AGREEMENT AND PLAN OF MERGER AND REORGANIZATION dated as of January 5, 2001 (the
"Agreement") by and among Net Connect Systems, Inc., a Florida corporation
("NetConnect Systems") and On-Line Connecting Systems Inc., a Texas corporation
("On-Line").
R E C I T A L S
The respective Boards of Directors of NetConnect Systems and On-Line deem
it desirable and in the best interests of their respective corporations, and of
their respective shareholders, subject to, among other things, the approval of
the shareholders of NetConnect Systems and On-Line, On-Line shall merge with and
into NetConnect Systems; as a result of which the holders of shares of capital
stock of On-Line will, in the aggregate, receive the consideration hereinafter
set forth (collectively, the "Merger"). Upon the terms and subject to the
conditions of this Agreement, at the Effective Date (as defined in Section 2.3
of this Agreement) in accordance with the merger laws of the state of Texas
("MERGER LAWS"), On-Line shall be merged with and into NetConnect Systems and
the separate existence of On-Line shall thereupon cease. NetConnect Systems
shall be the surviving corporation in the Merger and is hereinafter sometimes
referred to as the "Surviving Corporation."
NOW, THEREFORE, in consideration of the terms, conditions, agreements and
covenants contained herein, and in reliance upon the representations and
warranties contained in this Agreement, the parties hereto agree as follows:
I. RECITALS; TRUE AND CORRECT
The above stated recitals are true and correct and are incorporated into
this Agreement.
II. MERGER
2.1 Merger. In the manner and subject to the terms and conditions set forth
herein, On-Line shall merge with and into NetConnect Systems, and NetConnect
Systems shall be the surviving corporation after the Merger and shall continue
to exist as a corporation governed by the laws of *your state.
2.2 Incorporation and Name Change. Prior to the closing of the merger,
NetConnect Systems shall change its state of incorporation to Texas and in so
doing adopt On-Line's Articles of Incorporation and Bylaws (the
"Reincorporation").
2.3 Effective Date. If all of the conditions precedent to the obligations
of each of the parties hereto as hereinafter set forth shall have been satisfied
or shall have been waived, the Merger shall become effective on the date (the
"Effective Date") the Articles of Merger, together with Plans of Merger
reflecting the Merger, shall be accepted for filing by the Secretary of State of
*your state.
2.4 Securities of the Corporations. The authorized capital stock of On-Line
is comprised of 100 shares of Common Stock, (the "On-Line Stock"), of which
20.25 shares are issued and outstanding.
The authorized capital stock of NetConnect Systems is comprised of 50,000,000
shares of Common Stock, no par value per share (the "NetConnect Systems Stock"),
of which 125,000 shares will be issued and outstanding as of the date of closing
of the Merger. In addition, NetConnect Systems has authorized but unissued
20,000,000 shares of no par value Preferred Stock
2.5 Shares of the Constituent and Surviving Corporations. The manner and
basis of converting the shares of On-Line Stock into shares of NetConnect
Systems Stock shall be as follows:
At the Effective Date, by virtue of the Merger and without any action on the
part of any holder of any capital stock of either NetConnect Systems or On-Line,
each share of On-Line Stock issued and outstanding shall be converted into the
right to receive one million shares of NetConnect Systems Stock (the "Exchange
Ratio").
2.6 Effect of the Merger. As of the Effective Date, all of the following
shall occur:
(a) The separate existence and corporate organization of On-Line shall
cease (except insofar as it may be continued by statute), NetConnect Systems
shall exist as a surviving corporation.
(b) Except as otherwise specifically set forth herein, the corporate
identity, existence, purposes, powers, franchises, rights and immunities of
NetConnect Systems shall continue unaffected and unimpaired by the Merger, and
the corporate identity, existence, purposes, powers, franchises and immunities
of On-Line shall be merged with and into NetConnect Systems as the surviving
corporation, shall be fully vested therewith.
(c) Neither the rights of creditors nor any liens upon or security
interests in the property of On-Line shall be impaired by the Merger.
(d) All corporate acts, plans, policies, agreements approvals and
authorizations of the shareholders and Board of Directors of On-Line and of its
respective officers, directors and agents, which were valid and effective
immediately prior to the Effective Date, shall be the acts, plans, policies,
agreements, approvals and authorizations of NetConnect Systems and shall be as
effective and binding on NetConnect Systems as the same were on On-Line.
(e) NetConnect Systems shall be liable for all of the obligations and
liabilities of On-Line.
(f) The rights, privileges, goodwill, inchoate rights, franchises and
property, real, personal and mixed, and debts due on whatever account and all
other things in action belonging to On-Line, shall be, and they hereby are,
bargained, conveyed, granted, confirmed, transferred, assigned and set over to
and vested in NetConnect Systems, without further act or deed.
(g) No claim pending at the Effective Date by or against any of
On-Line, or any stockholder, officer or director thereof, shall xxxxx or be
discontinued by the Merger, but may be enforced, prosecuted, settled or
compromised as if the Merger had not occurred.
(h) All rights of employees and creditors and all liens upon the
property of On-Line shall be preserved unimpaired, limited in lien to the
property affected by such liens at the Effective Date, and all the debts,
liabilities and duties of On-Line shall attach to NetConnect Systems and shall
be enforceable against NetConnect Systems to the same extent as if all such
debts, liabilities and duties had been incurred or contracted by On-Line.
(i) The Articles of Incorporation of NetConnect Systems, as in effect
on the Effective Date, shall continue to be the Articles of Incorporation of
NetConnect Systems without change or amendment.
(j) The Bylaws of NetConnect Systems, as in effect on the Effective
Date, shall continue to be the Bylaws of NetConnect Systems without change or
amendment until such time, if ever, as it is amended thereafter in accordance
with the provisions thereof and applicable laws.
(k) Upon the Effective Date, the Board of Directors of NetConnect
Systems shall consist of those persons set forth in the registration statement,
and the officers of NetConnect Systems shall be the officers specified in the
registration statement.
2.7. Merger Fee. On-Line shall pay NetConnect Systems a merger fee of
$56,250 for this transaction.
As NetConnect Systems goes through the due diligence and filing process, facts
and circumstances not known to it when it started the process leading to closing
the merger may come to light that make proceeding with the transaction
inadvisable in the opinion of NetConnect Systems. If this occurs or if On-Line
cancels the agreement after paying the first installment, all fees previously
received by NetConnect Systems will be retained.
III. CONDUCT OF BUSINESS PENDING CLOSING; STOCKHOLDER APPROVAL
On-Line and NetConnect Systems covenant that between the date hereof and
the date of the Closing:
3.1 Access to On-Line. On-Line shall (a) give to NetConnect Systems and to
NetConnect System's counsel, accountants and other representatives reasonable
access, during normal business hours, throughout the period prior to the Closing
Date (as defined in Section 6.1), to all of the books, contracts, commitments
and other records of On-Line and shall furnish NetConnect Systems during such
period with all information concerning On-Line that NetConnect Systems may
reasonably request; and (b) afford to NetConnect Systems and to NetConnect
System's representatives, agents, employees and independent contractors
reasonable access, during normal business hours, to the properties of On-Line,
in order to conduct inspections at NetConnect System's expense to determine that
On-Line is operating in compliance with all applicable federal, state, local and
foreign statutes, rules and regulations, and all material building, fire and
zoning laws or regulations and that the assets of On-Line are substantially in
the condition and of the capacities represented and warranted in this Agreement;
provided, however, that in every instance described in (a) and (b), NetConnect
Systems shall make arrangements with On-Line reasonably in advance and shall use
its best efforts to avoid interruption and to minimize interference with the
normal business and operations of On-Line. Any such investigation or inspection
by NetConnect Systems shall not be deemed a waiver of, or otherwise limit, the
representations, warranties or covenants of On-Line contained herein.
3.2 Conduct of Business. During the period from the date hereof to the
Closing Date, On-Line shall and shall use reasonable efforts, to the extent such
efforts are within On-Line's control, to cause its business to be operated in
the usual and ordinary course of business and in material compliance with the
terms of this Agreement.
