<PAGE>
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
NHANCEMENT TECHNOLOGIES INC.
DATE OF INITIAL ISSUANCE: MAY 1, 2000
NUMBER OF SHARES: 45,613
INITIAL WARRANT PRICE: 15.50
EXPIRATION DATE: MAY 1, 2005
THIS CERTIFIES THAT for value received, CISCO SYSTEMS CAPITAL
CORPORATION, a Nevada corporation, or its registered assigns (hereinafter
called "Holder"), is entitled to purchase from Nhancement Technologies Inc.,
a Delaware corporation ("Company"), at any time during the Term of this
Warrant, up to Forty Five Thousand Six Hundred Thirteen (45,613) shares of
common stock of Company (the "Common Stock"), at the Warrant Price, payable
as provided herein. The exercise of this Warrant shall be subject to the
provisions, limitations and restrictions herein contained. This Warrant may
be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated (any capitalized terms used herein and not otherwise defined
herein to have the meanings ascribed to them in the Agreement):
"AGREEMENT" shall mean the Master Agreement to Lease Equipment, dated
as of April 21, 2000, between the Company, as lessee, and Holder, as lessor.
"COMMON STOCK" shall mean and include Company's authorized common
stock, as constituted at the date hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.
"TERM OF THIS WARRANT" shall mean the period beginning on the date of
initial issuance hereof and ending on the fifth anniversary of such date of
initial issuance.
<PAGE>
"WARRANT PRICE" shall mean $15.50 per share, subject to adjustment in
accordance with Section 5 hereof.
"WARRANTS" shall mean this Warrant and any other Warrant or Warrants
issued in connection with the Agreement to the original holder of this Warrant
or issued to any transferees of such original holder or subsequent holder.
"WARRANT SHARES" shall mean shares of Common Stock, subject to
adjustment or change as herein provided, purchased or purchasable by Holder upon
the exercise hereof.
SECTION 2. EXERCISE OF WARRANT EXERCISE OF WARRANT.
2.1 PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), Holder
shall deliver to Company at its office referred to in Section 14 hereof at any
time and from time to time during the Term of this Warrant: (i) the Notice of
Exercise in the form of EXHIBIT A attached hereto, (ii) cash, certified or
official bank check payable to the order of Company, wire transfer of funds to
Company's account, or cancellation of any indebtedness of Company to Holder (or
any combination of any of the foregoing) in the amount of the Warrant Price for
each share being purchased, and (iii) this Warrant. Notwithstanding any
provisions herein to the contrary, if the Current Market Price (as defined in
Section 5) is greater than the Warrant Price (at the date of calculation, as set
forth below), in lieu of exercising this Warrant as hereinabove permitted,
Holder may elect to receive shares of Common Stock equal to the value (as
determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the office of Company referred to in Section 14
hereof, together with the Notice of Exercise, in which event Company shall issue
to Holder that number of whole shares of Common Stock computed using the
following formula:
CS = WCS x (CMP-WP)
-------------------
CMP
Where
CS equals the number of shares of Common Stock to be issued to
Holder
WCS equals the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
CMP equals the Current Market Price (at the date of such
calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of Holder or such other name or names as may be
designated by Holder, shall be delivered to Holder hereof within a reasonable
time, not exceeding fifteen (15) days, after the rights represented by this
Warrant shall have been so exercised; and, unless this Warrant has expired, a
new Warrant representing the number of shares (except a
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<PAGE>
remaining fractional share), if any, with respect to which this Warrant shall
not then have been exercised shall also be issued to Holder hereof within such
time. The person in whose name any certificate for shares of Common Stock is
issued upon exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such shares on the date on which Holder shall
have complied with the conditions for exercise of this Warrant set forth above,
irrespective of the date of delivery of such certificate, except that, if the
date of such compliance is a date when the stock transfer books of Company are
closed, such person shall be deemed to have become the holder of such shares at
the close of business on the next succeeding date on which the stock transfer
books are open.
