EXHIBIT 4.1
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FORM OF SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of May 11, 1999
(this "Agreement"), is entered into by and between XYBERNAUT CORPORATION, a
Delaware corporation (Nasdaq SmallCap Market Symbol "XYBR"), with headquarters
located at 00000 Xxxx Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 (the "Company"), and
FOREST AVENUE LLC, a Cayman Islands limited liability company (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, by Rule 506 under Regulation
D ("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase and the Company wishes
to sell, upon the terms and subject to the conditions of this Agreement, shares
of Series E Preferred Stock, $.01 par value per share (the "Preferred Stock"),
of the Company which will be convertible into shares of Common Stock, $.01 par
value per share of the Company (the "Common Stock"), upon the terms and subject
to the conditions of the Certificate of Designation for the Preferred Stock
attached hereto as Exhibit 1 (the "Certificate of Designation") and the Common
Stock Purchase Warrant to purchase Common Stock attached hereto as Exhibit 4(l)
(the "Warrants") (the Preferred Stock, the Warrants and shares of Common Stock
issuable upon conversion of the Preferred Stock and the exercise of the Warrants
sometimes collectively referred to herein as the "Securities");
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE. The Buyer hereby agrees to purchase from the Company two
thousand (2,000) shares of the Company's Preferred Stock and Warrants to
purchase in the aggregate fifty (50,000) shares of the Company's Common Stock
per $2,000,000 of Preferred Stock purchased (or such pro rata amount if more or
less than $2,000,000 is purchased) for an aggregate purchase price of
$2,000,000. The purchase price for each share of Preferred Stock shall be $1,000
and shall be payable in United States Dollars.
b. FORM OF PAYMENT. The Buyer shall pay the purchase price for the
Preferred Stock by delivering immediately available good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Escrow
Agreement attached hereto as Exhibit 1(b) (the "Escrow Agreement") as set forth
below.
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c. METHOD OF PAYMENT. Payment into escrow of the purchase price for the
Preferred Stock shall be made by wire transfer of funds to:
CITIBANK N.A.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Account Name: Xxxxxx Xxxxxx Flattau & Klimpl, LLP
Account No.: 00000000
Citibank ABA No.: 000000000
Not later than 2:00 p.m., New York time, on the date the Company and the Buyer
shall have executed this Agreement and returned a signed counterpart of this
Agreement to the Escrow Agent by facsimile and the Buyer shall deposit with the
Escrow Agent the aggregate purchase price for the Preferred Stock, in currently
available funds.
2. BUYER'S REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting the Buyer's right to sell the Common Stock pursuant
to a registration statement or an exemption from registration, the Buyer is
purchasing the Preferred Stock and the Warrants and will be acquiring the shares
of Common Stock issuable upon conversion of the Preferred Stock and exercise of
the Warrants for its own account for investment only and not with a view towards
the public sale or distribution thereof and not with a view to or for sale in
connection with any distribution thereof;
b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Securities;
c. The Buyer is not subscribing for the Preferred Stock and the
Warrants as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar;
d. The Buyer understands that the shares of Preferred Stock and the
Warrants are being offered and sold, and the Shares are being offered, to the
Buyer in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the
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availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Stock and the Warrants and to receive an offer of the Shares;
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Preferred Stock and the Warrants
and the offer of the Shares which have been requested by the Buyer, including
Schedule 2(e) hereto. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has also had the opportunity to obtain and to review
the Company's (1) Annual Report on Form 10-K for the fiscal year ended December
31, 1998, (2) Quarterly Report on Form 10-Q for the fiscal quarters ended
September 30, 1998, June 30, 1998 and March 31, 1998, (3) Form 8-K dated June 4,
1998, and (4) Form S-3/A filed on January 08, 1999, (collectively, the
"Company's SEC Documents").
f. The Buyer understands that its investment in the Securities involves
a high degree of risk;
g. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities;
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally;
i. As of the Closing Date, neither the Buyer, its agents nor any of its
affiliates, has a short position in the Common Stock of the Company.
