EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT")
is entered into as of September 19, 2000, between NETLOJIX COMMUNICATIONS, INC.,
a Delaware corporation ("NETLOJIX"), CWE ACQUISITION CORPORATION, an Illinois
corporation and a wholly-owned subsidiary of NetLojix ("MERGERSUB"), CW
ELECTRONIC ENTERPRISES, INC., an Illinois corporation doing business as "CWE(2)
Network Systems" ("CWE(2)") and DUANE E. WERTH AND KAREN L. WERTH (the
"WERTHS").
RECITALS
A. CWE(2) is engaged in the business of providing network integration,
technical support, and web-centric applications development services and related
equipment (the "BUSINESS").
B. The Boards of Directors of NetLojix, Mergersub and CWE(2), and all
of the shareholders of CWE(2) (the "SHAREHOLDERS"), have approved the
acquisition of CWE(2) by NetLojix by means of the merger of Mergersub with and
into CWE(2) (the "MERGER"), pursuant to the Articles of Merger set forth in
Exhibit A hereto (the "ARTICLES OF MERGER") and the transactions contemplated
hereby, in accordance with the applicable provisions of the Illinois Business
Corporation Act of 1983, as amended (the "BCA"), which permit such Merger.
C. For federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization with the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE").
D. CWE(2) has 1,000,000 shares of its common stock authorized, issued
and outstanding (the "SHAREHOLDER SHARES"). The Shareholder Shares constitute
all of the issued and outstanding capital stock of CWE(2). The Werths own
894,430 shares (the "WERTH SHARES") of the Shareholder Shares.
E. Each of the parties to this Agreement desires to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions thereto.
AGREEMENT
In consideration of the mutual promises contained herein
and intending to be legally bound the parties agree as follows:
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1. THE MERGER.
1.1. THE MERGER. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the BCA, Mergersub shall be merged with and into
CWE(2), the separate corporate existence of Mergersub shall cease and CWE(2)
shall continue as the surviving corporation and as a wholly-owned subsidiary
of NetLojix. CWE(2) as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "SURVIVING CORPORATION."
1.2. EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 7, the closing of the Merger (the "CLOSING") will take
place as promptly as practicable, but no later than five (5) business days
following satisfaction or waiver of the conditions set forth in Section 6, at
the offices of Seed, Mackall & Cole LLP, 1332 Anacapa Street, Suite 200,
Santa Barbara, California, unless another place or time is agreed to by
NetLojix and CWE(2). The date upon which the Closing actually occurs is
herein referred to as the "CLOSING DATE." On the Closing Date, the parties
hereto shall cause the Merger to be consummated by filing the Articles of
Merger with the Secretary of State of Illinois, in accordance with the
relevant provisions of applicable law (the time of acceptance by the
Secretary of State of Illinois of such filing, or such later time as is
specified in the Articles of Merger, being referred to herein as the
"EFFECTIVE TIME").
1.3. EFFECT OF THE MERGER; FURTHER ACTION. At the Effective Time,
the effect of the Merger shall be as provided in the applicable provisions of
the BCA. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers
and franchises of CWE(2) and Mergersub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of CWE(2) and Mergersub
shall become the debts, liabilities and duties of the Surviving Corporation.
If, at any time after the Effective Time, any such further action is
necessary or reasonably desirable to carry out the purposes of this Agreement
and to vest the Surviving Corporation with full right, title and possession
to all assets, property, rights, privileges, powers and franchises of CWE(2)
and Mergersub, the officers and directors of CWE(2) and Mergersub are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
1.4. ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS.
1.4.1. ARTICLES OF INCORPORATION. Unless otherwise
determined by NetLojix prior to the Effective Time, at the Effective Time,
the Articles of Incorporation of CWE(2) shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Articles of Incorporation.
1.4.2. BYLAWS. The Bylaws of Mergersub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended.
2.1-2
1.4.3. DIRECTORS AND OFFICERS. The directors of Mergersub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. The officers of
Mergersub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, each to hold office in accordance with
the Bylaws of the Surviving Corporation.
1.5. CONVERSION OF SHARES.
1.5.1. CONVERSION OF CWE(2) COMMON STOCK. Each share of
Common Stock, no par value, of CWE(2) (tHE "CWE(2) COMMON Stock") issued and
outstanding immediately prior to the Effective Time will be canceled and
extinguished and be converted automatically into the right to receive, upon
surrender of the certificate representing such share of CWE(2) Common Stock
in the manner provided in Section 1.6, (i) one-half of one share of the
Common Stock, par value $.01 per share, of NetLojix (the "NETLOJIX COMMON
STOCK"), and (ii) $0.15 in cash in the form of a NetLojix check (together,
the "MERGER CONSIDERATION"). The shares of NetLojix Common Stock issued in
the Merger are referred to hereinafter as the "EXCHANGE SHARES". The
aggregate number of Exchange Shares to be issued in the Merger shall not
exceed 500,000 shares and the total cash included in the Merger Consideration
shall not exceed $150,000. NetLojix will deliver the Merger Consideration to
the Shareholders, upon surrender of the certificates for their CWE(2) Common
Stock, promptly after receiving written evidence from the Secretary of State
of Illinois that the Effective Time has occurred.
1.5.2. CAPITAL STOCK OF MERGERSUB. Each share of Common
Stock of Mergersub issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of Common Stock of the Surviving Corporation. Each
stock certificate of Mergersub evidencing ownership of any such shares of
Common Stock of Mergersub shall, as of the Effective Time, evidence ownership
of such shares of Common Stock of the Surviving Corporation.
1.5.3. FRACTIONAL SHARES. No fraction of a share of
NetLojix Common Stock will be issued, but in lieu thereof, each Shareholder
who would otherwise be entitled to a fraction of a share of NetLojix Common
Stock (after aggregating all fractional shares of NetLojix Common Stock to be
received by such Shareholder) shall be entitled to receive, without any
interest, from NetLojix an amount of cash (rounded to the nearest whole cent)
equal to the product of (i) such fraction, multiplied by (ii) the average
closing price of a share of NetLojix Common Stock as reported on Nasdaq over
the last five trading days ending with (and including) the second business
day prior to the Closing Date (the "AVERAGE CLOSING PRICE").
1.6. EXCHANGE PROCEDURES.
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1.6.1. TENDER OF CERTIFICATES. At the Closing, CWE(2) will
cause the Shareholders to tender to NetLojix the certificates representing
the Shareholder Shares, and such certificates will be cancelled by NetLojix.
If any stock certificate to be delivered to NetLojix by the Shareholders at
Closing shall have been lost, stolen or destroyed, NetLojix may, in its
reasonable discretion, require the owner of such lost, stolen or destroyed
stock certificate to provide an appropriate affidavit of ownership and
indemnity or other document(s) evidencing ownership of such Shareholder
Shares satisfactory to NetLojix.
1.6.2. DEPOSIT OF ESCROW SHARES. Concurrently with the
Effective Time, NetLojix will deposit certificates representing 100,000 of
the aggregate Werth Shares (the "ESCROW SHARES") into an escrow held by Santa
Barbara Bank and Trust (the "ESCROW AGENT") pursuant to an Escrow Agreement
in the form attached hereto as Exhibit B (the "ESCROW AGREEMENT"). The Werths
will be deemed to have received and consented to the deposit with the Escrow
Agent of the Escrow Shares (plus any additional shares as may be issued upon
any stock split, stock dividend or recapitalization effected by NetLojix
after the Effective Time), without any act required on the part of the
Werths. NetLojix, CWE(2) and the Werths each acknowledge that claims against
the Escrow Shares that may be made by NetLojix, if any, represent facts or
liabilities existing at the Effective Time but not known by NetLojix, which
if known by NetLojix at the Effective Time would have led to a reduction in
the aggregate Merger Consideration.
1.6.3. MERGER CONSIDERATION. At the Effective Time,
NetLojix will issue to each Shareholder the Merger Consideration due such
Shareholder with respect to his or her Shareholder Shares, less, in the case
of the Werths, the Escrow Shares which NetLojix has deposited under Section
1.6.2.
1.6.4. RESTRICTIVE LEGEND. The Exchange Shares (including
the Escrow Shares) will not be registered under any federal or state
securities laws. The Exchange Shares and the Escrow Shares will be
characterized as "restricted securities" for purposes of Rule 144 and Rule
145 under the Securities Act of 1933, as amended (the "SECURITIES ACT") and
each certificate representing any such shares shall bear a legend identical
or similar in effect to the following legend (together with any other legend
or legends required by applicable state securities laws or otherwise):
"THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT,
OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED. THE TRANSFERABILITY OF THESE SECURITIES
IS SUBJECT TO AN AGREEMENT AND PLAN OF REORGANIZATION DATED SEPTEMBER
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19, 2000, AMONG THE COMPANY AND THE HOLDER OF THESE SECURITIES."
1.7. SHAREHOLDER REPRESENTATIVE. Each of the Werths hereby
constitutes and appoints Duane E. Werth (the "SHAREHOLDER REPRESENTATIVE") to
execute and deliver any instruments or other documents, and to make such
decisions and to take such other action on behalf of the Werths as may be
necessary or appropriate in connection with the Werths' rights and
obligations under this Agreement, and each of the Werths hereby agrees to be
bound by any such instrument or other document executed and delivered by the
Shareholder Representative, and any such decision made or other action taken
by the Shareholder Representative, pursuant to the terms of this Agreement.
1.8. POST-CLOSING ADJUSTMENT.
1.8.1. CLOSING DATE BALANCE SHEET. Within sixty (60) days
after the Closing Date, NetLojix will submit to the Shareholder
Representative a balance sheet of CWE(2) as of the Closing Date (the "CLOSING
DATE BALANCE SHEET") together with its calculation of the adjustment set
forth in Section 1.8.3 below, if any. The Closing Date Balance Sheet will be
prepared in accordance with generally accepted accounting principles and
consistent with CWE(2)'s past practice. Within thirty (30) days after receipt
of the Closing Date Balance Sheet, the Shareholder Representative may either
accept or object to such statement and such adjustment. In the event the
Shareholder Representative objects to such statement or such adjustment, it
shall give written notice thereof to NetLojix within said thirty-day period,
together with a detailed written description of the grounds for such
objection and the Shareholder Representative's estimate of the disputed
amount or adjustment, and NetLojix and the Shareholder Representative shall
thereupon seek to resolve the Shareholder Representative's objections in good
faith. If NetLojix and the Shareholder Representative are unable to resolve
the Shareholder Representative's objections within thirty days thereafter,
then NetLojix and the Shareholder Representative shall submit the matter to
an independent firm of certified public accountants selected by the parties
(the "ACCOUNTANTS") for resolution. If the parties are unable to agree on the
choice of Accountants, then they will select a nationally-recognized
accounting firm by lot. If issues in dispute are submitted to the Accountants
for resolution, (i) each party will furnish to the Accountants such
workpapers and other documents and information relating to the disputed
issues as the Accountants may request and are available to that party, and
will be afforded the opportunity to present to the Accountants any material
relating to the determination and to discuss the determination with the
Accountants; (ii) the determination by the Accountants, as set forth in a
notice delivered to both parties by the Accountants, shall be made within
twenty days of submission and will be binding and conclusive on the parties;
and (iii) the fees of the Accountants for such determination shall be paid by
the party whose estimate of the disputed amount or adjustment is most
different (in absolute dollar amount) from the amount or adjustment
determined by the Accountants.
1.8.2. NET BOOK VALUE. For the purpose of this Agreement,
"NET BOOK VALUE" shall be the amount by which the aggregate book value of the
total assets of CWE(2), as set forth on the Closing Date Balance Sheet (as
adjusted by the Accountants, if necessary), exceeds the aggregate
2.1-5
book value of the total liabilities of CWE(2), as set forth on such Closing
Date Balance Sheet. If the aggregate book value of such total liabilities
exceeds the aggregate book value of such total assets, Net Book Value shall
be a negative number in the amount of such excess. In this Agreement, dollar
amounts in parentheses shall indicate negative numbers or deficits.
1.8.3. ADJUSTMENT. In the event the Net Book Value is less
than (i.e. is more of a deficit than) ($350,000), then NetLojix shall make a
written demand on the Shareholder Representative for the amount by which
($350,000) exceeds the Net Book Value (the "POST-CLOSING ADJUSTMENT AMOUNT").
