EX-10.1
2
ex10-1.htm
LLC
INTEREST PURCHASE AGREEMENT
Exhibit
10.1
LLC
INTERESTS PURCHASE AGREEMENT
BY
AND AMONG
COLLEXIS
HOLDINGS, INC.,
LAWRITER,
INC.,
LAWRITER
LLC,
XXXX.XXX
LLC,
AND
INSTITUTE
OF LEGAL PUBLISHING, INC. (f/k/a Lawriter Corporation)
ET
AL.
Dated
as
of February 1, 2008
Page
1
LLC
INTERESTS PURCHASE AGREEMENT
THIS
LLC INTERESTS PURCHASE AGREEMENT
(this
“Agreement”)
is
entered into as of February 1, 2008 (the “Effective
Date”)
by and
among Collexis Holdings, Inc., a Nevada corporation (“Collexis”),
Lawriter,
Inc.,
a
Nevada corporation and wholly-owned Subsidiary of Collexis (“Acquisition
Sub”
and,
together with Collexis, “Buyer”),
Lawriter LLC, an Ohio limited liability company (“Lawriter”),
XXXX.XXX LLC, an Ohio limited liability company (“OSBA”),
and
Institute of Legal Publishing, Inc. (f/k/a Lawriter Corporation), an Ohio
corporation (“Lawcorp”
and,
collectively with OSBA, “Members”
or
“Sellers”).
Buyer, Lawriter, and Sellers are referred to collectively herein as the
“Parties.”
For
purposes of Sections 6, 8, 9 and 11 of this Agreement only, Xxxxxx X. Xxxx,
III
(“Xxxx”),
Xxxxx
X. Xxxxx (“Xxxxx”)
and
the Association shall be added as parties (hereinafter, individually, the
“Ancillary Party,” and collectively the “Ancillary Parties”).
WHEREAS,
Members
in the aggregate own all of the limited liability company interests of Lawriter;
and
WHEREAS,
Buyer
desires to purchase from Members, and Members desire to sell to Buyer, all
of
the issued and outstanding limited liability company interests of Lawriter
in
return for cash and certain other consideration described herein.
NOW,
THEREFORE,
in
consideration of the representations, warranties, and covenants herein
contained, the Parties agree as follows.
SECTION
1. DEFINITIONS.
“Acquisition
Taxes”
shall
have the meaning ascribed thereto in Section 8 of this Agreement.
“Additional
Analytical Publications”
shall
mean books or treatises now or hereafter published by Xxxx or his
Affiliates.
“Additional
Content”
has
the
meaning set forth in Section 6(h) below.
“Adverse
Consequences”
means
all actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, reasonable amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys’ fees and expenses.
“Affiliate”
has
the
meaning set forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act.
“Affiliated
Group”
means
any affiliated group within the meaning of Code Section 1504(a) or any similar
group defined under a similar provision of state, local, or foreign
law.
“Association”
means
the Ohio State Bar Association.
“Bankruptcy
Law Handbook”
shall
mean that certain book which is a treatise on bankruptcy law.
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2
“Business
Reps”
has
the
meaning set forth in Section 8 below.
“Buyer”
has
the
meaning set forth in the preface above.
“Cap”
has
the
meaning set forth in Section 8 below.
“Cincinnati
Court Index Press” shall
mean that certain news publication that is the law publication of the Xxxxxxxx
County Courts in the State of Ohio.
“Closing”
has
the
meaning set forth in Section 2(c) below.
“Closing
Date”
has
the
meaning set forth in 2(c) below.
“COBRA”
means
the requirements of Part 6 of Subtitle B of Title I of ERISA and Code Section
4980B and of any similar state law.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“Collexis
Products”
has
the
meaning set forth in Section 2(b) below.
“Confidential
Information”
has
the
meaning set forth in Section 6.
“Consortium
Capital Contribution”
has
the
meaning set forth in Schedule 2(b)(ii)(C) below as to each Consortium
License.
“Consortium
Licenses”
has
the
meaning set forth in Section 2(b) below.
“Consortium
Net Profit”
has
the
meaning set forth in Section 2(b) below (also referred to by the Parties
as the
“Piece of the Rock Payments”).
“Consortium
Party”
shall
mean a party to a Consortium License other than Lawriter.
“Controlled
Group”
has
the
meaning set forth in Code Section 1563.
“Core
Rep”
has
the
meaning set forth in Section 8 below.
“Deductible”
has
the
meaning set forth in Section 8 below.
“Disclosure
Schedule”
has
the
meaning set forth in Section 4 below.
“Earnout”
has
the
meaning set forth in Section 2(b) below.
“Earnout
Percentage”
has
the
meaning set forth in Section 2(b) below.
“Earnout
Period”
has
the
meaning set forth in Section 2(b) below.
“Earnout
Start Date”
has
the
meaning set forth in Section 2(b) below.
“Employee
Benefit Plan”
means
any “employee benefit plan” (as such term is defined in
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3
ERISA
Section 3(3)) and any other employee benefit plan, program or arrangement
of any
kind.
“Employee
Pension Benefit Plan”
has
the
meaning set forth in ERISA Section 3(2).
“Employee
Welfare Benefit Plan”
has
the
meaning set forth in ERISA Section 3(1).
“Encumbrances”
shall
mean any and all indebtedness, liabilities, encumbrances, liens, obligations,
restrictions, or claims against or relating to Lawriter or all or any part
of
its assets, including the Lawriter and Casemaker trademarks, known or unknown,
contingent or liquidated, and such other indebtedness, liabilities,
encumbrances, liens, obligations, restrictions, or claims (contractual or
otherwise) as may relate thereto.
“Environmental,
Health, and Safety Requirements”
means
all federal, state, local, and foreign statutes, regulations, ordinances,
and
similar provisions having the force or effect of law, all judicial and
administrative orders and determinations, and all common law concerning public
health and safety, worker health and safety, pollution, or protection of
the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances, or wastes,
chemical substances, or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise, or radiation.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“ERISA
Affiliate”
means
each entity that is treated as a single employer with Lawriter for purposes
of
Code Section 414.
“Escrow
Agent”
means
Escrow Associates, Inc.
“Escrow
Agreement”
means
the Escrow Agreement attached hereto as Exhibit
A.
“Escrowed
Materials”
has
the
meaning set forth in Section 6(h).
“Financial
Statements”
has
the
meaning set forth in Section 4(f) below.
“Fixed
Payment”
has
the
meaning set forth in Section 2(b) below.
“GAAP”
means
United States generally accepted accounting principles as in effect from
time to
time, consistently applied.
“
Georgia
Courts”
has
the
meaning set forth in Section 11(h) below.
“
Georgia
Law”
has
the
meaning set forth in Section 11(h) below.
“Income
Tax”
means
any federal, state, local, or foreign income tax, including any interest,
penalty, or addition thereto, whether disputed or not.
“Income
Tax Return”
means
any return, declaration, report, claim for refund, or information return
or
statement relating to Income Taxes, including any schedule or attachment
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thereto,
and including any amendment thereof.
“Indemnified
Party”
has
the
meaning set forth in Section 8(d) below.
“Indemnifying
Party”
has
the
meaning set forth in Section 8(d) below.
“Intellectual
Property”
means
all of the following in any jurisdiction throughout the world: (a) all
inventions (whether patentable or unpatentable and whether or not reduced
to
practice), all improvements thereto, and all patents, patent applications,
and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof,
(b)
all trademarks, service marks, trade dress, logos, slogans, trade names,
corporate names, Internet domain names, and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals
in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier
lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including source code, executable code, data,
databases, and related documentation), (g) all advertising and promotional
materials, (h) all other proprietary rights, and (i) all copies and tangible
embodiments thereof (in whatever form or medium).
“Joint
Venture Agreement”
shall
have the meaning ascribed thereto in Section 4(m)(xi) of this
Agreement.
“Knowledge”
means,
except as otherwise provided in this Agreement, actual knowledge after
reasonable investigation. A Person (other than an individual) will be deemed
to
have “Knowledge” (as defined in this definition or otherwise in this Agreement)
of a particular fact or other matter if any individual who is serving or
has
served as a member, director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) had Knowledge of such fact or other matter
or any such Person who shall be serving in such capacity at the time “knowledge”
is to be determined, has knowledge as defined herein.
“Lawcorp”
has
the
meaning set forth in the preface above.
“Lawriter”
has
the
meaning set forth in the preface above.
“Lawriter
Interests”
means
all of that right, title and interest held by a Person in Lawriter, including,
without limitation, all voting rights, economic rights, capital interests
and
income interests therein.
“Lawriter
Operating Agreement”
means
the Limited Liability Company Agreement of Lawriter, dated June 20, 2000,
as
amended.
“Leased
Real Property”
means
all leasehold or subleasehold estates and other rights to use or occupy any
land, buildings, structures, improvements, fixtures, or other interest in
real
property held by Lawriter.
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5
“Leases”
means
all leases, subleases, licenses, concessions and other agreements (written
or
oral), including all amendments, extensions, renewals, guaranties, and other
agreements with respect thereto, pursuant to which Lawriter holds any Leased
Real Property.
“Legal
Research Services”
has
the
meaning set forth in Section 2(b) below.
“License
Agreement”
shall
mean that certain agreement entered into by and between Lawriter and the
Association as of the 20th day of June 2000, as amended by that certain
amendment dated June 20, 2006, and the License Agreement Amendment.
“License
Agreement Amendment”
shall
mean that certain amendment to the License Agreement and having such terms
and
conditions as are contemplated in this Agreement, a form of which is attached
hereto and marked as Exhibit
B.
“Lien”
means
any mortgage, pledge, lien, encumbrance, charge, or other security interest,
other than (a) liens for taxes not yet due and payable or for taxes that
the
taxpayer is contesting in good faith through appropriate proceedings, (b)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (c) other liens arising in the Ordinary Course of Business
and
not incurred in connection with the borrowing of money.
“Material
Adverse Effect”
or
“Material
Adverse Change”
means
any effect or change that would be (or could reasonably be expected to be)
materially adverse to the business, assets, condition (financial or otherwise),
operating results, operations, or business prospects of Lawriter, taken as
a
whole, excluding any effect or change arising out of either of the following:
(a) any change or trend in the economy in general or generally in the industry
in which Lawriter operates, or (b) this Agreement or the transactions
contemplated by this Agreement.
“Members”
has
the
meaning set forth in the preface above.
“Most
Recent Balance Sheet”
means
the balance sheet contained within the Most Recent Financial
Statements.
“Most
Recent Balance Sheet Date”
means
the date of the Most Recent Balance Sheet.
“Most
Recent Financial Statements”
has
the
meaning set forth in Section 4(f) below.
“Most
Recent Fiscal Month End”
has
the
meaning set forth in Section 4(f) below.
“Most
Recent Fiscal Year End”
has
the
meaning set forth in Section 4(f) below.
“Multiemployer
Plan”
has
the
meaning set forth in ERISA Section 3(37).
“Net
Sales”
has
the
meaning set forth in Section 2(b) below.
“Net
Taxes”
shall
have the meaning ascribed thereto in Section 8 of this Agreement.
“OATL
Verdict Reporter”
shall
mean that certain monthly publication of the Ohio Academy of Trial Lawyers
that
summarizes various verdicts and settlements.
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6
“Ohio
Evidence Manual”
means
that certain book which is a treatise on the Ohio rules of evidence.
“Ordinary
Course of Business”
means
the ordinary course of business consistent with past custom and practice
(including with respect to quantity and frequency).
“Original
Database and Software”
has
the
meaning set forth in Section 4(l) below.
“OSBA”
has
the
meaning set forth in the preface above.
“OSBA
Member”
shall
have the meaning ascribed to the term “Member” in the License
Agreement.
“Parties”
has
the
meaning set forth in the preface above.
“PBGC”
means
the Pension Benefit Guaranty Corporation.
“Person”
means
an individual, a partnership, a corporation, a limited liability company,
an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, any other business entity, or a governmental entity (or any
department, agency, or political subdivision thereof).
“Plan”
has
the
meaning set forth in Section 4(s) below.
“Post-Closing
Covenant”
shall
mean any covenant or agreement made or given in Section 6 of this Agreement
with
respect to any act, action, refrain, limitation or other matter that is to
occur
following (as opposed to on or before) the Closing.
“Pre-Closing
Tax Period”
has
the
meaning set forth in Section 9(a) below.
“Proprietary Information”
has
the
meaning set forth in Section 6(d) below.
“Purchase
Price”
has
the
meaning set forth in Section 2(b) below.
“Xxxxx”
shall
have the meaning ascribed thereto in the preface above.
“Receiving
Party”
shall
have the meaning ascribed thereto in Section 6(d).
“Regulatory
Rep”
has
the
meaning set forth in Section 8 below.
“Representatives”
has
the
meaning set forth in Section 6(d) below.
“Restricted
Territory”
shall
mean the territory defined as the United States of America and its several
territories.
“Scheduled
Payment”
shall
have the meaning ascribed thereto in Section 2(b)(i)(B)(3) of this
Agreement.
“Securities
Act”
means
the Securities Act of 1933, as amended.
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7
“Securities
Exchange Act”
means
the Securities Exchange Act of 1934, as amended.
“Security
Agreement”
has
the
meaning set forth in Section 2(b) below.
“Sellers”
has
the
meaning set forth in the preface above.
“Service”
means
the Casemaker® online legal research service made available to a Consortium
Party pursuant to its respective Consortium License and to the Association
pursuant to the License Agreement.
“Xxxx”
shall
have the meaning ascribed thereto in the preface above.
“Xxxx
Carveout”
means,
collectively (i) the Ohio Evidence Manual, (ii) the Bankruptcy Law Handbook,
(iii) the OATL Verdict Reporter, (iv) the Cincinnati Court Index Press, and
(v)
the Additional Analytical Publications.
“Subsidiary”
means,
with respect to any Person, any corporation, limited liability company,
partnership, association, or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election
of
directors, managers, or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation),
a
majority of the partnership or other similar ownership interests thereof
is at
the time owned or controlled, directly or indirectly, by that Person or one
or
more Subsidiaries of that Person or a combination thereof and for this purpose,
a Person or Persons own a majority ownership interest in such a business
entity
(other than a corporation) if such Person or Persons shall be allocated a
majority of such business entity’s gains or losses or shall be or control any
managing director or general partner of such business entity (other than
a
corporation). The term “Subsidiary”
shall
include all Subsidiaries of such Subsidiary.