j. Notwithstanding the provisions hereof or of the Preferred Stock, in
no event (except with respect to an automatic conversion of the Preferred Stock
as provided in the Certificate of Designation) shall a Buyer be entitled to
convert any shares of Preferred Stock to the extent after such conversion, the
sum of (1) the number of shares of Common Stock beneficially owned by the Buyer
and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Preferred Stock and the unexercised portion of any Warrants), and (2) the number
of shares of Common Stock issuable upon the conversion of the Preferred Stock
and exercise of the Warrants with respect to which the determination of this
proviso is being made, would result in beneficial ownership by the Buyer and its
affiliates of more than 4.99% of the outstanding shares of Common Stock. For
purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), except as otherwise
provided in clause (1) of such proviso. The preceding shall not interfere with
any Buyer's right to convert the Preferred Stock or exercise the Warrants which
in the aggregate total more than 4.99% of the outstanding shares of Common
Stock, over time, as long as no single Buyer owns more than 4.99% of the
outstanding Common Stock at any given time.
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3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not be expected to have a material adverse effect on the business or
financial condition of the Company, or materially and adversely affect the
ability of the Company to perform its obligations pursuant to this Agreement.
Except as disclosed in Schedule 3(a), the Company's SEC Documents or any public
filings made by the Company with the SEC after the date hereof including the
Company's SEC Documents (the "Commission Filings"), the Company does not
presently own or control, directly or indirectly, any interest in any other
corporation, partnership, association or other business entity.
b. CONCERNING THE SHARES. The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, $.01 par value per share, and
Schedule 3(b) sets forth the number of shares which are issued and outstanding,
and the number of shares of preferred stock, $.01 par value per share, which are
issued and outstanding. All of the outstanding shares of Common Stock and
Preferred Stock of the Company have been duly and validly authorized and issued
and are fully paid and nonassessable. No shares of Common Stock are subject to
preemptive or similar rights. Except as specifically disclosed herein, there are
no outstanding options, warrants, rights to subscribe to, calls or commitments
of any character whatsoever relating to, or, except as a result of the purchase
and sale of the Preferred Stock and the Warrants, securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
subsidiary is or may become bound to issue additional shares of Common Stock or
securities or rights convertible or exchangeable into shares of Common Stock.
c. REPORTING COMPANY STATUS. The Company has registered its Common
Stock pursuant to Section 12 of the Exchange Act and the Common Stock is listed
and traded on the Nasdaq SmallCap Market. The Company is in compliance, to the
extent applicable, with all reporting obligations under either Section 12(b),
12(g) or 15(d) of the Exchange Act. The Company has complied in all material
respects and to the extent applicable with all reporting obligations, under
either Section 13(a) or 15(d) of the Exchange Act for a period of at least
twelve (12) months immediately preceding the offer and sale of the Securities.
Except as set forth in Schedule 3(c) hereto, the Company has received no notice,
either oral or written, with respect to the continued eligibility of the Common
Stock for such listing on the Nasdaq Small Cap Market.
d. AUTHORIZED SHARES. The Company has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the conversion of the
Preferred Stock and the exercise of the Warrants. The Shares have been duly
authorized and, when issued upon conversion of the Preferred Stock and upon
exercise of the Warrants, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder.
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e. SECURITIES PURCHASE AGREEMENT; ESCROW AGREEMENT; REGISTRATION RIGHTS
AGREEMENT AND COMMON STOCK. The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement, and
all exhibits attached hereto, and to issue the Preferred Stock, the Warrants,
and the shares of Common Stock underlying the Preferred Stock and the Warrants.
This Agreement, the Escrow Agreement and the Registration Rights Agreement, the
form of which is attached hereto as Exhibit 4(e) (the "Registration Rights
Agreement"), and the transactions contemplated hereby and thereby, have been
duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Escrow
Agreement and the Registration Rights Agreement, when executed and delivered by
the Company, will be, valid and binding agreements of the Company enforceable in
accordance with their respective terms, subject as to enforceability to general
principles of equity and to bankruptcy, insolvency, moratorium, and other
similar laws affecting the enforcement of creditors' rights generally; and the
Preferred Stock and the Warrants will be duly and validly authorized and, when
executed and delivered on behalf of the Company in accordance with this
Agreement, will be a valid and binding obligation of the Company in accordance
with its terms, subject to general principles of equity and to bankruptcy,
insolvency, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally.