The Post-Closing Adjustment Amount shall be paid by the Werths to NetLojix by
way of a release to NetLojix of Escrow Shares in accordance with the terms of
the Escrow Agreement, with the Escrow Shares to be valued at the Average
Closing Price. Any balance of such Post-Closing Adjustment Amount (without
any interest thereon) still owing under this Section 1.8 after the release of
such Escrow Shares shall be paid by the Werths, to NetLojix by wire transfer
of immediately available funds within three business days after the release
of such Escrow Shares. In no event will the Post-Closing Adjustment Amount
exceed an amount equal to the value of the aggregate Merger Consideration
delivered by NetLojix to the Werths. The Werths' obligations to make payments
pursuant to this Section 1.8 are independent of, and in addition to, the
indemnity obligations set forth in Section 8 of this Agreement.
1.9. TAX CONSEQUENCES. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Income Tax Regulations.
1.10. NO FURTHER OWNERSHIP RIGHTS IN CWE(2) COMMON STOCK. The shares
of NetLojix Common Stock and cash issued pursuant to the Merger upon the
surrender for exchange of shares of CWE(2) Common Stock in accordance with
the terms hereof shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of CWE(2) Common Stock, and there shall
be no further registration of transfers on the records of the Surviving
Corporation of shares of CWE(2) Common Stock which were outstanding
immediately prior to the Effective Time.
2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
CWE(2) and the Werths, jointly and severally, hereby represent and
warrant to NetLojix, as of the date hereof and as of the Closing Date, as
follows:
2.1. Organization and Related Matters.
2.1.1. CWE(2). CWE(2) is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Illinois. CWE(2) is not required to be qualified or licensed to do business
in any jurisdiction other than the State of Illinois. CWE(2) has all
necessary corporate power and authority to own its properties and assets and
to carry on its Business as now conducted.
2.1-6
Schedule 2.1 correctly lists the current directors and executive officers of
CWE(2) and sets forth an organizational chart with respect to CWE(2)'s
operations and employees. True, correct and complete copies of the Articles
of Incorporation and bylaws of CWE(2) have been delivered to NetLojix.
2.1.2. SUBSIDIARIES. CWE(2) has no direct or indirect
subsidiaries. CWE(2) has never had any subsidiaries, is not a partner or
participant in any partnerships or joint ventures, and does not own, and
never has owned, directly or indirectly, any interests in any other
corporation, partnership, limited liability company or other entity.
2.1.3. THE SHAREHOLDERS. Each of the Shareholders is listed
on Schedule 2.1, together with such Shareholder's address and Social Security
Number. Except for the Shareholders set forth on Schedule 2.1, no person owns
any of the capital stock of CWE(2). Each of the Werths has all necessary
capacity, power and authority to execute, deliver and perform this Agreement
and any related agreements to which such person is a party.
2.2. CAPITAL STOCK.
2.2.1. OWNERSHIP OF SHAREHOLDER SHARES. The Shareholders
own the Shareholder Shares beneficially and of record in the amounts set
forth on Schedule 2.2. The Werth Shares are owned by the Werths, as joint
tenants with right of survivorship, free and clear of any claim, charge,
easement, encumbrance, lease, covenant, security interest, lien, option,
pledge, rights of others, or restriction (whether on voting, sale, transfer,
disposition or otherwise), whether imposed by agreement, understanding, law,
equity or otherwise, except for any restrictions on transfer generally
arising under any applicable federal or state securities law (each an
"ENCUMBRANCE"). At the Closing, NetLojix will acquire good and marketable
title to and complete ownership of the Werth Shares, free and clear of any
Encumbrance.
2.2.2. CAPITALIZATION. The authorized capital stock of
CWE(2) consists of 1,000,000 shares of the CWE(2) Common Stock, of which only
the Shareholder Shares are issued and outstanding on the date hereof. On the
Closing Date, only the Shareholder Shares will be issued and outstanding.
There are no outstanding options, warrants or other rights to subscribe for
or purchase, or contracts or other obligations to issue or grant any rights
to acquire, any stock or securities of CWE(2), or to restructure or
recapitalize CWE(2). Except as set forth on Schedule 2.2, there are no
outstanding contracts of the Shareholders, or CWE(2) to repurchase, redeem or
otherwise acquire any securities of CWE(2). The Shareholder Shares are duly
authorized, validly issued and outstanding and are fully paid and
nonassessable and were issued in conformity with applicable laws. There are
no preemptive rights in respect of any equity securities of CWE(2).
2.3. FINANCIAL STATEMENTS; CHANGES; CONTINGENCIES.
2.3.1. FINANCIAL STATEMENTS.
2.1-7
A. CWE(2) has delivered to NetLojix balance sheets for
CWE(2) as of September 30, 1999 and July 31, 2000, and the related statements
of operations for the year ended September 30, 1999 and the ten months ended
July 31, 2000 (collectively, "CWE(2) FINANCIAL STATEMENTS"). The CWE(2)
Financial Statements have been certified by the chief executive officer of
CWE(2). The CWE(2) Financial Statements have been prepared in conformity with
generally accepted accounting principles, consistently applied ("GAAP"),
except as specifically set forth on Schedule 2.3. Such statements of
operations present fairly the results of operations of CWE(2) for the
respective periods covered, and the balance sheets present fairly the
financial condition of CWE(2) as of their respective dates.
B. At the dates of each such balance sheet referenced in
this Section 2.3.1, CWE(2) had no material liability (actual, contingent or
accrued) that, in accordance with GAAP applied on a consistent basis, should
have been shown or reflected therein but was not. Since October 1, 1998,
there has been no change in any of the significant accounting policies,
practices or procedures of CWE(2).
2.3.2. NO MATERIAL ADVERSE CHANGES. Since October 1, 1999,
whether or not in the ordinary course of business, other than as contemplated
by this Agreement, there has not been, occurred or arisen:
A. any change in or event affecting the Shareholders,
CWE(2), the Business or the Shareholder Shares that has had or may reasonably
be expected to have a material adverse effect on CWE(2), the Business, or the
Shareholder Shares,
B. any agreement, condition, action or omission which
would be proscribed by (or require consent under) Section 4.3 had it existed,
occurred or arisen after the date of this Agreement,
C. any strike or other labor dispute, or
D. any casualty, loss, damage or destruction (whether or
not covered by insurance) of any material property of CWE(2) that is material
or that has involved or may involve a loss to CWE(2) in excess of applicable
insurance coverage.
2.3.3. NO OTHER LIABILITIES OR CONTINGENCIES. CWE(2) has no
liabilities of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due, probable of assertion or not,
except liabilities that (i) are reflected or disclosed in the CWE(2)
Financial Statements (as to liabilities of CWE(2)), (ii) were incurred after
July 31, 2000, in the ordinary course of business and in the aggregate do not
exceed $10,000 or (iii) are set forth in Schedule 2.3 hereto.
2.3.4. DIVIDENDS AND OTHER DISTRIBUTIONS. Except as shown
in the CWE(2) Financial Statements, there has been no dividend or other
distribution of assets or securities whether consisting
2.1-8
of money, property or any other thing of value, declared, issued or paid by
CWE(2) subsequent to September 30, 1999.
2.4. TAX AND OTHER RETURNS AND REPORTS.
2.4.1. TAX RETURNS AND PAYMENTS. Except as set forth in
Schedule 2.4, CWE(2) has timely filed or will file prior to Closing all
required Tax Returns and has paid or will have paid by Closing all Taxes due
for all periods ending on or before the Closing Date. All required Tax
Returns, including amendments to date, have been prepared in good faith
without negligence or willful misrepresentation and are complete and accurate
in all material respects. Adequate provision has been made in the books and
records of CWE(2), and in the CWE(2) Financial Statements, for all Taxes
whether or not due and payable and whether or not disputed. Except as set
forth on Schedule 2.4, CWE(2) has withheld and paid all Taxes required to be
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, customer, creditor, stockholder or other third party.
2.4.2. AUDITS AND DEFICIENCIES. Schedule 2.4 lists the date
or dates through which the Internal Revenue Service and any other government
or any agency, bureau, board, commission, court, department, official,
political subdivision, tribunal or other instrumentality of any government,
whether federal, state or local, domestic or foreign (a "GOVERNMENTAL
ENTITY") have examined the United States federal income Tax Returns and any
other Tax Returns of CWE(2). Except as set forth in the Schedule 2.4, no
Governmental Entity has, during the past three years, examined or is in the
process of examining any Tax Returns of CWE(2). Except as set forth on
Schedule 2.4, no Governmental Entity has proposed (tentatively or
definitively), asserted or assessed or, to the best knowledge of the
Shareholder, threatened to propose or assert, any deficiency, assessment or
claim for Taxes and there would be no basis for any such delinquency
assessment or claim.
2.4.3. COLLAPSIBLE CORPORATION. CWE(2) is not a
"collapsible corporation" as defined in Section 341(b) of the Code. CWE(2)
has not elected to be treated as a consenting corporation under Section
341(f) of the Code.
2.4.4. DEFINITIONS. For the purposes of this Agreement, (i)
"TAX" means any foreign, federal, state, county or local income, sales and
use, excise, franchise, real and personal property, transfer, gross receipt,
capital stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Governmental
Entity any interest and penalties (civil or criminal) related thereto or to
the nonpayment thereof, and any losses or expenses in connection with the
determination, settlement or litigation of any Tax liability, and (ii) "TAX
RETURN" means a report, return or other in formation required to be supplied
to a Governmental Entity with respect to Taxes including, where permitted or
required, combined or consolidated returns for any group of entities that
includes CWE(2).
2.1-9
2.5. MATERIAL CONTRACTS. Schedule 2.5 lists each agreement,
arrangement, bond, commitment, franchise, indemnity, indenture, instrument,
lease, license or understanding, whether or not in writing (each a
"CONTRACT") to which CWE(2) is a party or to which it or any of its
properties is subject or by which it is bound that (a) after July 31, 2000,
obligates such party to pay an amount of $25,000 or more, (b) has an
unexpired term as of July 31, 2000 in excess of one year, (c) represents a
Contract upon which the Business is substantially dependent or which is
otherwise material to such Business, (d) provides for an extension of credit
other than consistent with normal credit terms, (e) limits or restricts the
ability of CWE(2) or any of its Affiliates (as defined in Section 2.17) to
compete or otherwise to conduct its business in any manner or place, (f)
provides for a guaranty or indemnity by CWE(2), (g) grants a power of
attorney, agency or similar authority to another person or entity, (h)
contains a right of first refusal, (i) related to the possession or use of
any real property, or (j) was not made in the ordinary course of business.
Each of the Contracts listed on Schedule 2.5 shall be deemed to be a
"MATERIAL CONTRACT." True copies of the Material Contracts, including all
amendments and supplements, have been delivered to NetLojix. Each Material
Contract is valid and binding obligation of the parties thereto; CWE(2) has
duly performed all its obligations thereunder to the extent that such
obligations to perform have accrued; and no breach or default, alleged breach
or default, or event which would (with the passage of time, notice or both)
constitute a breach or default thereunder by CWE(2), or, to the best
knowledge of CWE(2) or the Werths, any other party or obligor with respect
thereto, has occurred or as a result of this Agreement or performance will
occur. Consummation of the transactions contemplated by this Agreement will
not (and will not give any person a right to) terminate or modify any rights
of, or accelerate or augment any obligation of, CWE(2).
2.6. REAL AND PERSONAL PROPERTY; TITLE TO PROPERTY; LEASES. CWE(2)
does not own, directly or indirectly, any interest whatsoever in any real
property, other than leasehold interests held by CWE(2) pursuant to office
leases included in the Material Contracts. Schedule 2.6 lists all tangible
personal property of CWE(2) material to the Business and designates any
leasehold interests therein. Except as set forth in Schedule 2.6, CWE(2) has
good and marketable title to, or a valid leasehold interest in (as designated
in Schedule 2.6), all such items of tangible personal property, free and
clear of any Encumbrances. All material tangible properties of CWE(2)
(excluding any inventory) are in a good state of maintenance and repair
(except for ordinary wear and tear) and are adequate for the Business. All
material leasehold properties held by CWE(2) as lessee are held under valid,
binding and enforceable leases, subject only to such exceptions as are not,
individually or in the aggregate, material to the Business.