“Successor
Business”
has
the
meaning set forth in Section 2(b) below.
“Tax”
or
“Taxes”
means
any federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, and including any obligations
to
indemnify or otherwise assume or succeed to the Tax liability of any other
Person.
“Tax
Return”
means
any return, declaration, report, claim for refund, or information return
or
statement relating to Taxes, including any schedule or attachment thereto,
and
including any amendment thereof.
“Third-Party
Claim”
has
the
meaning set forth in Section 8(d) below.
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“Thunderstone
Agreement”
has
the
meaning set forth in Section 6(j) below.
“Thunderstone
Obligation”
has
the
meaning set forth in Section 6(j) below.
“Thunderstone
Software”
has
the
meaning set forth in Section 6(j) below.
“Trade
Secrets”
has
the
meaning set forth in Section 6 below.
“Triggering
Event Fees”
has
the
meaning set forth in Schedule 2(b)(ii)(C) below as to each Consortium
License.
“Updated
Content”
has
the
meaning set forth in Section 6(h) below.
“Updated
Thunderstone Software”
shall
have the meaning ascribed thereto in Section 6(h) of this
Agreement.
WARN
Act”
has
the
meaning set forth in Section 4(r) below.
SECTION
2. PURCHASE AND SALE OF LAWRITER INTERESTS.
(a)
Summary of Transaction.
On and
subject to the terms and conditions of this Agreement, Buyer agrees to purchase
all of the Lawriter Interests from the Members and each Member agrees to
sell,
transfer and assign to Buyer all of its Lawriter Interest for the consideration
specified below in this Section 2.
(b)
Purchase Price.
As the
sole and complete consideration for the Lawriter Interests, Buyer agrees
to pay
the following: (i) the Fixed Payment and (ii) the Earnout (if any), as follows
(the Fixed Payment and the Earnout (if any) being referred to hereinafter
collectively as the “Purchase
Price”):
(i)
Fixed
Payment.
The
Fixed Payment is Nine Million Dollars ($9,000,000) (the “Fixed
Payment”),
payable as follows:
(A)
OSBA
Portion.
One
half of the Fixed Payment (or $4,500,000) shall be paid to OSBA as follows:
(1)
a
cash payment of $1,125,000 at the Closing, by wire transfer of immediately
available funds to such account designated by OSBA in writing at least one
business day prior to the Closing Date;
(2)
four
cash payments of $313,750 each, for a total of $1,255,000, by wire transfer
in
immediately available funds to such account designated by OSBA in writing
at
least one business day prior to the applicable payment date, payable during
the
first year following the Closing respectively on the 3-month, 6-month, 9-month
and 1-year anniversaries of the Closing Date; and
(3)
either (y) crediting against the balance, 100% of the monthly fee that would
otherwise be payable by the Association to Lawriter under the License Agreement
for the Service for the sixty (60) months following the Closing (which equals
a
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credit
of
approximately $424,000 per twelve month period or $2,120,000 in total);
provided,
however,
that the
License Agreement Amendment shall extend the term of the License Agreement
to
accommodate such credit and to make such further changes as are described
in
Section 6(i) of this Agreement, or (z) paying all or any portion of such
balance
directly to OSBA on a monthly basis, in which case the Association would
resume
making payments to Lawriter under the License Agreement as would thereafter
come
due in the Ordinary Course of Business; provided, further,
that
with respect to the unpaid portion of the Fixed Payment, Buyer shall have
the
right to prepay all or any portion thereof.
(B)
Lawcorp
Portion.
One-half of the Fixed Payment (or $4,500,000) is to be paid to Lawcorp as
follows:
(1) a cash
payment of Five Hundred Thousand Dollars ($500,000) at the Closing, by wire
transfer in immediately available funds to such account designated by Lawcorp
in
writing at least one business day prior to the Closing Date;
(2) Four
Hundred Ninety Nine Thousand Nine Hundred and Ninety Nine Dollars and Fifty
Cents ($499,999.50) in shares of Collexis common stock is to be paid at Closing,
which for purposes hereof shall result in the subscription for and issuance
of
Six Hundred Sixty Six Thousand Six Hundred and Sixty Six (666,666) shares
of
Collexis common stock, based on an agreed value of seventy-five cents ($0.75)
per share (the "Stock") pursuant to the Investor Letter (as defined below);
provided,
however,
that
Lawcorp shall have first completed Collexis’ Investor Letter, a copy of which
form is attached hereto and marked as Exhibit
2(b)(i)(B)(2)(the “Investor Letter”) [Collexis
shall instruct its transfer agent to deliver to Lawcorp a certificate for
the
Stock promptly after Closing. Lawcorp and Collexis agree that the Stock shall
be
“restricted securities” under Rule 144. Collexis represents and warrants that it
has made as of the Closing and shall make thereafter all necessary filings
with
the SEC as required under the Securities Act of 1933 and to take such other
actions as are reasonably requested by Lawcorp, including, without limitation,
the issuance of legal opinions if required, so as to permit Lawcorp to sell
the
Stock in accordance with such Rule.]; and
(3) Three
Million Five Hundred Thousand Dollars and Fifty Cents ($3,500,000.50) to
be paid
in scheduled cash payments in the amounts and as of the dates as follows
(collectively, the “Scheduled Payments”): (x) Five Hundred Thousand Dollars and
Fifty Cents ($500,000.50), which amount is to be paid on or before the
8th
day of
February 2008; and (z) Seven Hundred Fifty Thousand Dollars ($750,000) each
upon
and coincident with the first, second, third, and fourth anniversaries of
the
Closing; provided,
however,
that
with respect to the Scheduled Payments, Buyer shall have the right to prepay
all
or any portion thereof, the obligation for which shall be secured by a pledge
of
Lawriter’s accounts receivables earned from the Consortium Licenses in the event
of a default in the payment of any one of the installments payments to
Lawcorp
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described
under this Section 2(b)(i)(B)(2) and a first-priority lien on the Lawriter
equipment pursuant to a Security Agreement in the form attached hereto as
Exhibit
E
(the
“Security
Agreement”)
to
secure such installment payments.
(ii)
Earnout.
(A)
Earnout
Defined. For purposes of this Section 2(b)(ii), “Earnout”
shall
mean a lump sum cash payment equal to the product of the Earnout Percentage
multiplied by Net Sales of the Successor Business during each calendar quarterly
period within the Earnout Period, reduced by the Consortium Net Profits;
provided,
however,
that in
no event shall the aggregate of any or all such cash payments exceed Fifteen
Million Dollars ($15,000,000).
(B) Payment.
The Earnout shall be divided equally and paid on a prorata basis to each
Member
(in each case, by wire transfer in immediately available funds to such account
designated by Lawcorp or OSBA, respectively, in writing at least one business
day prior to the applicable payment date) within twenty (20) days following
the
end of such quarterly period to which it relates and adjusted in subsequent
periods as necessary to reflect any changes in Net Sales as set forth in
Buyer’s
annual audited financial statements for the applicable fiscal period. The
Earnout shall be paid with respect to Net Sales during the period beginning
on
the Earnout Start Date (as defined below) and ending on the last day of the
60th
calendar month thereafter (the “Earnout
Period”),
with
the calculation for any part year period being determined on a pro
rata
monthly
basis by Buyer’s auditors.
(C) Additional
Definitions. For purposes of the Earnout, the following phrases shall have
the
meaning ascribed thereto: (1) “Consortium
Net Profits”
shall
mean that amount as may become due to each Consortium Party (collectively,
the
“Consortium
Parties”)
in
accordance with its respective Consortium License as a result of the transaction
contemplated in this Agreement, which for this purpose, each of the Members
shall have provided on Schedule 2(b)(ii)(C)(1) its respective “Consortium
Capital Contribution”
as
of
Closing and on a supplement to such Schedule its Triggering Event Fees not
later
than thirty (30) days following Closing; (2) “Consortium
Licenses”
shall
mean those agreements set forth under the heading “Consortium Licenses” in
Section 4(m) of the Disclosure Schedule; (3) “Earnout
Percentage”
means
3.75% of Net Sales; provided,
however,
that if
prior to the Earnout Start Date, Buyer (or any Affiliate thereof) does not
acquire one or more USA legal content providers having aggregate annual Net
Sales of at least One Million Dollars ($1,000,000), then the Earnout Percentage
will be increased from 3.75% of Net Sales to 3.9% of Net Sales; provided,
further,
that
such Earnout Percentage shall return to 3.75% as of the date of the acquisition
by Buyer or any of its Affiliates of such a content provider or providers
and
thereafter for the remainder of the Earnout Period; (4) “Earnout
Start Date”
means
the first to occur of the following dates: (y) the first day of that calendar
month on which the aggregate Net Sales of the Successor Business for each
of the
previous three consecutive calendar months following the Closing have been
at
least equal to $2,750,000, or (z) the first
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11
day
of
the eighteenth month following Closing; (5) “Legal
Research Services”
means
the marketing, sales, licensing or other business undertaking relating to
the
online use (y) to any individual, business, or other entity (including, without
limitation bar associations, law firms or lawyers) of the Escrowed Materials,
and (z) to bar associations, law firms or lawyers of those other products
and
services that are described on that certain document labeled “The New Lawriter”
(a copy of which is attached hereto as Schedule 2(b)(ii)(C)(5)); (6)
“Net
Sales”
means
the gross revenues of the Successor Business from Legal Research Services,
less
returns, discounts, allowances, sales taxes, and bad debt reserves, all as
determined in accordance with GAAP; provided,
however,
that in
no event shall Net Sales include any such Successor Business revenue derived
from Collexis Products; (7) “Collexis
Products”
shall
mean any product or service that does not constitute Legal Research Services,
which products and services include, without limitation, transactions,
e-discovery and customized solutions or any other products or services created,
invented, developed or otherwise in-licensed by Buyer or any Affiliate thereof
that do not constitute Legal Research Services; and (8) “Successor
Business”
means
Lawriter, Buyer or any Affiliate thereof.
(D) With
each
quarterly Earnout payment, Buyer shall furnish to Sellers complete and detailed
written information as to the Net Sales for such quarter and all other matters
upon which the calculation of the amount of the payment was based. Not more
than
once per any twelve consecutive monthly period, Sellers shall have the right
to
jointly appoint an independent certified public accountant who may on Sellers’
behalf review at Sellers’ sole cost and expense Buyer’s books and records as and
to the extent the same shall pertain to the Earnout to verify such information
and the calculation of the Earnout payment amount and to speak with Buyer’s
auditors with respect to the same; provided,
however,
that
such rights shall lapse upon and coincident with the first anniversary of
the
last day of the Earnout Period; provided,
further,
that if
the review conducted under this Section 2(b)(ii)(D) evidences that the Earnout
payment made hereunder is underpaid by more than ten (10%) of the amount
that
should have been paid, then Buyer shall be obligated to reimburse Sellers
for
the expenses reasonably and actually incurred by Sellers for such annual
review
undertaken in connection therewith.
(c)
Closing.
The
closing of the transactions contemplated by this Agreement (the “Closing”)
shall
take place at the offices of Xxxxxxxx Xxxx LLP, 00 Xxxx Xxxxx Xxxxxx, Xxxxx
000,
Xxxxxxxx, Xxxx 00000, simultaneously with the execution of this Agreement,
or
such other location, date and time as the parties shall mutually agree (the
“Closing
Date”).
(d)
Deliveries
at Closing. At
the
Closing, (i) Sellers will deliver to Buyer the various certificates,
instruments, and documents referred to in Section 7(a) below, (ii) Buyer
will
deliver to Sellers the various certificates, instruments, and documents referred
to in Section 7(b) below, (iii) if the Lawriter Interests are certificated,
each
Member will deliver to Buyer limited liability company certificates representing
all of its Lawriter Interests, endorsed in blank or accompanied by duly executed
assignment documents, and (iv) Buyer will deliver to each Member the
consideration specified in Section 2(b) above to be paid at
Closing.
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12
(e)
Withholding
Rights; Deductions.
Buyer
shall be entitled to deduct and withhold from any payment to any Person under
this Agreement or any related agreements such amounts as it is required to
deduct and withhold with respect to the making of such payment or any other
Tax
withholding obligation with respect to the sale of the Lawriter Interests
owed
by such Person as of the Closing. To the extent that amounts are so withheld
or
deducted by the Buyer such withheld amounts shall be treated for all purposes
of
this Agreement as having been paid to such Person in respect of which such
deduction and withholding was made by the Buyer. Buyer will pay over to the
appropriate governmental entity amounts withheld under this clause.
SECTION
3. REPRESENTATIONS AND WARRANTIES CONCERNING TRANSACTION.
(a)
Sellers’ Representations and Warranties. Each
Seller severally represents and warrants to Buyer that the statements contained
in this Section 3(a) with respect to it, and each Seller jointly and severally
represents and warrants to Buyer that the statements contained in this Section
3(a) with respect to Lawriter, are true, correct and complete as of the date
of
this Agreement and will be true, correct and complete as of the Closing Date
(as
though made then and as though the Closing Date were substituted for the
date of
this Agreement throughout this Section 3(a)).
(i)
Organization
of Members.
Each
Member is duly organized, validly existing, and in good standing under the
laws
of the jurisdiction of its incorporation or formation.
(ii)
Authorization
of Transaction.
Each
Seller has full power and authority (including, as applicable, full corporate
or
other entity power and authority) to execute and deliver this Agreement and
to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of each Seller, enforceable in accordance with
its
terms and conditions. Sellers need not give any notice to, make any filing
with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated
by this
Agreement. The execution, delivery and performance of this Agreement and
all
other agreements contemplated hereby and to which Seller is to be a party
has
been duly authorized by such Seller.
(iii)
Non-contravention.
Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other
restriction of any government, governmental agency, or court to which any
Seller
is subject or any provision of its charter, bylaws or other governing documents,
(B) conflict with, result in a breach of, constitute a default under, result
in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which any Seller is a party
or by
which it is bound or to which any of its assets are subject, or result in
the
imposition of any Lien upon any of its assets, or (C) result in the imposition
or creation of a Lien upon or with respect to any Lawriter
Interests.
