<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 6, 1999
------------------------
NHancement Technologies Inc.
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(Exact name of registrant as specified in charter)
Delaware 0-21999 841360852
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(State or other jurisdiction (S.E.C. File Number) (IRS Employer
of Incorporation) Identification No.)
39420 Liberty Street, Suite 250, Fremont, CA 94538
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 744-3333
--------------------------------------------
<PAGE>
Item 5. OTHER EVENTS.
On January 6, 1999, Mr. Esmond T. Goei resigned his positions as Chief
Executive Officer and President pursuant to the terms of a Separation Agreement
approved by the Board of Directors, which modifies the terms of his Employment
Agreement. In exchange for Mr. Goei's resignation, the Company agreed to a
severance package with the following principal terms: (i) six and one-half
months of regular pay at his current rate, (ii) continued benefits under the
Company's medical and group insurance plan through May 15, 1999, (iii) use of
the Company paid leased automobile through the end of the lease term in July
1999, (iv) reimbursement for certain of Mr. Goei's accrued moving expenses
totaling $70,000, (v) the Company's agreement to issue warrants to purchase
50,000 shares of NHancement Common Stock at the fair market price effective as
of the date of his resignation at $1.00 per share, and (vi) Mr. Goei's and the
Company's agreement to a mutual waiver of all claims related to Mr. Goei's
employment. The Agreement also contains provisions for confidentiality and
covenants not to compete, to solicit customers or hire employees for a period of
two (2) years from Mr. Goei's resignation. A copy of the Separation Agreement is
attached as an exhibit to this 8-K.
On January 6, 1999, Mr. Douglas S. Zorn was appointed interim
President and CEO. On February 2, 1999, he was elected President and CEO by the
Board of Directors. Mr. Zorn continues to serve as CFO, Treasurer and Secretary
of the Company.
On January 6, 1999, Mr. James S. Gillespie was reappointed to fill a
newly created vacancy on the Board of Directors. Mr. Gillespie had served as Sr.
Vice President of Sales and a Director of the Company since its incorporation in
1996. He resigned his position as Vice President of Sales in April 1998, and
resigned as a director of the Company on September 22, 1998. In addition, he
currently serves as a consultant to the Company.
Messrs. James Boyle, Santanu Das and Gary Nemetz resigned as Directors
of the Company on January 6, 1999. At the same meeting, Messrs. Robert J.
Schmier and N. Bruce Walko were elected to fill the vacancies created by the
resignations of Messrs. Boyle, Das and Nemetz.
On January 13, 1999, Mr. Goei resigned as Chairman of the Board and
Director of the Company. Mr. Thomas J. Lawrence also resigned as a Director on
January 13, 1999. The changes in the composition of the Board of Directors and
in management of the Company did not result in a change in control of the
Company. In addition, no Director who resigned from the Board of Directors had a
disagreement with the Company relating to the Company's operations, policies or
practices.
On February 2, 1999, the Board voted to reduce the size of the Board
from seven (7) members to five (5) members. At the date of this report, there is
still one (1) vacancy on the Board of Directors. At the same meeting Mr. Walko
was elected as Chairman of the Board.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NHANCEMENT TECHNOLOGIES INC.
(Registrant)
Dated: February 11, 1999 By: /s/ Douglas S. Zorn
-------------------
Douglas S. Zorn, Chief Executive
Officer, President and CFO
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.47 Separation Agreement between the Company and
Esmond T. Goei dated January 13, 1999.
<PAGE>
Exhibit 10.47
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT (the "AGREEMENT") is made effective as of the
6th day of January, 1999 ("RESIGNATION DATE") by and between Esmond T. Goei,
a resident of the State of California ("EMPLOYEE"), and NHancement
Technologies Inc., a Delaware corporation (the "COMPANY"), with its principal
place of business located at 39420 Liberty Street, Suite 250, Fremont,
California, 94538.
RECITALS
A. The Company and Employee are parties to that certain employment
agreement dated October 30, 1996, as amended ("EMPLOYMENT AGREEMENT"), in
which the Company and Employee had agreed to an employment term starting on
February 3, 1997 and ending on February 3, 2000, and for such additional term
as may be agreed to in writing by the Company and Employee.
B. Employee is the President and Chief Executive Officer of the
Company (the "OFFICER").
C. As of January 15, 1999, Employee has accrued vacation time.
D. The Employee has executed and delivered to Company a Non-Negotiable
Unsecured Promissory Note, dated April 18, ("UNSECURED NOTE"), with a
maturity date of April 18, 1999.
E. The combined Compensation and Audit Committees of the Board of
Directors of the Company has approved a payment of Seventy Thousand Dollars
($70,000) for moving, relocation and extraordinary housing expenditures
resulting from Employees relocation from Colorado to California ("RELOCATION
EXPENSES").
F. Company and Employee AGREED (i) to terminate Employee's employment
with the Company, (ii) to effect Employee's resignation as the Officer and
(iii) to remove Employee as the responsible party on all matters related to
the Company.
