EXHIBIT 10.3
UNCONDITIONAL GUARANTY
THIS UNCONDITIONAL GUARANTY (the "GUARANTY") is entered into as of
October 13, 2004, by LION, INC., a Washington corporation (the "THE GUARANTOR"),
in favor of the holders of the notes that XXXXXX RISK MANAGEMENT SERVICES INC.,
a Delaware corporation (the "COMPANY"), issued to its stockholders (the
"STOCKHOLDERS") pursuant to the Secured Notes Agreement, dated as of October 13,
2004, by and among the Company, the Guarantor, Xxxxxxx Xxxxxx, as the
Stockholders' Representative, and the Stockholders (the "NOTE AGREEMENT";
capitalized terms used herein without definition shall have the meanings
assigned to them in the Note Agreement).
RECITALS
WHEREAS, pursuant to the Agreement of Merger, dated as of October 12,
2004, by and among the Guarantor, LION Acq., LLC, a Washington limited liability
company wholly-owned by the Guarantor ("MERGER LLC"), the Company, Xxxxxxx
Xxxxxx, Xxxx Xxxxxxxxxx, and Xxxxxxx Xxxxxx, as the Stockholders' Representative
(the "MERGER Agreement"), the Company will be merged with and into Merger LLC
and all of the Company's outstanding Common Stock will be converted into the
right to receive shares of Guarantor's common stock and promissory notes issued
by Guarantor (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; and
WHEREAS, the Stockholders are willing to receive the Distribution Notes
as part of the Merger transaction, and to approve the Merger, provided that the
Guarantor guaranties the Company's obligations under the Distribution Notes and
the other Note Documents, on the terms set forth herein, and the Guarantor is so
willing to guaranty the Company's obligations under the Distribution Notes and
the other Note Documents; and
NOW, THEREFORE, IT IS AGREED THAT:
1. The Guarantor unconditionally and irrevocably guarantees payment of
all amounts that the Company owes to the Stockholders under the Note Documents
and the Company's performance of its obligations under the Note Documents (the
"GUARANTEED OBLIGATIONS"). If the Company does not perform its payment
obligations under the Note Documents (including payment obligations arising as a
result of a breach of performance obligations), the Guarantor will immediately
pay all amounts due (including all principal, interest and fees) and satisfy all
the Company's payment obligations under the Note Documents. This Guaranty is a
guaranty of prompt and punctual payment of the Guaranteed Obligations, whether
at stated maturity, by acceleration or otherwise, and is not merely a guaranty
of collection.
2. These obligations are independent of the Company's obligations and
separate actions may be brought against the Guarantor (whether action is brought
against the Company or whether the Company is joined in the action). The
Guarantor waives benefit of any statute of
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limitations affecting its liability. The Guarantor's liability is not contingent
on the genuineness or enforceability of the Note Documents.
3. The Stockholders may, without notice to the Guarantor and without
affecting the Guarantor's obligations under this Guaranty, (a) renew, extend, or
otherwise change the terms of the Note Documents with the Company's consent; (b)
take security for the payment of this Guaranty or the other Note Documents; (c)
exchange, enforce, waive and release any security; and (d) apply the security
and direct its sale as the Stockholders, in their discretion, choose.
4. The Guarantor waives:
a) Any right to require the Stockholders to (i) proceed against the
Company or any other Person; (ii) proceed against or exhaust any
security or (iii) pursue any other remedy. The Stockholders may
exercise or not exercise any right or remedy they have against
the Company or any security they hold (including the right to
foreclose by judicial or nonjudicial sale) without affecting the
Guarantor's liability.
b) Any defenses from disability or other defense of the Company or
from the cessation of the Company's liabilities.
c) Any setoff, defense or counterclaim against the Stockholders.
d) Any defense from the absence, impairment or loss of any right of
reimbursement or subrogation or any other rights against the
Company. Until the Company's obligations to the Stockholders have
been paid, the Guarantor has no right of subrogation or
reimbursement or subrogation or other rights against the Company.
e) Any right to enforce any remedy that the Stockholders have
against the Company.
f) Any rights to participate in any security held by the
Stockholders.
g) Any demands for performance, notices of nonperformance or of new
or additional indebtedness. The Guarantor is responsible for
being and keeping itself informed of the Company's financial
condition. The Stockholders have no duty to provide information
regarding the Company to the Guarantor.
h) The benefits of California Civil Code Sections 2809, 2810, 2819,
2839, 2845, 2847, 2848, 2849, 2850, 2899 and 3433.
5. If the Company becomes insolvent or is adjudicated bankrupt or files
a petition for reorganization, or similar relief under the United States
Bankruptcy Code, or if a petition is filed against the Company and/or any
obligation under the Note Documents is terminated or rejected or any obligation
of the Company is modified or if the Company's obligations are avoided, the
Guarantor's liability will not be affected and its liability will continue. If
the Stockholders must return any payment because of the insolvency, bankruptcy
or reorganization
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of the Company, the Guarantor or any other the guarantor, this Guaranty will
remain effective or be reinstated.
6. Until payment in full in cash of the Company's obligations under the
Note Documents and termination or expiration of the Note Documents, the
Guarantor subordinates any indebtedness of the Company that it holds to the
Guaranteed Obligations; and the Guarantor will collect, enforce and receive
payments as the Stockholders' trustee and will pay the Stockholders those
payments without reducing or affecting its liability under this Guaranty.
7. Except as otherwise specifically provided herein, the Guarantor
waives demand, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of the Secured Obligations on which the Guarantor is
liable.
8. The Guarantor will pay the Stockholders' reasonable fees and
expenses incurred in enforcing this Guaranty, including reasonable attorneys'
fees and expenses. This Guaranty may not be waived, revoked or amended without
the Stockholders' and the Guarantor's prior written consent. If any provision of
this Guaranty is unenforceable, all other provisions remain effective. This
Guaranty is the entire agreement among the parties about this guaranty. No prior
dealings, no usage of trade, and no parol or extrinsic evidence may supplement
or vary this Guaranty. The Stockholders may assign this Guaranty. This Guaranty
benefits the Stockholders, their successors and assigns. This Guaranty is in
addition to any other guaranties the Stockholders obtain.
9. This Guaranty shall be governed by and construed in accordance with
the laws of the State of California, without regard to the conflicts of law
provisions thereof.
Date: October 13, 2004
LION, INC.
By: /s/ XXXXXXX X. XXXXX
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Title: CHAIRMAN AND CEO
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