(iv)
Brokers’
Fees.
Neither
Lawriter nor any other Seller has any liability or obligation to pay any
fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
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13
(v)
Lawriter
Interests.
Each
Member holds of record and owns beneficially its respective 50% of the Lawriter
Interests, free and clear of any restrictions on transfer, Taxes, Liens,
options, warrants, purchase rights, contracts, commitments, equities, claims
or
demands (other than any of the foregoing arising under the Securities Act,
state
securities laws, the Joint Venture Agreement, or the Lawriter Operating
Agreement). No Member is a party to any option, warrant, purchase right,
or
other contract or commitment (other than this Agreement, the Joint Venture
Agreement, or the Lawriter Operating Agreement) that could require it to
sell,
transfer, or otherwise dispose of any limited liability company interest
of
Lawriter. No Member is a party to any voting trust, proxy, or other agreement
or
understanding with respect to the voting of any limited liability company
interest of Lawriter other than the Lawriter Operating Agreement.
Notwithstanding the foregoing, the Lawriter Operating Agreement shall be
terminated upon and coincident with Closing.
(vi)
Piece
of the Rock Payments.
The
Consortium Capital Contribution and Triggering Event Fees are equal to the
amounts and the formula by which the corresponding “Piece of the Rock” payment
due and owing under each of the respective Consortium Licenses are as reflected
on Schedule 2(b)(ii)(C) as prepared for each respective Consortium Party
and
Consortium License referenced thereon. The “Piece of the Rock” payments required
to be made under the Consortium Agreements in connection with the transaction
contemplated in this Agreement are the only payments Lawriter is required
to
make to any Person in connection with the transactions contemplated by this
Agreement.
(b)
Buyer’s Representations and Warranties. Buyer
represents and warrants to Sellers that the statements contained in this
Section
3(b) are true, correct and complete as of the date of this Agreement and
will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout
this
Section 3(b)).
(i)
Organization
of Buyer.
Each
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation.
(ii)
Authorization
of Transaction.
Each
Buyer has full power and authority (including full corporate or other entity
power and authority) to execute and deliver this Agreement and to perform
its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of each Buyer, enforceable in accordance with its terms and
conditions. Buyer need not give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental
agency
in order to consummate the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement and all other agreements
contemplated hereby have been duly authorized by each Buyer.
(iii)
Non-contravention.
Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other
restriction of any government, governmental agency, or court to which either
Buyer is
Page
14
subject
or any provision of its charter, bylaws, or other governing documents or
(B)
conflict with, result in a breach of, constitute a default under, result
in the
acceleration of, create in any party the right to accelerate, terminate,
modify,
or cancel, or require any notice under any agreement, contract, lease,
license,
instrument, or other arrangement to which either Buyer is a party or by
which it
is bound or to which any of its assets are subject.
(iv)
Brokers’
Fees.
Buyer
has no liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(v)
Investment.
Buyer is
not acquiring the Lawriter Interests with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities
Act.
SECTION
4. REPRESENTATIONS AND WARRANTIES CONCERNING LAWRITER.
Lawriter
and each Seller jointly and severally represents and warrants to Buyer that
the
statements contained in this Section 4 are true, correct and complete as
of the
date of this Agreement and will be true, correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted
for
the date of this Agreement throughout this Section 4), except as set forth
in
the disclosure schedule delivered by Sellers to Buyer on the date hereof
and
initialed by the Parties (the “Disclosure
Schedule”).
The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 4.
(a)
Organization, Qualification, and Corporate Power. Lawriter
is a limited liability company duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization. Lawriter
is
duly qualified and authorized to conduct business and is in good standing
under
the laws of each jurisdiction where such qualification is required, except
where
the lack of such qualification would not have a Material Adverse Effect.
Lawriter has full limited liability company power and authority to carry
on the
business in which it is engaged and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and to own and
use
the properties owned and used by it. Section 4(a) of the Disclosure Schedule
lists the directors or managers and officers of Lawriter. Lawriter has delivered
to Buyer correct and complete copies of the certificate of formation or other
charter documents of Lawriter and the Lawriter Operating Agreement (in each
case
as amended to date). There are no agreements among Lawriter and its Members
or
among the Members relating to or otherwise governing the issues reflected
in the
Lawriter Operating Agreement other than the Joint Venture Agreement and the
Lawriter Operating Agreement. The minute books (containing the records of
meetings of the members, the board of directors or managers, and any committees
of the board) of Lawriter are correct and complete. Lawriter is not in default
under or in violation of any provision of its charter or the Lawriter Operating
Agreement.
(b)
Capitalization. The
entire authorized equity of Lawriter consists of limited liability company
interests, of which each Member is both the record and beneficial owner of
50%.
All of the Lawriter Interests have been duly authorized, are validly issued,
fully paid, and non-assessable. Except as may otherwise be provided in the
Joint
Venture Agreement or the Lawriter Operating Agreement (which Operating Agreement
shall be terminated upon and
Page
15
coincident
with Closing), (i) there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights,
or
other contracts or commitments that could require Lawriter to issue, sell,
or
otherwise cause to become outstanding any equity of Lawriter other than the
Lawriter Interests held by the Members; (ii) there are no outstanding or
authorized appreciation, phantom, profit participation, or similar rights
with
respect to Lawriter Interests; and (iii) there are no voting trusts, proxies,
or
other agreements or understandings with respect to the voting of the limited
liability company interests of Lawriter. All offers or sales of securities
of
Lawriter have been made in accordance with applicable securities laws, including
compliance with applicable exemptions under the Securities Act and applicable
state securities laws.
(c)
Non-contravention. Lawriter
is not required to give any notice to, make any filing with, or obtain any
authorization, consent, waiver or approval of any government or governmental
agency or other third party (except as may otherwise be provided in the Lawriter
Operating Agreement, which agreement shall be terminated upon and coincident
with Closing) in order for the Parties to consummate the transactions
contemplated by this Agreement, except where the failure to give notice,
to
file, or to obtain any authorization, consent, waiver or approval would not
have
a Material Adverse Effect.
(d)
No
Subsidiaries. Lawriter
does not have any Subsidiaries or Affiliates other than Sellers.
(e)
Title to Assets.
Lawriter
has good and marketable title to, or a valid leasehold interest in, the
properties and assets used by it, located on its premises, or otherwise shown
on
the Most Recent Balance Sheet or acquired after the date thereof, free and
clear
of all Liens or other Encumbrances, except for properties and assets disposed
of
in the Ordinary Course of Business since the date of the Most Recent Balance
Sheet. Without limiting the generality of the foregoing, Lawriter has good
and
marketable title, free and clear of all Liens or other Encumbrances, to the
assets listed on Schedule 4(e) as being owned by Lawriter, and as of the
Closing
Date, will have good and marketable title, free and clear of all Liens or
other
Encumbrances, to the federal registrations of the Lawriter and the Casemaker
trademarks now being used by Lawriter in connection with its business. Neither
Member holds, owns, claims or otherwise asserts any rights whatsoever to
any
property or right thereto used by Lawriter in the Ordinary Course of Business
or
otherwise owned by Lawriter.
(f) Financial
Statements. Attached
hereto as Exhibit C are the following financial statements (collectively
the
“Financial
Statements”):
(i)
compiled and reviewed consolidated balance sheets and profit and loss statements
and changes in cash flow as of and for the fiscal year ended December 31,
2006
(the “Most
Recent Fiscal Year End”)
for
Lawriter; and (ii) unaudited consolidated balance sheets and statements of
income and expense (the “Most
Recent Financial Statements”)
for
the month and interim period ended November 30, 2007 (the “Most
Recent Fiscal Month End”)
for
Lawriter. The Financial Statements (including the notes thereto) are true,
correct and complete, have been prepared in accordance with GAAP throughout
the
periods covered thereby and present fairly the financial condition of Lawriter
as of such dates and the results of operations of Lawriter for such periods;
provided,
however,
that
the Most Recent Financial Statements are subject to normal year-end adjustments
(which will not be material individually or in the aggregate) and lack footnotes
and other presentation items.
(g)
Events Subsequent to Most Recent Fiscal Year End. Except
as
expressly set forth below
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16
in
this
Subsection (g), since the Most Recent Fiscal Year End, there has not been
any
Material Adverse Change. Without limiting the generality of the foregoing,
since
that date:
(i)
Lawriter has not sold, leased, transferred, or assigned any assets, tangible
or
intangible, outside the Ordinary Course of Business;
(ii)
except as provided in Schedule 4(g)(A), (C), (D), (E), (F) and (G), Lawriter
has
not entered into any agreement, contract, lease, or license;
(iii)
except as provided in Schedule 4(g)(B), (C), (D), (E), (F) and (G), no party
has
accelerated, terminated, made material modifications to, or canceled any
agreement, contract, lease, or license to which Lawriter is a party or by
which
it is bound;
(iv)
Lawriter has not imposed or suffered any Lien upon any of its assets, tangible
or intangible;
(v)
Lawriter has not made any capital expenditures outside the Ordinary Course
of
Business;
(vi)
Lawriter has not made any capital investment in, or any loan to, any other
Person outside the Ordinary Course of Business;
(vii)
Lawriter has not created, incurred, assumed, or guaranteed more than $10,000
in
aggregate indebtedness for borrowed money and capitalized lease
obligations;
(viii)
Lawriter has not transferred, assigned, or granted any license or sublicense
of
any rights under or with respect to any Intellectual Property outside the
Ordinary Course of Business;
(ix)
there has been no change made or authorized in the charter of Lawriter or
the
Lawriter Operating Agreement;
(x)
Lawriter has not issued, sold, or otherwise disposed of any limited liability
company interests, or granted any options, warrants, or other rights to purchase
or obtain (including upon conversion, exchange, or exercise) any such interests;
(xi)
Except as otherwise provided in Section 5(c) below, Lawriter has not declared,
set aside, or paid any dividend or made any distribution with respect to
its
limited liability company interests (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of such interests;
(xii)
Lawriter has not experienced any damage, destruction, or loss (whether or
not
covered by insurance) to its property, normal wear and tear
excepted;
(xiii)
except as provided in Schedule 4(g)(D) and (E), Lawriter has not made any
loan
to, or entered into any other transaction with, any of its directors, officers,
or employees outside the Ordinary Course of Business;
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17
(xiv)
except as provided in Schedule 4(g)(F), Lawriter has not entered into or
terminated any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such contract or
agreement;
(xv)
Lawriter has not granted any increase in the base compensation of any of
its
directors or managers, officers, or employees outside the Ordinary Course
of
Business;
(xvi)
Lawriter has not adopted, amended, modified, or terminated any bonus, profit
sharing, incentive, severance, or other plan, contract, or commitment for
the
benefit of any of its directors or managers, officers, or employees (or taken
any such action with respect to any other Employee Benefit Plan);
(xvii)
Lawriter has not made any other change in employment terms for any of its
directors or managers, officers, or employees outside the Ordinary Course
of
Business;
(xviii)
Lawriter has not made any loans or advances of money; and
(xix)
Lawriter has not committed to any of the foregoing.
(h)
Undisclosed Liabilities. Lawriter
does not have any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due, including
any liability for Taxes) of the type requiring financial statement disclosure,
except for (i) liabilities set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) and (ii) liabilities that have arisen
after the Most Recent Fiscal Month End in the Ordinary Course of
Business.
(i)
Legal Compliance. Lawriter
has complied with all applicable laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder
and including the Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1 et
seq.)
of
federal, state, local, and foreign governments (and all agencies thereof),
and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against it alleging any failure
so
to comply.
(j)
Tax
Matters.
(i)
Lawriter has filed all federal Tax Returns and all state or other Tax Returns
that it was required to file. All such Tax Returns as so filed are true and
correct in all material respects and disclose the true and correct distributable
net income of the members thereof for the periods covered thereby. All Taxes
due
and owing by Lawriter (whether or not shown on any Tax Return) have been
paid.
Lawriter is not currently the beneficiary of any extension of time within
which
to file any Tax Return. There are no Liens for Taxes (other than Taxes not
yet
due and payable) upon any of the assets of Lawriter. Lawriter has withheld
and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
member,
or other third party, and all Forms W-2 and 1099 required with respect thereto
have been properly completed and timely filed.
(ii)
There is no dispute or claim concerning any Tax liability of Lawriter
either
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18
(A) claimed
or raised by any authority in writing or (B) as to which any of Sellers and
the
directors or managers or officers of Lawriter has Knowledge based upon personal
contact with any agent of such authority.
(iii)
Section 4(j) of the Disclosure Schedule lists all federal, state, local,
and
foreign Tax Returns filed with respect to Lawriter for taxable periods ended
on
or after December 31, 2003, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of audit.
Sellers
have delivered to Buyer correct and complete copies of all federal Income
Tax
Returns, examination reports, and statements of deficiencies assessed against,
or agreed to by Lawriter on or since December 31, 2003. Lawriter has not
waived
any statute of limitations in respect of Taxes or agreed to any extension
of
time with respect to a Tax assessment or deficiency.
(iv)
The
unpaid Taxes of Lawriter (A) did not, as of the Most Recent Fiscal Month
End,
exceed the reserve for Tax liability (rather than any reserve for deferred
Taxes
established to reflect timing differences between book and Tax income) set
forth
on the face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (B) for all periods prior to the Closing will not exceed that reserve
as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of Lawriter in filing its Tax
Returns.
(v)
Lawriter will not be required to include any item of income in, or exclude
any
item of deduction from, its distributable net income for any taxable period
(or
portion thereof) ending after the Closing Date as a result of any:
(A)
change in method of accounting for a taxable period ending on or prior to
the
Closing Date;
(B)
“closing agreement” as described in Code Section 7121 (or any corresponding or
similar provision of state, local or foreign income Tax law) executed on
or
prior to the Closing Date;
(C)
intercompany transactions or any excess loss account described in Treasury
Regulations under Code Section 1502 (or any corresponding or similar provision
of state, local or foreign income Tax law);
(D)
installment sale or open transaction disposition made on or prior to the
Closing
Date; or
(E)
prepaid amount received on or prior to the Closing Date.
