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As filed with the Securities and Exchange Commission on May 14, 1998.
Commission File No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NHANCEMENT TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
(State or other jurisdiction of incorporation or organization)
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84-1360852
(I.R.S. Employer Identification Number)
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39420 LIBERTY STREET, SUITE 250
FREMONT, CALIFORNIA 94538
(510) 744-3333
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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CORPORATION SERVICE COMPANY
1013 CENTRE ROAD
WILMINGTON, DELAWARE, 19805
(800) 927-9800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
CYNTHIA M. LOE, ESQ.
TOMLINSON ZISKO MOROSOLI & MASER LLP
200 PAGE MILL ROAD, SUITE 200
PALO ALTO, CALIFORNIA 94306
(650) 325-8666
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Title of each class Proposed maximum
of securities to be Amount to be maximum offering aggregate offering Amount of
registered registered (1) price per unit(2) price(2) registration fee(2)
<S> <C> <C> <C> <C>
Common Stock 1,638,375 $2.90626 $4,761,527.00 $1,405.00
($0.01 par value) shares
</TABLE>
(1) Includes (i) the estimated number of shares of Common Stock that may be
issued upon conversion of the Series A Convertible Preferred Stock issued or
issuable to certain of the selling stockholders, based on a conversion price
equal to 75% of the average closing bid price of the Common Stock for the five
(5) trading days ending on May 12, 1998 and (ii) 150,000 shares of Common Stock
held by a selling stockholder who is an affiliate of the Company. Pursuant to
Rule 416 of the Securities Act of 1933, as amended (the "Securities Act"), there
are also being registered hereunder such additional shares as may be issued as a
result of (x) accrued but unpaid dividends on the Series A Convertible Preferred
Stock, (y) any increase in the number of shares of Common Stock issuable upon
conversion of the Series A Convertible Preferred Stock by reason of the floating
rate conversion price and (z) any future stock dividends, stock distributions,
stock splits or similar capital readjustments.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee. Pursuant to Rule 457(c) under the Securities Act, the
registration fee has been calculated based upon the average of the bid and asked
price per share of the Common Stock, as reported on the Nasdaq SmallCap Market
System on May 11, 1998.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 3
THE INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 14, 1998
1,638,375 SHARES
NHANCEMENT TECHNOLOGIES INC.
COMMON STOCK
All of the shares of Common Stock, $0.01 par value ("Common Stock"), of
NHancement Technologies Inc., a Delaware corporation (the "Company" or
"NHancement"), offered hereby are being sold by certain stockholders of the
Company named herein under "Selling Stockholders" and may be offered for sale
from time to time by and for the account of such stockholders (collectively, the
"Selling Stockholders") as more fully described herein. See "Selling
Stockholders." Up to 150,000 of the shares offered for sale hereby are held by a
Selling Stockholder who is an affiliate of the Company; such Selling Stockholder
presently holds approximately 18.25% of the issued and outstanding shares of the
Common Stock of the Company. Such shares are being registered pursuant to the
terms of a registration rights agreement entered into between the Company and
such Selling Stockholder in connection with the initial public offering of the
Company's Common Stock in February 1997. The balance of the shares offered for
sale hereby are issuable upon conversion of the Series A Convertible Preferred
Stock of the Company currently held by or to be issued to certain of the Selling
Stockholders. Based on a conversion price equal to 75% of the average closing
bid price of the Common Stock for the five trading days ending on May 12, 1998,
the Series A Convertible Preferred Stock would convert into 1,488,375 shares of
Common Stock. The foregoing estimate is for illustrative purposes only. The
actual number of shares of Common Stock issued or issuable upon conversion of
the Series A Convertible Preferred Stock is subject to adjustment and could be
materially more than such estimated amount, depending upon factors that cannot
be predicted by the Company at this time, including, among others, the future
market price of the Common Stock. See "Risk Factors -- Prior Losses; Uncertainty
of Future Profitability" and "--Potential Volatility of Stock Price." There is
also a limitation on the number of shares of Common Stock that can be issued
upon conversion of the Preferred Stock at any particular time; generally, the
Selling Stockholders holding Series A Convertible Preferred Stock have
contractually agreed with the Company not to convert the Series A Convertible
Preferred Stock to the extent that such conversion would result in a Selling
Stockholder beneficially owning more than 9.99% of the then-outstanding Common
Stock. In addition, the issuance of shares of Series A Convertible Preferred
Stock convertible into Common Stock representing more than 20% of the
then-outstanding Common Stock of the Company requires the approval of the
Company's stockholders, which approval has not yet been solicited or obtained.
For a further description of the terms of the Series A Convertible Preferred
Stock financing, see "Recent Developments."
The Company will not receive any proceeds from the sale of shares
offered hereby by the Selling Stockholders. See "Use of Proceeds," "Selling
Stockholders" and "Plan of Distribution." The shares are being offered on a
continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act"), during a period of time commencing on the
effective date of the Registration Statement of which this Prospectus forms a
part and ending on _________________ or the earlier sale of all of the shares
offered hereby.
The Common Stock is currently listed on the Nasdaq SmallCap Market
System Market under the symbol "NHAN." On May 12, 1998, the closing bid price
per share of the Common Stock on the Nasdaq SmallCap Market System was $3.00.
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The shares may be offered by the Selling Stockholders from time to time
in transactions (which may include block transactions) on the Nasdaq SmallCap
Market System, in negotiated transactions, through a combination of such methods
of sale, or otherwise, at fixed prices that may be changed, at market prices
prevailing at the time of sale, or at negotiated prices. The Selling
Stockholders may effect such transactions by selling the shares to or through
broker-dealers, who may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
of the shares for whom such broker-dealers may act as agents or to whom they may
sell as principals, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions). As of the date of this Prospectus,
no agreements had been reached for the sale of the shares or the amount of any
compensation to be paid to underwriters, brokers or dealers in connection
therewith. The Company has agreed to bear all expenses in connection with the
registration and sale of the shares being offered hereby by the Selling
Stockholders, other than commissions, concessions or discounts to underwriters,
brokers or dealers and certain fees and expenses of counsel and other advisors
to certain of the Selling Stockholders. See "Selling Stockholders" and "Plan of
Distribution." Each of the Selling Stockholders, individually, reserves the sole
right to accept or reject, in whole or in part, any proposed purchase of the
shares to be made in the manner set forth above.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" COMMENCING ON PAGE _____ FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY SELLING STOCKHOLDER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
The date of this Prospectus is _________________, 1998.
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Seven World Trade Center, 13th Floor, New
York, New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can also be
obtained from the Commissioner's Web site at "http://www.sec.gov" and at
prescribed rates from the Public Reference Section of the Commission, at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Company's
Common Stock is currently quoted for trading on the Nasdaq SmallCap Market
System, and reports, proxy statements and other information concerning the
Company may be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 under the Securities Act with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, and to the exhibits and
schedules thereto. Statements contained in this Prospectus as to the contents of
any contract or any other document referred to herein are not necessarily
complete, and, in each instance, are qualified in all respects by reference to
the applicable documents filed with the Commission. The Registration Statement
and the exhibits and schedules thereto filed by the Company with the Commission
may be inspected and copied at the locations described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the
Company pursuant to the Exchange Act are hereby incorporated herein by reference
to this Prospectus:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997.
(b) All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering contemplated hereby.
(c) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A (Registration No. 0-21999), filed
with the Commission under Section 12 of the Exchange Act, including any
amendments or reports filed for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering covered by this Prospectus shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein (solely with
respect to statements incorporated by reference herein from a document that was
filed prior to the date of this Prospectus), or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the information
that has been incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Requests for copies of such information should be
directed to
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Douglas S. Zorn, Executive Vice President and Chief Financial Officer,
NHancement Technologies Inc., 39420 Liberty Street, Suite 250, Fremont,
California; Telephone Number: (510) ) 744-3333.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements included in or incorporated by reference into this
Prospectus constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions, which
will, among other things, impact the demand for the Company's products and
services; market demand, which generally tends to increase during strong years
of the business cycle and generally tends to decrease during weak years of the
business cycle, although the Company's historical and future financial
performance may not necessarily conform to these stated trends; product
performance and technological developments, which may affect the Company's
ability to compete with other companies marketing products or performing
services similar to those marketed or performed by the Company, thereby
affecting the Company's ability, among other things, to generate revenues;
changes in the Company's business strategy or development plans, which may,
among other things, prolong the time it takes to achieve the Company's
objectives described herein; the loss of any significant suppliers or customers;
the Company's dependence on key personnel; the quality, judgment and strategic
decisions of management and other personnel; and other factors referenced in
this Prospectus.
SPECIAL NOTE REGARDING CERTAIN TRANSACTIONS
In January 1998, the Company entered into a definitive agreement to
acquire Infotel Technologies (Pte) Ltd ("Infotel"), a communications systems
integrator located in Singapore. Closing of the transaction is contingent upon
the Company obtaining the financing necessary to complete the acquisition. In
the event that the Company is unable to complete the transaction by June 24,
1998, the Company is obligated to pay to the Infotel stockholders a termination
fee in the amount of approximately $312,500, together with interest at 3% above
the prime rate. See "Recent Developments" for a more complete description of the
terms of the proposed acquisition. See also the audited and unaudited financial
statements of Infotel and the pro forma financial statements of the Company
included in this Prospectus in accordance with the rules and regulations
promulgated by the Securities and Exchange Commission. There is no assurance
that the pending acquisition of Infotel will be completed by the Company,
notwithstanding the inclusion in this Prospectus of the Company's pro forma
financial information and the audited and unaudited financial statements of
Infotel.
In April 1998, the Company entered into a financing transaction with
certain of the Selling Stockholders pursuant to which the Company agreed to sell
shares of the Series A Convertible Preferred Stock of the Company that are
convertible into shares of the Common Stock offered hereby. The maximum
aggregate proceeds of the offering of Preferred Stock are $3.0 million, of which
$1,250,000 (less certain costs and expenses in the amount of approximately
$162,500) had been paid to the Company as of the date of the filing of the
Registration Statement on Form S-3 of which this Prospectus is a part. Payments
for additional installments of Preferred Stock are payable to the Company in
accordance with, and are subject to the terms of, the Preferred Stock financing.
See "Recent Developments" for a more complete description of the terms of the
Preferred Stock financing.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
more detailed information and financial statements, appearing elsewhere in or
incorporated by reference into this Prospectus. Each prospective investor is
urged to read this Prospectus in its entirety. This Prospectus includes certain
trademarks of NHancement and its subsidiaries.
The Company
NHancement Technologies Inc. is a multimedia communications systems
integrator, headquartered in Fremont, California. Its objective is to become a
leading global systems integrator of communications-centric products. The
Company, through its two operating subsidiaries, Voice Plus, Inc., a California
corporation ("Voice Plus" or "VPI"), also headquartered in Fremont, California,
and Advantis Network & System Sdn Bhd, a Malaysian corporation headquartered in
Kuala Lumpur ("Advantis"), provides businesses with communications products and
technological innovations designed to enhance efficiency. Services currently
provided by the Company include voice messaging, e-mail, paging and multimedia
systems, network servers, local area networks, wide area networks, routers,
transmission systems and network security systems.
The Company was incorporated in 1996 to pursue a business combination
opportunity with Voice Plus(R), a company engaged in the business of integrating
voice processing systems with telecommunications equipment, and BioFactors, Inc.
("BioFactors" or "BFI"), a development stage company incorporated in Delaware
that offered the FACTOR 1000(R) system, a proprietary computerized human
impairment testing system. These two companies were acquired by NHancement on
February 3, 1997 pursuant to two separate merger transactions whereby each of
Voice Plus and BioFactors became wholly-owned subsidiaries of the Company.
Immediately following these acquisitions, the Company completed an initial
public offering ("IPO") of shares of its Common Stock.
Subsequent to the completion of the IPO, management decided to combine
the operations of Voice Plus and BioFactors into a single entity. Effective as
of November 12, 1997, BioFactors was merged with and into Voice Plus in a
statutory merger intended to qualify, for federal income tax purposes, as a
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended. Voice Plus was the surviving corporation in the merger transaction with
BioFactors, and the separate existence of BioFactors ceased on the effective
date of the merger. The operations of the combined entity are currently being
conducted under the name of "Voice Plus."
Prior to its merger with Voice Plus, BioFactors had concentrated on
developing a market for the FACTOR 1000 system, which is used for detecting
worker impairment. The Company has since determined that such effort is no
longer justified, given the resources required to develop such a market, as well
as the need to dedicate its financial resources to its other core businesses,
and plans to seek a buyer for the Factor 1000 technology in 1998.
The acquisition of Advantis was completed by the Company on December
15, 1997. Advantis, now a wholly-owned subsidiary of NHancement, is a
communications systems integrator formed to address the growing communications
infrastructure needs of Malaysia.
On January 16, 1998, the Company entered into a definitive agreement to
acquire all of the issued and outstanding shares of the capital stock of Infotel
Technologies (Pte) Ltd ("Infotel"), a company organized under the laws of
Singapore. The terms of the agreement require a cash payment of approximately
$2.3 million, notes payable by NHancement to the Infotel stockholders of
approximately $2.0 million (with payment subject to Infotel achieving certain
1998 and 1999 profitability targets), and the issuance of 431,000 shares of
NHancement Common Stock. Consummation of the transaction is contingent upon the
Company obtaining the financing necessary to complete the acquisition, the
closing of which must occur, if at all, by no later than June 24, 1998.
The Company recently entered into a securities purchase agreement
providing for the sale to certain of the Selling Stockholders of shares of
Series A Convertible Preferred Stock, all or a portion of the proceeds of which
will be applied toward the purchase price of Infotel. The maximum aggregate
amount of the Preferred
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Stock financing is $3.0 million, of which $1,250,000 (less certain costs and
expenses in the amount of approximately $162,500) had been paid to the Company
as of the date of the filing of the Registration Statement on Form S-3 of which
this Prospectus is a part; and additional installments are payable to the
Company provided certain conditions are satisfied (see "Recent Developments" for
a more complete description of the terms of the Preferred Stock financing).
Should the Infotel acquisition be consummated, in addition to the Company's
existing portfolio of infrastructure communications equipment products, it will
provide radar system integration, turnkey project management services and test
instrumentation, as well as a wider portfolio of communications equipment. There
is no assurance that the Company will be able to consummate the Infotel
transaction or to obtain the financing necessary to complete the Infotel
acquisition. For a more complete description of the terms of the Infotel
transaction and the Series A Convertible Preferred Stock offering, as well as
the shares of Common Stock being offered hereby, see "Selling Stockholders" and
"Recent Developments."
The Offering
Securities offered by
the Selling Stockholders 1,638,375 shares of Common Stock(1)
Common Stock outstanding
prior to the offering 4,436,500 shares of Common Stock(2)
Common Stock to be outstanding
after the offering 5,924,875 shares of Common Stock(3)
Risk Factors The Common Stock offered hereby
involves a high degree of risk. See
"Risk Factors."
Use of Proceeds The Company will not receive any
proceeds from sales of the Common
Stock by the Selling Stockholders
but will bear the expenses of
registration of such Common Stock.
See "Use of Proceeds," "Selling
Stockholders" and "Plan of
Distribution."
Selling Stockholders Certain of the Selling Stockholders
are affiliates of the Company. See
"Selling Stockholders."
Recent Developments The Company has engaged in
transactions and experienced changes
in its financial position, material
to the Company since the date of its
Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1977.
See "Recent Developments."
Nasdaq Symbol Common Stock "NHAN."
- --------------------
(1) Estimated based in part on the aggregate number of shares of Common Stock
that may be issued upon conversion of shares of Series A Convertible Preferred
Stock issued or issuable to the Selling Stockholders, based on a conversion
price equal to 75% of the average closing bid price of the Common Stock for the
five (5) trading days ending on May 12, 1998. A greater or lesser number of
shares of Common Stock may be offered hereby in the event that (i) certain of
the Selling Stockholders do not acquire the maximum aggregate number of shares
of Preferred Stock that are convertible into the Common Stock offered hereby;
(ii) certain of the Selling Stockholders convert less than all shares of
Preferred Stock held by such Selling Stockholders into shares of Common Stock;
or
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(iii) the conversion price of the Preferred Stock is more or less than the
conversion price in effect on or about May 12, 1998. Any increase in the number
of shares issuable upon conversion of the Series A Convertible Preferred Stock
by reason of the floating rate conversion price, issuable as a result of accrued
but unpaid dividends on the Series A Convertible Preferred Stock, or issuable by
operation of certain antidilution provisions, automatically will result in an
increase in the number of shares covered by the Registration Statement on Form
S-3 of which this Prospectus is a part. Number of shares also includes 150,000
shares offered for sale hereby James Gillespie, an affiliate of the Company. See
"Risk Factors," "Selling Stockholders" and "Recent Developments."
(2) Based on actual shares of Common Stock outstanding on the date of this
Prospectus. Does not include (i) shares of Common Stock issuable upon conversion
of the Preferred Stock outstanding on the date of this Prospectus; (ii) shares
of Common Stock issuable to the former stockholders of Advantis upon
satisfaction of certain conditions precedent to issuance of such shares; (iii)
shares of Common Stock issuable to the current stockholders of Infotel, if, and
in the event that, the Company acquires Infotel; (iv) outstanding options and
options available for grant under the Company's Equity Incentive Plan, as
amended through the date of this Prospectus; or (v) other outstanding options or
warrants.
(3) Assumes issuance of all shares of Series A Convertible Preferred Stock and
conversion of all such shares into Common Stock at the conversion rate described
in Footnote 1 above. The actual number of shares of Common Stock outstanding may
be more or less, as described in Footnote 1 above. Does not include exercise of
any outstanding options, warrants or other convertible securities.
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a
high degree of risk relating to the Company, the markets in which the Company
operates and the securities markets, particularly the markets for securities of
smaller issuers such as the Company. Prospective purchasers of Common Stock
should consider carefully the information set forth below, as well as the other
information in this Prospectus, in determining whether to purchase the shares of
Common Stock offered hereby.
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully before purchasing the
Common Stock offered hereby. The discussion in this Prospectus, and in the
Company's annual, quarterly and other periodic reports incorporated in this
Prospectus, contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. See "Special Note Regarding Forward-Looking
Statements" on page ____. Such factors include, among others, the risk factors
set forth below.
Risks Associated with Delisting of Common Stock; Penny Stock Rules.
Although the Common Stock was approved for quotation on the Nasdaq
SmallCap Market System in connection with the Company's IPO, there can be no
assurance that it will remain eligible to be included on the Nasdaq SmallCap
Market System. In this regard, on or about April 16, 1998, Nasdaq informed the
Company that it no longer met the requirements for continued listing on the
Nasdaq SmallCap Market System. Specifically, the Company failed to meet the
requirements of Nasdaq Marketplace Rule 4310(c)(2) which requires that an issuer
maintain (i) net tangible assets of Two Million Dollars ($2,000,000); (ii)
market capitalization of Thirty-Five Million Dollars ($35,000,000); or (iii) net
income of Five Hundred Thousand Dollars ($500,000) in the most recently
completed fiscal year or in two of the last three most recently completed fiscal
years. The Company has notified Nasdaq of the steps it has taken and proposes to
take in order to remedy the above deficiency. The propriety of continuing the
Company's listing on the Nasdaq SmallCap Market System is currently being
reviewed by Nasdaq. While the Company believes that it will be in position to
meet these listing requirements in the near-term future, such belief is
dependent in part upon the Company completing the Infotel acquisition, the
financing for which had not been completed as of the date of this Prospectus.
There can be no assurance that the Company will in fact meet these requirements
in any future period.
If the Company is otherwise unable to meet the Nasdaq SmallCap Market
System's continuing listing requirements described above, Nasdaq may take
appropriate action against the Company, including placing
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restrictions on or additional requirements for listing of its Common Stock or
the denial of listing of its Common Stock. If the Company's Common Stock is
delisted from the Nasdaq SmallCap Market System, the Company will become subject
to the Securities and Exchange Commission's "penny stock" rules, and as a
result, an investor will find it more difficult to dispose of, or to obtain
accurate quotations as to the price of, the Company's Common Stock.
The "penny stock" rules under the Exchange Act impose additional sales
practice and market-making requirements on broker-dealers who sell and/or make a
market in such securities. For transactions covered by the penny stock rules, a
broker-dealer must make special suitability determinations for purchasers and
must have received the purchaser's written consent to the transaction prior to
sale. In addition, for any transaction involving a penny stock, unless exempt,
the rules require delivery prior to any transaction in a penny stock of a
disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities. Finally, monthly statements are required to be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market and penny stocks. As a result, the Company's delisting
from the Nasdaq SmallCap Market System and its becoming subject to the rules on
penny stocks would negatively affect the ability or willingness of
broker-dealers to sell or make a market in the Company's securities and,
therefore, would severely and adversely affect the market liquidity for the
Company's Common Stock.
Prior Losses; Uncertainty of Future Profitability.
For the year ended December 31, 1997, the Company incurred a net loss
in the amount of $4.6 million on net revenues of $9.0 million. The loss resulted
primarily from a combined charge of a $4.7 million impairment write-off and
amortization of goodwill associated with the Company's acquisition of Voice Plus
in February 1997. Net revenues for the first quarter of 1998 were $1.22 million
with a net loss for the quarter of approximately $786,300. VPI revenues were
significantly below historical levels for the same period in 1997, due in part
to the uncertainty surrounding the sale of the customer premises equipment
business of Centigram Communications Corporation, which management of the
Company believes caused VPI customers to delay their buying decisions. In
addition, the weakness of the Malaysian currency caused Advantis customers to
delay implementation of planned projects. Also, the issuance of the Series A
Convertible Preferred Stock that is convertible into shares of Common Stock at a
25% discount of which will be reflected as a preferred stock dividend, will
result in an increase in the loss applicable to Common Stock in computing the
net loss per share.
The failure of the Company to produce positive operating results may
affect the future value of the Common Stock sold hereunder, may contribute to
the Company losing its eligibility for listing of the Common Stock on the Nasdaq
SmallCap Market System, may adversely affect the Company's ability to obtain
debt or equity financing on terms acceptable to the Company, and may prevent the
Company from completing future acquisitions, including the Infotel acquisition.
See generally "Risk Factors -- Possible Volatility of Stock Prices," "-- Risks
Associated with Delisting of Common Stock; Penny Stock Rules," "-- Financing
Risks," and other risks described under "Risk Factors," as well as "Recent
Developments."
Possible Volatility of Stock Prices.
The over-the-counter markets for securities such as the Common Stock
historically have experienced extreme price and volume fluctuations during
certain periods. These broad market fluctuations and other factors, such as new
product developments and trends in the Company's industry and the investment
markets generally, as well as economic conditions and quarterly variations in
the Company's results of operations, may adversely affect the market price of
the Common Stock. In addition, there can be no assurance that the Company's
Common Stock will remain eligible for listing on the Nasdaq SmallCap Market
System. See "Risk Factors--Risks Associated with Delisting of Common Stock;
Penny Stock Rules."
Financing Risks.
The acquisition of complementary businesses and products is an element
of the Company's business strategy. If a cash payment in excess of available
working capital is required to make an acquisition, the
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Company will need to obtain additional debt or equity financing. Debt financing
may require the Company to pay significant amounts as interest and principal
payments, thus reducing the resources available to expand its existing
businesses. Equity financing may be dilutive to the Company's existing
stockholders' interest in the assets or earnings of the Company. There can be no
assurance that the Company will be able to obtain either debt or equity
financing if and when it is needed for acquisitions or that, if available, such
financing will be available on terms the Company deems acceptable. The inability
of the Company to obtain such financing would have a material adverse effect on
the Company's acquisition strategy. Further, the refusal of potential
acquisition candidates to accept Common Stock in payment of the Company's
purchase price obligations, in whole or in part, could require the Company to
reduce or curtail its acquisition strategy. To the extent that Common Stock is
used as consideration in an acquisition transaction, such stock issuance may be
dilutive to the Company's existing stockholders. Even if the Company is able to
obtain financing needed for an acquisition, the terms of such financing may
involve considerable costs to the Company.
VPI's Strategic Relationship with Centigram Communications Corporation.
VPI's business is based upon the integration of hardware and software
and telecommunications and data processing equipment manufactured by others into
integrated systems designed to meet the needs of its customers. Although VPI has
distributor agreements with a number of equipment manufacturers, substantially
all of its revenue is based upon products manufactured by Centigram
Communications Corporation ("Centigram"). The Company depends upon Centigram to
offer products that are competitive with products offered by other manufacturers
as to technological advancement, reliability and price. If Centigram's
competitors should surpass Centigram in any of these qualities, the Company may
be required to establish alternative strategic relationships. Any such
development, or any other adverse change in the Company's distributor
relationship with Centigram, would adversely affect the Company's business for
an indeterminate period of time until new supplier relationships could be
established. In this regard, Centigram recently announced to the public the sale
to Mitel Corporation ("Mitel") of its customer premises equipment ("CPE")
business. The distributor agreement entered into with Centigram may be canceled
by either party upon ninety (90) days' notice and is subject to termination in
the event that the Company defaults on or is otherwise in breach of various of
its obligations under the agreement. The Company has begun negotiations with
Mitel to insure that its access to Centigram products will continue
uninterrupted. Mitel has indicated its intention to maintain the Centigram CPE
distribution, including the VPI distributor agreement. However, an agreement has
not yet been signed with Mitel and no assurances can be made that an agreement
with terms acceptable to the Company will be successfully consummated. If Mitel
does not permit third parties such as the Company to continue to distribute the
CPE products, there would be a significant adverse impact upon the Company's
business for an indeterminate period of time until new supplier relationships
could be established.
Reliance upon VPI's and Advantis' Distributor and Supplier Relationships;
Dependence on Significant Customers.
VPI has distributor agreements with a number of equipment manufacturers
in addition to Centigram. Also, Advantis has distributor agreements with a
number of equipment manufacturers. In accordance with the terms of these
distributor agreements, a manufacturer may discontinue the distributor
relationship because of factors related to a particular distributor or because
of a manufacturer's decision to change its method of distributing its products
to all or parts of its markets. In making such a change, a manufacturer of key
products sold by a distributor may effectively become a direct competitor of its
former distributor. Moreover, a manufacturer may reduce its dealer discounts,
eliminate any exclusive distribution rights, and/or reduce the manufacturer's
support of a distributor or otherwise adversely affect the competitive
environment in which the distributor sells the manufacturer's products. Any
material change in VPI's or Advantis' distributor relationships with their key
suppliers or any interruption of the delivery of equipment to VPI or Advantis by
any of their key suppliers would have a material adverse effect upon the
Company.
For the fiscal year ended December 31, 1997, revenues from sales to two
of the Company's customers accounted for approximately 19% and 7% of the total
net revenues for the year. The loss of one or more significant customers of the
Company would have a material adverse effect upon the Company's financial
condition. In addition, while Infotel's business is diversified over several
business segments and customer groups, its systems and networking business is
characterized by very large contracts and projects directed at a
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<PAGE> 12
limited number of customers in any one period. The loss or rescheduling of one
or more such contracts would affect the timing of Infotel's revenues and cash
flow, and, if Infotel is acquired by the Company, could result in a material
adverse effect upon the Company's financial condition.
Competition in VPI's Voice Processing and Customer Premises Equipment
Businesses.
The voice processing and customer premises equipment markets are highly
competitive and competition in this industry is expected to intensify with the
introduction of new product enhancements and new competitors. VPI competes with
a number of larger integrated companies that provide competitive voice
processing products and services as subsets of larger product offerings,
including all the former regional Bell operating companies and major PBX
equipment manufacturers, such as Fujitsu Limited and Lucent Technologies Inc.
("Lucent"), formerly a division of AT&T. These integrated public company
competitors are substantially larger than the Company and have substantially
greater revenues than the Company, and, as a result, may encroach on the
Company's voice processing equipment and service markets. Additionally, in the
customer premises equipment markets, VPI competes with two types of equipment
companies: (i) interconnects (PBX providers), including Lucent, Northern Telecom
Limited, Fujitsu Limited and NEC Corporation, and (ii) independent voice
processing manufacturers, such as Octel Communications Corporation (now owned by
Lucent), Digital Sound Corporation, Active Voice Corporation, Applied Voice
Technology, Inc., Glenayre Technologies, Inc. and Comverse Technology, Inc.,
among others, also compete with the Company in the service provider market.
VPI's competitors have better name recognition in the market, a larger installed
base of customers and greater financial, marketing and technical resources than
the Company.
Competition in Advantis' and Infotel's Infrastructure Communications Equipment
Businesses.
The infrastructure communications market in Malaysia is largely driven
by the growth of the country's manufacturing and industrial sectors as well as
the country's urbanization. Consequently, much of the market opportunity is
controlled by either the government or the general construction contractors.
Both market sectors are addressed by several local Malaysian companies that are
larger than Advantis. In addition, while Advantis currently does not compete
directly with other large systems integrators in the market, since it acts as a
sub-contractor to another larger systems integrator with whom it has aligned
itself, the Company expects that Advantis will face such competitors directly in
the future when it has better established its installed base. Further, continued
growth of Malaysia's manufacturing and industrial sectors will likely fuel
competition in the country's infrastructure communications market.
Infotel competes against several large companies in Singapore that are
better capitalized. Although Infotel has in the past managed to compete
successfully against such larger companies on the basis of its engineering and
project management expertise, there can be no assurance that such expertise will
permit Infotel to compete effectively with such larger companies in the future.
Further, various large manufacturers have established their own branch offices
in Singapore and compete against Infotel.
Risks in Integrating Acquired Companies.
Acquisitions may involve a number of special risks, including adverse
short-term effects on the Company's operating results, diversion of management's
attention from the operations of the Company, dependence on retention, hiring
and training of key personnel, risks associated with unanticipated problems or
legal liabilities and amortization of acquired intangible assets, some or all of
which could have a material adverse effect on the Company's operations and
financial performance. Successfully integrating the operations of additional
companies into those of the Company will require the cooperative efforts of the
managers and employees of the respective business entities, including the
integration of the owners or managers of smaller companies into roles that
require them to report to supervisors. Significant costs and management time may
be required to integrate management control systems. Furthermore, to manage its
growth effectively, the Company must continue to improve its operational,
financial and management controls and information systems, to accurately
forecast sales demand, to control its overhead and to manage its marketing
programs. There can be no assurance of accomplishing these results without
encountering substantial costs, delays or other problems. In this regard, the
Company experienced a net loss of $4.6 million on revenues of $9.0 million for
the fiscal year ended December 31, 1997, primarily due to a combined charge of a
$4.7 million impairment write-off and amortization
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of goodwill associated with the Company's acquisition of Voice Plus in February
1997. Other acquisitions, such as the recently completed acquisition of Advantis
or the pending acquisition of Infotel, if consummated, may result in impairment
charges in the future. See "Risk Factors -- Prior Losses; Uncertainty of Future
Profitability." Accordingly, no assurance can be given that the future
performance of the Company's subsidiaries will be commensurate with the
consideration paid to acquire such companies. If management fails to establish
the needed controls and to manage growth effectively, the Company's operating
results, cash flows and overall financial condition will be adversely affected.
Pro Forma Financial Statements
This Prospectus incorporates by reference certain historical financial
statements of the Company and contains pro forma financial statements. The pro
forma financial statements reflect the Company's best estimate of the impact of
the Infotel acquisition on the historical financial statements of the Company.
Since the acquisition of Infotel has not closed, the actual impact of the
transaction on the Company's future financial statements could be materially
different than as presented.
Foreign Market and Currency Risks.
The Company's global business strategy subjects it to foreign market
and currency risks. In particular, the devaluation of the Malaysian currency
(Ringgit) in relation to the United States Dollar has affected the short and
medium term revenues of the Company's Advantis subsidiary in Malaysia. Although
the Company believes that the long term effects of the currency problems in
Malaysia and the Asian region will be manageable, the short term uncertainty
related to fluctuations in the Ringgit has caused Advantis' customers to
postpone the deployment of communications equipment. In addition to the short
term effects of the Ringgit devaluation described above, which weakened
substantially in 1997, any prolonged devaluation of the Ringgit can be expected
to materially and adversely affect the operations and financial condition of
Advantis, and may result in a material adverse effect on the business and
financial condition of the Company. The revenue performance of Advantis in the
first calendar quarter of 1998 was significantly below historical levels and
this trend is expected to continue through 1998, as customers defer purchases
due to the weakness of the Malaysian currency. The Company's proposed
acquisition of Infotel may also subject the Company to foreign market and
currency risks in Singapore.
Risks Associated with Future Unspecified Acquisitions.
With the exception of the proposed acquisition of Infotel, the Company
has not entered into any agreements, understandings or arrangements with respect
to any future acquisitions, although it is pursuing various acquisition
opportunities. The Company does not intend to submit a proposed acquisition or
other business transaction to the review and vote of its stockholders, except as
required by Delaware law. Even if submitted to a vote of stockholders, the
Company's management and non-management directors own a substantial portion of
the Company's outstanding voting securities and may be able to control the
outcome of any such proposal. The Company's growth strategy is highly dependent
on the Company's ability to make future acquisitions.
Subordination of Claims of Stockholders.