3.3 Exclusivity to NetConnect Systems. Until either the merger agreement is
terminated or the merger closed, On-Line agrees not to solicit any other
inquiries, proposals or offers to purchase or otherwise acquire, in a merger
transaction or another type of transaction, the business of On-Line or the
shares of capital stock of On-Line. Any person inquiring as to the availability
of the business or shares of capital stock of On-Line or making an offer
therefore shall be told that On-Line is bound by the provisions of this
Agreement. On-Line as well as its officers, directors, representatives or agents
further agree to advise NetConnect Systems promptly of any such inquiry or
offer.
3.4 Access to NetConnect Systems. NetConnect Systems shall (a) give to
On-Line and to On-Line's counsel, accountants and other representatives
reasonable access, during normal business hours, throughout the period prior to
the Closing Date, to all of the books, contracts, commitments and other records
of NetConnect Systems and shall furnish On-Line during such period with all
information concerning NetConnect Systems that On-Line may reasonably request;
and (b) afford to On-Line and to On-Line's representatives, agents, employees
and independent contractors reasonable access, during normal business hours, to
the properties of NetConnect Systems in order to conduct inspections at
On-Line's expense to determine that NetConnect Systems is operating in
compliance with all applicable federal, state, local and foreign statutes, rules
and regulations, and all material building, fire and zoning laws or regulations
and that the assets of NetConnect Systems are substantially in the condition and
of the capacities represented and warranted in this Agreement; provided,
however, that in every instance described in (a) and (b), On-Line shall make
arrangements with NetConnect Systems reasonably in advance and shall use its
best efforts to avoid interruption and to minimize interference with the normal
business and operations of NetConnect Systems. Any such investigation or
inspection by On-Line shall not be deemed a waiver of, or otherwise limit, the
representations, warranties or covenants of NetConnect Systems contained herein.
3.5 Conduct of Business. During the period from the date hereof to the
Closing Date, the business of NetConnect Systems shall be operated by NetConnect
Systems in the usual and ordinary course of such business and in material
compliance with the terms of this Agreement.
3.6 Exclusivity to On-Line. Until either the merger agreement is terminated
or the merger closed, NetConnect Systems has agreed not to make any other
inquiries, proposals or offers to purchase or otherwise acquire, in a merger
transaction or another type of transaction, the business or the shares of
capital stock of any other company. Any person inquiring as to the possibility
of being acquired by NetConnect Systems or making an offer therefore shall be
told that NetConnect Systems is bound by the provisions of this Agreement. Each
of NetConnect Systems and its officers, directors, representatives or agents
further agree to advise PC Universe promptly of any such inquiry or offer.
3.7 Stockholder Approval. (a) As promptly as reasonably practicable
following the date of this Agreement, NetConnect Systems shall take all action
reasonably necessary in accordance with the laws of the State of Florida and its
Articles of Incorporation and Bylaws to secure written consents for the approval
and adoption of the Merger and the Merger Agreement, as well as the
Reincorporation and Name Change. The Board of Directors of NetConnect Systems
shall unanimously recommend that NetConnect System's shareholders vote to
approve and adopt the Merger, this Agreement and any other matters to be
submitted to NetConnect System's shareholders in connection therewith.
NetConnect Systems shall, subject as aforesaid, use its best efforts to solicit
and secure from shareholders of NetConnect Systems such approval and adoption.
(b) As promptly as reasonably practicable following the date of this
Agreement, NetConnect Systems shall prepare and file with the SEC under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated by the SEC thereunder a registration statement on Form
S-4 (or other form of registration statement as agreed by the parties) (the
"registration statement")covering all shares of NetConnect Systems Stock
issuable as a consequence of the Merger. NetConnect Systems may also register
shares of existing shareholders for resale on a companion S-1 or SB-2 filing.
On-Line shall cooperate fully with NetConnect Systems in the preparation and
filing of the Registration Statement and any amendments and supplements thereto,
including, without limitation, the furnishing to NetConnect Systems of such
information regarding On-Line as shall be required by each of the Securities Act
and the Exchange Act and the respective rules and regulations promulgated by the
SEC thereunder.
(d) As promptly as practicable but in no event later than the Effective
Date, NetConnect Systems shall prepare and forward to a market maker to file
with the NASD OTC Bulletin Board ("BB"), an application to have the NetConnect
Systems Stock listed for trading on BB.
IV. REPRESENTATIONS AND WARRANTIES OF On-Line
On-Line represents and warrants to NetConnect Systems as follows, with the
knowledge and understanding that NetConnect Systems is relying materially upon
such representations and warranties:
4.1 Organization and Standing. On-Line is a corporation duly organized,
validly existing and in good standing under the laws of the state of Texas.
On-Line has all requisite corporate power to carry on its business as it is now
being conducted and is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction where such qualification is
necessary under applicable law, except where the failure to qualify
(individually or in the aggregate) does not have any material adverse effect on
the assets, business or financial condition of On-Line, and all states in which
each is qualified to do business as of the date hereof, are listed in the
information in the registration statement concerning On-Line. The copies of the
Articles of Incorporation and Bylaws of On-Line, as amended to date, delivered
to NetConnect Systems, are true and complete copies of these documents as now in
effect. Except as otherwise set forth in the information in the registration
statement concerning On-Line, On-Line does not own any interest in any other
corporation, business trust or similar entity. The minute book of On-Line
contains accurate records of all meetings of its respective Board of Directors
and shareholders since its incorporation.
4.2 Capitalization. The authorized capital stock of On-Line, the number of
shares of capital stock which are issued and outstanding and par value thereof
are as set forth in the Registration Statement. All of such shares of capital
stock are duly authorized, validly issued and outstanding, fully paid and
nonassessable, and were not issued in violation of the preemptive rights of any
person. There are no subscriptions, options, warrants, rights or calls or other
commitments or agreements to which On-Line is a party or by which it is bound,
calling for any issuance, transfer, sale or other disposition of any class of
securities of On-Line. There are no outstanding securities convertible or
exchangeable, actually or contingently, into shares of common stock or any other
securities of On-Line. On-Line has no subsidiaries.
4.3 Authority. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by On-Line in
accordance therewith (and assuming due execution and delivery by the other
parties hereto), the valid and binding obligation of On-Line, enforceable in
accordance with their respective terms, subject to general principles of equity
and bankruptcy or other laws relating to or affecting the rights of creditors
generally.
4.4 Properties. Except as set forth on the information in the registration
statement concerning On-Line, On-Line has good title to all of the assets and
properties which it purports to own as reflected on the balance sheet included
in the Financial Statements (as hereinafter defined), or thereafter acquired.
On-Line has a valid leasehold interest in all material property of which it is
the lessee and each such lease is valid, binding and enforceable against
On-Line, as the case may be, and, to the knowledge of On-Line, the other parties
thereto in accordance with its terms. Neither On-Line nor the other parties
thereto are in material default in the performance of any material provisions
thereunder. Neither the whole nor any material portion of the assets of On-Line
is subject to any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefore, nor, to the knowledge of On-Line, any such
condemnation, expropriation or taking been proposed. None of the assets of
On-Line is subject to any restriction which would prevent continuation of the
use currently made thereof or materially adversely affect the value thereof.
4.5 Contracts Listed; No Default. All contracts, agreements, licenses,
leases, easements, permits, rights of way, commitments, and understandings,
written or oral, connected with or relating in any respect to present or
proposed future operations of On-Line (except employment or other agreements
terminable at will and other agreements which, in the aggregate, are not
material to the business, properties or prospects of On-Line and except
governmental licenses, permits, authorizations, approvals and other matters
referred to in Section 4.17), which would be required to be listed as exhibits
to a Registration Statement on Form S-4 or an Annual Report on Form 10-K if
On-Line were subject to the reporting requirements of the Exchange Act
(individually, the "On-Line Contract" and collectively, the "On-Line
Contracts"), are listed and described in the information in the registration
statement concerning On-Line. On-Line is the holder of, or party to, all of the
On-Line Contracts. To the knowledge of On-Line, the On-Line Contracts are valid,
binding and enforceable by the signatory thereto against the other parties
thereto in accordance with their terms. Neither On-Line nor any signatory
thereto is in default or breach of any material provision of the On-Line
Contracts. On-Line's operation of its business has been, is, and will, between
the date hereof and the Closing Date, continue to be, consistent with the
material terms and conditions of the On-Line Contracts.