2.2 TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the
securities represented thereby) shall also bear such legend unless, in the
opinion of counsel for Holder thereof (which counsel shall be reasonably
satisfactory to Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
2.3 VESTING. Holder's right to exercise this Warrant will vest on a
proportionate basis equal to the ratio between (i) the aggregate equipment
cost under the lease schedules executed on the date of exercise in connection
with the Agreement, and (ii) the maximum equipment cost under the Agreement
(i.e., $10,100,000). For example, if the Company has executed lease schedules
for an aggregate equipment cost of $5,050,000 on the date of exercise, then
Holder shall have the right to exercise the Warrant with respect to 50% of
the Warrant Shares (i.e. 22,806 shares).
SECTION 3. COVENANTS AS TO COMMON STOCK. Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant shall, upon issuance, be validly issued, fully
paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. Company further covenants and agrees that it
shall pay when due and payable any and all federal and state taxes which may
be payable in respect of the issue of this Warrant or any Common Stock or
certificates therefor issuable upon the exercise of this Warrant. Company
further covenants and agrees that Company shall at all times have authorized
and reserved, free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant. Company further covenants and agrees that if any shares of capital
stock to be reserved for the purpose of the issuance of shares upon the
exercise of this Warrant require registration with or approval of any
governmental authority under any federal or state law before such shares may
be validly issued or delivered upon exercise, then Company shall in good
faith and as expeditiously as possible endeavor to secure such registration
or approval, as the case may be. If and so long as the Common Stock issuable
upon the exercise of this Warrant is listed on any national securities
exchange, Company shall, if permitted by the rules of such exchange, list and
keep listed on such exchange, upon official notice of issuance, all shares of
such Common Stock issuable upon exercise of this Warrant.
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<PAGE>
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING CAPITALIZATION ISSUES. As of
the initial issuance hereof, Company does not have outstanding any securities
convertible into or exchangeable for, or any rights to subscribe for or to
purchase, or any options or warrants for the purchase of, or any agreement
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock, in each
case other than as disclosed in writing to Holder prior to the date hereof.
SECTION 5. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price as provided in Section 6, Holder shall thereafter be entitled to purchase,
at the Warrant Price resulting from such adjustment, only the number of shares
(calculated to the nearest tenth of a share) obtained by multiplying the Warrant
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Warrant Price resulting from such adjustment.
SECTION 6. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If Company shall at any time or from time to time during the Term
of this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance shall forthwith (except as provided in this clause (i)) be adjusted to
a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been
issued pursuant to subdivision (3) of this clause (i) and to
clause (ii) below) immediately prior to such issuance
multiplied by the Warrant Price in effect immediately prior to
such issuance, PLUS
(y) the consideration received by Company upon such issuance,
by
(B) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been
issued pursuant to subdivision (3) of this clause (i) and to
clause (ii) below) immediately after the issuance of such
Common Stock.
For the purposes of any adjustment of the Warrant Price pursuant to
this clause (i), the following provisions shall be applicable:
1. In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid
therefor after deducting therefrom any discounts, commissions
or other expenses allowed, paid or incurred by Company for any
underwriting or otherwise in connection with the issuance and
sale thereof.
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<PAGE>
2. In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined by the Board of Directors
of Company, irrespective of any accounting treatment;
provided, however, that such fair market value as determined
by the Board of Directors, together with any cash
consideration being paid, shall not exceed the aggregate
Current Market Price (as hereinafter defined) of the shares of
Common Stock being issued.
