EXHIBIT 2.3
PLAN AND AGREEMENT OF REORGANIZATION
THIS PLAN AND AGREEMENT OF REORGANIZATION ("AGREEMENT"), dated December
10, 1999, by and among Trimark Inc., d.b.a. Triad Marketing, a California
corporation ("TRIMARK"), Xxxx Xxxxxxx and Xxxxxxx Xxxxxx (individually a
"SHAREHOLDER" and collectively the "SHAREHOLDERS"), NHancement Technologies
Inc., a Delaware corporation ("NHANCEMENT"), and NHancement Acquisition
Corp., a California corporation and wholly-owned subsidiary of NHancement
("MERGERSUB").
PLAN OF REORGANIZATION
The reorganization (the "REORGANIZATION") will comprise, in general, the
merger of Trimark with and into MergerSub and the issuance by NHancement to
the Shareholders of shares of NHancement's authorized but unissued voting
common stock (the "COMMON STOCK") in exchange for the cancellation of their
shares of Trimark Common Stock, all upon and subject to the terms and
conditions of the agreement hereinafter set forth. The parties intend that
the Reorganization qualify as a tax-free reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "CODE").
The parties further intend for the Reorganization to qualify for accounting
treatment as a tax-free reorganization.
AGREEMENT
In order to consummate the Reorganization, and in consideration of the
representations and undertakings herein set forth, the parties agree as
follows:
1. THE MERGER. At the Effective Time (as defined in Section 1.1) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California Corporations Code (the "CCC"),
Trimark shall be merged with and into MergerSub, the separate existence of
Trimark shall cease and MergerSub shall continue as a surviving corporation
and as a wholly-owned subsidiary of NHancement, the name of which shall, on
the Effective Time, be changed to "Trimark Inc., dba Triad Marketing" (the
"MERGER"). MergerSub as the surviving corporation after the Merger is
sometimes referred to as the "SURVIVING CORPORATION." The Merger shall be
accomplished as follows:
1.1 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 9, the closing of the Merger (the "CLOSING") will take
place as promptly as practicable, but in no event later than five (5) days
following satisfaction of the conditions set forth in Section 8, at the
offices of Xxxxxxxxx Xxxxx Morosoli & Maser LLP, 000 Xxxx Xxxx Xxxx, Xxxxxx
Xxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000. At the Closing, the parties shall cause
the Merger to be consummated by filing a Certificate of Merger with the
California Secretary of State (the "CERTIFICATE OF MERGER") in accordance
with the
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relevant provisions of the CCC. The date and time the Merger becomes
effective in accordance with the provisions of the CCC is the "EFFECTIVE
TIME."
1.2 EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the CCC.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises
of Trimark and MergerSub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Trimark and MergerSub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.3 ARTICLES OF INCORPORATION; BYLAWS. Unless otherwise
determined by NHancement prior to the Effective Time, at the Effective Time,
the Articles of Incorporation and Bylaws of MergerSub shall be the Articles
of Incorporation and Bylaws of the Surviving Corporation.
1.4 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 MAXIMUM SHARES TO BE ISSUED. The maximum number of shares of
NHancement Common Stock to be issued in exchange for the cancellation of all
outstanding Trimark Capital Stock shall be Seven Hundred Fifty Thousand
(750,000) shares and warrants (in the form attached as Exhibit "A") to
purchase Two Hundred Fifty Thousand (250,000) shares of NHancement Common
Stock at a warrant price equal to the then current fair market value at
Closing (further subject to the Valuation Formula set forth in Section 4.2
below). Each share of Common Stock of Trimark (the "TRIMARK 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 Seven Hundred Fifty (750) shares, and Warrants to purchase on
additional Two Hundred Fifty (250) shares, of NHancement Common Stock upon
surrender of the Certificate representing such shares of Trimark Common Stock
in the manner provided in Section 1.7. From the date hereof until the
Effective Time, Trimark agrees not to issue any additional shares of its
Capital Stock (including any options, warrants, conversion privileges or
other rights, commitments or agreements of any nature to purchase any such
shares of Trimark Capital Stock). All of the shares of MergerSub owned by
NHancement immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and non-assessable share of
Common Stock of the Surviving Corporation. Each stock certificate of
MergerSub evidencing ownership of any shares shall continue to evidence
ownership of shares of capital stock of the Surviving Corporation. No
fraction of a share, or a Warrant to purchase a fractional share, of
NHancement Common Stock will be issued, but in lieu thereof, each holder of
shares of Trimark Capital Stock who would otherwise be entitled to a fraction
of a share of NHancement Common Stock (after aggregating all fractional
shares of NHancement Common Stock to be received by such holder) shall be
entitled to receive from NHancement in the 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 NHancement
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Common Stock for the five (5) consecutive trading days ending on the trading
day immediately prior to the Closing, as reported on the NASDAQ National
Market and, in the case of the Warrants, a Warrant rounded up to purchase the
nearest whole share.
1.6 DISSENTING SHARES. Prior to the execution and delivery of
this Agreement by the parties, all of the holders of Trimark Capital Stock
shall have irrevocably consented to and approved the Merger and no holders of
any shares of Trimark Capital Stock shall be entitled to appraisal or
dissenters' rights.
1.7 SURRENDER OF CERTIFICATES. Prior to the Effective Time,
NHancement shall designate its transfer agent to act as the exchange agent
(the "EXCHANGE AGENT") in the Merger. Promptly after the Effective Time,
NHancement shall make available to the Exchange Agent for exchange in
accordance with this Section 1.7, the aggregate number of shares, and
warrants to purchase shares, of NHancement Common Stock issuable pursuant to
Section 1.5 in exchange for all issued and outstanding shares of Trimark
Capital Stock. Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each holder of record of a certificate or
certificates (the "CERTIFICATES") which immediately prior to the Effective
Time represented outstanding shares of Trimark Capital Stock whose shares
were converted and to the right to receive shares of NHancement Common Stock
and Warrant pursuant to Section 1.5, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and the risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and shall have such other provisions
as NHancement may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of NHancement Common Stock and Warrants. Upon surrender
of a Certificate for cancellation to the Exchange Agent together with such
letter of transmittal duly completed and validly executed in accordance with
the instructions thereto, the holder of Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of NHancement Common Stock plus cash in lieu of fractional shares and
Warrants in accordance with Section 1.5, to which such holder is entitled
pursuant to Section 1.5, and the Certificate so surrendered shall forthwith
be canceled. Until so surrendered, each outstanding Certificate that, prior
to the Effective Time, represented shares of Trimark Capital Stock will be
deemed from and after the Effective Time, for all corporate purposes, to
evidence the ownership of the number of full shares of NHancement Common
Stock and Warrants into which such shares of Trimark Capital Stock shall and
been so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.5.
1.8 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the
parties hereto that the Merger shall (i) constitute a reorganization within
the meaning of Section 368 of the Code and (ii) qualify for accounting
treatment as a tax free reorganization.
1.9 FURTHER ACTION. If, at any time after the Effective Date, any
such further action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Surviving Corporation with full right, title
and possession to all assets, liabilities, properties, rights, privileges,
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powers and franchises of Trimark and MergerSub, the officers and Directors of
Trimark and MergerSub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and
necessary actions.
2. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS. Each of the
Shareholders, jointly and severally, represent and warrant to NHancement that
all of the statements made below in this Section 2 are true and correct in
all respects. These representations and warranties are subject to the
exceptions set forth on attached Schedule 2 (the "SCHEDULE OF EXCEPTIONS"),
specifically identifying the relevant Section hereof, which exceptions shall
be deemed to be representations and warranties as if made hereunder. The
phrase "to the best knowledge of Trimark" shall, when included in a
representation or warranty made by a Shareholder, means to the best knowledge
of such Shareholder.
2.1 ORGANIZATION AND STANDING. Trimark is a corporation duly
organized, validly existing and in good standing under the laws of the State
of California and has full power and authority to carry on its business as
now conducted and as proposed to be conducted. Trimark is not required to be
qualified as a foreign corporation in any jurisdiction; provided, however,
that Trimark need not be qualified in any jurisdiction in which a failure to
qualify would not have a material and adverse effect on its operations or
financial condition.
2.2 CAPITALIZATION. The authorized capital stock of Trimark
consists of one million (1,000,000) shares of Common Stock, of which one
thousand (1,000) shares are presently, and at the Effective Time will be,
issued and outstanding. All of Trimark's issued and outstanding shares are
owned beneficially and of record by the Shareholders in the amounts set forth
on attached Schedule 2.2. All outstanding shares of Trimark Common Stock are
duly authorized, validly issued, fully paid and non-assessable and are not
subject to preemptive rights created by statute, the Articles of
Incorporation or Bylaws of Trimark or any agreement to which Trimark or
either Shareholder is a party or by which it is bound. There are no options,
warrants, calls, rights, conversion privileges, commitments or agreements of
any character, written or oral, to which Trimark is party or by which it is
bound obligating Trimark to issue, deliver, sell, repurchase or redeem, or
caused to be issued, delivered, sold, repurchased or redeemed, any shares of
the capital stock of Trimark.
2.3 SUBSIDIARIES. Trimark has no subsidiaries or affiliated
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any corporation, association, joint venture, partnership
or other business entity.
2.4 CORPORATE AUTHORITY AND AUTHORIZATION. Trimark has all
requisite, corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of Trimark, its officers, directors and Shareholder necessary for the
authorization, execution, delivery and performance of this Agreement by
Trimark and the performance of all of Trimark's obligations hereunder has
been taken. As set forth in Section 1.6 above, all of the holders of Trimark
Capital Stock have consented to and approved the Merger and no holders of any
shares of Trimark Capital Stock are entitled to appraisal or dissenters'
rights. This
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Agreement constitutes a valid and binding obligation of Trimark and the
Shareholders, enforceable against Trimark and the Shareholders in accordance
with its terms, except as the indemnification provisions of Section 7.7
hereof may be limited by principles of public policy and subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
2.5 GOVERNMENTAL CONSENT. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on
the part of Trimark is required in connection with the valid execution and
delivery of this Agreement, or the consummation of any transaction
contemplated hereby.
2.6 INTELLECTUAL PROPERTY.
2.6.1 Trimark possesses and has good, valid and marketable
title, free and clear of all security interests, liens, claims, charges,
encumbrances or any other defects in title of any nature whatsoever to, or
has the valid, enforceable right to use (pursuant to written agreements, true
and correct copies of which are listed on Schedule 2.6 and have been
submitted to NHancement), all trademarks, trademark rights, trade names,
trade name rights, licenses, franchises, service marks, patents, patent
applications, copyrights, inventions, discoveries, improvements, processes,
trade secrets, confidential or proprietary information, formulae, proprietary
rights or data, shop rights, algorithms, technical data, ideas or know-how
(collectively the "INTELLECTUAL PROPERTY") necessary to conduct its business
as now being conducted or as proposed to be conducted, without conflict with
or infringement upon any valid rights of others and the lack of which could
adversely affect the operations or condition, financial or otherwise, of
Trimark. Trimark (i) owns or has the right to use (and to make, use, sell,
license and lease products incorporating or manufactured using), free and
clear of all liens, claims and restrictions, all Intellectual Property used
in the conduct of its business as now conducted or as proposed to be
conducted without infringing upon or otherwise acting adversely to the right
or claimed right of any person under or with respect to any of the foregoing,
and (ii) is not obligated or under any liability whatsoever to make any
payments by way of royalties, fees or otherwise to any owner of, licensor of
or other claimant to any patent, trademark, service xxxx, trade name,
copyright, license or other right with respect to the use thereof in
connection with the conduct of its business or otherwise. Trimark owns and
has the unrestricted right to use all Intellectual Property required for or
incident to the development, manufacture, operation and sale of all products
and services sold or proposed to be sold by Trimark, free and clear of any
rights, liens or claims of others, including, without limitation, former
employers of all employees of Trimark. All of the foregoing rights to
Intellectual Property will be owned and enjoyed by the Surviving Corporation
following the Merger without the consent or approval of any third party and,
following such Merger, the Surviving Corporation will possess and enjoy all
of such rights to Intellectual Property as Trimark did immediately prior to
such Merger.
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2.6.2 Set forth in Schedule 2.6 is a complete listing of
all software related in any fashion or manner whatsoever to the business of
Trimark as now conducted or has proposed to be conducted (the "SOFTWARE").
All copies of the Software were, as of the Closing, in Trimark's possession
and control, except for certain object code copies which then were in the
possession of customers of Trimark. All such customers have entered into
license agreements with Trimark that, to the best knowledge of Trimark,
effectively protect Trimark's rights in and to all such Software. For
purposes of this Section, the term "SOFTWARE" includes any set of
instructions (including, without limitation, arithmetic, logical, data
transfer, data manipulation and input/output) meant to run on, or to control
the operation of, any computer, whether those instructions are a complete
program, a collection of programs making up a subsystem or system or are
merely subroutines or macroroutines meant to operate in conjunction with
other software, and whether such instructions must be run through another
computer program (commonly referenced as a "compiler") before being usable on
a computer, whether such instructions must be used at execution time in
conjunction with another computer program (commonly referenced as an
"interpreter") or whether such instructions are in a form that can be run on
a computer "as is" without additional programs.
2.6.3 The Software will not, due to a date change: (i)
have any operational impediments, (ii) malfunction, (iii) cease to perform,
(iv) generate incorrect or ambiguous data or results with respect to
same-century and multi-century, Leap Year and other calendar formulas,
functions and data or (v) produce incorrect or ambiguous results with respect
to same-century and multi-century, Leap Year and other calendar formulas,
functions, date values and date data interfaces. The Software is free from
all computer "viruses" and other elicit code. The Software performs in all
material respects in accordance with its specifications.
2.7 MANUFACTURING RIGHTS. Trimark has not granted rights to
manufacture or assemble its products to any other person or entity.
2.8 OFFICERS, DIRECTORS AND EMPLOYEES.
2.8.1 To the best knowledge of Trimark, no present or
former officer, director or employee of Trimark is a party to or is otherwise
bound by any agreement or arrangement (including any agreement of
noncompetition) that in any way adversely affects his or her performance of
his or her duties as an officer, director or employee of Trimark or Trimark's
ability to conduct its business. Trimark has established appropriate
policies and procedures to ensure no officer, director or other employee of
Trimark misuses confidential information or trade secrets of others in the
course of their employment or other relationship with Trimark. Trimark is
not a party to any labor agreements, employment contracts, consulting
agreements or any other instruments which limit the rights of Trimark to
terminate the employment or other relationship with a particular individual
at will. Trimark is not aware that any officer, director or key employee, or
that any group of officers, directors or key employees, would not continue
their employment with NHancement on the same terms as previously employed by
Trimark.
