, or
the decree,
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judgment or order of any court of competent jurisdiction; or, after such sale or
sales, claim or exercise any right under any statute now or hereafter made or
enacted by any state or otherwise to redeem the property so sold or any part
thereof, and, to the full extent legally permitted, hereby expressly waives all
benefit and advantage of any such law or laws, and covenants that it will not
invoke or utilize any such law or laws or otherwise hinder, delay or impede the
execution of any power herein granted and delegated to the Stockholders, but
will suffer and permit the execution of every such power as though no such
power, law or laws had been made or enacted.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Stockholders that, except as set forth in the
Schedule of Exceptions attached hereto as EXHIBIT "F", as of the date hereof,
except as otherwise stated to the contrary herein:
(a) CORPORATE POWER; BINDING OBLIGATIONS. The Company has all
requisite legal and corporate power to enter into, execute and deliver this
Agreement, the Distribution Notes and the other Note Documents to which it is a
party. The Note Documents to which it is a party are valid and binding
obligations of the Company, enforceable in accordance with their terms, except
as the same may be limited by bankruptcy, insolvency, moratorium, and other laws
of general application affecting the enforcement of creditors' rights and by
general principles of equity.
(b) AUTHORIZATION. All corporate and legal action on the part of
the Company needed for the Company to issue the Distribution Notes and to
perform its obligations hereunder and under the Distribution Notes and the other
Note Documents to which it is a party have been taken or will be taken prior to
the date hereof.
(c) NO LIENS. The Distribution Notes, when issued in compliance
with the provisions hereof, will be free of any liens or encumbrances; PROVIDED,
HOWEVER, that the Distribution Notes may be subject to restrictions on transfer
under state and/or federal securities laws.
(d) TITLE TO ASSETS; LIENS. The Company has good and marketable
title to the Collateral, in each case subject to no Lien, other than (i) those
resulting from taxes which have not yet become delinquent, and (ii) minor liens
and encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the Company's operations. The Company's
execution, delivery, and performance of and compliance with this Agreement and
the other Note Documents to which it is a party, and the issuance and sale of
the Distribution Notes will not, with or without the passage of time or giving
of notice, result in the creation of any Lien upon any of the Company's assets.
4. COMPANY COVENANTS. For so long as any of the Distribution Notes are
outstanding:
(a) FINANCIAL STATEMENTS. The Company shall deliver to each
Stockholder as soon as practicable after the end of each calendar month, and in
any event within thirty (30) days thereafter, an unaudited balance sheet of the
Company as of the end of such month, cash flow statements and an unaudited
statement of operations of the Company for the portion of the fiscal year ended
with such month prepared in accordance with GAAP and certified by the
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Company's chief financial officer, subject, however, to the exclusion of
footnotes and to normal year-end audit adjustments;
(b) ADDITIONAL INDEBTEDNESS. The Company shall not incur any
Indebtedness, other than the Indebtedness outstanding as of the date hereof,
without the consent of the Requisite Holders, given in their sole discretion;
and
(c) PREPAYMENT OF OTHER INDEBTEDNESS. The Company shall not
prepay, voluntarily or involuntarily, the principal outstanding or accrued
interest with respect to any other Indebtedness.
5. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "EVENT OF DEFAULT" hereunder and the other
Note Documents:
(a) The Company's failure to pay any amount payable under any of
the Distribution Notes or any other Note Documents in accordance with the terms
thereof;
(b) The Company's breach of any representation and warranty
hereunder or any of the other Note Documents or the Company's breach of any
covenant hereunder or any of the other Note Documents which is not cured within
ten (10) days of the earlier of the Company learning of such breach or of notice
thereof from the Stockholders' Representative or any of the Stockholders;
PROVIDED, HOWEVER, that if the cure will take more than ten (10) days and the
Company is diligently pursuing such cure during such ten (10) day period, then
an Event of Default shall not occur with respect to such breach if it is cured
within twenty (20) days of the earlier of the Company learning of such breach or
of notice thereof from the Stockholders' Representative or any of the
Stockholders;
(c) The Company (A) has an order for relief entered against it
under Chapter 11 of Title Eleven of the United States Code (the "BANKRUPTCY
CODE"), (B) makes an assignment for the benefit of creditors, (C) applies for or
seeks the appointment of a receiver, liquidator, assignee, trustee or other
similar official for it or of any substantial part of its property or any such
official is appointed, other than upon the Company's request, and such
unrequested appointment continues for thirty (30) days, (D) institutes
proceedings seeking an order for relief under the federal Bankruptcy Code or
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or any of its debts under other applicable federal or state law relating
to creditor rights and remedies, or any such proceeding is filed against it,
other than upon the Company's request, and such unrequested proceeding continues
undismissed or unstayed for thirty (30) days, or (E) takes corporate action in
furtherance of any of the foregoing actions;
(d) If there is a default in any agreement between the Company and
a third party that gives the third party the right to accelerate any
Indebtedness exceeding $100,000, or if there is an Event of Default, as defined
in the Notes, as issued pursuant to the Merger Agreement;
(e) If there (i) occurs a material adverse change in the business,
operations, prospects or condition (financial or otherwise) of the Company or
the Guarantor, or (ii) is a
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material impairment of the Company's ability to satisfy any portion of the
Secured Obligations; or
(f) The Guaranty ceases for any reason to be in full force or the
Guarantor or any circumstance described in Section 5(b) or Section 5(c) occurs
to or with respect to the Guarantor.
