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EXHIBIT 3
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO LOISLAW.COM, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
PROMISSORY NOTE
$500,000 December 8, 2000
FOR VALUE RECEIVED, Loislaw.com, Inc., a Delaware corporation (the
"Company"), hereby promises to pay to the order of Capital Resource Lenders III,
L.P., on the earlier of March 8, 2000 or the closing of a Subsequent Financing
(as defined below), the principal amount of Five Hundred Thousand Dollars
($500,000), plus interest in arrears from and including the date hereof on the
principal balance from time to time outstanding, computed daily, at a rate of
twelve percent (12%) per annum. Any interest due but remaining unpaid shall bear
interest at the rate equal to fifteen percent (15%) per annum. This Note may be
prepaid in whole or in part, at any time or from time to time, without premium
or penalty. Interest shall be calculated on the basis of the actual number of
days elapsed over a year of 360 days. Notwithstanding any other provision of
this Note, the holder hereof does not intend to charge and the Company shall not
be required to pay any interest or other fees or charges in excess of the
maximum permitted by applicable law; any payments in excess of such maximum
shall be refunded to the Company or credited to reduce principal hereunder. All
payments received by the holder hereunder will be applied first to costs of
collection, if any, then to interest and the balance to principal. The term
"Subsequent Financing" as used herein shall refer to the sale by the Company of
equity securities of the Company to one or more institutional investors, with
gross proceeds to the Company of at least $2,000,000.
Payments of principal and interest will be made by check in immediately
available United States funds sent to the holder at the address furnished to the
Company for that purpose.
This Note is issued by the Company pursuant to and entitled to the benefits
of a certain Note Purchase Agreement, dated as of December 8, 2000, between the
Company and the Investor named therein (as the same may be amended from time to
time, hereinafter referred to as the "Purchase Agreement"), and each holder of
this Note, by its acceptance hereof, agrees to be bound by the provisions of the
Purchase Agreement. This Note will be registered on the books of the Company or
its agent as to principal and interest. Any transfer of this Note will be
effected only by surrender of this Note to the Company and reissuance of a new
note to the transferee.
1. EVENTS OF DEFAULT. The outstanding principal and accrued interest on
this Note shall, at the option of the holder hereof, become due and payable
without notice or demand, upon the happening of any one of the following
specified events:
(a) failure to pay any amount as herein set forth;
(b) default in the performance by the Company of any other obligation to
the holder, which default is not cured within thirty (30) days after written
notice of such default from the holder;
(c) insolvency (however evidenced) or the commission of any act of
insolvency;
(d) the making of a general assignment for the benefit of creditors;
(e) the filing of any petition or the commencement of any proceeding by
the Company or any endorser or guarantor of this Note for any relief under
any bankruptcy or insolvency laws, or any laws relating to the relief of
debtors, readjustment of indebtedness, reorganizations, compositions, or
extensions;
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(f) the filing of any petition or the commencement of any proceeding
against the Company or any endorser or guarantor of this Note for any relief
under any bankruptcy or insolvency laws, or any laws relating to the relief
of debtors, readjustment of indebtedness, reorganizations, compositions, or
extensions, which proceeding is not dismissed within sixty (60) days;
(g) suspension of the transaction of the usual business of the Company;
or
(h) the breach of any representation or warranty of the Company in the
Purchase Agreement.
2. EXPENSES OF COLLECTION. In the event any payment herein provided is not
paid when due, the Company agrees to pay the holder's reasonable costs in
collecting and enforcing this Note, including reasonable attorney's fees.
3. WAIVER BY HOLDER. No waiver of any obligation of the Company under this
Note shall be effective unless it is in a writing signed by the holder. A waiver
by the holder of any right or remedy under this Note on any occasion shall not
be a bar to exercise of the same right or remedy on any subsequent occasion or
of any other right or remedy at any time.
4. WAIVER BY COMPANY. The Company hereby expressly waives presentment,
demand, and protest, notice of demand, dishonor and nonpayment of this Note, and
all other notices or demands of any kind in connection with the delivery,
acceptance, performance, default or enforcement hereof, and hereby consents to
any delays, extensions of time, renewals, waivers or modifications that may be
granted or consented to by the holder hereof with respect to the time of payment
or any other provision hereof.
5. GOVERNING LAW. This Note shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware.
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Loislaw.com, Inc.