f. NON-CONTRAVENTION. Except as set forth on Schedule 3(f)(ii) hereto,
the execution and delivery of this Agreement, the Escrow Agreement and the
Registration Rights Agreement by the Company, the issuance of the Securities,
and the consummation by the Company of the other transactions contemplated by
this Agreement, the Escrow Agreement, the Registration Rights Agreement, and the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) any indenture, mortgage, deed of trust, or other material agreement
or instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock or any "lock-up" or similar provision of any underwriting or similar
agreements except as herein set forth, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or (iv)
to its knowledge, order of any court, United States federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
the Company or any of its properties or assets, except such conflict, breach or
default which would not have a material adverse effect on the transactions
contemplated herein.
g. COMPLIANCE WITH LAW. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
would not be expected to have a material adverse effect on the business or
financial condition of the Company, or materially and adversely affect the
ability of the Company to perform its obligations pursuant to this Agreement.
The Company is not required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or issue
and sell the Common Stock, Preferred Stock, or the Warrants, in accordance with
the terms hereof.
h. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
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i. SEC FILINGS. None of the Company's SEC Documents filed with the SEC
since (and including) the filing of the Form 10-K SB for the fiscal year ended
December 31, 1998 contained, at the time they were filed, any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements made therein in light of the
circumstances under which they were made, not misleading. Except as set forth on
Schedule 3(i) hereto, the Company has since September 30, 1998 timely filed all
requisite forms, reports and exhibits thereto with the SEC and such filings
comply in all material respects with the requirements of the 1933 Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder. The Company has not provided to the Buyer any
information that, according to applicable law, rule or regulation, should have
been disclosed publicly prior to the date hereof by the Company, but which has
not been so disclosed. The financial statements of the Company included in the
documents referred to in Section 2(e) hereof comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC or other applicable rules and regulations with respect
thereto.
j. ABSENCE OF CERTAIN CHANGES. Since the filing of the Company's
Quarterly Report on Form 10-Q for fiscal quarter ended on September 30, 1998,
there has been no material adverse change and no material adverse development in
the business, properties, operations, financial condition, or results of
operations of the Company, except as disclosed in the documents referred to in
Section 2(e) hereof or the Commission Filings.
k. FULL DISCLOSURE. There is no fact known to the Company (other than
general economic conditions known to the public generally) or as disclosed in
the documents referred to in Section 2(e), that has not been disclosed in
writing to the Buyer that (i) would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company or (ii)
would reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement.
l. ABSENCE OF LITIGATION. Except as set forth in Schedule 3(l) hereto
or the Commission Filings, and in the documents referred to in Section 2(e),
which the Buyer has reviewed, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company, wherein
an unfavorable decision, ruling or finding would have a material adverse effect
on the business or financial condition of the Company or the transactions
contemplated by this Agreement or any of the documents contemplated hereby or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under, this Agreement or
any of such other documents. Except as set forth in Schedule 3(l) hereto, and in
the documents referenced in Section 2(e) or the Commission Filings, no judgment,
order, decree, writ or award has been issued by, or to the Company's knowledge,
requested of any court, arbitrator, or governmental agency which would have a
material adverse effect on the business or financial condition of the Company or
the transactions contemplated by this Agreement or any of the documents annexed
hereto, or which would adversely and materially affect the Company's ability to
perform its obligations under this Agreement or any document annexed hereto.
m. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in Schedule 3(m)
hereto and Section 3(g) or the Commission Filings, no Event of Default, as
defined in the agreement to which the Company is a party, and no event which,
with the giving of notice or the passage of time or both, would become an
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Event of Default (as so defined in such agreement), has occurred and is
continuing, which would have a material adverse effect on the Company's
financial condition or results of operations.