NOW, THEREFORE, in reliance on the foregoing recitals and in
consideration of the mutual covenants contained herein, the parties agree as
follows:
AGREEMENT
1 RESIGNATION DATE. Effective as of the Resignation Date, (i) Employee
hereby resigns as the Officer and the Company removes Employee as the
responsible party on all matters related to the Company, (ii) Employee's
employment relationship with the Company as specified in the Employment
Agreement shall terminate and cease to exist and (iii) Employee shall cease
to receive his regular
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NHancement Technologies Inc.
Separation Agreement
Page 2
employment salary, bonus and other compensation under the Employment
Agreement, except as provided below. Employee shall remain in the status of
an employee of Company through May 15, 1999, however, Employee's status as an
employee shall not restrict Employee from conducting other business or
seeking employment, nor does Employee's status as an employee require that
Employee spend any time in Nhancement except as otherwise provided in
paragraph 6 herein.
2. SEVERANCE PAYMENT. Employee shall receive his regular rate of pay
($17,500 per month) through January 15, 1999. Employee shall receive
severance payment equal to six and one half (6 1/2) months pay at Employees
regular rate which shall be paid as follows: three and one half (3 1/2)
months payment ($61,250) shall be paid upon expiration of the seven (7) day
revocation period described in Section 15 below (the "Initial Payment") and
the remaining three (3) months payment ($52,500) shall be paid in equal
installments, or an amount greater than equal installments over a period of
no longer than four (4) months after payment of the Initial Payment.
Employee shall receive one-time payment for Employee's accrued vacation days
("VACATION PAY") with the Initial Payment. Employee hereby acknowledges that
the amount of Vacation Pay represents payment in full for all accrued
vacation time owed by the Company.
3. UNSECURED NOTE AND RELOCATION EXPENSES. The Company and Employee hereby
agree that the amounts owed by Employee under the Unsecured Note and by the
Company for Relocation Expenses shall be offset one against the other and any
amount that Relocation Expenses exceed the Unsecured Note shall be paid to
Employee with the Initial Payment.
4. WARRANTS. The Company hereby grants to Employee warrants to purchase
50,000 shares of the Common stock of the Company at the lower of $1 per share
or the closing bid price on the Resignation Date. Warrants are effective for
three (3) years from the date of this Agreement and will carry substantially
the same registration rights as warrants previously granted by the Company.
A form of the Warrant provisions shall be attached hereto as Exhibit A, and
Warrant provisions shall contain a net exercise provision that allows for
payment to Employee of net proceeds in stock at the then current fair market
value of the stock.
5. COMPANY PROPERTY. On or before Employee receives the final installment
of Severance Payment, Employee shall return to the Company all Company
property in his possession except for the Company automobile and laptop
computer (IBM ThinkPad) and accessories. Employee and Company agree that
Employee may use the Company cell phone and telephone calling card in an
amount not to exceed $250.00 per month for a period of four (4) months from
the date of this Agreement or receipt of the final installment of Severance
Payment, whichever is longer ("Employment Period"). Employee may use the
automobile until the lease on the automobile expires on July 7, 1999 and
Employee will return the automobile no later than the lease expiration date.
Employee will not be responsible for making lease payments on the automobile
however; Employee shall be responsible for all end-of-lease charges on the
automobile. Employee will have the first right to purchase the automobile
according to the terms of the lease upon lease expiration. Employee agrees
that he will deliver to the Company and not keep or deliver to anyone else,
any and all records, documents, notes, memoranda, specifications,
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NHancement Technologies Inc.
Separation Agreement
Page 3
devices, and in general any and all material relating to the Company's
business. Company shall maintain the current levels of insurance on the
leased vehicle used by Employee.
6. EMPLOYMENT STATUS. During the period Employee remains as an employee he
shall not be required to perform service for the Company, keep regular hours,
or report to any individual, except for expeditiously signing documents
requested by BDO Seidman relating to the 1998 audit in process as of the date
of this Agreement and to advise and counsel the Company's officers as
reasonably requested, if availability permits.
7. EXPENSES. All expenses proposed to be charged by Employee to the
Company from the date of this Agreement up to the end of your employment with
the Company must first be approved in writing by Mr. Douglas Zorn or Linda
Moore on the company's behalf. Reimbursement for approved expenses shall be
made within 5 business days.
8. CONFIDENTIALITY. Employee agrees to hold in strictest confidence and
not to disclose to any person, firm or corporation or to use to compete with
the Company, without the express written authorization of the Company, any
confidential or proprietary information relating to the Company's business.
Confidential or proprietary information includes, but is not limited to:
trade secrets, processes, formulas, computer programs, data, know-how,
inventions, improvements, techniques, marketing plans, forecasts, discounts,
and customer and supplier lists. Employee and the Company agree to hold in
the strictest confidence the terms and conditions of Employee's employment
with the Company, this agreement and circumstances related to the Employee's
separation from the Company except such disclosures as required by law or
regulation.
9. NON-SOLICITATION OF EMPLOYEES. Employee agrees that for a period of two
(2) years after the execution of this Agreement, he will not attempt to
recruit or hire, either directly or indirectly, employees of the Company.
10. CONTINUATION OF BENEFITS. Employee shall continue to be covered by the
Company's medical plans and group insurance in which Employee is currently
enrolled until May 15, 1999. Upon the termination of Employee's medical
coverage, Employee will be entitled to elect his COBRA right to extend
coverage at his own cost and expense and the Company will provide Employee
with the necessary forms to make his election.