(k)
Real
Property.
(i)
Lawriter does not own any real property or any interest in leased property,
except for the leaseholds created under the real property leases identified
in
clause (ii) below.
(ii)
Section 4(k)(ii) of the Disclosure Schedule sets forth the address of each
parcel of Leased Real Property, and a true and complete description of all
Leases for each such Leased Real Property (including the date and name of
the
parties to such Lease
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19
document)
used in Lawriter’s business or with respect to which it otherwise has any
obligation. Sellers have delivered to Buyer a true and complete copy of each
such Lease document, including any amendments thereto. Except as set forth
in
Section 4(k)(ii) of the Disclosure Schedule, with respect to each of the
Leases:
(A)
such
Lease is legal, valid, binding, enforceable and in full force and
effect;
(B)
the
transactions contemplated by this Agreement do not require the consent of
any
other party to such Lease, will not result in a breach of or default under
such
Lease, and will not otherwise cause such Lease to cease to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the Closing;
(C)
Lawriter’s possession and quiet enjoyment of the Leased Real Property under such
Lease has not been disturbed and there are no disputes with respect to such
Lease;
(D)
neither Lawriter, nor any other party to the Lease is in breach of or default
under such Lease, and no event has occurred or circumstance exists that,
with
the delivery of notice, the passage of time or both, would constitute such
a
breach or default, or permit the termination, modification or acceleration
of
rent under such Lease;
(E)
no
security deposit or portion thereof deposited with respect to such Lease
has
been applied in respect of a breach of or default under such Lease that has
not
been redeposited in full;
(F)
Lawriter does not owe, nor will it owe in the future, any brokerage commissions
or finder’s fees with respect to such Lease;
(G)
the
other party to such Lease is not an affiliate of, and otherwise does not
have
any economic interest in, Lawriter;
(H)
Lawriter has not subleased, licensed or otherwise granted any Person the
right
to use or occupy the Leased Real Property or any portion thereof;
and
(I)
Lawriter has not collaterally assigned or granted any other Lien in such
Lease
or any interest therein.
(l)
Intellectual Property.
(i)
Section 4(l)(i) of the Disclosure Schedule contains a listing of all materials
included in the database made available in the Service and all computer software
that is part of the operation of the Service (collectively, the “Original
Database and Software”).
(ii)
Lawriter has not interfered with, infringed upon, misappropriated or violated
any
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20
Intellectual
Property rights of third parties; and none of Sellers or the directors, members
or officers of Lawriter has ever received any charge, complaint, claim, demand,
or notice alleging any such interference, infringement, misappropriation,
or
violation (including any claim that Lawriter must license or refrain from
using
any Intellectual Property rights of any third party). To the Knowledge of
Lawriter, Sellers, and the directors, members, or officers of Lawriter, no
third
party has interfered with, infringed upon, misappropriated, or violated any
Intellectual Property rights of Lawriter (with, for purposes of this Section
4(l)(ii), the definition of Knowledge to include knowledge that Lawriter,
Sellers, or the directors, members, or officers of Lawriter reasonably could
be
expected to discover or otherwise become aware of in the Ordinary Course
of
Business or in the proper discharge of their obligations).
(iii)
Lawriter Owned & Out-Licensed IP. Section 4(l)(iii) of the Disclosure
Schedule identifies each license, sublicense, agreement, or other permission
that Lawriter has granted to any third party with respect to the Original
Database and Software or any of its other Intellectual Property (together
with
any exceptions). Lawriter has no patents or registrations or applications
with
respect thereto, or any copyright registrations or applications with respect
thereto. Lawriter has delivered to Buyer correct and complete copies of all
such
licenses, sublicenses, agreements, and permissions (as amended to date) which
are in writing. Section 4(l)(iii) of the Disclosure Schedule also identifies
each item of Intellectual Property not otherwise described in Subsection
(iv)
below (including, without limitation, trade names or unregistered trademarks,
service marks, corporate names, Internet domain names, copyright and computer
software items) which is used by Lawriter in connection with its business,
owned
by or to which rights are held by Lawriter, and the loss of use of which
could
have a Material Adverse Effect. With respect to each item of Intellectual
Property required to be identified in Section 4(l)(iii) of the Disclosure
Schedule:
(A)
Lawriter possess all right, title, and interest in and to the item, free
and
clear of any Lien, license, or other restriction;
(B)
the
item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(C)
no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand is pending or is threatened that challenges the legality, validity,
enforceability, use, or ownership of the item; and
(D)
Lawriter has not ever agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict with respect
to
the item.
(iv)
Third Party IP. Section 4(l)(iv) of the Disclosure Schedule identifies (A)
any
part of the Original Database and Software that any third party owns and
that
Lawriter uses in connection with its business; and (B) any item of Intellectual
Property other than the Original Database and Software that any third party
owns, that Lawriter uses, and that the loss of use of which could have a
Material Adverse Effect. Sellers have delivered to
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21
Buyer
correct and complete copies of all such licenses, sublicenses, agreements,
and
permissions (as amended to date) pursuant to which any such use described
under
this Subsection is made or otherwise described on Section 4(l)(iv) of the
Disclosure Schedule. With respect to each item of Intellectual Property required
to be identified in Section 4(l)(iv) of the Disclosure Schedule:
(A)
the
license, sublicense, agreement, or permission covering the item is legal,
valid,
binding, enforceable, and in full force and effect in all respects;
(B)
no
party to the license, sublicense, agreement, or permission is in breach or
default, and no event has occurred that with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(C)
no
party to the license, sublicense, agreement, or permission has repudiated
any
provision thereof;
(D)
Lawriter has not granted any sublicense or similar right with respect to
the
license, sublicense, agreement, or permission; and
(E)
no
loss or expiration of the item is threatened, pending, or reasonably
foreseeable, except for patents expiring at the end of their statutory terms
(and not as a result of any act or omission by Sellers, Lawriter, including
a
failure by Sellers or Lawriter to pay any required maintenance
fees).
| | |
(v)
Lawriter owns or possesses or has the right to use (A) all of the
Original
Database and Software, and (B) all other Intellectual Property
used in or
as is necessary for the operation of its business as now being
conducted
and the loss of use of which could have a Material Adverse Effect.
Each
item of Intellectual Property owned or used by Lawriter immediately
prior
to the Closing will be owned or available for use by Lawriter on
identical
terms and conditions immediately subsequent to the Closing. Lawriter
has
taken all necessary and desirable action to maintain and protect
each item
of Intellectual Property that it owns or
uses.
|
(vi)
The
foregoing representations and warranties, and all other applicable
representations and warranties in this Section 4, shall encompass the federal
registrations of the “Lawriter” and “Casemaker” trademarks being conveyed to
Lawriter prior to Closing.
(m)
Contracts. Section
4(m) of the Disclosure Schedule lists the following contracts and other
agreements to which Lawriter is a party and pursuant to which either party
thereto has any outstanding performance obligation thereunder on the date
of
this Agreement:
(i)
any
agreement (or group of related agreements) for the lease of personal property
to
or from any Person providing for lease payments in excess of $10,000 per
annum;
(ii)
any
agreement (or group of related agreements) for the purchase or sale of raw
materials, commodities, supplies, products, or other personal property, or
for
the furnishing or receipt of services, the performance of which will extend
over
a period of
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22
more
than
one (1) year or involve consideration in excess of $10,000;
(iii)
any
agreement concerning a partnership or joint venture;
(iv)
any
agreement (or group of related agreements) under which it has created, incurred,
assumed, or guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, in excess of $10,000 or under which it has imposed a Lien
on
any of its assets, tangible or intangible;
(v)
any
agreement concerning confidentiality or non-competition;
(vi)
the
License Agreement;
(vii)
the
Consortium Licenses;
(viii)
the Thunderstone Agreement;
(ix)
the
Lawriter Operating Agreement;
(x)
the
Trademark License Agreement;
(xi)
that
certain Joint Venture Agreement, dated as of June 20, 2000, by and among
the
Association, OSBA, Xxxx and Lawcorp (the “Joint
Venture Agreement”);
(xii)
any
agreement for the employment of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in excess of $10,000
or
providing severance benefits;
(xiii)
any agreement under which the consequences of a default or termination could
have a Material Adverse Effect; or
(xiv)
any
other agreement (or group of related agreements) the performance of which
involves consideration in excess of $10,000.
Sellers
have delivered to Buyer a correct and complete copy of each written agreement
listed in Section 4(m) of the Disclosure Schedule (as amended to date) and
a
written summary setting forth the terms and conditions of each oral agreement
referred to in Section 4(m) of the Disclosure Schedule. With respect to each
such agreement: (A) the agreement is legal, valid, binding, enforceable and
in
full force and effect, and the other party to such agreement has no right
to
modify or terminate the same as a result of the consummation of the transactions
contemplated hereby; (B) to the Knowledge of Lawriter, Sellers, and the
directors, managers, and officers of Lawriter, no party is in breach or default
and no event has occurred that with notice or lapse of time would constitute
a
breach or default, or permit termination, modification, or acceleration,
under
the agreement; and (C) no party has repudiated any provision of the
agreement.
(n)
Notes and Accounts Receivable. All
notes
and accounts receivable of Lawriter are reflected properly on its books and
records, are valid receivables subject to no setoffs or
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23
counterclaims,
are current and collectible, and will be collected in accordance with their
terms at their recorded amounts, subject only to the reserve for bad debts
set
forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for operations and transactions through the Closing
Date in
accordance with the past custom and practice of Lawriter.
(o)
Powers of Attorney. There
are
no outstanding powers of attorney executed on behalf of Lawriter.
(p)
Insurance.
Section
4(p) of the Disclosure Schedule sets forth the following information with
respect to each insurance policy (including policies providing property,
casualty, liability, and workers’ compensation coverage and bond and surety
arrangements) with respect to which Lawriter is a party, a named insured,
or
otherwise the beneficiary of coverage:
(i)
the
name, address, and telephone number of the agent;
(ii)
the
name of the insurer, the name of the policyholder, and the name of each covered
insured;
(iii)
the
policy number and the period of coverage;
(iv)
the
scope (including an indication of whether the coverage is on a claims made,
occurrence, or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage;
and
(v)
a
description of any retroactive premium adjustments or other loss-sharing
arrangements.
(q)
Litigation. Section
4(q) of the Disclosure Schedule sets forth each instance in which Lawriter
(i)
is subject to any outstanding injunction, judgment, order, decree, ruling,
or
charge or (ii) is a party or, to the Knowledge of Lawriter, Sellers, or any
director, manager, or officer of Lawriter, is threatened to be made a party
to
any action, suit, proceeding, hearing, or investigation of, in, or before
(or
that could come before) any court or quasi-judicial or administrative agency
of
any federal, state, local, or foreign jurisdiction or before (or that could
come
before) any arbitrator.
(r)
Employees. To
the
Knowledge of Lawriter, Sellers, or any director, manager, or officer of
Lawriter, no executive, key employee or significant group of employees plans
to
terminate employment with Lawriter during the next twelve (12) months. Lawriter
is not a party to or bound by any collective bargaining agreement, nor has
it
experienced any strike or grievance, claim of unfair labor practices, or
other
collective bargaining dispute within the past three (3) years. Lawriter has
not
committed any unfair labor practice. There are no organizational efforts
presently being made or threatened by or on behalf of any labor union with
respect to employees of Lawriter. Within the past three (3) years, Lawriter
has
not implemented any plant closing or layoff of employees that could implicate
the Worker Adjustment and Retraining Notification Act of 1988, as amended,
or
any similar foreign, state, or local law, regulation, or ordinance
(collectively, the “WARN
Act”),
and
no such action will be implemented without advance notification to
Buyer.
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24
(s)
Employee Benefits. Lawriter
has no Employee Benefit Plans. Lawriter does not maintain, contribute to
or have
an obligation to contribute to, or have any liability or potential liability
with respect to, any Employee Welfare Benefit Plan providing health or life
insurance or other welfare-type benefits for current or future retired or
terminated employees (or any spouse or other dependent thereof) of Lawriter
other than in accordance with COBRA. Section 4(s) of the Disclosure Schedule
lists each written agreement, contract, or other arrangement—whether or not an
Employee Benefit Plan (collectively a “Plan”)—to
which Lawriter is a party that is a “nonqualified deferred compensation plan”
subject to Code Section 409A. Each such Plan either (A) complies with the
requirements of Code Section 409A(a)(2), (3), and (4) and any Internal Revenue
Service guidance issued thereunder or (B) has been operated in good faith
compliance with such requirements.
(t)
Guaranties. Lawriter
is not a guarantor or otherwise is responsible for any liability or obligation
(including indebtedness) of any other Person.
(u)
Business Continuity. The
Service has not experienced bugs, failures, breakdowns, or continued substandard
performance in the past twelve (12) months that has caused any substantial
disruption or interruption in or to the use of the Service, except, however,
that for not more than two separate occasions during that twenty-four
consecutive monthly period prior to Closing the Service suffered interruption
for not more than 24 hours.
(v)
Certain Business Relationships With Lawriter. None
of
Sellers, their Affiliates, Sellers’ directors, managers, officers and employees,
and Lawriter’s directors, managers, officers, employees, and Members has been
involved in any business arrangement or relationship with Lawriter within
the
past twelve (12) months, and none of the Sellers, their Affiliates, Sellers’
directors, managers, officers, employees, members and shareholders and
Lawriter’s directors, managers, officers, employees, and Members owns any asset,
tangible or intangible, that is used in the business of Lawriter, except
for the
Casemaker and the Lawriter trademarks which shall be transferred to Lawriter
prior to the Closing.
(w)
Disclosure.
None
of
the representations or warranties made by any Seller in this Agreement, nor
any
statement made in any Schedule or any certificate, instrument or document
furnished by any Seller pursuant to this Agreement, when taken together,
contains any untrue statement of a material fact, or omits to state any material
fact necessary in order to make the statements and information contained
herein
or therein, in the light of the circumstances under which they were made,
not
misleading.
SECTION
5. PRE-CLOSING COVENANTS. The
Parties agree as follows with respect to the period between the execution
of
this Agreement and the Closing:
(a)
General.