The Company is a holding company and its assets consist of its
investments in its subsidiaries, namely VPI and Advantis, and, if the proposed
acquisition of Infotel is consummated, Infotel. The Company's rights, and,
therefore, the extent to which holders of Common Stock will be able to
participate in the distribution of assets of any subsidiary upon such
subsidiary's liquidation or reorganization, will be subject to prior claims of
the subsidiary's creditors, including trade creditors, except to the extent that
the Company may itself be a creditor with recognized claims against such
subsidiary (in which case the claims of the Company would still be subject to
the prior claims of any secured creditor of such subsidiary and of any holder of
more senior indebtedness).
Dependence Upon Key Personnel.
The Company believes its success will depend to a significant extent on
the efforts and abilities of certain of its and its subsidiaries' senior
management, in particular, those of Esmond T. Goei, the Company's Chairman
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of the Board of Directors, Chief Executive Officer and President, and Douglas S.
Zorn, the Company's Executive Vice President, Chief Financial Officer and
Treasurer, who is also a director of the Company. The Company has purchased key
personnel insurance policies in the amount of $1.0 million on the lives of each
of Messrs. Goei and Zorn, which policies name the Company as the sole
beneficiary. The Company intends to purchase additional key personnel insurance
policies on other key employees. There can be no assurance that the Company will
be able to maintain existing key personnel insurance policies or obtain key
personnel insurance policies on additional individuals at an acceptable cost.
The loss of the services of any of the Company's key employees would have a
material adverse effect on the Company.
Risks Related to Intellectual Property.
The Company intends to protect vigorously the Company's intellectual
property against infringement or misappropriation by others. There can be no
assurance, however, that steps taken by the Company will prevent
misappropriation of its intellectual property or that competitors will not
develop products similar to the Company's products. Further, the enforcement of
proprietary rights of the Company through litigation could result in costs to
the Company that could have a material adverse effect on its financial
condition. In addition, although the Company believes that its intellectual
property, including its CTT and FACTOR 1000(R) technology, does not infringe on
the proprietary rights of third parties, there can be no assurance that
infringement or invalidity claims will not be asserted against the Company in
the future. An adverse determination or the costs of defending litigation based
on such claims could have a material adverse effect on the Company's business
and financial condition.
Product Liability Exposure; Litigation Risk; Limited Insurance.
The Company's human impairment testing business, which it plans to
dispose of in 1998, exposes it to potential litigation by employees of companies
using FACTOR 1000(R) testing if the employee's employment relationship is
affected thereby. Product and service liability insurance is expensive, to the
extent it is available at all. The Company currently maintains general liability
insurance, including products liability insurance, in the amount of $2.0 million
per occurrence and $2.0 million in the aggregate per policy year. There can be
no assurance, however, that the Company will be able to maintain such insurance
on acceptable terms, that the Company will be able to secure increased coverage
if needed or that any insurance policy will provide adequate protection against
successful claims. A successful claim brought against the Company in excess of
the Company's insurance coverage could have a material adverse effect upon the
Company.
Governmental Regulation.
The Telecommunications Act of 1996 eliminated government mandated
barriers between local and long distance calling, cable television, broadcasting
and wireless service/service providers. Consequently, local telephone companies,
the traditional long distance carriers and cable television companies may now
provide both local telephone and long distance service, as well as television
programming. Such increased competition likely will change the infrastructure
for implementing communications applications, such as voice and electronic
messaging. Such changes could have a material adverse impact on VPI's voice
processing business.
The acquisition of Advantis required the approval of the Foreign
Investment Committee of the Malaysian government, which approval was obtained
subject to the Company agreeing to apply for certification as a Multimedia Super
Corridor ("MSC") company in Malaysia, although no time limit was specified for
obtaining such certification. The MSC is an economic development zone
established by the Malaysian government to stimulate the indigenous development
of information technology. To encourage the participation of businesses in the
zone, MSC status provides certain corporate benefits including access to
government grants, preferred vendor status within the MSC and tax-free status
for ten years. MSC status is dependent on an applicant's contribution to the
betterment of the Malaysian people through the application of certain technology
of which communications technology is a prime component. The Company has
undertaken certain efforts to obtain MSC certification, including the hiring of
a consultant knowledgeable in such processes. The Company believes that it has
the necessary merits for certification, but there is no assurance that the
Company will be able to obtain such certification.
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<PAGE> 15
Shares Eligible for Future Sale.
The market price for the Common Stock could be adversely affected by
the availability of shares of Common Stock for sale or actual sales of
substantial amounts of Common Stock by existing or future stockholders. At April
30, 1998, approximately 3,406,825 shares of Common Stock were freely tradeable
without restriction or further registration under the Securities Act, by persons
other than "affiliates" of the Company. Upon registration of the shares offered
for sale hereby, and receipt of certain approvals required to be obtained by the
Company in connection with the Series A Convertible Preferred Stock offering, a
minimum of an additional 1,638,375 shares will be available for sale on the open
market, subject to restrictions on transfer affecting sales of securities held
by affiliates. The actual number of shares offered for sale hereby may, in fact,
be significantly greater since the Company is obligated to issue a currently
indeterminate number of shares of Common Stock upon conversion of the Series A
Convertible Preferred Stock. The exact number of shares of Common Stock issuable
pursuant to such conversion cannot be estimated with certainty because,
generally, such issuances of Common Stock will vary inversely with the market
price of the Common Stock at the time of such conversion. The Series A
Convertible Preferred Stock is also subject to various adjustments to prevent
dilution resulting from stock splits, stock dividends or similar transactions,
and additional shares of Common Stock are issuable as a result of accrued but
unpaid dividends.
Approximately 821,175 shares of Common Stock are "restricted
securities" within the meaning of Rule 144 under the Securities Act ("Rule 144")
and may not be sold in the absence of registration under the Securities Act
unless an exemption from registration is available, including the exemption
afforded by Rule 144. Any Common Stock issued in the future to the former
stockholders of Advantis, pursuant to the terms of the Advantis acquisition
agreement, and any Common Stock issued to the stockholders of Infotel, in the
event that the Infotel transaction is consummated, will be "restricted
securities" within the meaning of Rule 144. The holders of approximately
1,029,675 shares of Common Stock (in addition to the shares offered hereby)
possess registration rights with respect to such shares. In addition, following
the expiration in August 4, 1998 of certain lock-up agreements restricting the
transfer of certain of the shares held by the Company's Chairman of the Board
and Chief Executive Officer and affiliates and other officers, directors and key
employees, approximately 410,588 shares of Common Stock will become available
for resale in the public market, subject to the volume limitations, holding
periods and other restrictions of Rule 144 affecting the transfer of such
shares. At April 30, 1998, 1,476,500 shares of Common Stock had been reserved
for issuance under the Company's Equity Incentive Plan, as amended to date. The
Company also has granted warrants to third parties to purchase 846,796 shares of
Common Stock at prices ranging from $4.80 to $188.80, together with certain
registration rights relating to certain of such shares. Future sales of shares
of Common Stock, or the perception that such sales could occur, could have a
material adverse effect on the market price of the Common Stock.
No Dividends.
To date, the Company has not paid any cash dividends on its Common
Stock and does not expect to declare or pay any cash or other dividends in the
foreseeable future. In addition, the Preferred Stock financing documents
restrict the Company from paying dividends on its Common Stock.
Control by Management.
The Company's current officers and directors own over 25% of the issued
and outstanding shares of Common Stock and, thus, may be able to influence the
election of a majority of the Company's directors and thereby direct the
policies of the Company.
Anti-Takeover Provisions.
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation, as amended to date (the "Certificate of Incorporation"), and
certain provisions of the Delaware General Corporation Law may make it difficult
to change control of the Company. For example, the Certificate of Incorporation
permits the Board of Directors, without stockholder approval, to issue one or
more classes or series of Preferred Stock having the number of shares,
designations, relative voting rights, dividend rates, liquidation and other
powers, rights,
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preferences and limitations that the Board of Directors establishes. The
issuance of Preferred Stock, including the Series A Convertible Preferred Stock
described in this Prospectus, while providing flexibility in connection with
possible financings, acquisitions and other corporate purposes, could, among
other things, adversely affect the voting power of the holders of Common Stock.
In addition, under certain circumstances, the issuance by the Company of
Preferred Stock, including the Series A Convertible Preferred Stock, the shares
of which are convertible into the Common Stock offered hereby and described
herein, may make it more difficult for a third party to gain control of the
Company, may discourage bids for the Common Stock at a premium and may otherwise
adversely affect the market price of the Common Stock. Employment agreements
with the Company's Chief Executive Officer and Chief Financial Officer provide
for substantial severance pay in the event of a "Change of Control" of the
Company, as such term is defined in such agreements. In addition, in the event
of a change of control of the Company, certain outstanding stock options will
vest and become immediately exercisable and certain restricted stock awards will
become nonforfeitable.
Conflicts of Interest.
Certain officers, directors and stockholders of the Company have
entered into loan transactions with the Company, have purchased and sold
securities of the Company and have engaged or may engage in other businesses for
their own account, which may be in competition with the Company, all of which
could give rise to conflicts of interest. The Company does not intend to enter
into business transactions or arrangements with officers, directors or
stockholders unless they are on terms at least as favorable to the Company as
could be obtained from unrelated third parties. However, there can be no
assurance that any transaction or arrangement between the Company and an
officer, director or stockholder will be advantageous to the Company, that
conflicts of interest will not arise with respect to such transactions or
arrangements, or that if such conflicts arise, they will be resolved in a manner
favorable to the Company.
Indemnification of Directors and Officers by the Company; Limitations on
Liability.
The Certificate of Incorporation limits the liability of directors of
the Company for monetary damages for breaches of directors' fiduciary duty of
care. In addition, the Delaware General Corporation Law and the Certificate of
Incorporation contain provisions for indemnification of officers and directors
of the Company. The Certificate of Incorporation requires the Company to
indemnify such persons to the full extent permitted by Delaware law. Each
officer and director will be indemnified in any proceeding alleging breaches of
fiduciary duty to the Company and similar wrongful conduct if he or she acted in
good faith and in a manner which he or she reasonably believed to be in, or not
opposed to, the best interests of the Company. Indemnification would cover
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement.
The Company's Bylaws also provide that the Board of Directors may cause
the Company to purchase and maintain insurance on behalf of any present or past
director, officer, employee, fiduciary or agent of the Company insuring against
any liability asserted against such person arising out of such person's
position, whether or not the Company would have the power to indemnify such
person. The Company currently maintains director and officer liability insurance
of $5.0 million per occurrence and $5.0 million in the aggregate per policy
year.
Year 2000 Potential Impact.
The Company has begun to conduct a review of its internal computer
systems to identify the systems that could be affected by the "Year 2000" issue
and is developing an implementation plan to resolve any such problems. The Year
2000 problem is the result of computer programs being written using two digits
(rather than four) to define the applicable year. Software programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a major system failure or
miscalculations. The Company presently believes that, with modifications to or
replacement of existing software, the Year 2000 problems will not pose
significant operational problems for the Company's domestic computer systems.
The Company believes that the costs associated with any such upgrade or
replacement of software will not be material, and that all such changes will be
implemented by the end of calendar year 1998. However, if such modifications are
not made in a timely manner, or are not made properly, the Company may be unable
to implement appropriate Year 2000 solutions, which could have a material
adverse effect on the Company's business, financial condition, results of
operations and cash flows.
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The Company distributes products from third party product equipment
manufacturers, some of which are susceptible to Year 2000 problems. During
fiscal year 1997, the Company initiated a review of the products its domestic
subsidiary, VPI, distributes to determine which, if any, are not capable of
recognizing the year 2000. Communications were initiated with all of the
manufacturers of such products to determine the nature and extent of any Year
2000 problems. Where potential computer problems of the Year 2000 products used
or distributed by the Company have been identified, these manufacturers have
stated that they have committed resources to resolving such problems prior to
year 2000. However, there can be no assurance that these manufacturers will, in
fact, timely complete the resolution of their Year 2000 problems or, even if
timely completed, that those solutions will be acceptable in the marketplace.
The solution to be provided by some manufacturers will involve a significant
upgrade cost to the end user, which may give rise to disputes and/or litigation
between the end user and the manufacturer, which may also involve the Company.
The costs of such possible disputes or litigation could be significant, thereby
resulting in a material adverse effect on the Company's business, financial
condition, results of operations and cash flows.
The Company acquired Advantis Network & Systems Sdn Bhd, a Malaysian
company, on December 15, 1997. Additionally, the Company signed a definitive
agreement on January 16, 1998, to acquire Infotel Technologies (Pte) Ltd
("Infotel"), a company organized under the laws of Singapore. The Company has
begun, but has not yet completed, its review of the internal computer systems of
Advantis and Infotel to identify the systems in each company that are not Year
2000 compliant; thus, at this time the Company has not been able to determine
whether Year 2000 problems (if any) will pose a significant operational problem
for the computer systems of either of those two companies, and whether those
operational problems, if any, would result in a material adverse effect on the
Company's business, financial condition or results of operations. Similarly, the
Company has not yet begun its review of third-party products distributed by
Advantis or Infotel to determine the nature and extent of Year 2000 problems, if
any, with such products. As a result, the Company is currently unable to
determine whether there are any Year 2000 problems associated with such
third-party products, and if so, whether the manufacturers will be able to
timely resolve any such problems. The Company also has not been able to
determine whether the legal systems of Malaysia and Singapore would result in
more or less litigation exposure to the Company and its subsidiaries if there
are disputes between the end user of a product installed by either Advantis or
Infotel, and the manufacturer.
RECENT DEVELOPMENTS
On January 16, 1998, the Company entered into a definitive agreement to
acquire all of the issued and outstanding shares of the capital stock of Infotel
Technologies (Pte) Ltd ("Infotel"), a company organized under the laws of
Singapore which provides radar system integration, turnkey project management
services, and test instrumentation, as well as a wide portfolio of
communications equipment. Consummation of the transaction is contingent upon the
Company obtaining third party financing on terms satisfactory to the Company by
no later than June 24, 1998. The extension of the closing date from April 1998
to June 1998 was agreed to by Infotel's stockholders, conditioned upon the
Company making certain concessions. These concessions included a deposit in
escrow of funds in the amount of approximately $937,500, approximately $312,500
of which, together with interest at the rate of 3% above the prime rate for the
period from April 14, 1998 through June 24, 1998, is payable to the Infotel
stockholders in the event that the transaction fails to close on or before June
24, 1998. The funds in escrow will be credited toward the purchase price in the
event that closing of the transaction occurs on or before June 24, 1998; any
interest earned on the escrowed funds is payable to the Infotel stockholders as
additional consideration. The basic terms of the acquisition agreement require
an initial cash payment of approximately $2.3 million, notes payable by
NHancement to the Infotel stockholders of approximately $2.0 million (with
payment subject to Infotel achieving certain 1998 and 1999 profitability
targets), and the issuance of 431,000 shares of NHancement's Common Stock,
subject to certain price protections. There is no assurance that this
transaction will close as scheduled or that the Company will be able to secure
the financing necessary to complete the acquisition.
On April 13, 1998, the Company signed a $3.0 million Series A
Convertible Preferred Stock financing agreement. Under the terms of the
agreement, the Company had been paid $1,250,000 (less commissions and certain
other costs and expenses of approximately $162,500) as of the date of filing of
the Registration Statement on Form S-3 of which this Prospectus is a part; and,
subject to satisfaction of certain conditions specified in the
14
<PAGE> 18
stock purchase agreement documentation, will receive $500,000 sixty days after
the effective date of the Registration Statement, $500,000 thirty days
thereafter and the final $750,000 thirty days thereafter. The failure by the
Company to comply with certain of the provisions of the agreement may result in
the Company being assessed amounts payable to the Preferred Stock investors.
Further, the issuance of shares of Preferred Stock, convertible into shares of
Common Stock in excess of 20% of the issued and outstanding shares of Common
Stock of the Company, requires stockholder approval under applicable rules and
regulations promulgated by Nasdaq. The Company plans to seek such approval at a
special meeting of stockholders to be held in June 1998 or such later date as is
determined by the Board of Directors of the Company.
The Preferred Stock bears a 5% cumulative dividend and has a
liquidation preference equal to the original purchase price plus cumulative but
unpaid dividends. If the Company's Common Stock trades for a thirty day average
below $2.00 or the average daily volume for a thirty day period falls below
20,000 shares, the investors are not required to fund any remaining portion of
the $3.0 million in excess of the first $1,250,000 investment. Further, if the
five day average closing bid price of the Company's Common Stock falls below
$2.00 per share, the Company has the option to redeem the Preferred Stock at
118% of the original purchase price plus cumulative but unpaid dividends. Any
shares of Preferred Stock tendered for conversion prior to delivery of the
Company's notice of redemption shall not be affected by the redemption notice
and shall be converted into shares of Common Stock. As to any shares with
respect to which such conversion rights have not been timely exercised, such
conversion rights shall terminate upon delivery by the Company of its notice of
redemption. The Preferred Stock is convertible into Common Stock at the lesser
of the five day average closing bid price as of the April 13, 1998 initial
closing date or 75% of the five day average closing bid price at the time of
each conversion.
The Common Stock offered hereby by certain of the Selling Stockholders
is issuable upon conversion of the Preferred Stock. The Company intends to
utilize all or a portion of the proceeds of this financing to pay a portion of
the initial cash payment on the pending Infotel acquisition; the balance
remaining, if any, will be used to pay amounts owing to certain creditors of the
Company and for working capital.
The Company's operations for the first quarter of 1998 resulted in
revenues of about $1.22 million with a net loss for the quarter of approximately
$786,000. VPI revenues were significantly below historical levels for the same
period in 1997, due in part to the uncertainty surrounding the sale of
Centigram's CPE business, which management of the Company believes caused
customers to delay their buying decisions. The Company believes that VPI
revenues will begin to improve by the third quarter of 1998. Advantis' revenues
were significantly below historical levels, primarily due to customers deferring
purchases due to the weakness of the Malaysian currency. The Company expects
this revenues trend to continue.
USE OF PROCEEDS
The proceeds from the sale of the shares offered hereby will be solely
for the account of the Selling Stockholders. Accordingly, the Company will not
receive any of the proceeds from the sale of shares by the Selling Stockholders.
SELLING STOCKHOLDERS
Of the shares of Common Stock offered hereby, 1,488,375 shares may be
issued upon the conversion of the 30,000 shares of Series A Preferred
Convertible Stock issued or proposed to be issued to The Endeavour Capital Fund
S.A. and AMRO INTERNATIONAL S.A. in the securities purchase transaction entered
into with the Company on April 13, 1998. Such number of shares may be higher or
lower due to the floating rate conversion price at which the Series A
Convertible Preferred Stock is convertible into Common Stock and the other
factors described on the cover page of this Prospectus and under the heading
"Prospectus Summary--The Offering." Pursuant to the terms of the securities
purchase agreement, the Company has agreed to sell to such investors up to
30,000 shares of Series A Convertible Preferred Stock for $3.0 million, net of
certain costs and expenses in the amount of approximately $162,500 paid by the
Company to counsel and other advisors to the investors, as well as to certain
finders. In addition, the securities purchase agreement provides for certain
additional payments to be made by the Company to counsel for the investors in
connection with the Form S-3 Registration Statement of which this Prospectus is
a part. The shares of Preferred Stock issued or issuable to the investors
pursuant to the
15
<PAGE> 19
Preferred Stock purchase agreement have been and will be issued by the Company
in reliance upon the exemption afforded by Section 4(2) of the Securities Act
and/or Regulation D promulgated by the Commission thereunder. The issuance to
the investors of additional shares of Preferred Stock is contingent upon
satisfaction by the Company of the conditions described under "Recent
Developments" and the Company's obtaining stockholder approval of certain of
such issuances. The Endeavour Capital Fund S.A. and AMRO INTERNATIONAL S.A. are
headquartered in Jerusalem, Israel and Zurich, Switzerland, respectively.
Up to an additional 150,000 shares are being offered hereby by James S.
Gillespie, the founder of Voice Plus and currently a director of the Company.
Until recently, Mr. Gillespie served as the President of Voice Plus and the Vice
President of Sales of the Company. The shares being offered hereby by Mr.
Gillespie are being registered pursuant to the terms of a registration rights
agreement entered into with Mr. Gillespie in connection with the Company's IPO
in February 1997.
The following table sets forth, to the knowledge of the Company, the
number of shares of Common Stock and the percentage of the outstanding shares of
Common Stock beneficially owned by each Selling Stockholder, the number of
shares to be offered and sold by such Selling Stockholder, and the number of
shares and percentage of outstanding shares to be beneficially owned by such
Selling Stockholder after such offering and sale, assuming that all the shares
offered by such Selling Stockholder are in fact sold. Unless otherwise
indicated, each person has sole investment and voting power with respect to the
shares set forth in the following table. As of April 30, 1998, the Company had
4,436,500 shares of Common Stock issued and outstanding, and 12,500 shares of
Series A Convertible Preferred Stock issued and outstanding.
16
<PAGE> 20
<TABLE>
<CAPTION>
Shares of Common
Name Shares of Common Stock Shares of Common Stock Beneficially
---- Beneficially Owned Stock Offered for Owned After
Before Offering (1)(2) Sale Offering(2)(3)
---------------------- ----------------- --------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
The Endeavour Capital Fund S.A. 310,078 6.53% 744,187 1/2(4) 0 0%
AMRO INTERNATIONAL S.A. 310,078 6.53% 744,187 1/2(4) 0 0%
James S. Gillespie 815,000(5) 18 1/4%(5) 150,000 665,000(5) 11.2%(5)
</TABLE>
- --------------------
(1) Includes shares of Common Stock issuable on conversion of shares of
Series A Convertible Preferred Stock which can be purchased within sixty
days of the date hereof (assuming a conversion rate based on 75% of the
average closing bid price of the Common Stock for the five trading days
ending on May 12, 1998).
(2) Excludes any shares issuable to Advantis or Infotel, respectively, upon
satisfaction of certain conditions precedent set forth in the Advantis
stock purchase agreement and in the definitive Infotel stock purchase
agreement (closing of the transaction of which has not yet occurred).
(3) Assumes sale of all shares of Common Stock offered hereby by the Selling
Stockholders.
(4) Assumes issuance of an aggregate of 15,000 shares of Series A Preferred
Convertible Stock and conversion of such shares into Common Stock based
on the conversion rate described in footnote 1 above, which amount may be
higher or lower depending upon the actual conversion rate in effect on
the date of any conversion of Preferred Stock into Common Stock. The
actual number of shares of Common Stock offered for sale may be higher or
lower based on a number of factors that cannot be predicted by the
Company at this time. These factors include issuances of additional
shares of Common Stock as a result of accrued but unpaid dividends, as
well as issuances of additional shares in the event of any future stock
dividends, stock distributions, stock splits or similar capital
readjustments. There are also limitations on the number of shares of
Common Stock that may be offered for sale at any time. See the cover page
of this Prospectus, "Prospectus Summary--The Offering" and "Recent
Developments."
(5) Includes shares of Common Stock issuable upon exercise of options,
warrants and other securities which are exercisable by Mr. Gillespie
within sixty days as of the date hereof. Excludes shares of Common Stock
issuable upon exercise of options, warrants and other securities which
are exercisable by persons other than the Selling Stockholders as of the
date of this Prospectus.
PLAN OF DISTRIBUTION
The shares may be offered and sold from time to time by the Selling
Stockholders. No Selling Stockholder is required to offer or sell any of its or
his shares. Any such sales may be made on the Nasdaq SmallCap Market System or
such other national securities exchange on which shares of Common Stock are then
listed, through negotiated transactions or otherwise at prices and at terms then
prevailing or at prices related to the then-current market price or in
negotiated transactions. The Selling Stockholders directly, or through agents
designated from time to time, or through underwriters, brokers or dealers also
to be designated, may sell the shares from time to time on terms to be
determined at the time of sale. Any such underwriters, brokers or dealers may
receive compensation in the form of commissions or otherwise in such amounts as
may be negotiated by them. As of the date of this Prospectus, no agreements had
been reached for the sale of the shares or the amount of any compensation to be
paid to underwriters, brokers or dealers in connection therewith.
17
<PAGE> 21
The Company will bear all expenses in connection with the registration
and sale of the shares, other than commissions, concessions or discounts to
underwriters, brokers or dealers and certain of the fees and expenses of counsel
and other advisors to the Selling Stockholders.
The Company has agreed to indemnify the Selling Stockholders and the
Selling Stockholders have agreed to indemnify the Company, its officers,
directors, employees, agents and controlling persons from certain damages or
liabilities arising out of or based upon any untrue statement or alleged untrue
statement of any material fact contained in or material omission or alleged
omission from the Registration Statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, to the
extent such untrue statement or omission was made in the Registration Statement
or other document in reliance upon information furnished by the indemnifying
party.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, the Company has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification of such liabilities
(other than the payment by the Company of expenses incurred by a director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered hereby, the Company
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The Selling Stockholders and any underwriter, broker or dealer who acts
in connection with the sale of the shares hereunder may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any compensation received by them and any profit on any resale of the shares as
principals might be deemed to be underwriting discounts and commissions under
the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Tomlinson Zisko Morosoli & Maser LLP, 200 Page Mill Road, Suite
200, Palo Alto, California 94306.
EXPERTS
The consolidated financial statements of NHancement Technologies Inc.
incorporated by reference in this Prospectus have been audited by BDO Seidman,
LLP, independent certified public accountants, to the extent and for the periods
set forth in their report incorporated herein by reference, and are incorporated
herein in reliance upon such report given upon the authority of said firm as
experts in auditing and accounting. The report of NHancement Technologies Inc.
contains an emphasis paragraph regarding the fact that the Company purchases
substantially all of its inventory requirements from one vendor and that such
vendor has announced the sale of its customer premise equipment business which
services the largest portion of the Company's business.
The financial statements of Infotel Technologies (Pte) Ltd included in
this Prospectus have been audited by Ernst & Young, Singapore, independent
certified public accountants, to the extent and for the periods set forth in
their report appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of said firm as experts in auditing and
accounting.
18
<PAGE> 22
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Pro Forma Combined Condensed PF-1
Financial Statements (Unaudited)
of Infotel Technologies (Pte) Ltd
and NHancement Technologies Inc.
as of December 31, 1997
Financial Statements (Unaudited) F-1
of Infotel Technologies (Pte)
Ltd as of December 31, 1997
Report of Independent Auditors F-6
Financial Statements of Infotel F-7
Technologies (Pte) Ltd as
of June 30, 1997 and 1996
</TABLE>
<PAGE> 23
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
OF INFOTEL TECHNOLOGIES (PTE) LTD AND
NHANCEMENT TECHNOLOGIES INC., AS OF DECEMBER 31, 1997
The following unaudited pro forma combined condensed financial statements assume
a business combination between NHancement Technologies Inc.("NHancement")
including its wholly-owned subsidiaries, Voice Plus, Inc. ("Voice Plus"), which
was acquired in February 1997 immediately prior to the NHancement initial public
offering, Advantis Network & System Sdn Bhd ("Advantis"), which was acquired in
December 1997, and Infotel Technologies (Pte) Ltd ("Infotel"), to be accounted
for as a purchase (the "Acquisition"). The pro forma combined condensed
financial statements are based on the historical financial statements and the
notes thereto of NHancement included in the annual report on Form 10-KSB for the
year ended December 31, 1997, and the historical financial statements of Voice
Plus, Advantis and Infotel for the year ended December 31, 1997.
The pro forma combined condensed balance sheet combines NHancement's audited
December 31, 1997 condensed balance sheet with Infotel's unaudited December 31,
1997 condensed balance sheet, giving effect to the Acquisition and a Preferred
Stock financing as if they had occurred on December 31, 1997. The pro forma
combined condensed statement of operations combines NHancement's historical,
Voice Plus' pro forma and Advantis' pro forma condensed statements of operations
for the year ended December 31, 1997 with the corresponding Infotel condensed
statement of operations for the year ended December 31, 1997, giving effect to
the acquisitions of Infotel, Advantis and Voice Plus, and a Preferred Stock
financing, as if they occurred as of January 1, 1997.
The pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if the acquisitions of Infotel, Advantis and Voice Plus had been
consummated on January 1, 1997, nor is it necessarily indicative of future
operating results or financial position. The unaudited pro forma combined
condensed financial statements do not incorporate any benefits from potential
cost savings or synergies of operations of the combined company.
NHancement estimates that it will incur direct transaction costs of
approximately $49,600 associated with the Acquisition which has been reflected
as a component of the purchase consideration for Infotel. There can be no
assurance that NHancement will not incur additional direct transaction costs
associated with this acquisition in subsequent periods or that management will
be successful in their efforts to integrate the operations of the two companies.
These pro forma combined condensed financial statements should be read in
conjunction with the historical financial statements and the related notes
thereto of NHancement incorporated into this Prospectus by reference to
NHancement's annual report on Form 10-KSB for the fiscal year ended December 31,
1997, and the financial statements and the notes thereto of Infotel included
herein.
PF-1
<PAGE> 24
NHANCEMENT TECHNOLOGIES INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
============================================================================================================================
Pro Forma
NHancement Infotel Adjustments Combined
============================================================================================================================
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,363,200 $ 1,681,000 (1) $ (4,041,900) $ 1,512,300
(2) 2,510,000
Short-term investments -- 837,000 837,000
Accounts receivable, net 3,005,200 1,611,000 4,616,200
Inventory 536,200 988,000 1,524,200
Costs and estimated earnings in excess of
billings on uncompleted contracts -- 898,000 898,000
Notes receivable 109,500 -- 109,500
Income tax receivable 172,000 -- 172,000
Prepaid expenses and other 179,300 117,000 296,300
- ----------------------------------------------------------------------------------------------------------------------------
Total current assets 5,365,400 6,132,000 9,965,500
- ----------------------------------------------------------------------------------------------------------------------------
Furniture and equipment, net 702,800 299,000 1,001,800
Excess of cost over net assets acquired 2,487,100 -- (1) 2,151,200 4,638,300
Long-term portion of shareholder debt 157,500 -- 157,500
Prepaid acquisition costs 49,600 -- (1) (49,600) --
Other assets 142,500 -- 142,500
- ----------------------------------------------------------------------------------------------------------------------------
$ 8,904,900 $ 6,431,000 $ 15,905,600
============================================================================================================================
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements.
PF-2
<PAGE> 25
NHANCEMENT TECHNOLOGIES INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1997
(UNAUDITED)
continued
<TABLE>
<CAPTION>
============================================================================================================================
Pro Forma
NHancement Infotel Adjustments Combined
============================================================================================================================
<S> <C> <C> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit $ 192,100 $ -- $ 192,100
Current portion of long-term obligations 296,500 -- 296,500
Deferred revenues 1,057,000 -- 1,057,000
Accounts payable 1,392,200 1,217,000 2,609,200
Accrued liabilities 440,600 195,000 635,600
Accounts payable, affiliated companies 426,700 -- 426,700
Accounts payable, shareholders 58,200 -- 58,200
Accrued professional fees 159,800 -- 159,800
Payroll related liabilities 249,200 -- 249,200
Accrued income taxes -- 78,000 78,000
- ----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 4,272,300 1,490,000 5,762,300
- ----------------------------------------------------------------------------------------------------------------------------
Deferred income tax -- 46,000 46,000
Long-term debt, net of current portion 157,500 -- (1) $ 1,916,200 2,073,700
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 4,429,800 1,536,000 7,882,000
- ----------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, $0.01 par value, 2,000,000
shares authorized, 30,000 shares issued and
outstanding after financing -- -- (2) 2,510,000 2,510,000
Common stock, $0.01 par value,
20,000,000 shares authorized, 4,959,500 shares
issued and outstanding after Infotel acquisition
44,400 300,000 (1) (295,700) 48,700
Additional paid-in capital 18,020,600 -- (1) 1,034,200 19,054,800
Accumulated (deficit) surplus (13,601,200) 4,595,000 (1) (4,595,000) (13,601,200)
Cumulative translation gain 11,300 -- 11,300
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 4,475,100 4,895,000 8,023,600
- ----------------------------------------------------------------------------------------------------------------------------
$ 8,904,900 $ 6,431,000 $ 15,905,600
============================================================================================================================
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements.
PF-3
<PAGE> 26
NHANCEMENT TECHNOLOGIES INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
================================================================================================================================
Nhancement Pro Forma
NHancement Voice Plus Advantis Pro Forma Infotel Adjustments Combined
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 23,000 $ 9,565,900 $ 4,620,800 $ 14,209,700 $ 8,865,300 $ 23,075,000
Cost of goods sold 86,400 5,473,100 3,871,700 9,431,200 6,681,500 16,112,700
- --------------------------------------------------------------------------------------------------------------------------------
Gross profit (63,400) 4,092,800 749,100 4,778,500 2,183,800 6,962,300
- --------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Research and development 87,900 -- -- 87,900 -- 87,900
Sales, marketing,
general and administrative 813,900 3,129,300 754,600 4,697,800 2,458,100 7,155,900
Amortization of excess
of cost over assets acquired -- 4,687,600 99,100 4,786,700 -- (1) $215,100 5,001,800
- --------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 901,800 7,816,900 853,700 9,572,400 2,458,100 12,245,600
- --------------------------------------------------------------------------------------------------------------------------------
Operating loss (965,200) (3,724,100) (104,600) (4,793,900) (274,300) (5,283,300)
Net other income (expense) 65,200 (2,600) (182,500) (119,900) 654,500 (2) (165,500) 369,100
- --------------------------------------------------------------------------------------------------------------------------------
Net income (loss) before taxes (900,000) (3,726,700) (287,100) (4,913,800) 380,200 (4,914,200)
Income taxes -- (600) 1,200 600 88,000 88,600
- --------------------------------------------------------------------------------------------------------------------------------
Net (income) loss $(900,000) $ (3,726,100) $ (288,300) $ (4,914,400) $ 292,200 $ (5,002,800)
================================================================================================================================
Preferred Stock dividends(3) (1,000,000)
- --------------------------------------------------------------------------------------------------------------------------------
Net loss applicable to
Common Stock $ (5,969,800)
================================================================================================================================
Basic and diluted net loss
per common share $ (1.32)
================================================================================================================================
Weighted average shares
used in computing net
loss per common share (4) 4,560,493
================================================================================================================================
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined
Condensed Financial Statements.