11. CONTINUATION OF D&O INSURANCE. The Company will use commercially
reasonable efforts to maintain D&O insurance coverage on the Employee,
officers and directors of the Company for at least one (1) year from the date
of this agreement.
12. RELEASE. In consideration of the Company paying Vacation pay, offering
Employee use of Company property providing the other consideration hereunder,
Employee hereby releases and discharges the Company (and its directors,
officers, employees and attorneys) from any and all debts, demands, actions,
causes of action, suits, claims, or liabilities of any kind, both at law and
in equity, which Employee or his successors in interest now have, ever have
had or may have in the future, known
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NHancement Technologies Inc.
Separation Agreement
Page 4
or unknown, suspected or unsuspected, against the Company arising from or in
any manner related to Employee's employment with the Company or the
termination of such employment. This release includes any claim for wrongful
discharge, breach of the covenant of good faith and fair dealing,
defamation, interference, fraud or misrepresentation, benefits, vacation pay,
severance or other compensation of any sort, harassment or discrimination on
the basis of race, color, national origin, religion, age, sex, sexual
orientation, disability or marital status, and/or violation of any and all
statutes, rules, regulations or ordinances whether state, federal or local,
including without limitation the Fair Employment and Housing Act, as amended,
Title VII of the Civil Rights Act, as amended, the Age Discrimination in
Employment Act of 1967, as amended ("ADEA"), and the Americans with
Disabilities Act. As used in this Section, the term "employment" shall mean
employment with the Company that has occurred prior to the Resignation Date.
In consideration of Employee's resignation as President and Chief
Executive Officer of the Company and other consideration provided hereunder,
the Company hereby releases and discharges Employee, his successors and
assigns from any and all debts, demands, actions, causes of action, suits,
claims or liabilities of any kind, both at law and in equity, which Company
or its successors in interest now have, ever have had or may have in the
future, known or unknown, suspected or unsuspected, against the Employee
arising from or in any manner related to Employee's employment with the
Company or the termination of such employment.
13. ACKNOWLEDGMENTS. Employee acknowledges that he is waiving and releasing
any rights he may have against the Company and that this waiver and release
is knowing and voluntary. Employee and the Company agree that this waiver and
release does not apply to any rights or claims that may arise from events
occurring after the date Employee signs this Agreement. Employee acknowledges
that the consideration given for this waiver and release is in addition to
anything of value to which he was already entitled.
14. FREE NEGOTIATION OF AGREEMENT. Employee and the Company acknowledge that
this Agreement was freely entered into and negotiated and that both parties
had the opportunity to make proposals, counter proposals and to exchange
information and that neither party took a fixed position in regard to
reaching this Agreement.
15. LEGAL AND FINANCIAL ADVICE. Employee further acknowledges that he has
been advised to consult an attorney and a financial advisor for advice
regarding the effect of this Agreement prior to signing it. Employee
understands that he has the right to revoke this Agreement for seven (7) days
after signing ("Revocation Period") and that this Agreement shall not be
effective until the Revocation Period has expired. Employee acknowledges that
the only promises made to him about this Agreement are provided in this
Agreement.
15. WAIVER. Employee and Company acknowledges and fully understands the
statutory language of Section 1542 of the Civil Code of the State of
California and, having been so apprised, and except as provided herein, each
agrees nevertheless to waive any and all rights or benefits which they may now
<PAGE>
NHancement Technologies Inc.
Separation Agreement
Page 5
have, or in the future may have, under the terms of Section 1542 of the
California Civil Code which states:
"SECTION 1542. GENERAL RELEASE; EXTENT. A general release does
not extend to claims which the creditor does not know or suspect to
exist in his favor at the time of executing the Release, which if
known by him must have materially affected his settlement with the
debtor."
16. FULL AGREEMENT. This Agreement supersedes any prior written or verbal
adjustment of the termination of Employee's employment and constitutes a
complete resolution of all claims against the Company. There may be no
modification of this Agreement except in writing signed by the party to be
bound. If any of the above provisions are found null, void, or inoperative
for any reason, the remaining provisions will remain in full force and effect.
17. NON-ADMISSION. This Agreement constitutes the compromise and settlement
of disputed claims. Nothing contained in this Agreement shall constitute, be
construed as, or be deemed to be an admission of fault, liability or
wrongdoing on the part of any party. The Company and Employee expressly deny
any fault, liability or wrongdoing on behalf of themselves and on behalf of
each other.
18. PRESS RELEASE. The Company and Employee agree to prepare and release a
mutually acceptable press release concerning this Agreement.
19. FULL UNDERSTANDING. Employee and the Company acknowledge that each of
them have read this Agreement in its entirety with full understanding of the
terms, nature, and effect of this Agreement, which they voluntarily execute
in good faith and deem to be a fair and equitable settlement of this matter.
20. ATTORNEY'S FEES AND COSTS. In any action to enforce the terms of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorney's fees, expenses, and costs in connection with such action. In
addition, the Company agrees to pay Employee's reasonable and substantiated
legal fees related to the negotiation and preparation this Agreement in an
amount not to exceed $1000.