4.6 Litigation. Except as disclosed in the information in the registration
statement concerning On-Line, there is no claim, action, proceeding or
investigation pending or, to the knowledge of On-Line, threatened against or
affecting On-Line before or by any court, arbitrator or governmental agency or
authority which, in the reasonable judgment of On-Line, could have any
materially adverse effect on On-Line. There are no decrees, injunctions or
orders of any court, governmental department, agency or arbitration outstanding
against On-Line.
4.7 Taxes. For purposes of this Agreement, (A) "Tax" (and, with correlative
meaning, "Taxes") shall mean any federal, state, local or foreign income,
alternative or add-on minimum, business, employment, franchise, occupancy,
payroll, property, sales, transfer, use, value added, withholding or other tax,
levy, impost, fee, imposition, assessment or similar charge, together with any
related addition to tax, interest, penalty or fine thereon; and (B) "Returns"
shall mean all returns (including, without limitation, information returns and
other material information), reports and forms relating to Taxes or to any
benefit plans.
On-Line has duly filed all Returns required by any law or regulation to be
filed by it, except for extensions duly obtained. All such Returns were, when
filed, and to the knowledge of On-Line are, accurate and complete in all
material respects and were prepared in conformity with applicable laws and
regulations in all material respects. On-Line has paid or will pay in full or
has adequately reserved against all Taxes otherwise assessed against it through
the Closing Date, and the assessment of any material amount of additional Taxes
in excess of those paid and reported is not reasonably expected.
On-Line is not a party to any pending action or proceeding by any governmental
authority for the assessment of any Tax, and no claim for assessment or
collection of any Tax has been asserted against On-Line that has not been paid.
There are no Tax liens upon the assets (other than the lien of property taxes
not yet due and payable) of On-Line. There is no valid basis, to the knowledge
of On-Line, except as set forth in the information in the registration statement
concerning On-Line, for any assessment, deficiency, notice, 30-day letter or
similar intention to assess any Tax to be issued to On-Line by any governmental
authority.
4.8 Compliance with Laws and Regulations. To its knowledge, On-Line is in
compliance, in all material respects, with all laws, rules, regulations, orders
and requirements (federal, state and local) applicable to it in all
jurisdictions where the business of On-Line is currently conducted or to which
On-Line is currently subject which has a material impact on On-Line, including,
without limitation, all applicable civil rights and equal opportunity employment
laws and regulations, and all state and federal antitrust and fair trade
practice laws and the Federal Occupational Health and Safety Act. On-Line knows
of no assertion by any party that On-Line is in violation of any such laws,
rules, regulations, orders, restrictions or requirements with respect to its
current operations, and no notice in that regard has been received by On-Line.
To the knowledge of On-Line, there is not presently pending any proceeding,
hearing or investigation with respect to the adoption of amendments or
modifications to existing laws, rules, regulations, orders, restrictions or
requirements which, if adopted, would materially adversely affect the current
operations of On-Line.
4.9 Compliance with Laws. (a) To its knowledge, the business, operations,
property and assets of On-Line (and, to the knowledge of On-Line, the business
of any sub-tenant or licensee which is occupying or has occupied any space on
any premises of On-Line and the activities of which could result in any material
adverse liability to On-Line) (i) conform with and are in compliance in all
material respects with all, and are not in material violation of any applicable
federal, state and local laws, rules and regulations, including, but not limited
to, the Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended (including the 1986 Amendments thereto and the Superfund
Amendments and Reauthorization Act) ("CERCLA"), and the Resource Conservation
and Recovery Act ("RCRA"), as well as any other laws, rules or regulations
relating to tax, product liability, controlled substances, product registration,
environmental protection, hazardous or toxic waste, employment, or occupational
safety matters; and (ii) have been conducted and operated in a manner such that,
to On-Line's knowledge, On-Line has foreseeable potential liabilities for
environmental clean-up under CERCLA, RCRA or under any other law, rule,
regulation or common or civil law doctrine.
(b) To its knowledge, no predecessor-in-title to any real property now or
previously owned or operated by On-Line, nor any predecessor operator thereof
conducted its business or operated such property in violation of CERCLA and RCRA
or any other applicable federal, state and local laws, rules and regulations
relating to environmental protection or hazardous or toxic waste matters.
(c) Except as disclosed in the information in the registration statement
concerning On-Line, no suit, action, claim, proceeding, nor investigation,
review or inquiry by any court or federal, state, county, municipal or local
governmental department, commission, board, bureau, agency or instrumentality,
including, without limitation, any state or local health department (all of the
foregoing collectively referred to as "Governmental Entity") concerning any such
possible violations by On-Line is pending or, to the knowledge of On-Line,
threatened, including, but not limited to, matters relating to diagnostic tests
and products and product liability, environmental protection, hazardous or toxic
waste, controlled substances, employment, occupational safety or tax matters.
On-Line does not know of any reasonable basis or ground for any such suit,
claim, investigation, inquiry or proceeding. For purposes of this Section 4.9,
the term "inquiry" includes, without limitation, all pending regulatory issues
(whether before federal, state, local or inter-governmental regulatory
authorities) concerning any regulated product, including, without limitation,
any diagnostic drugs and products.
4.10 Information. On-Line has furnished NetConnect Systems all information
necessary to prepare the registration statement.
4.11 Condition of Assets. The equipment, fixtures and other personal
property of On-Line, taken as a whole, is in good operating condition and repair
(ordinary wear and tear excepted) for the conduct of the business of On-Line as
is contemplated to be conducted.
4.12 No Breaches. To its knowledge, the making and performance of this
Agreement and the other agreements contemplated hereby by On-Line will not (i)
conflict with or violate the Articles of Incorporation or the Bylaws of On-Line;
(ii) violate any material laws, ordinances, rules or regulations, or any order,
writ, injunction or decree to which On-Line is a party or by which On-Line or
any of its respective assets, businesses, or operations may be bound or
affected; or (iii) result in any breach or termination of, or constitute a
default under, or constitute an event which, with notice or lapse of time, or
both, would become a default under, or result in the creation of any encumbrance
upon any asset of On-Line under, or create any rights of termination,
cancellation or acceleration in any person under, any On-Line Contract.
4.13 Employees. Except as set forth in the information in the registration
statement concerning On-Line, none of the employees of On-Line is represented by
any labor union or collective bargaining unit and, to the knowledge of On-Line,
no discussions are taking place with respect to such representation.
4.14 Financial Statements. To its knowledge, the information in the
registration statement concerning On-Line contains, as to On-Line, certain
financial statements (the "Financial Statements"). The Financial Statements
present fairly, in all respects, the consolidated financial position and results
of operations of On-Line as of the dates and periods indicated, prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP"). The Financial Statements, when submitted to NetConnect Systems for
inclusion in the Registration Statement, will have been prepared in accordance
with Regulation S-X of the SEC and, in particular, Rules 1-02 and 3-05
promulgated thereunder. Without limiting the generality of the foregoing, (i)
there is no basis for any assertion against On-Line as of the date of the
Financial Statements of any debt, liability or obligation of any nature not
fully reflected or reserved against in the Financial Statements; and (ii) there
are no assets of On-Line as of the date of the Financial Statements, the value
of which is overstated in the Financial Statements. Except as disclosed in the
Financial Statements, On-Line has no known contingent liabilities (including
liabilities for Taxes), forward or long-term commitments or unrealized or
anticipated losses from unfavorable commitments other than in the ordinary
course of business. On-Line is not a party to any contract or agreement for the
forward purchase or sale of any foreign currency that is material to On-Line
taken as a whole.