3. In the case of the issuance of (i) options to purchase or
rights to subscribe for Common Stock, (ii) securities or
obligations by their terms convertible into or exchangeable
for Common Stock or (iii) options to purchase or rights to
subscribe for such convertible or exchangeable securities or
obligations:
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such
options or rights were issued and for a consideration
equal to the consideration (determined in the manner
provided in subdivisions (1) and (2) above with the
proviso in subdivision (2) being applied to the
number of shares of Common Stock deliverable upon
such exercise), if any, received by Company upon the
issuance of such options or rights plus the minimum
purchase price provided in such options or rights for
the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange
for any such convertible or exchangeable securities
or obligations or upon the exercise of options to
purchase or rights to subscribe for such convertible
or exchangeable securities or obligations and
subsequent conversions or exchanges thereof shall be
deemed to have been issued at the time such
securities or obligations were issued or such options
or rights were issued and for a consideration equal
to the consideration received by Company for any such
securities or obligations and related options or
rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by
Company upon the conversion or exchange of such
securities or obligations or the exercise of any
related options or rights (the consideration in each
case to be determined in the manner provided in
subdivisions (1) and (2) above with the proviso in
subdivision (2) being applied to the number of shares
of Common Stock deliverable upon such conversion,
exchange or exercise);
(C) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options or
rights or conversion of or exchange for such
convertible or exchangeable securities or
obligations, other than a change resulting from the
antidilution provisions thereof, the Warrant Price
shall forthwith be readjusted to such Warrant Price
as would have obtained had the
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<PAGE>
adjustment made upon the issuance of such options,
rights or securities or obligations not converted
prior to such change or options or rights related to
such securities or obligations not converted prior to
such change being made upon the basis of such change;
and
(D) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange
or the expiration of any options or rights related to
such convertible or exchangeable securities or
obligations, the Warrant Price shall forthwith be
readjusted to such Warrant Price as would have
obtained had the adjustment made upon the issuance of
such options, rights, securities or options or rights
related to such securities or obligations being made
upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the
conversion or exchange of such securities or
obligations or upon the exercise of the options or
rights related to such securities or obligations.
(ii) "Excluded Stock" shall mean shares of Common Stock issued by
Company (1) under any circumstance for which an adjustment is provided in
clauses (iii) or (iv) of this Section 6 or in Section 8, and (2) in connection
with the issuance of Common Stock (including any share of Common Stock deemed to
have been issued pursuant to subdivision (3) of clause (i) above) (appropriately
adjusted for stock splits and combinations) to directors, officers, or employees
of, or consultants to, Company under any stock option or other similar incentive
plan approved by the Board of Directors of Company.
(iii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Warrant Price shall be appropriately decreased so that the number of shares
of Common Stock issuable upon the exercise hereof shall be increased in
proportion to such increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Common Stock issuable upon the exercise hereof shall be decreased
in proportion to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, Company shall
declare a cash dividend upon its Common Stock payable otherwise than out of
earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by Company or other persons,
assets (excluding cash dividends and distributions) or options or rights
(excluding options to purchase and rights to subscribe for Common Stock or other
securities of Company convertible into or exchangeable for Common Stock), then,
in each such case, immediately following the record date fixed
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<PAGE>
for the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors of Company,
whose determination shall be conclusive) of the amount of cash, stock,
securities, evidences of indebtedness, assets, options or rights, as the case
may be, so distributed in respect of one share of Common Stock, and of which the
denominator shall be such Current Market Price.
(vi) All calculations under this Section 6 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 6,
the Current Market Price at any date of one share of Common Stock shall be
deemed to be the average of the daily closing prices for the 15 consecutive
business days ending on the last business day before the day in question (as
adjusted for any stock dividend, split, combination or reclassification that
took effect during such 15 business day period). The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sales took place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading or as reported by
Nasdaq (or if the Common Stock is not at the time listed or admitted for trading
on any such exchange or if prices of the Common Stock are not reported by Nasdaq
then such price shall be equal to the average of the last reported bid and asked
prices on such day as reported by The National Quotation Bureau Incorporated or
any similar reputable quotation and reporting service, if such quotation is not
reported by The National Quotation Bureau Incorporated); provided, however, that
if the Common Stock is not traded in such manner that the quotations referred to
in this clause (vii) are available for the period required hereunder, the
Current Market Price shall be determined in good faith by the Board of Directors
of Company or, if such determination cannot be made, by a nationally recognized
independent investment banking firm selected by the Board of Directors of
Company (or if such selection cannot be made, by a nationally recognized
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in this
Section 6, Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
Company shall cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Holder at its, his or her address appearing on
Company's records. Where appropriate, such copy may be given in advance and may
be included as part of the notice required to be mailed under the provisions of
clause (x) of this Section 6.