Each
of
the Parties will use his or its best efforts to take all action and to do
all
things necessary, proper, or advisable in order to consummate and make effective
the transactions contemplated by this Agreement (including satisfaction,
but not
waiver, of the Closing conditions set forth in Section 7 below).
(b)
Notices and Consents. Each
of
the Parties will give any notices to, make any filings with, and use its
or his
best efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters referred
to
in Section
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25
3(a)(ii),
Section 3(b)(ii), and Section 4(c) above.
(c)
Operation of Business. Lawriter
shall not engage in any practice, take any action, or enter into any transaction
outside the Ordinary Course of Business. Without limiting the generality
of the
foregoing, Lawriter shall not declare, set aside, or pay any dividend or
make
any distribution with respect to, or redeem, purchase, or otherwise acquire,
any
of its limited liability company interests, provided,
however,
that
Lawriter may, prior to Closing, distribute on such terms and conditions as
Members shall agree (i) all accounts receivable and cash and cash equivalents
on
hand immediately prior to Closing in excess of that which is (A) equal to
a pro
rata portion of the monthly revenues of Lawriter for that portion of the
calendar month remaining from and after the date of Closing, and (B) required
to
pay Lawriter’s payroll obligations and other payables existing on the
Closing, and
(ii)
the Texas Bar Association promissory note, so long as any such distribution
does
not result in a default thereof. In the event that, after the Closing, Lawriter
receives payment with respect to any accounts receivable distributed to the
Members prior to the Closing or any payment with respect to the Texas Bar
Association promissory note, Buyer shall cause Lawriter to promptly remit
the
same to the Members on a prorata basis thereof.
(d)
Preservation of Business. Lawriter
shall keep its business and properties substantially intact, including their
present operations, physical facilities, working conditions, insurance policies,
and relationships with lessors, licensors, suppliers, customers, and
employees.
(e)
Audit/Full Access; Confidentiality. Lawriter
shall permit representatives of Buyer (including legal counsel and accountants)
to have full access at all reasonable times, and in a manner so as not to
interfere with the normal business operations of Lawriter, to all premises,
properties, personnel, books, records (including tax records), contracts,
and
documents of or pertaining to Lawriter or its business. Each Party and its
Representatives shall keep all Proprietary Information of the other Parties
confidential and shall make no use of such Proprietary Information for any
purpose other than in connection with the transactions contemplated by this
Agreement. In the event this Agreement is terminated, each Party shall promptly
return to the other Parties all Proprietary Information of the other Parties
then in its possession.
(f)
Notice of Developments. Sellers
or Lawriter, as applicable, will give prompt written notice to Buyer of any
development causing a breach of any of the representations and warranties
in
Section 4 above. Each Party will give prompt written notice to the others
of any
development causing a breach of any of its own representations and warranties
in
Section 3 above. No disclosure by any Party pursuant to this Section 5(f),
however, shall be deemed to amend or supplement the Disclosure Schedule or
to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(g)
Exclusivity. No
Seller
will (and Sellers shall not cause or permit Lawriter to) (i) solicit, initiate,
or encourage the submission of any proposal or offer from any Person other
than
Buyer relating to the acquisition of any limited liability company interests
or
other voting securities, or any substantial portion of the assets, of Lawriter
(including any acquisition structured as a merger, consolidation, or
interests/share exchange), or (ii) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by
any
Person other than Buyer to do or seek
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26
any
of
the foregoing. No Seller will vote his, her, or its Lawriter Interests in
favor
of any such acquisition. Sellers will notify Buyer immediately if any Person
makes any proposal, offer, inquiry or contact with respect to any of the
foregoing.
(h)
Leases. Lawriter
will not cause or permit any Lease to be amended, modified, extended, renewed
or
terminated, nor shall Lawriter enter into any new lease, sublease, license
or
other agreement for the use or occupancy of any Leased Real Property, without
the prior written consent of Buyer.
(i)
Tax
Matters. Without
the prior written consent of Buyer, Lawriter shall not make or change any
election, change an annual accounting period, adopt or change any accounting
method, file any amended Tax Return, enter into any closing agreement, settle
any Tax claim or assessment relating to Lawriter, surrender any right to
claim a
refund of Taxes, consent to any extension or waiver of the limitation period
applicable to any Tax claim or assessment relating to Lawriter, or take any
other similar action relating to the filing of any Tax Return or the payment
of
any Tax, if such election, adoption, change, amendment, agreement, settlement,
surrender, consent or other action would have the effect of increasing the
Tax
liability of Lawriter for any period ending after the Closing Date or decreasing
any Tax attribute of Lawriter existing on the Closing Date.
SECTION
6 POST-CLOSING COVENANTS.
Each of
the Parties and, where so expressly stated, the Ancillary Parties, agrees
as
follows with respect to the period following the Closing:
(a)
General. In
case
at any time after the Closing any further actions are necessary to carry
out the
purposes of this Agreement, each of the Parties and Ancillary Parties will
take
such further actions (including the execution and delivery of such further
instruments and documents) as any other Party may reasonably request, all
at the
sole cost and expense of the requesting Party (unless the requesting Party
is
entitled to indemnification therefor under Section 8 below). Sellers and
Lawriter acknowledge and agree that from and after the Closing Buyer will
be
entitled to possession of all documents, books, records (including tax records),
agreements, and financial data of any sort relating to Lawriter, its business
and assets; provided,
however,
that
Sellers shall be entitled to retain or to receive copies of all such documents
and financial data and to use the same to fulfill their obligations under
this
Agreement or in connection with the termination of their ownership of Lawriter;
provided,
further,
that in
no event shall Sellers have any right whatsoever to retain under this Section
all or any part of the Escrowed Materials; and provided,
further,
that
any and all such documents and data shall constitute the Proprietary Information
of Lawriter and as a consequence thereof, shall be subject to the terms and
conditions of Section 6(d) below.
(b)
Litigation Support. In
the
event and for so long as any Party actively is contesting or defending against
any action, suit, proceeding, hearing, investigation, charge, complaint,
claim,
or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to
act,
or transaction on or prior to the Closing Date involving Lawriter, each of
the
other Parties and Ancillary Parties will cooperate with it and its counsel
in
the contest or defense, make available its personnel, and provide such testimony
and access to his or its
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27
books
and
records as shall be necessary in connection with the contest or defense,
all at
the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Section 8 below).
(c)
Transition. Until
the
expiration of the Restrictive Period (as defined in Section 6(e)(1) below),
neither Seller nor any Affiliate thereof or any Ancillary Party shall take
any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of Lawriter
from maintaining the same business relationships with Lawriter after the
Closing
as it maintained with Lawriter prior to the Closing.
(d)
Confidentiality.
(i)
As
used in this Agreement, the term “Proprietary Information”
means,
with respect to any Person, collectively all Trade Secrets and Confidential
Information (each as defined below), whether written or oral, furnished (whether
before or after the date hereof) or otherwise made available by such Person
or
its owners, members, partners, directors, managers, officers, employees,
Affiliates, representatives (including its financial advisors, attorneys
and
accountants) or agents (collectively, “Representatives”)
to any
other Person or its Representatives, and all analyses, compilations, forecasts,
studies, notes or other documents prepared by such other Person or its
Representatives in connection with the transactions contemplated by this
Agreement or which contain or reflect any such information; provided,
however,
that
the term “Proprietary Information” shall not include information that (A) is or
becomes publicly available other than as a result of a disclosure by any
Person
or its Representatives in violation of this Agreement, or (B) is or becomes
available to such other Person on a non-confidential basis from a source
that is
not prohibited from disclosing such information by any legal, contractual
or
fiduciary obligation.
(ii)
Sellers and each Affiliate thereof and each Ancillary Party (each a
“Receiving
Party”)
shall
keep all Proprietary Information of Buyer and after the Closing of Lawriter
confidential and shall not (except as required by applicable law, regulation
or
legal process, and then only after compliance with the last sentence of this
Section) without the prior written consent of Buyer, disclose any such
Proprietary Information in any manner whatsoever or use any such Proprietary
Information for any purpose whatsoever except for the purposes expressly
contemplated by this Agreement; provided,
however,
that a
Receiving Party may reveal such Proprietary Information to its Representatives
(A) who need to know such Proprietary Information for the purposes contemplated
by this Agreement, (B) who are informed by such Seller of the confidential
nature of the Proprietary Information, and (C) who agree to act in accordance
with the terms of this Section. In the event that any Receiving Party or
any of
its Representatives is requested pursuant to, or required by, applicable
law,
regulation or legal process to disclose any such Proprietary Information,
that
Person must notify Buyer promptly so that it may seek a protective order
or
other appropriate remedy or, in its sole and absolute discretion, waive
compliance with the terms of this Section. In any event, such Receiving Party
may furnish only that portion of such Proprietary Information that it is
advised
by counsel is legally required and shall exercise all commercially reasonable
efforts to obtain reliable assurance, to the extent it is possible to obtain
the
same, that confidential treatment will be afforded to such Proprietary
Information.
(iii)
Each Receiving Party recognizes and acknowledges that any breach of its
covenants
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28
in
this
Section will cause irreparable and material loss and damage to Buyer, the
amount
of which cannot be determined readily and as to which Buyer will not have
an
adequate remedy at law or in damages. Accordingly, in addition to any remedy
Buyer may have in damages by an action at law, Buyer shall be entitled to
the
issuance of an injunction restraining any such breach or threatened breach
or
any other remedy at law or in equity for any such breach.
(iv)
For
purposes hereof, “Trade
Secrets”
means
information of a Person or its Affiliates, without regard to form, which:
(a) derives economic value, actual or potential, from not being generally
known
to, and not being readily ascertainable by proper means by, other Persons
who
can obtain economic value from its disclosure or use; and (b) is the subject
of
efforts that are reasonable under the circumstances to maintain its secrecy.
“Confidential
Information”
means
any information of a Person or its Affiliates, other than Trade Secrets,
that is
of value to such Person or its Affiliates and not generally known to their
competitors, including such information held by a court of competent
jurisdiction not to rise to the level of a Trade Secret under applicable
law.
(e)
Covenant
Not to Compete.
(1)
Each
Seller and Ancillary Party acknowledges and agrees that as a mutual and
fundamental aspect of the deal, and as a condition to the respective obligations
of the parties at the Closing, and as a material and substantial inducement
to
the Buyer to enter into and perform its obligations hereunder and in
consideration of the payments and other consideration to be received by the
Sellers under this Agreement, such Seller and Affiliate thereof and Ancillary
Party shall not, without the prior written consent of the Buyer, at any time
during the period beginning on the Closing Date and ending on the third
(3rd)
anniversary of the last day of the Earnout Period (the “Restrictive
Period”),
(i)
directly or indirectly engage in, represent in any way, or be connected with,
the Competing Business within the Restricted Territory,
whether
such engagement shall be as a director, a manager, an officer, an owner,
an
employee, a partner, an Affiliate or other participant in such Competing
Business, (ii) assist any other Person in engaging in the Competing Business
in
the manner described in clause (i) above, (iii) induce or solicit any employee
of the Buyer or any of its Subsidiaries or other Affiliates at any time during
the Restrictive Period to terminate their employment with the Buyer or any
of
its Subsidiaries or other Affiliates, or to engage in the Competing Business,
or
(iv) induce or solicit any customer, vendor or agent or any other Person
with
which the Buyer or any or its Subsidiaries or other Affiliates has a business
relationship, contractual or otherwise, at any time during the Restrictive
Period to terminate or alter such business relationship. This covenant is
considered an integral part of this Agreement. The foregoing restriction
shall
not apply to the ownership of publicly traded securities that represent less
than five percent (5%) of the ownership interests of the issuer.
(2)
As
used herein, the term “Competing
Business”
means
any business engaged, in whole or in part, in the provision of Legal Research
Services; provided,
however,
that:
| |
(i)
|
the
Association may distribute, in hardcopy or online, its OSBA Report
(commonly known as the Green Book), Ohio Lawyer, Bar Leader Memo,
section
or committee newsletters, or other publications sponsored or endorsed
by
the Association so long as any such materials or data, whether
together or
separately, do not result in the
|
Page
29
| | | aggregation
of content or create a database that would significantly compete
with the
Legal Research Services and in any event is not marketed for sale
to
Persons who are not OSBA Members or do not do business in
Ohio; |
| |
(ii)
|
The
Association may make available to its members any online legal
information
service at any time after expiration, termination, or cancellation
of the
License Agreement; provided,
however,
that any such service may only be made available by the Association
having
obtained such service from a third-party vendor as opposed to it
engaging
in such a Competing Business by way of starting, building, developing
or
otherwise conducting, directly or indirectly, an operation through
which
any such service, in turn, would be provided;
and
|
| |
(iii)
|
The
Xxxx Carveouts, whether in hardcopy or online, shall not be considered
a
Competing Business so long as any such materials or data, whether
together
or separately, do not result in the aggregation of content or create
a
database that would significantly compete with the Legal Research
Services.
|
(3)
If,
at the time of enforcement of this Section, a court holds that the restrictions
stated herein are unreasonable under the circumstances then existing, the
parties agree that the maximum period, scope or geographical area reasonable
under such circumstances shall be substituted for the stated period, scope
or
geographical area. If any one of such covenants is declared invalid for any
reason, such determination shall not affect the validity of the remainder
of the
covenants. The other covenants set forth in this Section shall remain in
effect
as if the provision had been executed without the invalid covenants. The
parties
hereto hereby declare that they intend that the remaining covenants of the
provision continue to be effective without any covenants that have been declared
invalid. The parties hereto acknowledge that money damages would be an
inadequate remedy for any breach of this Section. Therefore, in the event
of a
breach or threatened breach of this Section, the Buyer or its successors
or
assigns may, in addition to other rights and remedies existing in its or
their
favor, apply to any court of competent jurisdiction for specific performance
or
injunctive relief in order to enforce or prevent any violations of the
provisions of this Section (without posting a bond or other
security).
(4)
Without limiting the generality of subsections (1) or (2) above, Lawcorp
shall,
on or immediately after the Closing Date, change its name to a name that
is not
confusingly similar to “Lawriter” and cooperate with Buyer, including the
execution and delivery of appropriate forms or instruments, to effectuate
such
change.
(f) Tolling.