<PAGE>
NHancement Technologies Inc.
Separation Agreement
Page 6
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
THE COMPANY: NHANCEMENT TECHNOLOGIES INC.
BY: /s/ Douglas S. Zorn, CFO
----------------------------
ITS: Douglas S. Zorn, CFO
----------------------------
DATE: 1/6/99
----------------------------
EMPLOYEE: ESMOND T. GOEI
/s/ Esmond T. Goei
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DATE: Jan 6, 1999
----------------------------
<PAGE>
NHANCEMENT TECHNOLOGIES INC.
----------------------------
Issued as of the 6th day (1) Aggregate Price: $50,000.00
of January, 1999 (2) Initial Warrant Price: $1.00
(3) Number of Shares Initially
Subject to Warrant: 50,000
NEITHER THIS WARRANT, NOR THE COMMON STOCK TO BE ISSUED UPON EXERCISE HEREOF,
HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("1933
SECURITIES ACT"), OR QUALIFIED OR REGISTERED UNDER CALIFORNIA OR OTHER
APPLICABLE SECURITIES LAWS ("STATE SECURITIES LAWS"), AND THIS WARRANT HAS
BEEN, AND THE COMMON STOCK TO BE ISSUED UPON EXERCISE HEREOF WILL BE,
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF. NO SUCH SALE OR OTHER DISPOSITION MAY BE MADE
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 SECURITIES ACT AND
COMPLIANCE WITH THE APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE ISSUER AND ITS COUNSEL, THAT SAID
REGISTRATION IS NOT REQUIRED UNDER THE 1933 SECURITIES ACT AND THAT
APPLICABLE STATE SECURITIES LAWS HAVE BEEN SATISFIED.
COMMON STOCK WARRANT
This certifies that ESMOND T. GOEI, ("PURCHASER"), whose address for
notice is located at 2003 Tripiano Court, Mountain View, California, 94040,
or any party to whom this Warrant is assigned in compliance with the terms
hereof (Purchaser and any such assignee being hereinafter sometimes
referenced as "HOLDER"), is entitled to subscribe for and purchase, during
the period commencing at the issue date set forth above and ending at the
later of (i) 5:00 p.m., California, local time, on the third (3rd)
anniversary of such issue date, (ii) 5:00 p.m., California, local time, on
the date three (3) years after Purchaser ceases rendering services to the
Company pursuant to that certain Separation Agreement between Purchaser and
the Company dated January 6, 1999 ("SEPARATION AGREEMENT"), the number of
shares of fully paid and nonassessable Common Stock ("COMMON STOCK") of
NHANCEMENT TECHNOLOGIES INC., A DELAWARE CORPORATION (the "COMPANY"), that
have an aggregate purchase price equal to the Aggregate Price as defined
below. The purchase price of each such share shall be equal to the Warrant
Price, as defined below. The Warrant was issued to Purchaser pursuant to the
Separation Agreement.
ARTICLE 1
DEFINITIONS
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1.1 "AGGREGATE PRICE" shall be $50,000.00
1.2 "WARRANT PRICE" shall be One Dollar ($1.00), as adjusted herein.
ARTICLE 2
EXERCISE AND PAYMENT
--------------------
(i) CASH EXERCISE. The purchase rights represented by this Warrant may be
exercised by Holder, in whole or in part, by the surrender of this Warrant at
the principal office of the Company, located at the address set forth on the
signature page hereof, accompanied by the form of Notice of Cash Exercise
attached hereto as Exhibit "B-1", and by the payment to the Company, by cash
or by certified, cashier's or other check acceptable to the Company, of an
amount equal to the aggregate Warrant Price of the shares being purchased.
2.2 NET ISSUE EXERCISE. In lieu of exercising this Warrant pursuant to
Section 2.1, Holder may elect to receive shares of Common Stock equal to the
value of this Warrant determined in the manner described below (or of any
portion thereof remaining unexercised) by surrender of this Warrant at the
principal office of the Company together with the form of Notice of Cashless
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Common Stock Warrant
Page 2
Exercise attached hereto as Exhibit "B-2", in which event the Company shall
issue to Holder a number of shares of the Company's Common Stock computed
using the following formula:
Y (A-B)
X = ------------
A
Where X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock purchasable under this Warrant
(at the date of such calculation).
A = the fair market value of one share of the Company's Common Stock
(at the date of such calculation).
B = Warrant Price.