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above
shall be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
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<PAGE>
(x) In the event Company shall propose to take any action of the types
described in clauses (iii), (iv), or (v) of this Section 6, Company shall
forward, at the same time and in the same manner, to Holder such notice, if any,
which Company shall give to the holders of capital stock of Company.
(xi) In any case in which the provisions of this Section 6 shall
require that an adjustment shall become effective immediately after a record
date for an event, Company may defer until the occurrence of such event issuing
to Holder of all or any part of this Warrant which is exercised after such
record date and before the occurrence of such event the additional shares of
capital stock issuable upon such exercise by reason of the adjustment required
by such event over and above the shares of capital stock issuable upon such
exercise before giving effect to such adjustment exercise; provided, however,
that Company shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder's right to receive such additional shares upon
the occurrence of the event requiring such adjustment.
SECTION 7. OWNERSHIP.
7.1 OWNERSHIP OF THIS WARRANT. Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than Company) for all purposes and shall not be affected by any notice to
the contrary until presentation of this Warrant for registration of transfer as
provided in this Section 7.
7.2 TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of Company by Holder hereof in
person or by duly authorized attorney, and a new Warrant or Warrants, of the
same tenor as this Warrant but registered in the name of the transferee or
transferees (and in the name of Holder, if a partial transfer is effected) shall
be made and delivered by Company upon surrender of this Warrant duly endorsed,
at the office of Company referred to in Section 14 hereof, together with a
properly executed Assignment (in the form of EXHIBIT B or EXHIBIT C hereto, as
the case may be). Upon receipt by Company of evidence reasonably satisfactory to
it of the loss, theft or destruction, and, in such case, of indemnity or
security reasonably satisfactory to it, and upon surrender of this Warrant if
mutilated, Company shall make and deliver a new Warrant of like tenor, in lieu
of this Warrant. This Warrant shall be promptly cancelled by Company upon the
surrender hereof in connection with any transfer or replacement. Except as
otherwise provided above, in the case of the loss, theft or destruction of a
Warrant, Company shall pay all expenses, taxes and other charges payable in
connection with any transfer or replacement of this Warrant, other than stock
transfer taxes (if any) payable in connection with a transfer of this Warrant,
which shall be payable by Holder. Holder shall not transfer this Warrant and the
rights hereunder except in compliance with federal and state securities laws.
SECTION 8. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of Company with another entity, or the proposed sale of
all or substantially all of its assets to another person or entity, or any
proposed reorganization or reclassification of the capital stock of Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, Company shall give 30 days' prior written notice thereof to
Holder hereof and lawful and adequate
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<PAGE>
provision shall be made whereby Holder shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein, in
lieu of the shares of the Common Stock of Company immediately theretofore
purchasable hereunder, such shares of stock, securities or assets as may (by
virtue of such consolidation, merger, sale, reorganization or reclassification)
be issued or payable with respect to or in exchange for the number of shares of
such Common Stock purchasable hereunder immediately before such consolidation,
merger, sale, reorganization or reclassification. In any such case appropriate
provision shall be made with respect to the rights and interests of Holder to
the end that the provisions hereof shall thereafter be applicable as nearly as
may be practicable, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of this Warrant.
SECTION 9. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
the assets of Company in dissolution or liquidation (except under circumstances
when the foregoing Section 8 shall be applicable), Company shall give notice
thereof to Holder hereof and shall make no distribution to shareholders until
the expiration of thirty (30) days from the date of mailing of the aforesaid
notice and, in any case, Holder hereof may exercise this Warrant within thirty
(30) days from the date of the giving of such notice, and all rights herein
granted not so exercised within such thirty-day period shall thereafter become
null and void.
SECTION 10. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of
Company shall declare any dividend or other distribution on its Common Stock
except out of earned surplus or by way of a stock dividend payable in shares of
its Common Stock, Company shall mail notice thereof to Holder hereof not less
than thirty (30) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 10 shall not apply to distributions made in connection with
transactions covered by Section 8.