2.7. INTELLECTUAL PROPERTY. Schedule 2.7 lists any and all
copyrights, patents, service marks, trademarks, tradenames, and all
registrations or applications for registration of any of the foregoing, used
in the Business or in which CWE(2) has an interest and the nature of such
interest, including all licenses or other rights with respect to any of the
foregoing. In addition, CWE(2) has previously provided in writing to NetLojix
descriptions of any and all trade secrets or other confidential information
or know-how used in the Business or in which CWE(2) has an interest. All of
the foregoing assets, properties and interests are referred to as the
"INTELLECTUAL PROPERTY."
2.1-10
Except as set forth on Schedule 2.7, CWE(2) has complete rights to and
ownership of all Intellectual Property. Except as set forth on Schedule 2.7,
CWE(2) does not use any Intellectual Property by consent of, or license from,
any other person and is not required to or makes any payments to others with
respect thereto. Except as set forth in Schedule 2.7, the Intellectual
Property of CWE(2) is fully assignable free and clear of any Encumbrances.
Neither the Intellectual Property nor any use by CWE(2) of any such
Intellectual Property conflicts with or infringes on the rights of any person
or entity. Neither CWE(2) nor the Werths have received any notice from any
person or entity claiming that the Intellectual Property or the use thereof
by CWE(2) conflicts with or infringes on the rights of any person or entity.
2.8. APPROVALS.
2.8.1. AUTHORIZATION. The execution, delivery and
performance of this Agreement and any related agreements by CWE(2) has been
duly and validly authorized by all necessary corporate action on the part of
CWE(2) including, without limitation, any required vote or consent of the
shareholders of CWE(2). This Agreement and any related agreement each
constitutes the legally valid and binding obligation of CWE(2) and the
Werths, enforceable against each of CWE(2) and the Werths in accordance with
its terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors rights generally.
2.8.2. NO CONFLICTS. The execution, delivery and
performance of this Agreement by CWE(2) and the Werths and the execution,
delivery and performance of any related agreements or contemplated
transactions by CWE(2) or the Werths will not violate, or constitute a breach
or default (whether upon lapse of time and/or the occurrence of any act or
event or otherwise) under, the Articles of Incorporation or bylaws of CWE(2)
or any Contract of CWE(2) or the Werths, result in the imposition of any
Encumbrance against any material asset or properties of CWE(2), or violate
any statute or other law, rule, regulation, or interpretation of any
Governmental Entity (each a "LAW"). Schedule 2.8 lists all approvals,
authorizations, consents, qualifications or registrations, or any waivers of
any of the foregoing, required to be obtained from, or any notices,
statements or other communications required to be filed with or delivered to,
any Governmental Authority or any other person or entity ("APPROVALS") by
CWE(2) or the Werths to consummate the transactions contemplated by this
Agreement. Except for matters identified in Schedule 2.8 as requiring that
certain actions be taken by or with respect to a third party or Governmental
Entity, the execution and delivery of this Agreement by CWE(2) and the Werths
and the performance of this Agreement and any related or contemplated
transactions by CWE(2) and the Werths will not require filing or registration
with, or the issuance of any Approval by, any other third party or
Governmental Entity.
2.9. LEGAL PROCEEDINGS. Except as set forth in Schedule 2.9, there
is no decree, injunction, judgment, order, ruling, assessment or writ (each
an "ORDER") or any action, complaint, petition, investigation, suit or other
proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity (each an "ACTION") pending, or, to the best
knowledge of CWE(2)
2.1-11
or the Werths, threatened, against or affecting CWE(2), the Werths or any of
their respective properties or assets or that, individually or when
aggregated with one or more other Orders or Actions, has or might reasonably
be expected to have an adverse effect on CWE(2) or the Business, on CWE(2)'s
or the Werths' ability to perform this Agreement, or on any aspect of the
transactions contemplated by this Agreement. Schedule 2.9 lists each Order
and each Action that involves a claim or potential claim against, or that
enjoins or seeks to enjoin any activity by, CWE(2). Except as set forth in
Schedule 2.9, there is no matter as to which CWE(2) has received any notice,
claim or assertion, or, to the best knowledge of CWE(2) or the Werths, which
otherwise has been threatened or is reasonably expected to be threatened or
initiated, against or affecting any director, officer, employee, agent or
representative of CWE(2), in such capacity, nor to the best knowledge of
CWE(2) or the Werths is there any reasonable basis therefor, in connection
with which any such person or entity has or may reasonably be expected to
have any right to be indemnified by CWE(2).
2.10. MINUTE BOOKS. The minute books of CWE(2) provided to NetLojix
accurately reflect all actions and proceedings taken to date by the
shareholders, board of directors and committees of CWE(2). The stock record
books of CWE(2) reflect accurately all transactions in the capital stock of
CWE(2).
2.11. ACCOUNTING RECORDS; INTERNAL CONTROLS.
2.11.1. ACCOUNTING RECORDS. Since October 1, 1998, CWE(2)
has maintained records that accurately and validly reflect its transactions,
and accounting controls sufficient to insure that such transactions are (i)
executed in accordance with management's general or specific authorization
and (ii) recorded in conformity with GAAP so as to maintain accountability
for assets.
2.11.2. DATA PROCESSING; ACCESS. Such records, to the
extent they contain important information that is not easily and readily
available elsewhere, have been duplicated, and such duplicates are stored
safely and securely pursuant to procedures and techniques utilized by
companies of comparable size in similar lines of business. The data
processing equipment, data transmission equipment, related peripheral
equipment and software used by CWE(2) in the operation of the Business to
generate and retrieve such records are comparable in performance, condition
and capacity with those utilized by companies of comparable size in similar
lines of business.
2.11.3. YEAR 2000 COMPLIANCE. Except as set forth in
Schedule 2.11, all software and systems (i) utilized by CWE(2), and (ii) sold
to or maintained for customers by CWE(2), are Year 2000 compliant, and have
not malfunctioned and, to the best knowledge of CWE(2) or the Werths, will
not malfunction as a result of (i) the year 2000 (and all subsequent years)
as distinct from 1900's years, or (ii) the date February 29, 2000, and all
subsequent leap years.
2.12. INSURANCE. CWE(2) is, and at all times since inception has
been, insured with reputable insurers against all risks normally insured
against by companies in similar lines of business, and all of the insurance
policies and bonds maintained by CWE(2) are in full force and effect.
Schedule 2.12
2.1-12
lists all insurance policies and bonds that are material to the Business.
CWE(2) is not in default under any such policy or bond. CWE(2) has timely
filed claims with its insurers with respect to all matters and occurrences
for which it has coverage. All insurance policies maintained by CWE(2) will
remain in full force and effect and may reasonably be expected to be renewed
on comparable terms following consummation of the transactions contemplated
by this Agreement (subject to continuing compliance with the applicable terms
thereof and any right of insurers to terminate without cause), and CWE(2) has
received no notice or other indication from any insurer or agent of any
intent to cancel or not so renew any of such insurance policies.
2.13. PERMITS. Except as set forth in Schedule 2.13, CWE(2) holds
all licenses, permits, franchises, certificates of authority, or orders, or
any waivers of the foregoing, required to be issued by any Governmental
Entity ("PERMITS") that are required by any Governmental Entity to permit it
to conduct its Business as now conducted, and all such Permits are valid and
in full force and effect and will remain so upon consummation of the
transactions contemplated by this Agreement. No suspension, cancellation or
termination of any of such Permits is threatened or imminent.
2.14. COMPLIANCE WITH LAW. CWE(2) conducts and has conducted its
business, in all material respects, in accordance with all applicable Laws
including, without limitation, those applicable to employment, persons with
disabilities, occupational safety and health, trade practices, competition
and pricing, retirement and labor relations. The forms, procedures and
practices of CWE(2) are in compliance with all such Laws, in all material
respects.
2.15. EMPLOYEES. Schedule 2.15 contains a true and correct list of
all employees to whom CWE(2) is paying compensation, including bonuses and
incentives for services rendered or otherwise, the annual salary, average
commission, or hourly wage compensation of each such employee, and any bonus
paid to each respective employee relating to services rendered during the
2000 fiscal year. NetLojix has been provided a copy of all W-2 forms
distributed to each such employee in respect to compensation received from
CWE(2) in the 1999 tax year. Since October 1, 1998, CWE(2) has not
experienced any labor disputes, union organization attempts or any work
stoppage due to labor disagreements in connection with its business. There is
no labor strike, dispute, request for representation, slowdown or stoppage
actually pending or threatened against or affecting CWE(2). All workers'
compensation and unemployment compensation insurance premiums due have been
fully paid or accrued in the CWE(2) Financial Statements.
2.16. EMPLOYEE BENEFITS.
2.16.1. EMPLOYEE BENEFIT PLANS, COLLECTIVE BARGAINING AND
EMPLOYEE AGREEMENTS, AND SIMILAR ARRANGEMENTS.
A. Schedule 2.16 lists all employee benefit plans and
collective bargaining, employment or severance agreements or other similar
arrangements to which CWE(2) is or ever has been a party or by which it is or
ever has been bound, legally or otherwise, including,
2.1-13
without limitation, (a) any profit-sharing, deferred compensation, bonus,
stock option, stock purchase, pension, retainer, consulting, retirement,
severance, welfare or incentive plan, agreement or arrangement, (b) any plan,
agreement or arrangement providing for "FRINGE BENEFITS" or perquisites to
employees, officers, directors or agents, including but not limited to
benefits relating to automobiles, clubs, vacation, child care, parenting,
sabbatical, sick leave, medical, dental, hospitalization, life insurance and
other types of insurance, (c) any employment agreement or (d) any other
"employee benefit plan" (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, and the related
regulations and published interpretations ("ERISA")).
B. CWE(2) has delivered to NetLojix true and complete
copies of all documents and summary plan descriptions with respect to such
plans, agreements and arrangements, or summary descriptions of any such
plans, agreements or arrangements not otherwise in writing.
C. There are no negotiations, demands or proposals that are
pending or have been made which concern matters now covered, or that would be
covered, by plans, agreements or arrangements of the type described in this
Section.
D. CWE(2) is in full compliance with the applicable
provisions of ERISA (as amended through the date of this Agreement), the
regulations and published authorities thereunder, and all other Laws
applicable with respect to all such employee benefit plans, agreements and
arrangements. CWE(2) has performed all of its obligations under all such
plans, agreements and arrangements. To the best knowledge of CWE(2) and the
Werths, there are no Actions (other than routine claims for benefits) pending
or threatened against such plans or their assets, or arising out of such
plans, agreements or arrangements, and, to the best knowledge of CWE(2) or
the Werths, no facts exist which could give rise to any such Actions.
E. Except as specified in Schedule 2.16, each of the plans,
agreements or arrangements can be terminated by CWE(2) within a period of 30
days following the Closing Date, without payment of any additional
compensation or amount or the additional vesting or acceleration of any such
benefits.
2.16.2. QUALIFIED PLANS. No plan listed in Schedule 2.16 is a
stock bonus, pension or profit-sharing plan within the meaning of Section
401(a) of the Code. No plan listed in Schedule 2.16 is a "MULTIEMPLOYER PLAN"
(within the meaning of Section 3(37) of ERISA). CWE(2) has never contributed
to or had an obligation to contribute to any multiemployer plan.
2.16.3. HEALTH PLANS. All group health plans of CWE(2) and any
Affiliate (as defined in Section 2.17) have been operated in compliance with
the group health plan continuation coverage requirements of Section 162(k) of
the Code to the extent such requirements are applicable.
2.1-14
2.16.4. FINES AND PENALTIES. There has been no act or omission
by CWE(2) or any Affiliate that has given rise to or may give rise to fines,
penalties, taxes, or related charges under Section 502(c) or (k) or Section
4071 of ERISA or Chapter 43 of the Code.
2.17. AFFILIATE INTERESTS AND TRANSACTIONS. Except as set forth in
Schedule 2.17, neither the Shareholders nor any Affiliate of the Shareholders
or CWE(2) nor any officer or director of any thereof, nor Associate of any
such individual, has any material interest in any property used in or
pertaining to the Business. Except as set forth in Schedule 2.17, no such
person or entity has engaged in any Transaction or entered into any Contract
with CWE(2). No such person or entity is indebted or otherwise obligated to
CWE(2); and CWE(2) is not indebted or otherwise obligated to any such person
or entity, except for amounts due under normal arrangements applicable to all
employees generally as to salary or reimbursement of ordinary business
expenses not unusual in amount or significance. The consummation of the
transactions contemplated by this Agreement will not (either alone, or upon
the occurrence of any act or event, or with the lapse of time, or both)
result in any benefit or payment (severance or other) arising or becoming due
from CWE(2) to any person or entity.