4.15 Absence of Certain Changes or Events. Except as set forth in the
information in the registration statement concerning On-Line, since the date of
the last financial statement included in the registration statement, there has
not been:
(a) Any material adverse change in the financial condition, properties,
assets, liabilities or business ofOn-Line;
(b) Any material damage, destruction or loss of any material properties
of On-Line, whether or not covered byinsurance;
(c) Any material change in the manner in which the business of On-Line
has been conducted;
(d) Any material change in the treatment and protection of trade
secrets or other confidential information of On-Line;
(e) Any material change in the business or contractual relationship of
On-Line with any customer or supplier which might reasonably be expected to
materially and adversely affect the business or prospects of On-Line;
(f) Any agreement by On-Line, whether written or oral, to do any of the
foregoing; and
(g) Any occurrence not included in paragraphs (a) through (f) of this
Section 4.16 which has resulted, or which On-Line has reason to believe, in its
reasonable judgment, might be expected to result, in a material adverse change
in the business or prospects of On-Line.
4.16 Governmental Licenses, Permits, Etc. To its knowledge, On-Line has all
governmental licenses, permits, authorizations and approvals necessary for the
conduct of its business as currently conducted ("Licenses and Permits"). The
information in the registration statement concerning On-Line includes a list of
all Licenses and Permits. All Licenses and Permits are in full force and effect,
and no proceedings for the suspension or cancellation of any thereof is pending
or threatened.
4.17 Employee Agreements. (a) For purposes of this Agreement, the following
definitions apply:
(1) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any regulations promulgated thereunder.
(2) "Multi-employer Plan" means a plan, as defined in ERISA Section
3(37), to which On-Line contributes or is required to contribute.
(3) "Employee Plan" means any pension, retirement, profit sharing,
deferred compensation, vacation, bonus, incentive, medical, vision, dental,
disability, life insurance or any other employee benefit plan as defined in
Section 3(3) of ERISA other than a Multi-employer Plan to which On-Line
contributes, sponsors, maintains or otherwise is bound to with regard to any
benefits on behalf of the employees of On-Line.
(4) "Employee Pension Plan" means any Employee Plan for the provision
of retirement income to employees or which results in the deferral of income by
employees extending to the termination of covered employment or beyond as
defined in Section 3(2) of ERISA.
(5) "Employee Welfare Plan" means any Employee Plan other than an
Employee Pension Plan.
(6) "Compensation Arrangement" means any plan or compensation
arrangement other than an Employee Plan, whether written or unwritten, which
provides to employees of On-Line, former employees, officers, directors or
shareholders of On-Line any compensation or other benefits, whether deferred or
not, in excess of base salary or wages, including, but not limited to, any bonus
or incentive plan, stock rights plan, deferred compensation arrangement, life
insurance, stock purchase plan, severance pay plan and any other employee fringe
benefit plan.
(b) The information in the registration statement concerning On-Line lists,
all (1) employment agreements and collective bargaining agreements to which
On-Line is a party; (2) Compensation Arrangements of On-Line; (3) Employee
Welfare Plans; (4) Employee Pension Plans; and (5) consulting agreements under
which On-Line has or may have any monetary obligations to employees or
consultants of On-Line or their beneficiaries or legal representatives or under
which any such persons may have any rights. On-Line has previously made
available to NetConnect Systems true and complete copies of all of the foregoing
employment contracts, collective bargaining agreements, Employee Plans and
Compensation Arrangements, including descriptions of any unwritten contracts,
agreements, Compensation Arrangements or Employee Plans, as amended to date. In
addition, with respect to any Employee Plan which continues after the Closing
Date, On-Line has previously delivered or made available to NetConnect Systems
(1) any related trust agreements, master trust agreements, annuity contracts or
insurance contracts; (2) certified copies of all Board of Directors' resolutions
adopting such plans and trust documents and amendments thereto; (3) current
investment management agreements; (4) custodial agreements; (5) fiduciary
liability insurance policies; (6) indemnification agreements; (7) the most
recent determination letter (and underlying application thereof and
correspondence and supplemental material related thereto) issued by the Internal
Revenue Service with respect to the qualification of each Employee Plan under
the provisions of Section 401(a) of the Code; (8) copies of all "advisory
opinion letters," "private letter rulings," "no action letters," and any similar
correspondence (and the underlying applications therefore and correspondence and
supplemental material related thereto) that was issued by any governmental or
quasigovernmental agency with respect to the last plan year; (9) Annual Reports
(Form 5500 Series) and Schedules A and B thereto for the last plan year; (10)
all actuarial reports prepared for the last plan year; (11) all certified
Financial Statements for the last plan year; and (12) all current Summary Plan
Descriptions, Summaries of Material Modifications and Summary Annual Reports.
All documents delivered by On-Line to NetConnect Systems as photocopies
faithfully reproduce the originals thereof, such originals are authentic and
were, to the extent execution was required, duly executed.
(c) Except as otherwise disclosed in the information in the registration
statement concerning On-Line:
(1) It is not a party to and has, in effect or to become effective
after the date of this Agreement, any bonus, cash or deferred compensation,
severance, medical, health or hospitalization, pension, profit sharing or
thrift, retirement, stock option, employee stock ownership, life or group
insurance, death benefit, welfare, incentive, vacation, sick leave, cafeteria,
so-called "golden parachute" payment, disability or trust agreement or
arrangement.
4.18 Brokers. On-Line has not made any agreement or taken any action with
any person or taken any action which would cause any person to be entitled to
any agent's, broker's or finder's fee or commission in connection with the
transactions contemplated by this Agreement.
4.19 Business Locations. On-Line does not nor does it own or lease any real
or personal property in any state except as set forth on the information in the
registration statement concerning On-Line. On-Line does not have a place of
business (including, without limitation, On-Line's executive offices or place
where On-Line's books and records are kept) except as otherwise set forth on the
information in the registration statement concerning On-Line.
4.20 Intellectual Property. The information in the registration statement
concerning On-Line lists all of the Intellectual Property (as hereinafter
defined) used by On-Line which constitutes a material patent, trade name,
trademark, service xxxx or application for any of the foregoing. "Intellectual
Property" means all of On-Line's right, title and interest in and to all
patents, trade names, assumed names, trademarks, service marks, and proprietary
names, copyrights (including any registration and pending applications for any
such registration for any of them), together with all the goodwill relating
thereto and all other intellectual property of On-Line. Other than as disclosed
in the information in the registration statement concerning On-Line, On-Line
does not have any licenses granted by or to it or other agreements to which it
is a party, relating in whole or in part to any Intellectual Property, whether
owned by On-Line or otherwise. All of the patents, trademark registrations and
copyrights listed in the information in the registration statement concerning
On-Line that are owned by On-Line are valid and in full force and effect. To the
knowledge of On-Line, it is not infringing upon, or otherwise violating, the
rights of any third party with respect to any Intellectual Property. No
proceedings have been instituted against or claims received by On-Line, nor to
its knowledge are any proceedings threatened alleging any such violation, nor
does On-Line know of any valid basis for any such proceeding or claim. To the
knowledge of On-Line, there is no infringement or other adverse claims against
any of the Intellectual Property owned or used by On-Line. To the knowledge of
On-Line, its use of software does not violate or otherwise infringe the rights
of any third party.
4.21 Warranties. The information in the registration statement concerning
On-Line sets forth a true and complete list of the forms of all express
warranties and guaranties made by On-Line to third parties with respect to any
services rendered by On-Line.
4.22 Suppliers. Except as set forth in the information in the registration
statement concerning On-Line, On-Line knows and has no reason to believe that,
either as a result of the transactions contemplated hereby or for any other
reason (exclusive of expiration of a contract upon the passage of time), any
present material supplier of On-Line will not continue to conduct business with
On-Line after the Closing Date in substantially the same manner as it has
conducted business prior thereto.
4.23 Accounts Receivable. The accounts receivable reflected on the balance
sheets included in the Financial Statements, or thereafter acquired by On-Line,
consists, in the aggregate in all material respects, of items which are
collectible in the ordinary and usual course of business.
4.24 Governmental Approvals. To its knowledge, other than as set forth
herein, no authorization, license, permit, franchise, approval, order or consent
of, and no registration, declaration or filing by On-Line with, any governmental
authority, federal, state or local, is required in connection with On-Line's
execution, delivery and performance of this Agreement.
