REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of the 13th day of
April, 1998, among the entities listed on Schedule A (collectively referred to
as the "Investors"), Settondown Capital International Ltd. (the "Placement
Agent", along with the Investor also referred to as the "Holders") located at
Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx, X.X. Xxx X. 0000, Xxxxxx, Bahamas, and
XYBERNAUT CORPORATION, a corporation incorporated under the laws of the state of
Delaware, and having its principle place of business at 00000 Xxxx Xxxxx Xxxxxx,
Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000 (the "Company").
WHEREAS, the Investors are purchasing from the Company, pursuant to
a Private Equity Line of Credit Agreement dated the date hereof (the "Equity
Line Agreement"), an aggregate of up to Eleven Million ($11,000,000) Dollars
principal amount of shares of Common Stock $0.01 par value, a Warrant A to
purchase 20,000 shares of the Company's Common Stock, and a Warrant B to
purchase 20,000 shares of the Company's Common Stock (plus such additional
shares of Common Stock as set forth in the Equity Line Agreement); and
WHEREAS, the Company shall issue to the Placement Agent, in return
for services rendered, the following securities: (a) upon the Closing for the
Initial Shares, (i) up to 50,000 shares of Common Stock (restricted as set forth
in Section 13.7 (i) of the Equity Line Agreement), and (ii) a Warrant A to
purchase 20,000 shares of Common Stock; and (b) upon the Closing of each Put,
five (5%) percent of that number of Put Shares issued on the Closing of each Put
(which shall not be included in the definition of Registrable Securities below);
and
WHEREAS, the Company desires to grant to the Holders the
registration rights set forth herein with respect to the shares of Common Stock
and shares of Common Stock underlying both Warrants A and B (plus such
additional shares of Common Stock issuable pursuant to the terms of the Equity
Line Agreement, collectively hereinafter referred to as the "Stock" or
"Securities" of the Company). All capitalized terms not defined herein shall
have that meaning as set forth in the Equity Line Agreement.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
"Registrable Security" means the Securities; provided, however, that with
respect to any particular Registrable Security, such security shall cease to be
a Registrable Security when, as of the date of determination, (i) it has been
effectively registered under the Securities Act of 1933, as amended (the "1933
Act") and disposed of pursuant thereto, (ii) registration under the 1933 Act is
no longer required for the immediate public distribution of such security as a
result of the provisions of Rule 144 promulgated under the 1933 Act, or (iii) it
has ceased to be outstanding. The term "Registrable Securities" means any and/or
all of the securities falling within the foregoing definition of a "Registrable
Security." In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of "Registrable Security"
as is appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Section 1.
Section 2. Restrictions on Transfer. The Holders acknowledge and
understand that prior to the registration of the Securities as provided herein,
the Securities are "restricted securities" as defined in Rule 144
promulgated under the Act. The Holders understand that no disposition or
transfer of the Securities may be made by the Holders in the absence of (i) an
opinion of counsel to the Holders that such transfer may be made without
registration under the 1933 Act or (ii) such registration. The Placement Agent
agrees that the shares of Common Stock it shall receive on the Subscription Date
shall be subject to a one-year lock up following the Subscription Date.
Section 3. Registration Rights.
(a) The Company agrees that it will prepare and file
with the Securities and Exchange Commission ("Commission"), within thirty (30)
days after the Subscription Date, a registration statement (on Form S-3) under
the 1933 Act (the "Registration Statement"), at the sole expense of the Company
(except as provided in Section 3(c) hereof), in respect of all holders of
Registrable Securities, so as to permit a resale of the Registrable Securities
under the Act.
The Company shall use its best efforts to cause the
Registration Statement to become effective within ninety (90) days from the
Subscription Date. The number of shares designated in the Registration Statement
to be registered shall be the total of: (i) one hundred fifty (150%) percent of
the number of Initial Shares; (ii) one hundred (100%) percent of the number of
Warrant Shares if they were issued on the day before the filing of the
Registration Statement; and (iii) such additional number of Put Shares deemed
reasonably necessary by the Company.