For the purposes of this Agreement, (i) "AFFILIATE" means a
person or entity that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with, a specified person or entity, and (ii) an "ASSOCIATE" of a person
means: (x) a corporation or organization (other than CWE(2)) of which such
person is an officer or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities; (ii) any trust or
other estate in which such person has a substantial beneficial interest or as
to which such person serves as trustee or in a similar capacity; and (iii)
any relative or spouse of such person or any relative of such spouse.
2.18. BANK ACCOUNTS, POWERS, ETC. Schedule 2.18 ("BANK LIST") lists
each bank, trust company, savings institution, brokerage firm, mutual fund or
other financial institution with which CWE(2) has an account or safe deposit
box and the names and identification of all persons authorized to draw
thereon or to have access thereto, and lists the names of each person or
entity holding powers of attorney or agency authority from CWE(2) and a
summary of the terms thereof.
2.19. NO BROKERS OR FINDERS. No agent, broker, finder, or investment
or commercial banker, or other person or firm engaged by or acting on behalf
of the Shareholders or CWE(2) or any of their respective Affiliates in
connection with the negotiation, execution or performance of this Agreement
or the transactions contemplated by this Agreement, is or will be entitled to
any brokerage or finder's or similar fee or other commission as a result of
this Agreement or such transactions.
2.20. INVENTORIES. All inventories of CWE(2) are of good and
merchantable quality, reasonably in balance, and salable within a
commercially reasonable period (in the case of inventory held for sale) or
currently usable (in the case of other inventory) in the ordinary course of
business. The value of obsolete, damaged or excess inventory and of inventory
below standard quality has
2.1-15
been written down on the most recent balance sheet delivered to NetLojix
pursuant to Section 2.3 or, with respect to inventories purchased since such
balance sheet date, on the books and records of CWE(2), to ascertainable
market value, or adequate reserves described on such balance sheet have been
provided therefor, and the value at which inventories are carried reflects
the customary inventory valuation policy of CWE(2) (which fairly reflects the
value of obsolete, spoiled or excess inventory) for stating inventory, in
accordance with GAAP consistently applied.
2.21. RECEIVABLES. All receivables of CWE(2), whether reflected on
the balance sheet or otherwise, represent sales actually made in the ordinary
course of business, and are current and fully collectible net of any reserves
shown on the balance sheet (which reserves are adequate and were calculated
on a basis consistent with GAAP and past practices) within 90 days. CWE(2)
has delivered to NetLojix a complete and accurate aging list of all
receivables of CWE(2) as of a date not more than thirty days prior to the
date hereof (and as of a date not more than thirty days prior to the Closing
Date).
2.22. CUSTOMERS AND SUPPLIERS. Schedule 2.22 lists the names of and
describes all Contracts with and the appropriate percentage of Business
attributable to, the ten largest customers of and ten most significant
suppliers of the Business at the date of this Agreement, and any sole-source
suppliers of significant goods or services (other than electricity, gas,
telephone or water) to CWE(2) with respect to which alternative sources of
supply are not readily available on comparable terms and conditions.
2.23. ENVIRONMENTAL COMPLIANCE. Except as set forth in Schedule 2.23
hereto, (i) CWE(2) has not generated, used, transported, treated, stored,
released or disposed of, and has not suffered or permitted anyone else to
generate, use, transport, treat, store, release or dispose of any Hazardous
Substance in violation of any Laws; (ii) there has not been any generation,
use, transportation, treatment, storage, release or disposal of any Hazardous
Substance in connection with the conduct of the Business of CWE(2) or the use
of any property or facility of CWE(2) or, to the knowledge of CWE(2) or the
Werths, any nearby or adjacent properties or facilities, which has created or
might reasonably be expected to create any liability under any Laws or which
would require reporting to or notification of any Governmental Entity; (iii)
no asbestos or polychlorinated biphenyl or underground storage tank is
contained in or located at any facility of CWE(2); and (iv) any Hazardous
Substance handled or dealt with in any way in connection with the Business of
CWE(2), whether before or during the Shareholders' ownership, has been and is
being handled or dealt with in all respects in compliance with applicable
Laws.
For the purposes of this Agreement, "HAZARDOUS SUBSTANCE"
means (but shall not be limited to) substances that are defined or listed in,
or otherwise classified pursuant to, any applicable Laws as "hazardous
substances," "hazardous materials," "hazardous wastes" or "toxic substances,"
or any other formulation intended to define, list or classify substances by
reason of deleterious properties such as ignitibility, corrosivity,
reactivity, radioactivity, carcinogenicity, reproductive toxicity or "EP
toxicity," and petroleum and drilling fluids, produced waters and other
2.1-16
wastes associated with the exploration, development, or production of crude
oil, natural gas or geothermal energy.
2.24. INVESTMENT REPRESENTATIONS.
2.24.1. PURCHASE FOR OWN ACCOUNT. Each of the Werths is
acquiring the Exchange Shares for investment and for such person's own
account, and not with a view to or for sale in connection with any
distribution of any part thereof.
2.24.2. INVESTMENT EXPERIENCE. Each of the Werths has such
knowledge and experience in financial and business matters that such person
is capable of evaluating the risks of such person's proposed investment in
the Exchange Shares and is able to bear the economic risk of such investment.
2.24.3. INFORMATION CONCERNING NETLOJIX. The Werths have
received copies of NetLojix's (i) Annual Report on Form 10-K for the year
ended December 31, 1999, (ii) Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2000 and June 30, 2000, (iii) Current Report on Form 8-K
dated June 23, 2000, (iv) Post-effective Amendment No. 1 to Registration
Statement on Form S-1 dated May 3, 2000, (v) Proxy Statement for its 2000
Annual Meeting of Stockholders, and (vi) each other document filed by
NetLojix with the Securities and Exchange Commission (the "SEC") after the
date hereof and prior to the Closing Date. The Werths have heretofore
discussed NetLojix and its plans, operations and financial condition with
NetLojix's officers and have heretofore received all such information as the
Werths have deemed necessary and appropriate to enable the Werths to evaluate
the financial risk inherent in making an investment in the Exchange Shares,
and the Werths have received satisfactory and complete information concerning
the business and financial condition of NetLojix in response to all inquiries
in respect thereof.
2.24.4. RESTRICTED SECURITIES. The Werths understand and
acknowledge that:
A. The NetLojix Common Stock to be issued pursuant to
Section 1.5 has not been registered under the Securities Act, or any state
securities laws and will be deemed to be "restricted securities" within the
meaning of Rule 144 promulgated thereunder; resale of such NetLojix Common
Stock will be subject to certain restrictions as set forth in Rule 144 and
145 of the Securities Act unless otherwise transferred pursuant to an
appropriate exemption from registration. The Werths must hold the NetLojix
Common Stock indefinitely unless (i) it is subsequently registered under the
Securities Act and qualified under such state laws, or (ii) the Werths
provide NetLojix with an opinion of counsel reasonably satisfactory to
NetLojix to the effect that an exemption from such registration and
qualification is available. NetLojix is under no obligation to register any
of such NetLojix Common Stock.
2.1-17
B. The share certificates representing such NetLojix
Common Stock will be stamped with legends as set forth in Section 1.6.4.
NetLojix will issue stop transfer instructions to its transfer agent with
respect to such NetLojix Common Stock.
C. Each of the Werths may be deemed to be an affiliate
of CWE(2)for purposes of Rule 144 and 145.
2.25. ACCURACY OF INFORMATION. None of the information supplied or
to be supplied in writing by or on behalf of CWE(2) or the Werths to
NetLojix, its agents or representatives in connection with these
transactions, this Agreement or the negotiations leading up to this Agreement
did contain, or at the respective times such information is or was delivered,
will contain any untrue statement of a material fact, or omitted or will omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. If any of such information at any time
subsequent to delivery and prior to Closing becomes untrue or misleading, in
any material respect, the Werths will promptly notify NetLojix in writing of
such fact and the reason for such change.
3. REPRESENTATIONS AND WARRANTIES OF NETLOJIX AND MERGERSUB.
NetLojix and Mergersub, jointly and severally, represent and warrant to
the Werths, as of the date hereof and as of the Closing Date, as follows:
3.1. ORGANIZATION AND RELATED MATTERS. NetLojix is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. Mergersub is a corporation duly organized, validly existing and in
good standing under the laws of Illinois. NetLojix has all necessary
corporate power and authority to carry on its business as now being
conducted. Each of NetLojix and Mergersub has the necessary corporate power
and authority to execute, deliver and perform this Agreement and any related
agreements to which it is a party. NetLojix is duly qualified to transact
business as a foreign corporation in each jurisdiction where the failure to
be so qualified would have a material adverse effect on its business.
3.2. AUTHORIZATION. The execution, delivery and performance of this
Agreement and any related agreements by NetLojix and Mergersub has been duly
and validly authorized by all necessary corporate action on the part of
NetLojix and Mergersub. This Agreement constitutes the legal, valid and
binding obligation of each of NetLojix and Mergersub, enforceable against
NetLojix and Mergersub in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
3.3. NO CONFLICTS. Except as set forth on Schedule 3.3, the
execution, delivery and performance of this Agreement and any related
agreements by NetLojix and Mergersub will not violate the provisions of, or
constitute a breach or default whether upon lapse of time and/or the
2.1-18
occurrence of any act or event or otherwise under (a) the Certificate of
Incorporation or Articles of Incorporation or bylaws of NetLojix or
Mergersub, (b) any Law to which NetLojix or Mergersub is subject or (c) any
Contract to which NetLojix or Mergersub is a party that is material to the
financial condition, results of operations or conduct of the business of
NetLojix.
3.4. VALID ISSUANCE OF NETLOJIX COMMON STOCK. The Exchange Shares,
when issued, sold and delivered in accordance with the terms hereof, shall be
duly and validly issued, fully paid and nonassessable. The Exchange Shares
shall not be registered under the Securities Act.
3.5. SEC DOCUMENTS. None of the documents and reports filed by
NetLojix with the SEC referenced in Section 2.24.3 contained, or will
contain, any untrue statement of material fact or omitted, or will omit, to
state any material fact necessary to make the information contained therein,
in light of the circumstances under which they were made, not misleading, as
of the filing date of such document or report.
3.6. NO BROKERS OR FINDERS. No agent, broker, finder or investment
or commercial banker, or other person or firms engaged by or acting on behalf
of NetLojix or its Affiliates in connection with the negotiation, execution
or performance of this Agreement or the transactions contemplated by this
Agreement, is or will be entitled to any broker's or finder's or similar fees
or other commissions as a result of this Agreement or such transactions.
3.7. LEGAL PROCEEDINGS. There is no Order or Action pending or to
the best knowledge of NetLojix or Mergersub, threatened against NetLojix or
Mergersub that individually or when aggregated with one or more other Actions
has or might reasonably be expected to have a material adverse effect on
NetLojix's ability to perform this Agreement.
4. COVENANTS TO BE PERFORMED PRIOR TO CLOSING
4.1. ACCESS. CWE(2) shall authorize and permit (and the Werths shall
cause CWE(2) to authorize and permit) NetLojix and its representatives (which
term shall be deemed to include its independent accountants and counsel) to
have reasonable access during normal business hours, upon reasonable notice
and in such manner as will not unreasonably interfere with the conduct of the
Business, to all of its properties, books, records, operating instructions
and procedures, Tax Returns and all other information with respect to the
Business as NetLojix may from time to time request, and to make copies of
such books, records and other documents and to discuss its Business with such
other persons, including, without limitation, its directors, officers,
employees, accountants, counsel, suppliers, customers, and creditors, as
NetLojix considers necessary or appropriate for the purposes of familiarizing
itself with the Business, obtaining any necessary Approvals of or Permits for
the transactions contemplated by this Agreement and conducting an evaluation
of the organization and Business of CWE(2). Without limiting the generality
of the foregoing, NetLojix shall be entitled to conduct or cause to be
conducted such physical inspections as NetLojix shall deem necessary or
useful in connection with its acquisition of CWE(2).