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2.8.2 Trimark: (i) is not bound by or subject to any
collective bargaining agreement with respect to any of its employees nor has
any labor union requested or, to the best knowledge of Trimark, sought to
represent any of the employees, representatives or agents of Trimark, (ii)
does not have any current labor problems or disputes, pending or threatened,
(iii) does not have in effect any "employee pension benefit plans" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974) or employee benefit or similar plans qualified under Section 401 of the
Internal Revenue Code of 1986, as amended, and (iv) does not maintain, has
not in the past maintained and is not and has not been a contributor to any
multi-employer plan or single employer plan, as defined in Section 4001 of
the Employee Retirement Income Security Act of 1974, as amended, for the
employees of Trimark or any trade or business (whether or not incorporated)
which, together with Trimark, would be deemed to be a "single employer"
within the meaning of such Section 4001. Trimark has complied in all
material respects with all laws relating to the employment of labor,
including provisions relating to wages, hours, equal opportunity, collective
bargaining and payment of Social Security and other taxes.
2.9 CERTAIN TRANSACTIONS. Except as set forth in schedule 2.0,
Trimark is not indebted, directly or indirectly, to any of its officers,
directors or Shareholder, or to their respective affiliates, spouses or
children, in any amount whatsoever, except for salaries and fees accrued in
the ordinary course of business; none of said officers, directors or, to the
best knowledge of Trimark, either Shareholder, or any of their affiliates or
members of their immediate families, are indebted to Trimark or have any
direct or indirect ownership interest in any firm or corporation with which
Trimark is affiliated or with which Trimark has a business relationship, or
any firm or corporation which competes with Trimark (except with respect to
any interest in less than five percent (5%) of the stock of any corporation
whose stock is publicly traded). No officer, director or shareholder, or any
affiliate or member of their immediate families, is, directly or indirectly,
interested in any material contract with Trimark.
2.10 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC.
Trimark is not in violation of any term of its Articles of Incorporation or
Bylaws, as amended and in effect on and as of the Closing. Trimark is not in
violation in any respect of any term or provision of any mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
order, statute, rule or regulation applicable to it where such violation
would adversely affect Trimark, its operations or financial condition. The
execution, delivery and performance of and compliance with this Agreement
have not resulted and will not result in any violation of or conflict with,
or constitute a material default under, any mortgage, indebtedness,
indenture, contract, agreement, instrument, judgment or decree, order,
statute, rule or regulation applicable to it, or result in the creation of
any mortgage, pledge, lien, encumbrance or charge upon any of the properties
or assets of Trimark; and there is no such term or provision which adversely
affects Trimark, its operations or financial condition as presently conducted
or as contemplated to be conducted. Trimark and, to the best knowledge of
Trimark, its officers, directors and key employees, are not parties to any
mortgage, indebtedness, indenture, contract, agreement, instrument, judgment,
decree or order restricting its ability to enter or compete in any line of
business or market.
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2.11 MATERIAL CONTRACTS AND OBLIGATIONS.
2.11.1 Included in the Schedule 2.11 is a list of all
agreements, contracts and other obligations to which Trimark is a party or by
which it is bound that are material to the operation of its business and
properties, which: (i) provide for aggregate payments to or by Trimark in
excess of Ten Thousand Dollars ($10,000), (ii) obligate Trimark to share,
license or develop any product or technology, (iii) appoint distributors,
dealers or sublicensees of Trimark's products, which agreements cannot be
terminated on thirty (30) days' notice or less or (iv) involve transactions
or proposed transactions between Trimark and its officers, directors,
affiliates or any affiliate thereof. Copies of such agreements and contracts
and documentation evidencing such other obligations have been delivered to
NHancement. All of such agreements and contracts are valid, binding and in
full force and effect in all material respects, assuming due execution by the
other parties to such agreements and contracts. There is no pending or
threatened dispute or disagreement, and there have been no events which may
give rise to any dispute or disagreement, between Trimark and any of the
clients or customers of Trimark, or any other person having a business
relationship with Trimark, which dispute or disagreement, if resolved
unfavorably to Trimark, would have a materially adverse effect on Trimark's
operations or financial condition. No significant client or customer of
Trimark, or any other significant person having a business relationship with
Trimark, has indicated that it presently contemplates terminating its
business relationship with Trimark.
2.11.2 All open orders, licenses and contracts for
Trimark's products and services can be fulfilled by Trimark within its
current capacity, in accordance with the terms thereof, and the fulfillment
thereof will not result in material losses or material warranty or other
liabilities to the Surviving Corporation. Section 2.11 sets forth a summary
of Trimark's backlog (including deferred revenue recorded on Trimark
financials), which included the total backlog as of the date of this
Agreement reflected and written agreements and a monthly breakdown of the
expected shipment dates for the orders represented by such backlog. All
orders reflected in such backlog are evidenced by written purchase orders or
contracts. All such orders or contracts are firm, fixed, committed and
non-cancelable. To the best of its knowledge, Trimark will collect the
revenue from such orders and contracts in accordance with the terms of their
respective purchase orders or contracts, including, without limitation,
receiving payment in accordance with the deadline set forth therein.
2.12 HAZARDOUS WASTE DISPOSAL. To the best knowledge of Trimark,
Trimark has materially complied with all laws regulating the discharge and
disposal of hazardous waste, the violation of which would have a material,
adverse effect on the operations or financial condition of Trimark,
including, but not limited to:
2.12.1 Comprehensive Environmental Response, Compensation
and Liability Act, 42 USC Sections 9601, et seq.;
2.12.2 Resource Conservation and Recovery Act, 42 USC
Sections 6901, et seq.;
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2.12.3 Toxic Substances Control Act, 15 USC Sections 2601,
et seq.;
2.12.4 California Hazardous Substances Information and
Training Act, California Labor Code Sections 6360, et seq.;
2.12.5 California Hazardous Waste Act, California Health &
Safety Code Sections 25100, et seq.;
2.12.6 California Hazardous Substances Act, California
Health & Safety Code Sections 28740, et seq.; and
2.12.7 California Safe Drinking Water and Toxic Enforcement
Act of 1986, California Health & Safety Code Sections 25249.5, et seq.
2.13 LICENSES AND PERMITS. Included in the Schedule 2.13 is a
complete and accurate list of all of the licenses, permits, authorizations
and franchises issued to, possessed by, used by or otherwise in effect with
respect to the business of Trimark. Trimark has delivered to NHancement
complete and accurate copies of all of the licenses, permits, authorizations
and franchises identified in said Schedule. All of the licenses, permits,
authorizations and franchises identified are valid and in full force and
effect. Said licenses, permits, authorizations and franchises constitute all
of the licenses, permits, authorizations and franchises required to permit
Trimark to conduct its business in the manner in which it is now being
conducted, and Trimark is not in violation or breach of any of the terms,
requirements or conditions of any of said licenses, permits, authorizations
or franchises.