SECTION 11. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where Holder would, except for the
provisions of this Section 11, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, Company shall, upon
the exercise of this Warrant for the largest number of whole shares then called
for, pay a sum in cash equal to the excess of the value of such fractional share
(determined in such reasonable manner as may be prescribed in good faith by the
Board of Directors of Company) over the Warrant Price for such fractional share.
SECTION 12. SPECIAL ARRANGEMENTS OF COMPANY. Company covenants and agrees that
during the Term of this Warrant, unless otherwise approved by Holder:
12.1 SHALL NOT AMEND CERTIFICATE. Company shall not amend its
certificate or articles, as the case may be, of incorporation to eliminate as an
authorized class of capital stock that class denominated as "Common Stock" on
the date hereof.
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<PAGE>
12.2 SHALL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to Company by merger,
consolidation or acquisition of all or substantially all of Company's assets.
SECTION 13. REGISTRATION. Company covenants and agrees that the shares of Common
Stock issuable upon the exercise of this Warrant shall be entitled to the
benefits of the registration rights set forth in EXHIBIT D attached hereto.
SECTION 14. NOTICES. Any notice or other document required or permitted to be
given or delivered to Holder shall be delivered at, or sent by certified or
registered mail to, Holder at its address for notices set forth in the Agreement
or to such other address as shall have been furnished to Company in writing by
Holder. Any notice or other document required or permitted to be given or
delivered to Company shall be delivered at, or sent by certified or registered
mail to, Company at its address for notices set forth in the Agreement or to
such other address as shall have been furnished in writing to Holder by Company.
Any notice so addressed and mailed by registered or certified mail shall be
deemed to be given when so mailed. Any notice so addressed and otherwise
delivered shall be deemed to be given when actually received by the addressee.
SECTION 15. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle Holder to any of the rights of a shareholder of Company except
upon exercise in accordance with the terms hereof. No provision hereof, in the
absence of affirmative action by Holder to purchase shares of Common Stock, and
no mere enumeration herein of the rights or privileges of Holder, shall give
rise to any liability of Holder for the Warrant Price hereunder or as a
shareholder of Company, whether such liability is asserted by Company or by
creditors of Company.
SECTION 16. LAW GOVERNING. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF VAR2 WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 17. AMENDMENTS. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by both
parties (or any respective predecessor in interest thereof). The headings in
this Warrant are for purposes of reference only and shall not affect the meaning
or construction of any of the provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Company has caused this Warrant to be signed by its
duly authorized officer this 20th day of April, 2000.
Nhancement Technologies Inc.
By: /s/ Douglas S. Zorn
-----------------------------------
Title: President & CEO
--------------------------------
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EXHIBIT A
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE ATTACHED WARRANT
The undersigned hereby exercises the right to purchase _________ shares
of Common Stock which the undersigned is entitled to purchase by the terms of
the attached Warrant according to the conditions thereof, and herewith
[check appropriate box(es)]
/ / makes payment of $__________ therefor in cash;
/ / makes payment of $__________ therefor through cancellation of
indebtedness; or
/ / directs Company to issue ______ shares, and to withhold ____ shares in
lieu of payment of the Warrant Price, as described in Section 2.1 of the
Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and the
initial address of such person to be entered on the books of Nhancement
Technologies Inc. shall be:
The shares are to be issued in certificates of the following denominations:
____________________________________
[Type Name of Holder]
By:_________________________________
Title:______________________________
Dated:____________________________
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EXHIBIT B
FORM OF ASSIGNMENT
(ENTIRE)
[To be signed only upon transfer of entire Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE ATTACHED WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto _______________________________ all rights of the undersigned
under and pursuant to the attached Warrant, and the undersigned does hereby
irrevocably constitute and appoint _____________________ Attorney to transfer
said Warrant on the books of Nhancement Technologies Inc., with full power of
substitution.