2.1-19
4.2. MATERIAL ADVERSE CHANGES; REPORTS. CWE(2) and the Werths will
promptly notify NetLojix of any event of which CWE(2) or the Werths obtain
knowledge which has had or might reasonably be expected to have a material
adverse effect on the Business or which if known as of the date hereof would
have been required to be disclosed to NetLojix.
4.3. CONDUCT OF BUSINESS. CWE(2) and the Werths agree with and for
the benefit of NetLojix that CWE(2) shall not, until the Effective Time,
without the prior consent in writing of NetLojix, which may be withheld for
any reason:
4.3.1. conduct the Business in any manner except in the
ordinary course consistent with prudent industry practice; or
4.3.2. amend, terminate, fail to renew or renegotiate any
Material Contract or default (or take or omit to take any action that, with
or without the giving of notice or passage of time, would constitute a
default) in any of its obligations under any Material Contract or enter into
any new Material Contract or take any action that would jeopardize the
continuance of its material supplier or customer relationships; or
4.3.3. terminate, amend or fail to renew any existing
insurance coverage; or
4.3.4. terminate or fail to renew or preserve any
Permits; or
4.3.5. except in the ordinary course of the Business, incur
or agree to incur any obligation or liability (absolute or contingent) that
individually calls for payment by CWE(2) of more than $5,000 in any specific
case or $25,000 in the aggregate; or
4.3.6. make any loan, guaranty or other extension of
credit, or enter into any commitment to make any loan, guaranty or other
extension of credit, to or for the benefit of any director, officer,
employee, Shareholder or any of their respective Associates or Affiliates; or
4.3.7. grant any general or uniform increase in the rates
of pay or benefits to officers, directors or employees (or a class thereof)
or any increase in salary or benefits of any officer, director, employee or
agent or pay any bonus to any person, or enter into any new employment,
collective bargaining or severance agreement; or
4.3.8. sell, transfer, mortgage, encumber or otherwise
dispose of any assets or any liabilities, except in the ordinary course of
business; or
4.3.9. issue, sell, redeem or acquire for value any debt
obligations or equity securities of CWE(2); or
2.1-20
4.3.10. declare, issue, make or pay any dividend or other
distribution of assets, whether consisting of money, other personal property,
real property or other thing of value, to its Shareholders, or split,
combine, dividend, distribute or reclassify any shares of its equity
securities; or
4.3.11. change or amend its Articles of Incorporation or
bylaws; or
4.3.12. make any capital expenditures or commitments with
respect thereto; or
4.3.13. make special or extraordinary payments to any
person; or
4.3.14. make any material investment, by purchase,
contributions to capital, property transfers, or otherwise, in any other
person or entity; or
4.3.15. dispose of or permit to lapse any rights to the use
of any Intellectual Property or dispose of or disclose any Intellectual
Property not a matter of public knowledge; or
4.3.16. directly or indirectly terminate or reduce or
commit to terminate or reduce any bank line of credit or the availability of
any funds under any other agreement or understanding, other than through the
use thereof in the ordinary course; or
4.3.17. compromise or otherwise settle any claims, or
adjust any assertion or claim of a deficiency in Taxes (or interest thereon
or penalties in connection therewith) or make any Tax election or make any
change in any method or period of accounting or in any accounting policy,
practice or procedure; or
4.3.18. introduce any new method of management or operation
in respect of the Business; or
4.3.19. agree to or make any commitment to take any actions
prohibited by this Section 4.3.
4.4. PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE. During the
period beginning on the date hereof and ending on the Closing Date, (a)
CWE(2) and the Werths will use their best efforts to preserve the Business
and to preserve the goodwill of customers, suppliers and others having
business relations with CWE(2), and (b) CWE(2), the Werths and NetLojix will
consult with each other concerning, and CWE(2) and the Werths will cooperate
to keep available to NetLojix, the services of the officers and employees of
CWE(2) that NetLojix may wish to have CWE(2) retain. Nothing in this Section
shall obligate NetLojix or CWE(2) after the Closing to retain or offer
employment to any officer or employee of CWE(2).
2.1-21
4.5. NOTIFICATION OF CERTAIN MATTERS. CWE(2) and the Werths shall
give prompt notice to NetLojix of (i) the occurrence, or failure to occur, of
any event that would be likely to cause any representation or warranty of
CWE(2) or the Werths contained in this Agreement to be untrue or inaccurate
in any material respect at any time from the date of this Agreement to the
Closing Date and (ii) any failure of CWE(2) or the Werths to comply with or
satisfy, in any material respect, any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement prior to the Closing
Date. NetLojix shall give prompt notice to CWE(2) and the Shareholder
Representative of (x) the occurrence, or failure to occur, of any event that
would be likely to cause any representation or warranty of NetLojix contained
in this Agreement to be untrue or inaccurate in any material respect at any
time from the date of this Agreement to the Closing Date and (ii) any failure
of NetLojix to comply with or satisfy, in any material respect, any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement prior to the Closing Date. No such notification shall affect the
representations or warranties of the parties or the conditions to their
respective obligations hereunder.
4.6. PERMITS AND APPROVALS.
4.6.1. CWE(2) and the Werths each agree to cooperate and
use their best efforts to obtain, and to cause CWE(2) to obtain, all
Approvals and Permits that may be necessary or which may be reasonably
requested by NetLojix to consummate the transactions contemplated by this
Agreement. Without limiting the foregoing, CWE(2) will, and the Werths will
cause CWE(2) to, immediately prepare all registrations, filings and
applications, requests and notices in connection with such Approvals and
Permits.
4.6.2. To the extent that the Approval of a third party
with respect to any Contract is required in connection with the transactions
contemplated by this Agreement, CWE(2) and the Werths shall (and the Werths
shall use their best efforts to cause CWE(2) to) obtain such Approval prior
to the Closing Date and in the event that any such Approval is not obtained
(but without limitation on NetLojix's rights under Section 6.2), the Werths
shall cooperate with NetLojix to ensure that NetLojix obtains the benefits of
each such Contract and shall indemnify and hold harmless NetLojix and CWE(2)
from and against any and all Losses (as defined in Section 8) as a result,
directly or indirectly, of any failure to obtain any such Approval which
results from the actions or inaction of the Werths.
4.7. NO TRANSFER OF WERTH SHARES. Each of the Werths agrees that
such person will not sell, transfer, pledge, hypothecate or otherwise
encumber or dispose of any of the Werth Shares other than pursuant to this
Agreement. Each of the Werths will comply with all applicable securities and
other laws and regulations relating to this Agreement or the transactions
contemplated hereby.
4.8. EXCLUSIVITY. Neither CWE(2), the Werths nor any of their
respective Affiliates or employees shall, directly or indirectly, solicit,
initiate or encourage any offer or engage in any discussions or negotiations
(other than with NetLojix) concerning any sale of the Shareholder Shares
2.1-22
or of the Business or assets of CWE(2) or any material part thereof, or any
merger, reorganization or similar business combination or transaction.
Neither CWE(2), the Werths nor any of their respective Affiliates or
employees shall furnish any information with respect to CWE(2) or the
Business to any person in connection with any such offer or transaction. If
CWE(2) or the Werths receive any offer or inquiry with respect to any of the
foregoing types of transactions, CWE(2) and the Werths will promptly inform
NetLojix of such offer or inquiry.
4.9. ELIMINATION OF AFFILIATE LIABILITIES. Prior to the Closing
Date, the Werths shall (i) purchase, cause to be repaid or (with respect to
guarantees) assume liability for any and all loans, guarantees or other
extensions of credit made by CWE(2) to or for the benefit of any Shareholder,
director, officer, or employee of CWE(2), or any of their Affiliates or
Associates, and (ii) forgive any loans, obligations and other amounts
outstanding owed by CWE(2) to the Werths. At the Closing Date, neither
NetLojix nor CWE(2) shall have any continuing commitment, obligation or
liability of any kind with respect to the persons referred to in the
preceding sentence except pursuant to, or as contemplated by, this Agreement.
The Werths agree to indemnify NetLojix and CWE(2) for any Losses with respect
to any liability, loan or other amount not fully assumed or discharged as
contemplated. The Werths further represent that the transactions contemplated
by this Section will not have an adverse effect on the Business.
4.10. ADDITIONAL INTERIM FINANCIAL STATEMENTS. CWE(2) will prepare
additional interim financial statements as soon as practicable after the end
of each month and will provide copies of such financial statements promptly
to NetLojix. Such interim financial statements shall be prepared consistently
with the CWE(2) Financial Statements and shall present fairly the results of
operations and financial condition of CWE(2) for and as of their respective
dates.
5. ADDITIONAL CONTINUING COVENANTS
5.1. COVENANT NOT TO COMPETE.
5.1.1. RESTRICTIONS ON COMPETITIVE ACTIVITIES. The Werths
agree that, after the Closing, NetLojix and CWE(2) shall be entitled to the
goodwill and going concern value of the Business and to protect and preserve
the same to the maximum extent permitted by law. The Werths also acknowledges
that their management contributions to the Business have been uniquely
valuable and involve proprietary information that would be competitively
unfair to make available to any competitor of CWE(2). For these and other
reasons and as an inducement to NetLojix to enter into this Agreement, each
of the Werths agrees that, for a period of two years after the Closing Date,
neither of them will, directly or indirectly, for their own benefit or as
agent for another, carry on or participate in the ownership, management or
control of, or the financing of, or be employed by, or consult for or
otherwise render services to, or allow such person's name or reputation to be
used in or by any other present or future business enterprise that competes
with NetLojix, CWE(2) or any of their Affiliates in activities in which
CWE(2) is engaged as of the Closing Date in each separate county and parish
in each of the fifty states of the United States of America (each a
"LOCATION") for so long
2.1-23
as NetLojix, CWE(2) or any person entitled to or acquiring ownership of the
goodwill of the Business or the Shareholder Shares through NetLojix carries
on a like business therein.
5.1.2. EXCEPTIONS. Nothing contained herein shall limit the
right of either of the Werths as an investor to hold and make investments in
securities of any corporation or limited partnership that is registered on a
national securities exchange or admitted to trading privileges thereon or
actively traded in a generally recognized over-the-counter market, provided
the their equity interest therein does not exceed 1% of the outstanding
shares or interests in such corporation or partnership.
5.1.3. RESTRICTIONS ON SOLICITING EMPLOYEES. In addition,
to protect NetLojix against any efforts by the Werths to cause employees of
CWE(2) to terminate their employment, each of the Werths agrees that for a
period of two years following the Closing Date, they will not directly or
indirectly (i) induce any employee of CWE(2) to leave CWE(2) or to accept any
other employment or position, (ii) hire any person who is employed by CWE(2)
on or after the date hereof, or (iii) assist any other entity in hiring any
such employee.
5.1.4. SPECIAL REMEDIES AND ENFORCEMENT. The Werths
recognize and agree that a breach by either of them of any of the covenants
set forth in this Section 5.1 or Section 5.2 could cause irreparable harm to
NetLojix, CWE(2) and their respective successors, that the remedies at law in
the event of such breach would be inadequate, and that, accordingly, in the
event of such breach a restraining order or injunction or both may be issued
against the breaching party, in addition to any other rights and remedies
which are available to NetLojix, CWE(2) or their respective successors. If
this Section 5.1 is more restrictive than permitted by the Laws of the
jurisdiction in which enforcement is sought, this Section 5.1 shall be
limited to the extent required to permit enforcement under such Laws. Without
limiting the generality of the foregoing, the parties intend that the
covenants contained in the preceding portions of this Section 5.1 shall be
construed as a series of separate covenants, one for each Location specified.
Except for geographic coverage, each such separate covenant shall be deemed
identical in terms. It is the desire and intent of the parties hereto that
the provisions of this Section 5.1 shall be enforced to the fullest extent
(both geographical and temporal) permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought. If the
final judgment of a court of competent jurisdiction declares that any term or
provision of this Section 5.1 is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or unenforceability
shall have the power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or unenforceable term or provision, and this Section shall be enforceable as
so modified. If any particular provision or portion of this Section 5.1 shall
be adjudicated to be invalid or unenforceable, such adjudication shall apply
only with respect to the operation of this Section 5.1 in the particular
jurisdiction in which such adjudication is made.
