SERVICE AGREEMENT
SERVICE AGREEMENT dated as September 10, 2002 (this "Agreement"), by and between
ELITE FINANCIAL COMMUNICATIONS GROUP, LLC, located at 000 Xxxxxxxx Xxxxxxxxx
Xxxxx, Xxxxx 000, Xxxx Xxxx, Xxxxxxx 00000 (hereinafter referred to as "ELITE")
and XYBERNAUT CORPORATION, a Delaware corporation, located at 00000 Xxxx Xxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, (hereinafter referred to as the "Company").
WITNESSETH:
For and in consideration of the mutual promises and covenants contained herein,
the parties hereto agree as follows:
1. EMPLOYMENT
The Company hereby retains the services of ELITE, as an independent contractor,
to perform the duties and obligations specified herein for the Company and ELITE
agrees to perform such duties and obligations hereunder, as an independent
contractor, to the Company upon the terms and conditions hereinafter set forth.
2. TERM
The term of this Agreement shall be for twelve (12) months, subject to earlier
termination as provided for herein (the "Term"). The Company shall have the
right to terminate this Agreement upon not less than ten (10) days prior written
notice to ELITE at any time after ninety (90) days from the date hereof.
3. DUTIES AND OBLIGATIONS OF ELITE
During the Term of the engagement of ELITE hereunder, ELITE shall do the
following:
3.1 ELITE will review and analyze various aspects of the Company's goals
and make recommendations on feasibility and achievement of desired
goals.
3.2 Through its Tele-Market Relations Group, ELITE will provide exposure
to its network of firms and brokers that may be interested in
information regarding the Company. ELITE will create, build and
continually enhance a database of all brokers, investors, analysts and
media contacts who have expressed an interest in receiving ongoing
information on the Company and manage the ongoing distribution of news
announcements and/or other Company approved communications.
3.3 At the Company's request, ELITE will be available to field any calls
from firms, individual investors/shareholders and brokers inquiring
about the Company. In addition, ELITE, at the request of the Company,
will assist the Company in preparing its quarterly and annual
communications relative to its financial results and coordinate
corresponding news announcements, conference calls and simulcasts on
the Internet, all in accordance with all applicable laws and
regulations, including, without limitation, Regulation FD.
3.4 ELITE will feature the Company on the Internet via ELITE's home web
site (xxx.xxxx.xxx) within the Elite Financial Forum ------------
which will feature comprehensive information relative to the Company's
fundamental and technical strengths, as well as industry and corporate
overviews; management biographies; stock trading history; market
making activity; conference call/webcast archives; and other
information meaningful to the investment community. The Forum will be
updated routinely and provide for site visitors to request ongoing
information about the Company as it is released. All information
posted about the Company will be subject to the Company's prior
written approval, and any information that the Company requests to be
deleted will be immediately deleted by ELITE.
3.5 ELITE shall assist the Company in preparing and releasing all news
announcements. The Company shall make all final determination as to
the contents of each press release. The Company shall be solely
responsible for paying all fees associated with the actual release(s)
through BusinessWire, PR Newswire, or any other comparable news
dissemination source.
3.6 ELITE shall assist the Company in obtaining coverage in both national
and industry publications, in financial newsletters, on financial
radio and television programming and via traditional press mediums.
Specifically, ELITE will facilitate an ongoing outreach program to an
intelligently targeted universe of media professionals. Further, ELITE
will track, for the Company's benefit, published articles and in
association with Burrelles provide monthly clippings of those
articles/mentions featuring the Company.
3.7 At the Company's request, assist the Company in obtaining analyst
coverage.
4. ELITE'S COMPENSATION
4.1 $5,000 cash per month, with the first payment immediately following
the execution of this Agreement and subsequent payments due every 30
days thereafter during the Term of this Agreement.
4.2 ELITE would also be entitled to receive a Warrant to purchase up to
200,000 shares of the Company's common stock (the "Warrants"),
exercisable as follows:
4.2.1 25,000 shares exercisable at $0.50 per share, which shall vest
immediately.
4.2.2 25,000 shares exercisable at $0.60 per share, which shall vest
on the 91st day following execution of this Agreement;
4.2.3 50,000 shares exercisable at $0.70 per share, which shall vest
on the 181st day following execution of this Agreement; and
4.2.4 50,000 shares exercisable at $0.80 per share, which shall vest
on the 271st day following execution of this Agreement.
4.2.5 50,000 shall be exercisable at $1.00 per share and will vest on
the one year anniversary of this Agreement.
Any Warrants which are not vested at the time of the termination of this
Agreement shall automatically be cancelled and shall be null and void.