2.3 FAIR MARKET VALUE. For purposes of this Article II, fair market value of
one share of the Company's Common Stock shall mean:
(i) The average of the closing bid and asked prices of the Common Stock
quoted in the Over-The-Counter Market Summary, the last reported sale
price of the Common Stock or the closing price quoted on the Nasdaq
National Market System ("NMS") or on any exchange on which the Common
Stock is listed, whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the trading day prior to the date
of determination of fair market value; or
(ii) If the Common Stock is not traded Over-The-Counter, on the NMS or
on an exchange, the per share fair market value of the Common Stock
shall be as determined by mutual agreement of the Company and the
Holder; provided, however that if such agreement cannot be reached
within twenty (20) calendar days, such value shall be determined by an
independent appraiser appointed in good faith by the Company's Board of
Directors. The cost of such appraisal shall be borne equally by the
Company and the Holder. Such appraiser shall meet the following
criteria: (a) it shall not be associated or affiliated with the Company
in any fashion and shall not have previously provided services to the
Company; (b) the appraiser shall have reasonable qualifications to
appraise the value of the Common Stock; (c) it is not (and none of its
affiliates is) a promoter, director or officer of the Company or any of
its affiliates or an underwriter with respect to any of the securities
of the Company; and (d) it does not provide any advice or opinions of
the Company except as an appraiser under this section. In the event such
an appraisal is required it should be conducted under the following
procedures: the Company shall select the appraiser within ten (10) days
of receipt of written notice from the Holder that agreement cannot be
reached and the Company shall submit the name of such appraiser to
Holder. Twenty (20) days after selection of the appraiser, the Company
and the Holder shall each submit to the appraiser a single value
representing such party's contention as to the fair market value of one
share of the Company's Common Stock. Within fifteen (15) days after
receipt of the submission of the Company and the Holder, the appraiser
shall select one of the two values submitted by the parties, and such
value shall be the fair market value of one share of the Common Stock
for purpose of this Warrant. The appraiser shall have no discretion to
take any action other than selection of one of the two values submitted
to the appraiser. The parties may submit to the appraiser and one
another, at the time they submit their respective single values, such
supporting documentation as they deem necessary or appropriate. The
parties shall have the opportunity seven (7) business days after receipt
of the other party's proposed valuation and supporting documentation to
provide the appraiser and each other with supplemental written
information. The appraiser may, in its discretion, hold a single six (6)
hour hearing on valuation issues. If a hearing is held, each party shall
be allocated three (3) hours. The appraiser may conduct the hearing in
accordance with any rules of procedure it deems appropriate. The value
selected by the appraiser shall be final and binding upon the parties
without any further right of appeal.
<PAGE>
Common Stock Warrant
Page 3
2.4 STOCK CERTIFICATES. In the event of any exercise of the rights
represented by this Warrant, certificates for the shares of Common Stock so
purchased shall be delivered to Holder within a reasonable time and, unless
this Warrant has been fully exercised or has expired, a new Warrant
representing the remaining unexercised Aggregate Price shall also be issued
to Holder at such time.
2.5 AUTOMATIC EXERCISE. To the extent this Warrant is not previously
exercised, and if the fair market value of one share of the Company's Common
Stock is greater than the Warrant Price, as adjusted, this Warrant shall be
deemed automatically exercised in accordance with Section 2.2 hereof (even if
not surrendered) immediately before its expiration. For purposes of such
automatic exercise, the fair market value of one share of the Company's
Common Stock upon such expiration shall be the fair market value determined
pursuant to Section 2.3 above. To the extent this Warrant or any portion
thereof is deemed automatically exercised pursuant to this Section 2.5, the
Company agrees to notify Holder within a reasonable period of time of the
number of shares of the Company's Common Stock, if any, Holder is to receive
by reason of such automatic exercise.
2.6 STOCK FULLY PAID; RESERVATION OF SHARES. The Company covenants and
agrees that all Common Stock which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof (excluding taxes based on the income of Holder). The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times
have authorized and reserved for issuance a sufficient number of shares of
its Common Stock or other securities as would be required upon the full
exercise of the rights represented by this Warrant (including conversion of
all such Common Stock issuable hereunder).
2.7 FRACTIONAL SHARES. No fractional share of Common Stock will be issued
in connection with any exercise hereof; in lieu of a fractional share upon
complete exercise hereof, Holder may purchase a whole share by delivering
payment equal to the appropriate portion of the then effective Warrant Price.
ARTICLE 3
CERTAIN ADJUSTMENTS OF NUMBER OF SHARES PURCHASABLE AND WARRANT PRICE
The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to
time upon the happening of certain events, as follows:
3.1 RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of: (i) any
reclassification or change of outstanding securities issuable upon exercise
of this Warrant; (ii) any consolidation or merger of the Company with or into
another corporation (other than a merger with another corporation in which
the Company is a continuing corporation and which does not result in any
reclassification, change or exchange of outstanding securities issuable upon
exercise of this Warrant); or (iii) any sale or transfer to another
corporation of all, or substantially all, of the property of the Company,
then, and in each such event, the Company or such successor or purchasing
corporation, as the case may be, shall execute a new Warrant of like form,
tenor and effect and which will provide that Holder shall have the right to
exercise such new Warrant and purchase upon such exercise, in lieu of each
share of Common Stock theretofore issuable upon exercise of this Warrant, the
kind and amount of securities, money and property receivable upon such
reclassification, change, consolidation, merger, sale or transfer by a holder
of one share of Common Stock issuable upon exercise of this Warrant had this
Warrant been exercised immediately prior to such reclassification, change,
consolidation, merger, sale or transfer. Such new Warrant shall be as nearly
equivalent in all substantive respects as practicable to this Warrant and the
adjustments provided in this Article III and the provisions of this Section
3.1, shall similarly apply to successive reclassifications, changes,
consolidations, mergers, sales and transfers.