Sellers hereby
expressly acknowledge and agree that in the event the enforceability of any
of
the terms of this Section 6 shall be challenged in court or pursuant to
arbitration, but the enforceability is not enjoined (either temporarily or
permanently) pending resolution of the challenge, if a court of competent
jurisdiction or arbitration panel finds subsequently that the challenged
restraint is enforceable, the time period of the restraint shall be deemed
tolled upon the filing of the legal proceedings challenging the enforceability
of the restraint until the dispute is finally resolved and all periods of
appeal
have expired.
(g) Ancillary
Agreement. Unless and to the extent expressly provided to the contrary in
the
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30
Escrow
Agreement, Section 6(a)
through and including this subsection (g) shall be construed as an agreement
ancillary to the other provisions of this Agreement, and the existence of
any
claim or cause of action of one Party against the other, whether predicated
on
this Agreement or otherwise, shall not constitute a defense to the enforcement
of such Sections.
(h)
Escrow Arrangement. Upon and coincident with Closing, each of Buyer and Sellers
shall execute the Escrow Agreement, pursuant to which, inter alia, Buyer
and
Sellers, as the case may be, will copy onto a DVD or otherwise deliver an
electronic copy of and place into such escrow the Escrowed Materials, which
would be available to OSBA solely for the purposes and circumstances described
in the Escrow Agreement.
For
purposes of this Agreement, the phrase “Escrowed
Materials”
shall
mean a copy of (i) the Original Database and Software; (ii) the Additional
Content; (iii) any and all US or US territory-related case law or primary
legal
materials which any Successor Business then has the right to utilize and
otherwise transfer, assign or sublicense (subject in all cases to the
limitations described in the immediately following sentence and any such
existing agreements relating thereto)(hereinafter, the “Updated
Content”);
and
(iv) the Thunderstone Software that is part of the operation of the Service
as
of the Closing Date, together with all updates, new releases, or versions
of the
Thunderstone Software received by Lawriter after the Closing Date (the
“Updated
Thunderstone Software”).
Notwithstanding any provision of this Agreement or the Escrow Agreement to
the
contrary, neither is it intended for Buyer to escrow nor shall Buyer be
obligated to escrow (1) cases resolved through settlement; (2) compilations
of
single-specialty databases (such as, for example, databases relating solely
to
patent law or tax law, etc.); (3) products and services described in Section
2(b)(ii)(C)(5)(z) that do not otherwise constitute Escrowed Materials; (4)
the
Collexis Products; (5) the Collexis search engine, even if the Collexis search
engine is then being used by customers to access the Original Database and
Software, Additional Content or Updated Content; or (6) other than the
Additional Content and the Original Database and Software, any other software,
update, release, release, version or other Intellectual Property or right
thereto, whether or not expressly referenced in this Agreement, to which a
Successor Business does not have the right to transfer, assign or sublicense,
as
the case may be, in the manner and to the extent contemplated in this Agreement
or the Escrow Agreement; provided,
however,
that in
no event shall Collexis or any Successor-Owned Business attempt to negotiate
or
negotiate an agreement for the use or purchase of Updated Content or Updated
Thunderstone Software that would permit the assignment or other transfer
thereof, but which would, as an exception thereto, preclude Collexis or the
Successor Business from delivering an electronic copy of and placing into
the
escrow such content or software in accordance with the Escrow Agreement or
to
make the same available to OSBA to use for the purposes described in the
Escrow
Agreement. “Additional
Content”
shall
mean all US or US territory-related legal materials listed in Schedule 6(h)(ii).
Notwithstanding any provision in this Agreement or the Escrow Agreement to
the
contrary, the release of the Escrowed Materials to the Beneficiary (as defined
under the Escrow Agreement) shall in no event grant, sell, transfer or assign
to
Beneficiary, the Association, Xxxxx or any other Person any right, title
or
interest in or to the names “Casemaker” or “Lawriter” or any copyright or
trademark rights thereto.
In
the
event that Buyer fails to perform any of its obligations to OSBA under this
Agreement or the Escrow Agreement and such failure continues unremedied for
a
period of thirty (30) days after notice of such failure is given to Buyer
by
OSBA, OSBA shall have the right to take any or all of the following actions:
OSBA may declare all unpaid amounts owing to OSBA by Buyer
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31
under
this Agreement to be immediately due and payable; OSBA may proceed to exercise
its rights under the Escrow Agreement; and/or OSBA may proceed with court
action
against Buyer in accordance with Section 11(h). If OSBA elects to exercise
its
rights under the Escrow Agreement (whether exclusively or in connection with
its
other remedies) and OSBA receives the Escrowed Materials in accordance
therewith, OSBA agrees that an amount equal to fifty percent (50%) of the
Adverse Consequences OSBA suffered in connection with Buyer's breach shall
be
deemed satisfied by the delivery of the Escrowed Materials to OSBA.
(i)
The
License Agreement. Upon and coincident with Closing, the License Agreement
Amendment will be executed by Lawriter and the Association, which amendment
will
provide for the crediting of payments as provided for in Section 2(b)(i)(3)
above and a most-favored nations provision pursuant to which the Association
will be extended rates for the Service that are no greater than the rates
for
the Service that are extended to other bar associations having similar
membership numbers based on Lawriter’s current pricing methodology for the
Service.
(j) The
Thunderstone Agreement. On or about July 31, 1998, Lawriter entered into
that
certain agreement with Expansion Program International, Inc.\Thunderstone
(the
“Thunderstone
Agreement”),
pursuant to which Lawriter acquired the perpetual right to use the Thunderstone
search engine and other Intellectual Property relating thereto in its provision
of the Service (the “Thunderstone
Software”).
In
the event that Lawriter is using the Thunderstone Software in the operation
of
the Service on June 15, 2008, Buyer shall be responsible for the payment
of the
$63,917.50 balance of the Thunderstone expansion fee which becomes payable
on
that date. If, however, Lawriter is not then using the Thunderstone Software
in
the operation of the Service, Sellers shall, jointly and severally, be
responsible for the $63,917.50 payment due at that time (the “Thunderstone
Obligation”).
SECTION
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a)
Conditions to Buyer’s Obligation. The
obligation of Buyer to consummate the transactions to be performed by it
in
connection with the Closing is subject to satisfaction of the following
conditions:
(i)
the
representations and warranties set forth in Section 3(a) and Section 4 above
shall be true and correct in all material respects at and as of the Closing
Date;
(ii)
Sellers shall have performed and complied with all of their covenants hereunder
in all material respects through the Closing;
(iii)
no
action, suit, or proceeding shall be pending before any court or quasi-judicial
or administrative agency of any federal, state, local, or foreign jurisdiction
or before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, (C)
adversely affect the right of Buyer to own the Lawriter Interests and to
control
Lawriter, or (D) materially and adversely affect the right of Lawriter to
own
its assets and to operate its business (and no such injunction, judgment,
order,
decree, ruling, or charge shall be in effect);
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32
(iv)
Lawriter shall have delivered to Buyer a certificate to the effect that each
of
the conditions specified above in Section 7(a)(i)-(iii) is satisfied in all
respects;
(v)
Sellers shall have provided to Buyer a notebook in which or compact disk
on
which a complete copy of all of the documents and other information provided
in
response to Buyer’s due diligence request shall be contained, and Buyer’s
auditors shall have completed their audit of Lawriter’s books and
records;
(vi)
the
Parties shall have received all other material authorizations, consents,
and
approvals of governments and governmental agencies referred to in Section
3(a)(ii), Section 3(b)(ii), and Section 4(c) above;
(vii)
Buyer shall have received from counsel to Sellers an opinion in form and
substance as set forth in Exhibit
F
attached
hereto, addressed to Buyer;
(viii)
Buyer shall have received the resignations, effective as of the Closing,
of each
director or manager and officer of Lawriter;
(ix)
Buyer shall have received evidence that the Lawriter and the Casemaker
trademarks now being used by Lawriter have been transferred to
Lawriter;
(x)
all
actions to be taken by Sellers in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
will
be reasonably satisfactory in form and substance to Buyer;
(xi)
each
of Xxxx and the Association shall have entered into separate consulting
agreements, with restrictive covenants, substantially in the form attached
hereto as Exhibit
D,
and
such agreements shall be in full force and effect as of the
Closing;
(xii)
OSBA, Lawriter and the Escrow Agent shall have executed and delivered to
Buyer
the Escrow Agreement, substantially in the form of Exhibit
A,
dated
as of the` Closing Date;
(xiii)
Each of the Members shall have transferred to Lawriter its respective rights
in
and to the tradenames “Lawriter” and “Casemaker” and the federal registrations
of the trademarks associated therewith;
(xiv)
Xxxx shall have caused Lawcorp to change its name to a name that does not
contain the word “Lawriter” or “Casemaker” or any other name confusingly similar
to either “Lawriter” or “Casemaker”;
(xv)
Sellers shall have delivered to Buyer a copy of the certificate of formation,
including all amendments to date, of Lawriter, certified on or soon before
the
Closing Date by the Secretary of State of the jurisdiction of Lawriter’s
formation;
(xvi)
Sellers shall have delivered to Buyer copies of the certificate of good standing
of Lawriter, issued on or soon before the Closing Date by the Secretary of
State
of the
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33
jurisdiction
of Lawriter’s organization;
(xvii)
Sellers shall have delivered to Buyer a certificate of the secretary of
Lawriter, dated the Closing Date, in form and substance reasonably satisfactory
to Buyer, as to: (A) no amendments to the certificate of organization of
Lawriter since the date of the certificate described in clause (xv) above;
(B)
the Lawriter Operating Agreement and no amendments thereto since the date
thereof; (C) the resolutions of the board of directors or managers (or a
duly
authorized committee thereof) of Lawriter authorizing the execution, delivery,
and performance of this Agreement and the transactions contemplated hereby;
and
(D) incumbency and signatures of the officers of Lawriter executing this
Agreement or any other instrument or agreement contemplated by this Agreement;
(xviii)
Lawriter and the Association shall have executed the License Agreement
Amendment;
(xix)
Termination of the following agreements as of and coincident with Closing,
with
any and all provisions thereunder being null and void thereafter:
| |
(A)
|
Lawriter
Operating Agreement
|
| |
(B)
|
Joint
Venture Agreement; and
|
| |
(C)
|
Trademark
License Agreement;
|
(xx)
Each
of the Sellers and the Ancillary Parties shall have delivered a general,
full
and unconditional release of and covenant not to xxx for any and all claims
he
or it may have against the Lawriter Interest or Lawriter, a form of which
agreement is attached hereto and as Exhibit
G;
and
(xxi)
Sellers shall have made such other deliveries as are described as being their
responsibility in Section 2(d) above.
Buyer
may
waive any condition specified in this Section 7(a) if it executes a writing
so
stating at or prior to the Closing.
(b)
Conditions to Sellers’ Obligation. The
Sellers’ obligation to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i)
the
representations and warranties set forth in Section 3(b) above shall be true
and
correct in all material respects at and as of the Closing Date;
(ii)
Buyer shall have performed and complied with all of its covenants hereunder
in
all material respects through the Closing;
(iii)
no
action, suit, or proceeding shall be pending before any court or quasi-judicial
or administrative agency of any federal, state, local, or foreign jurisdiction
or before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge
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34
would
(A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(iv)
Buyer shall have delivered to Sellers a certificate to the effect that each
of
the conditions specified above in Section 7(b)(i)-(iii) is satisfied in all
respects;
(v)
Buyer
shall have delivered to Sellers evidence that Buyer has the right to make
all or
substantially all of the Additional Content available to the Association
and the
Consortium Parties at no additional charge throughout the Earnout Period,
to
include the Additional Content as part of the Escrowed Materials, and to
provide
rights to OSBA to use the same for the purposes described in the Escrow
Agreement;
(vi)
all
actions to be taken by Buyer in connection with consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Sellers;
(vii)
Buyer shall have executed and delivered the Escrow Agreement and the Escrowed
Materials shall have been delivered to the Escrow Agent;
(viii)
Lawriter and the Association shall have executed the License Agreement
Amendment, and Lawriter and Lawcorp shall have executed the Security Agreement;
and
(ix)
Buyer shall have made such other deliveries as are described as being its
responsibility in Section 2(d) above.
Sellers
may waive any condition specified in this Section 7(b) on behalf of themselves
if they execute a writing so stating at or prior to the Closing.
SECTION
8. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a)
Survival of Representations and Warranties.
(i) Business
Reps. All of the representations and warranties of the Sellers, other than
the
Core Reps and Regulatory Reps (as each such phrase are defined below), shall
survive the Closing hereunder (even if Buyer knew or had reason to know of
any
misrepresentation or breach of warranty at the time of Closing) and continue
in
full force and effect for a period of two (2) years thereafter (collectively,
the “Business
Reps”).
(ii)
Core
Reps. All of the Sellers’ representations and warranties contained in Section
3(a) above and the Sellers’ representations and warranties contained in Section
4(a), 4(b), 4(c), 4(d) and the last sentence of 4(e) of this Agreement (each,
a
“Core Rep”)
shall
survive the Closing (even if the damaged Party knew or had reason to know
of any
misrepresentation or breach of warranty at the time of Closing) and continue
in
full force and effect indefinitely.
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35
(iii)
Regulatory Reps. All of the Sellers’ representations and warranties concerning
compliance with laws or other governmental mandates (each, a “Regulatory
Rep”)
shall
survive the Closing (even if the damaged Party knew or had reason to know
of any
misrepresentation or breach of warranty at the time of Closing) and continue
in
full force and effect until 30 days following the expiration of the applicable
statutes of limitations (including any extension thereto).
(iv)
Buyer’s Representations and Warranties. Buyer’s representations and warranties
provided under Section 3(b) of this Agreement shall survive the Closing and
continue in full force and effect following the expiration of the applicable
statutes of limitations (including any extension thereto).
(v)
Covenants. All of the Sellers,’ Ancillary Parties’ and Buyer’s covenants and
agreements shall survive the Closing and continue in full force and effect
indefinitely.
(b)
Indemnification Provisions for Buyer’s Benefit.
(i)
In
General.