2.1-24
5.2. NONDISCLOSURE OF PROPRIETARY DATA. The Werths shall not, at any
time, make use of, divulge or otherwise disclose, directly or indirectly, any
trade secret or other proprietary data (including, but not limited to, any
customer list, record or financial information) concerning the business or
policies of CWE(2). In addition, the Werths shall not make use of, divulge or
otherwise disclose, directly or indirectly, to persons other than NetLojix,
any confidential information concerning the business or policies of CWE(2).
Nothing in this Section shall prevent either of the Werths who is employed by
CWE(2) from using such information in the proper course of his or her
employment.
5.3. TAX RETURNS; RESPONSIBILITY FOR CERTAIN TAX MATTERS. The
following provisions shall govern the allocation of responsibility as between
NetLojix, CWE(2), and the Shareholders for certain Tax matters following the
Closing Date:
5.3.1 TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE.
NetLojix shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for CWE(2) for all Tax periods ending on or prior to the
Closing Date which are filed after the Closing Date. NetLojix shall permit
the Shareholder Representative to review and comment on each such Tax Return
described in the preceding sentence prior to filing. The Werths shall
reimburse NetLojix for Taxes of CWE(2) with respect to such periods within
fifteen (15) days after payment by NetLojix or CWE(2) of such Taxes to the
extent such Taxes are not reflected in 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 CWE(2) Financial
Statements.
5.3.2 TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE
CLOSING DATE. NetLojix shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of CWE(2) for Tax periods which begin
before the Closing Date and end after the Closing Date. The Werths shall pay
to NetLojix within fifteen (15) days after the date on which Taxes are paid
with respect to such periods an amount equal to the portion of such Taxes
which relates to the portion of such taxable period ending on the Closing
Date to the extent such Taxes are not reflected in 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
CWE(2) Financial Statements. For purposes of this subsection, in the case of
any Taxes that are imposed on a periodic basis and are payable for a taxable
period that includes (but does not end on) the Closing Date, the portion of
such Tax which relates to the portion of such taxable period ending on the
Closing Date shall (i) in the case of any Taxes other than Taxes based upon
or related to income or receipts, be deemed to be the amount of such Tax for
the entire taxable period multiplied by a fraction the numerator of which is
the number of days in the taxable period ending on the Closing Date and the
denominator of which is the number of days in the entire taxable period, and
(ii) in the case of any Tax based upon or related to income or receipts be
deemed equal to the amount which would be payable if the relevant taxable
period ended on the Closing Date. All determinations necessary to give effect
to the foregoing allocations shall be made in a manner consistent with prior
practice of CWE(2).
2.1-25
5.3.3 COOPERATION ON TAX MATTERS.
A. NetLojix shall have the responsibility for, and the
right to control, at its expense, the audit (and disposition thereof) of any
Tax Return of CWE(2) relating to periods ending on or prior to the Closing
Date. The Shareholder Representative shall have the right directly or through
his designated representatives, to review in advance and comment upon all
submissions made in the course of audits or appeals thereof to any
Governmental Entity relating to periods ending or treated by this Agreement
as ending on or prior to the Closing Date.
B. The Werths shall, and shall cause the other Shareholders
and their respective Affiliates to, cooperate fully, as and to the extent
reasonably requested by NetLojix, in connection with the filing of Tax
Returns pursuant to this Section 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 which are reasonably relevant to any such 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.
C. NetLojix and the Werths agree (i) to retain all books
and records with respect to Tax matters pertinent to CWE(2) relating to any
taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by NetLojix or the
Shareholder Representative, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with
any taxing authority, and (ii) 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, CWE(2) or the Shareholder
Representative, as the case may be, shall allow the other party to take
possession of such books and records. Any information obtained pursuant to
this Section or pursuant to any other Section hereof providing for the
sharing of information or the review of any Tax Return or other Schedule
relating to Taxes shall be subject to Section 9.9.
5.4. SECURITIES LAWS MATTERS. Each of the Werths agrees not to sell,
transfer, pledge or otherwise dispose of the shares of NetLojix Common Stock
received pursuant to this Agreement over which such person has direct or
indirect control unless (i) such shares are subsequently registered under the
Securities Act and qualified under all applicable state securities laws, or
(ii) the Werths provide NetLojix with all relevant facts relating to the
proposed sale, transfer, pledge or disposition together with an opinion of
counsel reasonably satisfactory to NetLojix to the effect that such sale,
transfer, pledge or disposition is exempt from such registration and
qualification and otherwise complies with all applicable federal and state
laws. Each of the Werths will comply in all respects with federal and state
securities laws in connection with any such sale, transfer, pledge or
disposition including, without limitation, the requirements of Rule 144 and
Rule 145(d) promulgated under the Securities Act.
2.1-26
5.5. RELEASE OF WERTHS FROM GUARANTEE. The parties will cooperate in
good faith and shall use their best efforts to obtain the prompt release of
the Werths from their personal guarantee of up to $250,000 of the
indebtedness of CWE(2) to Citibank, F.S.B. pursuant to that certain Business
Ready Credit Agreement dated as of January 16, 1998 between CWE(2) and
Citibank, F.S.B. Pending such release, NetLojix shall indemnify and hold
harmless the Werths from and against any and all Losses (as defined in
Section 8) as a result, directly or indirectly, of the failure to obtain such
release.
6. CONDITIONS OF PURCHASE
6.1. GENERAL CONDITIONS. The obligations of the parties to effect
the Merger shall be subject to the satisfaction, at or prior to the Closing,
of the following conditions, unless waived in writing by all parties:
6.1.1. NO ORDERS; LEGAL PROCEEDINGS. No Law or Order shall have
been enacted, entered, issued, promulgated or enforced by any Governmental
Entity, nor shall any Action have been instituted and remain pending at what
would otherwise be the Closing Date, which prohibits or restricts or would
(if successful) prohibit or restrict the transactions contemplated by this
Agreement or (with respect to obligations of NetLojix only) which would not
permit the Business as presently conducted to continue unimpaired following
the Closing Date.
6.1.2. APPROVALS. All Permits and Approvals with respect to the
transactions contemplated hereby required to be obtained from any
Governmental Entity shall have been received or obtained on or prior to the
Closing Date.
6.2. CONDITIONS TO OBLIGATIONS OF NETLOJIX AND MERGERSUB. The
obligations of NetLojix and Mergersub to effect the Merger shall be subject
to the satisfaction, at or prior to the Closing, of the following additional
conditions except to the extent waived in writing by NetLojix:
6.2.1. REPRESENTATIONS AND WARRANTIES AND COVENANTS OF CWE(2)
AND THE SHAREHOLDERS. The representations and warranties of CWE(2) and the
Shareholders contained herein and in the CWE(2) Shareholder Agreements (as
described below) shall be true in all material respects at the Closing Date
with the same effect as though made at such time; CWE(2) and the Shareholders
shall have in all material respects performed all obligations and complied
with all covenants and conditions required by this Agreement and the CWE(2)
Shareholder Agreements to be performed or complied with by them at or prior
to the Closing Date.
6.2.2. NO MATERIAL ADVERSE CHANGE. There shall not have been
any material adverse change in or affecting the Business subsequent to July
31, 2000.
6.2.3. CONSENTS. CWE(2) and the Werths shall have obtained and
provided to NetLojix all required Approvals and Permits listed on Schedule
2.8, each in form and substance satisfactory to NetLojix.
2.1-27
6.2.4. CERTIFICATE OF CWE(2) AND WERThs. CWE(2) and the Werths
shall have delivered to NetLojix and Mergersub a certificate dated the
Closing Date, signed by an officer of CWE(2) and by each of the Werths, in
form and substance satisfactory to NetLojix, certifying that the conditions
set forth in Sections 6.2.1, 6.2.2 and 6.2.3 have been fully satisfied.
6.2.5. OPINION OF COUNSEL. NetLojix shall receive at the
Closing from Wolin & Rosen, Ltd., counsel to CWE(2), an opinion dated the
Closing Date, in form and substance substantially as set forth in Exhibit C.
6.2.6. DUE DILIGENCE. NetLojix shall not, in the course of its
on-going business investigation, have discovered information, not previously
disclosed in full by CWE(2) or the Werths, which NetLojix reasonably believes
has or is likely to have a materially adverse effect on the Business or is
materially inconsistent with information disclosed to NetLojix prior to the
date hereof.
6.2.7. KEY EMPLOYEES. The individuals identified on Schedule
6.2.7 hereto shall have entered into confidentiality and invention assignment
agreements in the form of Exhibit D (the "CONFIDENTIALITY AGREEMENTS").
NetLojix shall be reasonably satisfied that the significant employees of
CWE(2) are willing to remain employees of CWE(2) (or become employees of
NetLojix) on terms reasonably satisfactory to NetLojix following the
consummation of the transactions contemplated by this Agreement.
6.2.8. ESCROW AGREEMENT. Each of the Werths shall have executed
and delivered to NetLojix the Escrow Agreement together with executed,
undated stock powers relating to Escrow Shares.
6.2.9. CWE(2) SHAREHOLDER AGREEMENT. Each of the Shareholders,
other than the Werths, shall have executed and delivered to NetLojix a CWE(2)
Shareholder Agreement in the form attached hereto as Exhibit E. Such
agreements shall be referred to collectively herein as the "CWE(2)
SHAREHOLDER AGREEMENTS."
6.2.10. RELEASE AGREEMENTS. Each of the Shareholders shall have
executed and delivered to NetLojix a Release Agreement in the form attached
hereto as Exhibit F.
6.2.11. DISSENTERS' RIGHTS. No shareholder of CWE(2) shall have
asserted his or her dissenter's rights in connection with the Merger.
6.3. CONDITIONS TO OBLIGATIONS OF CWE(2) AND THE WERTHS. The
obligations of CWE(2) and the Werths to effect the Merger shall be subject to
the satisfaction, at or prior to the Closing, of the following additional
conditions, except to the extent waived in writing by the Shareholder
Representative:
2.1-28
6.3.1. REPRESENTATIONS AND WARRANTIES AND COVENANTS OF
NETLOJIX. The representations and warranties of NetLojix herein contained
shall be true in all material respects at the Closing Date with the same
effect as though made at such time; NetLojix shall have in all material
respects performed all obligations and complied with all covenants and
conditions required by this Agreement to be performed or complied with by it
at or prior to the Closing Date, and NetLojix shall have delivered to the
Shareholder Representative an officers' certificate of NetLojix in form
reasonably satisfactory to the Shareholder Representative, dated the Closing
Date, to such effect.
6.3.2. CONSENTS. NetLojix shall have obtained and provided to
the Shareholder Representative all required Approvals and Permits listed on
Schedule 3.3, each in form and substance satisfactory to the Shareholder
Representative.
6.3.3. ESCROW AGREEMENT. NetLojix shall delivered to the
Shareholder Representative an original of the Escrow Agreement executed by
NetLojix and the Escrow Agent.
6.3.4. EMPLOYEE STOCK OPTIONS. Concurrently with the Closing,
NetLojix shall have awarded 100,000 stock options pursuant to its 1998 Stock
Incentive Plan (the "1998 PLAN") to continuing employees of CWE(2) in the
amounts set forth on Schedule 6.3.4. Such options shall have an exercise
price equal to the closing sale price of a share of NetLojix Common Stock on
The Nasdaq SmallCap Market on the Closing Date. Such options shall be subject
to (i) all of the terms and conditions of the 1998 Plan, and (ii) the terms
and conditions normally imposed on grants of options to employees of
NetLojix, including vesting schedules, the obligation to remain employed and
similar requirements. All such options shall be treated as "incentive stock
options" (as defined in Section 422 of the Code) to the extent permitted by
the Code and the circumstances of the issuance of such options.
7. TERMINATION OF OBLIGATIONS; SURVIVAL
7.1. TERMINATION OF AGREEMENT. Anything herein to the contrary
notwithstanding, this Agreement and the transactions contemplated by this
Agreement shall terminate if the Closing does not occur on or before midnight
on October 31, 2000, unless extended by mutual consent in writing of
NetLojix, CWE(2) and the Shareholder Representative and otherwise may be
terminated at any time before the Closing as follows and in no other manner:
7.1.1. MUTUAL CONSENT. By mutual consent in writing of
NetLojix, CWE(2) and the Shareholder Representative.