(b) The Company will maintain the effectiveness the
Registration Statement or post-effective amendment filed under this Section 3
hereof current under the 1933 Act until the earlier of (i) the date that all of
the Registrable Securities have been sold pursuant to the Registration
Statement, (ii) the date the holders thereof receive an opinion of counsel that
all of the Registrable Securities may be sold under the provisions of Rule 144
or (iii) five and one half years after the Subscription Date.
(c) All fees, disbursements and out-of-pocket expenses
and costs incurred by the Company in connection with the preparation and filing
of the Registration Statement under subparagraph 3(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees) shall be borne by the Company. The Holder shall bear the cost
of underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel. The
Company shall qualify any of the securities for sale in such states as such
Holder reasonably designates and shall furnish indemnification in the manner
provided in Section 6 hereof. However, the Company shall not be required to
qualify any of the securities for sale in any state which will require an escrow
or other restriction relating to the Company and/or the sellers. The Company at
its expense will supply the Holder with copies of the Registration Statement and
the prospectus or offering circular included therein and other related documents
in such quantities as may be reasonably requested by the Holder.
(d) The Company shall not be required by this Section
3 to include a Holder's Registrable Securities in any Registration Statement
which is to be filed if, in the opinion of counsel for both the Holders and the
Company (or, should they not agree, in the opinion of another counsel
experienced in securities law matters acceptable to counsel for the Holders and
the Company) the proposed offering or other transfer as to which such
registration is requested is exempt from applicable federal and state securities
laws and would result in all Investors or transferees obtaining securities which
are not "restricted securities", as defined in Rule 144 under the 1933 Act.
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(e) In the event the Registration Statement to be
filed by the Company pursuant to Section 3(a) above is not filed with the
Commission within thirty (30) days from the Subscription Date and/or the
Registration Statement is not declared effective by the Commission within ninety
(90) days from the Subscription Date, then the Company will pay Holder (pro
rated on a daily basis), as liquidated damages for such failure and not as a
penalty, two (2%) percent of the Purchase Price of the then outstanding
Securities for every thirty (30) day period thereafter until the Registration
Statement has been filed and/or declared effective. Such payment of the
liquidated damages shall be made to the Holders in cash, immediately upon
demand, provided, however, that the payment of such liquidated damages shall not
relieve the Company from its obligations to register the Securities pursuant to
this Section.
If the Company does not remit the damages to the Holders
as set forth above, the Company will pay the Holders' reasonable costs of
collection, including attorneys fees, in addition to the liquidated damages. The
registration of the Securities pursuant to this provision shall not affect or
limit Holders' other rights or remedies as set forth in this Agreement.
(f) No provision contained herein shall preclude the
Company from selling securities pursuant to any Registration Statement in which
it is required to include Registrable Securities pursuant to this Section 3.
(g) If at any time or from time to time after the
effective date of the Registration Statement, the Company notifies the Holders
in writing of the existence of a Potential Material Event (as defined in Section
3(h) below), the Holders shall not offer or sell any Registrable Securities or
engage in any other transaction involving or relating to Registrable Securities,
from the time of the giving of notice with respect to a Potential Material Event
until such Holder receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event; provided, however, that the Company may not so
suspend the right to such holders of Securities for more than one (1) twenty
(20) day period in the aggregate during any twelve month period, during the
periods the Registration Statement is required to be in effect. If a Potential
Material Event shall occur prior to the date the Registration Statement is
filed, then the Company's obligation to file the Registration Statement shall be
delayed without penalty for not more than twenty (20) days. The Company must
give each Holder notice in writing at least two (2) business days prior to the
first day of the blackout period.
(h) "Potential Material Event" means any of the
following: (a) the possession by the Company of material information not ripe
for disclosure in a registration statement; or (b) any material engagement or
activity by the Company which would be adversely affected by disclosure in a
registration statement at such time, that the Registration Statement would be
materially misleading absent the inclusion of such information.