(A)
Sellers’ Acts or Omissions (other than Post-Closing Covenants). In the event
that any Seller breaches any of his or its representations, warranties or
covenants, or agreements other than its Post-Closing Covenants (as governed
by
Section 8(b)(i)(B), below), and provided that Buyer makes a written claim
for
indemnification against Sellers pursuant to Section 11(g) below within the
applicable period of limitations, then each Seller shall be obligated jointly
and severally to indemnify Buyer or any Affiliate thereof from and against
the
entirety of any Adverse Consequences Buyer or any Affiliate thereof may suffer
(including any Adverse Consequences Buyer or any Affiliate may suffer after
the
end of any applicable survival period) resulting from, arising out of, relating
to, in the nature of, or caused by the breach thereof; provided,
however,
that if
Buyer elects in its sole and absolute discretion to exercise either (or both)
of
the remedies provided in Section 8(f) below, then Buyer shall exercise such
right of set off or recoupment, as the case may be, against the Earnout by
dividing evenly the amount so claimed against the Earnout between the Sellers,
unless and until the amount of any such recoupment or set off proves
insufficient to satisfy Buyer’s indemnity claims, in which case such limitation
shall have no further applicability and Buyer shall have the right to pursue
any
and all such remedies otherwise available to it.
(B)
Sellers’ Post-Closing Covenants and Ancillary Parties Acts or Omissions. In the
event that any Seller breaches its Post Closing Covenants or Ancillary Party
breaches any of his or its representations, warranties or covenants or
agreements in this Agreement, and provided that Buyer makes a written claim
for
indemnification against any such breaching Party pursuant to Section 11(g)
below
within the applicable period of limitations, then such breaching Party shall
be
obligated severally, but not jointly, to indemnify Buyer or any Affiliate
thereof from and against the entirety of any Adverse Consequences Buyer or
any
Affiliate thereof may suffer (including any Adverse Consequences Buyer or
any
Affiliate may suffer after the end of any applicable survival period) resulting
from, arising out of, relating to, in the nature of, or caused by such breach
thereof.
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36
(ii)
Notwithstanding the provisions of Section 8(b)(i) above or Section 9 below,
but
subject to the provisions of (iii) below, Sellers shall only have an obligation
to indemnify Buyer from and against any Adverse Consequences caused to Buyer
by
the breach of a Business Rep or the representations and warranties set forth
in
Section 4(i) or the obligation under Section 9 to indemnify Buyer for Taxes
to
the extent that Buyer has suffered Adverse Consequences in excess of $10,000
for
any single claim or $90,000 in the aggregate of all such claims (the
“Deductible,”)
and
then only to the extent of any such excess. The indemnification liability
of
Sellers and the Ancillary Parties under this Section 8 shall not exceed the
sum
of that portion of the Purchase Price already received by the Sellers and
that
portion of the Purchase Price that thereafter becomes payable to the Sellers
pursuant to the terms of this Agreement taking into account Buyer’s rights of
recoupment and set off as provided in this Section 8 below (the “Cap”),
provided,
however,
(A) for
purposes of the Cap, amounts paid by the Association or Xxxxx pursuant to
the
last sentence of Section 8(b)(i) shall be deemed to have been paid by OSBA
and
amounts paid by Xxxx pursuant to the last sentence of Section 8(b)(i) shall
be
deemed to have been paid by Lawcorp; and (B) that in the case of Lawcorp
only,
the Cap shall be reduced by the amount of Net Taxes. For purposes of this
Section 8(b)(ii), the phrase “Net
Taxes”
shall
mean the amount of any Acquisition Taxes actually paid by Xxxx, as the sole
shareholder of Lawcorp (which is a Subchapter S corporation), increased by
Available Refunds; “Acquisition Taxes” shall mean only those Taxes that
constitute income taxes reported by Xxxx on his properly filed state, local,
and
federal income tax returns as being due and payable solely on account of
Buyer’s
purchase of the Lawriter Interest from Lawcorp in accordance with Section
2(a)
of this Agreement; “Available
Refunds”
shall
mean the amount of any overpayment in such Acquisition Taxes that Xxxx may
have
made due to him having satisfied a claim for indemnification in favor of
Buyer
under this Section 8.
(iii)
Notwithstanding the limitation under Section 8(b)(ii) above, if and to the
extent Buyer shall have any obligation to pay either Seller an Earnout payment
as provided under Section 2(b)(ii) of this Agreement and Buyer’s claims for
indemnification under this Agreement equal or exceed in the aggregate $90,000,
then Buyer shall have the right to receive reimbursement of the $90,000,
but
only by either setting off or recouping (or both) the entirety of the Deductible
against any such Earnout Payment in accordance with Section 8(f) below.
(iv)
Specific Indemnification. If the insurance described in Schedule 4(p) fails
to
pay in full any Adverse Consequences incurred by Buyer in connection with
any
litigation that may be instituted in connection with the claim described
in
Schedule 4(q), Sellers shall be deemed to have breached the representation
and
warranty set forth in Section 4(q) and shall be liable to Buyer in accordance
with the provisions of this Section 8(b). Sellers shall indemnify and hold
harmless Buyer from and against any and all Adverse Consequences arising
in
connection with or otherwise relating to Thunderstone Obligation.
(c)
Indemnification Provisions for Sellers’ Benefit.
In the
event Buyer breaches any of its representations, warranties, covenants, or
agreements contained herein and provided that any Seller makes a written
claim
for indemnification against Buyer pursuant to Section 11(h) below, then Buyer
agrees to indemnify each claiming Seller from and against the entirety of
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37
any
Adverse Consequences suffered (including any Adverse Consequences suffered
after
the end of any applicable survival period) resulting from, arising out
of,
relating to, in the nature of, or caused by the breach.
(d)
Matters Involving Third Parties.
(i)
If
any third party notifies any Party (the “Indemnified
Party”)
with
respect to any matter (a “Third-Party
Claim”)
that
may give rise to a claim for indemnification against any other Party (the
“Indemnifying
Party”)
under
this Section 8, then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided,
however,
that no
delay on the part of the Indemnified Party in notifying any Indemnifying
Party
shall relieve the Indemnifying Party from any obligation hereunder unless
(and
then solely to the extent) the Indemnifying Party is thereby
prejudiced.
(ii)
Any
Indemnifying Party will have the right to assume the defense of the Third-Party
Claim with counsel of its choice reasonably satisfactory to the Indemnified
Party at any time within fifteen (15) days after the Indemnified Party
has given
notice of the Third-Party Claim; provided,
however,
that
the Indemnifying Party must conduct the defense of the Third-Party Claim
actively and diligently thereafter in order to preserve its rights in this
regard; and provided
further
that the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third-Party Claim.
(iii)
So
long as the Indemnifying Party has assumed and is conducting the defense
of the
Third-Party Claim in accordance with Section 8(d)(ii) above, (A) the
Indemnifying Party will not consent to the entry of any judgment on or
enter
into any settlement with respect to the Third-Party Claim without the prior
written consent of the Indemnified Party (not to be unreasonably withheld)
unless the judgment or proposed settlement involves only the payment of
money
damages by one or more of the Indemnifying Parties and does not impose
an
injunction or other equitable relief upon the Indemnified Party and (B)
the
Indemnified Party will not consent to the entry of any judgment on or enter
into
any settlement with respect to the Third-Party Claim without the prior
written
consent of the Indemnifying Party (not to be unreasonably
withheld).
(iv)
In
the event none of the Indemnifying Parties assumes and conducts the defense
of
the Third-Party Claim in accordance with Section 8(d)(ii) above, however,
(A)
the Indemnified Party may defend against, and consent to the entry of any
judgment on or enter into any settlement with respect to, the Third-Party
Claim
in any manner it may reasonably deem appropriate (and the Indemnified Party
need
not consult with, or obtain any consent from, any Indemnifying Party in
connection therewith) and (B) the Indemnifying Parties will remain responsible
for any Adverse Consequences the Indemnified Party may suffer resulting
from,
arising out of, relating to, in the nature of, or caused by the Third-Party
Claim to the fullest extent provided in this Section 8.
(e)
Remedies.
If the
Closing occurs, the Parties acknowledge and agree that the foregoing
indemnification provisions in this Section 8 shall be the sole and exclusive
remedy of such Party for all matters described in this Section 8; provided,
however,
that
the
limitations and thresholds
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38
set
forth
in this Section 8 shall not apply with respect to (A) fraud, an intentional
or
willful misrepresentation, (B) any breach of any Core Rep, or (C) any equitable
remedy, including a preliminary or permanent injunction or specific performance.
Each
Seller and Ancillary Party (other than Lawriter) hereby agrees that he
or it
will not make any claim for indemnification against Lawriter or Buyer by
reason
of the fact that he or it was a director, manager, officer, employee, consultant
or agent of any such entity or was serving at the request of any such entity
as
a partner, trustee, director, manager, officer, consultant, employee, or
agent
of another entity (whether such claim is for judgments, damages, penalties,
fines, costs, amounts paid in settlement, losses, expenses, or otherwise
and
whether such claim is pursuant to any statute, charter document, bylaw,
agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by Buyer against such Seller (whether
such
action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
(f)
Recoupment and Right of Setoff Against Earnout, etc. Buyer
shall have the option of recouping all or any part of any Adverse Consequences
to which Buyer is entitled pursuant to this Section 8 or Section 9 by notifying
Sellers that Buyer is reducing the Earnout, if any, payable to such Sellers.
Buyer shall have the additional right to withhold and deduct any sum that
may be
owed to it under this Section 8 or Section 9 from any amount otherwise
payable
by Buyer pursuant to the Earnout; provided,
that to
exercise either of the foregoing rights of recoupment or setoff, Buyer
shall
deliver to Sellers a notice of such claim at least thirty (30) days prior
to the
date on which Buyer intends to exercise its right of recoupment or setoff
hereunder. Notwithstanding anything in this Agreement to the contrary,
the
exercise by Buyer of any right of recoupment or setoff shall under no
circumstances constitute a breach of this Agreement, even if it is subsequently
determined that the amount so recouped or set off is higher than Buyer’s actual
entitlement or Adverse Consequences or even if Buyer fails to provide timely
such thirty (30) notice where a claim for indemnification arises within
that
thirty (30) day period immediately prior to the date on which an Earnout
payment
is required to be made and Buyer determines that subsequent Earnout payments,
if
any, will be insufficient to cover the amount of any such indemnification
claim;
provided,
however,
that if
it is later determined by a court of competent jurisdiction that Buyer
was not
entitled to any portion of such recoupment or setoff, Buyer shall reimburse
the
applicable Seller for that portion of the attorneys’ fees and costs and expenses
incurred by it in contesting the same that is equal to the percentage of
the
total recoupment or setoff to which it is determined that Buyer was not
entitled.
SECTION
9. TAX MATTERS. The
following provisions shall govern the allocation of responsibility as between
Buyer and Sellers for certain tax matters following the Closing
Date:
(a)
Tax
Indemnification. Subject
to the applicable provisions of Section 8, Sellers shall jointly and severally
indemnify Buyer, and each Buyer Affiliate and hold them harmless from and
against (i) all Taxes (or the non-payment thereof) of Lawriter for all
taxable
periods ending on or before the Closing Date and the portion through the
end of
the Closing Date for any taxable period that includes (but does not end
on) the
Closing Date (“Pre-Closing
Tax Period”),
(ii)
any and all Income Taxes of any member of Lawriter or member of an affiliated,
consolidated, combined, or unitary group of which Lawriter (or any predecessor
of any of the foregoing) is or was a member on or prior to the Closing
Date,
including pursuant to Treasury Regulation Section 1.1502-6 or any analogous
or
similar state, local, or foreign law or regulation, and (iii) any and
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39
all
Income Taxes of any Person (other than Lawriter) imposed on Lawriter as
a
transferee or successor, by contract or pursuant to any law, rule or regulation,
which Taxes relate to an event or transaction occurring before the
Closing.
(b)
Straddle Period. In
the
case of any taxable period that includes (but does not end on) the Closing
Date,
the amount of any Income Taxes for such taxable period shall be determined
based
on an interim closing of the books as of the close of business on the Closing
Date.
(c)
Responsibility for Filing Tax Returns. Buyer
shall prepare or cause to be prepared and file or cause to be filed all
Income
Tax Returns for Lawriter that are filed after the Closing Date; provided,
however,
that
the Members shall be responsible for filing all Income Tax Returns with
respect
to any periods ending on the Closing Date. Each Party shall permit the
other
Parties to review and comment on any such Income Tax Return described in
the
preceding sentence prior to filing and shall make such revisions to such
Income
Tax Returns as are reasonably requested.
(d)
Cooperation on Tax Matters.
(i)
Buyer, Lawriter, Sellers and Ancillary Parties shall cooperate fully, as
and to
the extent reasonably requested by the other Party, in connection with
the
filing of Tax Returns pursuant to this Section 9 and any audit, litigation
or
other proceeding with respect to Taxes. Such cooperation shall include
the
retention and (upon the other Party’s request) the provision of records and
information that are reasonably relevant to any such filing, audit, litigation
or other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided
hereunder. Lawriter and Sellers agree (A) to retain all books and records
with
respect to Tax matters pertinent to Lawriter relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or Sellers, any extensions
thereof) of the respective taxable periods, and to abide by all record
retention
agreements entered into with any taxing authority, and (B) to give the
other
Party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other Party so requests, Lawriter
or
Sellers, as the case may be, shall allow the other Party to take possession
of
such books and records.
(ii)
Buyer, Sellers and Ancillary Parties further agree, upon request, to use
their
best efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including with respect to the
transactions contemplated hereby).
(iii)
Buyer and Sellers further agree, upon request, to provide the other Party
with
all information that either Party may be required to report pursuant to
Code
Section 6043, or Code Section 6043A, or Treasury Regulations promulgated
thereunder.
(e)
Tax-Sharing Agreements. All
tax-sharing agreements or similar agreements with respect to or involving
Lawriter shall be terminated as of the Closing Date and, after the Closing
Date,
Lawriter shall not be bound thereby or have any liability
thereunder.
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40
(f)
Certain Taxes and Fees. All
transfer, documentary, sales, use, stamp, registration and other such Taxes,
and
all conveyance fees, recording charges and other fees and charges (including
any
penalties and interest) incurred in connection with the consummation of
the
transactions contemplated by this Agreement shall be borne by
Members.