n. PRIOR ISSUES. Schedule 3(p) sets forth all of the presently
outstanding unconverted shares of convertible securities of the Company as at
May 11, 1999.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the shares of
Preferred Stock and the Warrants have not been and are not being registered
under the provisions of the 1933 Act and, except as provided in the Registration
Rights Agreement, the Shares have not been and are not being registered under
the 1933 Act, and may not be transferred unless (A) in accordance with
Regulation D, (B) subsequently registered thereunder or (C) an exemption from
registration exists and the Buyer shall have delivered to the Company any
information reasonably necessary for the Company's independent counsel to
prepare and deliver an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
b. The Buyer covenants that it will not knowingly make any sale,
transfer or other disposition of the Preferred Stock, the Warrants and/or Shares
in violation of the 1933 Act, the Exchange Act, or the rules and regulations of
the SEC promulgated under any of the foregoing.
c. The Buyer, its respective agents and any and all of their respective
affiliates will abide by all SEC rules and regulations regarding shorting.
d. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that the
Preferred Stock, and, until such time as the Common Stock has been registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
pursuant to an effective registration statement ("Registration Statement") or an
exemption from registration, the Shares issued to the Buyer upon conversion of
the Preferred Stock and exercise of the Warrants shall bear a restrictive legend
in substantially the following form:
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
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e. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter
into the Registration Rights Agreement, in substantially the form attached
hereto as Exhibit 4(e), on or before the Closing Date (as defined in Section
7(b) hereof), and the Company shall cause such Registration Rights Agreement to
remain in full force and effect for so long as the Securities are outstanding,
and the Company shall comply with the terms thereof.
f. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Preferred Stock and the Warrants to
the Buyer under any United States laws and regulations, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
g. REPORTING STATUS. So long as the Buyer beneficially owns any of the
Preferred Stock and/or the Warrants, the Company shall file all reports required
to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act,
and the Company shall not terminate its status as an issuer required to file
reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination.
h. USE OF PROCEEDS. The Company will use the proceeds from the sale of
the Preferred Stock and the Warrants (excluding amounts paid by the Company for
legal fees and finder's fees in connection with the sale of the Preferred Stock
and the Warrants) for the production and marketing of the Company's Mobile
Assistant(R) IV and related products and for general working capital purposes
and acquisitions; provided, however, no proceeds from the sale of the Preferred
Stock or the Warrants will be used directly or indirectly to engage in a
transaction or any transaction with an Affiliate (as hereinafter defined)of the
Company. For purposes of this section, "Affiliate" shall mean a person that
directly, or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with such designated person.
i. CERTAIN AGREEMENTS. (i) The Company covenants and agrees that it
will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock with any third party ("Subsequent Financing") until the
earlier of (a) the date which is one hundred eighty (180) days after the
Effective Date (as defined below) or (b) the date on which 85% of the Preferred
Stock shares have been converted into shares of Common Stock (the "Non-Financing
Period"). If the Company receives a proposal for a Subsequent Financing during
the Non-Financing Period, upon receipt of such proposed terms the Company
covenants and agrees to promptly furnish a notice to the Buyer which sets forth
the terms of the proposed Subsequent Financing. The Buyer shall have the right,
exercisable for a period of ten (10) days after receipt of the written notice
from the Company, to consummate the Subsequent Financing with the Company on the
same terms and conditions as the proposed Subsequent Financing within ten (10)
days after making the election. If the Buyer does not exercise its right to
consummate the Subsequent Financing as set forth herein, the Company shall be
free to enter into the proposed Subsequent Financing on substantially the same
terms as disclosed to the Buyer. If the Buyer exercises its right within such
ten (10) day period but do not close the Subsequent Financing, other than due to
a breach by the Company, the Buyer shall be liable to the Company if the
counterparty to the Subsequent Financing no longer wishes to engage in the
transaction. Notwithstanding the foregoing, the Company may enter into a
Subsequent Financing without the prior written consent of the Buyer if such
Subsequent Financing is exempt from securities registration under Regulation D
and the Company is not required to file a registration statement with respect to
the underlying
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securities within one hundred twenty (120) days of the Effective Date (as
defined below) or if the proceeds from such Subsequent Financing are used to
redeem all of the then outstanding Preferred Stock.
