Exhibit 10.1
LLC INTERESTS PURCHASE AGREEMENT
BY AND AMONG
COLLEXIS HOLDINGS, INC.,
LAWRITER, INC.,
LAWRITER LLC,
OSBA.COM LLC,
AND
INSTITUTE OF LEGAL PUBLISHING, INC. (f/k/a Lawriter
Corporation)
ET AL.
Dated
as of February 1, 2008
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 ”),
OSBA.COM 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,
Joseph W. Shea, III (“
Shea ”),
Denny L. Ramey (“
Ramey ”)
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 Shea 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.
“
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 Hamilton 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
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
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.
“
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.
“
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.
“
Ramey ”
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.
“
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.
“
Shea ”
shall have the meaning ascribed thereto in the preface
above.
“
Shea 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.
“
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
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 8
th 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
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
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 Thompson Hine LLP, 10 West Broad
Street, Suite 700, Columbus, Ohio 43215, 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.
(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.
(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
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
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
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;
(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
(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
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
deliver