2.14 LITIGATION, ETC. Except as set forth in schedule 2.0. There
are no actions, suits, proceedings or investigations pending against Trimark
or, to the best knowledge of Trimark, any of its officers, directors or
employees or its properties, before any court or governmental agency (nor, to
the best knowledge of Trimark, is there any reasonable basis therefor or
threat thereof), which, either in any case or in the aggregate, might result
in any material adverse change in the business or financial condition of
Trimark, or in any material impairment of the right or ability of Trimark to
carry on its business as now conducted or as proposed to be conducted or in
any material liability on the part of Trimark, or any change in the current
equity ownership of Trimark, and none which questions the validity of this
Agreement or any action taken or to be taken in connection herewith. The
foregoing includes, without limiting its generality, actions pending or
threatened (or any basis therefor known to Trimark) involving the prior
employment of any of Trimark's employees, their use in connection with
Trimark's business of any information or techniques allegedly proprietary to
any of their former employers or their obligations under any agreements with
prior employers.
2.15 CRIMINAL INVESTIGATIONS AND ACTIVITIES. Trimark, its past and
present officers and directors and the Shareholder: (i) have never been
convicted of a felony, (ii) have not been named as a defendant in a pending
criminal proceeding involving a felony, and (iii) are not now or ever have
been the subject of any governmental decree or order prohibiting it or any of
them from engaging
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in certain business activities. There is no pending criminal investigation
of any nature whatsoever into the activities of Trimark, its officers,
directors and Shareholder. Trimark has fully complied with the provisions of
the United States Export Administration Act and all rules and regulations
promulgated thereunder.
2.16 MATERIAL LIABILITIES. Trimark has no liabilities which are,
individually or in the aggregate, material to the financial condition or
operating results of Trimark which have not been disclosed on Schedule 2.16
and schedule 2.0.
2.17 TRIMARK FINANCIAL STATEMENTS. Schedule 2.17 sets forth
Trimark's unaudited balance sheets as of December 31, 1998 and November
30,1999 (the "BALANCE SHEETS") and the related unaudited statements of
operations, stockholders' equity and cash flows for the years then ended and
the Company's unaudited balance sheets dated as of November 30, 1999 and the
unaudited statements of operations for the period then ended (all of the
foregoing collectively the "TRIMARK FINANCIALS"). The Trimark Financials
have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
presented except that the unaudited Trimark Financials do not contain the
footnotes required by GAAP and are subject to normal year-end adjustments
which will not be material individually or in the aggregate. The Trimark
Financials fairly present the financial position of Trimark as of their dates
and results of operations for the periods there ended. Except as set forth
in the Trimark Financials, Trimark does not have any liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured or otherwise (whether or not
required to be reflected in financial statements in accordance with GAAP),
which individually or in the aggregate has not arisen in the ordinary course
of Trimark's business since the unaudited Trimark Financials, in all cases
consistent with past practices and amounts.
2.18 TAX AND OTHER RETURNS AND REPORTS.
2.18.1 DEFINITION OF TAXES. For the purposes of this
Agreement, "TAX" or, collectively, "TAXES", means any and all federal, state,
local and foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts and any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
2.18.2 TAX RETURNS AND AUDITS. Except as set forth in
Schedule 2.18:
2.18.2.1 Trimark as of the Effective Time will have
prepared and filed all federal, state, local and foreign returns, estimates,
information statements and reports ("RETURNS") required to be filed by such
date relating to any and all Taxes concerning or attributable to
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 11
Trimark or its operations and such Returns are or will be true and correct
and have been completed in accordance with applicable law.
2.18.2.2 Trimark as of the Effective Time: (a) will have
paid or accrued all Taxes it is required to pay or accrue and (b) will have
withheld with respect to its employees all federal and state income taxes,
FICA, FUTA and other Taxes required to be withheld.
2.18.2.3 Trimark has not been delinquent in the payment
of any Tax nor is there any Tax deficiency outstanding, proposed or assessed
against Trimark, nor has Trimark executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of
any Tax.
2.18.2.4 No audit or other examination of any Return of
Trimark is presently in progress, nor has Trimark been notified of any
request for such an audit or other examination.
2.18.2.5 Trimark does not have any liabilities for
unpaid federal, state, local or foreign Taxes which have not been accrued or
reserved against on the Trimark Financials, whether asserted or unasserted,
contingent or otherwise, and Trimark has no knowledge of any basis for the
assertion of any such liability attributable to Trimark, its assets or
operations.
2.18.2.6 Trimark has provided to NHancement copies of
all federal and state income and all state sales and use Tax Returns filed to
date for all periods since the date of Trimark's incorporation.
2.18.2.7 There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims, security interests
or other encumbrances of any sort ("LIENS") on the assets of Trimark relating
to or attributable to Taxes except liens for current taxes not yet delinquent.
2.18.2.8 Trimark has no knowledge of any basis for the
assertion of any claims relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the asserts of Trimark.
2.18.2.9 None of Trimark's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
2.18.2.10 As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of
Trimark that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G or 162 of
the Code.
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 12
2.18.2.11 Trimark has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Trimark.
2.18.2.12 Trimark is not a party to a tax sharing or
allocation agreement nor does Trimark owe any amount under any such agreement.
2.18.2.13 Trimark is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
2.18.2.14 Trimark has not agreed to and is not required
to make any adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method, and
there is no application by Trimark pending with any taxing authority
requesting permission for any changes in any accounting method of Trimark.
No taxing agency (domestic or foreign) has proposed any adjustment or change
in Trimark's method of accounting for tax purposes.
2.19 TITLE. Except as set forth in schedule 2.0. Trimark has good
and marketable title to all of its assets and properties (both tangible and
intangible). Such assets and properties (both tangible and intangible) are
not subject to any security interests, liens, mortgages, pledges,
encumbrances or charges of any kind.
2.20 CHANGE OF CONTROL. There is no plan or agreement pursuant to
which any amounts may become payable (whether currently or in the future) to
current or former employees, officers and directors of Trimark as a result of
or in connection with the Merger.
2.21 BROKER'S FEES. Trimark has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
2.22 DISCLOSURE. Trimark has fully provided NHancement with all of
the information which NHancement has requested for deciding whether to enter
into the Reorganization hereunder and all information reasonably necessary to
enable NHancement to make such decision. This Agreement, the Trimark
Financials, and any written statement or certificate furnished to NHancement
pursuant to this Agreement in connection with the transactions contemplated
by this Agreement, when taken together, do not contain any untrue statement
of a material fact nor omit to state a material fact necessary to make the
statements made not misleading.
2.23 TAX TREATMENT OF TRANSACTION. Trimark, to the best of its
knowledge and based upon consultation with its independent advisors, has not
taken or agreed to take any action, and is not aware of any condition that
(without giving effect to any action taken or agreed to be taken by
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 13
Trimark), would effect the ability of the parties hereto to report the
business combination to be effected by the Merger as a tax-free
reorganization within the meaning of Section 368 of the Code.
3. REPRESENTATIONS AND WARRANTIES OF NHANCEMENT. NHancement
represents and warrants to the Shareholders that:
3.1 CORPORATE STATUS. NHancement is a corporation duly organized
and existing under the laws of Delaware, with an authorized, issued and
outstanding capital stock as set forth in the 1934 Act documents in defined
Section 3.4 below.