The Company shall agree to issue ELITE piggyback registration rights for the
shares of common stock underlying the Warrants, whereby these shares will be
registered for resale by ELITE on the first applicable registration statement
(other than a registration statement on Forms X-0, X-0 or any comparable form)
filed by the Company with the U.S. Securities & Exchange Commission. The
Warrants shall, expire twenty-four (24) months from the effective date of the
registration statement registering the shares of common stock underlying the
Warrants. The piggyback registration rights granted to ELITE shall be subject to
standard underwriter cut-backs and standard black-out periods.
4.3 In order to induce the Company to issue the Warranty to ELITE, ELITE
hereby represents and warrants to the Company as follows:
4.3.1 ELITE is aware of what constitutes an "accredited investor" as
that term is defined under Regulation D promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), and
under applicable state securities laws, and ELITE represents
and warrants that is an "accredited investor" for purposes of
Regulation D and such state securities laws.
4.3.2 ELITE acknowledges that the Warrants and the shares of common
stock underlying the Warrants are a speculative investment and
involves a high degree of risk, and that the Company makes no
assurances whatsoever concerning the present or prospective
value of its common stock. ELITE is able to bear the economic
risks of an investment in the Company and,
Page 2 of 7 Initial Company ______ Initial ELITE _____
consequently, without limiting the generality of the foregoing,
is able to hold the Warrants and the shares of common stock
underlying the Warrants for an indefinite period of time and
has a sufficient net worth to sustain a loss of its entire
investment.
4.3.3 ELITE is acquiring the Warrants for ELITE's own account for
investment and not with a view to or for resale in connection
with any distribution of the Warrants or the shares of common
stock underlying the Warrants. ELITE has not offered or sold
any portion of the shares of common stock underlying the
Warrants and has no present intention of dividing the shares of
common stock underlying the Warrants with others or of selling,
distributing or otherwise disposing of any portion of the
shares of common stock underlying the Warrants either currently
or after the passage of a fixed or determinable period of time
or upon the occurrence or non-occurrence of any predetermined
event or circumstance.
4.3.4 ELITE understands that the issuance of the shares of common
stock underlying the Warrants has not been registered under the
Securities Act and that the Warrants and the shares of common
stock underlying the Warrants have been issued in reliance upon
an exemption therefrom for non-public limited offerings. ELITE
acknowledges that the Warrants and the shares of common stock
underlying the Warrants constitute "restricted securities"
under the Securities Act and they may not be sold, transferred,
assigned, pledged or otherwise disposed of, except pursuant to
a registration statement that is declared effective under the
Securities Act, or an exemption from registration under the
Securities Act as determined by the Company's legal counsel.
ELITE further acknowledges and agrees that the Company will
place an appropriate restrictive legend on the certificate for
the Warrants and the shares of common stock underlying the
Warrants, as applicable, to comply with the Securities Act and
to identify the Warrants and the shares of common stock
underlying the Warrants as "restricted securities".
4.3.5 ELITE further acknowledges that no United States federal agency
(including, without limitation, the SEC), state agency or other
similar agency or regulatory authority of any other country,
has reviewed, approved, passed upon or made any recommendation
or endorsement regarding the Company or the Warrants and the
shares of common stock underlying the Warrants.
4.3.6 ELITE acknowledges that the Company is relying on the accuracy
of the foregoing representations and warranties in issuing the
Warrants to ELITE.
5. ELITE'S EXPENSES AND COSTS
The Company shall pay all reasonable out-of-pocket costs and expenses incurred
by ELITE, in carrying out its duties and obligations pursuant to the provisions
of this Agreement, excluding ELITE's general and administrative expenses and
costs, but including and not limited to the following costs and expenses;
provided that all costs and expense items in excess of $1.00 must be approved by
the Company in writing prior to ELITE's incurrence of the same:
5.1 Travel expenses, transportation, lodging and food expenses.
5.2 Seminars, expositions, money and investment shows.
5.3 Radio and television time and print media advertising costs, when
applicable.
5.4 Costs of due diligence meetings at the Company's offices, if
applicable.
Page 3 of 7 Initial Company ______ Initial ELITE _____
5.5 Printing and publication costs of brochures and marketing materials
which are not supplied by the Company.
5.6 Duplicating costs for the Company annual reports, quarterly reports,
and/or other shareholder communication collateral material which is
not supplied by the Company.
6. COMPANY'S DUTIES AND OBLIGATIONS
The Company shall have the following duties and obligations under this
Agreement:
6.1 Cooperate with the reasonable requests of ELITE so as to enable ELITE
to perform its obligations under this Agreement.