____________________________________
[Type Name of Holder]
By:_________________________________
Title:______________________________
Dated:____________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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EXHIBIT C
FORM OF ASSIGNMENT
(PARTIAL)
[To be signed only upon partial transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE ATTACHED WARRANT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _______________________________ (i) the rights of the
undersigned to purchase _____________ shares of Common Stock under and
pursuant to the attached Warrant, and (ii) on a non-exclusive basis, all
other rights of the undersigned under and pursuant to the attached Warrant,
it being understood that the undersigned shall retain, severally (and not
jointly) with the transferee(s) named herein, all rights assigned on such
non-exclusive basis. The undersigned does hereby irrevocably constitute and
appoint __________________________ Attorney to transfer said Warrant on the
books of Nhancement Technologies Inc., with full power of substitution.
____________________________________
[Type Name of Holder]
By:_________________________________
Title:______________________________
Dated:____________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Warrant in every particular, without alteration or
enlargement or any change whatsoever.
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EXHIBIT D
REGISTRATION RIGHTS
The Common Stock issuable upon exercise of the attached Warrant shall
be deemed "registrable securities" under, and Holder of the attached Warrant
shall otherwise be entitled to the benefit of, the following agreement (the
"Agreement") between Company and its investor(s):
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[Identify Agreement by date, title and parties.]
Company agrees that no amendments shall be made to the Agreement which
would have an adverse impact on Holder's registration rights thereunder without
the consent of Holder. By acceptance of the Warrant to which this Exhibit D is
attached, Holder shall be deemed to be a party to the Agreement.
If no Agreement is identified above, then Holder shall be entitled to
the benefits of the following registration rights (hereinafter referred to as
the "Registration Rights") which shall be incorporated into and deemed part of
the attached Warrant:
1. CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following respective meanings (any capitalized terms used in these
Registration Rights and not otherwise defined below to have the meanings
ascribed to them in the attached Warrant):
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"HOLDER" shall mean any holder of Registrable Securities.
"OTHER SHAREHOLDERS" shall mean holders of securities of Company who
are entitled by contract with Company or who are permitted by Company to have
securities included in a registration of Company's securities.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"REGISTRABLE SECURITIES" shall mean the Warrant Shares less any Warrant
Shares theretofore sold to the public or in a private placement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by Company in
compliance with Section 2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for Company, blue sky fees and expenses, and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of Company, which shall be paid in any event
by Company).
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"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions and registration and filing fees applicable to the sale of
Registrable Securities, all fees and disbursements of counsel for any Holder and
any blue sky fees and expenses excluded from the definition of "Registration
Expenses."
2. COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If Company shall determine to register any
of its Common Stock or securities convertible into or exchangeable or
exercisable for Common Stock either for its own account or for the account of
any Other Shareholder other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Commission Rule 145
transaction, or any other registration on any registration form which does not
permit secondary sales, Company shall:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which Company intends to attempt to
qualify such securities under the applicable blue sky or other state securities
laws); and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests, made
by any Holder within fifteen (15) days after receipt of the written notice from
Company described in clause (i) above, subject to any limitations on the number
of shares as set forth in Section 2(b) below.
(b) UNDERWRITING. (a) If the registration of which Company gives notice
is for a registered public offering involving an underwriting, Company shall so
advise Holders as part of the written notice given pursuant to Section 2(a)(i).
In such event, the right of any Holder to registration pursuant to Section 2
shall be conditioned upon such Holder's participation in such underwriting and
the inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with Company, directors and officers
and the Other Shareholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for underwriting by Company.
Notwithstanding any other provision of this Section 2, if the
underwriter determines that marketing or other factors require a limitation on
the number of shares to be underwritten, the underwriter may (subject to the
allocation priority set forth below) exclude from such registration and
underwriting some or all of the Registrable Securities which would otherwise be
underwritten pursuant hereto. Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner. The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors and officers
and Other Shareholders (if any) shall be allocated among such Holders, directors
and officers and Other Shareholders in proportion, as nearly as practicable, to
the respective amounts of Registrable Securities and other securities which they
had requested to be included in such registration at the time of filing the
registration statement.