PF-4
<PAGE> 27
NHANCEMENT TECHNOLOGIES INC.
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
PERIODS COMBINED
The NHancement, Voice Plus and Advantis columns of the unaudited pro forma
combined condensed statement of operations for the year ended December 31, 1997
have been combined with the Infotel condensed statement of operations for the
year ended December 31, 1997 giving effect to the acquisitions of Infotel,
Advantis and Voice Plus as if they had occurred on January 1, 1997.
The NHancement audited balance sheet as of December 31, 1997 has been combined
with the Infotel unaudited condensed balance sheet as of the same date giving
effect to the Acquisition as if it had occurred on December 31, 1997.
BASIS OF PRESENTATION
Pro Forma Basis of Presentation
The pro forma combined condensed financial statements reflect (i) the
Acquisition and (ii) the completion of a Preferred Stock financing, the proceeds
of which are being used in large part for the acquisition of Infotel.
Pro Forma Combined Condensed Balance Sheet Adjustments:
(1) To reflect an adjustment, under the terms of purchase accounting, for the
acquisition of all the shares of Infotel's Common Stock and the recording
of the excess of cost over net assets acquired of $2,151,200 including
estimated transaction costs of approximately $49,600 associated with the
Acquisition. The components of the purchase price and calculation of the
excess of cost over net assets acquired are as follows:
<TABLE>
<CAPTION>
INFOTEL(a)
----------
<S> <C>
CONSIDERATION:
Cash $ 2,245,500
Notes Payable 1,916,200
Common Stock(b) 1,038,500
-------------
5,200,300
-------------
CALCULATION OF GOODWILL:
Net assets acquired (c) 4,895,000
Dividend prior to Acquisition (1,796,400)
Cost related to Acquisition (49,600)
-------------
Sub-total 3,049,000
-------------
Excess of cost over net assets acquired $ 2,151,200
=============
</TABLE>
- ---------------------
(a) Accounted for as purchase with the assets and liabilities assumed
recorded at estimated fair values with Singapore dollars converted
into US dollars at 1.67.
(b) 431,000 shares subject to lock-up agreements.
(c) Fair value approximates book value.
(2) To reflect an adjustment for the recording of a $3.0 million Preferred
Stock financing net of $490,000 of fees and expenses. The proceeds of the
financing being used in large part for the purchase of Infotel.
Pro Forma Combined Condensed Statement of Operations Adjustments:
(1) To reflect an adjustment for the amortization of the excess of cost over
net assets acquired of $215,100 for the year ended December 31, 1997, based
on a ten-year amortization period.
PF-5
<PAGE> 28
(2) To reflect an adjustment for the recording of one year of interest on notes
payable at 9% per annum.
(3) The issuance of the Series A Convertible Preferred Stock that is
convertible into shares of Common Stock at a 25% discount which, has been
reflected as a preferred stock dividend, results in a $1 million increase
in the loss applicable to Common Stock in computing the net loss per share.
(4) The weighted average outstanding shares is based on the estimated number of
shares of Common Stock of NHancement (after giving effect to the
acquisition of Voice Plus and Advantis and the pending Acquisition of
Infotel as if they had occurred on January 1, 1997) outstanding during the
year calculated as follows:
<TABLE>
<S> <C> <C>
Shares outstanding at beginning of period 612,800
Shares issued in connection with the Voice Plus acquisition 1,312,500
Shares issued in IPO, including over allotment 1,770,963
Shares issued to effect the conversion and repayment of debt and
accrued interest 224,730
Shares issued in connection with the Advantis acquisition 208,500
Shares issued in connection with the Infotel acquisition 431,000 3,947,693
---------
Total for combined companies, as adjusted 4,560,493
=========
</TABLE>
Acquisition Transaction Costs
As of December 31, 1997, NHancement's direct transaction costs of approximately
$49,600 associated with the Acquisition were recorded in excess of cost over net
assets acquired, consisting of legal fees, accountants fees and other related
charges.
CONFORMING ADJUSTMENTS AND RECLASSIFICATIONS
There were no adjustments required to conform the accounting policies of
NHancement and Infotel. Certain amounts for Infotel have been reclassified to
conform with NHancement's financial statement presentation. All significant
intercompany transactions have been eliminated.
PF-6
<PAGE> 29
INFOTEL TECHNOLOGIES (PTE) LTD
UNAUDITED CONDENSED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1997
S$'000 US$'000
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents 2,808 1,681
Fixed deposits 647 387
Accounts receivable, net of allowance for
doubtful accounts of S$261,000 at
December 31, 1997 2,691 1,611
Short term investments 752 450
Inventories 1,650 988
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,499 898
Other debtors 176 105
Deferred income taxes 20 12
---------- ----------
Total current assets 10,243 6,132
---------- ----------
FIXED ASSETS:
Office equipment 451 270
Workshop equipment 684 410
Furniture and fixtures 195 117
Electrical installation 40 24
Renovation 53 32
Equipment for rental 196 117
Motor vehicles 607 363
---------- ----------
2,226 1,333
Accumulated depreciation (1,727) (1,034)
---------- ----------
Net fixed assets 499 299
---------- ----------
TOTAL ASSETS 10,742 6,431
========== ==========
</TABLE>
See notes to unaudited condensed financial statements.
F-1
<PAGE> 30
INFOTEL TECHNOLOGIES (PTE) LTD
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED DECEMBER ENDED
31, 1996 DECEMBER 31, 1997
S$'000 S$'000 US$'000
<S> <C> <C> <C>
Operating revenues:
Product sales, net 7,584 4,481 2,683
Contract revenues 87 60 36
Service fees 664 1,113 666
---------- ---------- ----------
Total operating revenues 8,335 5,654 3,385
Costs and operating expenses
Selling, general and administrative expenses 1,780 1,738 1,041
Cost of products sold 5,942 3,606 2,159
Cost of contract revenues 53 35 21
Service costs 197 395 236
Depreciation 128 113 68
Net unrealized holding losses 0 118 71
---------- ---------- ----------
Total costs and operating expenses 8,100 6,005 3,596
Operating income / (loss) 235 (351) (211)
Other income
Net foreign exchange gains 93 110 66
Profit on sale of short term investments 0 31 19
Agency commission 164 40 24
Miscellaneous income 61 36 22
---------- ---------- ----------
Total other income 318 217 131
---------- ---------- ----------
Income / (loss) before income taxes 553 (134) (80)
Provision for income taxes (144) 35 21
---------- ---------- ----------
Net income 409 (99) (59)
========== ========== ==========
</TABLE>
See notes to unaudited condensed financial statements.
F-2
<PAGE> 31
INFOTEL TECHNOLOGIES (PTE) LTD
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31
1996 1997 1997
S$'000 S$'000 US$'000
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income / (loss) 409 (99) (59)
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 128 113 68
Deferred income taxes (27) 2 1
Changes in assets and liabilities
Fixed deposits (198) 856 513
Short term investments (220) 1,173 702
Contract work-in-progress 754 (108) (65)
Inventories 392 327 196
Accounts receivable 915 480 287
Other debtors (76) (68) (41)
Accounts payable 4 (979) (586)
Accrued expenses (187) (106) (63)
Income taxes payable (149) (206) (123)
-------- -------- --------
Net cash provided by operating activities 1,745 1,385 830
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets (409) (93) (56)
-------- -------- --------
Net cash used in investing activities (409) (93) (56)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (185) (185) (111)
-------- -------- --------
Net cash used in financing activities (185) (185) (111)
-------- -------- --------
Net increase in cash and cash equivalents 1,151 1,107 663
Cash and cash equivalents at beginning of
period 1,360 1,701 1,018
-------- -------- --------
Cash and cash equivalents at end of period 2,511 2,808 1,681
======== ======== ========
</TABLE>
See notes to unaudited condensed financial statements.
F-3
<PAGE> 32
INFOTEL TECHNOLOGIES (PTE) LTD
UNAUDITED CONDENSED BALANCE SHEET
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31, 1997
S$'000 US$'000
<S> <C> <C>
CURRENT LIABILITIES
Trade creditors 2,033 1,217
Accrued expenses 326 195
Income taxes payable 130 78
-------- --------
Total current liabilities 2,489 1,490
-------- --------
NON-CURRENT LIABILITY
Deferred income tax 79 46
-------- --------
Total non-current liabilities 79 46
-------- --------
SHAREHOLDERS' EQUITY
Ordinary Shares, S$1 par value:
Authorized - 500,000 shares
at December 31, 1997
Issued and fully paid - 500,000 shares
at December 31, 1997 500 300
Retained earnings 7,674 4,595
-------- --------
10,742 6,431
======== ========
</TABLE>
See notes to unaudited condensed financial statements.
F-4
<PAGE> 33
INFOTEL TECHNOLOGIES (PTE) LTD
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six-month period ended December 31,
1997 are not necessarily indicative of the results that may be expected for the
year ended June 30, 1998. For further information, refer to the financial
statements and footnotes thereto included in the Company's audited financial
statements for the year ended June 30, 1997.
The financial statements are stated in Singapore dollars (S$).
Translation of S$ amounts into United States dollars (US$) amounts is included
solely for the convenience of the readers outside Singapore and has been made at
the rate of S$1.67 to US$1.00, the approximate exchange rate at December 31,
1997. No representation is made that the S$ amounts could have been, or could
be, converted into US dollars at that or any other rate.
SUBSEQUENT EVENTS
On January 5, 1998, the Company paid an interim dividend of 810.81%,
less 26% tax, amounting to S$3 million for the year ending June 30, 1998.
F-5
<PAGE> 34
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Infotel Technologies (Pte) Ltd
We have audited the accompanying balance sheets of Infotel Technologies
(Pte) Ltd as of June 30, 1996 and 1997, and the related statements of
operations, shareholders' equity and cash flows for each of the three years in
the period ended June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Infotel Technologies
(Pte) Ltd at June 30, 1996 and 1997, and the results of its operations and its
cash flows for each of the three years in the period ended June 30, 1997, in
conformity with United States generally accepted accounting principles.
ERNST & YOUNG
Singapore
May 12, 1998
F-6
<PAGE> 35
INFOTEL TECHNOLOGIES (PTE) LTD
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30
1996 1997 1997
S$'000 S$'000 US$'000
NOTES
<S> <C> <C> <C>
CURRENT ASSETS:
-----------------------------------------------------
Cash and cash equivalents 1,360 1,701 1,018
Fixed deposits 1,299 1,503 900
Accounts receivable, net of allowance for
doubtful accounts of S$111,977 and
S$288,642 at June 30, 1996 and 1997
respectively 4,502 3,171 1,899
Short term investments 2 1,736 1,925 1,153
Inventories 2,312 1,977 1,184
Costs and estimated earnings in excess of
billings on uncompleted contracts 4 0 1,391 833
Other debtors 83 108 65
Deferred income taxes 5 0 20 12
-----------------------------------------------------
Total current assets 11,292 11,796 7,064
-----------------------------------------------------
FIXED ASSETS:
-----------------------------------------------------
Office equipment 383 418 250
Workshop equipment 548 685 410
Furniture and fixtures 184 193 115
Electrical installation 40 40 24
Renovation 53 53 32
Equipment for rental 196 196 117
Motor vehicles 485 572 343
-----------------------------------------------------
1,889 2,157 1,291
Accumulated depreciation (1,554) (1,638) (981)
-----------------------------------------------------
Net fixed assets 335 519 310
-----------------------------------------------------
TOTAL ASSETS 11,627 12,315 7,374
=====================================================
</TABLE>
See accompanying notes
F-7
<PAGE> 36
INFOTEL TECHNOLOGIES (PTE) LTD
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30
1996 1997 1997
NOTES S$'000 S$'000 US$'000
CURRENT LIABILITIES
----------------------------------------------------
<S> <C> <C> <C> <C>
Billings in excess of costs and estimated
earnings on uncompleted contracts 4 248 -- --
Trade creditors 2,601 3,012 1,803
Accrued expenses 595 432 259
Income taxes payable 468 336 201
----------------------------------------------------
Total current liabilities 3,912 3,780 2,263
----------------------------------------------------
NON-CURRENT LIABILITY
----------------------------------------------------
Deferred income tax 5 68 77 46
----------------------------------------------------
Total non-current liabilities 68 77 46
----------------------------------------------------
SHAREHOLDERS' EQUITY
Ordinary Shares, S$1 par value:
Authorized - 500,000 shares at June 30,
1996 and 1997
Issued and fully paid - 500,000 shares
at June 30, 1996 and 1997 500 500 300
Retained earnings 7,147 7,958 4,765
----------------------------------------------------
11,627 12,315 7,374
====================================================
</TABLE>
See accompanying notes
F-8
<PAGE> 37
INFOTEL TECHNOLOGIES (PTE) LTD
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
JUNE 30
1995 1996 1997 1997
NOTE S$'000 S$'000 S$'000 US$'000
<S> <C> <C> <C> <C> <C>
Operating revenues:
Product sales, net 13,579 15,544 13,616 8,153
Contract revenues 2,937 2,256 2,420 1,449
Service fees 709 970 1,450 868
--------- --------- --------- ---------
Total operating revenues 17,225 18,770 17,486 10,470
Costs and operating expenses
Selling, general and administrative expenses 3,175 3,764 3,626 2,171
Cost of products sold 10,321 11,775 10,920 6,539
Cost of contract revenues 2,440 1,596 1,940 1,162
Service costs 246 353 454 272
Bad debts written off 1 4 0 0
Depreciation 227 166 241 144
Provision for doubtful debts 17 0 177 106
--------- --------- --------- ---------
Total costs and operating expenses 16,427 17,658 17,358 10,394
Operating income 798 1,112 128 76
Other income
Net foreign exchange gains 295 308 226 135
Interest income 60 23 46 28
Profit on sale of short term investments 0 0 157 94
Profit on redemption of short term investments 0 0 71 42
Net unrealized holding gains 0 0 262 157
Dividend income from quoted equity investments 0 0 7 4
Agency commission 283 167 340 204
Equipment rental 73 80 5 3
Gain on disposal of fixed assets 3 9 65 39
Miscellaneous income 0 119 15 9
--------- --------- --------- ---------
Total other income 714 706 1,194 715
--------- --------- --------- ---------
Income before income taxes 1,512 1,818 1,322 791
Provision for income taxes 5 (408) (473) (326) (195)
--------- --------- --------- ---------
Net income 1,104 1,345 996 596
========= ========= ========= =========
</TABLE>
See accompanying notes
F-9
<PAGE> 38
INFOTEL TECHNOLOGIES (PTE) LTD
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
JUNE 30
1995 1996 1997 1997
S$'000 S$'000 S$'000 US$'000
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 1,104 1,345 996 596
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation 227 166 241 144
Gain on disposal of fixed assets (3) (9) (65) (39)
Provision for doubtful debts 17 0 177 106
Deferred income taxes (3) 12 (11) (7)
Changes in assets and liabilities
Fixed deposits 535 (1,231) (204) (122)
Short term investments 0 (1,736) (189) (113)
Contract work-in-progress 39 355 (1,639) (981)
Inventories 187 (799) 335 201
Accounts receivable (1,692) 1,252 1,154 691
Other debtors (34) 12 (25) (15)
Accounts payable 349 (66) 411 246
Accrued expenses 251 (17) (163) (98)
Income taxes payable 76 24 (132) (79)
-------- -------- -------- --------
Net cash provided by / (used in)
operating activities 1,053 (692) 886 530
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets (89) (181) (425) (255)
Proceeds from disposal of fixed
assets 10 21 65 39
-------- -------- -------- --------
Net cash used in investing activities (79) (160) (360) (216)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (137) (137) (185) (110)
-------- -------- -------- --------
Net cash used in financing activities (137) (137) (185) (110)
-------- -------- -------- --------
Net increase in cash and cash 837 (989) 341 204
equivalents
Cash and cash equivalents at
beginning of year 1,512 2,349 1,360 814
-------- -------- -------- --------
Cash and cash equivalents at end of
period 2,349 1,360 1,701 1,018
======== ======== ======== ========
</TABLE>
See accompanying notes
F-10
<PAGE> 39
INFOTEL TECHNOLOGIES (PTE) LTD
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ORDINARY RETAINED TOTAL ORDINARY RETAINED TOTAL
SHARES EARNINGS SHAREHOLDERS SHARES EARNINGS SHAREHOLDERS
EQUITY EQUITY
S$'000 US$'000
----------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1994 500 4,972 5,472
Net income for the year -- 1,104 1,104
Dividend paid -- (137) (137)
-------- -------- --------
BALANCE AT JUNE 30, 1995 500 5,939 6,439
Net income for the year -- 1,345 1,345
Dividend paid -- (137) (137)
-------- -------- --------
BALANCE AT JUNE 30, 1996 500 7,147 7,647 300 4,279 4,579
Net income for the year -- 996 996 -- 596 596
Dividend paid -- (185) (185) -- (110) (110)
-------- -------- -------- -------- -------- --------
BALANCE AT JUNE 30, 1997 500 7,958 8,458 300 4,765 5,065
======== ======== ======== ======== ======== ========
</TABLE>
See accompanying notes
F-11
<PAGE> 40
INFOTEL TECHNOLOGIES (PTE) LTD
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1997
(BALANCES PRESENTED ARE IN THOUSANDS OF DOLLARS UNLESS OTHERWISE INDICATED)
1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
The Company was incorporated in Singapore on October 21, 1983 as a private
company limited by shares under the name of Green Trading Pte Ltd and changed
its name to Infotel Technologies (Pte) Ltd ("Infotel") on March 27, 1984.
Revenues are earned by supplying equipment, systems, and services in the
telecommunications and information technology markets. The Company also provide
technical services in a range of coordinated multidisciplinary services, from
radio communications to computer networking applications; and from electronic
test and measuring equipment to turn-key projects.
Basis of presentation
The Company maintains its records and prepares its statutory financial
statements in accordance with the provisions of Singapore Companies Act, Cap. 50
and Singapore Statements of Accounting Standard. The accompanying financial
statements differ from the financial statements issued for statutory purposes in
Singapore in that they reflect certain adjustments, not recorded in Infotel's
books, which are appropriate to present the financial position, results of
operations and cash flows in accordance with United States generally accepted
accounting principles ("US GAAP"). The principal adjustments relate to: (1)
foreign currency translation; (2) deferred income taxes; (3) accounting for
marketable securities held for trading; and (4) proposed/paid dividends.
Foreign Currency Translation
Infotel considers Singapore dollar as its functional currency. Foreign
currency transactions are converted into Singapore dollars at rates of exchange
approximating those ruling at transaction dates. Foreign currency assets and
liabilities are translated into Singapore dollars at the rates ruling at the
balance sheet date. All profits and losses on exchange are dealt with through
the profit and loss account.
The financial statements are stated in Singapore dollars (S$).
Translation of S$ amounts into United States dollars (US$) amounts is included
solely for the convenience of the readers outside Singapore and has been made at
the rate of S$1.67 to US$1.00, the approximate exchange rate at December 31,
1997. No representation is made that the S$ amounts could have been, or could
be, converted into US dollars at that or any other rate.
F-12
<PAGE> 41
INFOTEL TECHNOLOGIES (PTE) LTD
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES - (CONTINUED)
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Inventory
Inventory consists of parts and equipment for resale and is stated at the
lower of cost or net realizable value which approximates market value. Cost is
determined on a first-in-first-out basis. Net realizable value is arrived at
after due allowance is made for damaged, obsolete and slow-moving inventories.
Fixed assets and depreciation
Fixed assets are stated at historical cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the fixed assets ranging
from 3 to 5 years.
Revenue recognition
Sales under fixed price contracts in progress is recognized under the
percentage-of-completion method of accounting in which the estimated sales value
is determined on the basis of physical completion to date (the total contract
amount multiplied by percent of performance to date less sales value recognized
in previous periods). Claims for extra work are included in revenues when
collection is probable.
Costs comprise material, sub-contracting fee and other directly related
expenses. Provisions for estimated losses on uncompleted contracts are made in
the period in which such losses are determined. Provisions are made to cover
contingency and remedial work that may be necessary.
The current asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The current liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents amounts billed in excess of
revenues recognized.
Revenue from the sale of products comprising parts and equipment are
recognized upon passage of titles to the customers which generally coincides
with their delivery and acceptance.
F-13
<PAGE> 42
INFOTEL TECHNOLOGIES (PTE) LTD
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
1. ORGANIZATION, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING
POLICIES - (CONTINUED)
Cash and cash equivalents
For purposes of statement of cash flows, the Company considers highly
liquid investments with a maturity of three months or less when purchased to be
cash equivalents.
Marketable securities
Effective July 1, 1995, the Company adopted Statement of Financial
Accounting Standard No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Under Statement No. 115, debt and marketable securities are
required to be classified in one of the three categories: trading,
available-for-sale, or held to maturity. The Company's debt and equity
securities qualify under the provisions of Statement No. 115 as trading
securities. Such securities are recorded at fair value, and unrealized holding
gains and losses are included in earnings.
Dividend income is accrued on the basis of the date dividend is declared by
the investee company. Interest income is taken up on an accrual basis.
Income taxes
The Company computes and records income tax in accordance with the
liability method of Statement of Financial Accounting Standard No.109
"Accounting for Income Taxes."
Deferred income taxes are provided for temporary differences between the
financial reporting and tax basis of the Company's assets and liabilities at
enacted tax rates in effect when the temporary differences will reverse.
2. SHORT TERM INVESTMENTS
<TABLE>
<CAPTION>
1996 1997 1997
S$ S$ US$
<S> <C> <C> <C>
Quoted shares in corporations 1,736 1,925 1,153
======= ======= =======
</TABLE>
Included in the Company's earnings for 1997 and 1996 were changes in net
unrealized holding gains of S$262,000 and S$nil respectively.
F-14
<PAGE> 43
INFOTEL TECHNOLOGIES (PTE) LTD
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes for the period ended June 30, 1997, was as
follows:
<TABLE>
<CAPTION>
JUNE 30
1995 1996 1997 1997
S$ S$ S$ US$
<S> <C> <C> <C> <C>
Income taxes 335 437 468 280
</TABLE>
4. CONTRACT WORK-IN-PROGRESS
<TABLE>
<CAPTION>
1996 1997 1997
S$ S$ US$
<S> <C> <C> <C>
Contract work-in-progress comprises:-
Costs incurred on uncompleted contracts 268 3,079 1,844
Estimated earnings -- 169 101
-------- -------- --------
268 3,248 1,945
Contract revenues recognized to date on
contracts in progress -- -- --
Less: Billings to date (516) (1,857) (1,112)
-------- -------- --------
Net contract work-in-progress (248) 1,391 833
======== ======== ========
Included in the accompanying balance sheet
under the following captions-
Costs and estimated earnings in excess of
billings on uncompleted contracts -- 1,391 833
Billings in excess of costs and estimated
earnings on uncompleted contracts (248) -- --
-------- -------- --------
(248) 1,391 833
======== ======== ========
</TABLE>
F-15
<PAGE> 44
INFOTEL TECHNOLOGIES (PTE) LTD
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
5. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
JUNE 30
1995 1996 1997 1997
S$ S$ S$ US$
<S> <C> <C> <C> <C>
Current 411 461 337 202
Deferred (3) 12 (11) (7)
-------- -------- -------- --------
408 473 326 195
======== ======== ======== ========
</TABLE>
Total income tax expense differs from the amount computed by applying the
Singapore statutory income tax rate of 26% (1996: 26% ; 1995: 27%) to income
before taxes as follows:
<TABLE>
<CAPTION>
JUNE 30
1995 1996 1997 1997
S$ S$ S$ US$
<S> <C> <C> <C> <C>
Computed expected income taxes 408 473 343 205
Non-taxable item - gain on disposal of
private car -- -- (17) (10)
-------- -------- -------- --------
408 473 326 195
======== ======== ======== ========
</TABLE>
The Company had no tax credit carryforwards in Singapore as at June 30,
1997.
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
JUNE 30
1996 1997 1997
S$ S$ US$
<S> <C> <C> <C>
Deferred tax assets:
Unrealized exchange loss -- 20 12
Deferred tax liabilities
Depreciation and fixed assets (68) (77) (46)
-------- -------- --------
Net deferred liability (68) (57) (34)
======== ======== ========
</TABLE>
F-16
<PAGE> 45
INFOTEL TECHNOLOGIES (PTE) LTD
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
5. INCOME TAXES (CONTINUED)
The net deferred tax asset is classified as follows:
<TABLE>
<CAPTION>
JUNE 30
1996 1997 1997
S$ S$ US$
<S> <C> <C> <C>
Non-current liability (68) (77) (46)
Current assets -- 20 12
-------- -------- --------
(68) (57) (34)
======== ======== ========
</TABLE>
The deferred tax provision for 1996 and 1997 resulted primarily from the
timing differences between financial and income tax reporting for depreciation
of fixed assets and realization of foreign exchange differences.
6. RELATED PARTY TRANSACTIONS
During the year ended June 30, 1997, the Company sold a motor vehicle (with
net book value of $0) to a director of the Company, Mr. James Han, for S$65,000
and realized a gain on disposal of fixed asset for the same amount.
7. SUBSEQUENT EVENTS
In January 1998, the Company entered into a definitive agreement with
NHancement Technologies Inc. ("NHancement"), a company currently listed on the
Nasdaq SmallCap Market System for the acquisition of the Company by NHancement.
Closing of the transaction is contingent upon NHancement obtaining the financing
necessary to complete the acquisition.
On January 5, 1998, the Company paid an interim dividend of 810.81%, less
26% tax, amounting to S$3 million for the year ending June 30, 1998.
F-17
<PAGE> 46
INFOTEL TECHNOLOGIES (PTE) LTD
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
8. SALES TO MAJOR CUSTOMERS
The Company operates in one primary business segment - supplying equipment,
systems, and services in the telecommunications and information technology
markets and related technical services. The Company's main source of revenue is
derived from product sales and contract revenues.
Product sales to customers outside Singapore represent less than 15 percent
of total sales.
Product sales comprise mainly sales of equipment and related parts and
accessories:
<TABLE>
<CAPTION>
1995 1996 1997 1997
S$ S$ S$ US$
<S> <C> <C> <C> <C>
Data communication 4,558 8,230 6,902 4,133
Telecommunication / Radio equipment 2,867 2,382 2,418 1,448
Test instruments 5,981 4,800 4,274 2,559
Others 173 132 22 13
-------- -------- -------- --------
Total product sales 13,579 15,544 13,616 8,153
======== ======== ======== ========
</TABLE>
Contracts with government agencies and customer A make up more than 90% of
the total contract revenue generated by the Company.
Operating revenues from major customers are presented below:
<TABLE>
<CAPTION>
1995 1996 1997
---% OF TOTAL SALES---
<S> <C> <C> <C>
Government agencies n/a 11 21
Customer A n/a 27 9
Customer B n/a 7 9
</TABLE>
n/a Information is not available.
In view of the size and strong financial position of the major customers,
the management does not believe significant credit risk exists at June 30, 1997.
Historically, the Company has not experienced significant losses related to
receivables from individual customers or groups of customers in any industry.
F-18
<PAGE> 47
1,638,375 SHARES OF COMMON STOCK
NHANCEMENT TECHNOLOGIES INC.
--------------
PROSPECTUS
--------------
____________, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information
Incorporation of Certain
Documents by Reference
Special Note Regarding Forward-Looking Statements
Special Note Regarding Certain Transactions
Prospectus Summary
Risk Factors
Recent Developments
Use of Proceeds
Selling Stockholders
Plan of Distribution
Legal Matters
Experts
Index to Financial Statements
</TABLE>
<PAGE> 48
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses payable in connection with the issuance and distribution of
the securities being registered hereby (estimated, including the registration
fees) are as follows:
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
Registration Fee $ 1,405(1)
Legal Fees and Expenses 35,000(2)
Accounting Fees and Expenses 40,000(3)
Printing 300
Transfer Agent and Registrar Fees 1,000
Miscellaneous 870
----------
TOTAL $ 78,575
</TABLE>
- ----------------------
(1) Pursuant to Rule 457 promulgated by the Commission under the Securities
Act, the registration fee has been calculated based upon the average of
the bid and asked price per share of the Company's Common Stock, as
reported on the Nasdaq SmallCap Market System, on May 11, 1998.
(2) Excludes legal fees incurred in connection with Preferred Stock offering.
Also excludes legal fees related to the proxy solicitation required in
connection with the special meeting of stockholders to approve of the
issuance of certain shares of Common Stock into which shares of the
Series A Convertible Preferred Stock are convertible.
(3) Includes an estimate of accounting fees related to the preparation of
financial statements of Infotel Technologies (Pte) Ltd, a Singapore
corporation, included in the Prospectus which is a part of this Form S-3
Registration Statement.
Item 15. Indemnification of Officers and Directors.
The Company has included in its Certificate of Incorporation and in its
Bylaws provisions to (i) eliminate the personal liability of its directors for
monetary damages resulting from breaches of their fiduciary duty to the extent
permitted by the General Corporation Law of Delaware and (ii) indemnify its
directors and officers to the fullest extent permitted by the General
Corporation Law of Delaware, including circumstances in which indemnification is
otherwise discretionary. The Company believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
The Company has purchased a directors' and officers' insurance policy
with a $5.0 million coverage limit per occurrence and $5.0 million in the
aggregate per policy year.
II-1
<PAGE> 49
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit Number Title of Exhibit
- -------------- ----------------
<S> <C>
2.1 Agreement relating to the sale and purchase of 500,000
ordinary shares in the capital of Infotel Technologies
(Pte) Ltd ("Infotel"), dated as of January 19, 1998, by
and between the Registrant and the stockholders of
Infotel (the "Sale Agreement")
2.2 Letter agreement amending the Sale Agreement, dated as
of April 2, 1998, by and between the Registrant and the
stockholders of Infotel (the "First Amendment")
2.3 Form of letter agreement amending the Sale Agreement, as
amended by the First Amendment, by and between the
Registrant and the stockholders of Infotel
4.1 Form of certificate evidencing Common Stock, $.01 par
value, of the Company, incorporated by reference to the
document bearing the same exhibit number as contained in
Registrant's Registration Statement on Form SB-2
(Registration No. 333-15563), as filed with the
Securities and Exchange Commission on November 5, 1996
5 Opinion of Tomlinson Zisko Morosoli & Maser LLP,
regarding legality of securities being registered
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Ernst & Young, Singapore
23.3 Consent of Tomlinson Zisko Morosoli & Maser LLP
(included in Exhibit 5)
24 Power of Attorney (included in signature pages to
Registration Statement)
</TABLE>
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sell securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the
most recent post-effective amendments thereto) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or
high and of the estimated maximum offering range may be
reflected in the form of
II-2
<PAGE> 50
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement; and
(iii) Include any material information with respect to the plan
of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be filed with a post-effective amendment by
those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the Registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That for determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new
registration of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities that remain unsold at the termination of the
offering.
The undersigned hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-3
<PAGE> 51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fremont, State of California, on the 14th day of
May, 1998.
NHANCEMENT TECHNOLOGIES INC.