6.2 Within ten (10) days after the date of execution of this Agreement to
deliver to ELITE a complete due diligence package on the Company,
including all of the Company's filings with the U.S. Securities and
Exchange Commission within the last twelve months; the last six (6)
months of press announcements on the Company; and all other relevant
materials with respect to such filings, including, but not limited to,
corporate reports, brochures, and the like, and a list of analysts and
or fund managers, who have been following the Company.
6.3 The Company will act diligently and promptly in reviewing materials
submitted to it from time to time by ELITE and inform ELITE of any
inaccuracies contained therein prior to the dissemination of such
materials.
6.4 Promptly pay all Company pre-approved costs and expenses incurred by
ELITE under the provisions of this Agreement when presented with
invoices for the same by ELITE.
6.5 Promptly pay the compensation due ELITE under the provisions of this
Agreement, and as and when due in accordance with this Agreement.
7. NONDISCLOSURE
7.1 Except as may be required by law or regulation, the Company and ELITE,
their respective officers, directors, employees, agents and affiliates
shall not disclose the contents and provisions of this Agreement to
any individual or entity without the other's prior written consent
(which consent shall not be unreasonably withheld or delayed), other
than to their respective legal counsel, accountants and other persons
performing investment banking, financial, or related functions who
agree to be bound by the provisions of this Section 7.
7.2 ELITE agrees that it shall not, directly or indirectly, use, or
disclose to any third party any Confidential Information. For purposes
of this Agreement, the term "Confidential Information" shall mean all
confidential information regarding the Company, including, but not
limited to, customer lists, vendor lists, product lists, price lists,
product strategies, sales reports, financial data and reports,
marketing and sales plans, strategies and procedures, pricing
strategies, purchasing and sales strategies, operational techniques,
business plans and systems, quality control procedures and systems,
internal control procedures, accounting and reporting systems, special
projects, employee compensation, personnel and any other records,
intellectual property rights and intellectual property strategies,
applications or other information which is not in the pubic domain or
is otherwise proprietary to the Company.
7.3 It is expressly acknowledged and agreed by ELITE that its obligations
set forth in Section 7.2 were an inducement to the Company to enter
into this Agreement and that the scope of the provisions set forth in
this Section 7 are in each case reasonable and necessary in light of
the circumstances. If, for any reason, any aspect of any provision set
forth in Section 7.2 is determined by a court of competent
jurisdiction, to be unreasonable, illegal, invalid or unenforceable,
any such provision shall, to the fullest extent possible, be modified
by the court to the minimum extent required by applicable law to make
the provisions legal, valid and enforceable to the fullest extent
permitted by applicable law. ELITE agrees that the Company shall be
entitled to enforce the provisions of Section 7.2
Page 4 of 7 Initial Company ______ Initial ELITE _____
through the use of all remedies available at law or in equity,
including, but not limited to, obtaining a court order, an injunction
(both permanent and temporary) or other equitable relief, without the
Company being required to post a bond or other security or prove any
amount of actual damages.
8. TERMINATION
8.1 The Company or ELITE, as applicable, shall have the right to terminate
the engagement of ELITE hereunder prior to the end of the Term hereof
upon prior written notice to the other party hereto upon the
occurrence of any of the following events:
8.1.1 a breach by such other party of any of its material agreements
and/or covenants contained herein which breach is not cured to
the reasonable satisfaction of the Company or ELITE, as
applicable, within ten (10) days of written notice from the
non-breaching party of the occurrence of such breach; or
8.1.2 any representation or warranty made by such other party in this
Agreement shall be, materially false or misleading as of the
time made.
8.2 Either the Company or ELITE, as applicable, shall be entitled to
terminate the engagement of ELITE hereunder upon the occurrence with
respect to the other party of any of the following: (i) the
institution against the Company or ELITE, as applicable, of any
proceedings under any federal or state law for the relief of debtors
or relating to insolvency, reorganization or moratorium, including,
without limitation, the filing by or against the Company or ELITE, as
applicable, of a voluntary or involuntary petition under the federal
bankruptcy law, which proceedings, if involuntary, are not dismissed
within sixty (60) calendar days after the filing thereof, (ii) an
adjudication of the Company or ELITE, as applicable, as being
insolvent or bankrupt; (iii) an assignment of all or a substantial
portion of the assets of the Company or ELITE, as applicable, for the
benefit of creditors; (iv) the appointment of a receiver, trustee,
conservator or similar official of any substantial portion of the
assets of the Company or ELITE, as applicable, which appointment, if
obtained ex parte is not dismissed within sixty (60) calendar days
thereafter; or (v) the seizure by a sheriff, receiver, trustee,
conservator or similar official of any substantial portion of the
assets of The Company, as applicable, to pay such its debts as they
become due.