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If any Holder of Registrable Securities or any officer, director or
Other Shareholder disapproves of the terms of any such underwriting, it, he or
she may elect to withdraw therefrom by written notice to Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
3. REGISTRATION RIGHTS. In the event that Company grants after the date
hereof registration rights, including demand registration rights, to any other
holder of securities of Company, Company shall promptly give to Holder written
notice thereof and, if in the opinion of Holder such registration rights are
more favorable than the registration rights provided under the attached Warrant,
Holder shall so notify Company within thirty (30) days of receipt of the
foregoing notice from Company, whereupon such registration rights shall
automatically be deemed to be incorporated in the attached Warrant.
4. EXPENSES OF REGISTRATION. Company (or Other Shareholders) shall bear
all Registration Expenses incurred in connection with any registration,
qualification and compliance by Company (or such Other Shareholders) pursuant to
Section 2 hereof. All Selling Expenses shall be borne by the holders of the
securities so registered pro rata on the basis of the number of their shares so
registered.
5. REGISTRATION PROCEDURES. In the case of each registration effected
by Company pursuant to these Registration Rights, Company shall keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. Company shall, at its expense:
(i) keep such registration effective for a period of one hundred twenty
(120) days or until Holder or Holders have completed the distribution described
in the registration statement relating thereto, whichever first occurs;
(ii) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(iii) use its best efforts to register or qualify the Registrable
Securities under the securities laws or blue-sky laws of such jurisdictions as
any Holder may request; provided, however, that Company shall not be obligated
to register or qualify such Registrable Securities in any particular
jurisdiction in which Company would be required to execute a general consent to
service of process in order to effect such registration, qualification or
compliance, unless Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act or applicable rules or
regulations thereunder.
6. INDEMNIFICATION.
(i) Company, with respect to each registration, qualification and
compliance effected pursuant to these Registration Rights, shall indemnify and
hold harmless each Holder, each of its officers, directors, partners, and
agents, and each party controlling such Holder, and each underwriter, if any,
and each party who controls any underwriter, against all claims, losses, damages
and liabilities (or
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actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by Company of the
Securities Act or any rule or regulation thereunder applicable to Company and
relating to action or inaction required of Company in connection with any such
registration, qualification or compliance, and shall reimburse each such Holder,
each of its officers, directors, partners, and agents, and each party
controlling such Holder, each such underwriter and each party who controls any
such underwriter, for any legal and any other expenses incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, provided that Company shall not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission based solely upon written information
furnished to Company by such Holder or underwriter, as the case may be, and
stated to be specifically for use in any prospectus, offering circular or other
document (including any related registration statement, notification or the
like) incident to any such registration, qualification or compliance.
(ii) Each Holder shall, if Registrable Securities held by it, him or
her are included in the securities as to which such registration, qualification
or compliance is being effected, indemnify and hold harmless Company, each of
its directors and officers and each underwriter, if any, of Company's securities
covered by such a registration statement and each party who controls Company or
such underwriter against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and shall reimburse
Company and such directors, officers, partners, agents, parties, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document solely in reliance upon and in conformity with written
information furnished to Company by such Holder and stated to be specifically
for use in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance; provided, however, that the
obligations of such Holder hereunder shall be limited to an amount equal to the
proceeds to each such Holder of securities sold as contemplated herein.
(iii) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall
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not unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under these
Registration Rights. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall provide such information as may be
reasonably requested by an Indemnifying Party in order to enable such
Indemnifying Party to defend a claim as to which indemnity is sought.
7. INFORMATION BY HOLDER. Each Holder shall furnish to Company such
information regarding such Holder as Company may reasonably request in writing
and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in these Registration Rights.
8. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, Company agrees to:
(i) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times that
Holder holds Registrable Securities from and after ninety (90) days following
the effective date of the first registration under the Securities Act filed by
Company for an offering of its securities to the general public;
(ii) File with the Commission in a timely manner all reports and other
documents required of Company under the Exchange Act at any time after it has
become subject to such reporting requirements; and
(iii) So long as Holder owns any Registrable Securities, furnish to
Holder forthwith upon request a written statement by Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after the end of the ninety (90) day period referred to in clause (i)), and of
the Securities Act and the Exchange Act (at any time after it has become subject
to such reporting requirements), a copy of the most recent annual or quarterly
report of Company, and such other reports and documents so filed as Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing Holder to sell any such securities without registration.
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