3.2 CORPORATE AUTHORITY AND AUTHORIZATION. NHancement has the
corporate right and authority to issue and deliver the NHancement Common
Stock and Warrants required to be issued hereunder to Trimark; and such
shares and Warrants when delivered at or after the Closing will be fully paid
and nonassessable. All corporate action on the part of NHancement necessary
for the authorization, execution, delivery and performance of this Agreement
by NHancement and the performance of all of NHancement's obligations
hereunder has been taken. This Agreement constitutes a valid and binding
obligation of NHancement, and enforceable against NHancement in accordance
with its terms, except of the indemnification provisions of Section 7.7
hereof may be limited by principals of public policy and subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
3.3 GOVERNMENTAL CONSENT. No consent, approval or authorization
or designation, declaration or filing with any governmental authority on the
part of NHancement is required in connection with the valid execution and
delivery of this Agreement, or of the consummation of any other transaction
contemplated hereby except as specifically referenced in the Agreement.
3.4 1934 ACT DOCUMENTS. NHancement has delivered to Trimark and
the Shareholder a copy of its Form 10K for the fiscal year ending September
30, 1998 and its Form 10Q for the quarter ending June 30, 1999 (the "1934 ACT
DOCUMENTS") filed with the SEC by NHancement pursuant to the Securities
Exchange Act of 1934 (the "1934 ACT"). None of the 1934 Documents, when
taken together, contain any untrue statement of the material fact or omit to
state a material fact necessary to make the statements made not misleading.
3.5 BROKER'S FEES. NHancement has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
4. ADDITIONAL AGREEMENTS. NHancement, Trimark and the Shareholders
further agree as follows:
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 14
4.1 TAX ACCOUNTING. Neither NHancement nor Trimark has taken nor
shall take any action which reasonably would be expected to jeopardize the
tax-free nature of the reorganization hereunder.
4.2 SUBSEQUENT ADJUSTMENT. In the event that the average closing
price of a share of NHancement Common Stock as reported on the NASDAQ
National Market for the five (5) consecutive trading days ending on the
trading day immediately prior to the first anniversary and second anniversary
of the Closing (the "VALUATION FORMULA") is then less than $4.50 per share
(as presently constituted and subject to appropriate adjustment for stock
splits, combinations, dividends and the like), NHancement shall provide to
the Shareholders, in proportion to their respective proportionate interests
in Trimark at the Closing, at NHancement's option, either (i) cash in the
aggregate amount of the Adjustment Amount, (ii) shares of NHancement's
restricted Common Stock then valued in accordance with the Valuation Formula
in aggregate value equal to the Adjustment Amount or (iii) some combination
of (i) and (ii). For purposes of this Section, at the first anniversary the
term "ADJUSTMENT AMOUNT" SHALL mean one half of the unregistered shares plus
those registered shares still owned by the Shareholders (as presently
constituted and subject to appropriate adjustment for stock splits,
combinations, dividends and the like) multiplied by the lesser of (a) $4.50
minus the then current fair market value of a share of NHancement's Common
Stock determined in accordance with the Valuation Formula or (b) $3.00 (i.e.
$4.50 - $1.50). By way of illustration, if at the first anniversary date
the Shareholders had a total of five hundred thousand (500,000) registered
and unregistered shares and the value of a share of NHancement Common Stock
calculated pursuant to the Valuation Formula was then $2.00 per share, the
Shareholders as a group would be entitled to $1,250,000 in cash or in shares
of NHancement Common Stock (then valued in accordance with the Valuation
Formula) or some combination of cash and shares allocated between them in
accordance with their proportionate interests in Trimark at the Closing. In
other words, the Shareholders as a group would be entitled to, in this
example, the differential in value between $4.50 and $2 (or $2.50) multiplied
by 500,000 shares in accordance with the foregoing. ). For purposes of this
Section, at the second anniversary the term "ADJUSTMENT AMOUNT" shall mean
two hundred and fifty thousand (250,000) unregistered shares owned by the
Shareholders (as presently constituted and subject to appropriate adjustment
for stock splits, combinations, dividends and the like) multiplied by the
lesser of (a) $4.50 minus the then current fair market value of a share of
NHancement's Common Stock determined in accordance with the Valuation Formula
or (b) $3.00 (i.e. $4.50 -$1.50) By way of illustration, at the second
anniversary date the Shareholders have a total of 250,000 unregistered shares
and if the value of a share of NHancement Common Stock calculated pursuant to
the Valuation Formula was then $2.00 per share, the Shareholders as a group
would be entitled to $625,000 in cash or in shares of NHancement Common
Stock (then valued in accordance with the Valuation Formula) or some
combination of cash and shares allocated between them in accordance with
their proportionate interests in Trimark at the Closing. In other words, the
Shareholders as a group would be entitled to, in this example, the
differential in value between $4.50 and $2 (or $2.50) multiplied by 250,000
shares in accordance with the foregoing. All shares of NHancement Common
Stock issued pursuant to this section shall be "restricted securities" for
purposes of federal and state securities laws and may not be resold or
transferred by the Shareholders except in compliance with such laws. Each of
the Shareholders shall execute and deliver to
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 15
NHancement an investment representation letter with respect to such shares in
usual and customary form.
5. SURVIVAL OF REPRESENTATIONS, WARRANTIES; INDEMNITY. The respective
representations and warranties given by NHancement, Trimark and the
Shareholders contained herein shall remain effective against their respective
successors, heirs and assigns and shall survive the Closing. NHancement
shall indemnify and hold Trimark and the Shareholders harmless from any
damage, claim, liability or expense, including reasonable attorneys' fees,
arising out of the breach of any representation or warranty or the
nonfulfillment of any agreement contained herein, or in any certificate to be
delivered at the Closing, by NHancement. Trimark and each of the Shareholders
shall, jointly and severally, indemnify and hold NHancement harmless from any
damage, claim, liability or expense, including reasonable attorneys' fees,
arising out of the breach of any representation or warranty or the
nonfulfillment of any agreement contained herein, or in any certificate to be
delivered at the Closing, by Trimark or the Shareholder.
6. SECURITIES LAWS MATTERS. Because of the exemptions from the
registration requirements of the Securities Act of 1933 (the "ACT") and from
the qualification requirements of the California Corporate Securities Law of
1968 (the "LAW") relied upon by NHancement in issuing the shares of
NHancement Common Stock under Section 1 above (the "SECURITIES"), the
Shareholders represent and warrant that they:
6.1 Are aware that such Securities are highly speculative and that
there can be no assurance as to what return, if any, there may be.
6.2 Are aware of NHancement's business affairs and financial
condition and have acquired sufficient information about NHancement to reach
an informed and knowledgeable decision to acquire such Securities.
6.3 Are each acquiring such Securities for investment FOR HIS OR
HER OWN ACCOUNT ONLY and not with a view to, or for sale in connection with,
any "distribution" thereof within the meaning of the Act or the Law (except
that shares of Registrable Stock may be resold pursuant to and on the
effectiveness of the S-3 Registration Statement referred to in Section 7
below (the "S-3").
