ESCROW AGREEMENT
THIS AGREEMENT is made as of the 13th day of April, 1998 by and
among XYBERNAUT CORPORATION, with its principal office at 00000 Xxxx Xxxxx
Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000, (hereinafter the "Company"), the
"Purchasers" specified on Schedule A attached hereto, with their respective
principal offices at the addresses set forth in Schedule A (hereinafter
collectively referred to as the "Investor"), Settondown Capital International
Ltd. (the "Placement Agent", also referred to as the "Investor") located at
Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx, X.X. Xxx X. 0000, Xxxxxx, Bahamas, and
XXXXXXXXX, XXXXXXXXX & XXXX, LLP, 00 Xxxxxxxx, 00xx Xx., Xxx Xxxx, XX 00000
(hereinafter the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Purchasers will be purchasing Common Stock and Warrants
A and B (the "Initial Shares") from the Company at a purchase price as set forth
in a Private Equity Line Of Credit Agreement (the "Agreement") dated as of April
13, 1998, which will be issued as per the terms contained herein and in the
Agreement executed by the Company and Purchaser; and
WHEREAS, the Company will be issuing Common Stock and a Warrant A
(also referred to as the Initial Shares) to the Placement Agent pursuant to the
Agreement; and
WHEREAS, the Company shall have a Put to the Purchasers for the
remainder of the Commitment Amount after the Initial Shares Investment Amount
has been paid to the Company, in accordance with the terms and conditions in the
Agreement; and
WHEREAS, it is intended that the purchase of Securities be
consummated in accordance with the requirements set forth by Regulation D
promulgated under the Securities Act of 1933, as amended; and
WHEREAS, the Company has requested that the Escrow Agent hold the
Initial Shares Investment Amount and the remainder of the Commitment Amount in
escrow until the Escrow Agent has received the Initial Shares, and the Put
Shares. The Escrow Agent will then immediately wire transfer or otherwise
deliver at the Company's discretion immediately available funds to the Company's
account and arrange for delivery of the Initial Shares, and Put Shares to the
Investors as per the terms and conditions in the Agreement.
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein and other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW FOR THE INITIAL SHARES
1.1 The parties hereby agree to establish an escrow account with
the Escrow Agent whereby the Escrow Agent shall hold the funds for the purchase
of the Initial Shares (collectively, with the Put Shares, referred to as the
"Securities").
1.2 Upon Escrow Agent's receipt of the Initial Shares Investment
Amount into its attorney trustee account, it shall notify the Company, or the
Company's designated attorney or agent, of the amount of funds it has received
into its account.
1.3 The Company, upon receipt of said notice and acceptance of the
Agreement by both parties, as evidenced by the Company's and the Investor's
execution thereof, shall deliver to the Escrow Agent the Initial Shares. Escrow
Agent shall then communicate with the Company to confirm the validity of its
issuance.
1.4 Once Escrow Agent confirms the validity of the issuance of the
Initial Shares, the Escrow Agent shall immediately wire that amount of funds
necessary to purchase the Initial Shares per the written instructions of the
Company. The Company will furnish Escrow Agent with a "Net Letter" directing
payment of (i) the placement agent fees in the amount of five percent (5%) of
the gross proceeds for the Initial Shares to the Placement Agent; and (ii)
legal, administrative, and escrow costs in the amount of one (1%) percent of the
gross proceeds to Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP, such fees are to be remitted
to in accordance with wire instructions that will be sent to Escrow Agent from
the Company, with the net balance payable to the Company. Once the funds (as set
forth above) have been received per the Company's instructions, the Escrow Agent
shall then arrange to have the Securities delivered as per instructions from the
Investor.
ARTICLE 2
TERMS OF THE ESCROW FOR THE PUT SHARES
2.1 The parties hereby agree to establish an escrow account with
the Escrow Agent whereby the Escrow Agent shall hold the funds for the purchase
of the Put Shares.
2.2 Upon Escrow Agent's receipt of confirmation in writing that
the Company has properly served a Put Notice in accordance with the Agreement,
and once it has received the Purchase Price for the Put Shares into its attorney
trustee account, it shall notify the Company, or the Company's designated
attorney or agent, of the amount of funds it has received into its account.
2.3 The Company, upon receipt of said notice and acceptance by the
Investors, as evidenced by written notice by the Investor, shall deliver to the
Escrow Agent the Put Shares
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being purchased. Escrow Agent shall then communicate with the Company to confirm
the validity of its issuance.
2.4 Once Escrow Agent confirms the validity of the issuance of the
Put Shares, he shall immediately wire that amount of funds necessary to purchase
of the Put Shares per the written instructions of the Company. The Company will
furnish Escrow Agent with a "Net Letter" directing payment of (i) placement
agent fees in the amount of five (5%) percent of the gross proceeds for the Put
Shares to the Placement Agent; and (ii) legal, administrative, and escrow costs
in the amount of one half of one (0.5%) percent of the gross proceeds to
Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP, with a cap of Two Thousand Five Hundred
($2,500) Dollars per Closing of Put Shares. Such fees are to be remitted to in
accordance with wire instructions that will be sent to Escrow Agent from the
Company, with the net balance payable to the Company. Once the funds have been
received per the Company's instructions, the Escrow Agent shall then arrange to
have the Securities delivered as per instructions from the Investor.