4.25 No Omissions or Untrue Statements. None of the information relating to
On-Line supplied or to be supplied in writing by it specifically for inclusion
in the Registration Statement, at the respective times that the Registration
Statement becomes effective (or any registration statement included therein),
the Proxy Statement is first mailed to NetConnect System's shareholders and the
meeting of NetConnect System's shareholders takes place, as the case may be,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a 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. NetConnect Systems shall give notice to On-Line
in advance of the dates of such effectiveness, mailing and meeting sufficient to
permit On-Line to fulfill its obligations under the second sentence of this
Section.
4.26 information in the registration statement concerning On-Line Complete.
On-Line shall promptly supplement the information in the registration statement
concerning On-Line if events occur prior to the Closing Date that would have
been required to be disclosed had they existed at the time of executing this
Agreement. The information in the registration statement concerning On-Line, as
supplemented prior to the Closing Date, will contain a true, correct and
complete list and description of all items required to be set forth therein. The
information in the registration statement concerning On-Line, as supplemented
prior to the Closing Date, is expressly incorporated herein by reference.
Notwithstanding the foregoing, any such supplement to the information in the
registration statement concerning On-Line following the date hereof shall not in
any way affect NetConnect System's right not to consummate the transactions
contemplated hereby as set forth in Section 8.2 hereof.
V. REPRESENTATIONS AND WARRANTIES OF NetConnect Systems
NetConnect Systems represents and warrants to On-Line as follows, with the
knowledge and understanding that On-Line is relying materially on such
representations and warranties:
5.1 Organization and Standing of NetConnect Systems. NetConnect Systems is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Florida, and has the corporate power to carry on its
business as now conducted and to own its assets and it not required to qualify
to transact business as a foreign corporation in any state or other
jurisdiction. The copies of the Articles of Incorporation and Bylaws of
NetConnect Systems, delivered to On-Line, are true and complete copies of those
documents as now in effect. NetConnect Systems does not own any capital stock in
any other corporation, business trust or similar entity, and is not engaged in a
partnership, joint venture or similar arrangement with any person or entity. The
minute books of NetConnect Systems contain accurate records of all meetings of
its incorporator, shareholders and Board of Directors since its date of
incorporation.
5.2 NetConnect System's Authority. NetConnect System's Board of Directors
has approved and adopted this Agreement and the Merger and has resolved to
recommend approval and adoption of this Agreement and the Merger by NetConnect
System's shareholders. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by NetConnect
Systems in accordance herewith (and assuming due execution and delivery by the
other parties hereto), the valid and binding obligations of NetConnect Systems,
enforceable in accordance with their respective terms, subject to general
principles of equity and bankruptcy or other laws relating to or affecting the
rights of creditors generally.
5.4 No Breaches. To its knowledge, the making and performance of this
Agreement (including, without limitation, the issuance of the NetConnect Systems
Stock) by NetConnect Systems will not (i) conflict with the Articles of
Incorporation or the Bylaws of NetConnect Systems; (ii) violate any order, writ,
injunction, or decree applicable to NetConnect Systems; or (iii) result in any
breach or termination of, or constitute a default under, or constitute an event
which, with notice or lapse of time, or both, would become a default under, or
result in the creation of any encumbrance upon any asset of NetConnect Systems
under, or create any rights of termination, cancellation or acceleration in any
person under, any agreement, arrangement or commitment, or violate any
provisions of any laws, ordinances, rules or regulations or any order, writ,
injunction or decree to which NetConnect Systems is a party or by which
NetConnect Systems or any of its assets may be bound.
5.5 Capitalization. The NetConnect Systems Stock consists of 50,000,000
shares of common stock, no par value per share, of which 125,000 shares are
issued and outstanding and 20,000,000 shares of no par preferred stock, of which
none are outstanding. All of the outstanding NetConnect Systems Stock is duly
authorized, validly issued, fully paid and nonassessable, and was not issued in
violation of the preemptive rights of any person. The NetConnect Systems Stock
to be issued upon effectiveness of the Merger, when issued in accordance with
the terms of this Agreement shall be duly authorized, validly issued, fully paid
and nonassessable. Other than as stated in this Section 5.5, there are no
outstanding subscriptions, options, warrants, calls or rights of any kind issued
or granted by, or binding upon, NetConnect Systems, to purchase or otherwise
acquire any shares of capital stock of NetConnect Systems, or other equity
securities or equity interests of NetConnect Systems or any debt securities of
NetConnect Systems. There are no outstanding securities convertible or
exchangeable, actually or contingently, into shares of NetConnect Systems Stock
or other stock of NetConnect Systems.
5.6 Business. NetConnect Systems, since its formation, has engaged in no
business other than to seek to serve as a vehicle for the acquisition of an
operating business, and, except for this Agreement, is not a party to any
contract or agreement for the acquisition of an operating business.
5.7 Governmental Approval; Consents. To its knowledge, except for the
reports required to be filed in the future by NetConnect Systems, as a reporting
company, under the Exchange Act, and under the Securities Act with respect to
the shares of NetConnect Systems Stock issuable upon exercise of the NetConnect
Systems Warrants, the filing of the Registration Statement under the Securities
Act, the Proxy Statement under the Exchange Act for the purpose of seeking
stockholder approval of the Merger referred to in Section 2.1 and the issuance
of the NetConnect Systems Stock pursuant to the Merger and the filing of the S-4
Registration Statement (or other form of registration statement as agreed by the
parties), no authorization, license, permit, franchise, approval, order or
consent of, and no registration, declaration or filing by NetConnect Systems
with, any governmental authority, federal, state or local, is required in
connection with NetConnect System's execution, delivery and performance of this
Agreement. No consents of any other parties are required to be received by or on
the part of NetConnect Systems to enable NetConnect Systems to enter into and
carry out this Agreement.
5.8 Financial Statements. To its knowledge, the financial statements of
NetConnect Systems previously furnished to On-Line (collectively, the
"NetConnect Systems Financial Statements") present fairly, in all material
respects, the financial position of NetConnect Systems as of the respective
dates and the results of its operations for the periods covered in accordance
with GAAP. Without limiting the generality of the foregoing, (i) except as set
forth in the NetConnect Systems Disclosure Schedule, there is no basis for any
assertion against NetConnect Systems as of the date of said balance sheets of
any material debt, liability or obligation of any nature not fully reflected or
reserved against in such balance sheets or in the notes thereto; and (ii) there
are no assets of NetConnect Systems, the value of which (in the reasonable
judgment of NetConnect Systems) is materially overstated in said balance sheets.
Except as disclosed therein, NetConnect Systems has no known material contingent
liabilities (including liabilities for taxes), unusual forward or long-term
commitments or unrealized or anticipated losses from unfavorable commitments.
NetConnect Systems is not a party to any contract or agreement for the forward
purchase or sale of any foreign currency.
5.9 Adverse Developments. Except as expressly provided or set forth in, or
required by, this Agreement, or as set forth in the NetConnect Systems Financial
Statements, since the last date of its financial information in the registration
statement, there have been no materially adverse changes in the assets,
liabilities, properties, operations or financial condition of NetConnect
Systems, and no event has occurred other than in the ordinary and usual course
of business or as set forth in NetConnect System's Registration statement or in
the NetConnect Systems Financial Statements which could be reasonably expected
to have a materially adverse effect upon NetConnect Systems, and NetConnect
Systems does not know of any development or threatened development of a nature
that will, or which could be reasonably expected to, have a materially adverse
effect upon NetConnect System's operations or future prospects.
5.10 Contracts Listed. All material contracts, agreements, licenses,
leases, easements, permits, rights of way, commitments, and understandings,
written or oral, connected with or relating in any respect to the present
operations of NetConnect Systems are, with the exception of this Agreement,
described in NetConnect System's Registration statement.