6.4 Except for shares of Registrable Stock registered under the
S-3, understand that such Securities have not been registered under the Act
or qualified under the Law by reason of specific exemptions therefrom, which
exemptions depend upon, among other things, the bona fide nature of the
Shareholders' investment intent as expressed herein. In this connection, the
Shareholders understand that, in the view of the SEC, the statutory basis for
one exemption from the Act may not be present if their representations mean
that their present intentions are to hold such shares for a minimum capital
gains period under the tax statutes, for a deferred sale, for a market rise,
for a sale if the market does not rise, or for a year or any other fixed
period in the future.
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 16
6.5 Except for shares of Registrable Stock registered under the
S-3, further understand that such Securities must be held indefinitely unless
subsequently registered under the Act and qualified under the Law or an
exemption from such registration and such qualification is available, and
that, except as set forth in Section 7 below, NHancement is under no
obligation to effect such registration or qualification or to assure the
availability of any such exemption.
6.6 Are aware of Rule 144 promulgated under the Act which permits
limited public resale of the Securities if it is acquired in a non-public
offering subject to the satisfaction of certain conditions, including, among
other things: the availability of certain public information about the
NHancement, the resale occurring not less than one (1) year after he or she
purchased and completed payment for the Securities to be sold, the sale being
made on the public market through a broker in an unsolicited "broker's
transaction" or to a "market maker" and the amount of the Securities sold
during any three-month period not exceeding specified limitations (generally,
one percent (1%) of all Common Stock outstanding); except that such
conditions need not be met by a person who is not an affiliate of the
NHancement at the time of sale and has not been an affiliate for the
preceding three (3) months, if the Securities to be sold have been
beneficially owned by such person for at least two (2) years prior to their
sale. The Common Stock may not be publicly traded or NHancement may not be
satisfying the current public information requirements of Rule 144 at the
time Trimark or a Shareholder wishes to sell the Securities; and thus, they
may be precluded from selling the Securities under Rule 144 even though the
minimum holding period may have been satisfied.
6.7 Further understand that in the event the requirements of Rule
144 are not met, registration under the Act, compliance with Regulation A or
some other registration exemption will be required for any disposition of the
Securities; and that, although Rule 144 is not exclusive, the Commission has
expressed its opinion that persons proposing to sell private placement
Securities other than in a registered offering and other than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales and that
such persons and the brokers who participate in such transactions do so at
their own risk.
6.8 Except for shares of Registrable Stock registered under the
S-3, understand that the certificates evidencing the Securities will be
imprinted with legends in substantially the following form:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT FOR THE SHAREHOLDERS OWN ACCOUNT AND NOT WITH
A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF.
NO SALE OR OTHER DISPOSITION OF SUCH SHARES MAY BE EFFECTED WITHOUT
THE (1) REGISTRATION OF SUCH SALE OR DISPOSITION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND (2) QUALIFICATION OF SUCH
SALE OR DISPOSITION UNDER THE CALIFORNIA CORPORATE SECURITIES LAW OF
1968, AS AMENDED, OR WITHOUT AN OPINION OF COUNSEL IN FORM AND
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 17
SUBSTANCE SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED."
7. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS;
COMPLIANCE WITH SECURITIES ACT.
7.1 RESTRICTIONS ON TRANSFERABILITY. The Securities shall not be
sold, assigned, transferred or pledged except upon the conditions specified
in this Section 7.
7.2 CERTAIN DEFINITIONS. As used in this Section 7, the following
terms shall have the following respective meanings:
7.2.1 "REGISTRABLE SECURITIES" shall mean Two Hundred
Fifty Thousand (250,000) shares of the Securities as so designated by the
Shareholders jointly in writing to NHancement and any Common Stock of
NHancement issued as a dividend or other distribution with respect to or in
exchange for replacement of any such shares.
7.2.2 The terms "REGISTER," "REGISTERED" and
"REGISTRATION" shall refer to a registration effected by preparing and filing
an S-3 Registration Statement in compliance with the Act, and the declaration
or ordering of the effectiveness of such registration statement. Such terms
shall also include an undertaking to file all required pre and post-effective
amendments to such registration statement and the preparation, filing and
declaration or ordering of the effectiveness of appropriate applications for
the qualification or registration of securities pursuant to applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Act and any other governmental requirements or
regulations necessary to permit the lawful offer and sale of Registrable
Securities in the United States of America.
7.2.3 "REGISTRATION EXPENSES" shall mean all expenses
incurred by Trimark in complying with Section 7.3, including, without
limitation, all registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel for NHancement.
7.2.4 "SELLING EXPENSES" shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities.
7.2.5 "HOLDER" shall mean any Shareholder so long as such
Shareholder holds outstanding Registrable Securities.
7.3 REGISTRATION ON FORM S-3.
7.3.1 NHancement shall use its best efforts to qualify for
registration on Form S-3 (or successor forms); and, to that end, NHancement
shall comply with the reporting requirements of the 1934 Act. NHancement
will use its best efforts to effect promptly the registration of
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 18
all shares of Registrable Securities on Form S-3 (or successor form) as soon
as practicable but in no event later than six (6) months following the
Closing.
7.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred
in connection with any registration, qualification or compliance pursuant to
Section 7.3 shall be borne by NHancement. All Selling Expenses related to
securities registered by the Holders shall be borne by the Holders.
7.5 REGISTRATION PROCEDURES. In the case of the registration
effected by NHancement pursuant to this Section 7, NHancement will keep each
Holder advised in writing as to the initiation of such registration,
qualification and compliance and as to the completion thereof. At its
expense NHancement shall:
7.5.1 Keep such registration effective for a period of one
hundred eighty (180) days, or until the Holder or Holders have completed the
distribution described in the registration statement relating thereto,
whichever shall occur first; and
7.5.2 Furnish such number of prospectuses and other
documents incident thereto as a Holder from time to time may reasonably
request.
7.6 DELAY OF REGISTRATION. No Holder shall have any right to take
any action to restrain, enjoin or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation
or implementation of this Section 7.
7.7 INDEMNIFICATION. In the event any Registrable Securities
shall be included in a registration statement pursuant to this Section 7:
7.7.1 To the extent permitted by law, NHancement will
indemnify and hold harmless each Holder requesting or joining in a
registration and each person, if any, who controls such Holder within the
meaning of the Act against any losses, claims, damages or liabilities, joint
or several, to which they may become subject under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based on any untrue or alleged untrue statement
of any material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or
arise out of any violation by NHancement of any rule or regulation
promulgated under the Act or any other applicable law, rule or regulation
applicable to NHancement and relating to action or inaction required of
NHancement in connection with any such registration; and will reimburse each
such Holder or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage,
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 19
liability or action; provided, however, that the indemnity agreement
contained in this Section 7.7.2 shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of NHancement (which consent shall not be
unreasonably withheld) nor shall NHancement be liable in any such case for
any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in connection with such
registration statement, preliminary prospectus, final prospectus or
amendments or supplements thereto, in reliance upon and in conformity with
information furnished expressly for use in connection with such registration
by any such Holder or controlling person seeking the indemnification.
7.7.2 To the extent permitted by law, each Holder
requesting or joining in the registration will indemnify and hold harmless
NHancement, each of its directors, each of its officers who have signed the
registration statement and each person, if any, who controls NHancement
within the meaning of the Act and each other such Holder against any losses,
claims, damages or liabilities to which NHancement or any such director,
officer, controlling person or other Holder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in such registration statement,
preliminary or final prospectus or amendments or supplements thereto, in
reliance upon and in conformity with information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by NHancement
or any such director, officer, controlling person or other Holder in
connection with investigating or defending such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement
contained in this Section 7.7.3 shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of such Holder (which consent shall not be
unreasonably withheld), and provided, further, that the liability of each
Holder to reimburse legal or other expenses pursuant to this Section shall,
in each case, be limited to the total dollar amount received by such Holder
for the securities sold pursuant to such registration by that Holder.
