SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. 3 )(1)
Nhancement Technologies, Inc.
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(Name of Issuer)
Common Stock, $.01 par value
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(Title of Class of Securities)
65334P104
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(CUSIP Number)
Gerald L. Fishman
Wolin & Rosen, Ltd.
55 West Monroe Street, Suite 3600
Chicago, IL 60603
312.424.0600
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 31, 2000
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(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [_].
Note: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7(b)
for other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 8 Pages)
- ----------
(1) The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(SC13D-07/99)
<PAGE>
CUSIP No. 65334P104 13D Page 2 of 8 Pages
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1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
L. Thomas Baldwin III SS No.
L. Thomas Baldwin III Living Trust u/t/a dated 11/9/95 FEIN No.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [X]
(b) [_]
See Note A
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
PF -- See Note A
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
Item 2(d) [_]
Item 2(e) [_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Illinois
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7 SOLE VOTING POWER
NUMBER OF 224,515 See Note A
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
2,014,762 See Note A
OWNED BY
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EACH 9 SOLE DISPOSITIVE POWER
REPORTING 224,515 See Note A
PERSON _________________________________________________________________
10 SHARED DISPOSITIVE POWER
WITH
2,014,762 See Note A
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
73,085 -- L. Thomas Baldwin III (See Note A)
151,430 -- L. Thomas Baldwin III Living Trust (See Note A)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[X]
See Note A
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.03%
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14 TYPE OF REPORTING PERSON*
IN -- L. Thomas Baldwin III
OO -- L. Thomas Baldwin III Living Trust
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
CUSIP No. 65334P104 13D Page 3 of 8 Pages
ITEM 1. SECURITY AND ISSUER
a. Nhancement Technologies, Inc.
6663 Owens Drive
Pleasanton, CA 94588
b. Common Stock, $.01 par value
ITEM 2. IDENTITY AND BACKGROUND
a. L. Thomas Baldwin III a. L. Thomas Baldwin III Living
Trust, L. Thomas Baldwin III, Trustee
b. 141 West Jackson Boulevard b. 141 West Jackson Boulevard
Suite 2850 Suite 2850
Chicago, IL 60604 Chicago, IL 60604
c. Investor, Trader c. Trust, Trustee
d. N/A d. N/A
e. N/A e. N/A
f. USA f. Illinois, USA
ITEM 3. SOURCE AND AMOUNT OF FUNDS FOR OTHER CONSIDERATION
The source of the funds are the personal funds of L. Thomas Baldwin III
and the L. Thomas Baldwin III Living Trust. The aggregate amount of funds used
in making purchases through and including 15 August 2000 for these Reporting
Persons (see Note A) were $650,400 for Mr. Baldwin and $1,684,659 for the L.
Thomas Baldwin III Living Trust.
ITEM 4. PURPOSE OF TRANSACTION
The purpose of the acquisition of securities of the Issuer is as an
investment by L. Thomas Baldwin III.
<PAGE>
CUSIP No. 65334P104 13D Page 4 of 8 Pages
a. Mr. Baldwin has plans to purchase additional shares of
the Issuer up to as much as 25% of the total issued and
outstanding.
b-j. Mr. Baldwin has no present intentions to engage in or
cause any of the matters listed in these subsections of
this Item 4. His present intention is to be and remain
an investor in the Issuer. The timing and amount of
additional purchases, if any, are currently unknown.
ITEM 5. INTEREST AND SECURITIES OF THE ISSUER
a. Shares owned:
a. Shares owned:
(1) L. Thomas Baldwin III -- 73,085 shares (.66%)
(See Note A)
(2) Rosenthal Collins Group, L.L.C. (See Note A)
(i) L. Thomas Baldwin III -- 1,260,132 shares (11.3%)
(ii) L. Thomas Baldwin III Living Trust -- 151,430
shares(1.4%)
Total Rosenthal Collins Group, L.L.C. -- 1,411,562
shares (12.7%)
(3) Rosenthal Collins Equities, L.L.C. Proprietary Trading
Account 530,145 shares (4.8%) (See Note A)
Total Group (See Note A) -- 2,014,792 shares (18.2%)
b. Voting power:
(1) L. Thomas Baldwin III, individually (See Note A)
Sole voting power -- 224,515
Shared voting power --- 1,790,277
Sole dispositive power -- 224,575
Shared dispositive power -- 1,790,277
(2) Rosenthal Collins Group, L.L.C. (See Note A)
Sole voting power -- 1,411,562
Shared voting power --- 1,411,562
Sole dispositive power -- 1,411,562
Shared dispositive power -- 1,411,562
<PAGE>
CUSIP No. 65334P104 13D Page 5 of 8 Pages
(3) Rosenthal Collins Equities, L.L.C. (See Note A)
Sole voting power -- 530,145
Shared voting power --- 530,145
Sole dispositive power -- 530,145
Shared dispositive power -- 530,145
c. L. Thomas Baldwin III, individually, purchased 9,400 shares
more than 60 days prior to the date of the event which
requires filing of this statement at an average price of
approximately $16 per share on Nasdaq. On or about May 19,
2000, Mr. Baldwin purchased $500,000 principal amount of the
Issuer's 8% Convertible Debentures due May 30, 2000
("Debenture"). The Debenture is convertible at any time at the
option of the holder at a sliding scale conversion price. On
August 8, 2000, Mr. Baldwin sent notice to the Issuer of his
election to convert the Debenture into 63,685 shares, at a
conversion price of $7.85 per share. On September 8, 2000, Mr.