5.11; No Default. All of the contracts, agreements, leases, commitments and
understandings, written or oral, and any other contract, agreement, lease,
commitment or understanding, written or oral, binding upon NetConnect Systems
referred to in section 5.10 above, are listed in the NetConnect Systems
Disclosure Schedule (the "NetConnect Systems Contracts"). To the knowledge of
NetConnect Systems, the NetConnect Systems Contracts are valid, binding and
enforceable by NetConnect Systems against the other parties thereto in
accordance with their terms. Neither NetConnect Systems nor, to the knowledge of
NetConnect Systems, any of the other parties thereto is in default or breach of
any material provision of the NetConnect Systems Contracts. NetConnect Systems
has furnished On-Line with a true and complete copy of each NetConnect Systems
Contract, as amended.
5.12 Taxes. NetConnect Systems has duly filed all Returns required by any
law or regulation to be filed by it except for extensions duly obtained. All
such Returns were, when filed, and to the best of NetConnect System's knowledge
are, accurate and complete in all material respects and were prepared in
conformity with applicable laws and regulations. NetConnect Systems has paid or
will pay in full or has adequately reserved against all Taxes otherwise assessed
against it through the Closing Date, and the assessment of any material amount
of additional Taxes in excess of those paid and reported is not reasonably
expected.
NetConnect Systems is not a party to any pending action or proceeding by
any governmental authority for the assessment of any Tax, and no claim for
assessment or collection of any Tax has been asserted against NetConnect Systems
that has not been paid. There are no Tax liens upon the assets of NetConnect
Systems (other than the lien of personal property taxes not yet due and
payable). There is no valid basis, to the best of NetConnect System's knowledge,
except as set forth in the NetConnect Systems Disclosure Schedule, for any
assessment, deficiency, notice, 30-day letter or similar intention to assess any
Tax to be issued to NetConnect Systems by any governmental authority.
5.13 Litigation. Except as disclosed in the NetConnect Systems Disclosure
Schedule, there is no claim, action, proceeding or investigation pending or, to
NetConnect System's knowledge, threatened against or affecting NetConnect
Systems before or by any court, arbitrator or governmental agency or authority
which, in the reasonable judgment of NetConnect Systems, could have a materially
adverse effect on NetConnect Systems. There are no decrees, injunctions or
orders of any court, governmental department, agency or arbitration outstanding
against NetConnect Systems.
5.14 Compliance with Laws and Regulations. To its knowledge, NetConnect
Systems is in compliance, in all material respects, with all laws, rules,
regulations, orders and requirements (federal, state and local) applicable to it
in all jurisdictions in which the business of NetConnect Systems is currently
conducted or to which NetConnect Systems is currently subject, which may have a
material impact on NetConnect Systems, including, without limitation, all
applicable civil rights and equal opportunity employment laws and regulations,
all state and federal antitrust and fair trade practice laws and the Federal
Occupational Health and Safety Act. NetConnect Systems does not know of any
assertion by any party that NetConnect Systems is in violation of any such laws,
rules, regulations, orders, restrictions or requirements with respect to its
current operations, and no notice in that regard has been received by NetConnect
Systems. To NetConnect System's knowledge, there is not presently pending any
proceeding, hearing or investigation with respect to the adoption of amendments
or modifications of existing laws, rules, regulations, orders, restrictions or
requirements which, if adopted, would materially adversely affect the current
operations of NetConnect Systems.
5.15 Compliance with Laws. (a) To its knowledge, the business operations,
property and assets of NetConnect Systems (and to the knowledge of NetConnect
Systems, the business of any sub-tenant or license which is occupying or has
occupied any space on any premises of NetConnect Systems and the activities of
which could result in any material adverse liability to NetConnect Systems) (i)
conform with and are in compliance in all material respects with all, and are
not in material violation of any applicable federal, state and local laws, rules
and regulations, including, but not limited to, CERCLA and RCRA, as well as any
other laws, rules or regulations relating to tax, product liability, controlled
substances, product registration, environmental protection, hazardous or toxic
waste, employment, or occupational safety matters; and (ii) have been conducted
and operated in a manner such that, to NetConnect System's knowledge, NetConnect
Systems has no foreseeable potential liabilities for environmental clean-up
under CERCLA, RCRA or under any law, rule, regulation or common or civil law
doctrine.
(b) To its knowledge, no predecessor-in-title to any real property now or
previously owned or operated by NetConnect Systems, nor any predecessor operator
thereof conducted its business or operated such property in violation of CERCLA
and RCRA or any other applicable, federal, state and local laws, rules and
regulations relating to environmental protection or hazardous or toxic waste
matters.
(c) Except as disclosed in the NetConnect Systems Disclosure Schedule, no
suit, action, claim, proceeding nor investigation review or inquiry by any
Government Entity (as defined in Section 4.9) concerning any such possible
violations by NetConnect Systems is pending or, to NetConnect System's
knowledge, threatened, including, but not limited to, matters relating to
diagnostic tests and products and product liability, environmental protection,
hazardous or toxic waste, controlled substances, employment, occupational safety
or tax matters. NetConnect Systems does not know of any reasonable basis or
ground for any such suit, claim, investigation, inquiry or proceeding.
5.16 Governmental Licenses, Permits, Etc. To its knowledge, NetConnect
Systems has all governmental licenses, permits, authorizations and approvals
necessary for the conduct of its business as currently conducted. All such
licenses, permits, authorizations and approvals are in full force and effect,
and no proceedings for the suspension or cancellation of any thereof is pending
or threatened.
5.17 Brokers. NetConnect Systems has not made any agreement or taken any action
with any person or taken any action which would cause any person to be entitled
to any agent's, broker's or finder's fee or commission in connection with the
transactions contemplated by this Agreement.
5.18 Employee Plans. Except as listed in NetConnect System's Registration
statement, NetConnect Systems has no employees, consultants or agents, and
NetConnect Systems has no Employee Plans or Compensation Arrangements.
VI. STOCKHOLDER APPROVAL; CLOSING DELIVERIES
6.1 Stockholder Approval. On-Line shall submit the Merger and this
Agreement to its shareholders for approval and adoption at the Meeting or by
written consent as soon as practicable following the date the SEC declares the
registration statement effective in accordance with Section 3.7 hereof. Subject
to the Merger and this Agreement receiving all approvals of On-Line and On-Line
shareholders and regulatory approvals and the absence of 99+% or more of the
non-affiliated shareholders of On-Line (i) voting against the Merger; and (ii)
requesting redemption of their shares of On-Line Stock in the manner to be set
forth in the Information Statement, and subject to the other provisions of this
Agreement, the parties shall hold a closing (the "Closing") no later than the
fifth business day (or such later date as the parties hereto may agree)
following the later of (a) the date of the Meeting of Shareholders of On-Line to
consider and vote upon the Merger and this Agreement or the receipt of the
requisite percentage of written consents or (b) the business day on which the
last of the conditions set forth in Articles VII and VIII hereof is fulfilled or
waived (such later date, the "Closing Date"), at 10:00 A.M. at the offices of
XXXXXXXX LAW GROUP, P.A., or at such other time and place as the parties may
agree upon.
6.2 Closing Deliveries of On-Line. At the Closing, On-Line shall deliver,
or cause to be delivered, to NetConnect Systems:
(a) A certificate dated as of the Closing Date, to the effect that the
representations and warranties of On-Line contained in this Agreement are true
and correct in all material respects at and as of the Closing Date and that
On-Line has complied with or performed in all material respects all terms,
covenants and conditions to be complied with or performed by On-Line on or prior
to the Closing Date;
(b) An opinion of On-Line's counsel, *, in form and substance
reasonably satisfactory to NetConnect Systems, in a form to be mutually agreed
to prior to the Closing;
(c) a certificate, dated as of the Closing Date, certifying as to the
Articles of Incorporation and Bylaws of On-Line, the incumbency and signatures
of the officers of each of On-Line and copies of the directors' and
shareholders' resolutions of On-Line approving and authorizing the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby;
(d) Such other documents, at the Closing or subsequently, as may be
reasonably requested by NetConnect Systems as necessary for the implementation
and consummation of this Agreement and the transactions contemplated hereby.