(ii) The provisions of subparagraph (i)(i) will not apply to
(x) the issuance of securities (other than for cash) in connection with a
merger, consolidation, strategic alliance, sale of assets, disposition or
entering into a binding agreement with an investment banking firm of recognized
regional or national status to obtain financing and provide investment banking
services or (y) the exchange of the capital stock for assets, stock or other
joint venture interests.
(iii) The term "Effective Date" means the effective date of
the Registration Statement covering the Registrable Securities (as defined in
the Registration Rights Agreement).
j. AVAILABLE SHARES. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield the number of shares of Common Stock issuable upon
conversion and/or exercise as may be required to satisfy the conversion rights
of the Buyer pursuant to the terms and conditions of the Preferred Stock and the
exercise rights of the Buyer pursuant to the terms of the Warrants.
k. DILUTION. The Company acknowledges that the number of Shares
issuable upon conversion of the Preferred Stock and/or exercise of the Warrants
may increase substantially in certain circumstances, including, but not limited
to, when the trading price of the Common Stock declines prior to a conversion
and that the issuance of the Shares upon such a conversion of the Preferred
Stock may have a dilutive effect of the ownership interest of the other
shareholders of the Company.
l. WARRANTS. The Company agrees to issue to the Buyer on the Closing
Date Warrants to purchase an aggregate of fifty thousand (50,000) shares of
Common Stock per $2,000,000 of Preferred Stock purchased (or such pro rata
amount if more or less than $2,000,000 is purchased). Such Warrants shall bear
an exercise price equal to one hundred twenty-five percent (125%) of the Closing
Price (as defined in the Warrant) and shall expire on the third anniversary of
the issuance date of the Warrant, in the form annexed hereto as Exhibit 4(l),
together with registration rights granted pursuant to the Registration Rights
Agreement.
m. LISTING OF COMMON STOCK. The Company shall (a) as soon as
practicable, prepare and file with the Nasdaq Small Cap Market (as well as any
other national securities exchange, market or trading facility on which the
Common Stock is then listed) an additional shares listing application covering
the amount of shares of Common Stock issued upon the conversion of the Series E
Preferred Stock or the exercise of the Warrants, (b) take all steps necessary to
cause such shares to be approved for listing on the Nasdaq Small Cap Market (as
well as on any other national securities exchange, market or trading facility on
which the Common Stock is then listed) as soon as possible thereafter, and (c)
provide to the Buyer evidence of such listing, and the Company shall maintain
the listing of its Common Stock on such exchange or market. The Company will
comply with the listing and trading requirements of its Common Stock on Nasdaq
Small Cap Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Nasdaq Small Cap
Market. In the event the Company receives notification from Nasdaq or any other
controlling entity stating that the Company is not in compliance with the
listing qualifications of the Nasdaq Small Cap Market, the Company will take all
action necessary to bring the Company within compliance with all applicable
listing standards of the Nasdaq Small Cap Market.
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n. EXCHANGE ACT REGISTRATION. The Company will maintain the
registration of its Common Stock under Section 12 of the Exchange Act, will
comply in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any document (whether or not
permitted by Exchange Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Act.
o. CORPORATE EXISTENCE. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
p. NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION. The Company will
immediately notify the Buyer upon the occurrence of any of the following events
in respect of a registration statement or related prospectus in respect of an
offering of Registrable Securities (as defined in the Registration Rights
Agreement): (i) receipt of any request for additional information by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate. The Company will promptly make available to the
Buyer any such supplement or amendment to the related prospectus.
q. LEGAL OPINION. The Company's independent counsel shall deliver to
the Buyer upon execution of this Agreement, an opinion in the form of Exhibit
4(q). The Company will obtain for the Buyer, at the Company's expense, any and
all opinions of counsel which may be reasonably required in order to convert the
Preferred Stock and/or exercise the Warrants, including, but not limited to,
obtaining for the Buyer an opinion of counsel, subject only to receipt of a
notice of conversion, and/or subject only to a receipt of a notice of exercise
in the form annexed to the Warrant, and in connection with the resale of the
Shares by the Buyer directing the transfer agent to remove the legend from the
certificate.
r. PERMITTED OFFERINGS. Notwithstanding anything to the contrary set
forth herein (including, without limitation, Section 4(i) hereof), the Company
shall be permitted to issue and sell its Common Stock or securities, convertible
into its Common Stock in a registered offering or private placement, provided,
that the proceeds of such offering shall be applied first to redeem all the
Preferred Stock in accordance with the terms of the Certificate of Designation
and after all the Preferred Stock has been so redeemed, any remaining proceeds
may be used in accordance with the Company's direction.