6. DEFINITIONS. As used herein, the following terms shall have the following
meanings:
"GAAP": generally accepted accounting principles as in effect from time
to time.
"INDEBTEDNESS": any liability, whether or not contingent, (i) with
respect to borrowed money, or evidenced by bonds, notes, debentures or similar
instruments, (ii) representing the balance deferred and unpaid of the purchase
price of any property or services (except such balance that constitutes an
account payable to a trade creditor created or incurred in the ordinary course
of business, (iii) as lessee under leases that are capital leases for GAAP
purposes, (iv) consisting of reimbursement obligations with respect to surety
bonds, letters of credit, banker's acceptances, drafts or similar documents or
instruments issued for the liable Person's account, and (v) as a guarantor for
any liability described in clause (i), (ii), (iii) or (iv) of this definition,
including any guarantor arising from the pledge of any property as security for
any liability of a third party described in clause (i), (ii), (iii) or (iv) of
this definition.
"LIENS": any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, security interest, charge, claim
or other encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest) and any agreement to give or refrain from giving a lien,
mortgage, pledge, hypothecation, assignment, deposit arrangement, security
interest, charge, claim or other encumbrance of any kind.
"NOTE DOCUMENTS": this Agreement, the Distribution Notes, the Guaranty
and all documents needed to perfect or give notice of the Stockholders' security
interest in the Collateral.
"PERSON": any individual, sole proprietorship, corporation, limited
liability company, limited liability partnership, partnership, joint venture,
trust, unincorporated organization, estate or any other entity or any
governmental agency.
"REQUISITE HOLDERS": at any time, the Stockholders holding a majority,
measured by principal amount, of the Distribution Notes outstanding.
"UCC": the Uniform Commercial Code in effect from time to time in the
relevant jurisdiction.
7. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement, the Distribution Notes and
the Guaranty constitute the full and entire understanding and agreement between
the parties with regard to the subject matters hereof and thereof.
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(b) WAIVERS AND AMENDMENTS. No provision of this Agreement or any
other Note Document to which the Company is a party may be amended, waived or
modified other than by a document signed by the Company and the Requisite
Holders (as of the effective date of such action); PROVIDED, HOWEVER, that no
amendment, waiver or modification of this subsection may be made without the
consent of all the Stockholders. Upon any such amendment, waiver or
modification, the Company shall promptly give written notice thereof to the
Stockholders who did not execute the written consent. Each Stockholder
acknowledges that the Requisite Holders will have the power under this
subsection to diminish or eliminate rights of such Stockholder under the Note
Documents.
(c) STOCKHOLDER RIGHTS. Each Stockholder shall have the absolute
right to exercise or to refrain from exercising any right such Stockholder has
under the Note Documents, including the right to consent to an amendment, waiver
or modification of any of such documents, and such Stockholder shall not incur
any liability to any other Stockholder with respect to exercising or refraining
from exercising any such right.
(d) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. This Agreement
shall be governed by and construed in accordance with the laws of the State of
California, without regard to the conflicts of law provisions. The Company, LION
and each Stockholder each hereby submits to the jurisdiction of the state and
Federal courts located in the County of San Francisco, State of California, or,
at Stockholders' Representative's sole option, such other venues and courts
which have appropriate jurisdiction over the matter in controversy with respect
to all actions relating to the Note Documents. Each of the Company and LION (i)
waives any objection of forum non conveniens and venue, (ii) waives personal
service of any process upon it, (iii) consents that all such service of process
be made in the manner set forth in Section 7(e) for the giving of notice and
(iv) waives any right it may otherwise have to collaterally attack any judgment
entered against it. The Company, LION and each Stockholder each hereby waive
their respective rights to a jury trial of any claim or cause of action based
upon or arising out of any of the Note Documents or any of the transactions
contemplated therein, including contract claims, tort claims, breach of duty
claims, and all other common law or statutory claims. Each party recognizes and
agrees that the foregoing waiver constitutes a material inducement for entering
into the Note Documents. Each party represents and warrants that such party has
reviewed this waiver with legal counsel and that such party knowingly and
voluntarily waives such party's jury trial rights following consultation with
legal counsel.