By: /s/ Esmond T. Goei
--------------------------------------
Esmond T. Goei
Chief Executive Officer and President
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Esmond T. Goei and Douglas S. Zorn, and each of
them, his attorneys-in-fact and agents, each with the power of substitution, for
him and in his name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement, and to sign any registration statement for the same offering covered
by this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
Principal Executive Officer:
/s/ Esmond T. Goei Chairman of the Board, President, May 14, 1998
- ------------------------------------ Chief Executive Officer and Director
Esmond T. Goei
Principal Financial and Accounting Officer:
/s/ Douglas S. Zorn Executive Vice President, Chief May 14, 1998
- ------------------------------------ Financial Officer, Treasurer and
Douglas S. Zorn Secretary
</TABLE>
[Signatures Continued Next Page]
II-4
<PAGE> 52
<TABLE>
<S> <C> <C>
Additional Directors:
/s/ James S. Gillespie Director May 14, 1998
- ------------------------------------
James S. Gillespie
/s/ Gary L. Nemetz Director May 14, 1998
- ------------------------------------
Gary L. Nemetz
/s/ Santanu Das Director May 14, 1998
- ------------------------------------
Santanu Das
/s/ James H. Boyle Director May 14, 1998
- ------------------------------------
James H. Boyle
</TABLE>
II-5
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Title of Exhibit
- -------------- ----------------
<S> <C>
2.1 Agreement relating to the sale and purchase of 500,000
ordinary shares in the capital of Infotel Technologies
(Pte) Ltd ("Infotel"), dated as of January 19, 1998, by
and between the Registrant and the stockholders of
Infotel (the "Sale Agreement")
2.2 Letter agreement amending the Sale Agreement, dated as
of April 2, 1998, by and between the Registrant and the
stockholders of Infotel (the "First Amendment")
2.3 Form of letter agreement amending the Sale Agreement, as
amended by the First Amendment, by and between the
Registrant and the stockholders of Infotel
4.1 Form of certificate evidencing Common Stock, $.01 par
value, of the Company, incorporated by reference to the
document bearing the same exhibit number as contained in
Registrant's Registration Statement on Form SB-2
(Registration No. 333-15563), as filed with the
Securities and Exchange Commission on November 5, 1996
5 Opinion of Tomlinson Zisko Morosoli & Maser LLP,
regarding legality of securities being registered
23.1 Consent of BDO Seidman, LLP
23.2 Consent of Ernst & Young, Singapore
23.3 Consent of Tomlinson Zisko Morosoli & Maser LLP
(included in Exhibit 5)
24 Power of Attorney (included in signature pages to
Registration Statement)
</TABLE>
<PAGE> 1
Exhibit 2.1
DATED JANUARY 19, 1998
BETWEEN
GERARD FOO LOKE KIEAN
JAMES HAN KIM GUAN
LEONG SAU PAN
FOO KHOON WONG
SAE FOO KITIPONGSE @ FOO LOKE KHEE
AS VENDORS
- AND -
NHANCEMENT TECHNOLOGIES INC.
AS PURCHASER
---------------------------------------------
A G R E E M E N T
RELATING TO
THE SALE AND PURCHASE OF 500,000
ORDINARY SHARES IN THE CAPITAL OF
INFOTEL TECHNOLOGIES (PTE) LTD
---------------------------------------------
RQ/WTST/13764/972
Allen & Gledhill
Advocates & Solicitors
Singapore
<PAGE> 2
INFOTEL - Share Sale Agmt
2.
CONTENTS
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE
- ------ ------- ----
<S> <C> <C>
1. INTERPRETATION 1
2. SALE OF SHARES 4
3. ESCROW ARRANGEMENTS 5
4. CONSIDERATION 5
5. REPRESENTATIONS BY PURCHASER 11
6. COMPLETION 11
7. PURCHASER'S RIGHT OF ACCESS 14
8. RESTRICTIONS ON VENDORS 14
9. WARRANTIES 17
10. CONFIDENTIALITY 23
11. ANNOUNCEMENTS 24
12. PROVISIONS RELATING TO THIS AGREEMENT 24
13. GOVERNING LAW AND JURISDICTION 28
SCHEDULE 1 29
I - VENDORS
II - DIRECTORS
III - SPECIFIED EMPLOYEES
IV - PARTICULARS OF THE COMPANY
SCHEDULE 2 - WARRANTIES AND REPRESENTATIONS 31
SCHEDULE 3 - ADJUSTMENT OF CONSIDERATION 52
SCHEDULE 4 - PROPERTY 58
SCHEDULE 5 - PROVISIONS APPLICABLE TO CLAUSE 4(F)(iv) 59
APPENDIX A - FORM OF ESCROW AGENT AGREEMENT 62
APPENDIX B - FORM OF SERVICE AGREEMENT 63
</TABLE>
<PAGE> 3
INFOTEL - Share Sale Agmt
3.
THIS AGREEMENT is made on January 19, 1998 BETWEEN:-
(1) THE PERSONS SPECIFIED IN PART I OF SCHEDULE 1 (together, the
"Vendors", which expression shall include their respective
successors); and
(2) NHANCEMENT TECHNOLOGIES INC. (the "Purchaser", which expression shall
include its successors and permitted assigns), a corporation
incorporated in the State of Delaware, United States of America and
having a principal place of business at 39420 Liberty Street, Suite
250, Fremont, California 94538, United States of America.
WHEREAS the Purchaser wishes to acquire from the Vendors the entire issued
share capital of Infotel Technologies (Pte) Ltd, a company incorporated in
Singapore with its registered office at 19 Tai Seng Drive #06-00, Singapore
535222 (the "Company"), upon the terms and subject to the conditions of this
Agreement.
IT IS HEREBY AGREED as follows:-
1. INTERPRETATION
(A) In this Agreement and the Schedules, unless the context otherwise
requires:-
"Additional Consideration Shares" means the additional shares in the
common stock of the Purchaser defined as such in clause 4(C)(i)
credited as fully paid.
"Affiliates" means in respect of any Vendor, any member of his
immediate family, any partnership in which that Vendor is a partner
and any company in which that Vendor has for purposes of Section 7 of
the Companies Act an interest in shares in that company of a nominal
value equal to 20 per cent. or more of the nominal value of the equity
share capital of that company.
"Audited Accounts" means the audited balance sheet of the Company made
up as at the Balance Sheet Date including the notes thereto and the
directors" report and auditors" report, true copies of all of which
are annexed to the Disclosure Letter.
"Balance Sheet Date" means 30th June 1997.
"Business Day" means a day on which banks are open for ordinary
banking business in Singapore.
<PAGE> 4
INFOTEL - Share Sale Agmt
4.
"Cash Portion" means S$3,750,000.00.
"Companies Act" means the Companies Act, Chapter 50 of Singapore.
"Completion" means completion of the sale and purchase of the Sale
Shares.
"Completion Accounts" means the accounts prepared in accordance with
paragraph 2 of Schedule 3 and agreed or determined in accordance with
paragraph 4 of Schedule 3.
"Completion Date" means 16th March 1998 (or such other date as the
parties may agree but, in any event, being a date not later than 30th
June 1998).
"Consideration Shares" means the Initial Consideration Shares and the
Additional Consideration Shares.
"Directors" means the persons named in Part II of Schedule 1.
"Disclosure Letter" means the letter dated the date of this Agreement
written by or on behalf of the Vendors to the Purchaser in agreed
terms.
"Escrow Agent" means Messrs. BDO Binder.
"Escrow Agent Agreement" means the agreement between the Vendors, the
Purchaser and the Escrow Agent substantially in the form annexed hereto
as Appendix A, as amended, modified or supplemented from time to time.
"First Anniversary" means the first anniversary of the date of
Completion.
"ICS Value" means the amount in United States Dollars derived by
multiplying the number of Initial Consideration Shares by US$5.00.
"Initial Consideration Shares" means the number of shares in the common
stock of the Purchaser determined in accordance with paragraph 5 of
Schedule 3.
"Management Accounts" means the management accounts of the Company for
the period from the Balance Sheet Date to 31st December 1997.
"Net Tangible Assets" means the aggregate value of all fixed and
current assets (excluding goodwill, patents, trade marks and other
intangible assets) minus the aggregate value of all liabilities and
<PAGE> 5
INFOTEL - Share Sale Agmt
5.
provisions and excluding any reserves or capital created by the upward
revaluation of assets subsequent to the Balance Sheet Date.
"Performance Payments" means the payments (if any) of such amounts as
shall be determined in accordance with clause 4(F).
"Purchaser's Accountants" means Messrs. BDO Binder, a firm of
certified public accountants with a place of business at 112 Middle
Road #02-01, Midland House, Singapore 188970.
"Relevant Financial Year" shall have the meaning ascribed to it in
clause 4(G)(i).
"Relevant NHancement Shares" shall have the meaning ascribed to it in
paragraph 8 in Part II of Schedule 5.
"Sale Shares" means the shares to be bought and sold pursuant to
clause 2(A).
"SAS" means Statement of Accounting Standard published by the
Institute of Certified Public Accountants of Singapore.
"SEC" means the Securities and Exchange Commission of the United
States of America.
"Second Anniversary" means the second anniversary of the date of
Completion.
"Service Agreements" means the service agreements to be entered into
between the Company and each of the Specified Employees, substantially
in the form annexed hereto as Appendix B, as amended, modified or
supplemented from time to time.
"Shareholding Proportion" means the proportion in which the Sale
Shares are held by each Vendor as set out opposite his name in the
second column of Part I of Schedule 1.
"Singapore Dollars" and "S$" mean the lawful currency of the Republic
of Singapore.
"Specified Employees" means the employees of the Company as at the
date of this Agreement, whose names are set out in Part III of
Schedule 1.
"Taxation" means all forms of taxation and, without limiting the
generality of the foregoing, shall include all forms of income tax,
corporation tax and any taxation of a similar nature, goods and
services tax, stamp duty and all levies, imposts, duties, penalties,
charges,
<PAGE> 6
INFOTEL - Share Sale Agmt
6.
fees, deductions and withholdings whatsoever charged or imposed by any
statutory, governmental, state, provincial, local government or
municipal authority in Singapore or any taxing jurisdiction in which
the Company owns assets or conducts business;
"United States Dollars" and "US$" mean the lawful currency of the
United States of America.
"US Dollar Equivalent" means the amount of United States Dollars
(conclusively determined by the Purchaser) which a Singapore Dollar
amount will purchase by using the closing rate of exchange for
Singapore Dollars into United States Dollars furnished by the Bank of
America to the public on the Business Day prior to the date of this
Agreement.
"Warranties" means the warranties and representations set out in
paragraph 2 of Schedule 2.
(B) Modification of Statutes
Any reference to a statutory provision shall include that provision and
any regulations made in pursuance thereof as from time to time modified
or re-enacted whether before or after the date of this Agreement so far
as such modification or re-enactment applies or is capable of applying
to any transactions entered into prior to Completion and (so far as
liability thereunder may exist or can arise) shall include also any
past statutory provision or regulation (as from time to time modified
or re-enacted) which such provision or regulation has directly or
indirectly replaced.
(C) Vendors
(i) References to the Vendors include a reference to each of them.
(ii) Unless otherwise expressly provided, all warranties, representations,
indemnities, covenants, agreements and obligations given or entered
into by more than one person in this Agreement are given or entered
into jointly and severally.
(D) Miscellaneous
(i) Except where the context otherwise requires, words denoting the
singular include the plural and vice versa; words denoting any gender
include all genders; words denoting persons include firms and
corporations and vice versa.
(ii) All references to "related corporation" shall have the meaning ascribed
to it in the Companies Act.
<PAGE> 7
INFOTEL - Share Sale Agmt
7.
(iii) Unless otherwise stated, a reference to a clause, schedule or appendix
is a reference to a clause of, a schedule to, or an appendix to,this
Agreement. A reference to a sub-clause is a reference to a sub-clause
in the clause in which that sub-clause is found, and a reference to a
paragraph is a reference to a paragraph of the sub-clause in which
that paragraph is found.
(iv) Clause and sub-clause headings are for ease of reference only and do
not affect the construction of this Agreement.
2. SALE OF SHARES
(A) Sale and purchase
Subject to the terms of this Agreement, each of the Vendors shall sell
and the Purchaser shall purchase, free from all liens, charges,
equities and encumbrances and together with all rights now or
hereafter attaching thereto the number of ordinary shares with a par
value of S$1/- each set opposite his name in the third column of Part
I of Schedule 1 (which shares together comprise the entire issued
share capital of the Company) as at Completion.
(B) Simultaneous completion
The Purchaser shall not be obliged to complete the purchase of any of
the Sale Shares unless the purchase of all the Sale Shares is
completed simultaneously.
(C) Waiver of pre-emption rights
Each of the Vendors hereby waives any pre-emption rights he may have
relating to the Sale Shares, whether conferred by the Company's
Articles of Association or otherwise.
3. ESCROW ARRANGEMENTS
(A) Appointment of Escrow Agent
The parties agree to jointly appoint the Escrow Agent on the terms and
conditions of the Escrow Agent Agreement and shall enter into and
execute the Escrow Agent Agreement on the date of this Agreement. The
Purchaser agrees to bear all costs and expenses incidental to such
appointment.
(B) Vendors' obligations
The Vendors shall:-
(i) no later than 14 days after the date of this Agreement,
deliver to the Escrow Agent duly executed transfers of the
Sale Shares
<PAGE> 8
INFOTEL - Share Sale Agmt
8.
by the registered holders thereof in favour of the Purchaser
together with the relative share certificates; and
(ii) on the date of this Agreement, deliver to the Purchaser the
Disclosure Letter complete with the annexures thereto.
4. CONSIDERATION
(A) Total Consideration: The total consideration for the Sale Shares shall
be:-
(i) the Cash Portion;
(ii) the allotment to the Vendors of the Initial Consideration
Shares;
(iii) the allotment to the Vendors of the Additional Consideration
Shares (if any) issued and delivered in accordance with
sub-clause (C); and
(iv) the Performance Payments (if any) made in accordance with
sub-clause (F),each payable to the Vendors in the Shareholding
Proportion; and
(v) the obligation on the part of the Purchaser to provide funds to
the Company in accordance with sub-clause (G).
(B) Initial Consideration Shares
(i) The Initial Consideration Shares shall carry the right to receive in
full all dividends and other distributions declared, made or paid in
respect thereof on and after Completion.
(ii) In addition to and notwithstanding the provisions of sub-clause (D)(i),
the Vendors will not be permitted to sell, transfer, assign or
otherwise dispose of any of the Initial Consideration Shares at any
time before the First Anniversary and, unless any of the Initial
Consideration Shares are otherwise redeemed under paragraph (ii) or
(iii) of sub-clause (D), the Vendors may only dispose of up to one-half
of their respective shareholdings of the Initial Consideration Shares
during the one year period commencing on the First Anniversary. After
the Second Anniversary, all Initial Consideration Shares then held by
any Vendor may be disposed of at his discretion. The agreements entered
into by each Vendor under this paragraph (ii) are entered into by the
Vendors severally (and not jointly).
(C) Additional Consideration Shares
(i) Subject to paragraphs (ii) and (iii) of sub-Clause (D) and paragraph
(ii) of this sub-clause, in the event that
<PAGE> 9
INFOTEL - Share Sale Agmt
9.
the fair market value of an Initial Consideration Share is less than X
(as defined below) per share on the First Anniversary or on the Second
Anniversary, the Purchaser will issue and deliver to the Vendors
additional shares of the common stock of the Purchaser (the
"Additional Consideration Shares") in an amount equal to the lesser
of:-
(aa) the quotient obtained by dividing one-half of the ICS Value
by the fair market value (as defined below) per share of the
Purchaser's common stock as at the First Anniversary or the
Second Anniversary, as the case may be, less one-half of the
number of all of the Initial Consideration Shares; and
(bb) the quotient obtained by dividing one-half of the ICS Value
by 0.55X, less one-half of the number of all of the Initial
Consideration Shares,
where:-
the "fair market value" of a share of the Purchaser's common stock on
the First Anniversary and the Second Anniversary shall be the average
of the closing sale price of the Purchaser's common stock as reported
on The NASDAQ Small Cap Market System (or any alternative exchange on
which the Purchaser's common stock is then being traded) for the five
trading days immediately preceding the First Anniversary and the
Second Anniversary, as the case may be; and
"X" means US$5.00 (unless the Purchaser's stock of which Initial
Consideration Shares form part, are split or a rights offering is made
in respect thereof, in which case "X" shall be adjusted accordingly).
(ii) In the event that in accordance with the foregoing paragraph (i)
Additional Consideration Shares are to be issued as at the First
Anniversary or the Second Anniversary, as the case may be, and
redemption(s) of Initial Consideration Shares shall have been effected
under sub-clause (D), then the number of Additional Consideration
Shares to be issued shall be reduced by the same proportion as the
proportion which the number of Initial Consideration Shares which have
been redeemed bears to all the Initial Consideration Shares.
(iii) For the avoidance of doubt, in the event that the Completion Accounts
shall not have become binding for purposes of paragraph 4.4 of
Schedule 3 and the final number of Initial Consideration Shares shall
accordingly not have been determined by the First Anniversary, the
<PAGE> 10
INFOTEL - Share Sale Agmt
10.
Additional Consideration Shares to be issued by the Purchaser with
reference to the First Anniversary shall, in accordance with paragraph
(i), be issued as soon as practicable after the final number of Initial
Consideration Shares shall have been determined.
(iv) For the avoidance of doubt, it is hereby acknowledged and agreed that
the Purchaser shall have no further obligation to issue Additional
Consideration Shares to the Vendors after the Second Anniversary.
(D) Redemption
(i) At any time and from time to time up to the Second Anniversary, the
Purchaser shall have the option (but not the obligation) to redeem in
the Shareholding Proportion all or any portion of the Initial
Consideration Shares and the Additional Consideration Shares. The
aggregate redemption price for all of the Initial Consideration Shares
and any Additional Consideration Shares which shall have been issued to
the Vendors under sub-Clause (C)(i) shall be an amount equivalent to
the Cash Portion.
(ii) In the event of a redemption (either in a single transaction or series
of transactions) of all of the Initial Consideration Shares:-
(aa) at any time on or before the First Anniversary, then all of the
Initial Consideration Shares issued to date shall be deemed to
have been redeemed and the Purchaser shall have no obligation
to issue any Additional Consideration Shares to the Vendors
under sub-Clause (C)(i) whether on the First Anniversary or the
Second Anniversary; and
(bb) at any time after the First Anniversary but before the Second
Anniversary, then all of the Initial Consideration Shares and
Additional Consideration Shares issued to date shall be deemed
to have been redeemed and the Purchaser shall have no
obligation to issue any Additional Consideration Shares to the
Vendors under sub-Clause (C)(i) on the Second Anniversary.
(iii) If the Purchaser elects to redeem only a portion of the Initial
Consideration Shares, Additional Consideration Shares (if any) then
issued prior to the redemption date shall be redeemed in the same
proportion (the "Relevant Proportion") as the portion of the Initial
Consideration Shares being redeemed bears to all of the Initial
Consideration Shares. The redemption price payable for the Initial
Consideration Shares and Additional Consideration Shares being
redeemed, shall be equal to the Relevant Proportion of the Cash
Portion.
(iv) The Purchaser will be entitled to exercise its option to redeem the
Initial Consideration Shares and the Additional Consideration Shares,
regardless of whether or not the restrictions on transfer of any of the
Initial Consideration Shares described in sub-clause (B)(ii) are
effective, provided however that the Purchaser will not be entitled to
redeem the Initial Consideration Shares and the Additional
<PAGE> 11
INFOTEL - Share Sale Agmt
11.
Consideration Shares which shall have been properly sold, transferred,
assigned or otherwise disposed by the Vendors in accordance with the
provisions of sub-clause (B)(ii).
(v) In the event that any Vendor so sells, transfers, assigns or otherwise
disposes of his Initial Consideration Shares and/or Additional
Consideration Shares, the aggregate price payable to all Vendors for
redemption of all Initial Consideration Shares and Additional
Consideration Shares shall be reduced in the same proportion as the
proportion which the number of Initial Consideration Shares and/or
Additional Consideration Shares so sold, transferred, assigned or
otherwise disposed bears to all Initial Consideration Shares and (as
then issued) all Additional Consideration Shares respectively.
(vi) For the avoidance of doubt, the Initial Consideration Shares and the
Additional Consideration Shares shall not be redeemable by the
Purchaser under the provisions of this sub-Clause (D) following the
Second Anniversary.
(vii) The agreements entered into by each Vendor under this sub-clause (D)
are entered into by each Vendor severally (and not jointly).
(E) Consideration Shares: The Consideration Shares will not be registered
under the Securities Act of 1933 of the United States of America, as
amended (the "Securities Act"), or under any state securities laws,
and will be subject to restrictions on transfer until such time as the
Consideration Shares may be sold in reliance upon the exemption from
registration afforded by Rule 144 promulgated by the SEC under the
Securities Act, or another exemption from registration, or until such
shares are registered.
(F) Performance Payments
(i) In respect of the Company's financial years ending 30th June 1998 and
30th June 1999 respectively (each, a "Pay-Out Financial Year"), the
Purchaser agrees to pay the Vendors S$2.00 for every S$1.00 of Profit
After Tax (as defined in paragraph (ii)) earned by the Company in the
ordinary course of business during each Pay-Out Financial Year;
provided however that the Purchaser shall cease to be liable to make
any further payments to the Vendors under this sub-Clause (F) once it
shall have paid up to an amount of S$3,200,000.00 in aggregate.
(ii) For purposes of this sub-Clause (F), the amount of "Profit After Tax"
shall be conclusively determined by the Purchaser's Accountants on the
basis of the Company's audited accounts in respect of a Pay-Out
Financial Year
<PAGE> 12
INFOTEL - Share Sale Agmt
12.
in question (which accounts shall be prepared in accordance with
generally accepted accounting principles by the Company's auditors for
the time being); provided however that:-
(aa) for the purposes of determining such amount, the ordinary
course of business of the Company during that Pay-Out Financial
Year shall exclude net losses suffered from business and
activities which the Company does not carry on in the ordinary
course as at the date of this Agreement;
(bb) the amount of Profit After Tax shall exclude all amounts by way
of incentive bonuses (referred to in clause 3.4 of the Service
Agreement) paid to Specified Employees in respect of that
Pay-Out Financial Year;
(cc) in respect of the Pay-Out Financial Year ending 30th June 1999,
there shall be taken into account any net losses incurred by
the Company in respect of the Pay-Out Financial Year ending
30th June 1998 (but net losses suffered from business and
activities which the Company does not carry on in the ordinary
course as at the date of this Agreement are not required to be
taken into account).
(iii) Any payment due to the Vendors as aforesaid shall (subject to the
Vendors having given to the Purchaser payment instructions therefor) be
made to the Vendors no later than 30 days after the date of filing with
the SEC of the Purchaser's annual report on Form 10-KSB or other
similar form for the year ended on the last day of each Pay-Out
Financial Year.
(iv) In the event that the Purchaser fails in respect of any Pay-Out
Financial Year to make a payment under this sub-clause (F) to any one
or more of the Vendors, the provisions of Schedule 5 shall take effect
in accordance with the terms thereof.
(G) Incentive Bonuses
(i) The Purchaser shall provide the Company with funds of up to
S$300,000.00 for purposes of making payments to the Specified Employees
of the incentive bonuses in accordance with the provisions of clause
3.4 of and Schedule 2 to the Service Agreements. The incentive bonuses
shall be payable if the Company earns Profit After Tax (as defined
below) in respect of each of the Company's financial years ending 30th
June 1998, 30th June 1999 and 30th June 2000 respectively (each, a
"Relevant Financial Year"). "Profit After Tax" shall have the
<PAGE> 13
INFOTEL - Share Sale Agmt
13.
meaning ascribed to it in paragraph 1 of Schedule 2 to the Service
Agreements.
(ii) The Specified Employees (or their respective successors who shall have
completed not less than six months employment with the Company) shall
participate in the amount of incentive bonus declared in respect of
any one Relevant Financial Year according to the percentage (the
"Participation Percentage") of the Profit After Tax for that Relevant
Financial Year set against their respective names:-
<TABLE>
<S> <C> <C>
(a) Managing Director - 1.5%
(b) Director, Sales and Marketing - 1.5%
(c) Sales and Marketing Manager, Test Instruments - 4.0%
(d) Finance Manager - 2.4%
(e) Manager, CSD - 2.4%
(f) Business Development Manager - 1.0%
(g) Manager, Projects and Radio Systems - 1.6%
(h) Sales and Marketing Manager, Networking Systems - 1.6%
-----
Total- 16.0%
=====
</TABLE>
Provided however that if a Specified Employee shall have been in the
employ of the Company for less than one year, the amount of incentive
bonus received by him in respect of that Relevant Financial Year,
shall be pro- rated according to the number of months he has been
employed by the Company in that Relevant Financial Year.
(iii) In the event that less than S$300,000.00 in aggregate shall have been
declared by the Company as at the end of the Relevant Financial Year
ending 30th June 2000, the Company shall, irrespective of whether the
Company shall have earned any Profit After Tax for the Company's
financial year ending 30th June 2001, pay to the Specified Employees
in the same proportion as their proportionate entitlements to the
Participation Percentage the amount of the shortfall below
S$300,000.00, within sixty (60) days of finalisation of the Company's
audited accounts for that financial year.
(iv) In calculating all incentive bonuses to be paid to the Specified
Employees, any and all contributions which the Company (as employer)
is required to make to the Central Provident Fund in connection with
such incentive bonuses shall be taken into account for purposes of
aggregating the S$300,000.00 limit referred to in paragraph (i).
(v) The incentive bonus payable to a Specified Employee under the Service
Agreement, shall only be paid to a Specified
<PAGE> 14
INFOTEL - Share Sale Agmt
14.
Employee on condition that he remains in the employment of the Company
at the time when payment thereof is due to be made under the Service
Agreement.
5. REPRESENTATIONS BY PURCHASER
The Purchaser represents and warrants to and for the benefit of each of
the Vendors that:-
(a) it has the power to enter into, exercise its rights and
perform and comply with its obligations under this Agreement;
(b) all action, conditions and things required to be taken,
fulfilled and done (including the obtaining of any necessary
consents and approvals) in order to (i) enable it lawfully to
enter into, exercise its rights and perform and comply with
its obligations under this Agreement and (ii) ensure that
those obligations are valid, legally binding and enforceable
shall be taken, fulfilled and done as at Completion;
(c) its obligations under this Agreement are valid, binding and
enforceable; and
(d) the allotment and issue of the Consideration Shares to be
allotted and issued pursuant to the provisions of this
Agreement shall on the date(s) of allotment and issue
thereof, be duly authorised by the Purchaser and each of the
Consideration Shares shall when issued be valid, fully paid
and (unless otherwise provided in this Agreement) free from
any liens, charges and encumbrances.
6. COMPLETION
(A) Date and place of Completion: Completion shall take place on the
Completion Date at the offices of Messrs. Allen & Gledhill of 36
Robinson Road #18-01, City House, Singapore 068877 at 2:00 p.m. (unless
otherwise agreed between the parties).
(B) Vendors' Obligations
On Completion the Vendors shall:-
(i) together with the Purchaser, instruct the Escrow Agent to
deliver to the Purchaser duly executed transfers of the Sale
Shares by the registered holders thereof in favour of the
Purchaser together with the relative share certificates;
(ii) deliver to the Purchaser as agent for the Company:-
<PAGE> 15
INFOTEL - Share Sale Agmt
15.
(aa) all the statutory and other books (duly written up to
date) of the Company and its certificate of
incorporation, any certificates of incorporation on
change of name and common seal; and
(bb) the Service Agreements, each executed by the relevant
Specified Employee;
(iii) procure a board meeting of the Company to be duly convened
and held at which there shall be:-
(aa) passed a resolution to register the transfers of the
Sale Shares and (subject only to due stamping) to
register, in the register of members, the Purchaser
as the holder of the shares concerned;
(bb) revoked all existing authorities to banks and new
authorities shall be given to such banks and on such
terms as the Purchaser may direct;
(cc) approved and entered into such supplemental or other
agreements and/or security documents (if any) as may
be required by any of the Company's lenders as a
condition of such lender's consent to the release of
any security given by any one or more of the Vendors
for banking facilities granted to the Company;
(dd) approved and entered into Service Agreements between
each of the Specified Employees and the Company; and
(iv) (if so required by the Purchaser by reasonable prior notice)
procure the discharge (by Completion or within a reasonable
period thereafter) of all guarantees and like obligations
given by the Company in respect of the obligations of any
other person (and including the guarantees and obligations
stipulated to be discharged at Completion in the Disclosure
Letter), such discharge to be given in the agreed terms.
(C) Purchaser's Obligations
On Completion, the Purchaser shall:-
(i) pay the Cash Portion, by delivery to the Escrow Agent of the
relevant cashier's orders made in favour of each of the
Vendors;
(ii) deliver to the Escrow Agent the share certificates in respect
of the Initial Consideration Shares;
(iii) together with all the Vendors, instruct the Escrow Agent to
deliver to each Vendor in his Shareholding Proportion:-
<PAGE> 16
INFOTEL - Share Sale Agmt
16.
(aa) the relevant cashier's order for the Purchaser's
payment of the Cash Portion; and
(bb) (subject to sub-clause (E)) the Initial Consideration
Shares;
(iv) provide evidence reasonably satisfactory to the Vendors that
all personal guarantees given by any one or more of the Vendors
as security for banking facilities granted to the Company,
shall be discharged as at Completion or within a reasonable
period thereafter.
(D) Failure to complete
If in any respect the obligations of the Vendors or Purchaser are not
complied with on the Completion Date the party not in default may:-
(i) defer Completion to a date not more than 28 days after the
Completion Date (and so that the provisions of this sub-clause
(D), apart from this item, shall apply to Completion as so
deferred); or
(ii) proceed to Completion so far as practicable (without prejudice
to its rights hereunder); or
(iii) rescind this Agreement.
(E) Escrow Arrangements
In the event that the Completion Accounts shall not have become binding
for purposes of paragraph 4.4 of Schedule 3 by the Completion Date, the
parties agree that the following provisions shall take effect (and the
Escrow Agent shall be instructed accordingly):-
(i) share certificates for a provisional number of 428,560
Initial Consideration Shares shall prior to the Completion
Date, be delivered to the Escrow Agent for purposes of
sub-clause (C)(ii);
(ii) share certificates in respect of half of the provisional
number of 428,560 Initial Consideration Shares shall be
released by the Escrow Agent to the Vendors on Completion
Date;
(iii) share certificates in respect of the remaining half of the
provisional number of 428,560 Initial Consideration Shares
shall not be released to the Vendors on Completion Date,
but instead be held in escrow by the Escrow Agent under
the Escrow Agent Agreement pending release thereof;
<PAGE> 17
INFOTEL - Share Sale Agmt
17.
(iv) after the Completion Accounts shall have become binding
for purposes of paragraph 4.4 of Schedule 3, the parties
shall determine the final number of Initial Consideration
Shares in accordance with paragraph 5 of Schedule 3;
(v) the Purchaser shall forthwith furnish to the Escrow Agent
substitute or further share certificates in respect of
shares in its common stock as may be appropriate, with
the intent that, after taking into account half of the
provisional number of 428,560 Initial Consideration
Shares released to the Vendors on Completion Date, the
Vendors shall in their respective Shareholding Proportion
receive the final number of Initial Consideration Shares;
(vi) the parties shall instruct the Escrow Agent as to the
Escrow Agent's release to (aa) each of the Vendors in his
Shareholding Proportion, of all or part of the share
certificates in respect of the Initial Consideration
Shares then held by it in escrow and any substitute or
further share certificates furnished to the Escrow Agent
under the foregoing paragraph (v) and (bb) the Purchaser
of the remaining share certificates;
(vii) if the final number of Initial Consideration Shares as
finally determined shall be less than half of the
provisional number of 428,560 Initial Consideration
Shares, (aa) the Vendors shall be required to forthwith
deliver up to the Purchaser the share certificates
released to the Vendors on Completion Date in exchange
for share certificates allotted to each Vendor for the
final number of Initial Consideration Shares in his
Shareholding Proportion and (bb) the Vendors and the
Purchaser shall instruct the Escrow Agent to forthwith
deliver up to the Purchaser all share certificates then
held by it in escrow;
(viii) the release of share certificates under the foregoing
paragraph (vii) shall take place 15 Business Days after
the Completion Accounts shall have become binding for
purposes of paragraph 4.4 of Schedule 3 (or if such day
is not a Business Day, on the immediately succeeding
Business Day).
7. PURCHASER's RIGHT OF ACCESS
From the date of this Agreement, the Purchaser and any persons
authorised by it shall be allowed full access to
<PAGE> 18
INFOTEL - Share Sale Agmt
18.
all the premises, books and records of the Company, and the Vendors
shall supply or procure the supply of any information reasonably
required by the Purchaser relating to the Company and its affairs.
8. RESTRICTIONS ON VENDORS
(A) Restricted Business: In this clause, "Restricted Business" means the
business of distribution and/or servicing and/or maintenance of
telecommunications equipment within Singapore and which directly or
indirectly competes with the business of the Company carried on at the
date of this Agreement.
(B) Covenants
Each Vendor undertakes with the Purchaser (as trustee for itself and
the Company) and its successors in title that he will not:-
(i) for the period commencing from the date of this Agreement up to
and including the Specified Date (as defined below), either on
his own account or in conjunction with or on behalf of any
person, firm or company, carry on or be engaged, concerned or
interested (directly or indirectly and whether as principal,
shareholder, director, employee, agent, consultant, partner or
otherwise) in carrying on any Restricted Business (other than
as a holder of less than five per cent. of any class of shares
or debentures listed on the Stock Exchange of Singapore Limited
or any other recognised stock exchange);
(ii) for the period commencing from the date of this Agreement up to
and including the Specified Date, either on his own account or
in conjunction with or on behalf of any person, firm or
company, solicit or endeavour to entice away from the Company
any person who at the date of this Agreement is (or who within
a period of one year prior to the date of this Agreement has
been) a director, officer, manager, employee or servant of the
Company whether or not such person would commit a breach of
contract by reason of leaving service or office;
(iii) for the period commencing from the date of this Agreement up to
and including the Specified Date, either on his own account or
in conjunction with or on behalf of any person, firm or
company, in connection with any Restricted Business deal with,
solicit the custom of or endeavour to entice away from the
Company any person who at the date of this Agreement is (or who
within a period of one year prior to the date of this Agreement
has been) a customer of the Company whether or not such person
would commit a breach of contract by reason of transferring
business;
(iv) for the period commencing from the date of this Agreement up to
and including the Specified Date, either on his own account or
in conjunction with or on behalf of any person, firm or
<PAGE> 19
INFOTEL - Share Sale Agmt
19.
company, in connection with any Restricted Business endeavour
to entice away from the Company any person who at the date of
this Agreement is (or who within a period of one year prior
to the date of this Agreement has been) a supplier of the
Company whether or not such person would commit a breach of
contract by reason of transferring business; and
(v) at any time after the date of this Agreement, directly or
indirectly use or attempt to use in the course of any
business on his own account or in conjunction with or on
behalf of any person, firm or company, any trade or service
mark, trade name, design or logo (whether registered or not)
used in the business of the Company or any other name, logo,
trade or service mark or design which is or might be
confusingly similar thereto.