Baldwin received warrants to purchase 300,000 shares at an
exercise price of $6.00 per share. The warrants expire on July
31, 2001 and were dated as of July 31, 2000. (See Note A)
Rosenthal Collins Group, L.L.C. received 323,267 shares,
171,837 shares from L. Thomas Baldwin III and 151,430 shares
from the L. Thomas Baldwin III Living Trust as deposits to Mr.
Baldwin's Class C capital account at Rosenthal Collins Group,
L.L.C., a Commodity Futures Trading Commission registered
futures commission merchant. The shares of the Issuer are
traded on Nasdaq and were taken into such capital accounts at
$ 11.125 per share (before capital haircuts under CFTC
Regulation 1.17). Rosenthal Collins Equities, L.L.C., an
affiliate of Rosenthal Collins Group, L.L.C., transferred to
the latter 788,295 shares on August 24, 2000. These shares
were taken into Mr. Baldwin's Class C capital account at
$14.69 per share and 300,000 shares on August 29, 1000,
respectively (before haircuts). (See Note A)
Commencing on August 16, 2000, Rosenthal Collins Equities,
L.L.C., a registered broker/dealer member firm of the Chicago
Board Options Exchange, in its proprietary trading account
purchased additional shares on Nasdaq as follows: 127,000
shares on 16 August 2000 at an average price of $9.05 per
share; 63,060 shares on 17 August 2000 at an average price of
$10.57 per share; 137,900 shares on 18 August 2000 at an
average price of $11.88 per share; 65,800 shares on 21 August
2000 at an average price of $12.94 per share; 123,755 shares
on 22 August 2000 at an average price of $13.82 per share;
199,900 shares on 23 August 2000 at an average price of $15.02
per share; 74,090 shares on 24 August 2000 at an average price
of $14.53 per share; 3,700 shares on 25 August 2000 at an
average price of $14.39 per share; 12,900 shares on 28 August
2000 at an average price of $14.27 per share; 34,400 shares on
29 August 2000 August 2000 at an average price of $14.84 per
share; 10,000 shares on 31 August 2000 at an average price of
$14.19 per share; 49,500 shares on 1 September 2000 at an
average price of $14.21 per share; 11,900 shares on 5
September 2000 at an average price of $15.29 per share; 16,000
shares on 6 September 2000 at an average price of $15.81 per
share; 11,700 shares on 7 September 2000 at an average price
of $15.23 per share; 10,000 shares on 8 September 2000 at an
average price of $15.06 per share; 10,500 shares on 11
September 2000 at an average price of $14.60 per share; 39,600
shares on 12 September 2000 at an average price of $13.81 per
share; 24,100 shares on 13 September 2000 at an average price
of $13.60 per share; 48,900 shares on 14 September 2000 at an
average price of $15.17 per share; 15,200 shares on 15
September 2000 at an average price of $15,70 per share; and
68,200 shares on 18 September 2000 at an average price of
$15.74 per share. (See Note A)
d. N/A
e. N/A
<PAGE>
CUSIP No. 65334P104 13D Page 6 of 8 Pages
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
See Note A with respect to the relationships among the persons named in
Item 2 and with respect to the securities of the Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
1. There are no materials relating to the borrowing of funds to
finance the acquisition, as disclosed in Item 3.
2. There are no written agreements relating to the acquisition of
Issuer control, liquidation, sale of assets, merger or change
in business or corporate structure or any other matter, as
disclosed in Item 4.