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5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the Closing Date, the Company will irrevocably
instruct its transfer agent to issue Common Stock from time to time upon
conversion of the Preferred Stock and/or exercise of the Warrants in such
amounts as specified from time to time by the Company to the transfer agent,
bearing the restrictive legend specified in Section 4(d) of this Agreement prior
to registration of the Shares under the 1933 Act and resale of the Shares,
registered in the name of the Buyer or its nominee and in such denominations to
be specified by the Buyer in connection with each conversion of the Preferred
Stock and/or exercise of the Warrants. The Company warrants that no instruction
other than such instructions referred to in this Section 5 and stop transfer
instructions to give effect to Section 4(a) hereof prior to registration and
sale of the Shares under the 1933 Act will be given by the Company to the
transfer agent and that the Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement, the Registration Rights Agreement, and applicable law. Nothing in
this Section shall affect in any way the Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of the Securities. If the
Buyer provides the Company with an opinion of counsel reasonably satisfactory to
the Company that registration of a resale by the Buyer of any of the Securities
in accordance with clause (1)(B) of Section 4(a) of this Agreement is not
required under the 1933 Act, the Company shall (except as provided in clause (2)
of Section 4(a) of this Agreement) permit the transfer of the Shares and, in the
case of the Shares, promptly instruct the Company's transfer agent to issue one
or more certificates for Common Stock without legend in such name and in such
denominations as specified by the Buyer.
b. The Company will permit the Buyer to exercise its right to convert
the Preferred Stock by telecopying an executed and completed Notice of
Conversion to the Company and delivering within three (3) business days
thereafter, the original Notice of Conversion and the certificates representing
the Preferred Stock being converted to the Company by express courier, with a
copy to the transfer agent. Each date on which a Notice of Conversion is
telecopied to and received by the Company in accordance with the provisions
hereof shall be deemed a Conversion Date. The Company will transmit the
certificates representing the Converted Shares issuable upon conversion of any
Preferred Stock (together with certificates representing the Preferred Stock not
being so converted) to the Buyer via express courier, by electronic transfer or
otherwise, within three (3) business days after receipt by the Company of the
original Notice of Conversion and the certificate representing the Preferred
Stock being converted (the "Delivery Date").
c. The Company understands that a delay in the issuance of the Shares
of Common Stock beyond the Delivery Date could result in economic loss to the
Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer for late issuance of Shares upon Conversion in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond five (5) business days from
Delivery Date); provided, however, the Company shall not be obligated to make
any payment under this Section if the cause of such delay in the issuance of the
Shares of Common Stock is not caused by the Company or is the result of an act,
omission or circumstance beyond the control of the Company and/or its agents.
Late Payment For Each
$10,000 of Initial Preferred Stock
No. Business Days Late Principal Amount Being Converted
---------------------------------------------------------------
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1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each
Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Buyer's right to
pursue actual damages for the Company's failure to issue and deliver the Common
Stock to the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails for any reason to
effect delivery of such shares of Common Stock within five (5) business days
after the Delivery Date, the Buyer will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company
whereupon the Company and the Buyer shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion.
d. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Buyer and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of the
Buyer's Prime Broker with DTC through its Deposit Withdrawal Agent Commission
system.
6. DELIVERY INSTRUCTIONS.
The Preferred Stock shall be delivered by the Company to the
Escrow Agent pursuant to Section 1(b) hereof, on a delivery against payment
basis on the Closing Date.