For purposes of this sub-clause (B), the "Specified Date" means the
earlier of:-
(aa) the date falling one year after the date on which the
Purchaser shall have paid up to $3,200,000.00 in aggregate by
way of performance payments under clause 4(F); and
(bb) 30th June 1999.
(C) Vendors to procure compliance
Each Vendor undertakes to take all such steps as shall from time to
time be necessary to ensure compliance with the terms of sub-clause
(B) by his employees and agents.
(D) Separate Covenants
Each of the undertakings in sub-clauses (B) and (C) shall be construed
as a separate and independent undertaking and if one or more of the
undertakings is held to be void or unenforceable, the validity of the
remaining undertakings shall not be affected.
(E) Reasonableness
The Vendors agree that the restrictions and undertakings contained in
sub-clauses (B) and (C) are reasonable and necessary for the
protection of the Purchaser's legitimate interests in the goodwill of
the Company, but if any such restriction or undertaking shall be found
to be void or voidable but would be valid and enforceable if some part
or parts of the restriction or undertaking were deleted, such
restriction or undertaking shall apply with such modification as may
be necessary to make it valid and enforceable.
(F) Void or Unenforceable Restrictions
Without prejudice to sub-clause (E), if any restriction or undertaking
is found by any court or other competent authority to be void or
unenforceable the parties shall negotiate in good faith to
<PAGE> 20
INFOTEL - Share Sale Agmt
20.
replace such void or unenforceable restriction or undertaking with a
valid provision which, as far as possible, has the same legal and
commercial effect as that which it replaces.
(G) Confidential Information Concerning the Company
(i) The Vendors shall not and shall procure that none of their respective
officers or employees shall, make use of or divulge to any third party
(other than to the Vendors" professional advisers for the purpose of
this Agreement in which case the Vendors shall use all reasonable
endeavours to procure that such advisers keep such information
confidential on terms equivalent to this Clause) any confidential
information relating to the Company save only:-
(aa) insofar as the same has become public knowledge otherwise than,
directly or indirectly, through any Vendor's breach of this
paragraph (i) or the failure of the officers, employees or
professional advisers referred to above to keep the same
confidential; or
(bb) to the extent required by law or by any supervisory or
regulatory body whether in Singapore or United States of
America,
provided however that any Vendor who is also employed by the Company
may use or divulge confidential information relating to the Company in
the manner and to the extent permitted under his service agreement with
the Company.
(ii) In the event that the sale and purchase of the Sale Shares is for any
reason not completed hereunder, the Purchaser shall not and shall
procure that none of its officers or employees shall, make use of or
divulge to any third party (other than to the Purchaser's professional
advisers for the purpose of this Agreement in which case the Purchaser
shall use all reasonable endeavours to procure that such advisers keep
such information confidential on terms equivalent to this Clause) any
confidential information relating to the Company save only:-
(aa) insofar as the same has become public knowledge otherwise than,
directly or indirectly, through the Purchaser's breach of this
paragraph (ii) or the failure of the officers, employees or
professional advisers referred to above to keep the same
confidential; or
(bb) to the extent required by law or by any supervisory or
regulatory body whether in Singapore or United States of
America.
(H) Obligations several
The undertakings and agreements given or entered into by each Vendor
under this clause 8 are given and entered into by the Vendors severally
(and not jointly).
<PAGE> 21
INFOTEL - Share Sale Agmt
21.
9. WARRANTIES
(A) General
The Vendors hereby jointly and severally warrant and represent to the
Purchaser in the terms of the Warranties and acknowledge and accept
that the Purchaser is entering into this Agreement in reliance upon
each of the Warranties, and each of the Warranties is deemed to be
repeated by the Vendors from day to day and on each day during the
period from the date of this Agreement up to (and including) the date
of Completion.
(B) Purchaser's knowledge
The Warranties are given subject to matters fairly disclosed in this
Agreement or in the Disclosure Letter, but no other information
relating to the Company of which the Purchaser has knowledge (actual
or constructive) shall prejudice any claim made by the Purchaser under
the Warranties or operate to reduce any amount recoverable.
(C) Warranties to be independent
Each of the Warranties shall be separate and independent and, save as
expressly provided, shall not be limited by reference to any other
Warranty or anything in this Agreement.
(D) Damages
Without restricting the rights of the Purchaser or the ability of the
Purchaser to claim damages on any basis in the event that any of the
Warranties is broken or proves to be untrue or misleading, the Vendors
hereby jointly and severally covenant to pay, on demand, to the
Purchaser:-
(i) the amount necessary to put the Company into the position
which would have existed if the Warranties had not been
broken and had been true and not misleading; and
(ii) all costs and expenses incurred by the Purchaser or the
Company, directly or indirectly, as a result of such breach,
provided however that all amounts, costs and expenses paid under the
foregoing paragraphs (i) and (ii) shall be subject to the limitations
set out in sub-clause (I).
(E) Liaison on Conduct of Business
The Vendors shall procure that, from the date of this Agreement until
Completion, the business of the Company is carried on in the usual and
normal course and that the Company shall not enter into any contract
or commitment or do anything which, in any such case, is either out of
the ordinary and usual course of its business or of a
<PAGE> 22
INFOTEL - Share Sale Agmt
22.
material nature without the prior consent in writing of the Purchaser.
In particular, but without limiting the foregoing, the Vendors shall
procure that from the date of this Agreement until Completion, save
with the prior consent in writing of the Purchaser, the Company shall
not:-
(i) make any alteration to its memorandum or articles of
association or any other document or agreement establishing,
evidencing or relating to its constitution or operation;
(ii) alter the nature or scope of its business;
(iii) manage its business otherwise than in accordance with its
business and trading policies and practice to date as currently
practised, except as may be necessary to comply with any
legislative changes;
(iv) enter into any agreement or arrangement or permit any action
whereby another company becomes its subsidiary or another
business becomes its subsidiary undertaking;
(v) enter into any transaction other than on arm's length terms and
for valuable consideration;
(vi) (other than transactions entered into in the ordinary course of
business relating to inventory) acquire or enter into any
agreement to acquire (whether by one transaction or by a series
of transactions) the whole or a substantial or material part of
the business, undertaking or assets of any other person;
(vii) (other than transactions entered into in the ordinary course of
business relating to inventory) dispose of or enter into any
agreement to dispose of (whether by one transaction or by a
series of transactions) the whole or any substantial or
material part of its business, undertaking or assets;
(viii) (save in respect of the purchase of a new car for Leong Sau Pan
as disclosed in the Disclosure Letter) incur or agree to incur
any capital expenditure with a value in excess of S$25,000.00;
(ix) (other than forward contracts entered into and bank guarantees
furnished in the ordinary course of business) take or agree to
take any loans, borrowings or other form of funding or
financial facility or assistance, or enter into or agree to
enter into any foreign exchange contracts, interest rate swaps,
collars, guarantees or agreements or other interest rate
instruments;
(x) (other than subsisting banking facilities extended to the
Company for purposes of its business) grant or agree to grant
any loans or other financial facilities or assistance
<PAGE> 23
INFOTEL - Share Sale Agmt
23.
to or any guarantees or indemnities for the benefit of any
person or create or allow to subsist any mortgage, charge or
other encumbrance over the whole or any part of its
undertaking, property or assets (other than liens arising by
operation of law);
(xi) enter into or agree to enter into any joint venture,
partnership or agreement or arrangement for the sharing of
profits or assets;
(xii) (save for the Service Agreements) enter into or agree to
enter into any death, retirement, profit sharing, bonus,
share option, share incentive or other scheme for the benefit
of any of its officers or employees or make any variation
(including, but without limitation, any increase in the rates
of contribution) to any such existing scheme or effect any
key man insurance;
(xiii) commence, compromise or discontinue any legal or arbitration
proceedings (other than routine debt collection);
(xiv) prematurely repay or prepay any loans, borrowings or other
financial facilities or assistance made available to it;
(xv) terminate the employment or office of any of its directors,
officers or Specified Employees or appoint any new director,
officer or senior employee or (save in the ordinary course of
business) any consultant or materially alter the terms of
employment or engagement of any director, officer, senior
employee or consultant;
(xvi) declare, make or pay any dividend or distribution (whether of
capital or of profits);
(xvii) (save where (aa) prior written notice is given to the
Purchaser in respect of any contract or arrangement having a
value in excess of S$1,000,000.00 and (bb) the prior written
consent of the Purchaser is obtained in respect of any
contract or arrangement having a value in excess of
S$2,500,000.00) make or agree to any material amendment,
variation, deletion, addition, renewal or extension to or of,
or terminate or give any notice or intimation of termination
of, or breach or fail to comply with the material terms of
any contract or arrangement; and
(xviii) pay or agree to pay any remuneration, fee or other sum to any
Vendor or any Affiliate (other than remuneration properly
accrued due or reimbursement of business expenses properly
incurred, in each case as disclosed in the Disclosure
Letter),
<PAGE> 24
INFOTEL - Share Sale Agmt
24.
provided however that the Directors may prior to Completion (without
the Purchaser's consent) and subject to the requirements of Section 403
of the Companies Act, declare interim net dividends of an aggregate
amount not exceeding S$3,000,000.00 in respect of the Company's
financial year ending on 30th June 1998 and in connection therewith:-
(1) such interim net dividends shall be declared on the basis
that they shall be payable after the Directors have
ascertained the quantum of cash, cash equivalents and
marketable securities owned by the Company as at 31st
December 1997;
(2) if the quantum so determined has an aggregate value equal
to or greater than S$1,500,000.00, the Directors shall
thereupon be entitled to pay the full amount of the
interim dividends so declared;
(3) if the quantum so determined has an aggregate value of
less than S$1,500,000.00, the Directors shall forthwith
revoke the interim net dividends so declared by the amount
of the difference between the quantum so determined and
S$1,500,000.00, and pay out to the Vendors the amount
remaining as interim net dividends;
(4) for purposes of calculating the said S$1,500,000.00
quantum, the sum of S$450,000.00 paid to Motorola ISG on
29th December 1997 in respect of invoice nos. 2786375,
2808046, 2855730, 96/03076, 96/09728 and 97/03480, may be
added back and deemed not to have been paid out by the
Company; and
(5) in the event that the profits of the Company distributable
as dividends shall, on the basis of the audited accounts
in respect of financial year ending on 30th June 1998, be
less than the amount of interim net dividends declared and
paid under this proviso, the Vendors shall forthwith on
demand by the Company repay the difference between the
amounts of the distributable profits and the interim net
dividends.
(F) Further Disclosure by Vendors
The Vendors without prejudice to sub-clause (E) shall forthwith
disclose in writing to the Purchaser any matter or thing which may
arise or become known to any Vendor after the date hereof and before
Completion which is inconsistent with any of the Warranties in any
material respect or which might make any of them inaccurate or
misleading in any material respect if they were given at any and all
times from the date hereof up to Completion or which is material to be
known to a purchaser for value of the Sale Shares.
(G) Rescission
In the event of any act or omission which would make any of the
Warranties inaccurate or misleading in any material respect becoming
<PAGE> 25
INFOTEL - Share Sale Agmt
25.
known to the Purchaser before Completion or in the event of it
becoming apparent on or before Completion that any Vendor is in breach
of any of the Warranties in any material respect or any other material
term of this Agreement, the Purchaser may at its option either:-
(i) rescind this Agreement by notice in writing to the Vendors;
or
(ii) proceed to Completion but without prejudice to its right to
claim for breach of this Agreement or such Warranties.
(H) Waiver of Claims
Each Vendor undertakes to the Purchaser that it will not make or
pursue any claim which it has or may have against the Company or any
of the Employees (referred to in paragraph 2.11(B)(1) of Schedule 2)
in respect of or arising out of the Warranties or any information
supplied by them to or on behalf of the Vendors or any Vendor's
professional advisers on or prior to the date hereof.
(I) Vendor Protection
The liability of the Vendors in respect of any claim under or in
connection with the Warranties (each such claim, a "Relevant Claim")
shall be limited as follows:-
(i) the aggregate liability of the Vendors in respect of Relevant
Claims shall be limited to S$11,000,000.00;
(ii) the Vendors shall not be liable in respect of a Relevant
Claim unless the aggregate liability of the Vendors in
respect of all Relevant Claims exceeds S$100,000.00 in which
case the Vendors shall jointly and severally be liable for
the whole amount and not merely the excess over S$100,000.00;
(iii) the Vendors shall have no liability in respect of any
Relevant Claim unless the Purchaser shall have given notice
in writing to the Vendors of such claim on or before 31st
December 1999;
(iv) if the Vendors pay to or for the benefit of the Purchaser an
amount in respect of any Relevant Claim and any of the
Purchaser or the Company subsequently receives from any other
person any payment in respect of the matter giving rise to
the Relevant Claim, the Purchaser shall thereupon pay to the
Vendors (unless otherwise requested, in the Shareholding
Proportion) an amount equal to the payment received, after
having taken into account any cost, liability (including tax
liability) or expense in respect thereof and except to any
extent that the liability of the Vendors in respect of the
<PAGE> 26
INFOTEL - Share Sale Agmt
26.
Relevant Claim was reduced to take account of such payment;
(v) in respect of any claim made by or against the Company in
relation to third parties which is subject- matter of a
Relevant Claim, the Purchaser shall at its absolute discretion,
acting reasonably and in good faith, take all reasonable steps
to defend or pursue such claim;
(vi) the Vendors shall not be liable to the extent that any Relevant
Claim arises out of any voluntary act or omission of the
Purchaser or its directors, employees or agents after
Completion;
(vii) the Vendors shall not be liable to the extent that any Relevant
Claim arises out the passing or any change in any law, rule,
regulation or administrative practice of any government,
governmental department, agency or regulatory body affecting
the Company after the date of this Agreement,
Provided However that the foregoing limits on the Vendors" liability
shall not apply in respect of any Relevant Claim if it is (or the delay
in the discovery of which is) the consequence of fraud, falsification
or wilful concealment by any Vendor.
10. CONFIDENTIALITY
(A) Confidentiality
Subject to sub-clause (B) and to Clause 11 and without prejudice to
clause 8(G), each party:-
(i) shall treat as strictly confidential information obtained or
received by it as a result of its entering into or performing
its obligations under this Agreement or relating to the
negotiations concerning, or the provisions or subject matter
of, this Agreement or the other party ("confidential
information"); and
(ii) shall not, except with the prior written consent of the other
party (which shall not be unreasonably withheld or delayed),
publish or otherwise disclose to any person any confidential
information.
(B) Permitted Disclosures
Sub-clause (A) shall not apply if and to the extent that:-
(i) such disclosure is required by law or by any securities
exchange or regulatory or governmental body having jurisdiction
over it and whether or not the requirement has the force of
<PAGE> 27
INFOTEL - Share Sale Agmt
27.
law;
(ii) the confidential information was lawfully in its possession
prior to its disclosure by the other party (as evidenced by
written records) and had not been obtained from that other
party; or
(iii) the confidential information has come into the public domain
other than through its fault or the fault of any person to
whom the confidential information has been disclosed.
(C) Continuance of Restrictions
The restrictions contained in this Clause on the part of the Vendors
shall survive Completion.
(D) Obligations several
The agreements entered into be each Vendor under this clause 10 are
entered into by the Vendors severally (and not jointly).
11. ANNOUNCEMENTS
(A) Restriction
Subject to sub-clause (B), neither the Vendors nor the Purchaser shall
make any announcement, whether to the public, to the customers or
suppliers of the Company, or to all or any of the employees of the
Company, concerning the subject matter of this Agreement without the
prior written approval of the other (which shall not be unreasonably
withheld or delayed).
(B) Permitted Announcements
Sub-clause (A) shall not apply if and to the extent that such
announcement is required by law or by any securities exchange or
regulatory or governmental body having jurisdiction over it and
whether or not the requirement has the force of law and provided that
any such announcement shall be made only after consultation with the
other party.
(C) Continuance of Restrictions
The restrictions contained in this Clause on the part of the Vendors
shall survive Completion.
(D) Obligations several
The agreements entered into by each Vendor under this clause 11 are
entered into by the Vendors severally (and not jointly).
<PAGE> 28
INFOTEL - Share Sale Agmt
28.
12. PROVISIONS RELATING TO THIS AGREEMENT
(A) Assignment
This Agreement shall be binding upon and inure for the benefit of the
successors of the parties but shall not be assignable, save that the
Purchaser may at any time after having given prior notice to the
Vendors assign all or any part of its rights and benefits under this
Agreement, including the Warranties and any cause of action arising
under or in respect of any of them, to any Transferee (as defined
below) of the share capital of the Company who may enforce them as if
it had also been named in this Agreement as the Purchaser. A
"Transferee" for purposes of this sub-clause (A) means either (i) any
corporation in which the Purchaser beneficially owns a majority
interest or (ii) any other corporation approved by the Vendors (whose
approval shall not be unreasonably withheld).
(B) Whole Agreement
(i) This Agreement, together with any documents referred to in it,
constitutes the whole agreement between the parties relating to its
subject matter and supersedes and extinguishes any prior drafts,
agreements, undertakings, representations, warranties, assurances and
arrangements of any nature, whether in writing or oral, relating to
such subject matter.
(ii) The Purchaser acknowledges that it has not been induced to enter into
this Agreement by any representation, warranty, promise or assurance by
the Vendors or any other person save for those contained in this
Agreement and in the Disclosure Letter. The Purchaser agrees that
(except in respect of fraud) it shall have no right or remedy in
respect of any other representation, warranty, promise or assurance
save for those contained in this Agreement. The Purchaser acknowledges
that its legal advisers have explained to it the effect of this
paragraph (ii).
(iii) No variation of this Agreement shall be effective unless made in
writing and signed by each of the parties.
(C) Agreement Survives Completion
The Warranties and all other provisions of this Agreement in so far as
the same shall not have been performed at Completion, shall remain in
full force and effect notwithstanding Completion.
(D) Rights etc Cumulative and Other Matters
(i) The rights, powers, privileges and remedies provided in this Agreement
are cumulative and are not exclusive of any rights, powers, privileges
or remedies provided by law or otherwise.
(ii) No failure to exercise nor any delay in exercising any right, power,
privilege or remedy under this Agreement shall in any way impair or
affect the exercise thereof or operate as a waiver thereof in whole or
in part.
<PAGE> 29
INFOTEL - Share Sale Agmt
29.
(iii) No single or partial exercise of any right, power, privilege or remedy
under this Agreement shall prevent any further or other exercise
thereof or the exercise of any other right, power, privilege or
remedy.
(E) Release of One Vendor
The Purchaser may release or compromise the liability of any of the
Vendors hereunder without affecting the liability of the other
Vendors.
(F) Further Assurance
At any time after the date hereof each of the Vendors shall, at the
request and cost of the Purchaser, execute or procure the execution of
such documents and do or procure the doing of such acts and things as
the Purchaser may reasonably require for the purpose of vesting the
Sale Shares in the Purchaser or its nominees and giving to the
Purchaser the full benefit of all the provisions of this Agreement.
(G) Invalidity
If any provision of this Agreement shall be held to be illegal, void,
invalid or unenforceable under the laws of any jurisdiction, the
legality, validity and enforceability of the remainder of this
Agreement in that jurisdiction shall not be affected, and the
legality, validity and enforceability of the whole of this Agreement
in any other jurisdiction shall not be affected.
(H) Counterparts
This Agreement may be executed in any number of counterparts, which
shall together constitute one Agreement. Any party may enter into
this Agreement by signing any such counterpart.
(I) Costs
Each party shall bear its own costs arising out of or in connection
with the preparation, negotiation and implementation of this
Agreement.
(J) Notices
(i) Any notice or other communication required to be given under this
Agreement or in connection with the matters contemplated by it shall,
except where otherwise specifically provided, be in writing and shall
be addressed as provided in paragraph (ii) and may be:-
(aa) personally delivered, in which case it shall be deemed to
have been given upon delivery at the relevant address; or
(bb) if within Singapore, sent by pre-paid post, in which case it
<PAGE> 30
INFOTEL - Share Sale Agmt
30.
shall be deemed to have been given two Business Days after the
date of posting; or
(cc) if from or to any place outside Singapore, sent by pre-paid
airmail, in which case it shall be deemed to have been given
seven Business Days after the date of posting; or
(dd) sent by fax, in which case it shall be deemed to have been
given when despatched, subject to confirmation of uninterrupted
transmission by a transmission report provided that any notice
despatched by fax after 5:00 p.m. (at the place where such fax
is to be received) on any day shall be deemed to have been
received at 8:00 a.m. on the next Business Day.
(ii) The addresses and other details of the parties referred to in paragraph
(i) are, subject to paragraph (iii):-
Purchaser
Name: NHancement Technologies Inc.
Address: 39420 Liberty Street, Suite 250
Fremont
California 94538
United States of America.
Fax number: (510) 744 4003
For the attention of: Esmond T. Goei/Douglas S. Zorn
Vendors
1. Name: Gerard Foo Loke Kiean
Address: 10 Persiaran Canton Victoria Park
30250 Ipoh
Perak
Malaysia
Fax number: (603) 705 1818
2. Name: James Han Kim Guan
Address: 15 Mimosa Walk
Singapore 807862
Fax number: -
3. Name: Leong Sau Pan
Address: 27B Fernhill Road
Singapore 259089
Fax number: -
4. NAME: FOO KHOON WONG
Address: 7 Jalan Belfield
Ipoh
Perak
Malaysia
Fax number: -
<PAGE> 31
INFOTEL - Share Sale Agmt
31.
5. Name: Sae Foo Kitipongse @ Foo Loke Khee
Address: 869/243 Muang Thong 4
Sukumvit 101
Bangkok 10250
Thailand
Fax number: 66-2-3319697
(iii) Any party to this Agreement may notify the other parties of any change
to its address or other details specified in paragraph (ii), provided
that such notification shall be effective only on the date specified
in such notice or five Business Days after the notice is given,
whichever is later.
(K) Good faith
Each of the Vendors and the Purchaser agrees to at all times exercise
good faith towards bringing the sale and purchase of the Sale Shares
to Completion.
13. GOVERNING LAW AND JURISDICTION
(A) Governing Law
This Agreement shall be governed by, and construed in accordance with,
the laws of Singapore.
(B) Jurisdiction
In relation to any legal action or proceedings to enforce this
Agreement or arising out of or in connection with this Agreement
("proceedings") each of the parties irrevocably submits to the
exclusive jurisdiction of the Singapore courts and waives any
objection to proceedings in such courts on the grounds of venue or on
the grounds that the proceedings have been brought in an inconvenient
forum; provided however that the Vendors hereby acknowledge and agree
that the parties" agreement to submit to the exclusive jurisdiction of
the Singapore courts shall exclude and not apply to any action, claim,
indemnity or proceeding made by the Purchaser against any one or more
of the Vendors arising out of the Vendors' shareholding of
Consideration Shares and/or Relevant NHancement Shares.
<PAGE> 32
INFOTEL - Share Sale Agmt
32.
SCHEDULE 1
PART I
The Vendors
<TABLE>
<CAPTION>
SHAREHOLDING SALE
NAME AND PARTICULARS OF VENDOR PROPORTION SHARES
<S> <C> <C>
1. GERARD FOO LOKE KIEAN (MALAYSIA IC FIVE PER 25,000
NO. A3516527) OF 10 PERSIARAN CANTON CENT.
VICTORIA PARK, 30250 IPOH, PERAK, MALAYSIA
2. JAMES HAN KIM GUAN (NRIC NO. S0028404A) 25 PER CENT. 125,000
OF 15 MIMOSA WALK, SINGAPORE 807862
3. LEONG SAU PAN (NRIC NO. S2570969A) OF 25 PER CENT. 125,000
27B FERNHILL ROAD, SINGAPORE 259089
4. FOO KHOON WONG (MALAYSIAN IC NO. 1376406) 20 PER CENT. 100,000
OF 7 JALAN BELFIELD, IPOH, PERAK, MALAYSIA
5. Sae Foo Kitipongse @ Foo Loke Khee 25 PER CENT. 125,000
(Malaysian IC No. 7231358) 869/243
Muang Thong 4, Sukumvit 101, Bangkok
10250, Thailand
</TABLE>
PART II
Directors
1. Leong Sau Pan
2. James Han Kim Guan
<PAGE> 33
INFOTEL - Share Sale Agmt Schedule 1
33.
PART III
Specified Employees
1. Leong Sau Pan, Managing Director
2. James Han Kim Guan, Director, Sales and Marketing
3. Ng Yam Sing, Sales and Marketing Manager, Test Instruments
4. Evelyn Yeo, Finance Manager
5. Peter Tsang, Manager, CSD
6. Rakesh Narang, Business Development Manager
7. Yeo York Hong, Manager, Projects and Radio Systems
8. (position vacant as at date of this Agreement) Sale and Marketing
Manager, Networking Systems
PART IV
Particulars of the Company
Name: INFOTEL TECHNOLOGIES (PTE) LTD
Number: 198305034M
Registered Office: 19 Tai Seng Drive #06-00, Singapore 535222
Authorised Capital: S$500,000.00
Issued Capital: S$500,000.00
Directors and other
directorships: Leong Sau Pan (no other directorships)
James Han Kim Guan (no other directorships)
Secretary: Tan Lay Hiong
Accounting Reference
Date: 30th June
Auditors: Ernst & Young
<PAGE> 34
INFOTEL - Share Sale Agmt
34.
SCHEDULE 2
Warranties and representations
1 INTERPRETATION
1.1 In this Schedule, where the context admits:
"Computer Systems" means the Hardware, Software and Data;
"Data" means any data or information used by or for the benefit of the
Company at any time and stored electronically at any time;
"Hardware" means any computer equipment used by or for the benefit of
the Company at any time including, without limitation, PCs, mainframes,
screens, terminals, keyboards, disks, printers, cabling, associated and
peripheral electronic equipment but excluding all Software;
"Intellectual Property" means patents, trade marks, service marks,
rights (registered or unregistered) in any designs; applications for
any of the foregoing; trade or business names; copyright (including
rights in computer software) and topography rights; know-how; secret
formulae and processes; lists of suppliers and customers and other
confidential and proprietary knowledge and information; rights
protecting goodwill and reputation; database rights and rights under
licences and consents in relation to such things and all rights or
forms of protection of a similar nature to any of the foregoing or
having equivalent effect anywhere in the world;
"Software" means any set of instructions for execution by
microprocessor used by or for the benefit of the Company at any time
irrespective of application, language or medium.
Where, in this Schedule, a term is defined in and for the purposes of a
particular paragraph or sub-paragraph the relevant definition shall
apply, where the context admits, for all other purposes of this
Schedule.
2 WARRANTIES AND REPRESENTATIONS
The Vendors hereby jointly and severally warrant and represent to and
for the benefit of the Purchaser in the following terms.
2.1 THE COMPANY AND THE VENDORS
(A) Capacity Each of the Vendors has full power and authority to enter into
and perform this Agreement, may execute and deliver this Agreement and
perform his obligations under this Agreement without requiring or
obtaining the consent of any other person, authority or
<PAGE> 35
INFOTEL - Share Sale Agmt Schedule 2 - Warranties
35.
body and this Agreement constitutes valid and binding obligations on
each of the Vendors in accordance with its terms.
(B) Ownership of Sale Shares Each of the Vendors is the registered and
sole beneficial owner of his Sale Shares free from any encumbrances.
(C) Liabilities Owing to or by Vendors There is not outstanding any
indebtedness or other liability (actual or contingent) owing by the
Company to any Vendor, Affiliate or Director, nor is there any
indebtedness owing to the Company by any Vendor, Affiliate or
Director, and no promise or representation has been made by the
Company to any of the Vendors in connection with the Warranties or the
Disclosure Letter in respect of which the Company might be liable.
(D) Competing Interests So far as the Vendors are aware, no Affiliate has
any interest, direct or indirect, in any business other than that now
carried on by the Company which is or is likely to be or become
competitive with the business of the Company (save as the registered
holder or beneficial owner of not more than 5 per cent of any class of
securities of any company which is listed in the Stock Exchange of
Singapore Limited or other recognised stock exchange).
2.2 THE COMPANY'S CONSTITUTION
(A) Share Capital The Sale Shares comprise the whole of the issued and
allotted share capital of the Company, are fully paid and are
beneficially owned and registered as set out in the third column of
Schedule 1 against the name of each Vendor free from any encumbrances.
(B) Options etc No person has the right (whether exercisable now or in the
future and whether contingent or not) to call for the allotment,
issue, sale, transfer or conversion of any share or loan capital of
the Company under any option or other agreement (including conversion
rights and rights of pre-emption).
(C) Memorandum and Articles The copy of the memorandum and articles of
association of the Company annexed to the Disclosure Letter is true
and complete and has embodied therein or annexed thereto a copy of
every resolution or agreement as is required by law to be embodied in
or annexed to it, and sets out completely the rights and restrictions
attaching to each class of authorised share capital of the Company.
(D) Company Resolutions Neither the Company nor any class of its members
has passed any special resolution.
2.3 THE COMPANY AND ITS INVESTMENTS
(A) Particulars of the Company The particulars of the Company set out in
Part IV of Schedule 1 are true and complete and the Company has no
subsidiaries.
<PAGE> 36
INFOTEL - Share Sale Agmt Schedule 2 - Warranties
36.
(B) Investments, Associations and Branches The Company:-
(1) is not the holder or beneficial owner of, and has not agreed to
acquire, any class of the share or other capital of any other
company or corporation (whether incorporated in the Singapore
or elsewhere), save as the registered holder or beneficial
owner of not more than 5 per cent of any class of securities of
any company which is listed in the Stock Exchange of Singapore
Limited or other recognised stock exchange;
(2) is not, and has not agreed to become, a member of any
partnership, joint venture, consortium or other unincorporated
association, body or undertaking in which it is to participate
with any other in any business or investment; and
(3) has no branch, agency or place of business outside Singapore
and no permanent establishment (as that expression is defined
in the relevant double taxation relief orders current at the
date of this Agreement) outside Singapore.
2.4 THE COMPANY AND THE LAW
(A) Compliance with Laws The Company has conducted its business in all
material respects in accordance with all applicable laws and
regulations of Singapore and any relevant foreign country or authority
and so far as the Vendors are aware there is no order, decree or
judgment of any court or any governmental or other competent authority
or agency of Singapore or any foreign country outstanding against the
Company or any person for whose acts the Company is vicariously liable
which may have a material adverse effect upon the assets or business of
the Company.
(B) Licences etc
(1) All necessary licences, consents, permits, approvals and authorisations
(public and private) have been obtained by the Company to enable the
Company to lawfully carry on its business in the places and in the
manner in which such business is now carried on, the non-obtaining of
which will materially and adversely affect the business of the Company,
and all such licences, consents, permits, approvals and authorisations
are in full force and effect and are not subject to onerous conditions
which the Company is incapable of complying with.
(2) All material reports, returns and information required by law or as a
condition of any licence, consent, permit, approval or other
authorisation as aforesaid to be made or given to any person or
authority in connection with the Company's business have been made or
given to the appropriate person or authority.
(3) The utilisation of any of the assets of the Company or the carrying
<PAGE> 37
INFOTEL - Share Sale Agmt Schedule 2 - Warranties
37.
on of any aspect of the Company's business or any business now being
carried on at No. 19 Tai Seng Drive #06- 00, Singapore 535222 (and/or
such other principal place of business of the Company) is not in
breach of any of the material terms and conditions of any of such
licences, consents, permits, approvals and authorisations and so far
as any of the Vendors is aware there is no circumstance which
indicates that any such licence, consent, permit, approval or
authorisation is likely to be suspended or revoked or prematurely
terminated before Completion.
(4) At Completion there will be no restriction on the right of the Company
to carry on its business which does not now apply to the Company.
(C) Breach of Statutory Provisions Neither the Company, nor any of its
officers, agents or employees (during the course of their duties in
relation to the Company) have committed, or omitted to do, any act or
thing the commission or omission of which is, or could be, in
contravention of any Act, Order, Regulation, or the like in Singapore
or elsewhere which is punishable by fine or other penalty and the
commission or omission of which will materially and adversely affect
the business of the Company, and no notice or communication has been
received with respect to any alleged, actual or potential violation of
or failure to comply with such Act, Order, Regulation or the like or
any other law or legal requirement.
