EXHIBIT 2.3
PLAN AND AGREEMENT OF REORGANIZATION
THIS PLAN AND AGREEMENT OF REORGANIZATION ("AGREEMENT"), dated December
10, 1999, by and among Trimark Incorporated, a California corporation
("TRIMARK"), Xxxx Xxxxxxx and Xxxxxxx Xxxxxx (individually a "SHAREHOLDER" and
collectively the "SHAREHOLDERS"), and NHancement Technologies Inc., a Delaware
corporation ("NHANCEMENT").
PLAN OF REORGANIZATION
The reorganization (the "REORGANIZATION") will comprise, in general, the
merger of Trimark with and into a wholly-owned subsidiary of NHancement to be
named "NHancement Acquisition Corp." and incorporated following the date hereof
under the laws of the State of California ("MERGER SUB"), 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 Merger Sub, the separate existence of Trimark
shall cease and Merger Sub 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"). Merger
Sub 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")
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 2
in accordance with the 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 Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of Trimark and Merger Sub 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 Merger Sub shall be the Articles of
Incorporation and Bylaws of the Surviving Corporation.
1.4 DIRECTORS AND OFFICERS. The Directors of Merger Sub
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 Merger
Sub 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 Merger Sub
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 Merger
Sub 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
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 3
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 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.
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 4
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, powers
and franchises of Trimark and Merger Sub, the officers and Directors of Trimark
and Merger Sub 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.
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 5
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
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
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 6
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.
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.
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 7
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.
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.
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 8
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.
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
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 9
(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.;
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
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 10
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 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
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 11
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
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.
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 12
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.
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
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 13
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),
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.
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 14
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 Shareholders a copy of its Form 10-K for the fiscal year ending
September 30, 1998 and its Form 10-Q 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:
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
SmallCap 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 $4.00 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
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 15
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) $4.00
minus the then current fair market value of a share of NHancement's Common Stock
determined in accordance with the Valuation Formula or (b) $2.50 (i.e. $4.00 -
$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 $1.50 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 $4.00 and $1.50 (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) $4.00
minus the then current fair market value of a share of NHancement's Common Stock
determined in accordance with the Valuation Formula or (b) $2.50 (i.e. $4.00 -
$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
$1.50 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 $4.00 and $1.50 (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 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,
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 16
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.
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.
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 17
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 SUBSTANCE SATISFACTORY
TO THE ISSUER THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT
REQUIRED."
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 18
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 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.
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 19
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, 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,
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 20
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 notify the
indemnifying party will not relieve such
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 21
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,
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 22
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
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
MERGER SUB. The obligations of NHancement and Merger Sub 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 Merger
Sub:
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
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 23
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.
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 December 11, 1999,
(ii) the Effective Time has not occurred by January 31, 2000 (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
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 24
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 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, Merger
Sub, 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 Merger Sub, 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.
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 25
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 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).
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 26
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
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
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 27
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.
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
Trimark Inc./ NHancement Technologies Inc.
Plan & Agreement of Reorganization
Page 28
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.
NHANCEMENT: TRIMARK:
NHANCEMENT TECHNOLOGIES INC. TRIMARK INCORPORATED
By: /s/ Xxxxxxx X. Xxxx By: /s/ Xxxxxxx Xxxxxx
----------------------------- -----------------------------------
Xxxxxxx X. Xxxx, Xxxxxxx Xxxxxx,
President and Chief Executive President and Chief Executive
Officer Officer
By: /s/ Xxxx Xxxxxxx
-----------------------------------
Xxxx Xxxxxxx
SHAREHOLDERS: Executive Vice President and Chief
Operating Officer
/s/ Xxxx Xxxxxxx
-----------------------------
Xxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxx
-----------------------------
Xxxxxxx Xxxxxx