7. CLOSING DATE.
a. The date and time of the issuance and sale of the Preferred Stock
("Closing Date") shall occur no later than 1:00 P.M., New York time on the date
of the fulfillment or waiver of all of the closing conditions pursuant to
Sections 8 and 9, or such other mutually agreed to time. The closing shall occur
on such date at the offices of the Escrow Agent. Notwithstanding anything to the
contrary contained herein, the Escrow Agent will be authorized to release the
funds representing the Purchase Price for the Preferred Stock and the Warrants,
and the Preferred Stock and the Warrants only upon satisfaction of each of the
conditions set forth in Sections 8 and 9 hereof.
E-35
b. Notwithstanding anything to the contrary contained in Section 7(a),
the Closing Date shall be upon the execution by the parties of this Agreement,
and the payment of the Purchase Price and the delivery of the original stock
certificates evidencing the Preferred Stock and the Warrants; provided, that the
Closing Date is a business day, and, if not, then the immediately following
business day.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Preferred Stock and the Warrants on the Closing Date to the Buyer pursuant
to this Agreement is conditioned upon:
a. Acceptance by the Buyer of this Agreement as evidenced by execution
of this Agreement and all agreements annexed hereto by the Buyer for at least
$2,000,000 of Preferred Stock (or such lesser amount as the Company, in its sole
discretion, shall determine);
b. Delivery by the Buyer to the Escrow Agent of good funds as payment
in full of an amount equal to the Purchase Price for the Preferred Stock and the
Warrants in accordance with Section 1(c) hereof;
c. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Buyer contained in this Agreement as if
made on the Closing Date, except for representation and warranties that are
expressly made as of a particular date, and the performance by the Buyer on or
before the Closing Date of all covenants and agreements of the Buyer required to
be performed on or before the Closing Date;
d. There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
9. CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE.
The Company understands that each Buyer's obligation to
purchase the Preferred Stock on the Closing Date is conditioned upon:
a. Acceptance by the Company of an Agreement for the sale of Preferred
Stock and the Warrants, as evidenced by execution of this Agreement and all
agreements annexed hereto by the Company;
b. Delivery by the Company to the Escrow Agent of the original shares
of Preferred Stock and the Warrants in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date, except for representation and warranties that are
expressly made as of a particular date, and the performance by the Company on or
before the Closing Date of all covenants, agreements and conditions of the
Company required by this Agreement, the Registration Rights Agreement, the
Escrow Agreement and the Warrants to be performed on or before the Closing Date;
and
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d. On the Closing Date, the Buyer having received an opinion of counsel
for the Company, dated as of such Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in Exhibit 4(q)
attached hereto, and the Registration Rights Agreement annexed hereto as Exhibit
4(e).
e. The Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the Preferred Stock and the
Warrants, or shall have the availability of exemptions therefrom. The sale and
issuance of the Preferred Stock and the Warrants shall be legally permitted by
all laws and regulations to which the Company is subject.
f. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that materially
prohibits or directly, materially and adversely affects any of the transactions
contemplated by this Agreement, and no proceeding shall have been commenced that
may have the effect of materially prohibiting or adversely affecting any of the
transactions contemplated by this Agreement.
g. The trading of the Common Stock is not suspended by the SEC, the
Nasdaq Small Cap Market or such other exchange, and the Common Stock shall have
been approved for listing or quotation on and shall not have been delisted from
the Nasdaq Small Cap Market. The issuance of shares of Preferred Stock and the
Warrants with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Nasdaq Small Cap Market.
h. The parties hereto shall have entered into the Escrow Agreement to
hold the Preferred Stock and the Warrants issuable upon the Closing Date and the
Purchase Prices due hereunder, which shall remain in full force and effect as of
the Closing Date.
i. On the Closing Date the Company will deliver a certificate of an
officer of the Company confirming the satisfaction of the conditions set forth
in Sections 9(c) and (f) hereof; provided that the statements regarding
compliance with Section 9(f) shall be limited to rules, regulations, orders,
executive degrees, rulings, injunctions or proceedings applicable to the
Company.
10. GOVERNING LAW; SPECIFIC PERFORMANCE.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without giving effect to the
principles thereof regarding the conflict of laws. Each of the parties consents
to the exclusive jurisdiction of the federal courts whose districts encompass
any part of the State of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS, to the
bringing of any such proceeding in such jurisdictions. Each party waives its
right to a trial by jury. Each party to this Agreement irrevocably consents to
the service of process in any such proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, to such party at its address
set forth herein. Nothing herein shall affect the right of any party to serve
process in any other manner permitted by law.
11. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given, (i) on the date delivered, (a) by personal delivery, or (b) if advance
copy is given by fax, (ii) seven business days after deposit in the United
States
E-37
Postal Service by regular or certified mail, or (iii) three business days
mailing by international express courier, with postage and fees prepaid,
addressed to each of the other parties thereunto entitled at the following
addresses, or at such other addresses as a party may designate by ten days
advance written notice to each of the other parties hereto.
COMPANY: XYBERNAUT CORPORATION
00000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxx, Vice Chairman
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx Flattau & Klimpl, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxx Xxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
BUYER: Forest Avenue LLC
c/o Citco Trustees (Cayman) Limited
Commercial Centre
PO Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Attention: Bas Horsten
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxxx & Prager
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telecopier No.: (000) 000-0000
ESCROW AGENT: Xxxxxx Xxxxxx Flattau & Klimpl, LLP
0000 Xxxxxx xx xxx Xxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No. (000) 000-0000
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
representations and warranties shall survive the execution and delivery hereof
of this Agreement and the delivery of the Preferred Stock and the Purchase
Price, and shall inure to the benefit of the Buyer and their respective
successors and assigns. The Company's covenants set forth in Section 5 hereof
shall terminate
E-38
upon the redemption of all of the Preferred Stock in accordance with the
Company's Certificate of Designation for the Preferred Stock.
13. MISCELLANEOUS
a. INDEMNIFICATION. The Company agrees to indemnify and hold harmless the
Buyer and each officer, director of the Buyer or person, if any, who controls
the Buyer within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), to which the Buyer may become subject,
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
the breach of any term of this Agreement. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
b. ASSIGNMENT. The provisions of this Agreement shall be binding upon and
inure to the benefit of, the parties and their respective successors and
assigns.
c. COUNTERPARTS; FACSIMILE; AMENDMENTS. This Agreement may be executed in
multiple counterparts, each of which may be executed by less than all of the
parties and shall be deemed to be an original instrument which shall be
enforceable against the parties actually executing such counterparts and all of
which together shall constitute one and the same instrument. Except as otherwise
stated herein, in lieu of the original documents, a facsimile transmission or
copy of the original documents shall be as effective and enforceable as the
original. This Agreement may be amended only by a writing executed by the
Company on the one hand, and the Buyer, on the other hand.
d. ENTIRE AGREEMENT. This Agreement and the Exhibits, which include, but
are not limited to the Certificate of Designation, the Warrant, the Escrow
Agreement, and the Registration Rights Agreement, set forth the entire agreement
and understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits and Schedules to
this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as is fully set forth herein.
e. SEVERABILITY. In the event that any provision of this Agreement becomes
or is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party
f. TITLE AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
g. REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied upon
for the determination of the trading price or trading volume of the Common Stock
on any given trading day for the purposes of this Agreement and all Exhibits
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Buyer and the Company shall be required to employ any other reporting
entity.
E-39
h. REPLACEMENT OF CERTIFICATES. Upon (i) receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of a
certificate representing the Preferred Stock, the Warrants, or shares of Common
Stock underlying the Preferred Stock or the Warrants, and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company or (iii) in the case of any such mutilation, on surrender and
cancellation of such certificate, the Company at its expense will execute and
deliver, in lieu thereof, a new certificate of like tenor.
i. PUBLICITY. The Company and the Buyer shall consult with each other in
issuing any press releases or otherwise making public statements with respect to
the transactions contemplated hereby and no party shall issue any such press
release or otherwise make any such public statement without the prior written
consent of the other parties, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
parties with prior notice of such public statement. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of the Buyer without
the prior written consent of the Buyer, except to the extent required by law, in
which case the Company shall provide the Buyer with prior written notice of such
public disclosure.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers thereunto duly authorized as of the date
first above written.
XYBERNAUT CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
-------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice Chairman
FOREST AVENUE LLC
By:
-------------------------------
Name:
Title:
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