(D) Litigation
(1) Neither the Company nor (so far as any Vendor is aware) any of its
officers, agents or employees is (during the course of their duties in
relation to the Company) engaged in or the subject of any litigation,
arbitration or administrative proceedings in relation to any claim
exceeding S$250,000.00 or criminal proceedings whether as plaintiff,
defendant or otherwise, which materially and adversely affects or is
likely to have a material adverse effect on the Company's business
and/or the ability of the Company to carry on the Company's business
in the same manner and to the same extent as previously carried on.
(2) No litigation or arbitration or administrative or criminal proceedings
are pending or threatened, by or against the Company; and so far as
any of the Vendors is aware there are no facts or circumstances likely
to give rise to any such litigation or arbitration or administrative
or criminal proceedings.
(3) Neither the Company nor (so far as any Vendor is aware) any officer or
employee of the Company (during the course of his duties in relation
to the Company) has not been a party to any undertaking or assurance
given to any court or governmental agency or the subject of any
injunction which is still in force.
(E) Product Liability
<PAGE> 38
INFOTEL - Share Sale Agmt Schedule 2 - Warranties
38.
(1) There is no claim in respect of Product Liability (as hereinafter
defined) outstanding or threatened against the Company in relation to
its business and so far as any Vendor is aware there are no
circumstances which are likely to give rise to any such claim. For this
purpose "Product Liability" means a liability arising out of death,
personal injury or damage to property caused by a defective product or
defective services sold supplied or provided by the Company in the
course of its business on or prior to the date hereof.
(2) So far as the Vendors are aware (after having made due and careful
inquiries), the Company has not manufactured, sold or supplied any
product or service which does not comply in any material respect with
any warranty or representation, express or implied, made by or on
behalf of the Company in respect of it or with all laws, regulations,
standards and requirements applicable to it.
(F) Inducements So far as any Vendor is aware no officer, agent or employee
of the Company has paid any bribe (monetary or otherwise) for purposes
of the Company's business.
2.5 THE COMPANY'S AND VENDOR's SOLVENCY
(A) Winding Up & Bankruptcy No order has been made, petition presented or
resolution passed for the winding up of the Company and no meeting has
been convened for the purpose of winding up the Company. The Company
has not been a party to any transaction which could be avoided in its
winding up. No application has been made in relation to any Vendor
under the Bankruptcy Act 1995 of Singapore for an interim order.
(B) Administration and Receivership No steps have been taken for the
appointment of an administrator or receiver (including an
administrative receiver) of all or any part of the Company's assets. No
receiver has been appointed in respect of any Vendor's property.
(C) Compositions The Company has not made or proposed any arrangement or
composition with its creditors or any class of its creditors. None of
the Vendors has made a proposal to his creditors for a composition in
satisfaction of his debts or a scheme of arrangement of his affairs.
(D) Insolvency The Company is not insolvent, is not unable to pay its debts
and has not stopped paying its debts as they fall due. None of the
Vendors is unable or has no reasonable prospect of being to pay his
debts.
(E) Unsatisfied Judgments No distress, execution or other process has been
levied against the Company or action taken to repossess goods in the
Company's possession. No unsatisfied judgment is outstanding against
the Company.
(F) Floating Charges No floating charge created by the Company has
<PAGE> 39
INFOTEL - Share Sale Agmt Schedule 2 - Warranties
39.
crystallised and, so far as any of the Vendors is aware, there are no
circumstances likely to cause such a floating charge to crystallise.
(G) Analogous Events No event analogous to any of the foregoing has
occurred in or outside Singapore.
2.6 THE COMPANY'S ACCOUNTS AND RECORDS
(A) Books and records All accounts, books, ledgers, financial and other
statutory records of whatsoever kind ("Records") of the Company:-
(1) have been fully, properly and accurately maintained on a
consistent basis and will at Completion be up to date and are
in the possession and control of the Company (or agents duly
authorised for such purpose) and contain true, complete and
accurate records of all matters required by law to be entered
therein;
(2) do not contain or reflect any material inaccuracies or
discrepancies; and
(3) give and reflect a true and fair view of the financial,
contractual and trading position of the Company and of its
fixed and current assets and liabilities (actual and
contingent) and debtors and creditors (as appropriate),
and no notice or allegation that any of the records is incorrect or
should be rectified has been received.
(B) Accounts The Audited Accounts:-
(1) were prepared in accordance with the requirements of all
relevant statutes and accounting practices generally accepted
in Singapore at the time they were audited;
(2) show a true and fair view of the assets and liabilities of
the Company as at, and the profits of the Company for the
accounting reference period ended on, the Balance Sheet Date;
(3) are not affected by any unusual or non-recurring items; and
(4) apply bases and policies of accounting which have been
consistently applied in the audited financial statements of
the Company for the financial year of the Company ending on
the Balance Sheet Date.
(C) Provision for Liabilities Full provision has been made in the Audited
Accounts for all actual liabilities of the Company outstanding at the
Balance Sheet Date and proper provision (or note) in accordance with
generally accepted accounting principles in Singapore at the time they
were audited has been made therein for all other liabilities of the
Company then outstanding whether contingent, quantified, disputed
<PAGE> 40
INFOTEL - Share Sale Agmt Schedule 2 - Warranties
40.
or not including (without limitation) the cost of any work or material
for which payment has been received or credit taken, any future loss
which may arise in connection with uncompleted contracts and any claims
against the Company in respect of completed contracts.
(D) Valuation of Stock and Work in Progress
(1) For the purposes of the Audited Accounts all stock in trade was valued
at the lower of cost and net realisable value and all work in progress
was valued on a basis excluding profit, including proper provision for
losses which are or could reasonably be anticipated.
(2) None of the stock in trade of the Company is obsolete, redundant (being
out of fashion or demand), slow moving or likely to realise less than
its book value to any extent not provided for or reflected in the
Company's books in accordance with accounting principles generally
acceptable in Singapore.
(3) The respective amounts of raw materials, work in progress, finished
goods, packaging and promotional material held or on order by the
Company are appropriate and normal for its present level of business.
(E) Management Accounts The Management Accounts have been carefully
prepared in accordance with accounting policies consistent with those
used in preparing the Audited Accounts and on a basis consistent with
the management accounts prepared in the preceding year. The cumulative
profits, assets and liabilities of the Company stated in the Management
Accounts have not been misstated and are not inaccurate in any respect
and each of the Vendors does not consider the Management Accounts
misleading.
(F) Returns The Company has complied with the provisions of the Companies
Act and all returns, particulars, resolutions and other documents
required under any legislation to be delivered on behalf of the Company
to the Registrar of Companies or to any other authority whatsoever have
been properly made and delivered. All such documents delivered to the
Registrar of Companies or to any other authority whatsoever, whether or
not required by law, were true and accurate when so delivered and the
Company has not received notification of the levy of any fine or
penalty for non-compliance by the Company or any director of the
Company.
2.7 THE COMPANY'S BUSINESS AND THE EFFECT OF SALE
(A) Business Since the Balance Sheet Date Since the Balance Sheet Date:-
(1) the Company has carried on its business in the ordinary and
usual course so as to maintain it as a going concern and
without any material interruption or alteration in the nature,
scope or manner of its business;
(2) there has been no material deterioration in the financial
<PAGE> 41
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41.
position or turnover of the Company;
(3) there has been no significant event or occurrence (including,
but not limited to the loss of any significant customer or
supplier) which has had or is following Completion likely to
have a material adverse affect on the Company's business;
(4) the Company has not borrowed or raised any money or taken any
form of financial facility (whether pursuant to a factoring
arrangement or otherwise);
(5) the Company has paid its creditors in accordance with their
respective credit terms or (if not) within the time periods
usually applicable to such creditors and save as disclosed
there are no debts outstanding by the Company which have been
due for more than three months;
(6) there has been no unusual change in the book value of the
Company's stock in trade;
(7) (save in respect of the purchase of a new car for Leong Sau
Pan as disclosed in the Disclosure Letter) the Company has
not entered into, or agreed to enter into, any capital
commitments or any commitment to acquire or dispose of on
capital account any asset, of a value in excess of
S$100,000.00 or any commitment involving expenditure by it on
capital account;
(8) no share or loan capital has been issued or agreed to be
issued by the Company; and
(9) no distribution of capital or income has been declared, made
or paid in respect of any share capital of the Company and
(excluding fluctuations in overdrawn current accounts with
bankers) no loan or share capital of the Company has been
repaid in whole or part or has become liable to be repaid in
whole or part.
(B) Commission No one is entitled to receive from the Company any finder's
fee, brokerage, or other commission in connection with this Agreement
or the sale and purchase of shares in the Company.
(C) Consequence of Share Acquisition by the Purchaser The acquisition of
the Sale Shares by the Purchaser or compliance with the terms of this
Agreement will not:-
(1) (so far the Vendors are aware and to the extent that the
Company's business is materially and adversely affected)
cause the Company to lose the benefit of any right or
privilege it presently enjoys or relieve any person of any
obligation to the Company (whether contractual or otherwise)
or enable any person to determine any such obligation or any
contractual right or benefit enjoyed by the Company or to
exercise any right whether
<PAGE> 42
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42.
under an agreement with the Company or otherwise;
(2) result in any present or future indebtedness of the Company
becoming due or capable of being declared due and payable prior
to its stated maturity;
(3) give rise to or cause to become exercisable any right of
pre-emption;
(4) result in a breach of, or constitute a default under any
provision of the memorandum or articles of association of the
Company;
(5) result in a breach of, or constitute a default under any order,
judgment or decree of any court or government agency by which
the Company is bound or subject; or
(6) result in a breach of, or constitute a default under the
material terms, conditions or provisions of any of the
Company's contracts,
and, in the view of the Vendors arrived at in good faith, the Company's
relationships with clients, customers, suppliers and employees will not
be adversely affected thereby and none of the Vendors is aware of any
circumstances (whether or not connected with the Purchaser and/or the
sale of the Sale Shares hereunder) indicating that, nor has it been
informed or is otherwise aware that, any person who now has business
dealings with the Company would or might cease to do so from and after
Completion.
(D) Insurances
(1) Full particulars of all the insurance policies (including, without
limitation, the limit and basis of cover under each policy and the
amount of the applicable excess) in which the Company has an interest
(the "Company's Insurances") are given in the Disclosure Letter.
(2) All the Company's Insurances are in full force and effect and will be
maintained in full force without alteration pending Completion, and
there are no circumstances likely to give rise to any liability under
any of the Company's Insurances being avoided by the insurers or the
premiums being increased. In relation to the Company's Insurances,
there are no special or unusual terms, restrictions or rates of premium
and all premiums have been paid on time. There is no claim outstanding
under any of the Company's Insurances nor is any of the Vendors aware
of any circumstances likely to give rise to a claim nor (if the Vendors
were to renew the Company's Insurances) are the Vendors aware of any
circumstances as to why the insurers would refuse to renew them.
(E) Trading Name The Company does not trade under any name other than its
corporate name and any other name given in the Disclosure Letter (if
any).
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43.
(F) Trade Associations Full particulars of all trade or business
associations of which the Company is a member (if any) are set out in
the Disclosure Letter.
2.8 THE COMPANY'S ASSETS
(A) Assets and Charges
(1) Except for current assets disposed of by the Company in the ordinary
course of its business, the Company is the owner legally and
beneficially of and has good title to all assets included in the
Audited Accounts and all assets which have been acquired by the
Company since the Balance Sheet Date and no encumbrance is outstanding
(other than liens arising by operation of law) nor is there any
agreement or commitment to give or create or allow any encumbrance
over or in respect of the whole or any part of the Company's assets,
undertaking, goodwill or uncalled capital and no claim has been made
by any person that he is entitled to any such encumbrance.
(2) Since the Balance Sheet Date, save for disposals in the ordinary
course of its business, the assets of the Company have been in the
possession of, or under the control of, the Company.
(3) No asset is shared by the Company with any other person and the
Company does not depend for its business upon any assets, premises,
facilities or services owned or supplied by any Vendor or any
Affiliate.
(4) No charge in favour of the Company is void or voidable for want of
registration.
(B) Debts Save to the extent of the provision or reserve therefor
contained or reflected in the Completion Accounts, any debts owed to
the Company as recorded in the Company's books and records are good
and collectable in the ordinary course of business and will realise
their full face value within three months of Completion. The rights
of the Company in respect of such debts are valid and enforceable so
far as the Vendors are aware and are not subject to any defence, right
of set-off or counter-claim, withholding or other deduction and so far
as the Vendors are aware no act has been done or omission permitted
whereby any of them has ceased or might cease to be valid and
enforceable in whole or in part. No amount included in the Audited
Accounts as owing to the Company at the Balance Sheet Date has been
released for an amount less than the value at which it was included in
the Audited Accounts or is now regarded by the Vendors as
irrecoverable in whole or in part. The Company has not factored or
discounted any of its debts or other receivables or agreed to do so.
(C) Title Retention The Company has not acquired or agreed to acquire any
<PAGE> 44
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44.
fixed asset on terms that title therein does not pass until full
payment is made.
(D) Plant All plant and machinery, including fixed plant and machinery,
vehicles, Computer Systems and other equipment used in, or in
connection with, the business of the Company:-
(1) (subject to fair wear and tear) is in good repair and condition
and in satisfactory working order and has been regularly and
properly serviced and maintained and none is dangerous,
obsolete or in need of renewal or replacement;
(2) (subject to fair wear and tear) is capable, and there are no
circumstances known to the Vendor rendering it incapable, over
the period of time during which it will be written down to a
nil value in the accounts of the Company, of doing the work for
which it was designed or purchased; and
(3) is not surplus to the Company's current or proposed
requirements to any material extent.
(E) Confidential information & know-how The Company operates and fully
complies with procedures disclosed in the Disclosure Letter which
maintain confidentiality of its confidential information and know-how.
None of the Vendors is aware of any such confidentiality having been
breached and the Company has not disclosed (except in the ordinary
course of its business) any of its know-how, trade secrets or list of
customers to any other person, which breach or disclosure has a
material adverse effect on the Company.
(F) Property
(1) Title to Property
(a) The particulars of the Property shown in Schedule 4 are true and
correct. Except as shown the Company has no other interest in land and
does not occupy any other property and has not entered into any
agreement to acquire or dispose of any land or premises or any interest
therein which has not been completed.
(b) The Company is entitled to exclusive occupation of the Property.
(c) The sub-lease more particularly described in Schedule 4 under which the
Property is held, is valid and subsisting against all persons,
including any person in whom any superior estate or interest is vested.
(d) To the best of the Vendors" knowledge, there are appurtenant to the
Property all rights and easements necessary for its current use and
enjoyment.
(2) Matters affecting Property
<PAGE> 45
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45.
(a) The Property is in a tenantable state of repair and condition and fit
for the current use (fair wear and tear excepted).
(b) All restrictions, conditions and covenants (including any imposed by
or pursuant to the sub-lease more particularly described in Schedule
4 and any arising in relation to any superior title) affecting the
Property have been observed and performed, the non-observance or
non-performance of which will have a material adverse effect on the
Company, and no notice of any breach of any of the same has been
received or is to the Vendors" knowledge likely to be received.
(c) The current use of the Property and all machinery and equipment
therein and the conduct of any business therein complies in all
respects with all relevant statutes and regulations made thereunder
and all necessary licences and consents required thereunder have been
obtained, the non-compliance or non-obtaining of which will have a
material adverse effect on the Company.
(d) The Property is not used for any purpose other than the use specified
therefor in Schedule 4.
(e) In respect of the interest of the Company in the Property being
leasehold, (save as disclosed in the Disclosure Letter) there is no
right for the landlord to determine the lease except in the event of
non-payment of rent or other breach of covenant by the tenant.
(3) Outstanding Property Liabilities
Except in relation to the Property more particularly described in
Schedule 4, the Company has no liabilities (actual or contingent)
arising out of the conveyance, transfer, lease, tenancy, licence,
agreement or other document relating to land or premises or an
interest in land or premises, including, without limitation, leasehold
premises assigned or otherwise disposed of.
2.9 THE COMPANY'S CONTRACTS
(A) No Other Contracts There are not in force in relation to the Company's
business, assets or undertaking any agreements, undertakings,
understandings, arrangements or other engagements, whether written or
oral to which any Vendor or any Affiliate is a party or has the
benefit of or is otherwise subject, the benefit of which would be
required to be assigned to or otherwise vested in the Company to
enable the Company to carry on its business and/or to enjoy all the
rights and privileges attaching thereto and/or to any of its assets
and undertaking in the same manner and scope and to the same extent
and on the same basis as the Company has carried on business or
enjoyed such rights prior to the date hereof.
(B) The Company's Contracts Each of the Company's contracts of a value in
excess of S$500,000.00 are valid and binding so far as the Vendors are
aware and no notice of termination of any such contract has been
<PAGE> 46
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46.
received or served by the Company and none of the Vendors is aware of
the invalidity of, or of any grounds for determination, rescission,
avoidance or repudiation of any such contracts.
(C) Contractual Arrangements The Company is not a party to or subject to
any agreement, transaction, obligation, commitment, arrangement or
liability which is material in the context of the Company's business
and which:-
(1) is known by any Vendor or by the Company to be likely to result
in a material loss to the Company on completion of performance;
or
(2) cannot readily be fulfilled or performed by the Company on time
and without undue or unusual expenditure of money and effort; or
(3) requires the Company to pay any commission, finder's fee,
royalty or the like; or
(4) in any way restricts the Company's freedom to carry on the whole
or any part of its business in any part of the world in such
manner as it thinks fit; or
(5) is a contract for the sale of shares, or assets (excluding the
Company's stock-in-trade) of a value exceeding S$25,000.00 which
contains warranties or indemnities under which the Company still
has a remaining liability or obligation; or
(6) can be terminated as a result of any change in the underlying
ownership or control of the Company; or
(7) is in any way otherwise than in the ordinary course of the
Company's business.
(D) Substantial or significant contracts No contract, agreement,
transaction, obligation, commitment, arrangement or liability entered
into by the Company and now outstanding or unperformed involves any of
the following:-
(1) obligations on the part of the Company which will cause or are
likely to cause the Company to incur expenditure or an
obligation to pay money in excess of S$500,000.00;
(2) obligations on the part of the Company to purchase any
specified minimum quantity or any specified minimum percentage
of its total requirement for telecommunications equipment or
other stock in trade from any one supplier;
(3) the supply by the Company of telecommunications equipment or
other products or services whether by way of lease or outright
sale or otherwise to any one customer such that the value of
such supplies exceeds or is likely to exceed ten per cent. of
the total turnover of the Company in the financial year ending
<PAGE> 47
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47.
the Balance Sheet Date.
(E) Defaults
(1) Neither the Company nor (so far as the Vendors are aware) any other
party to any agreement with the Company is in default thereunder, and
the Company is not aware of any invalidity or grounds for termination,
avoidance, rescission or repudiation of any agreement to which the
Company is a party which, in any such case, would be material and
adverse in the context of the financial or trading position of the
Company nor (so far as any of the Vendors is aware) are there any
circumstances likely to give rise to any such event.
(2) Full details of any past or present customers who have defaulted in
the payment when due of any monies exceeding S$50,000.00 to the
Company during the last 12 months and which remain unpaid, are
specified in the Disclosure Letter.
(F) Sureties Neither the Vendors nor any Affiliate nor any third party has
given any guarantee of or security for, any overdraft loan, loan
facility or off-balance sheet financing granted to the Company nor has
the Company given any guarantee of or security for any overdraft loan,
loan facility or off-balance sheet financing granted to any of the
Vendors or any Affiliate and there is not now outstanding in respect
of the Company any guarantee or warranty or agreement for indemnity or
for suretyship given by or for the accommodation of the Company or in
respect of the Company's business in relation to financing
obligations.
(G) Powers of Attorney No powers of attorney given by the Company (other
than to the holder of an encumbrance solely to facilitate its
enforcement) are now in force. No person, as agent or otherwise, is
entitled or authorised to bind or commit the Company to any obligation
not in the ordinary course of the Company's business, and none of the
Vendors is aware of any person purporting to do so.
(H) Insider Contracts
(1) There is not outstanding, and there has not at any time during the
last 18 months been outstanding, any agreement or arrangement of a
value in excess of S$50,000.00 to which the Company is a party and in
which:-
(a) any Vendor;
(b) any Affiliate;
(c) any person beneficially interested in the Company's share
capital; or
<PAGE> 48
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48.
(d) any Director,
is or has been interested, whether directly or indirectly.
(2) The Company is not a party to, nor have its profits or financial
position during such period been affected by, any agreement or
arrangement which is not entirely of an arm's length nature.
(3) All costs incurred by the Company have been charged to the Company and
not borne by any Affiliate.
(I) Debts There are no debts owing by or to the Company other than debts
which have arisen in the ordinary course of business, nor has the
Company lent any money which has not been repaid.
(J) Options and Guarantees The Company is not a party to any option or
pre-emption right of a value exceeding S$250,000.00, or a party to nor
has it given any guarantee, suretyship, comfort letter or any other
obligation (whatever called) of a value exceeding S$250,000.00 to pay,
provide funds or take action in the event of default in the payment of
any indebtedness of any other person or in the performance of any
obligation of any other person.
(K) Tenders, etc No offer, tender, or the like is outstanding which is
capable of being converted into an obligation of the Company of a value
exceeding S$500,000.00 by an acceptance or other act of some other
person and the Company is not in negotiations with, nor has it put
proposals forward or entered into discussions with any customer or
supplier for the renewal of any existing business or acquisition of any
new business of a value exceeding S$500,000.00.
(L) Documents All title deeds and agreements to which the Company is a
party and other documents owned by or which properly ought to be in the
possession or control of the Company and which are material in the
context of the Company's business, are in the possession or control of
the Company (or its agents duly authorised for such purpose) and are
properly stamped (if so required) and are free from any encumbrance.
2.10 THE COMPANY AND ITS BANKERS
(A) Borrowings The total amount borrowed by the Company from its bankers
does not exceed its facilities and the total amount borrowed by the
Company from whatsoever source does not exceed any limitation on its
borrowing contained in its articles of association, or in any debenture
or loan stock deed or other instrument.
(B) Continuance of Facilities Full and accurate details of all overdrafts,
loans or other financial facilities outstanding or available to the
Company are given in the Disclosure Letter and true and correct copies
of all documents relating thereto are annexed to the Disclosure Letter
and (save for the sale and purchase of the Sale
<PAGE> 49
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49.
Shares under this Agreement) neither the Vendors nor the Company has
done anything whereby the continuance of any such facilities in full
force and effect might be affected or prejudiced.
(C) Off-balance Sheet Financing The Company has not engaged in any
borrowing or financing not required to be reflected or noted in the
Audited Accounts.
2.11 THE COMPANY AND ITS EMPLOYEES
(A) Directors Part II of Schedule 1 shows the full names and offices held
by each person who is a director of the Company and no other person is
a director or shadow director of the Company.
(B) Particulars of Employees
(1) The individuals, details (in the form agreed between the parties) of
which are given in or annexed to the Disclosure Letter (the
"Employees") are all employed by the Company at the date of this
Agreement and (save in the case of conduct giving rise to grounds for
dismissal) notice of termination will not be given by the Company on
or before Completion. There are no other individuals employed at the
date of this Agreement in the Company wheresoever. There will be no
other individuals employed at the date of Completion by the Company
wheresoever save on the usual employment terms for purposes of filling
up any vacancy in the Company existing at the date of this Agreement.
(2) All contracts of service of any of the Employees are terminable on not
more than three months" notice without compensation.
(3) The particulars shown in the Disclosure Letter show true and complete
details of lengths of continuous service of all of the Employees and
by reference to each of the Employees remuneration payable and other
benefits provided or which the Company is bound to provide (whether
now or in the future) to each category of the Employees at Completion
and (without limiting the generality of the foregoing) include
particulars of all profit sharing, incentive, bonus, commission
arrangements and any other benefit to which any such category of the
Employees is entitled or which is regularly provided or made available
to them (including details of their notice period and their
entitlement to holiday).
(4) There are no subsisting contracts for the provision by any person of
any consultancy services to the Company.
(5) None of the Employees has given notice terminating his contract of
employment.
(6) None of the Employees is under notice of dismissal or has any
outstanding dispute with the Company in connection with or arising
from his employment nor is there any liability outstanding to such
<PAGE> 50
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50.
persons except for remuneration or other benefits accruing due and no
such remuneration or other benefit which has fallen due for payment has
not been paid.
(7) During the period of six months ending with the execution of this
Agreement the Company has not directly or indirectly terminated the
employment of any person employed in or by the Company.
(8) None of the Employees belongs or has belonged at any material time to
an independent trade union recognised by the Company.
(9) There are no employee representatives representing all or any of the
Employees.
(10) There is no plan, scheme, commitment, custom, or practice relating to
redundancy affecting any of the Employees more generous than the
statutory redundancy requirements.
(11) There are no loans owed by any of the Employees to the Company.
(12) Since the Balance Sheet Date, no change has been made in (i) the rate
of remuneration, or the emoluments or pension benefits or other
contractual benefits, of any officer of the Company or any of the
Employees or (ii) the terms of engagement of any such officer or any of
the Employees.
(13) There is no outstanding undischarged liability to pay to any
governmental, statutory or regulatory authority in any jurisdiction any
contribution, taxation or other duty arising in connection with the
employment or engagement of any of the Employees.
(14) Save for the Specified Employees with each of whom the Company shall
enter into a Service Agreement on or before Completion, none of the
Employees will become entitled by virtue of their contract of service
to any enhancement in or improvement to their remuneration, benefits or
terms and conditions of service only by reason of completion of the
sale and purchase under or pursuant to this Agreement.
(C) Service Contracts There is not outstanding any contract of service
between the Company and any of its directors, officers or employees
which is not terminable by the Company without compensation (other than
any compensation payable by statute) on not more than three months"
notice given at any time.
(D) Disputes with Employees There is no:-
(1) outstanding or (so far as the Vendors are aware) threatened
claim by any person who is now or has been an employee of the
Company or any dispute outstanding with any of the said persons
or with any unions or any other body representing all or any of
them in relation to their employment by the Company or (so far
as the Vendors are aware) of any circumstances likely to give
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51.
rise to any such dispute;
(2) industrial action involving any employee, whether official or
unofficial, currently occurring or threatened; or
(3) industrial relations matter which has been referred to any
governmental agency in the applicable jurisdiction for
advice, conciliation or arbitration.
(F) Industrial Relations
(1) The Company is not involved in any industrial or trade dispute or any
dispute or negotiation regarding a claim of material importance with
any trade union or association of trade unions or organisation or body
of employees and there are no facts known, or which would on
reasonable enquiry be known, to the Vendors which might indicate that
there may be any such dispute.
(2) The Company has not entered into any union membership, security of
employment, recognition or other collective agreement (whether legally
binding or not) with a trade union nor has it done any act which might
be construed as recognition.
(G) Share Incentive, Bonus Schemes etc.
The Company does not have in existence and is not proposing to
introduce any share incentive scheme, share option scheme or profit
sharing scheme for all or any part of its directors or employees other
than as set out in the Disclosure Letter.
(H) Pensions
The Company has no pension or other scheme pursuant to which the
Company makes or could become liable to make payments for providing
retirement, death, disability, life assurance or medical benefits. No
proposal has been announced by the Company to establish any pension or
other scheme for providing any such benefits and the Company does not
provide and has not promised to provide any such benefits.
2.12 TAXATION MATTERS
(A) Returns, Information and Clearances
(1) All returns, computations and notices which are or have been required
to be made or given by the Company for any Taxation purpose (a) have
been made or given within the requisite periods and on a proper basis
and are up- to-date and correct and (b) none of them is, or is likely
to
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52.
be, the subject of any dispute with the Inland Revenue Authority of
Singapore ("IRAS") or other Taxation authorities.
(2) All information required to be provided to IRAS or any Taxation
authority has been provided within the requisite period and is full and
accurate.
(3) The Disclosure Letter contains full and accurate particulars of all
transactions, acts, events or omissions of whatever nature effected
since the Balance Sheet Date in respect of which the Company is
required to make a specific return or provide information to the
relevant Taxation authorities and in respect of which the time for
making such return or providing such information will expire on or
after Completion.
(4) No transaction, act, event or omission of whatever nature has been
effected since the Balance Sheet Date by the Company in respect of
which any consent or clearance from IRAS or other governmental
authorities was required or was or could have been sought (a) without
such consent or clearance having been validly obtained before such
transaction, act, event or omission was effected and (b) otherwise than
in accordance with the terms of and so as to satisfy any conditions
attached to such consent or clearance, and (c) otherwise than at a time
when and in circumstances in which such consent or clearance was valid
and effective.
(5) All particulars furnished to IRAS or other governmental authorities, in
connection with the application for any consent or clearance by the
Company, made since the Balance Sheet Date fully and accurately
disclosed all facts and circumstances material to the decision of IRAS
or such other authorities.
(6) There are no circumstances that have arisen since any application for
any such consent or clearance was made which might reasonably be
expected to cause such consent or clearance to be or become invalid or
to be withdrawn by IRAS or the governmental authority concerned.
(7) The Company has not since the Balance Sheet Date taken any action which
has had, or will have, the result of altering, prejudicing or in any
way disturbing any arrangement or agreement which it has previously had
with IRAS or customs and excise or other Taxation authorities.
(B) Penalties and Interest Neither the Company nor any of its directors or
officers (in the course of their duties) has
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53.
since the Balance Sheet Date paid, or become liable to pay, any fine,
penalty or interest charged by virtue of any other statutory provision
relating to Taxation.
(C) Taxation Claims, Liabilities and Reliefs
(1) There is no liability to Taxation in respect of which a claim could be
made under this Agreement and there are no circumstances likely to
give rise to such a liability.
(2) There are set out in the Disclosure Letter, with express reference to
this paragraph, particulars of all matters relating to Taxation in
respect of which the Company (either alone or jointly with any other
person) has, or at Completion will have, an outstanding entitlement:-
(a) to make any claim, including a supplementary claim, for
relief under the Income Tax Act, Chapter 134 of Singapore or
any other statutory provision relating to Taxation;
(b) to make any election, including an election for one type of
relief, or one basis, system or method of Taxation, as
opposed to another;
(c) to make any appeal (including a further appeal) against an
assessment to Taxation;
(d) to make any application for the postponement of, or payment
by instalments of, Taxation; or
(e) to disclaim or require the postponement of any allowance or
relief.
(3) The Company is not nor may it become, liable to pay, or make
reimbursement or indemnity in respect of, any Taxation (or amounts
corresponding thereto) in consequence of the failure by any other
person to discharge that Taxation within any specified period or
otherwise, where such Taxation relates to a profit, income or gain,
transaction, event, omission or circumstance arising, occurring or
deemed to arise or occur (whether wholly or partly) prior to
Completion.
(4) No relief (whether by way of deduction, reduction, set-off, exemption,
postponement, roll-over, hold-over, repayment or allowance, or
otherwise) from, against or in respect of any Taxation has been
claimed and/or given to the Company which could or might be
effectively withdrawn, postponed, restricted, clawed back or otherwise
lost after Completion, as a result of any act, omission, event or
circumstance arising or occurring in
<PAGE> 54
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54.
the ordinary course of business at or at any time before Completion.
(5) The Company has not incurred a loss on the disposal or deemed disposal
of an asset other than trading stock in relation to which its ability
to set the whole of that loss against any chargeable gain arising in
the same or a later accounting period is or may be restricted or
excluded.
(6) No asset owned by the Company has at any time since its acquisition by
the Company or any company which has at any time been a member of a
group (as defined from time to time for any Taxation purpose) of which
the Company has at any time been a member been subjected to a reduction
in value such that any allowable loss arising on its disposal is likely
to be reduced or eliminated or any chargeable gain arising on its
disposal is likely to be increased.
(D) Deductions from Payments The Company has complied in all respects with
all statutory provisions relating to Taxation and requiring the
deduction of tax from any payment made by it, and has properly
accounted for any such tax which ought to have been accounted for.
(E) Anti-avoidance Provisions The Company has not since the Balance Sheet
Date engaged in, or been a party to, any transaction or series of
transactions or scheme or arrangement of which the main purpose, or one
of the main purposes, was or could be said to be the avoidance of, or
deferral of or a reduction in the liability to, Taxation.
(F) Stamp Duty All documents to which the Company is a party or which form
part of the Company's title to any asset owned or possessed by it or
which the Company may need to enforce or produce in evidence in the
courts of Singapore have been duly stamped and (where appropriate)
adjudicated.
2.13 MISCELLANEOUS
All Material Matters Disclosed All information contained or referred to
in this Agreement (including the Schedules and the documents in agreed
terms) and in the Disclosure Letter or in any annexure thereto or which
has otherwise been disclosed by or on behalf of the Vendors to the
Purchaser or its advisers on or prior to the date hereof is true and
accurate in all material respects and none of the Vendors is aware of
any other fact or matter which renders any such information misleading
in any material respect because of any omission, ambiguity or for any
other reason. The Vendors have disclosed to the Purchaser all
information and facts relating to the Company and its business,
<PAGE> 55
INFOTEL - Share Sale Agmt Schedule 2 - Warranties
55.
assets and undertaking (including financial information) which to the
best of the knowledge and belief of the Vendors, having made due and
careful inquiries, are or may be material for disclosure to a
purchaser of the Company on the terms of this Agreement and all
information and facts so disclosed are true and accurate in all
material respects.
<PAGE> 56
INFOTEL - Share Sale Agmt
56.