7.1.2. MATERIAL BREACH. By NetLojix, on the one hand, or
CWE(2) and the Shareholder Representative, on the other, if there has been a
material misrepresentation or other material breach by the other party (or,
in the case of NetLojix, by any of the Shareholders or CWE(2)) in its
representations, warranties and covenants set forth herein or in any of the
CWE(2) Shareholder
2.1-29
Agreements; provided, however, that if such breach is susceptible to cure,
the breaching party shall have ten business days in which to cure such breach
after receipt of notice from the other party of its intention to terminate
this Agreement if such breach continues.
7.2. EFFECT OF TERMINATION. In the event that this Agreement shall
be terminated pursuant to Section 7.1, all further obligations of the parties
under this Agreement shall terminate without further liability of any party
to another; provided that the obligations of the parties contained in Section
9.9 and Section 9.11 shall survive any such termination. A termination under
Section 7.1 shall not relieve any party of any liability for a breach or
violation of any representation, warranty or covenant contained in this
Agreement, or be deemed to constitute a waiver of any available remedy
(including specific performance if available) for any such breach or
violation.
7.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained in or made pursuant to this Agreement shall survive
the Closing without regard to any investigation made by the other party
hereto.
8. INDEMNIFICATION
8.1. OBLIGATIONS OF THE SHAREHOLDERS. Each of the Werths, jointly
and severally, agrees to indemnify and hold harmless NetLojix, Mergersub,
CWE(2) and their respective directors, officers, employees, Affiliates,
agents and assigns (the "NETLOJIX PARTIES") from and against any and all
actions, costs, damages, disbursements, expenses, liabilities, losses,
deficiencies, diminution in value, obligations, penalties or settlements of
any kind or nature, whether foreseeable or unforeseeable, including but not
limited to, interest or other carrying costs, legal, accounting and other
professional fees and expenses incurred in the investigation, collection,
prosecution and defense of claims and amounts paid in settlement
(collectively, "LOSSES"), that may be imposed on or otherwise incurred or
suffered by any of such persons or entities, directly or indirectly, as a
result of, or based upon or arising from:
8.1.1. any inaccuracy in or breach of any of the
representations or warranties made by CWE(2) or the Werths in or pursuant to
this Agreement (without giving effect to any materiality qualifications
contained in any such representation or warranty); or
8.1.2. any breach of any of the covenants or agreements made by
CWE(2) or the Werths in or pursuant to this Agreement; or
8.1.3. any Order or Action set forth in Schedule 2.9 or
improperly omitted from Schedule 2.9; or
8.1.4. the failure of CWE(2) or the Werths to obtain, prior to
the Closing Date, any consents, approvals and waivers of governmental
agencies or entities, lessors, landlords, suppliers, and other third parties
as may be necessary on the part of CWE(2) or the Shareholders to permit the
2.1-30
consummation of the transactions contemplated hereby and to permit NetLojix
to continue to operate the business of the CWE(2) in the manner presently
conducted after the Closing Date; or
8.1.5. any other matter as to which the Werths in other
provisions of this Agreement have agreed to indemnify a NetLojix Party.
8.2. OBLIGATIONS OF NETLOJIX. NetLojix agrees to indemnify and hold
harmless the Werths from and against any Losses of the Werths, directly or
indirectly, as a result of, or based upon or arising from:
8.2.1. any inaccuracy in or breach of any of the
representations or warranties, made by NetLojix or Mergersub in or pursuant
to this Agreement (without giving effect to any materiality qualifications
contained in any such representation or warranty); or
8.2.2. any breach of any of the covenants or agreements made by
NetLojix or Mergersub in or pursuant to this Agreement.
8.3. CERTAIN TAX MATTERS. The Werths agree to indemnify, defend and
hold harmless the NetLojix Parties against (i) any Taxes payable by or on
behalf of CWE(2), the Shareholders or any of their Affiliates for any taxable
period ending or treated by this Agreement as ending on or prior to the
Closing Date, to the extent such Taxes are not reflected in 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 CWE(2) Financial Statements, (ii) any deficiencies in any Tax payable
by or on behalf of CWE(2), the Shareholders or any of their Affiliates
arising from any audit by any taxing agency or authority with respect to any
period ending or treated by this Agreement as ending on or prior to the
Closing Date, (iii) any claim or demand for reimbursement or indemnification
resulting from any transfer by CWE(2) or the Shareholders prior to the
Closing of any Tax benefits or credits to any other person, (iv) any Tax
liabilities arising out of the conversion of the Shareholder Shares, and (v)
with respect to any Taxes due for Tax periods ending after the Closing Date,
a pro-rata share of such tax, calculated as if the period ended on the
Closing Date, to the extent such Taxes are not reflected in 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 CWE(2) Financial Statements.
8.4. LIMITATIONS ON INDEMNIFICATION.
8.4.1. WITH RESPECT TO WERTHS' OBLIGATIONS. The Werths shall
have no obligation to indemnify the NetLojix Parties for Losses under Section
8.1.1 unless and until the aggregate of all such individual Losses incurred
or sustained by all NetLojix Parties in respect of Section 8.1.1 exceeds
$25,000, whereupon the Werths shall be obligated in respect of all such
Losses without regard to such $25,000 threshold. In no event shall the
maximum aggregate liability of the Werths with respect to the obligations to
indemnify the NetLojix Parties for Losses under Section 8.1.1
2.1-31
exceed an amount equal to the value of the aggregate Merger Consideration
delivered by NetLojix to the Werths. The limitations set forth in this
Section 8.4.1 shall not apply to the indemnification obligations of the
Werths under Section 8.1.1 with respect to any Losses that have resulted from
a breach of the representations and warranties contained in Section 2.1,
Section 2.2, Section 2.4 or Section 2.23. The limitations set forth in this
Section 8.4.1 shall not apply to any indemnification obligations of the
Werths other than those pursuant to Section 8.1.1.
8.4.2. WITH RESPECT TO NETLOJIX'S OBLIGATIONS. NetLojix shall
have no obligation to indemnify the Werths for Losses under Section 8.2.1
unless and until the aggregate of all such individual Losses incurred or
sustained by the Werths in respect of Section 8.2.1 exceeds $25,000,
whereupon NetLojix shall be obligated in respect of all such Losses without
regard to such $25,000 threshold. In no event shall the maximum aggregate
liability of NetLojix with respect to the obligations to indemnify the Werths
for Losses under Section 8.2.1 exceed an amount equal to the value of the
aggregate Merger Consideration delivered by NetLojix to the Werths. The
limitations set forth in this Section 8.4.2 shall not apply to any
indemnification obligations of NetLojix other than those pursuant to Section
8.2.1.
8.4.3. FRAUD OR WILLFUL BREACH. The parties hereby agree that
the limitations set forth in Section 8.4.1 and Section 8.4.2 shall not apply
to the indemnification obligations of any party with respect to any Losses
that have resulted from the fraud or willful breach of such party.
8.5. THIRD PARTY CLAIMS. Within ten (10) days after the receipt by
any party entitled to indemnification (the "Indemnified Party") pursuant to
this Section 8 of notice of the commencement of any action against such
Indemnified Party by a third party, such Indemnified Party shall, if a claim
with respect thereto is to be made against any party obligated to provide
indemnification (the "Indemnifying Party") pursuant to this Section 8, give
such Indemnifying Party written notice thereof (in accordance with Section
9.10) in reasonable detail in light of the circumstances then known to such
Indemnified Party; provided, however, that the failure to give such notice
shall not relieve any Indemnifying Party from any obligation hereunder except
where, and then solely to the extent that, such failure actually and
materially prejudices the rights of such Indemnifying Party. Such
Indemnifying Party shall have the right to defend such claim, at such
Indemnifying Party's expense and with counsel of its choice reasonably
satisfactory to the Indemnified Party, provided that the Indemnifying Party
conducts the defense of such claim actively and diligently. If the
Indemnifying Party assumes the defense of such claim, the Indemnified Party
agrees to reasonably cooperate in such defense so long as the Indemnified
Party is not materially prejudiced thereby and on the condition that the
Indemnifying Party reimburse the Indemnified Party for any reasonable
expenses incurred by the Indemnified Party pursuant to such cooperation. So
long as the Indemnifying Party is conducting the defense of such claim
actively and diligently, the Indemnified Party may retain separate co-counsel
at its sole cost and expense and may participate in the defense of such
claim, and neither any Indemnifying Party nor any Indemnified Party will
consent to the entry of any judgment or enter into any settlement with
respect to such claim without the prior written consent of the other, which
consent will not be unreasonably withheld or delayed. In the event that: (a)
the Indemnifying
2.1-32
Party does not or ceases to conduct the defense of such claim actively and
diligently, (b) the Indemnified Party reasonably determines that there is a
conflict between its position and the position of the Indemnifying Party
respecting defense of the claim, or (c) the Indemnified Party reasonably that
determines customer, strategic or other business considerations reasonably
could cause the Indemnifying Party's defense of the claim to have a material
adverse effect on the Business, then (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, such claim in any manner it may reasonably deem
to be appropriate, (ii) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the costs of defending against such
claim, including attorneys' fees and expenses, and (iii) the Indemnifying
Party will remain responsible for any Losses that the Indemnified Party may
suffer as a result of such claim and for which the Indemnified Party has a
right of indemnification from the Indemnifying Party under this Section 8.
8.6. TAX ADJUSTMENTS. Any amounts payable by the Indemnifying Party
to or on behalf of an Indemnified Party in respect of a Loss shall be
adjusted as follows:
8.6.1. ADDITIONAL TAXES. If such Indemnified Party is liable
for any additional Taxes as a result of the payment of amounts in respect of
an indemnifiable claim, the Indemnifying Party will pay to the Indemnified
Party in addition to such amounts in respect of the Loss within 10 days after
being notified by the Indemnified Party of the payment of such liability (x)
an amount equal to such additional Taxes (the "TAX REIMBURSEMENT AMOUNT")
plus (y) any additional amounts required to pay additional Taxes imposed with
respect to the Tax Reimbursement Amount and with respect to amounts payable
under this clause (y), with the result that the Indemnified Party shall have
received from the Indemnifying Party, net of the payment of Taxes, an amount
equal to the Loss.
8.6.2. TAX BENEFIT. The Indemnified Party shall reimburse the
Indemnifying Party an amount equal to the net reduction in the liability for
Taxes (that are based upon or measured by income) of the Indemnified Party or
any member of a consolidated or combined tax group of which the Indemnified
Party is, or was at any time, part, which reduction is actually realized with
respect to any period after the Closing Date and which reduction would not
have been realized but for the amounts paid (or any audit adjustment or
deficiency with respect thereto, if applicable) in respect of a Loss, or
amounts paid by the Indemnified Party pursuant to this paragraph (a "NET TAX
BENEFIT"). The amount of any Net Tax Benefit shall be paid not later than 15
days after the date on which such Net Tax Benefit shall be realized. Any
expenses associated with the realization of a Net Tax Benefit or any contest
or proceeding with respect to a Net Tax Benefit shall be deemed to reduce
such Net Tax Benefit.
8.7. SURVIVAL. This Section 8 shall survive any termination of this
Agreement. Any matter as to which a claim has been asserted by notice to the
other party that is pending or unresolved at the end of any applicable
statute of limitations period shall continue to be covered by this Section 8
notwithstanding such statute of limitations (which the parties hereby waive)
until such matter is
2.1-33
finally terminated or otherwise resolved by the parties under this Agreement
and any amounts payable hereunder are finally determined and paid.
8.8. NOTICE BY THE WERTHS. The Werths agree to notify NetLojix
promptly of any liabilities, claims or misrepresentations, breaches or other
matters covered by this Section 8 upon discovery or receipt of notice thereof
(other than from NetLojix), whether before or after Closing.
8.9. NOT EXCLUSIVE REMEDY. This Section 8 shall not be deemed to
preclude or otherwise limit in any way the exercise of any other rights or
pursuit of other remedies for the breach of this Agreement or with respect to
any misrepresentation.
8.10. NO WAIVER. The closing of the transaction contemplated by this
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of
condition constituting the basis of the claim at or before the Closing.
9. GENERAL
9.1. AMENDMENTS; WAIVERS. This Agreement and any schedule or exhibit
attached hereto may be amended only by agreement in writing of all parties.
No waiver of any provision nor consent to any exception to the terms of this
Agreement or any agreement contemplated hereby shall be effective unless in
writing and signed by the party to be bound and then only to the specific
purpose, extent and instance so provided.