Section 4. Cooperation with Company. Holders will cooperate with the
Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Registrable Securities.
Section 5. Registration Procedures. If and whenever the Company is
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities under the Act, the Company shall (except as
otherwise provided in this Agreement), as expeditiously as possible:
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(a) prepare and file with the Commission such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Act with respect to the sale
or other disposition of all securities covered by such registration statement
whenever the Holder of such securities shall desire to sell or otherwise dispose
of the same (including prospectus supplements with respect to the sales of
securities from time to time in connection with a registration statement
pursuant to Rule 415 promulgated under the Act);
(b) furnish to each Holder such numbers of copies of a
summary prospectus or other prospectus, including a preliminary prospectus or
any amendment or supplement to any prospectus, in conformity with the
requirements of the Act, and such other documents, as such Holder may reasonably
request in order to facilitate the public sale or other disposition of the
securities owned by such Holder;
(c) register and qualify the securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Holders shall reasonably request (subject to the
limitations set forth in Section 3(d) above), and do any and all other acts and
things which may be necessary or advisable to enable each Holder to consummate
the public sale or other disposition in such jurisdiction of the securities
owned by such Holder, except that the Company shall not for any such purpose be
required to qualify to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified or to file therein any general consent to service
of process;
(d) list such securities on the NASDAQ Small Cap Stock
Market or other national securities exchange on which any securities of the
Company are then listed, if the listing of such securities is then permitted
under the rules of such exchange or NASDAQ;
(e) notify each Holder of Registrable Securities
covered by the Registration Statement, at any time when a prospectus relating
thereto covered by the Registration Statement is required to be delivered under
the Act, of the happening of any event of which it has knowledge as a result of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
Section 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless
the Holders and each person, if any, who controls each Holder within the meaning
of the 1933 Act ("Distributing Holder") 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 Distributing Holder may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, or any related preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Company (i) will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
preliminary
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prospectus, final prospectus, offering circular, notification or amendment or
supplement thereto in reliance upon, and in conformity with, written information
furnished to the Company by the Distributing Holder, specifically for use in the
preparation thereof, or (ii) cannot pay any amounts paid in settlement of any
loss, claim, damage or liability if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld. This
Section 6(a) shall not inure to the benefit of any Distributing Holder with
respect to any person asserting such loss, claim, damage or liability who
purchased the Registrable Securities which are the subject thereof if the
Distributing Holder failed to send orgive (in violation of the 1933 Act or the
rules and regulations promulgated thereunder) a copy of the prospectus contained
in such Registration Statement to such person at or prior to the written
confirmation of such person of the sale of such Registrable Securities, where
the Distributing Holder was obligated to do so under the 1933 Act or the rules
and regulations promulgated thereunder. This indemnity provision will be in
addition to any liability which the Company may otherwise have.
(b) Each Distributing Holder agrees that it will
indemnify and hold harmless the Company, and each officer, director of the
Company or person, if any, who controls the Company within the meaning of the
1933 Act, against any losses, claims, damages or liabilities (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 Company or any
such officer, director or controlling person may become subject under the 1933
Act or otherwise, insofar as such losses claims, damages or liabilities (or
actions in respect thereof); arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, or any related preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the
Registration Statement, preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto in reliance upon, and
in conformity with, written information furnished to the Company by such
Distributing Holder, specifically for use in the preparation thereof. This
indemnity provision will be in addition to any liability which the Distributing
Holder may otherwise have.