3. There are no written agreements relating to the transfer of
voting of the securities, finders' fees, joint ventures,
options, puts, calls, guarantees of loans, guarantees against
loss of profit, or the giving or withholding of any proxy, as
disclosed in Item 6, except the Common Stock Warrant attached
as an Exhibit hereto.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: September 27, 2000.
/s/ L. Thomas Baldwin III
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L. THOMAS BALDWIN III,
Individually and as Trustee of
the L. Thomas Baldwin III Living
Trust u/t/a dated 11/9/95
Attention. Intentional misstatements or omissions of fact constitute federal
criminal violations (see 18 U.S.C. 1001).
<PAGE>
CUSIP No. 65334P104 13D Page 7 of 8 Pages
NOTE A
This Schedule 13D represents ownership by the Reporting Person and other members
of the "group" as described below of an aggregate of 2,014,792 shares of common
stock of the Issuer (18.2%). By including Mr. Baldwin's immediately exercisable
warrants to purchase 300,000 shares at $6.00 per share, ownership of the "group"
aggregates 2,314,792 shares (20.91%). L. Thomas Baldwin III is a non-voting,
non-managing member of Rosenthal Collins Group, L.L.C., an Illinois limited
liability company ("RCG"). RCG is registered with the Commodity Futures Trading
Commission as a futures commission merchant and is a clearing member of all
major principal futures exchanges in the United States and elsewhere. As such,
RCG is required to meet and maintain significant levels of adjusted net capital
to comply with CFTC and exchange clearing requirements. As of June 30, 2000,
RCG's adjusted net capital (unaudited) was $34,382,657. Reference is hereby made
to the public portions of RCG's Forms 1-FR as filed with the Commodity Futures
Trading Commission, which forms are publicly available under FOIA for a complete
statement of the financial condition of RCG.
On June 21, 2000, L. Thomas Baldwin III and the L. Thomas Baldwin III Living
Trust (Mr. Baldwin is a Class C non-voting and non-managing Member of RCG),
deposited shares of the Issuer with RCG as part of his capital account at RCG.
RCE (defined below) transferred 788,295 shares on August 24, 2000 and 300,000
shares on August 29, 2000 to RCG for deposit to Mr. Baldwin's capital account at
RCG. Such shares, after appropriate haircuts, are held and maintained by RCG (in
a custody account for its benefit at the Harris Trust & Savings Bank, N.A.,
Chicago, Illinois) and is deemed capital of RCG for regulatory purposes.
Accordingly, RCG has full legal control over such shares. Mr. Baldwin could
always direct RCG to sell the shares, which accommodation RCG would be willing
to accommodate subject, of course, to all the various capital requirements with
which RCG must comply. Moreover, as an accommodation, RCG would be willing to
defer to Mr. Baldwin with respect to the voting of such shares. Hence, RCG in
Item 5.b has listed the shares deposited with it as owned by it, and it has
listed voting and dispositive power as shared with Mr. Baldwin.
Rosenthal Collins Equities, L.L.C. ("RCE") is an Illinois limited liability
company registered as a broker/dealer which is a member firm of the Chicago
Board Options Exchange, its designated examining authority. RCE has no customers
and trades on a proprietary basis only. RCE is wholly-owned by Rosenthal Collins
Group, L.L.C. The shares of the Issuer purchased by RCE, as disclosed in Item
6.c above, were purchased by RCE at the request and as an accommodation to L.
Thomas Baldwin III. As a result, RCE is the record and beneficial owner of such
shares. Mr. Baldwin could always direct RCE to sell the shares, which
accommodation RCE would be willing to accommodate, subject, of course, to the
capital requirements with which RCE must comply. Moreover, as an accommodation,
RCE would be willing to defer to Mr. Baldwin with respect to the voting of such
shares. Hence, Item 5.b lists shared voting and dispositive power for all shares
of the Issuer owned by RCE as shared with Mr. Baldwin. Solely for internal net
capital accounting, RCE transferred 1,088,295 shares of the Issuer to RCG, its
parent, for deposit to Mr. Baldwin's capital account at RCG.