6.3 Closing Deliveries of NetConnect Systems. At the Closing, NetConnect
Systems shall deliver to On-Line:
(a) A certificate of NetConnect Systems, dated as of the Closing Date,
to the effect that the representations and warranties of NetConnect Systems
contained in this Agreement are true and correct in all material respects and
that NetConnect Systems has complied with or performed in all material respects
all terms, covenants and conditions to be complied with or performed by
NetConnect Systems on or prior to the Closing Date;
(b) A certificate, dated as of the Closing Date, executed by the
Secretary of NetConnect Systems, certifying the Articles of Incorporation,
Bylaws, incumbency and signatures of officers of NetConnect Systems and copies
of NetConnect System's directors' and shareholders' resolutions approving and
authorizing the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby;
(c) An opinion of NetConnect System's counsel , XXXXXXXX LAW GROUP,
P.A., in form and substance reasonably satisfactory to On-Line, in a form to be
mutually agreed to prior to the Closing;
(d) The written resignations of all officers, and all directors of
NetConnect Systems.
(e) Certificates representing the NetConnect Systems Stock issuable
upon consummation of the Merger;
(f) The books and records of NetConnect Systems; and
(h) Documentation satisfactory to On-Line evidencing the fact that the
signatories on all relevant bank accounts of NetConnect Systems have been
changed to signatories designated by On-Line.
VII. CONDITIONS TO OBLIGATIONS OF On-Line
The obligation of On-Line to consummate the Closing is subject to the
following conditions, any of which may be waived by On-Line in its sole
discretion:
7.1 Compliance by NetConnect Systems. NetConnect Systems shall have
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by
NetConnect Systems prior to or on the Closing Date.
7.2 Accuracy of NetConnect System's Representations. NetConnect System's
representations and warranties contained in this Agreement (including the
NetConnect Systems Disclosure Schedule) or any schedule, certificate or other
instrument delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true and correct in all material
respects at and as of the Closing Date (except for such changes permitted by
this Agreement) and shall be deemed to be made again as of the Closing Date.
7.3 Material Adverse Change. No material adverse change shall have occurred
subsequent to the date of the last financial information in the registration
statement in the financial position, results of operations, assets, liabilities
or prospects of NetConnect Systems, nor shall any event or circumstance have
occurred which would result in a material adverse change in the financial
position, results of operations, assets, liabilities or prospects of NetConnect
Systems within the reasonable discretion of On-Line.
7.4 Documents. All documents and instruments delivered by NetConnect
Systems to On-Line at the Closing shall be in form and substance reasonably
satisfactory to On-Line and its counsel.
7.5 Capitalization. At the Closing Date, NetConnect Systems shall have not
more than less than 1% [125,000 shares] shares of NetConnect Systems Stock
issued and outstanding.
7.6 Effectiveness of Registration Statement; No Stop Order. The
Registration Statement shall be effective under the Securities Act and shall not
be subject to a stop order or any threatened stop order.
7.7 Reorganization. The Merger shall qualify as a tax-free reorganization
under Section 368 of the Code.
7.8 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or, to On-Line's knowledge, be threatened.
7.9 Dissenters' Rights. It is a condition to On-Line's obligations to
consummate the merger that the holders of no more than 10% of the outstanding
shares of On-Line's common stock are entitled to dissenters' rights. If demands
for payment are made with respect to more than 10%, of the outstanding shares of
On-Line's common stock, and, as a consequence more than 10% of the shareholders
of On-Line's become entitled to exercise dissenters' rights, then On-Line will
not be obligated to consummate the merger.
VIII. CONDITIONS TO NetConnect System's OBLIGATIONS
NetConnect System's obligation to consummate the closing is subject to the
following conditions, any of which may be waived by NetConnect Systems in its
sole discretion:
8.1 Compliance by On-Line. On-Line shall have performed and complied in all
material respects with all agreements and conditions required by this Agreement
to be performed or complied with prior to or on the Closing Date.
8.2 Accuracy of On-Line's Representations. On-Line's representations and
warranties contained in this Agreement (including the exhibits hereto and the
NetConnect Systems Disclosure Schedule) or any schedule, certificate or other
instrument delivered pursuant to the provisions hereof or in connection with the
transactions contemplated hereby shall be true and correct in all material
respects at and as of the Closing Date (except for such changes permitted by
this Agreement) and shall be deemed to be made again as of the Closing Date.
8.3 Material Adverse Change. No material adverse change shall have occurred
subsequent to the last date of the financial statement of On-Line in the
registration statement in the financial position, results of operations, assets,
liabilities or prospects of On-Line taken as a whole, nor shall any event or
circumstance have occurred which would result in a material adverse change in
the business, assets or condition, financial or otherwise, of On-Line taken as a
whole, within reasonable discretion of NetConnect Systems.
8.4 Litigation. No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall be
pending or, to NetConnect System's knowledge, be threatened.
8.5 Reorganization. The Merger shall qualify as a tax-free reorganization
under Section 368 of the Code and there are no material adverse tax consequences
to the Merger.
8.6 Documents. All documents and instruments delivered by On-Line to
NetConnect Systems at the Closing shall be in form and substance reasonably
satisfactory to NetConnect Systems and its counsel.
IX. INDEMNIFICATION
9.1 By On-Line. Subject to Section 9.4, On-Line shall indemnify, defend and
hold NetConnect Systems, its directors, officers, shareholders, attorneys,
agents and affiliates, harmless from and against any and all losses, costs,
liabilities, damages, and expenses (including legal and other expenses incident
thereto) of every kind, nature and description, including any undisclosed
liabilities (collectively, "Losses") that result from or arise out of (i) the
breach of any representation or warranty of On-Line set forth in this Agreement
or in any certificate delivered to NetConnect Systems pursuant hereto; or (ii)
the breach of any of the covenants of On-Line contained in or arising out of
this Agreement or the transactions contemplated hereby.
9.2 By NetConnect Systems. Subject to Section 9.4, NetConnect Systems shall
indemnify, defend, and hold On-Line its directors, officers, shareholders,
attorneys, agents and affiliates harmless from and against any and all Losses
that arise out of (i) the breach of any representation or warranty of NetConnect
Systems set forth in this Agreement or in any certificate delivered to On-Line
pursuant hereto; or (ii) the breach of any of the covenants of NetConnect
Systems contained in or arising out of this Agreement or the transactions
contemplated hereby.
9.3 Claims Procedure. Should any claim covered by Sections 9.1 or 9.2 be
asserted against a party entitled to indemnification under this Article (the
"Indemnitee"), the Indemnitee shall promptly notify the party obligated to make
indemnification (the "Indemnitor"); provided, however, that any delay or failure
in notifying the Indemnitor shall not affect the Indemnitor's liability under
this Article if such delay or failure was not prejudicial to the Indemnitor. The
Indemnitor upon receipt of such notice shall assume the defense thereof with
counsel reasonably satisfactory to the Indemnitee and the Indemnitee shall
extend reasonable cooperation to the Indemnitor in connection with such defense.
No settlement of any such claim shall be made without the consent of the
Indemnitor and Indemnitee, such consent not to be unreasonably withheld or
delayed, nor shall any such settlement be made by the Indemnitor which does not
provide for the absolute, complete and unconditional release of the Indemnitee
from such claim. In the event that the Indemnitor shall fail, within a
reasonable time, to defend a claim, the Indemnitee shall have the right to
assume the defense thereof without prejudice to its rights to indemnification
hereunder.
9.4 Limitations on Liability. Neither On-Line nor NetConnect Systems shall
be liable hereunder as a result of any misrepresentation or breach of such
party's representations, warranties or covenants contained in this Agreement
unless and until the Losses incurred by each, as the case may be, as a result of
such misrepresentations or breaches under this Agreement shall exceed, in the
aggregate, $200,000 (in which case the party liable therefore shall be liable
for the entire amount of such claims, including the first $200,000).
X. TERMINATION
10.1 Termination Prior to Closing. (a) If the Closing has not occurred by
any date as mutually agreed upon by the parties (the "Termination Date"), any of
the parties hereto may terminate this Agreement at any time thereafter by giving
written notice of termination to the other parties; provided, however, that no
party may terminate this Agreement if such party has willfully or materially
breached any of the terms and conditions hereof.