(c) Promptly after receipt by an indemnified party
under this Section 6 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than as to the particular item as to which
indemnification is then being sought solely pursuant to this Section 6. In case
any such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section 6 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that if the indemnified party is the Distributing Holder, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the
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indemnifying party, or (ii) the named parties to any such action (including any
impleaded parties) include both the Distributing Holder and the indemnifying
party and the Distributing Holder shall have been advised by such counsel that
there may be one or more legal defenses available to the indemnifying party
different from or in conflict with any legal defenses which may be available to
the Distributing Holder (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the Distributing Holder,
it being undertood, however, that the indemnifying party shall, in connection
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable only for the reasonable fees and expenses of one
separate firm of attorneys for the Distributing Holder, which firm shall be
designated in writing by the Distributing Holder). No settlement of any action
against an indemnified party shall be made without the prior written consent of
the indemnified party, which consent shall not be unreasonably withheld.
Section 7. Contribution. In order to provide for just and equitable
contribution under the 1933 Act in any case in which (i) the indemnified party
makes a claim for indemnification pursuant to Section 6 hereof but is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 6 hereof provide
for indemnification in such case, or (ii) contribution under the 1933 Act may be
required on the part of any indemnified party, then the Company and the
applicable Distributing Holder shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the applicable
Distributing Holder on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Holder agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section 7. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 7 shall be deemed to inclue any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
Section 8. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully
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prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to Xybernaut Corporation: Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxx
00000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Tele: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Xxxxxx Xxxx Xxxxxxxx, Esq.
Xxxxxx Xxxxxx Flattau & Klimpl, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Tele: (000) 000-0000
Fax: (000) 000-0000
If to the Investors at the addresses set forth on Schedule A
attached hereto.
If to the Placement Agent: Settondown Capital International Ltd.
Xxxxxxxxx Xxxxx, Xxxxxxxxx Xxxxxx,
X.X. Xxx X. 0000
Xxxxxx, Bahamas
with a copy to: Xxxxx X. Xxxxxxxxx, Esq.
(shall not constitute notice) Xxxxxxxxx, Xxxxxxxxx & Xxxx, LLP
00 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tele: (000) 000-0000
Fax: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section by giving at least ten (10) days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 9. Assignment. This Agreement is binding upon and inures to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. The rights granted the Holder under this Agreement shall not
be assigned without the written consent of the Company, which consent shall not
be unnecessarily withheld. In the event of a transfer of the rights granted
under this Agreement, the Holder agrees that the Company may require that the
transferee comply with reasonable conditions as determined in the discretion of
the Company.
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Section 10. 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 all parties.
Section 11. Termination of Registration Rights. The rights granted
pursuant to this Agreement shall terminate as to each Holder (and permitted
transferees or assignees) upon the occurrence of any of the following:
(a) all Holder's Securities subject to this Agreement have been
registered;
(b) all of such Holder's Securities subject to this Agreement may
be sold without such registration pursuant to Rule 144 promulgated by the SEC
pursuant to the Securities Act;
(c) all of such Holder's Securities subject to this Agreement can
be sold pursuant to Rule 144(k).
Section 12. Headings. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 13. Governing Law: Venue; Jurisdiction. This Agreement will
be construed and enforced in accordance with and governed by the laws of the
State of New York, except for matters arising under the Act, without reference
to principles of conflicts of law. Each of the parties consents to the
jurisdiction of the U.S. District Court sitting in the Southern District of the
State of New York or the state courts of the State of New York sitting in
Manhattan 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 hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. 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.
Section 14. Severability. If any provision of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceablity shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid or unenforceable
8
provision had never been contained herein. Terms not otherwise defined herein
shall be defined in accordance with the Agreement.
Section 15. Capitalized Terms. All capitalized terms not otherwise
defined herein shall have the meaning assigned to them in the Equity Line
Agreement.
Section 16. Entire Agreement. This Agreement, together with all
documents referenced herein, embody the entire agreement and understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all prior oral or written agreements and understandings relating to
the subject matter hereof. No statement, representation, warranty, covenant or
agreement of any kind not expressly set forth in this Agreement shall affect, or
be used to interpret, change or restrict, the express terms and provisions of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on the day and year first above written.
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
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