<PAGE>
CUSIP No. 65334P104 13D Page 8 of 8 Pages
In addition, Mr. L. Thomas Baldwin III, individually, purchased 9,400 shares of
the Issuer more than 60 days prior to the event which requires filing of this
statement on Nasdaq, at an average of $16 per share. Moreover, on or about May
19, 2000, Mr. Baldwin purchased $500,000 principal amount of the Issuer's 8%
Convertible Debentures due May 30, 2000 ("Debenture"). The Debenture is
convertible at any time at the option of the holder at a sliding scale
conversion price. On August 8, 2000, Mr. Baldwin sent notice to the Issuer of
his election to convert the Debenture into 63,685 shares, at a conversion price
of $7.85 per share. Mr. Baldwin, of course, has and will have sole dispositive
and voting power over such shares. On September 8, 2000, Mr. Baldwin received
warrants to purchase 300,000 shares of common stock of the Issuer. The warrants
are immediately exercisable at $6.00 per share and expire on July 31, 2001. The
warrants, while received by Mr. Baldwin on September 8, 2000, are dated as of
July 31, 2000.
While the shares of the Issuer held by RCG and RCE are owned of record and are
under the total legal control of those entities, RCG and RCE, solely for
purposes of the shares of the Issuer and not otherwise, should be deemed
affiliates of L. Thomas Baldwin III and Mr. Baldwin should be deemed de facto
beneficial owner of all such shares, notwithstanding that all such shares are
subject to the risks and requirements, regulatory and market, of RCG and RCE,
respectively.
<PAGE>
EXHIBIT TO AMENDMENT NO. 3
Nhancement Technologies, Inc.
Issued as of the 31st day of July, 2000 (1) Aggregate Price: $1,800,000.00
(2) Initial Warrant Price: $6.00
(3) Number of Shares Initially Subject
to Warrant: 300,000
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 Lucian Thomas Baldwin III ("Purchaser"), whose
address for notice is located at Suite 2850, 141 West Jackson, Chicago, Illinois
60604 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, in whole or in part,
during the period commencing at the issue date set forth above and ending at
5:00 p.m., California, local time, on the first (1st) anniversary of such issue
date, the number of shares of fully paid and non-assessable 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; provided that the Purchaser remains as a Director of the
Company at the time of exercise of this warrant. The purchase price of each such
share shall be equal to the Warrant Price, as defined below.
ARTICLE 1
DEFINITIONS
1.1 "Aggregate Price" shall be $1,800,000.00.
1.2 "Warrant Price" shall be at $6.00 as adjusted herein.
ARTICLE 2
EXERCISE AND PAYMENT
<PAGE>
2.1 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 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:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to Holder.
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 2, 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
<PAGE>
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 singe 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.
2.4 Stock Certificates. In the event of any exercise of the rights represented
by this Warrant, certificates of the shares of Common Stock so purchased shall
be delivered by 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 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
non-assessable 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).
2.6 Fractional Shares. No fractional shares 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
<PAGE>
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 3 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 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 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 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.
3.5 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.
3.6 Duration of Adjustment 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.
<PAGE>
3.7 Adjustment of Number of Shares. Upon each adjustment of the Warrant Price
pursuant to this Article 3, 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 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 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
insurance 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 principal 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 of the 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.
<PAGE>
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 Authority. 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
act 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 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 hereto 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 the 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.
<PAGE>
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.
6663 Owens Drive
Pleasanton, California 94588
Attn: Douglas S. Zorn
Holder: Lucian Thomas Baldwin III
Suite 2850, 141 West Jackson
Chicago, Illinois 60604
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.
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 Delaware corporation
By: /s/ Douglas S. Zorn
-------------------------------------------------
Douglas S. Zorn, Chief Executive Officer
<PAGE>
EXHIBIT B-1
NOTICE OF EXERCISE OF COMMON STOCK WARRANT
BY CASH PAYMENT OF WARRANT PRICE
Date:
- ------------------------------------- Aggregate Price of Warrant Before
- ------------------------------------- Exercise: $
Attention: Chief Executive Officer Aggregate Price 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 for $___________ per share, as currently in
effect under the Warrant. 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 of the foregoing Notice of Exercise must exactly
correspond to the name of the Holder on the Warrant.
<PAGE>
EXHIBIT B-2
NOTICE OF EXERCISE OF COMMON STOCK WARRANT
PURSUANT TO NET ISSUE ("CASHLESS") EXERCISE PROVISIONS
Date:
- ------------------------------------- Aggregate Price of Warrant Before
- ------------------------------------- Exercise: $
Attention: Chief Executive Officer Aggregate Price 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, 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 certificates
evidencing the Common Stock issued in response to this Notice of Exercise.
By:_________________________________
[Name]
NOTE
The execution of the foregoing Notice of Exercise must exactly
correspond to the name of the Holder on the Warrant.