3.2 SUBDIVISION OR COMBINATION OF SHARES. If the Company shall at any time
while this Warrant remains outstanding and less than fully exercised: (i)
divide its Company Stock, the Warrant Price
<PAGE>
Common Stock Warrant
Page 4
shall be proportionately reduced; or (ii) shall combine shares of its Common
Stock, the Warrant Price shall be proportionately increased.
3.3 STOCK DIVIDENDS. If the Company, at any time while this Warrant is
outstanding and unexpired, shall pay a dividend payable in, or make any other
distribution to holders of, Common Stock (except any distribution described
in Sections 3.1 and 3.2 hereof) then the Warrant Price shall be adjusted to
that price determined by multiplying the Warrant Price then in effect by a
fraction, the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution,
and the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution.
3.4 OTHER ACTION AFFECTING COMMON STOCK. If the Company takes any action
affecting its Common Stock after the date hereof (including dividends and
distributions), other than an action described in any of Sections 3.1 and 3.2
hereof, which would have an adverse effect upon Holder's rights hereunder,
the Warrant Price shall be adjusted downward in such manner and at such time
as the Board of Directors of the Company shall in good faith determine to be
equitable under the circumstances.
3.5 TIME OF ADJUSTMENTS TO THE WARRANT PRICE. All adjustments to the Warrant
Price and the number of shares purchasable hereunder, unless otherwise
specified herein, shall be effective as of the earlier of:
(i) the date of issue of the security causing the adjustment;
(ii) the date of sale of the security causing the adjustment;
(iii) the effective date of a division or combination of shares;
(iv) the record date of any action of holders of any class of the
Company's capital stock taken for the purpose of entitling shareholders
to receive a distribution or dividend payable in equity securities,
provided that such division, combination, distribution or dividend
actually occurs.
3.6 NOTICE OF ADJUSTMENTS. In each case of an adjustment in the Warrant
Price and the number of shares purchasable hereunder, the Company, at its
expense, shall cause the Chief Financial Officer of the Company to compute
such adjustment and prepare a certificate setting forth such adjustment and
showing in detail the facts upon which such adjustment is based. The Company
shall promptly mail a copy of each such certificate to Holder pursuant to
Section 6.8 hereof.
3.7 DURATION OF ADJUSTED WARRANT PRICE. Following each adjustment of the
Warrant Price, such adjusted Warrant Price shall remain in effect until a
further adjustment of the Warrant Price.
3.8 ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price pursuant to this Article III, the number of shares of Common Stock
purchasable hereunder shall be adjusted to the nearest whole share, to the
number obtained by dividing the Aggregate Price by the Warrant Price as
adjusted.
ARTICLE 4
TRANSFER, EXCHANGE AND LOSS
4.1 TRANSFER. This Warrant is transferable on the books of the Company at
its principal office by the registered Holder hereof upon surrender of this
Warrant properly endorsed, subject to compliance with federal and state
securities laws. The Company shall issue and deliver to the transferee a new
Warrant or Warrants representing the Warrants so transferred. Upon any
partial transfer, the Company will issue and deliver to Holder a new Warrant
or Warrants with respect to the Warrants not so transferred. Notwithstanding
the foregoing, Holder shall not be entitled to transfer a number of shares or
an interest in this Warrant representing less than five percent (5%) of the
aggregate shares initially covered by this Warrant (as presently constituted,
with appropriate
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Common Stock Warrant
Page 5
adjustment being made in the event of stock splits, combinations,
reorganizations and the like occurring after the issue date hereof). Any
transferee shall be subject to the same restrictions on transfer with respect
to this Warrant as the Purchaser.
4.2 SECURITIES LAWS. Upon any issuance of shares of Common Stock upon
exercise of this Warrant, it shall be the Company's responsibility to comply
with the requirements of: (1) the Securities Act of 1933, as amended; (2)
the Securities Exchange Act of 1934, as amended; (3) any applicable listing
requirements of any national securities exchange; (4) any state securities
regulation or "Blue Sky" laws; and (5) requirements under any other law or
regulation applicable to the issuance or transfer of such shares. If required
by the Company, in connection with each issuance of shares of Common Stock
upon exercise of this Warrant, the Holder will give: (i) assurances in
writing, satisfactory to the Company, that such shares are not being
purchased with a view to the distribution thereof in violation of applicable
laws, (ii) sufficient information, in writing, to enable the Company to rely
on exemptions from the registration or qualification requirements of
applicable laws, if available, with respect to such exercise, and (iii) its
cooperation to the Company in connection with such compliance.
4.3 EXCHANGE. This Warrant is exchangeable at the principle office of
the Company for Warrants which represent, in the aggregate, the Aggregate
Price hereof; each new Warrant to represent the right to purchase such
portion of the Aggregate Price as Holder shall designate at the time of such
exchange. Each new Warrant shall be identical in form and content to this
Warrant, except for appropriate changes in the number of shares of Common
Stock covered thereby, the percentage stated in Section 4.1 above, and any
other changes which are necessary in order to prevent the Warrant exchange
from changing the respective rights and obligations of the Company and the
Holder as they existed immediately prior to such exchange.
4.4 LOSS OR MUTILATION. Upon receipt by the Company of evidence
satisfactory to it of the ownership of, and the loss, theft, destruction or
mutilation of, this Warrant and (in the case of loss, theft, or destruction)
of indemnity satisfactory to it, and (in the case of mutilation) upon
surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant.