9.2. SCHEDULES; EXHIBITS; INTEGRATION. Each schedule and exhibit
delivered pursuant to the terms of this Agreement shall be in writing and
shall constitute a part of this Agreement, although schedules need not be
attached to each copy of this Agreement. This Agreement, together with such
schedules and exhibits, constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersedes all prior agreements
and understandings of the parties in connection therewith.
9.3. BEST EFFORTS; FURTHER ASSURANCES.
9.3.1. STANDARD. Each party will use its best efforts to cause
all conditions to its obligations to be timely satisfied and to perform and
fulfill all obligations on its part to be performed and fulfilled under this
Agreement, to the end that the transactions contemplated by this Agreement
shall be effected substantially in accordance with its terms as soon as
reasonably practicable. The parties shall cooperate with each other in such
actions and in securing requisite Approvals.
9.3.2. LIMITATION. As used in this Agreement, the term "BEST
EFFORTS" shall not mean efforts which require the performing party to do any
act that is unreasonable under the circumstances or to expend any funds other
than reasonable out-of-pocket expenses incurred in satisfying its
2.1-34
obligations hereunder, including but not limited to the fees, expenses and
disbursements of its accountants, counsel and other professionals.
9.4. GOVERNING LAW. This Agreement and the legal relations between
the parties shall be governed by and construed in accordance with the laws of
the State of Illinois applicable to contracts made and performed in such
State and without regard to conflicts of law doctrines except to the extent
that certain matters are preempted by federal law.
9.5. NO ASSIGNMENT. Neither this Agreement nor any rights or
obligations under it are assignable except that NetLojix may assign its
rights hereunder (including but not limited to its rights under Section 8) to
any subsidiary or affiliate of NetLojix or to any post-Closing purchaser of a
substantial part of the shares or assets of CWE(2) or of the Business.
9.6. HEADINGS. The descriptive headings of the Sections and
subsections of this Agreement are for convenience only and do not constitute
a part of this Agreement.
9.7. COUNTERPARTS. This Agreement and any amendment hereto or any
other agreement (or document) delivered pursuant hereto may be executed in
one or more counterparts and by different parties in separate counterparts.
All of such counterparts shall constitute one and the same agreement (or
other document) and shall become effective (unless otherwise provided
therein) when one or more counterparts have been signed by each party and
delivered to the other party. This Agreement and any amendment hereto or any
other agreement (or document) delivered pursuant hereto may be executed by
telefacsimile transmission of the signature page thereto with the same
binding effect as an original.
9.8. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure to the benefit of each party, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies
of any nature whatsoever under or by reason of this Agreement. Nothing in
this Agreement is intended to relieve or discharge the obligation of any
third person to (or to confer any right of subrogation or action against) any
party to this Agreement.
9.9. CONFIDENTIALITY; PUBLICITY. Each party agrees to maintain the
confidentiality of all information that is furnished by the other party and
designated in writing as confidential by such other party or its
representatives in connection with the transactions contemplated by this
Agreement. If for any reason such transactions are not consummated, the
receiving party shall, on request, return or destroy all such written
information. This Section shall not apply to any information (i) already
known to the receiving party or its representatives or to others not bound by
a duty of confidentiality or which becomes publicly available through no
fault of the receiving party or its representatives, (ii) the use of which is
necessary or appropriate in making any filing or obtaining any financing,
consent or approval required for the consummation of such transactions, or
(iii) the furnishing or use of which is required by law or the rules of the
SEC or Nasdaq, or necessary or appropriate in connection with, legal
proceedings. Except as necessary to obtain required third party consents, or
2.1-35
to the extent required by law or the rules of the SEC or Nasdaq, without the
prior written consent of the other party, none of NetLojix, CWE(2) or the
Werths will make (and each will direct its Affiliates and representatives not
to make) directly or indirectly, any public comment, statement, or
communication with respect to, or otherwise to disclose or to permit the
disclosure of the existence of this Agreement, the transactions contemplated
hereby, or any of the terms, conditions, or other aspects hereof.
9.10. NOTICES. Except as otherwise provided herein, any notice or
other communication to be given hereunder shall be in writing and shall be
(as elected by the party giving such notice): (i) personally delivered; (ii)
transmitted by postage prepaid registered or certified airmail, return
receipt requested; (iii) transmitted by electronic mail via the Internet with
receipt being acknowledged by the recipient by return electronic mail; (iv)
transmitted by facsimile (with a copy of such transmission by postage paid
prepaid registered or certified airmail, return receipt requested); or (v)
deposited prepaid with a nationally recognized overnight courier service.
Unless otherwise provided herein, all notices shall be deemed to have been
duly given on: (a) the date of receipt (or if delivery is refused, the date
of such refusal) if delivered personally, by electronic mail, facsimile or by
courier; or (b) three (3) days after the date of posting if transmitted by
mail. Notice hereunder shall be directed to a party at the address for such
party which is set forth as follows:
If to NetLojix or Mergersub If to the Werths, the Shareholder
addressed to: Representative or (prior to
Closing) CWE(2), addressed
to (or in care of):
NetLojix Communications, Inc. Mr. Duane E. Werth
501 Bath Street 54 Genesee Avenue
Santa Barbara, CA 93101 Elgin, Illinois 60123
Attention: Anthony E. Papa Facsimile No. (847) 697-2391
Facsimile No. (805) 884-6311 E-mail: dwerth@cwe2.com
E-mail: tpapa@netlojix.com
With a copy to: With a copy to:
Seed, Mackall & Cole LLP Wolin & Rosen, Ltd.
1332 Anacapa Street, Suite 200 55 West Monroe Street, Suite 3600
Santa Barbara, CA 93101 Chicago, IL 60603
Attention: Thomas N. Harding Attention: Lewis F. Matuszewich
Facsimile No. (805) 435-1498 Facsimile No. (312) 464-0660
E-mail: tharding@seedmackall.com E-mail: lmatuszewich@wolinlaw.com
or to such other address or to such other person as any party shall have last
designated by such notice to the other party.
2.1-36
9.11. EXPENSES. CWE(2), on behalf of itself and the Shareholders,
and NetLojix shall each pay their own expenses incident to the negotiation,
preparation and performance of this Agreement and the transactions
contemplated hereby, including but not limited to the fees, expenses and
disbursements of their respective counsel; provided, however, that CWE(2) may
not incur more than $25,000 of expenses relating to the transactions
contemplated hereby without the prior consent of NetLojix. Any expenses of
CWE(2) in excess of such amount will be reimbursed to CWE(2) by the Werths.
9.12. WAIVER. No failure on the part of any party to exercise or
delay in exercising any right hereunder shall be deemed a waiver thereof, nor
shall any single or partial exercise preclude any further or other exercise
of such or any other right.
9.13. ARBITRATION. Any dispute, controversy or claim of any kind or
nature arising under or in connection with this Agreement, including disputes
as to the creation, validity, interpretation, breach or termination of this
Agreement (each a "DISPUTE"), will be submitted to arbitration in accordance
with the following procedures:
9.13.1. DEMAND FOR ARBITRATION; LOCATION. Either party may
demand arbitration by giving the other party written notice to such effect,
which notice will describe, in reasonable detail, the facts and legal grounds
forming the basis for the filing party's request for relief and will include
a statement of the total amount of damages claimed, if any, and any other
remedy sought by that party. The arbitration will be held before one neutral
arbitrator in Santa Barbara, California.
9.13.2. IDENTIFICATION OF ARBITRATOR. Within ten days after the
other party's receipt of such demand, the parties will mutually determine who
the arbitrator will be. If the parties are unable to agree on the arbitrator
within that time period, the arbitrator will be selected by the American
Arbitration Association ("AAA").
9.13.3. CONDUCT OF ARBITRATION. The arbitration will be
governed by the Commercial Arbitration Rules of the AAA, except as expressly
provided in this Section 9.13 However, the arbitration will be administered
by any organization mutually agreed to in writing by the parties. If the
parties are unable to agree on the organization to administer the
arbitration, it will be administered by the AAA. Pending the arbitrator's
determination of the merits of the Dispute, either party may apply to any
court of competent jurisdiction to seek injunctive or other extraordinary
relief.
9.13.4. AWARD. The decision of, and award rendered by, the
arbitrator will be final and binding on the parties. Upon the request of a
party, the arbitrator's award will include written findings of fact and
conclusions of law. Judgment on the award may be entered in and enforced by
any court of competent jurisdiction. Other than those matters involving
injunctive or other extraordinary relief or any action necessary to enforce
the award of the arbitrator, the parties agree that the provisions of this
Section 9.13 are a complete defense to any suit, action or other proceeding
2.1-37
instituted in any court or before any administrative tribunal with respect to
any Dispute or terms of this Agreement.
9.13.5. ATTORNEYS' FEES. The arbitrator shall award to the
prevailing party on each material issue that party's reasonable attorney's
fees and costs. The term "prevailing party" shall mean the party which shall
have substantially prevailed on a material issue in dispute, and the other
party shall be the "losing party" with respect to such issue. As to distinct,
severable issues in dispute, the arbitrator may decide which party is the
prevailing party. Accordingly, the arbitrator shall have the discretion to
award attorney's fees to both parties, in amounts to be determined by the
arbitrator, if the arbitrator shall determine that as to separate and
distinct material issues having a bearing on an entitlement to relief each of
the parties shall have been a prevailing party. A party that voluntarily
dismisses an action or proceeding shall be considered a losing party for all
purposes of this provision. Application for cost and expenses shall be
substantiated with documentary verification. The actual cost of the
arbitration itself shall be borne by the losing party or shall be allocated
between the parties in such proportions as the arbitrator decides if there
are distinct, severable issues in dispute and the arbitrator determines that
each of the parties has, to some extent, been a losing party.
9.14. REPRESENTATION BY COUNSEL; INTERPRETATION. CWE(2), the Werths
and NetLojix each acknowledge that each party to this Agreement has been
represented by counsel in connection with this Agreement and the transactions
contemplated by this Agreement. Accordingly, any rule of Law or any legal
decision that would require interpretation of any claimed ambiguities in this
Agreement against the party that drafted it has no application and is
expressly waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of CWE(2), the Werths and NetLojix.
9.15. SEVERABILITY. If any provision of this Agreement is determined
to be invalid, illegal or unenforceable by any Governmental Entity, the
remaining provisions of this Agreement shall remain in full force and effect
provided that the essential terms and conditions of this Agreement for both
parties remain valid, binding and enforceable.
(Signatures begin on following page)
2.1-38
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, or caused this Agreement to be executed by its duly authorized
officers, as of the day and year first above written.
"NETLOJIX" "CWE(2)"
NETLOJIX COMMUNICATIONS, INC., CW ELECTRONIC ENTERPRISES, INC.,
a Delaware corporation an Illinois corporation
By /s/ ANTHONY E. PAPA By /s/ DUANE E. WERTH
-------------------------------- ------------------------------
Anthony E. Papa Duane E. Werth
Chief Executive Officer President and Chief Executive
Officer
"MERGERSUB" "WERTHS"
CWE(2) ACQUISITION CORPORATION,
an Illinois corporation /s/ DUANE E. WERTH
--------------------------------
Duane E. Werth
By /s/ ANTHONY E. PAPA /s/ KAREN L. WERTH
--------------------------------- --------------------------------
Anthony E. Papa Karen L. Werth
Chief Executive Officer
2.1-39
LIST OF OMITTED SCHEDULES TO STOCK PURCHASE AGREEMENT
Schedule 2.1 Organization and Related Matters
Schedule 2.2 Capital Stock
Schedule 2.3 Financial Statements
Schedule 2.4 Tax Returns
Schedule 2.5 Material Contracts
Schedule 2.6 Tangible Personal Property
Schedule 2.7 Intellectual Property
Schedule 2.8 Approvals
Schedule 2.9 Orders and Actions
Schedule 2.11 Year 2000 Compliance
Schedule 2.12 Insurance Policies
Schedule 2.13 Permits
Schedule 2.15 Employees
Schedule 2.16 Employee Benefit Plans
Schedule 2.17 Affiliate Interests and Transactions
Schedule 2.18 Bank Accounts
Schedule 2.22 Customers and Suppliers
Schedule 2.23 Environmental Compliance
Schedule 3.3 NetLojix Approvals
Schedule 6.2.7 Key Employees
Schedule 6.3.4 CWE(2)Optionees
The Registrant agrees to furnish supplementally a copy of any omitted schedule
to the Commission upon request.
2.1-40