SCHEDULE 3
Adjustment of Consideration
1 INTERPRETATION
In this Schedule, where the context admits, any defined term used in
this Schedule shall have the same meanings as in the Agreement and the
Schedules.
2 COMPLETION ACCOUNTS
2.1 PREPARATION
The Vendors shall as soon as practicable, and in any event by 16th
February 1998, procure that accounts for the Company shall be prepared
in accordance with this Schedule. The Purchaser shall bear the costs
and expenses charged by the Company's auditors in respect of their
preparation of such accounts.
2.2 DESCRIPTION
The Completion Accounts shall consist of a balance sheet of the Company
as at the close of business on 31st December 1997 and a profit and loss
account of the Company in respect of the period from the day following
the Balance Sheet Date to 31st December 1997 (both dates inclusive).
2.3 GENERAL REQUIREMENTS
Subject to the specific requirements of paragraph 2.4 of this Schedule
3, the Completion Accounts shall:-
(A) make full provision for all actual, future and contingent
liabilities of the Company as at 31st December 1997;
(B) be prepared under the historic cost convention and in
accordance with the requirements of all relevant statutes and
generally accepted accounting practices and principles and
SASs;
(C) show a true and fair view of the state of affairs of the
Company at 31st December 1997 and the profits (or loss) of the
Company for the period from the Balance Sheet Date to 31st
December 1997;
(D) apply and adopt the same bases and policies of accounting as
applied or adopted for the purposes of the Audited Accounts.
2.4 SPECIFIC REQUIREMENTS
In preparing the Completion Accounts:-
<PAGE> 57
INFOTEL - Share Sale Agmt Schedule 3 - Adjustments
57.
(A) no value shall be attributed to goodwill or any other
intangible asset;
(B) other fixed assets shall be included at the value at which
they were included in the Audited Accounts, (or, if acquired
after the Balance Sheet Date, their cost) on a pro rata basis
at the rates for allowance used in preparing the Audited
Accounts and, in each case, less provisions for damage or
impairment on the same basis used in preparing the Audited
Accounts;
(C) stock shall be determined in accordance with paragraph 3 of
this Schedule 3 and valued on the same basis as used in the
Audited Accounts (details of any change(s) of such basis are
described in the Disclosure Letter) and full provision on a
pro rata basis at the rates used in preparing the Audited
Accounts will be made for unusable, unsaleable, slow moving
or deteriorated stocks on the same basis used in preparing
the Audited Accounts;
(D) no value shall be attributed to any assets (including in
particular any prepayment or debt) except to the extent that
(following 31st December 1997) the Company will have the
benefit of the same;
(E) full provision shall be made for rebates or discounts that
will fall due and fees and commissions that will become
payable after 31st December 1997 in either case in respect of
sales or other transactions that took place before 31st
December 1997;
(F) full provision shall be made for any liability arising as a
result of the change of control of the Company on Completion;
(G) to the extent that it is not capable of being set off against
the liability of the Company for corporation tax for the
current financial year or any previous financial year, full
provision shall be made for the advance corporation tax
payable on any distribution declared or paid before
Completion;
(H) full provision shall be made in respect of the cost of making
good dilapidations and/or wants of repair on or to the
Property (referred to in paragraph 2.8(F) of Schedule 2);
(I) full provision shall be made for any debts due in the
ordinary course of trading outstanding and uncollected at
31st December 1997 and proper provision or reserve shall be
made for all other bad or doubtful debts included in the
Completion Accounts on the same basis used in preparing the
Audited Accounts;
(J) full provision shall be made in accordance with SASs for any
repairs or other servicing required in relation to any
vehicles or other plant and machinery;
<PAGE> 58
INFOTEL - Share Sale Agmt Schedule 3 - Adjustments
58.
(K) full provision shall be made in accordance with SASs for
liabilities disclosed in the Disclosure Letter; and
(L) provision shall be made for deferred tax in accordance with SAS.
3. STOCK VALUATION
For the purposes of the preparation of the Completion Accounts, the
value of stock shall be ascertained in accordance with the provisions
of this paragraph 3.
(A) The Vendors and the Purchaser shall cause a stocktaking to be
made of all the stock insofar as it then belongs to the Company
as at 31st December 1997.
(B) Unless otherwise agreed by the parties such stocktaking shall
consist of a physical check of the amount, quality and
condition of all such stock situated on the Properties prior to
Completion and an inspection of the books and records and
contractual documentation (of the Company) for all stock not so
situated together with confirmation from the person or persons
having physical possession of such stock of the extent of any
interest in or encumbrance claimed over such stock (if any).
(C) When such stocktaking has been completed the stock shall be
valued by the Purchaser in accordance with paragraph 2.4(C) of
this Schedule 3 and included in the Completion Accounts.
4 PROCEDURE
4.1 SUBMISSION OF DRAFT
(A) As soon as the Completion Accounts (or any sections thereof) shall have
been prepared, the Vendors shall send a copy to the Purchaser together
with such working papers used in connection with the preparation of the
same as the Vendors reasonably consider necessary or appropriate to
understand and agree to the Completion Accounts and shall in addition,
at the same time, send to the Purchaser its calculation of the Net
Tangible Assets.
(B) The Vendors shall promptly supply all such information and provide
access to all such records and personnel as the Purchaser shall
reasonably request or require to review the Completion Accounts and
verify the Vendors" calculation.
(C) Unless the Purchaser shall within seven days of receipt of the
Completion Accounts (and associated papers and calculation as provided
in Sub-Paragraph (A)) serve a notice in writing on the Purchaser that
it objects to the Completion Accounts (identifying the reason for any
objection and the amount(s) or item(s) in the Completion Accounts
and/or calculation which is/are in dispute) (such notification being,
for the purposes of this paragraph 4, an "Objection Notice") the
Purchaser shall be deemed to have agreed to
<PAGE> 59
INFOTEL - Share Sale Agmt Schedule 3 - Adjustments
59.
the Completion Accounts and the Vendors" calculation of the Net
Tangible Assets for all purposes of this Agreement.
4.2 AGREEMENT OF DRAFT
If, within the period referred to in paragraph 4.1(C), the Purchaser
shall give the Vendors an Objection Notice then the Purchaser and the
Vendors shall use their best endeavours to reach agreement upon
adjustments to the draft and the value of Net Tangible Assets.
4.3 INDEPENDENT ACCOUNTANT
In the event that the Vendors and the Purchaser are unable to reach
agreement within seven days following service of the Objection Notice,
either any Vendor or the Purchaser shall be entitled to refer the
matter or matters in dispute to an independent firm of chartered
accountants agreed upon between them or (failing agreement) to be
selected (at the instance of either party) by the President for the
time being of the Institute of Certified Public Accountants of
Singapore. Such independent firm of chartered accountants shall act as
experts not as arbitrators and shall determine the matter or matters
in dispute and whose decision shall, save in the event of fraud or
manifest error, be binding. The costs of the independent firm of
accountants shall be borne by the Vendors and the Purchaser equally.
4.4 COMPLETION ACCOUNTS FINAL AND BINDING
If:-
(a) the Purchaser accepts, or is deemed to accept, the Completion
Accounts so furnished by the Vendors, the Completion Accounts
so furnished; or
(b) (if paragraph 4.3 shall apply) the final draft of the
Completion Accounts as determined by the independent
accountant,
shall be the Completion Accounts for the purposes of this Agreement
and shall be final and binding on the parties.
4.5 INFORMATION AND EXPLANATIONS
The Vendors shall, and shall procure that the auditors for the time
being of the Company, provide such information and explanations
relating to the draft Completion Accounts and their preparation as the
Purchaser's Accountants, or any independent chartered accountant
appointed pursuant to paragraph 4.3, shall reasonably request or
require.
<PAGE> 60
INFOTEL - Share Sale Agmt Schedule 3 - Adjustments
60.
5 DETERMINATION OF NUMBER OF INITIAL CONSIDERATION SHARES
The number of Initial Consideration Shares (denoted "N" below) to be
issued by the Purchaser to the Vendors as at Completion, shall be
calculated in accordance with the following formula (rounded downwards
to the nearest whole number):-
N = ( P - R )
---------
X
where:-
"P" means the US Dollar Equivalent of S$3,750,000.00;
"R" means the US Dollar Equivalent of the amount (if any) by which
the Net Tangible Assets of the Company as at 31st December 1997
as shown by the Completion Accounts, are less than S$4,800,000
by an amount in excess of S$200,000; and
"X" means US$5.00 (unless the Purchaser's stock of which the
Initial Consideration Shares form part, are split or a rights
offering is made in respect thereof, in which case "X" shall be
adjusted accordingly),
Provided however that:-
(a) If, as calculated in accordance with this paragraph 5, "N"
(rounded downwards to the nearest whole number) shall either be
zero or a negative number, the number of Initial Consideration
Shares to be issued shall be zero.
(b) If, during the period from the date of this Agreement up to the
date of Completion, any dividends shall have been declared in
relation to shares in the common stock of the Purchaser, the
number of Initial Consideration Shares shall be increased by
the amount (denoted "I") calculated in accordance with the
following formula (rounded downwards to the nearest whole
number):-
I = V
-------
X
where:-
"V" is the value (in US Dollars) of dividends notionally
payable in respect of the number of Initial
Consideration Shares denoted "N" calculated in
accordance with this paragraph 5 (rounded downwards to
the nearest whole number); and
"X" is as defined above.
(c) If, during the period from the date of this Agreement up to the
date of Completion, the aggregate percentage interest of the
Vendors in the capital of the Purchaser shall be diluted by
reason only that any rights offering or bonus issue is made by
<PAGE> 61
INFOTEL - Share Sale Agmt Schedule 3 - Adjustments
61.
the Purchaser, the number of Initial Consideration Shares
shall be adjusted accordingly such that such aggregate
percentage interest of the Vendors is maintained. Such
aggregate percentage interest shall be ascertained on the
basis of the proportion which the number of Initial
Consideration Shares denoted "N" calculated in accordance
with this paragraph 5 (rounded downwards to the nearest whole
number), bears to all shares in the common stock of the
Purchaser which are issued as at the date of this Agreement.
For the avoidance of doubt, there shall be no adjustment of
the number of Initial Consideration Shares under this
sub-paragraph (c) in the event that the Purchaser allots
fresh shares in its common stock otherwise than by reason of
a rights offering or bonus issue.
6 INTERACTION WITH OTHER PROVISIONS
If the Purchaser shall have any claim against the Vendors under this
Agreement in respect of any liability or deficiency which is taken
into account in the Completion Accounts the amount of such liability
or deficiency so taken into account shall be deducted from the amount
of the Purchaser's claim but, save as aforesaid, preparation and
acceptance of the Completion Accounts by the Purchaser shall be
without prejudice to any claim which the Purchaser may have against
any Vendor under or in respect of any breach of this Agreement.
<PAGE> 62
INFOTEL - Share Sale Agmt
62.
SCHEDULE 4
Property
Description: JTC Private lot A14638 at No. 19 Tai Seng Drive
Address: 19 Tai Seng Drive #06-00, Singapore 535222
Manner of
holding: As sub-tenant of Singapore Technologies Pte Ltd (the
"Landlord"), the Landlord in turn being a lessee of
Jurong Town Corporation ("JTC") under a principal
agreement dated 15th August 1991.
Term: Two years commencing from 1st October 1997.
Area: 805.00 square metres
Permitted Use: Production/factory/workshop and office for system
design and assembly, software production, consultancy,
project management, installation, repair and
maintenance of electronic products in the fields of
telecom and information technologies and related
activities agreed to by JTC and the Landlord.
Special
Provisions: By its letter of 15th September 1997 to the Landlord,
JTC, as a condition of its approval to the Landlord's
sub-letting of the Property to the Company, reserved
the right to withdraw its consent to such sub-letting
by giving three months" notice in writing to the
Landlord.
<PAGE> 63
INFOTEL - Share Sale Agmt
63.
SCHEDULE 5
Provisions applicable to clause 4(F)(iv)
1. In the event that the Purchaser fails in respect of any Pay-Out
Financial Year (as defined in clause 4(F)(iv)) to make a payment under
clause 4(F)(iv) to any one or more Vendors (each, a "Buyer"), each
Buyer shall, by notice in writing to the Purchaser made no later than
45 days after the date of the Purchaser's failure to make such
payment, (provided that such non-payment to that Buyer is continuing)
be entitled to either:-
(a) require the Purchaser to sell to him issued ordinary shares
with a par value of $1/- each in the capital of the Company,
to which the provisions of Part I of this Schedule shall
apply; or
(b) require the Purchaser to allot to him shares in the common
stock of the Purchaser, to which the provisions of Part II of
this Schedule shall apply.
2. In the event that the Purchaser does not receive notice from any Buyer
within the aforesaid 45 day period, (a) that Buyer's entitlement as
set out in paragraph 1 above shall thereafter lapse and no longer be
capable of exercise and (b) the amount due and unpaid shall carry
interest (accrued daily and compounded monthly) at the rate of three
per cent. per annum above the prime lending rate of The Development
Bank of Singapore Limited from time to time prevailing from the date
falling 45 days after the due date until the date of actual payment.
PART I
3. If any Buyer elects under paragraph 1(a) of this Schedule 5 to
purchase from the Purchaser issued shares in the capital of the
Company, the number of issued ordinary shares of S$1/- each in the
capital of the Company (the "Relevant Infotel Shares") to be sold by
the Purchaser and purchased by that Buyer shall be specified by the
Buyer, which number shall not be greater than the limit (rounded
downwards to the nearest whole number) determined by dividing the
amount (in Singapore Dollars) which the Purchaser shall have failed to
pay that Buyer under clause 4(F)(iv), by S$22.00.
4. Completion of the sale and purchase of the specified number of
Relevant Infotel Shares shall take place at the registered office of
the Company on the date falling 30
<PAGE> 64
INFOTEL - Share Sale Agmt Schedule 5
64.
days after the notice under paragraph 1 of this Schedule 5 is given.
5. The specified number of Relevant Infotel Shares sold under this Part I
shall be sold free of all liens, charges and encumbrances and together
with all rights attaching to them at the last day of the Pay-Out
Financial Year in respect of which the Purchaser failed to make payment
to that Buyer under clause 4(F)(i).
6. On completion, in exchange for the purchase price of S$22.00 per
Relevant Infotel Share payable by that Buyer (after deducting any
amount due and unpaid to that Buyer under clause 4(F)(i)), the
Purchaser shall deliver to that Buyer, duly executed share transfers
for the Relevant Infotel Shares in question, in favour of that Buyer
(or as he may direct) together with the relevant share certificate(s).
7. If a Buyer specifies under the paragraph 3 of this Schedule 5 that he
wishes to purchase fewer Relevant Infotel Shares than the limit to
which he is entitled (as determined under paragraph 3 of this Schedule
5), the balance of the amount outstanding under clause 4(F)(iv) after
deducting the purchase price for the Relevant Infotel Shares purchased
under this Part I shall be the amount due and outstanding for purposes
of paragraph 2(b) of this Schedule 5.
PART II
8. If any Buyer elects under paragraph 1(b) of this Schedule 5 to require
the Purchaser to allot to him shares in the common stock of the
Purchaser, the number of shares in the common stock of the Purchaser to
be allotted by the Purchaser to that Buyer shall be specified by him
(the "Relevant NHancement Shares", denoted "N" below), which number
shall not be greater than the limit calculated in accordance with the
following formula:-
N = DP
----------
MV
where:-
"DP" means the United States Dollar equivalent of the amount in
Singapore Dollars which the Purchaser shall have failed to that
Buyer under clause 4(F)(i), calculated by using the closing
rate of
<PAGE> 65
INFOTEL - Share Sale Agmt Schedule 5
65.
exchange (conclusively determined by the Purchaser) for
Singapore Dollars into United States Dollars furnished by the
Bank of America to the public on the Business Day prior to
the day on which the notice under paragraph 1 of this
Schedule 5 is given; and
"MV" means the fair market value of a share of the Purchaser's
common stock on the trading day immediately prior to the day
on which the notice under paragraph 1 of this Schedule 5 is
given, being the average of the closing sale price of the
Purchaser's common stock as reported on The NASDAQ Small Cap
Market System (or any alternative exchange on which the
Purchaser's common stock is then being traded) on that
trading day,
and where N shall be rounded downwards to the nearest whole number.
9. The Relevant NHancement Shares shall carry the right to receive in
full all dividends and other distributions declared, made or paid in
respect thereof on Completion.
10. Allotment of the sale and purchase of the Relevant NHancement Shares
shall take place on the date falling 30 days after the notice under
paragraph 1 of this Schedule 5 is given.
11. If a Buyer specifies under the paragraph 8 of this Schedule 5 that he
wishes to purchase fewer Relevant NHancement Shares than the limit to
which he is entitled (as calculated under paragraph 8 of this Schedule
5), the balance of the amount outstanding under clause 4(F)(iv) after
deducting the purchase price for the Relevant NHancement Shares
purchased under this Part II shall be the amount due and outstanding
for purposes of paragraph 2(b) of this Schedule 5.
<PAGE> 66
IN WITNESS WHEREOF this Agreement has been entered into on the date stated at
the beginning.
The Vendors
SIGNED by /S/ GERARD FOO LOKE KIEAN )
-----------------------------
in the presence of:- /S/ SHIRLEY )
TAN CHING PING, Advocate )
and Solicitor for Singapore )
SIGNED by /S/ JAMES HAN KIM GUAN )
-----------------------------
in the presence of:- /S/ SHIRLEY )
TAN CHING PING, Advocate )
and Solicitor for Singapore )
SIGNED by /S/ LEONG SAU PAN )
-----------------------------
in the presence of:- /S/ SHIRLEY )
TAN CHING PING, Advocate )
and Solicitor for Singapore )
SIGNED by /S/ FOO KHOON WONG )
-----------------------------
in the presence of:- /S/ SHIRLEY )
TAN CHING PING, Advocate )
and Solicitor for Singapore )
SIGNED by /S/ SAE FOO KITIPONGSE @ )
-----------------------------
FOO LOKE KHEE in the presence of:- )
/S/ SHIRLEY TAN CHING PING, Advocate )
and Solicitor for Singapore )
<PAGE> 67
The Purchaser
SIGNED by /S/ ESMOND T. GOEI )
-----------------------------
for and on behalf of )
NHANCEMENT TECHNOLOGIES INC. )
in the presence of:- )
<PAGE> 68
APPENDIX A
Form of
Escrow Agent Agreement
<PAGE> 69
DATED ______________ 1998
Between
GERARD FOO LOKE KIEAN
JAMES HAN KIM GUAN
LEONG SAU PAN
FOO KHOON WONG
SAE FOO KITIPONGSE @ FOO LOKE KHEE
as Vendors
NHANCEMENT TECHNOLOGIES INC.
as Purchaser
- AND -
MESSRS. BDO BINDER
AS ESCROW AGENT
---------------------------------------------
FORM OF
ESCROW AGENT AGREEMENT
IN CONNECTION WITH
THE SALE AND PURCHASE OF 500,000
ORDINARY SHARES IN THE CAPITAL OF
INFOTEL TECHNOLOGIES (PTE) LTD
---------------------------------------------
Allen & Gledhill
Advocates & Solicitors
Singapore
<PAGE> 70
THIS AGREEMENT is made on ____________, 1998 BETWEEN:-
(1) THE PERSONS SPECIFIED IN PART I OF SCHEDULE 1 (together, the
"Vendors");
(2) NHANCEMENT TECHNOLOGIES INC. (the "Purchaser", which expression shall
include its successors and assigns), a corporation incorporated in the
State of Delaware, United States of America and having a principal
place of business at 39420 Liberty Street, Suite 250, Fremont,
California 94538, United States of America; and
(3) MESSRS. BDO BINDER, a firm of certified public accountants with a place
of business at 112 Middle Road #02-01, Midland House, Singapore 188970
(the "Escrow Agent").
WHEREAS:-
(A) Pursuant to the Agreement dated 1998 (the "Share
Sale Agreement") entered into between the Vendors and the Purchaser,
the Purchaser agreed to acquire from the Vendors the entire issued
share capital of Infotel Technologies (Pte) Ltd, upon the terms and
subject to the conditions of the Share Sale Agreement.
(B) Under clause 3(A) of the Share Sale Agreement, the Purchaser and the
Vendors have agreed to enter into this Agreement to appoint the Escrow
Agent to act as escrow agent in connection with the Share Sale
Agreement, and the Escrow Agent has agreed to accept such appointment,
upon the terms and subject to the conditions of this Agreement.
IT IS AGREED as follows:-
1. INTERPRETATION
In this Agreement and the Appendices hereto, unless the context
otherwise requires, all terms and references used in this Agreement
shall, unless otherwise defined or construed herein, have the same
meaning and construction as set out in the Share Sale Agreement.
2. APPOINTMENT
(A) Each of the Vendors and the Purchaser hereby appoints the Escrow Agent
to act as escrow agent in connection with the Share Sale Agreement upon
the terms and subject to the conditions of this Agreement.
<PAGE> 71
(B) The sole duty of the Escrow Agent shall be to act in accordance with
the provisions of this Agreement, which the Escrow Agent is hereby
unconditionally and irrevocably authorised and instructed to do by
each of the Vendors and the Purchaser.
3. DOCUMENTS
(A) The parties hereto agree that duly executed transfers of the Sale
Shares by the registered holders thereof in favour of the Purchaser
together with the relative share certificates (the "Sale Share
Documents") shall be delivered by the Vendors to the Escrow Agent
within 14 days of the date hereof and that the Sale Share Documents
shall be held by the Escrow Agent in accordance herewith.
(B) Subject to sub-clause (C), the Escrow Agent shall receive and hold in
escrow the Sale Share Documents until it shall have received notice in
writing (substantially in the form of Appendix A) from the Vendors and
the Purchaser setting out instructions which shall require the Escrow
Agent on the Completion Date, to:-
(i) receive from the Purchaser the Cash Portion, by way of
cashier's orders made in favour of each of the Vendors;
(ii) receive from the Purchaser share certificates in respect of
the final number of Initial Consideration Shares specified in
such instructions,
and against such receipt:-
(iii) release to the Purchaser the Sale Share Documents;
(iv) deliver to each Vendor the relevant cashier's order for the
Purchaser's payment of his share of the Cash Portion; and
(v) deliver to each Vendor share certificates for the specified
number of Initial Consideration Shares allotted to him.
(C) In the event that that the final number of Initial Consideration
Shares shall not have been determined by the Completion Date, the
Purchaser and the Vendors shall issue to the Escrow Agent a notice in
writing (substantially in the form of Appendix B) to such effect,
requiring the Escrow Agent in accordance with the instructions
contained therein on the Completion Date, to:-
(i) receive from the Purchaser the Cash Portion, by way of
cashier's orders made in favour of each of the Vendors;
(ii) receive from the Purchaser share certificates for a
provisional number of 428,560 Initial Consideration Shares,
and against such receipt:-
<PAGE> 72
(iii) release to the Purchaser the Sale Share Documents;
(iv) deliver to each Vendor the relevant cashier's order for the
Purchaser's payment of his share of the Cash Portion; and
(v) release to the Vendors his share certificate(s) in respect of
his share of half of the provisional number of 428,560 Initial
Consideration Shares.
(D) The Escrow Agent shall:-
(i) on and after the Completion Date, hold in escrow share
certificates for half of the provisional number of 428,560
Initial Consideration Shares pending release thereof;
(ii) in accordance with and on the date specified in the relevant
notice in writing from the Vendors and the Purchaser, release
to the Vendors and/or the Purchaser (as instructed) all or any
of the remaining share certificates of the 428,560 Initial
Consideration Shares then held by the Escrow Agent.
5. INSTRUCTIONS AND NOTICES
(A) In the event that any further or other instructions are to be given to
the Escrow Agent in relation to the Documents, such instructions shall
be in writing and signed by all the Vendors and on behalf of the
Purchaser.
(B) The Escrow Agent shall be entitled to rely upon notices issued pursuant
to the provisions of this Agreement without further act or inquiry and
notwithstanding any matter or thing of which the Escrow Agent may
otherwise be aware.
6. FEES
(A) In respect of its services as Escrow Agent hereunder, the Purchaser
shall pay, within fourteen (14) days of the date hereof, a fee of
S$1,500.00 (together goods and services tax thereon).
(B) The Purchaser hereby agrees to indemnify and keep indemnified the
Escrow Agent for all reasonable expenses incurred by the Escrow Agent
in relation to the performance of its duties hereunder.
7. NO DISCRETIONARY TRUST
Neither the Escrow Agent nor any of its officers, employees, partners
or agents shall by reason of any matter or thing contained in this
Agreement, be deemed to be a trustee (other than as a bare trustee) for
or have any fiduciary relationship with any of the parties hereto or
any other person.
<PAGE> 73
8. NOTICES
(A) Any notice or other communication required to be given under this
Agreement or in connection with the matters contemplated by it shall,
except where otherwise specifically provided, be in writing and
addressed as provided in sub-clause (B) and may be:-
(i) personally delivered, in which case it shall be deemed to
have been given upon delivery at the relevant address; or
(ii) if within Singapore, sent by pre-paid post, in which case it
shall be deemed to have been given two Business Days after
the date of posting; or
(iii) if from or to any place outside Singapore, sent by pre-paid
airmail, in which case it shall be deemed to have been given
seven Business Days after the date of posting; or
(iv) sent by fax, in which case it shall be deemed to have been
given when despatched, subject to confirmation of
uninterrupted transmission by a transmission report provided
that any notice despatched by fax after 5:00 p.m. (at the
place where such fax is to be received) on any day shall be
deemed to have been received at 8:00 a.m. on the next
Business Day.
(B) The addresses and other details of the parties referred to in
sub-clause (A) are, subject to sub-clause (C):-
Purchaser
Name: NHancement Technologies Inc.
Address: 39420 Liberty Street, Suite 250
Fremont
California 94538
United States of America.
Fax number: (1 510) 744 4003
For the attention of: Esmond T. Goei/Douglas S. Zorn
Vendors
1. Name: Gerard Foo Loke Kiean
Address: 10 Persiaran Canton Victoria Park
30250 Ipoh
Perak
Malaysia
Fax number: (603) 705 1818
2. Name: James Han Kim Guan
Address: 15 Mimosa Walk
Singapore 807862
Fax number: -
<PAGE> 74
3. Name: Leong Sau Pan
Address: 27B Fernhill Road
Singapore 259089
Fax number: -
4. Name: Foo Khoon Wong
Address: 7 Jalan Belfield
Ipoh
Perak
Malaysia
Fax number: -
5. Name: Sae Foo Kitipongse @ Foo Loke Khee
Address: 869/243 Muang Thong 4
Sukumvit 101
Bangkok 10250
Thailand
Fax number: 66-2-3319697
Escrow Agent
Name: Messrs. BDO Binder
Address: 112 Middle Road #02-01
Midland House
Singapore 188970
Fax number: (65) 3381493
For the attention of: Patrick Tay/Peter Leong
(C) Any party to this Agreement may notify the other parties of any change
to its address or other details specified in sub-clause (B), provided
that such notification shall be effective only on the date specified in
such notice or five Business Days after the notice is given, whichever
is later.
9. GOVERNING LAW AND JURISDICTION
(A) This Agreement shall be governed by, and construed in accordance with,
the laws of Singapore.
(B) In relation to any legal action or proceedings to enforce this
Agreement or arising out of or in connection with this Agreement
("proceedings") each of the parties irrevocably submits to the
exclusive jurisdiction of the Singapore courts and waives any objection
to proceedings in such courts on the grounds of venue or on the grounds
that the proceedings have been brought in an inconvenient forum.
<PAGE> 75
SCHEDULE 1
Vendors
1. GERARD FOO LOKE KIEAN (Malaysia IC No. A3516527) of 10 Persiaran
Canton Victoria Park, 30250 Ipoh, Perak, Malaysia
2. JAMES HAN KIM GUAN (NRIC NO. S0028404A) of 15 Mimosa Walk, Singapore
807862
3. LEONG SAU PAN (NRIC No. S2570969A) of 27B Fernhill Road, Singapore
259089
4. FOO KHOON WONG (Malaysian IC No. 1376406) of 7 Jalan Belfield, Ipoh,
Perak, Malaysia
5. SAE FOO KITIPONGSE @ FOO LOKE KHEE (Malaysian IC No. 7231358) of
869/243 Muang Thong 4, Sukumvit 101, Bangkok 10250, Thailand
<PAGE> 76
APPENDIX A
Notice to Escrow Agent
(referred to in clause 4(B))
[ ] 1998
To: Messrs. BDO Binder
112 Middle Road #02-01
Midland House
Singapore 188970
Attn: Mr Patrick Tay/Mr Peter Leong
Dear Sirs,
INFOTEL TECHNOLOGIES PTE LTD
We refer to the Escrow Agent Agreement (the "Agreement") dated [ ] 1998
entered into between (1) Gerard Foo Loke Kiean, James Han Kim Guan, Leong Sau
Pan, Foo Khoon Wong and Foo Kitipongse @ Foo Loke Khee, as Vendors, (2)
NHancement Technologies Inc., as Purchaser, and (3) yourselves, as Escrow
Agent. All terms and references used in this notice shall, unless otherwise
defined or construed herein, have the same meaning as set out in the Agreement.
With reference to clause 4(B) of the Agreement, we the undersigned parties
hereby notify you that completion of the Share Sale Agreement shall take place
on [ ] 1998 at [ ] a.m./p.m. at
[Singapore].
At Completion, you are instructed that AGAINST DELIVERY by the Purchaser to you
of:-
(i) payment of S$3,750,000.00 by way of the following cashier's orders:-
(aa) cashier's order for S$187,500.00 made in favour of "Gerard Foo
Loke Kiean";
(bb) cashier's order for S$937,500.00 made in favour of "James Han
Kim Guan";
(cc) cashier's order for S$937,500.00 made in favour of "Leong Sau
Pan";
(dd) cashier's order for S$750,000.00 made in favour of "Foo Khoon
Wong"; and
(ee) cashier's order for S$937,500.00 made in favour of "Sae Foo
Kitipongse @ Foo Loke Khee"; and
<PAGE> 77
(ii) share certificates for the final number of [ ] shares
in the common stock of the Purchaser (each , an "Initial Consideration
Share") as follows:-
(aa) [ ] Initial Consideration Shares issued in the
name of "Gerard Foo Loke Kiean";
(bb) [ ] Initial Consideration Shares issued in the
name of "James Han Kim Guan";
(cc) [ ] Initial Consideration Shares issued in the
name of "Leong Sau Pan";
(dd) [ ] Initial Consideration Shares issued in the
name of "Foo Khoon Wong"; and
(ee) [ ] Initial Consideration Shares issued in the
name of "Sae Foo Kitipongse @ Foo Loke Khee",
YOU SHALL FORTHWITH:-
(iii) RELEASE to the Purchaser the Sale Share Documents; and
(iv) DELIVER to the respective Vendors:-
(aa) the cashier's orders referred to in paragraph (i);
and
(bb) the Initial Consideration Shares referred to in paragraph
(ii).
Dated [ ] 1998.
Yours faithfully,
-------------------------------- ------------------------------
GERARD FOO LOKE KIEAN JAMES HAN KIM GUAN
-------------------------------- ------------------------------
LEONG SAU PAN FOO KHOON WONG
-------------------------------- ------------------------------
SAE FOO KITIPONGSE Signed by
@ FOO LOKE KHEE as of and for and on behalf of
NHANCEMENT TECHNOLOGIES INC.
<PAGE> 78
APPENDIX B
Notice to Escrow Agent
(referred to in clause 4(C))
[ ] 1998
To: Messrs. BDO Binder
112 Middle Road #02-01
Midland House
Singapore 188970
Attn: Mr Patrick Tay/Mr Peter Leong
Dear Sirs,
INFOTEL TECHNOLOGIES PTE LTD
We refer to the Escrow Agent Agreement (the "Agreement") dated [ ] 1998
entered into between (1) Gerard Foo Loke Kiean, James Han Kim Guan, Leong Sau
Pan, Foo Khoon Wong and Foo Kitipongse @ Foo Loke Khee, as Vendors, (2)
NHancement Technologies Inc., as Purchaser, and (3) yourselves, as Escrow
Agent. All terms and references used in this notice shall, unless otherwise
defined or construed herein, have the same meaning as set out in the Agreement.
With reference to clause 4(C) of the Agreement, we the undersigned parties
hereby notify you that completion of the Share Sale Agreement shall take place
on [ ] 1998 at [ ] a.m./p.m. at
[Singapore] and that the final number of Initial Consideration Shares will not
have been determined by that date.