By: /s/ KYLE D. PARKER
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Chief Executive Officer
</TABLE>
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NOTE PURCHASE AGREEMENT
December 8, 2000
Loislaw.com, Inc., a Delaware corporation (the "Company"), and Capital
Resource Lenders III, L.P., a Delaware limited partnership (the "Investor"),
hereby agree as follows:
1. THE NOTE. The Company has authorized the issuance and sale, in
accordance with the terms hereof, of the Company's Promissory Note in the
original principal amount of $500,000 (the "Note"). The Note will be
substantially in the form set forth in Exhibit A hereto.
2. THE CLOSING. The Company agrees to issue and sell to the Investor, and,
subject to and in reliance upon the representations, warranties, terms and
conditions contained herein, the Investor agrees to purchase the Note, for a
purchase price of $500,000, payable by wire transfer to the Company's account.
Such purchase and sale shall take place at a closing (the "Closing") to be held
at 10 A.M. on December 8, 2000 at the offices of Testa, Hurwitz & Thibeault,
L.L.P., 125 High Street, Boston, MA 02110 (or such other place and time as shall
be mutually agreed upon). At the Closing, the Company shall deliver to the
Investor an opinion of Novakov, Davis & Munck, P.C., counsel to the Company,
satisfactory in form and substance to the Investor and its counsel.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants that, as of the Closing,
(a) the Company is a duly organized and validly existing corporation
under the laws of the State of Delaware;
(b) the Company has taken or will take all corporate action required to
make all the obligations of the Company reflected in the provisions of this
Agreement and the Note the valid and enforceable obligations they purport to
be;
(c) the issuance of the Note will not require any further corporate
action; and
(d) neither the authorization, execution and delivery of the Note nor
the issuance and delivery of this Agreement has constituted or resulted in,
nor will constitute or result in, a default or violation of any law or
regulation applicable to the Company or any term or provision of the
Company's Certificate of Incorporation or By-laws, both as amended, or any
agreement or instrument by which it is bound or to which its properties or
assets are subject.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
(a) The Investor confirms that it has full power and authority and has
taken all required action necessary to permit it to execute and deliver and
to carry out the terms of this Agreement and all other documents or
instruments required hereby and to make all the obligations of the Investor
hereunder valid and enforceable.
(b) The Investor represents that it is its present intention to acquire
the Note for its own account and that the Note is being acquired by it for
the purpose of investment and not with a view to distribution. The Investor
agrees that it will not sell or transfer the Note without registration under
applicable federal and state securities laws, or the availability of
exemptions therefrom. The Investor agrees that the Note will bear a
restrictive legend stating that it has not been registered under applicable
federal and state securities laws and referring to restrictions on its
transferability and sale.
(c) The Investor acknowledges that it currently has, and had immediately
prior to its receipt of the offer of sale from the Company, such knowledge
and experience in financial and business matters that it is capable of
evaluating the merits and risks of this investment and further acknowledges
that it is able to bear the economic risk of this investment. During the
course of this transaction and prior to the sale to the Investor of the Note
hereunder, the Investor acknowledges that it had the opportunity to ask
questions of, and receive answers from, management of the
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Company concerning the terms and conditions of this investment and to obtain
any additional information of the same kind that is specified in Rule 502 of
Regulation D of the Securities Act of 1933, as amended, or that is necessary
to verify the accuracy of the other information obtained. The Investor
acknowledges that it has received such information as it deems necessary to
enable it to make its investment decision.
5. AMENDMENTS, WAIVERS, ETC. This Agreement and the Note may be amended
only by a written instrument signed by the Company and the Investor.
6. CHOICE OF LAW. It is the intention of the parties that the internal
laws, and not the laws of conflicts, of the State of Delaware should govern the
enforceability and validity of this Agreement, the construction of its terms and
the interpretation of the rights and duties of the parties pursuant to the
relationships among them contemplated herein, whether or not such rights and
duties arise directly under this Agreement.
7. LEGAL FEES. The Company agrees to pay at the Closing and thereafter on
demand the fees and out-of-pocket expenses of Testa, Hurwitz & Thibeault, LLP,
counsel to the Investor, with respect to the transactions contemplated herein.
8. PARTIES IN INTEREST. The terms and provisions of this Agreement shall
be binding upon and inure to the benefit of, and be enforceable by, the
respective successors and assigns of the parties hereto. This Agreement shall
not run to the benefit of or be enforceable by any person other than a party to
this Agreement and its successors and assigns.
9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this Note Purchase
Agreement as of the date first above written.
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COMPANY:
Loislaw.com, Inc.
By: /s/ KYLE D. PARKER
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Title: Chief Executive Officer
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INVESTOR:
Capital Resource Lenders III, L.P.
By: Capital Resource Partners III, L.L.C.,
Its General Partner
By: /s/ ROBERT C. AMMERMAN
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Title: Managing Member
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</TABLE>