ARTICLE 5
HOLDER RIGHTS
5.1 NO SHAREHOLDER RIGHTS UNTIL EXERCISE. No Holder hereof, solely by
virtue hereof, shall be entitled to any rights as a shareholder of the
Company. Holder shall have all rights of a shareholder with respect to
securities purchased upon exercise hereof at the time: (i) the cash exercise
price for such securities is delivered pursuant to Section 2.1 hereof and
this Warrant is surrendered, (ii) of delivery of notice of cashless exercise
pursuant to Section 2.2 hereof and this Warrant is surrendered, or (iii) of
automatic exercise hereof (even if not surrendered) pursuant to Section 2.5
hereof.
ARTICLE 6
MISCELLANEOUS
6.1 GOVERNMENTAL APPROVALS. The Company will from time to time take all
action which may be necessary to obtain and keep effective any and all
permits, consents and approvals of governmental agencies and authorities and
securities acts filings under federal and state laws, which may be or become
requisite in connection with the issuance, sale, and delivery of this
Warrant, and the issuance, sale and delivery of the Common Stock or other
securities or property issuable or deliverable upon exercise of this Warrant.
6.2 GOVERNING LAWS. IT IS THE INTENTION OF THE PARTIES HERETO THAT
EXCEPT AS SET FORTH BELOW, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
U.S.A. (IRRESPECTIVE OF ITS CHOICE OF LAW PRINCIPLES) SHALL GOVERN THE
VALIDITY OF THIS
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Common Stock Warrant
Page 6
WARRANT, THE CONSTRUCTION OF ITS TERMS, AND THE INTERPRETATION AND
ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO.
6.3 BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and unless otherwise
provided in, this Warrant, each and all of the covenants, terms, provisions,
and agreements contained herein shall be binding upon, and inure to the
benefit of the permitted successors, executors, heirs, representatives,
administrators and assigns of the parties hereto.
6.4 SEVERABILITY. If any one or more provisions of this Warrant, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Warrant and the application of such
provisions to other persons or circumstances shall be interpreted so as best
to reasonably effect the intent of the parties hereto. The parties further
agree to replace any such void or unenforceable provisions of this Warrant
with valid and enforceable provisions which will achieve, to the extent
possible, the economic, business and other purposes of the void or
unenforceable provisions.
6.5 DEFAULT, AMENDMENT AND WAIVERS. This Warrant may be amended upon the
written consent of the Company and the holders in the aggregate of the right
to purchase a majority of the number of unexercised shares covered by the
Warrant initially issued by the Company pursuant to the Consulting Agreement.
The waiver by a party of any breach hereof for default in payment of any
amount due hereunder or default in the performance hereof shall not be deemed
to constitute a waiver of any other default or any succeeding breach or
default. The failure to cure any breach of any term of this Warrant within
ten (10) days of written notice thereof shall constitute an event of default
under this Warrant.
6.6 NO WAIVER. The failure of any party to enforce any of the provisions
hereof shall not be construed to be a waiver of the right of such party
thereafter to enforce such provisions.
6.7 ATTORNEYS' FEES. Should suit be brought to enforce or interpret any
part of this Warrant, the prevailing party shall be entitled to recover, as
an element of the costs of suit and not as damages, reasonable attorneys'
fees to be fixed by the court (including without limitation, costs, expenses
and fees on any appeal). The prevailing party shall be the party entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment. A party not entitled to recover its costs shall not be entitled to
recover attorneys' fees. No sum for attorneys' fees shall be counted in
calculating the amount of a judgment for purposes of determining if a party
is entitled to recover costs or attorneys' fees.
6.8 NOTICES. Whenever any party hereto desires or is required to give any
notice, demand, or request with respect to this Warrant, each such
communication shall be in writing and shall be effective only if it is
delivered by personal service or mailed, United States certified mail, postage
prepaid, return receipt requested, addressed as follows:
Company: NHancement Technologies Inc.
39420 Liberty Street
Suite 250
Fremont, California 94538
Attn: Douglas S. Zorn
Holder: Esmond T. Goei
2003 Tripiano Court
Mountain View, California 94040
Such communications shall be effective when they are received by the
addressee thereof; but if sent by certified mail in the manner set forth
above, they shall be effective three (3) business days after being deposited
in the United States mail. Any party may change its address for such
communications by giving notice thereof to the other party in conformity with
this Section.
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Common Stock Warrant
Page 7
6.9 TIME. Time is of the essence of this Warrant.
6.10 CONSTRUCTION OF AGREEMENT. A reference in this Warrant to any Section
shall include a reference to every Section the number of which begins with
the number of the Section to which reference is specifically made (E.G., a
reference to Section 3 shall include a reference to Sections 3.5 and 3.7).
The titles and headings herein are for reference purposes only and shall not
in any manner affect the interpretation of this Warrant.
6.11 NO ENDORSEMENT. Holder understands that no federal or state securities
administrator has made any finding or determination relating to the fairness
of investment in the Company or purchase of the Common Stock hereunder and
that no federal or state securities administrator has recommended or endorsed
the offering of securities by the Company hereunder.