8.3 Notwithstanding a termination of this Agreement, the non-breaching
party shall retain all of its other remedies under applicable law and
in equity.
9. COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to ELITE for the purpose of inducing ELITE
to enter into and consummate this Agreement as follows:
9.1 The Company has the power and authority to execute, deliver and
perform under this Agreement.
9.2 The execution and delivery by the Company of this Agreement have been
duly and validly authorized by all requisite action by the Company. No
license, consent or approval of any form is required for the Company's
execution and delivery of this Agreement.
9.3 No representation or warranty by the Company in this Agreement and no
information in any statement, certificate, exhibit, schedule or other
document furnished, or to be furnished by the Company to ELITE
pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading.
Page 5 of 7 Initial Company ______ Initial ELITE _____
10. ELITE'S REPRESENTATIONS AND WARRANTIES
ELITE represents and warrants to the Company for the purpose of inducing ELITE
to enter into and consummate this Agreement as follows:
10.1 ELITE has the power and authority to execute, deliver and perform
under this Agreement.
10.2 The execution and delivery by ELITE of this Agreement have been duly
and validly authorized by all requisite action by ELITE. No license,
consent or approval of any form is required for ELITE's execution and
delivery of this Agreement.
10.3 No representation or warranty by ELITE in this Agreement and no
information in any statement, certificate, exhibit, schedule or other
document furnished, or to be furnished by ELITE to the Company
pursuant hereto, or in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading.
11. MISCELLANEOUS
11.1 Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be deemed to have been
duly given when delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid to the
parties hereto at their addresses first above written or by facsimile
transmission during regular business hours at the facsimile numbers
set forth on Schedule 1 attached hereto. Any notice or communication
shall be effective upon receipt by the intended recipient. Either
party may change its address for the purpose of this paragraph by
written notice similarly given.
11.2 Entire Agreement. This Agreement sets forth the entire understanding
and agreement between the parties hereto with respect to the subject
matter hereof and it supersedes all prior and/or contemporaneous
understandings and agreements (whether written or oral) with respect
to such subject matter, all of which are merged herein. There are no
covenants, promises, agreements, conditions, understandings,
representations or warranties with respect to the subject matter
hereof, except those expressly set forth herein. All indemnification
obligations of the parties hereunder shall survive the expiration or
termination of this Agreement.
11.3 Amendment of Agreement. This Agreement may only be altered or amended,
in whole or in part, in a writing signed by each of the parties.
11.4 Waiver. No waiver of any breach or condition of this Agreement shall
be deemed to be a waiver of any other subsequent breach or condition,
whether of a like or different nature, unless such shall be signed by
the person making such waiver and/or which so provides by its terms.
11.5 Captions. The captions appearing in this Agreement are inserted as a
matter of convenience and for reference and in no way affect the
interpretation or construction of this Agreement.
11.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference
to its conflicts of laws principles.
11.7 Benefits. This Agreement shall inure to the benefit of and be binding
upon the parties hereto, their heirs, personal representatives,
successors and assigns. This Agreement may not be assigned by ELITE
nor may any of its duties hereunder be delegated without the prior
written consent of the Company.
11.8 Severability. If any provision of this Agreement shall be held to be
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall attach only to such provision and shall not in
any way render invalid or unenforceable any other provisions of this
Agreement, and this Agreement shall be carried out as if such invalid
or unenforceable provision were not contained herein.
Page 6 of 7 Initial Company ______ Initial ELITE _____
11.9 Arbitration. Any controversy, dispute or claim arising out of or
relating to this Agreement or the breach thereof shall be settled by
binding arbitration. Arbitration proceedings shall be conducted in
accordance with the rules then prevailing of the American Arbitration
Association (the "AAA") or any successor thereto and shall be
conducted in New York, New York. The award of the Arbitration shall be
conclusive, final binding on the Parties. Judgment may be entered upon
an arbitration award or in a court of competent jurisdiction and
confirmed by such court. Costs of arbitration, reasonable attorney's
fees of the parties, together with all other expenses, shall be paid
as provided in the Arbitration award. The arbitration shall be
conducted by one arbitrator chosen from a panel designated by the AAA.
11.10 Multiple Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all
of such counterparts shall constitute one (1) instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written:
ELITE FINANCIAL COMMUNICATIONS GROUP, LLC
BY:
------------------------------------
NAME
TITLE:
XYBERNAUT CORPORATION
BY:
------------------------------------
NAME
TITLE:
Page 7 of 7 Initial Company ______ Initial ELITE _____