At Completion, you are instructed that AGAINST DELIVERY by the Purchaser to you
of:-
(i) payment of S$3,750,000.00 by way of the following cashier's orders:-
(aa) cashier's order for S$187,500.00 made in favour of "Gerard Foo
Loke Kiean";
(bb) cashier's order for S$937,500.00 made in favour of "James Han
Kim Guan";
(cc) cashier's order for S$937,500.00 made in favour of "Leong Sau
Pan";
(dd) cashier's order for S$750,000.00 made in favour of "Foo Khoon
Wong"; and
(ee) cashier's order for S$937,500.00 made in favour of "Sae Foo
Kitipongse @ Foo Loke Khee"; and
(ii) share certificates for the provisional number of 428,560 shares in the
common stock of the Purchaser (each, an "Initial Consideration Share")
as follows:-
<PAGE> 79
(aa) 21,428 Initial Consideration Shares issued in the name of
"Gerard Foo Loke Kiean";
(bb) 107,140 Initial Consideration Shares issued in the name of
"James Han Kim Guan";
(cc) 107,140 Initial Consideration Shares issued in the name of
"Leong Sau Pan";
(dd) 85,712 Initial Consideration Shares issued in the name of
"Foo Khoon Wong"; and
(ee) 107,140 Initial Consideration Shares issued in the name of
"Sae Foo Kitipongse @ Foo Loke Khee",
YOU SHALL FORTHWITH:-
(iii) RELEASE to the Purchaser the Sale Share Documents; and
(iv) DELIVER to the respective Vendors:-
(aa) the cashier's orders referred to in paragraph (i); and
(bb) share certificates for half of the number of Initial
Consideration Shares respectively allotted to each Vendor, as
referred to in paragraph (ii); and
(v) HOLD IN ESCROW share certificates for the remaining half of the number
of Initial Consideration Shares respectively allotted to each Vendor,
as referred to in paragraph (ii), pending further instructions in
writing from the Purchaser and the Vendors in respect of the release
thereof.
Dated [ ] 1998.
Yours faithfully,
------------------------------ ------------------------------
GERARD FOO LOKE KIEAN JAMES HAN KIM GUAN
------------------------------ ------------------------------
LEONG SAU PAN FOO KHOON WONG
------------------------------ ------------------------------
SAE FOO KITIPONGSE Signed by
@ FOO LOKE KHEE as of and for and on
behalf of NHANCEMENT
TECHNOLOGIES INC.
<PAGE> 80
IN WITNESS WHEREOF this Agreement has been entered into on the date stated at
the beginning.
The Vendors
SIGNED by GERARD FOO LOKE KIEAN )
in the presence of:- )
SIGNED by JAMES HAN KIM GUAN )
---------------------------
in the presence of:- )
SIGNED by LEONG SAU PAN )
---------------------------
in the presence of:- )
SIGNED by FOO KHOON WONG )
---------------------------
in the presence of:- )
SIGNED by SAE FOO KITIPONGSE @ )
---------------------------
FOO LOKE KHEE in the )
presence of:- )
<PAGE> 81
The Purchaser
SIGNED by )
------------------------
for and on behalf of )
NHANCEMENT TECHNOLOGIES INC. )
in the presence of:- )
<PAGE> 82
The Escrow Agent
SIGNED by )
------------------------
for and on behalf of )
MESSRS. BDO BINDER )
in the presence of:- )
<PAGE> 83
APPENDIX B
Form of Service Agreement
<PAGE> 84
DATED _________, 1998
BETWEEN
THE PERSON WHOSE NAME APPEARS IN
ITEM 1 OF SCHEDULE 1
AS EMPLOYEE
- AND -
INFOTEL TECHNOLOGIES (PTE) LTD
AS COMPANY
-------------------------------
FORM OF
SERVICE AGREEMENT
-------------------------------
(RQ/WTST/13764/972)
Allen & Gledhill
Advocates & Solicitors
Singapore
<PAGE> 85
THIS AGREEMENT is made on ____________, 1998 BETWEEN:-
(1) THE PERSON WHOSE NAME APPEARS IN ITEM 1 OF SCHEDULE 1 residing at the
address set out in Item 2 of Schedule 1 (the "Employee"); and
(2) INFOTEL TECHNOLOGIES (PTE) LTD, a company incorporated in Singapore
with its registered office at 19 Tai Seng Drive #06-00, Singapore
535222 (the "Company").
WHEREAS pursuant to an agreement for sale of all the issued shares in the
capital of the Company whereby NHancement Technologies Inc. (the "Purchaser")
purchased all the issued shares in the capital of the Company, the outgoing
shareholders of the Company obtained the Purchaser's agreement that, inter
alia, the Purchaser provides the Company with funds for the payment by the
Company to its specified employees (including the Employee) of the incentive
bonus referred to in clause 3.4 of and Schedule 2 to this Agreement.
IT IS AGREED as follows:-
1. DEFINITIONS
1.1 In this Agreement where the context so admits, the following
expressions shall have the following meanings:-
1.1.1 "Board" means the board of directors of the Company;
1.1.2 "Confidential Information" shall have the meaning ascribed to
it in Clause 7.2 hereof;
1.1.3 "Employment Period" means the period stated in Item 4 of
Schedule 1, unless the employment is terminated earlier in
accordance with this Agreement;
1.1.4 "Inventions" means discoveries, improvements, ideas and
artistic or literary property rights which are or may
constitute intellectual property rights and which relate to:-
1. any of the Company's present or future manufacturing,
sales research or other activities, any of such
activities or investigations relating to things which
are entirely foreign to any products or processes
currently being made or used by the Company; or
2. ideas, work or investigations conceived carried on by
him in connection with or because of his employment
with the Company.
<PAGE> 86
1.2 Words denoting the singular shall include the plural number and vice
versa. Words denoting the masculine gender shall include the feminine
and neuter genders. Words denoting persons shall include corporations
and firms.
1.3 Clause headings are for reference only and shall be ignored when
construing the meaning of any provisions of this Agreement.
1.4 The Schedules shall be taken read and construed as an essential part of
this Agreement.
1.5 References to Clauses and Schedules are references to Clauses and
Schedules of this Agreement respectively.
2. EMPLOYMENT
2.1 The Company hereby appoints the Employee and the Employee hereby agrees
to act in the position stated in Item 3 of Schedule 1.
2.2 The said appointment shall be for the Employment Period.
3. REMUNERATION, BONUSES AND OTHER BENEFITS
3.1 The gross remuneration of the Employee shall be at the rate stated in
Item 5 of Schedule 1.
3.2 The said remuneration shall be reviewed by the Board at the end of each
of the Company's financial years and the salary rate may be increased
with effect from such review date or such other date as may be
determined by the Board.
3.3 An annual wage supplement (13th month) bonus equivalent to one (1)
month's gross remuneration shall be paid pro rata for every 12 months"
of continuous employment with the Company.
3.4 The Employee shall in addition to his remuneration and annual wage
supplement and any other bonus prescribed by the Board from time to
time to be applicable to all employees or a category of employees of
the Company, be entitled to receive an incentive bonus which shall be
paid if the conditions set out in Schedule 2 are fulfilled.
3.5 The Employee shall participate in the Company's profit sharing scheme
on terms set out in Item 6 of Schedule 1.
3.6 The payment of any other bonus is at the discretion of the Board.
3.7 The Employee will also be reimbursed and/or receive the allowances or
benefits as set out in Item 7 of Schedule 1.
<PAGE> 87
4. WORKING HOURS, HOLIDAYS AND PAYMENT
DURING ABSENCE ON MEDICAL GROUNDS
4.1 The Employee shall conform to such hours of work as may from time to
time reasonably be required of him and shall not be entitled to
receive any additional remuneration for work outside his normal hours.
Unless otherwise determined by the Board, the normal working hours of
the Company as the date hereof are:-
Mondays to Fridays : 8:30 a.m. to 12:30 p.m. and
1:30 p.m. to 6:00 p.m.
4.2 The Employee shall (in addition to normal public holidays) be entitled
to annual leave at the rate of twenty- one (21) working days per year,
to be taken at such time or times as the Board or his supervisor may
approve. The Employee shall in addition to annual leave, be entitled
to such other leave which may from time to time be prescribed by the
Board to be applicable to all employees of the Company.
4.3 For the purpose of Clause 4.2, the number of days of annual leave
accrued to the Employee up to the date hereof is set out in Item 8 of
Schedule 1.
4.4 The Company shall continue to pay the Employee's remuneration during
any period of absence on medical grounds up to a maximum of fourteen
(14) days in any period of twelve (12) months PROVIDED that the
Employee shall if required supply the Company with medical
certificates covering the period(s) of absence.
4.5 The Company shall pay the cost of all medical attention and all
medicines prescribed by the Company's approved doctors for the
Employee. Medical attention does not include dental or optical
treatment, unless sustained by injury at work.
4.6 The Company shall continue to pay the Employee's remuneration during
any period of absence up to a maximum of sixty (60) days in any period
of twelve (12) months if the Employee is hospitalised on medical
grounds provided that the Employee shall if required supply the
Company with medical certificates covering the period(s) of absence.
4.7 The Employee shall be entitled to participate in such group hospital
and surgical insurance scheme and group personal accident scheme and
any other insurance scheme as the Company may cause to be effected
from time to time.
5. GENERAL DUTIES AND RESTRICTIONS
5.1 The Employee shall devote substantially the whole of his time and
attention and skill to his appointed duties and shall faithfully and
diligently perform such duties and exercise such powers consistent
with the office to which he is appointed as may from time to time be
assigned to
<PAGE> 88
or vested in him and shall obey the instructions of the Board or his
superior and use his best endeavours to promote the interests and
welfare of the Company.
5.2 The Employee shall not undertake any occupation either remunerative or
otherwise outside the Company during his employment period without the
prior written approval of the Company.
6. CONFLICT OF INTEREST
6.1 Save in respect of interests as holder of less than five per cent. of
any class of shares or debentures listed on the Stock Exchange of
Singapore Limited or any other recognised stock exchange, the Employee
shall declare to the Company his interests in any other business
similar to or in competition with the business of the Company or its
subsidiaries and shall not engage or pursue such interests in any other
business.
7. CONFIDENTIALITY
7.1 The Employee shall not, except in the proper course of his duties,
during or after the Employment Period divulge to any person whatever
and shall use his best endeavours to prevent the publication or
disclosure of any Confidential Information and shall not after the
Employment Period otherwise make use of any Confidential Information in
relation to any competing business, activity, products or services.
7.2 Confidential Information shall mean:-
7.2.1 any and all trade secrets concerning the business and affairs
of the Company, product specifications, data, know-how,
formulae, compositions, processes, designs, sketches,
photographs, graphs, drawings, samples, inventions and ideas,
past, current and planned research and development, current and
planned manufacturing and distribution methods and processes,
customer lists, current and anticipated customer requirements,
price lists, market studies, business plans, computer software
and programs (including object code and source code), computer
software and database technologies, systems, structures and
architectures (and related processes, formulae, compositions,
improvements, devices, know-how, inventions, discoveries,
concepts, ideas, designs, methods and information of the
Company and any other information, however documented) of the
Company that is a trade secret;
<PAGE> 89
7.2.2 any and all information concerning the business and affairs
of the Company which the Company reasonably considers to be
of a confidential or proprietary nature, which includes
historical financial statements, financial projections and
budgets, historical and projected sales, capital spending
budgets and plans, the names and backgrounds of key
personnel, personnel training and techniques and materials,
however documented; and
7.2.3 any and all notes, analysis, compilations, studies,
summaries, and other material prepared by or for the Company
containing or based, in whole or in part, on any information
included in the foregoing,
save only:-
7.2.4 insofar as the same has become public knowledge otherwise
than, directly or indirectly, through the Employee's breach
under this clause to keep the same confidential; or
7.2.5 to the extent required by law or by any supervisory or
regulatory body whether in Singapore or United States of
America to be divulged.
7.3 All notes and memoranda of any Confidential Information which is
acquired received or made by the Employee during his Employment Period
shall be the property of the Company and shall be surrendered by the
Employee to someone duly authorised in that behalf at the termination
of his employment or at the request of the Board during his Employment
Period.
7.4 An Employee contravening any of the above will expose himself to legal
action by the Company.
8. INVENTIONS
8.1 If the Employee conceives or makes Inventions either solely or jointly
with others during his Employment Period, whether or not during normal
working hours or whether or not at the Company's premises, or within
one year after termination of his employment if such Inventions relate
to a product or process upon which he worked during the last two (2)
years of his employment by the Company, the Employee shall:-
8.1.1 promptly and fully disclose and describe such Inventions in
writing to the Company;
8.1.2 assign (and the Employee does hereby assign) to the Company
or its nominee all of his rights to such Inventions, and to
applications for letters patent in all countries and to
letters patent granted upon such Inventions in all countries;
and
8.1.3 acknowledge and deliver promptly to the Company such written
instruments
<PAGE> 90
and do such other acts as may be necessary in the opinion of
the Company to obtain and maintain letters patent and to vest
the entire right and title thereto in the Company or its
nominee.
9. COMPLIANCE WITH RULES AND REGULATIONS AND HANDBOOK
9.1 The Employee shall comply with, and shall be entitled to and to
exercise all benefits and rights available to him under, all rules and
regulations issued by the Company from time to time which are
applicable to all employees and the company manual, if any, containing
the general terms and conditions of service which are issued by the
Company from time to time and which shall form part of this Agreement.
10. RIGHT TO VARY TERMS
10.1 The Company shall have the right to vary the terms and conditions of
service of this Agreement from time to time to meet the needs of the
Company provided that any such variation shall have the prior mutual
agreement in writing of the Employee.
11. CENTRAL PROVIDENT FUND
11.1 The Company and the Employee shall contribute to the Central Provident
Fund at such rate required by law during the Employment Period.
12. TERMINATION
12.1 The employment of the Employee hereunder shall be subject to
termination by either the Company or the Employee by each giving to the
other not less than three (3) months' notice in writing given at any
time or payment in lieu of notice.
12.2 The employment of the Employee hereunder shall be subject to
termination by the Company by summary notice in writing if the Employee
shall at any time:-
12.2.1 commit a serious or persistent breach of any of the provisions
herein contained;
12.2.2 be guilty of any default, misconduct or wilful neglect in the
discharge of his duties hereunder or in connection with or
affecting the business of the Company;
12.2.3 be served with any bankruptcy notice or become bankrupt or make
any arrangement or composition with his creditors;
12.2.4 be charged or convicted of any criminal offence, other than a
minor traffic offence or an offence
<PAGE> 91
which in the sole and absolute opinion of the Board does not
affect his position; or
12.2.5 be guilty of any conduct tending to bring himself or the
Company or any of its shareholders, directors or officers
into disrepute.
12.3 If the Company becomes entitled to terminate the appointment of the
Employee hereunder pursuant to Clause 12.2 it shall be entitled (but
without prejudice to its right subsequently to terminate such
appointment on the same or any other ground) to suspend the Employee
or relieve him of all or any of his duties hereunder on full payment
of salary for a period not exceeding in aggregate three (3) months.
12.4 Termination of the Employee's appointment hereunder shall be without
prejudice to any rights of the parties hereto in respect of any
antecedent breach of the provisions of this Agreement herein
contained.
13. MOBILITY CLAUSE
13.1 The Employee shall work at 19 Tai Seng Drive #06-00, Singapore 535222
and in such other parts of Singapore as is necessary for the proper
discharge of the Employee's duties or as the Company shall from time
to time direct. The Employee may in the performance of his duties
also be required to travel outside Singapore.
13.2 The Employee shall be subject to posting for training or other duties
in connection with his employment outside Singapore for such
reasonable periods as the Company may require and on mutually
acceptable terms.
14. NOTICES
14.1 Any communication (including without limitation notices consents and
similar documents) required or permitted to be given or served under
this Agreement shall be in writing and may be served by registered
post for addresses within the country of the sender and by registered
air-letter for addresses outside the country of the sender and in both
cases by hand or by telefax, addressed to the relevant party at the
addresses or telefax numbers set out herein or such other address or
telefax number as may have been notified to the other party in
accordance with this Clause.
14.2 Any such communication notice consents and similar documents shall be
deemed to have been served:-
14.2.1 in the case of delivery by hand when delivered if a receipt
is obtained from the addressee; and
<PAGE> 92
14.2.2 in the case of telefax:-
1. if despatched during regular business hours of the
receiving office when despatched and telefax
acknowledgement or answerback is duly and
automatically received by the sender of the telefax;
or
2. if despatched otherwise than during regular business
hours of the receiving office upon the commencement at
the receiving office of the next regular business
hours succeeding transmission provided always that
answerback is duly automatically received by the
sender on despatch as aforesaid;
14.2.3 if despatched by registered post to an address within the
country of the sender two (2) days and if despatched by
registered air-letter to an address outside the country of the
sender seven (7) days after the date it is lodged with the
postal authorities for despatch.
15. SEVERABILITY & ENTIRE AGREEMENT
15.1 Any term, condition, stipulation, provision, covenant or undertaking in
this Agreement which is or may become illegal, void, prohibited or
unenforceable in any respect under any law shall be ineffective to the
extent of such illegality, voidness, prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such
illegality, voidness, prohibition or unenforceability shall not
invalidate or render illegal, void or unenforceable any other term
condition, stipulation, provision, covenant or undertaking contained in
this Agreement.
15.2 This Agreement (together with all agreements and documents executed
contemporaneously with it or referred to in it) constitutes the entire
agreement between the parties in relation to its subject matter and
supersedes all prior agreements and understandings whether oral or
written with respect to such subject matter and no variation of this
Agreement shall be effective unless reduced to writing and signed by a
duly authorised representative of each of the parties.
16. TIME OF THE ESSENCE
16.1 Time wherever mentioned shall be of the essence in this Agreement.
17. GOVERNING LAW AND JURISDICTION
17.1 This Agreement shall be governed by and construed in all respects in
accordance with the laws of Singapore and
<PAGE> 93
the parties hereto submit to the exclusive jurisdiction of the courts
of Singapore.
<PAGE> 94
SCHEDULE 1
(referred to in description of parties,
clauses 1.13, 2.1 and 3.1)
ITEM SUBJECT
1. Name of Employee:
2. Address of Employee:
3. Position of Employee:
4. Employment Period:
5. Gross Remuneration:
6. Profit-sharing:
7. Reimbursements/Allowances/Benefits:
8. Accrued leave:
<PAGE> 95
SCHEDULE 2
(referred to in clause 3.4)
1. The Employee shall be entitled to receive incentive bonuses as
declared by the Board if the Company earns Profit After Tax (as
defined below) in respect of any of the financial years ending 30th
June 1998, 30th June 1999 and 30th June 2000 respectively (each, a
"Relevant Financial Year") on condition that the Employee:-
(a) has been in the employ of the Company for not less than
six months;
(b) is in the employ of the Company on the last day of the
Relevant Financial Year in question; and
(c) is in the employ of the Company at the time when payment
of the incentive bonus is due to be made under this
Schedule 2,
Provided However that the Company shall no longer be required to pay
to the Employee the incentive bonus under this Schedule 2, once the
Company has paid an aggregate of S$300,000 by way of incentive
bonuses to the Specified Employees, being the Employee and such
other key employees of the Company as the Board shall specify. The
calculation of this aggregate amount of S$300,000 paid by the
Company shall take into account any and all contributions which the
Company (as employer) is required to make to the Central Provident
Fund in connection with the incentive bonuses.
1. The term "Profit After Tax" as used in this Schedule 2 means the
profit after tax earned by the Company in respect of any such
financial year, as shall be conclusively determined by accountants
appointed by the Company's shareholders for this purpose. Such
determination shall:-
(a) be made on the basis of the Company's audited accounts in
respect of the Relevant Financial Year (which accounts
shall be prepared by the Company's auditors for the time
being in accordance with generally accepted accounting
principles); and
(b) exclude all amounts by way of incentive bonuses payable
in respect of the Relevant Financial Year in question.
2. The Employee shall in respect of each Relevant Financial Year
receive 1.5% of the Profit After Tax for that Relevant Financial
Year as incentive bonus, provided
<PAGE> 96
that if the Employee shall have been in the employ of the Company for
less than one year at the end of a Relevant Financial Year, the
amount of incentive bonus paid to him shall be pro-rated according to
the number of months he has been employed by the Company in that
Relevant Financial Year.
4. Any such payment due to the Employee as aforesaid shall be made to
the Employee within sixty (60) days of finalisation of the Company's
audited accounts for each Relevant Financial Year.
5. In the event that less than S$300,000.00 in aggregate shall have been
declared by the Company as at the end of the Relevant Financial Year
ending 30th June 2000, on condition that the Employee:-
(a) has been in the employ of the Company for not less than
six months;
(b) is in the employ of the Company on the last day of the
Relevant Financial Year in question; and
(c) is in the employ of the Company at the time when payment
of the relevant amount is due to be made under this
paragraph 5,
the Company shall, irrespective of whether the Company shall have earned any
Profit After Tax for the Company's financial year ending 30th June 2001, pay to
the Employee his proportionate share (which shall be in the proportion of his
percentage share of the aggregate incentive bonus for a Relevant Financial
Year) of the amount of the shortfall below S$300,000.00, within sixty (60) days
of finalisation of the Company's audited accounts for that financial year. In
calculating the amount to be paid to the said Specified Employee, any and all
contributions which the Company (as employer) is required to make to the
Central Provident Fund in connection with such payment shall be taken into
account.
<PAGE> 97
IN WITNESS WHEREOF the parties hereto have hereunto set their hands the day
and year first above written.
The Employee
- -----------------------------------
The Company
- -----------------------------------
Signed by
-------------------------
as of and for and on behalf
of the Company
<PAGE> 1
Exhibit 2.2
[Letterhead of Nhancement Technologies Inc.]
To : (1) Gerard Foo Loke Kiean
10 Persiaran Canton Victoria Park
30250 Ipoh, Perak
Malaysia
(2) James Han Kim Guan
15 Mimosa Walk
Singapore 807862
(3) Leong Sau Pan
27B Fernhill Road
Singapore 259089
(4) Foo Khoon Wong
7 Jalan Belfield
Ipoh, Perak,
Malaysia
(5) Sae Foo Kitipongse @ Foo Loke Khee
869/243 Muang Thong 4
Sukumvit 101, Bangkok 10250
Thailand
April 2, 1998
Dear Sirs,
INFOTEL TECHNOLOGIES PTE LTD (the "Company")
1. We refer to the Sale and Purchase Agreement entered into by yourselves,
as vendors (the "Vendors") and ourselves, as purchaser (the
"Purchaser"), dated 19 January 1998, relating to the sale and purchase
of 500,000 ordinary shares of $1.00 each in the capital of the Company
(the "Agreement") and the Disclosure Letters from yourselves to us
dated 19 January 1998 and 16 March 1998 respectively which we have
received (and acknowledged as such) in their entirety. The capitalised
terms used in this letter shall have the same meanings ascribed to them
in the Agreement.
2. We had requested for Completion to be deferred by 28 days to 13 April
1998 as we were unable to proceed with Completion on 16 March 1998.
<PAGE> 2
3. In consideration of your agreement to defer Completion to 13 April
1998, we agree to the following:
(a) we shall pay to each of the Vendors interest on the Cash
Portion at the rate of 2% above the prime lending rate of The
Development Bank of Singapore Ltd for Singapore Dollars, such
interest to accrue on a daily basis for the period commencing
on and including 16 March 1998 up to and including 13 April
1998. Such interest shall be payable to each of the Vendors
at Completion on 13 April 1998 by way of cashiers" orders
made in favour of each of the Vendors in their respective
Shareholding Proportions; and
(b) with effect from 16 March 1998, the Agreement shall be varied
by inserting the following provision as new sub-Clause (J) of
Clause 9:
"(J) Additional Limitation on Vendors' Liability
In addition to the limits on the Vendors" liability
set out in sub-Clause (I), the liability of the
Vendors shall be further limited such that, subject
to the Vendors" performance and observance of the
provisions of sub-Clauses (E) and (F), the Vendors
shall not be liable in respect of any breach of any
of the Warranties in respect of the period commencing
on and including 16 March 1998 up to and including 13
April 1998."
Save as expressly amended, modified or supplemented above, all other terms of
the Agreement shall remain unaffected, valid and subsisting. Please indicate
your acceptance and agreement to the terms contained in this letter by signing
the acknowledgement below.
/S/ DOUGLAS S. ZORN
----------------------------
Signed By DOUGLAS S. ZORN
For and On Behalf of
NHANCEMENT TECHNOLOGIES INC.
<PAGE> 3
ACKNOWLEDGEMENT
We, the Vendors, hereby agree to Completion being deferred to 13 April 1998
subject to the Purchaser's agreement to the foregoing.
/s/ Gerard Foo Loke Kiean /s/ James Han Kim Guan
- ----------------------------- -------------------------------
Gerard Foo Loke Kiean James Han Kim Guan
/s/ Leong Sau Pan /s/ Foo Khoon Wong
- ----------------------------- -------------------------------
Leong Sau Pan Foo Khoon Wong
/s/ Sae Foo Kitipongse
- -----------------------------
Sae Foo Kitipongse
@ Foo Loke Khee
<PAGE> 1
Exhibit 2.3
[Letterhead of Nhancement Technologies Inc.]
FORM OF
SECOND SUPPLEMENTAL LETTER
To : (1) Gerard Foo Loke Kiean
Persiaran Canton Victoria Park
Ipoh, Perak
Malaysia
(2) James Han Kim Guan
15 Mimosa Walk
Singapore 807862
(3) Leong Sau Pan
27B Fernhill Road
Singapore 259089
(4) Foo Khoon Wong
7 Jalan Belfield
Ipoh, Perak,
Malaysia
(5) Sae Foo Kitipongse @ Foo Loke Khee
Muang Thong 4
Sukumvit 101, Bangkok 10250
Thailand
[Date]
Dear Sirs,
INFOTEL TECHNOLOGIES PTE LTD (THE "COMPANY")
1. We refer to:
(a) the Sale and Purchase Agreement (the "Agreement") dated 19th
January 1998 entered into by yourselves (together, the
"Vendors"), as vendors, and ourselves (the "Purchaser"), as
purchaser, relating to the sale and purchase of 500,000
ordinary shares of $1.00 each in the capital of the Company;
and
(b) the Supplemental Letter (the "First Supplemental Letter")
dated 2nd April 1998 addressed by ourselves to yourselves and
duly countersigned by yourselves, being an agreement
supplemental to the Agreement.
<PAGE> 2
The capitalised terms used in this Second Supplemental Letter shall
have the same meanings ascribed to them in the Agreement.
2. We had requested for Completion to be further deferred to 24th June
1998 as we were unable to proceed with Completion on 13th April 1998.
3. In consideration of your agreement to further defer Completion to 24th
June 1998, we agree to the following:
(a) we shall pay to the Vendors interest on the Cash Portion at the
rate of 3% above the prime lending rate of The Development Bank
of Singapore Ltd for Singapore Dollars, such interest to accrue
on a daily basis for the period commencing on and including
14th April 1998 up to and including 24th June 1998. Such
interest shall be payable to each of the Vendors on Completion
by way of cashiers" orders made in favour of each of the
Vendors in their respective Shareholding Proportions;
(b) with effect from 13th April 1998, the Agreement shall be varied
as follows:
(i) clause 1(A) shall be amended by deleting in its
entirety the definitions of "First Anniversary" and
"Second Anniversary" and substituting respectively
therefor the following:-
""First Anniversary" means 16th March 1999."; and
""Second Anniversary" means 16th March 2000.",
and all references to "First Anniversary" and "Second
Anniversary" in the Agreement shall be construed
accordingly; and
(ii) the Agreement shall be varied by inserting the
following provision as new sub-Clause (K) of clause
9:-
"(K) Additional Limitation on Vendors" Liability
In addition to the limits on the Vendors" liability
set out in sub-Clauses (I) and (J), the liability of
the Vendors shall be further limited such that,
subject to the Vendors" performance and observance of
the provisions of sub-Clauses (E) and (F), the Vendors
shall not be liable in respect of any breach of any of
the Warranties in respect of the period commencing on
and including 14th April 1998 up to and including 24th
June 1998."; and
(a) we shall forthwith deposit in an interest-bearing account in
the name of our solicitors, Messrs Allen & Gledhill, as
stakeholders the principal sum of S$1,500,000/- to be held and
applied as follows:-
<PAGE> 3
(i) on Completion, the whole of the S$1,500,000/-
(together with accrued interest thereon) shall be
released from stakeholding and forthwith paid to the
Vendors in their respective Shareholding Proportions,
whereby the whole of the S$1,500,000/- (exclusive of
accrued interest thereon) shall constitute
part-payment of the Cash Portion payable by the
Purchaser to the Vendors for the Sale Shares; and
(ii) in the event that Completion does not take place on
24th June 1998 for whatever reason:-
(aa) the amount of S$500,000/- (together with
accrued interest thereon) shall be released
from stakeholding and forthwith paid as a
non-refundable break-up fee to the Vendors
in their respective Shareholding
Proportions; and
(bb) the amount of S$1,000,000/- (together with
accrued interest thereon) shall be released
by the stakeholders and forthwith repaid to
the Purchaser.
Upon payment to the Vendors under the foregoing
sub-paragraph (aa), the Agreement (as amended by the
First Supplemental Letter and this Second
Supplemental Letter) shall automatically cease and
determine and each of the Vendors and the Purchaser
shall be forthwith discharged and released from
further observance and performance of their
respective obligations and liabilities under the
Agreement, the First Supplemental Letter and this
Second Supplemental Letter. Neither any Vendor not
the Purchaser shall thereafter have or be entitled to
make any claim against the other parties to the
Agreement in respect of compensation, damages or
remedy of any nature whatsoever.
Save as expressly amended, modified or supplemented pursuant to this Second
Supplemental Letter, all other terms of the Agreement (as amended by the First
Supplemental Letter) shall remain unaffected, valid and subsisting. Please
indicate your acceptance and agreement to the terms contained in this Second
Supplemental Letter by signing the acknowledgement below.
-----------------------------
Signed by DOUGLAS T. ZORN
For and on behalf of
NHANCEMENT TECHNOLOGIES INC.
<PAGE> 4
ACKNOWLEDGEMENT
We, the Vendors, hereby agree to Completion being further deferred to 24th June
1998 subject to the Purchaser's agreement to the foregoing terms of the Second
Supplemental Letter dated [ ] 1998.
- ----------------------------------- -----------------------------------
Gerard Foo Loke Kiean James Han Kim Guan
- ----------------------------------- -----------------------------------
Leong Sau Pan Foo Khoon Wong
- -----------------------------------
Sae Foo Kitipongse
@ Foo Loke Khee
<PAGE> 1
Exhibit 5
May 14, 1998
NHancement Technologies Inc.
39420 Liberty Street, Suite 250
Fremont, CA 94338
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We furnish this opinion as counsel for NHancement Technologies Inc., a
Delaware corporation ("NHancement"), in connection with the Registration
Statement on Form S-3 (the "REGISTRATION STATEMENT") filed by NHancement with
the Securities and Exchange Commission on May 14, 1998, providing for the
registration under the Securities Act of 1933, as amended, of (i) a sufficient
number of shares of Common Stock, par value $0.01 per share, of NHancement (the
"Shares") issuable to The Endeavour Capital Fund S.A. and AMRO INTERNATIONAL
S.A. (the "Initial Investors") upon conversion of the shares of Series A
Convertible Preferred Stock held by the Initial Investors pursuant to the terms
of that certain Securities Purchase Agreement dated April 13, 1998 by and
between NHancement and the Initial Investors (the "Purchase Agreement"), and
(ii) One Hundred Fifty Thousand (150,000) shares of Common Stock, par value
$0.01 per share, of NHancement issued to James S. Gillespie (the "Issued
Shares").
In our capacity as counsel to NHancement, we have examined, among
other things, originals, or copies identified to our satisfaction as being
true copies of such documents as we have deemed necessary, including
resolutions by the stockholders and the board of directors authorizing the
issuance of the Shares to the Initial Investors upon conversion of their
shares of Series A Preferred Stock and filing of the Registration Statement,
and we have obtained from officers and representatives of NHancement such
other certificates and assurances as we consider necessary for the purposes of
this opinion.
In those cases in which we have not been involved directly in the
preparation, execution or the filing of a document, we have assumed that (i)
the document reviewed by us is an original document, or a true and accurate
copy of the original document, and has not been subsequently amended, (ii) the
signatures on each original document are genuine, and (iii) each party who
executed the document had proper authority and capacity to execute such
document.
On the basis of our examination, and in reliance thereon and on our
consideration of such other matters of fact and questions of law as we
consider relevant in the circumstances, we are of the opinion that, (i) when
issued and paid for in accordance with the terms of, and after satisfaction of
the conditions stated in the Purchase Agreement, the Shares will be legally
issued, fully paid and nonassessable and (ii) the Issued Shares are legally
issued, fully paid and nonassessable.
We hereby consent to the use of our name under the caption "Legal
Matters" in the prospectus which constitutes a part of the above-mentioned
Registration Statement, and to the filing of this opinion as an exhibit to
said Registration Statement.
Very truly yours,
Tomlinson Zisko Morosoli & Maser LLP
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
NHancement Technologies Inc.
Fremont, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated April 13,
1998, relating to the consolidated financial statements of NHancement
Technologies Inc. appearing in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1997. Our report contains an emphasis paragraph
regarding the fact that the Company purchases substantially all of its inventory
requirements from one vendor and that such vendor has announced its intentions
to sell its customer premise equipment business which services the largest
portion of the Company's business.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
San Francisco, California
May 12, 1998
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
NHancement Technologies Inc.
Fremont, California
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of NHancement
Technologies Inc. for the Registration of shares of its common stock and to
the inclusion therein of our report dated May 12, 1998, with respect to the
financial statements of Infotel Technologies (Pte) Ltd for the year ended June
30, 1997.
ERNST & YOUNG
Singapore
May 12, 1998