6.12 PRONOUNS. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
6.13 FURTHER ASSURANCES. Each party agrees to cooperate fully with the other
parties and to execute such further instruments, documents and agreements and
to give such further written assurances, as may be reasonably requested by
any other party to better evidence and reflect the transactions described
herein and contemplated hereby, and to carry into effect the intents and
purposes of this Warrant.
NHancement Technologies Inc., a California corporation
By: /s/ Douglas S. Zorn
-------------------------------------------------
Douglas S. Zorn, Chief Financial Officer
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Common Stock Warrant
Page 8
EXHIBIT B-1
NOTICE OF EXERCISE OF COMMON STOCK WARRANT
BY CASH PAYMENT OF WARRANT PRICE
DATE:__________________________
____________________________ Aggregate Price of Warrant
____________________________ Before Exercise: $__________________
____________________________ Aggregate Price
Attention: Chief Financial Officer Being Exercised: $__________________
Warrant Price: $___________ per share
Number of Shares of Common Stock to be
Issued Under this Notice: _____________
Remainder Aggregate Price
(if any) After Issuance: $_____________
CASH EXERCISE
-------------
Gentlemen:
The undersigned registered Holder of the Common Stock Warrant delivered
herewith ("WARRANT"), hereby irrevocably exercises such Warrant for, and
purchases thereunder, shares of the Common Stock of NHancement Technologies,
Inc., a Delaware corporation, as provided below. Capitalized terms used
herein, unless otherwise defined herein, shall have the meanings given in the
Warrant. The portion of the Aggregate Price (as defined in the Warrant) to be
applied toward the purchase of Common Stock pursuant to this Notice of
Exercise is $______________, thereby leaving a remainder Aggregate Price (if
any) equal to $__________. Such exercise shall be pursuant to the cash
exercise provisions of Section 2.1 of the Warrant. Therefore, Holder makes
payment with this Notice of Exercise by way of check payable to the Company
in the amount of $_________. Such check is payment in full under the Warrant
for __________ shares of Common Stock based upon the Warrant Price of
$________ per share, as currently in effect under the Warrant. Holder
requests that the certificates for the purchased shares of Common Stock be
issued in the name of and delivered to "______________________",
_________________________________. To the extent the foregoing exercise is
for less than the full Aggregate Price, a Replacement Warrant representing
the remainder of the Aggregate Price and otherwise of like form, tenor and
effect should be delivered to Holder along with the share certificates
evidencing the Common Stock issued in response to this Notice of Exercise.
By:_______________________________
[NAME]
NOTE
The execution to the foregoing Notice of Exercise must exactly
correspond to the name of the Holder on the Warrant.
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Common Stock Warrant
Page 9
EXHIBIT B-2
NOTICE OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT TO NET ISSUE ("CASHLESS") EXERCISE PROVISIONS
[DATE]
__________________________ Aggregate Price of Warrant
__________________________ Before Exercise: $____________________
__________________________ Aggregate Price
Attention: Chief Financial Officer Being Exercised: $____________________
Warrant Price: $________________ per share
Number of Shares of Common Stock to be
Issued Under this Notice: ________________
Remainder Aggregate Price
(if any) After Issuance: $________________
CASHLESS EXERCISE
Gentlemen:
The undersigned, registered Holder of the Common Stock Warrant delivered
herewith ("WARRANT", hereby irrevocably exercises such Warrant for, and
purchases thereunder, shares of the Common Stock of NHancement Technologies
Inc., a Delaware corporation, as provided below. Capitalized terms used
herein, unless otherwise defined herein, shall have the meanings given in the
Warrant. The portion of the Aggregate Price (as defined in the Warrant) to
be applied toward the purchase of Common Stock pursuant to this Notice of
Exercise is $__________, thereby leaving a remainder Aggregate Price (if any)
equal to $__________. Such exercise shall be pursuant to the net issue
exercise provisions of Section 2.2 of the Warrant; therefore, Holder makes no
payment with this Notice of Exercise. The number of shares to be issued
pursuant to this exercise shall be determined by reference to the formula in
Section 2.2 of the Warrant which, by reference to Section 2.3, requires the
use of the current per share fair market value of the Company's Common Stock.
The current fair market value of one share of the Company's Common Stock
shall be determined in the manner provided in Section 2.3, which amount has
been determined or agreed to by Holder and the Company to be $__________,
which figure is acceptable to Holder for calculations of the number of shares
of Common Stock issuable pursuant to this Notice of Exercise
[SPECIFY ANY ALTERNATIVE ARRANGEMENTS TO THE FOREGOING, IF NECESSARY OR
APPLICABLE]. Holder requests that the certificates for the purchased shares
of Common Stock be issued in the name of and delivered to
"___________________", __________________. To the extent the foregoing
exercise is for less than the full Aggregate Price of the Warrant, a
replacement Warrant representing the remainder of the Aggregate Price (and
otherwise of like form, tenor and effect) shall be delivered to Holder along
with the share certificate evidencing the Common Stock issued in response to
this Notice of Exercise.
By:______________________________
[NAME]
NOTE
The execution to the foregoing Notice of Exercise must exactly
correspond to the name of the Holder on the Warrant.