SECTION
10. [Section Omitted.]
SECTION
11. MISCELLANEOUS.
(a)
Press Releases and Public Announcements. Prior
to
the Closing, no Party shall make any announcement regarding any aspect
of the
transactions contemplated by this Agreement to any third party, including
without limitation, the financial community, governmental agencies, employees,
or the public generally, unless mutually agreed by Buyer and Sellers. After
the
Closing, each of the Sellers and Ancillary Parties agrees to not issue
any press
release or make any public announcement relating to the subject matter
of this
Agreement without the prior written approval of Buyer.
(b)
No
Third-Party Beneficiaries. This
Agreement shall not confer any rights or remedies upon any Person other
than the
Parties and their respective successors and permitted assigns, except as
provided in Section 8.
(c)
Entire Agreement. This
Agreement (including all certificates, instruments or documents referred
to
herein) constitutes the entire agreement among the Parties and supersedes
any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they relate in any way to the subject matter
hereof, including without limitation, the October 10, 2007 letter of intent
among the Parties relating to this transaction.
(d)
Buyer Liability; Succession and Assignment. Each
Buyer shall be jointly and severally liable for the performance of all
obligations of Buyer under this Agreement. This Agreement shall be binding
upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement
or
any of its rights, interests, or obligations hereunder without the prior
written
approval of Buyer and Sellers, and any such assignment shall be void;
provided,
however,
that
Buyer may (i) assign any or all of its rights and interests hereunder to
one or
more of its Affiliates and (ii) designate one or more of its Affiliates
to
perform its obligations hereunder (in any or all of which cases Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(e)
Counterparts. This
Agreement may be executed in one or more counterparts (including by means
of
facsimile), each of which shall be deemed an original but all of which
together
will constitute one and the same instrument.
(f)
Headings. The
section headings contained in this Agreement are inserted for convenience
only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(g)
Notices. All
notices, requests, demands, claims, and other communications hereunder
shall be
in writing. Any notice, request, demand, claim, or other communication
hereunder
shall be deemed duly given when received by the Party for whom intended.
The
sending Party shall
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41
have
the
burden of proving receipt. Notices, requests, demands, claims and other
communications shall addressed to the intended recipient as set forth
below:
|
If
to Sellers:
To
their addresses or facsimile numbers set forth below their signatures
on
the signature page of this Agreement
| |
With
a Copy, which shall not constitute notice, to:
Xxxxxxxx
Xxxx LLP
00
Xxxx Xxxxxx Xxxxxx
Xxxxxx,
Xxxx 00000
Attn:
Xxxxxx Xxxxxx Xxxxxxxx, Esq.
|
| | | |
|
If
to Buyer:
Collexis,
Inc.
0000
Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx,
XX 00000 Attn: President
| |
With
a Copy, which shall not constitute notice, to:
XxXxxxxx
& Xxxxx, LLP
XX
Xxx 000000
Xxxxxxxx,
Xxxxxxx 00000-0000
Attn:
Xxxxx XxXxxxxx, Esq.
|
Any
Party
may change the address to which notices, requests, demands, claims, and
other
communications hereunder are to be delivered by giving the other Parties
notice
in the manner herein set forth.
(h)
Governing Law and Venue. This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of
Georgia without giving effect to any choice or conflicts
of
law provision or rule (whether of the State of
Georgia or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of
Georgia (the “
Georgia
Law”).
Each
of the Parties consents to the exclusive jurisdiction of the Federal and
State
Courts sitting in the County of Xxxxxx in the State of
Georgia in connection
with any dispute arising under this Agreement and hereby waives, to the
maximum
extent permitted by law, any objection, including any objection based on
venue
or inconvenient forum, to the bringing of any such proceeding in such
jurisdiction (the “
Georgia
Courts”).
Each
party agrees (1) to make no filing whatsoever either with or before any
court,
arbitrator or other tribunal other than in a
Georgia Court or for the
application of any law other than
Georgia Law (except in the case where
Federal
law might apply) with respect to any matter or dispute arising under or
in
connection with either this Agreement or Escrow Agreement; (2) to not challenge
the application of either Georgia Law or jurisdiction by or of the Georgia
Courts (or both); and (3) in the event of any challenge by a court, arbitrator
or other tribunal, sua
sponte,
to
either the application of Georgia Law or jurisdiction by or of the Georgia
Courts (or both), then in any such case each party shall cooperate in the
filing
of any and all pleadings and other documents as may be necessary to obtain
or
secure the application of Georgia Law or jurisdiction by or of the Georgia
Court
(or both).
Subject
to the provisions of the last paragraph of this Section 11(h), should any
Seller
or Ancillary Party (or any successor, assignee or Affiliate thereof) make
any
filing in breach of this Section and thereafter fail to dismiss the same
within
ten (10) business days after written demand
Page
42
thereof
by Buyer or fail to support the application of Georgia Law or jurisdiction
by or
of the Georgia Courts, the law of the State of South Carolina shall apply
and
jurisdiction for any and all disputes or other matters arising under this
Agreement shall be moved to the State of South Carolina. Subject to the
provisions of the last paragraph of this Section 11(h), should Buyer or
any
successor, assignee or Affiliate thereof make any filing in breach of this
Section and fail to dismiss the same within ten (10) business days after
written
demand thereof by either Seller or Ancillary Party or fail to support the
application of Georgia Law or jurisdiction by or of the Georgia Courts,
the law
of the State of Ohio shall apply and jurisdiction for any and all disputes
or
other matters arising under this Agreement shall be moved to the State
of Ohio.
In
the
event of any such dispute, the court shall award attorneys’ fees and expenses,
and all costs, to the prevailing party.
In
the
event that the Georgia Courts shall determine that the Georgia Courts are
not
the proper forum for disputes arising under this Agreement or the Escrow
Agreement, Sellers and the Ancillary Parties may pursue jurisdiction over
Buyer
in any court other than a court located in the State of Ohio, and Buyer
may
pursue jurisdiction over Sellers and the Ancillary Parties in any court
other
than a court located in the State of South Carolina.
(i)
Amendments and Waivers. No
amendment of any provision of this Agreement shall be valid unless the
same
shall be in writing and signed by Buyer and Sellers. No waiver by any Party
of
any provision of this Agreement or any default, misrepresentation, or breach
of
warranty or covenant hereunder, whether intentional or not, shall be valid
unless the same shall be in writing and signed by the Party making such
waiver,
nor shall such waiver be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect
in any
way any rights arising by virtue of any prior or subsequent such occurrence,
nor
shall such waiver apply to any other provision, breach, default or
misrepresentation.
(j)
Severability.
Any
term
or provision of this Agreement that is invalid or unenforceable in any
situation
in any jurisdiction shall not affect the validity or enforceability of
the
remaining terms and provisions hereof or the validity or enforceability
of the
offending term or provision in any other situation or in any other
jurisdiction.
(k)
Expenses. Each
Seller and Buyer shall bear his or its own costs and expenses (including
legal
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby; provided,
however,
that
Members will bear all costs and expenses of Lawriter (including all of
its legal
fees and expenses) in connection with this Agreement and the transactions
contemplated hereby in the event that such transactions are consummated.
Without
limiting the generality of the foregoing, all transfer, documentary, sales,
use,
stamp, registration and other such Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with the consummation of the transactions contemplated
hereby shall be paid by Members when due, and Members shall, at their own
expense, file all necessary Tax Returns and other documentation with respect
to
all such Taxes.
(l)
Construction. The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this
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43
Agreement
shall be construed as if drafted jointly by the Parties and no presumption
or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the
authorship of any of the provisions of this Agreement. Any reference to
any
federal, state, local, or foreign statute or law shall be deemed also to
refer
to all rules and regulations promulgated thereunder, unless the context
requires
otherwise. The word “including” shall mean including without limitation; and,
unless the context otherwise requires, the
words
“hereof,” “herein,” “hereunder” or the like refer to this Agreement as a
whole.
Nothing
in the Disclosure Schedule or Annexes shall be deemed adequate to disclose
an
exception to a representation or warranty made herein unless the Disclosure
Schedule or Annex identifies the exception with particularity and describes
the
relevant facts in detail. Without limiting the generality of the foregoing,
the
mere listing (or inclusion of a copy) of a document or other item shall
not be
deemed adequate to disclose an exception to a representation or warranty
made
herein (unless the representation or warranty has to do with the existence
of
the document or other item itself). The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance.
If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of
the
relative levels of specificity) that the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(m)
Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
(n)
Specific Performance.
Each
Seller acknowledges and agrees that Buyer would be damaged irreparably
in the
event any provision hereof is not performed in accordance with its specific
terms or otherwise is breached, so that Buyer shall be entitled to injunctive
relief to prevent breaches of the provisions hereof and to enforce specifically
this Agreement and the terms and provisions hereof in addition to any other
remedy to which Buyer may be entitled, at law or in equity. In particular,
the
Parties acknowledge that the business of Lawriter is unique and recognize
and
affirm that in the event any Seller breaches this Agreement, money damages
would
be inadequate and Buyer would have no adequate remedy at law, so that Buyer
shall have the right, in addition to any other rights and remedies existing
in
its favor, to enforce its rights and the other Parties’ obligations hereunder
not only by action for damages but also by action for specific performance,
injunctive, or other equitable relief.
(o)
Tax
Disclosure Authorization. Notwithstanding
anything herein to the contrary, the Parties (and each Affiliate and Person
acting on behalf of any Party) agree that each Party (and each employee,
representative, and other agent of such Party) may disclose to any and
all
Persons, without limitation of any kind, the transaction’s tax treatment and tax
structure (as such terms are used in regulations promulgated under Code
Section
6011) contemplated by this Agreement and all materials of any kind (including
opinions or other tax analyses) provided to such Party or such Person relating
to such tax treatment and tax structure, except to the extent necessary
to
comply with any applicable federal or state securities laws; provided,
however,
that
such disclosure may not be made until the earlier of date of (A) public
announcement of discussions relating to the transaction, (B) public announcement
of the transaction, or (C) execution of an agreement (with or without
conditions) to enter into the transaction. This
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44
authorization
is not intended to permit disclosure of any other information including
(A) any
portion of any materials to the extent not related to the transaction’s tax
treatment or tax structure, (B) the identities of participants or potential
participants, (C) the existence or status of any negotiations, (D) any
pricing
or financial information (except to the extent such pricing or financial
information is related to the transaction’s tax treatment or tax structure), or
(E) any other term or detail not relevant to the transaction’s tax treatment or
the tax structure.
IN
WITNESS WHEREOF,
the
Parties hereto have executed and delivered this Agreement, in the case
of any
entity by its duly authorized officer, as of the date first above
written.
| |
BUYER
|
| |
COLLEXIS
HOLDINGS, Inc.
|
| | |
| |
By:
|
/s/
Xxxxxxx X. Xxxxxxxx
|
| | |
Name:
Xxxxxxx X. Xxxxxxxx
|
| | |
Title:
Chief Executive Officer
|
| | |
| |
LAWRITER,
INC.
|
| | |
| |
By:
|
/s/
Xxxxxxx X. Xxxxxxxx
|
| | |
Name:
Xxxxxxx X. Xxxxxxxx
|
| | |
Title:
President
|
| | |
| |
SELLERS
|
| |
Lawriter
LLC
|
| | |
| |
By:
|
/s/
Xxxxxx X. Xxxx III
|
| | |
Name:
Xxxxxx X. Xxxx III
|
| | |
Title:
Chief Executive Officer
|
| | |
| |
Address:
|
| | |
| |
x/x
Xxxx & Xxxxxxxxxx
|
| |
000
Xxxxxxxx Xxxxxx
|
| |
000
X. Xxxxx Xxxxxx
|
| |
Xxxxxxxxxx,
Xxxx 00000
|
Page
45
| |
Institute
of Legal Publishing, Inc.
(f/k/a
Lawriter Corporation)
|
| | |
| |
By:
|
/s/
Xxxxxx X. Xxxx III
|
| | |
Name:
Xxxxxx X. Xxxx III
|
| | |
Title:
President
|
| | |
| |
Address:
|
| | |
| |
x/x
Xxxx & Xxxxxxxxxx
|
| |
000
Xxxxxxxx Xxxxxx
|
| |
000
X. Xxxxx Xxxxxx
|
| |
Xxxxxxxxxx,
Xxxx 00000
|
| | |
| |
XXXX.XXX
LLC
|
| | |
| |
By:
|
/s/
Xxxxxx X. Xxxx
|
| | |
Name:
Xxxxxx X. Xxxx
|
| | |
Title:
Member
|
| | |
| |
Address:
|
| | |
| |
XXXX.XXX
LLC
|
| |
c/o
Ohio State Bar Association
|
| |
X.X.
Xxx 00000
|
| |
Xxxxxxxx,
Xxxx 00000-0000
|
| | |
| |
ANCILLARY PARTIES
|
| | |
| |
/s/
Xxxxxx X. Xxxx III
|
| |
Xxxxxx
X. Xxxx III
|
| | |
| |
Address:
|
| | |
| |
Xxxxxx
X. Xxxx III
|
| |
x/x
Xxxx & Xxxxxxxxxx
|
| |
000
Xxxxxxxx Xxxxxx
|
| |
000
X. Xxxxx Xxxxxx
|
| |
Xxxxxxxxxx,
Xxxx 00000
|
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46
| |
/s/
Xxxxx X. Xxxxx
|
| |
Xxxxx
Xxxxx
|
| | |
| |
Address:
|
| |
Xxxxx
X. Xxxxx
|
| |
c/o
Ohio State Bar Association
|
| |
X.X.
Xxx 00000
|
| |
Xxxxxxxx,
Xxxx 00000-0000
|
| | |
| |
XXXX
XXXXX BAR ASSOCIATION
|
| | |
| |
By:
|
/s/
Xxxxxx X. Xxxx
|
| | |
Name:
Xxxxxx X. Xxxx
|
| | |
Title:
President
|
| | |
| |
Address:
|
| |
Ohio
State Bar Association
|
| |
X.X.
Xxx 00000
|
| |
Xxxxxxxx,
Xxxx 00000-0000
|
Page
47