7.7.3 Promptly after receipt by an indemnified party under
this Section 7.7 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party under this Section, notify the indemnifying party in
writing of the commencement thereof and the indemnifying party shall have the
right to participate in and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties. The
failure to notify an indemnifying party promptly of the commencement of any
such action, if materially prejudicial to such indemnifying party's ability
to defend such action, shall relieve such indemnifying party of any liability
to the indemnified party under this Section, but the omission to so
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 20
notify the indemnifying party will not relieve such indemnifying party of any
liability that such indemnifying party may have to any indemnified party
otherwise than under this Section.
7.8 REPORTS UNDER THE 1934 ACT. With a view to making available
to the Holders the benefits of certain rules and regulations promulgated by
the SEC that may permit the Holders to sell shares of NHancement's stock to
the public without registration, NHancement agrees to:
7.8.1 Make and keep adequate current public information
available, as those terms are understood and defined in Rule 144, at all
times subsequent to the Closing; and
7.8.2 Furnish to any Holder forthwith upon request, so
long as such Holder shall own any Registrable Securities, a written statement
by NHancement that it has complied with the reporting requirements of Rule
144, and of the Act and the 1934 Act, a copy of the most recent annual or
quarterly report of NHancement, and such other reports and documents so filed
by NHancement as may be reasonably requested in availing the Holder of any
rule or regulation promulgated by the Commission that allows the selling of
any such securities without registration.
7.9 LOCKUP AGREEMENT. In consideration for NHancement's agreeing
to its obligations under this Agreement and to ensure compliance with the
Act, each Shareholder agrees not to sell, make any short sale of, loan, grant
any option for the purchase of or otherwise dispose of (i) any shares of the
Securities (other than Registrable Securities registered and sold under a
then effective S-3) for a one (1) year period following the Closing and (ii)
one-half (1/2) of such shares of the stock for an additional one (1) year
period following the first anniversary date of the Closing. All subsequent
transferees or assignees of the shares of Stock must agree in writing to the
provisions set forth in this Section 7.9 a precondition to any such transfer
or assignment. Following the expiration of any such lock-up, shares of such
Securities may be resold by the Shareholders only in compliance with all
applicable federal and state securities laws.
7.10 ASSIGNMENT OF REGISTRATION RIGHTS. With the exception of a
spouse or immediate family member of Shareholder, the rights hereby granted
to the Holders to cause NHancement to register securities under Section 7.3
above may not be assigned, in whole or in part, to any transferee or assignee
of Registrable Securities.
7.11 TERMINATION OF REGISTRATION RIGHTS. In lieu of registering
the Registrable Securities pursuant to this Section 7 and upon mutual
agreement between NHancement and Shareholders, NHancement shall have the
right, to terminate its obligations to effect such registration by
irrevocably offering to purchase all of such Registrable Securities on the
third (3rd) month anniversary date of the Closing at a purchase price equal
to the then current fair market value determined in accordance with the
Valuation Formula, but in no event less than $1.50 per share (as presently
constituted and subject to appropriate adjustment for stock splits,
combinations, dividends and the like). In the event NHancement so elects to
terminate such registration rights, NHancement shall provide the Holders with
written notice thereof at least ten (10) days prior to such third (3rd) month
anniversary date
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 21
and the Holders shall then have the option, exercisable by written notice to
NHancement within ten (10) days following receipt of NHancement's notice to
elect to have all or any portion of such Registrable Securities repurchased
at such purchase price. Such repurchase shall occur within twenty (20) days
following receipt by NHancement of written acceptance by such Holders. In
the event the Holders decline to accept such offer with respect to all or any
portion of the Registrable Securities, the registration rights granted hereby
shall nevertheless terminate.
8. CONDITIONS TO THE MERGER.
8.1 CONDITIONS TO OBLIGATIONS OF EACH TO PARTY TO AFFECT THE
MERGER. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction at or prior to the Closing of
the following conditions:
8.1.1 NHANCEMENT BOARD APPROVAL. This Agreement and the
Merger shall have been approved and adopted by the Board of Directors of
NHancement.
8.1.2 NO INJUNCTIONS OR RESTRAINTS. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal or regulatory restrain
or prohibition preventing the consummation of the Merger shall be in effect.
No litigation challenging the legality of the transactions contemplated by
this Agreement shall be pending or overtly threatened.
8.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF NHANCEMENT AND
MERGERSUB. The obligations of NHancement and MergerSub to consummate the
Merger and the transactions contemplated by this Agreement shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, exclusively by NHancement
and MergerSub:
8.2.1 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Trimark and the Shareholders contained in this Agreement
shall have been true and correct in all material respects when made and shall
continue to be true and correct in all material respects as of the Effective
Time except for changes contemplated by this Agreement, and NHancement shall
have received a certificate to such effect signed by Trimark and the
Shareholders.
8.2.2. AGREEMENTS AND COVENANTS. Trimark and the
Shareholders shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be performed or
complied with by them on or prior to the Effective Time, and NHancement shall
have received a certificate to such effect signed by Trimark and the
Shareholders.
8.2.3 MATERIAL ADVERSE CHANGE. There shall not have
occurred any material adverse change in the business, assets (including
intangible assets), financial condition or results of operation of Trimark
since the date of this Agreement.
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 22
8.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF TRIMARK AND
SHAREHOLDERS. The obligations of Trimark and Shareholders to consummate the
Merger and the transactions contemplated by this Agreement shall be subject
to the satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, exclusively by Trimark
and the Shareholders:
8.3.1 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of NHancement contained in this Agreement shall have been true
and correct in all material respects when made and shall continue to be true
and correct in all material respects as of the Effective Time, and Trimark
and the Shareholders shall have received a certificate to such effect signed
by NHancement.
8.3.2 AGREEMENTS AND COVENANTS. NHancement shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it
on or prior to the Effective Time, and Trimark and the Shareholders shall
have received a certificate to such effect signed by NHancement.
8.3.3 MATERIAL ADVERSE CHANGE. There shall not occurred
any material adverse change in the business, assets (including intangible
assets), financial condition or results of operation of NHancement since the
date of this Agreement. For purposes of this condition, a reduction in the
trading price of NHancement's Common Stock as quoted by NASDAQ shall not
constitute a material adverse change.
9. TERMINATION, AMENDMENT AND WAIVER.
9.1 TERMINATION. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
9.1.1 By the mutual consent of NHancement and Trimark;
9.1.2 By NHancement or Trimark if (i) the condition
specified in Section 8.1.1 shall not have been satisfied by January 11, 2000,
(ii) the Effective Time has not occurred by December 11, 1999 (provided that
the right to terminate this Agreement under this Section shall not be
available to any party whose willful failure to fulfil any obligation
hereunder has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date); (iii) there shall be a final
non-appealable order of a federal or state court in effect preventing
consummation of the Merger or (iv) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any governmental entity that would make the consummation of the
Merger illegal;
9.1.3 By NHancement (if it is not a material breach of its
obligations under this Agreement) if there has been a breach of any
representation, warranty, covenant or agreement
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 23
contained in this Agreement on the part of Trimark or the Shareholders or a
material adverse change in the financial condition of Trimark as set forth in
Section 8.2.3.