(b) Prior to the Termination Date either party to this Agreement may
terminate this Agreement following the insolvency or bankruptcy of the other, or
if any one or more of the conditions to Closing set forth in Article VI, Article
VII or Article VIII shall become incapable of fulfillment and shall not have
been waived by the party for whose benefit the condition was established, then
either party may terminate this Agreement.
10.2 Consequences of Termination. Upon termination of this Agreement
pursuant to this Article X or any other express right of termination provided
elsewhere in this Agreement, the parties shall be relieved of any further
obligation to the others except as follows: As NetConnect Systems goes through
the due diligence and filing process, facts and circumstances not known to it
when it started the process leading to closing the merger may come to light that
make proceeding with the transaction inadvisable in the opinion of NetConnect
Systems. If this occurs or if On-Line cancels the agreement after paying the
first installment, all fees previously received by NetConnect Systems will be
retained. No termination of this Agreement, however, whether pursuant to this
Article X hereof or under any other express right of termination provided
elsewhere in this Agreement, shall operate to release any party from any
liability to any other party incurred before the date of such termination or
from any liability resulting from any willful misrepresentation made in
connection with this Agreement or willful breach hereof.
XI. ADDITIONAL COVENANTS
11.1 Mutual Cooperation. The parties hereto will cooperate with each other,
and will use all reasonable efforts to cause the fulfillment of the conditions
to the parties' obligations hereunder and to obtain as promptly as possible all
consents, authorizations, orders or approvals from each and every third party,
whether private or governmental, required in connection with the transactions
contemplated by this Agreement.
11.2 Changes in Representations and Warranties of On-Line. Between the date
of this Agreement and the Closing Date, On-Line shall not, directly or
indirectly, except as contemplated in the information in the registration
statement concerning On-Line, enter into any transaction, take any action, or by
inaction permit an event to occur, which would result in any of the
representations and warranties of On-Line herein contained not being true and
correct at and as of (a) the time immediately following the occurrence of such
transaction or event or (b) the Closing Date. On-Line shall promptly give
written notice to NetConnect Systems upon becoming aware of (i) any fact which,
if known on the date hereof, would have been required to be set forth or
disclosed pursuant to this Agreement and (ii) any impending or threatened breach
in any material respect of any of the representations and warranties of On-Line
contained in this Agreement and with respect to the latter shall use all
reasonable efforts to remedy same.
11.3 Changes in Representations and Warranties of NetConnect Systems.
Between the date of this Agreement and the Closing Date, NetConnect Systems
shall not, directly or indirectly, enter into any transaction, take any action,
or by inaction permit an event to occur, which would result in any of the
representations and warranties of NetConnect Systems herein contained not being
true and correct at and as of (a) the time immediately following the occurrence
of such transaction or event or (b) the Closing Date. NetConnect Systems shall
promptly give written notice to On-Line upon becoming aware of (i) any fact
which, if known on the date hereof, would have been required to be set forth or
disclosed pursuant to this Agreement and (ii) any impending or threatened breach
in any material respect of any of the representations and warranties of
NetConnect Systems contained in this Agreement and with respect to the latter
shall use all reasonable efforts to remedy same.
XII. MISCELLANEOUS
12.1 Expenses. NetConnect Systems will pay for its counsel and financial
consultant and all their costs. On-Line will pay for your accountants and
attorneys and all their costs. On-Line will be responsible for paying the SEC
filing fee, and state filing fees and all costs of converting your documents to
they can be filed with the SEC.
.
12.2 Survival of Representations, Warranties and Covenants. All statements
contained in this Agreement or in any certificate delivered by or on behalf of
On-Line or NetConnect Systems pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed representations, warranties and
covenants by On-Line or NetConnect Systems, as the case may be, hereunder. All
representations, warranties and covenants made by On-Line and by NetConnect
Systems in this Agreement, or pursuant hereto, shall survive through the Closing
Date.
12.3 Nondisclosure. NetConnect Systems will not at any time after the date
of this Agreement, without On-Line' consent, divulge, furnish to or make
accessible to anyone (other than to its representatives as part of its due
diligence or corporate investigation) any knowledge or information with respect
to confidential or secret processes, inventions, discoveries, improvements,
formulae, plans, material, devices or ideas or know-how, whether patentable or
not, with respect to any confidential or secret aspects (including, without
limitation, customers or suppliers) ("Confidential Information") of On-Line.
On-Line will not at any time after the date of this Agreement, without
NetConnect System's consent (except as may be required by law), use, divulge,
furnish to or make accessible to anyone any Confidential Information (other than
to its representatives as part of its due diligence or corporate investigation)
with respect to NetConnect Systems. The undertakings set forth in the preceding
two paragraphs of this Section 12.3 shall lapse if the Closing takes place as to
NetConnect Systems and On-Line, but shall not lapse as to the officers and
directors of NetConnect Systems, individually.
Any information, which (i) at or prior to the time of disclosure by either
of On-Line or NetConnect Systems was generally available to the public through
no breach of this covenant, (ii) was available to the public on a
non-confidential basis prior to its disclosure by either of On-Line or
NetConnect Systems or (iii) was made available to the public from a third party,
provided that such third party did not obtain or disseminate such information in
breach of any legal obligation to On-Line or NetConnect Systems, shall not be
deemed Confidential Information for purposes hereof, and the undertakings in
this covenant with respect to Confidential Information shall not apply thereto.
12.4 Succession and Assignments; Third Party Beneficiaries. This Agreement
may not be assigned (either voluntarily or involuntarily) by any party hereto
without the express written consent of the other party. Any attempted assignment
in violation of this Section shall be void and ineffective for all purposes. In
the event of an assignment permitted by this Section, this Agreement shall be
binding upon the heirs, successors and assigns of the parties hereto. Except as
expressly set forth in this Section, there shall be no third party beneficiaries
of this Agreement.
12.5 Notices. All notices, requests, demands or other communications with
respect to this Agreement shall be in writing and shall be (i) sent by facsimile
transmission, (ii) sent by the United States Postal Service, registered or
certified mail, return receipt requested, or (iii) personally delivered by a
nationally recognized express overnight courier service, charges prepaid, to the
addresses specified in writing by each party.
Any such notice shall, when sent in accordance with the preceding sentence,
be deemed to have been given and received on the earliest of (i) the day
delivered to such address or sent by facsimile transmission, (ii) the fifth
(5th) business day following the date deposited with the United States Postal
Service, or (iii) twenty-four (24) hours after shipment by such courier service.
12.6 Construction. This Agreement shall be construed and enforced in accordance
with the internal laws of the State of Florida without giving effect to the
principles of conflicts of law thereof, except to the extent that the Securities
Act or the Exchange Act applies to the Registration Statements and the Proxy
Statement.
12.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
12.8 No Implied Waiver; Remedies. No failure or delay on the part of the
parties hereto to exercise any right, power or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver, nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. All rights, powers and privileges granted herein shall be in addition
to other rights and remedies to which the parties may be entitled at law or in
equity.
12.9 Entire Agreement. This Agreement, including the Exhibits and Schedules
attached hereto, sets forth the entire understandings of the parties with
respect to the subject matter hereof, and it incorporates and merges any and all
previous communications, understandings, oral or written, as to the subject
matter hereof, and cannot be amended or changed except in writing, signed by the
parties.
12.10 Headings. The headings of the Sections of this Agreement, where
employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the parties.
12.11 Severability. To the extent that any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect.
12.12 Public Disclosure. From and after the date hereof through the Closing
Date, NetConnect Systems shall not issue a press release or any other public
announcement with respect to the transactions contemplated hereby without the
prior consent of On-Line, which consent shall not be unreasonably withheld or
delayed. It is understood by On-Line that NetConnect Systems is required under
the Exchange Act to make prompt disclosure of any material transaction.
THE PARTIES TO THIS AGREEMENT HAVE READ THIS AGREEMENT, HAVE HAD THE
OPPORTUNITY TO CONSULT WITH INDEPENDENT COUNSEL OF THEIR OWN CHOICE, AND
UNDERSTAND EACH OF THE PROVISIONS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
Net Connect Systems, Inc.
By:____________________________
Its:_____________________________
On-Line Connecting Systems, Inc.
By:____________________________
Its:____________________________