(e) NOTICES. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery or sent by
facsimile, addressed (i) if to a Stockholder or the Stockholders'
Representative, at the address such Person has furnished to the Company in
writing, (ii) if to the Company, at the address set forth on the signature page
hereof or such other address as it has furnished to the Stockholders'
Representative in writing in accordance with this subsection, and (iii) if to
LION, at the address set forth on the signature page hereof or such other
address as it has furnished to the Stockholders' Representative in writing in
accordance with this subsection. A notice shall be deemed effectively given, (a)
upon personal delivery to the party to be notified; (b) when sent by confirmed
facsimile if sent during normal business hours of the recipient, and if not,
then on the next business day; (c) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or (d)
one (1) day after
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deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt.
(f) EXPENSES. The Company shall reimburse the Stockholders'
Representative and the Stockholders for all reasonable fees and expenses that
they incur in enforcing the Note Documents and their rights and remedies under
the Note Documents and by law, including reasonable attorneys' fees and legal
expenses. All such fees and expenses shall be Secured Obligations.
(g) VALIDITY. If any provision of this Agreement is judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(h) TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
(i) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date first written above.
XXXXXX RISK MANAGEMENT SERVICES INC.
By: /s/ XXXXXXX XXXXXX
--------------------------------------------
Title: President
-----------------------------------------
ADDRESS FOR NOTICES:
Xxxxxx Risk Management Services Inc.
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xx. Xxxxxxx Xxxxxx
/s/ XXXXXXX XXXXXX
------------------------------------------------
Xxxxxxx Xxxxxx, the Stockholders' Representative
LION INC.
By: /s/ XXXXXXX X. XXXXX
--------------------------------------------
Title: Chairman and CEO
-----------------------------------------
ADDRESS FOR NOTICES:
0000 - 00xx Xxx. X.X., Xxxxx 000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Chairman and CEO
STOCKHOLDER:
/s/
------------------------------------------------
Address:
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EXHIBIT A
[ INTENTIONALLY OMITTED ]
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EXHIBIT B
THIS SECURED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN
COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR HOLDERHOLDER, SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
SECURED PROMISSORY NOTE
$______ October __, 2004
For value received, XXXXXX RISK MANAGEMENT SERVICES INC., a Delaware
corporation (the "COMPANY"), promises to pay to the order of _________________
("HOLDER") the principal sum of $_____, with interest on the unpaid principal
from the date hereof at a rate equal to ten percent (10%) per annum. Interest
shall be computed based on the basis of a 365 day year for the actual number of
days elapsed.
The principal shall be paid in four (4) equal installments, due on
January __, 2005, April __, 2005, July __, 2005, and October __, 2005 (the
"MATURITY DATE"). Each scheduled principal payment shall be accompanied by
accrued and unpaid interest outstanding. In addition to such scheduled principal
payments, the Company shall make on the fifteenth day of each calendar month,
commencing with November 15, a principal payment equal to the amount obtained by
multiplying fifteen percent (15%) of the Company's accounts receivable
collections during the preceding calendar month (in the case of October 2004,
for the period from the date hereof to the last day of such month), by a
fraction, the numerator of which is the then principal amount outstanding under
this Note and the denominator of which is the then aggregate principal amount
outstanding under all of the Notes issued under the Note Agreement, as defined
herein. Each such principal payment shall be applied to the scheduled quarterly
principal payments in the inverse order of maturity. This Note is issued
pursuant to the Secured Notes Agreement, dated as of the date hereof, by and
among the Company, the Holder, LION, Inc., Xxxxxxx Xxxxxx, as the Stockholders'
Representative, and the other stockholders of the Company named therein (the
"NOTE AGREEMENT"; capitalized terms used herein without definition shall have
the meanings assigned to them in the Note Agreement).
The Company shall have the right to prepay, in whole or in part, the
principal outstanding hereunder. Each such principal prepayment shall be
accompanied by the interest accrued and outstanding with respect to such
principal amount. Each such principal prepayment shall be applied to the
scheduled quarterly principal payments in the inverse order of maturity.
All payments of principal and interest shall be in lawful money of the
United States of America.
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Pursuant to the Note Agreement, the Company's payment and other
obligations hereunder are secured by the Collateral.
Upon the Company's receipt of reasonably satisfactory evidence of the
loss, theft, destruction or mutilation of this Note and (i) in the case of any
such loss theft or destruction, upon delivery of indemnity reasonably
satisfactory to the Company in form and amount, or (ii) in the case of any such
mutilation, upon surrender of this Note for cancellation, the Company, at its
expense, shall execute and deliver, in lieu thereof, a new Note.
If any provision of this Note is judicially determined to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
This Note shall be binding upon, and shall inure to the benefit of,
Company and Holder and their respective successors and permitted assigns.
Company may not assign its obligations under this Note without the Holder's
consent, given in the Holder's sole discretion.
This Note shall be construed in accordance with the laws of the State
of California, without giving effect to conflicts of law principles thereof.
XXXXXX RISK MANAGEMENT SERVICES INC
By:
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Title:
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E-13
EXHIBITS C - F
[ INTENTIONALLY OMITTED ]
E-14