9.1.4 By Trimark and Shareholders (if they are not in
breach of their obligations under this Agreement) if there has been a breach
of any representation, warranty, covenant or agreement contained in this
Agreement on the part of NHancement or a material adverse change in the
financial condition of NHancement as set forth in Section 8.3.3.
9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of NHancement,
MergerSub, Trimark or the Shareholders, or their respective officers,
directors or stockholders.
9.3 EXTENSION; WAIVER. At any time prior to the Effective Time,
NHancement and MergerSub, on the one hand, and the Company and the
Shareholders, on the other, may (i) extend the time for the performance of
any of the obligations of the other party(s) hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance of any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of party hereto to
any such extension or waiver shall be valid only if set forth in an
instrument and writing signed on behalf of such party.
10. EXPENSES. Except as provided to the contrary herein, each party
shall pay all of its own costs and expenses incurred with respect to the
negotiation, execution and delivery of this Agreement. Except, Nhancement
agrees to pay Trimark's attorney expenses not to exceed $10,000.
11. SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with
a valid and enforceable provision which will achieve, to the extent possible,
the economic, business and other purposes of the void or unenforceable
provision.
12. ENTIRE AGREEMENT. This Agreement, the exhibits hereto, the
documents referenced herein, and the exhibits thereto, constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect hereto and thereto. The
express terms hereof control and supersede any course of performance or usage
of the trade inconsistent with any of the terms hereof.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and
the same instrument. This Agreement shall become binding when one
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 24
or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as signatories.
14. FINDER'S FEES. Each party agrees to indemnify and to hold harmless
all other parties from any liability for any commission or compensation in
the nature of a brokerage or finders' fee or agents' commission or any
similar charge (and the costs and expenses of defending against such
liability or asserted liability) for which such indemnifying party, its
employees, agents or representatives is responsible.
15. OTHER REMEDIES. Any and all remedies herein expressly conferred
upon a party shall be deemed cumulative with and not exclusive of any other
remedy conferred hereby or by law on such party, and the exercise of any one
remedy shall not preclude the exercise of any other.
16. AMENDMENT AND WAIVERS. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby.
The waiver by a party of any breach hereof for default in payment of any
amount due hereunder or default in the performance hereof shall not be deemed
to constitute a waiver of any other default or succeeding breach or default.
17. SURVIVAL OF AGREEMENTS. All covenants, agreements, representations
and warranties made herein shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
18. NO WAIVER. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
19. ATTORNEYS' FEES. Should suit be brought to enforce or interpret
any part of this Agreement, the prevailing party shall be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation,
costs, expenses and fees on any appeal).
20. NOTICES. Whenever any party hereto desires or is required to give
any notice, demand, or request with respect to this Agreement, each such
communication shall be in writing and shall be effective only if it is
delivered by personal service or mailed, United States certified mail,
postage prepaid, addressed as follows:
If to Trimark: Trimark Inc.
d.b.a. Triad Marketing
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000-0000
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 25
If to a Shareholder: Trimark Inc.
d.b.a. Triad Marketing
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000-0000
If to NHancement: NHancement Technologies Inc.
0000 Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
If to NHancement, Xxxxxxx X. Xxxxx, Esq.
with a copy to: Xxxxxxxxx Xxxxx Morosoli & Maser LLP
000 Xxxx Xxxx Xxxx, Xxxxxx Xxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Such communications shall be effective when they are received by the
addressee thereof; but if sent by certified mail in the manner set forth
above, they shall be effective five (5) days after being deposited in the
United States mail. Any party may change its address for such communications
by giving notice thereof to the other party in conformity with this Section.
21. TIME. Time is of the essence of this Agreement.
22. CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof
shall not be construed for or against any party. A reference in this
Agreement to any Section shall include a reference to every Section the
number of which begins with the number of the Sections to which reference is
specifically made (e.g., a reference to Section 5.8 shall include a reference
to Sections 5.8.1 and 5.8.2.1). The titles and headings herein are for
reference purposes only and shall not in any manner limit the construction of
this Agreement which shall be considered as a whole.
23. NO JOINT VENTURE. Nothing contained in this Agreement shall be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall
have the power to control the activities and operations of any other and
their status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party shall have any power or
authority to bind or commit any other. No party shall hold itself out as
having any authority or relationship in contravention of this Section.
24. FURTHER ASSURANCES. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party, to better evidence and reflect the transactions
described herein and contemplated hereby, and to carry into effect the
intents and purposes of this Agreement.
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 26
25. ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions of this
Agreement are intended nor shall be interpreted to provide or create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, or partner of any party hereto or any other
person; unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof shall be personal solely between the parties
to this Agreement.
26. EXECUTION OF DOCUMENTS. At any time and from time to time after
the Closing, the Shareholders will execute and deliver to NHancement such
further conveyances, assignments and other written assurances as NHancement
shall reasonably request in order to consummate the Merger.
27. PARTIES IN INTEREST. Nothing herein expressed or implied is
intended or shall be construed to confer upon or to give any person, firm or
corporation other than the parties hereto any rights or remedies under or by
reason hereof.
28. BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and unless
otherwise provided in, this Agreement, each and all of the covenants, terms,
provisions, and agreements contained herein shall be binding upon, and inure
to the benefit of, the permitted successors, executors, heirs,
representatives, administrators and assigns of the parties hereto.
29. GOVERNING LAW. It is the intention of the parties hereto that the
internal laws of the State of California, U.S.A. (irrespective of its choice
of law principles) shall govern the validity of this Agreement, the
construction of its terms, and the interpretation and enforcement of the
rights and duties of the parties hereto.
30. COMPLETENESS OF AGREEMENT. This Agreement and the other agreements
entered into among the parties on even date herewith contain the entire
understanding between the parties hereto with respect to the transactions
contemplated hereby and there are no prior or contemporaneous agreements
other than are in writing signed by the parties which alter or modify this
written instrument. It is intended by the parties that this Agreement
supercede all oral or contemporaneous agreements other than those signed by
the parties mentioned above. This Agreement constitutes the final, complete
and exclusive embodiment of the parties' agreement.
31. NEGOTIATED AGREEMENT. This Agreement has been negotiated by the
parties hereto and their respective legal counsel, and the language hereof
shall not be construed for or against any such party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
Trimark Inc. / NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 27
NHANCEMENT: TRIMARK:
NHANCEMENT TECHNOLOGIES INC. TRIMARK INC.
By: /s/ Xxxxxxx X. Xxxx By: /s/ Xxxxxxx Xxxxxx
---------------------------- ----------------------------------
Xxxxxxx X. Xxxx, Xxxxxxx Xxxxxx
President and Chief Executive President and Chief Executive Officer
Officer
SHAREHOLDERS: By: /s/ Xxxx Xxxxxxx
----------------------------------
Xxxx Xxxxxxx
/s/ Xxxx Xxxxxxx Executive Vice President and Chief
--------------------------------- Operating Officer
Xxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxx
---------------------------------
Xxxxxxx Xxxxxx