ARTICLE 3
MISCELLANEOUS
3.1 No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.
3.2 All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent by fax, overnight courier,
registered or certified mail, postage prepaid, return receipt requested, and
shall be deemed received upon receipt thereof, as follows:
(a) Xybernaut Corporation
00000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx and Xxxxxx Xxxxxx
Tele: (000) 000-0000
Fax: (000) 000-0000
or to such other person at such other place as the Company shall designate to
the Investor in writing;
(b) if to the Purchaser, to such Purchaser's address set forth on
Schedule A hereto.
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(c) Settondown Capital International Ltd.
Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx
P.O. Box N. 9204
Nassau, Bahamas
Attn: Xxxxxxx X. X. Xxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(d) Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP 00 Xxxxxxxx,
00xx Xx. Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx, Esq.
(telephone) (000) 000-0000
(facsimile) (000) 000-0000
3.3 This Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and assigns of the parties hereto.
3.4 This Agreement is the final expression of, and contains the
entire Agreement between, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Agreement may
not be modified, changed, supplemented or terminated, nor may any obligations
hereunder be waived, except by written instrument signed by the parties to be
charged or by its agent duly authorized in writing or as otherwise expressly
permitted herein.
3.5 Whenever required by the context of this Agreement, the
singular shall include the plural and masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Agreement.
3.6 The Company acknowledges and confirms that it is not being
represented in a legal capacity by Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP and it has
had the opportunity to consult with its own legal advisors prior to the signing
of this Agreement.
3.7 The parties hereto expressly agree that this Agreement shall
be governed by, interpreted under and construed and enforced in accordance with
the laws of the State of New York . Any action to enforce, existing out of, or
relating in any way to, any provisions of this Agreement shall brought through
the American Arbitration Association at the designated locale of New York, New
York as is more fully set forth in the Agreement.
3.8 This Agreement may be altered or amended only with the consent
of all of the parties hereto. Should the Company or Investor attempt to change
this Agreement in a manner which, in the Escrow Agent's discretion, shall be
undesirable, the Escrow Agent may resign as Escrow Agent by notifying the
Company and the Investor in writing. In the case of the Escrow Agent's
resignation or removal pursuant to the foregoing, its only duty, until receipt
of notice from the Company and the Investor or its agent that a successor escrow
agent shall have been appointed, shall be to hold and preserve the funds. Upon
receipt by the Escrow Agent of said notice from the Company and the Investor of
the appointment of a successor escrow agent, the name of a
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successor escrow account and a direction to transfer the funds, the Escrow Agent
shall promptly thereafter transfer all of the funds held in escrow to said
successor escrow agent. Immediately after said transfer, the Escrow Agent shall
furnish the Company and the Investor with proof of such transfer. The Escrow
Agent is authorized to disregard any notices, requests, instructions or demands
received by it from the Company or the Investor after notice of resignation or
removal shall have been given, unless the same shall be the aforementioned
notice from the Company and the Investor to transfer the funds to a successor
escrow agent or to return same to the respective parties.
3.9 The Escrow Agent shall be reimbursed by the Company and the
Investor for any reasonable expenses incurred in the event there is a conflict
between the parties and the Escrow Agent shall deem it necessary to retain
counsel.
3.10 The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith in accordance with the advice of the Escrow Agent's
counsel; and in no event shall the Escrow Agent be liable or responsible except
for the Escrow Agent's own gross negligence or willful misconduct.
3.11 The Company and the Investors warrant to and agree with the
Escrow Agent that, unless otherwise expressly set forth in this Agreement:
(i) there is no security interest in the Securities or any
part thereof;
(ii) no financing statement under the Uniform Commercial Code
is on file in any jurisdiction claiming a security interest or
in describing (whether specifically or generally) the
Securities or any part thereof; and
(iii) the Escrow Agent shall have no responsibility at any
time to ascertain whether or not any security interest exists
in the Securities or any part thereof or to file any financing
statement under the Uniform Commercial Code with respect to
the Securities or any part thereof.
3.12 The Escrow Agent in its capacity as such has no liability
hereunder to either party other than to hold the funds and the Securities and to
deliver them under the terms hereof. Each party hereto agrees to indemnify and
hold harmless the Escrow Agent in its capacity as such from and with respect to
any suits, claims, actions or liabilities arising in any way out of this
transaction including the obligation to defend any legal action brought which in
any way arises out of or is related to this Escrow.
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IN WITNESS WHEREOF, the parties hereto have cause this Escrow
Agreement to be executed as of the 13th day of April, 1998.
XYBERNAUT CORPORATION
By___________________________
BALMORE FUNDS, S.A.
By____________________________
Francois Morax
AUSTOST ANSTALT XXXXXX
By____________________________
Xxxxxx Xxxxx
SETTONDOWN CAPITAL INTER-
NATIONAL LTD.
By_____________________________
Xxxxxxx X.X. Xxxxx Xxxxx
XXXXXXXXX, XXXXXXXXX & XXXX, LLP,
Escrow Agent
By______________________________
Xxxxx X. Xxxxxxxxx
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