Exhibit 4.2
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR OTHER POLITICAL
SUBDIVISION OF THE UNITED STATES. THESE SECURITIES ARE BEING OFFERED PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD, TRANSFERRED OR OFFERED FOR RESALE OR
TRANSFER OR PLEDGED OR HYPOTHECATED, EXCEPT AS PERMITTED UNDER THE ACT PURSUANT
TO REGISTRATION OR EXEMPTION THEREFROM. THIS SUBSCRIPTION AGREEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
5% CONVERTIBLE PREFERRED STOCK AND COMMON STOCK
PURCHASE AGREEMENT
XYBERNAUT CORPORATION
THIS AGREEMENT is made as of the 15th day of May, 1998, among
Xybernaut Corporation, Nasdaq Symbol "XYBR" (the "Company"), a Delaware
corporation, with its principal office at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, and Libertyview Plus Fund, Libertyview Fund, LLC and CPR (USA) Inc.,
(each a "Purchaser"), with their principal office at c/o Libertyview Capital
Management, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and the Purchaser agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement:
"Agreement" means this 5% Convertible Preferred Stock and Common
Stock Purchase Agreement.
"Closing Date" means the date agreed to by the parties for the
delivery of the original stock certificate against a wire transfer of the funds
to the Company.
"Closing" means the completion of the purchase and sale of the
Shares on the Closing Date.
"Common Shares" means the shares of Common stock being issued and
sold pursuant to Section 2.2 hereof.
"Common Stock" means the Common Stock of the Company, $0.01 par
value per share.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to the Company.
"Convertible Preferred Stock" means the shares of Series C Preferred
Stock of the Company convertible into Common Stock of the Company as hereinafter
provided; including the Certificate of Designation designating the Series C
Preferred Stock.
"Conversion Price" means an amount equal to the lesser of (a) 100
percent of the average closing bid price of the Common Stock as reported by
NASDAQ or any successor exchange in which the Common Stock is listed for the
five (5) trading days preceding the Conversion Date, or (b) Four ($4.00)
Dollars.
"Conversion Shares" means the shares of Common Stock issued upon the
conversion of the Convertible Preferred Stock.
"Purchase Price" means the aggregate purchase price of the Shares
purchased.
"Shares" means, collectively, the shares of Common Shares and
Convertible Preferred Stock purchased pursuant to this Agreement.
Section 2. Authorization and Sale of Shares.
2.1 Authorization. Subject to the terms and conditions of this
Agreement, the Company has authorized the sale and issuance of the Shares.
2.2 Agreement to Sell and Purchase the Shares. The offer and sale
of the Shares are being made hereunder in reliance upon the provisions of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). The Company will sell and the Purchasers will buy Shares in
reliance upon the representations and warranties of the Company and Purchasers
contained in this Agreement, upon the terms and conditions hereinafter set
forth, 110,294 shares of Common Stock at a price of $3.40 per share (the "Common
Shares"), for an aggregate purchase price of $375,000 and 375 shares of
Convertible Preferred Stock for an aggregate purchase price of $375,000 based on
the purchase price of $1,000 per share. The Convertible Preferred Stock shall
pay a 5% cumulative dividend, payable in cash or Common Stock at the Conversion
Price, at the discretion of the Company, at the time of each conversion. The
purchase and sale of the Shares shall occur on the Closing Date.
2.3 Time and Place of Closing. The Closing shall be held at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP ("Escrow Agent"), ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, as promptly as practicable as agreed to by the
parties to this Agreement.
2.4 Payment and Delivery. At or prior to the Closing, the
following shall occur:
(a) Purchasers shall remit by wire transfer the Purchase
Price to Escrow Agent pursuant to the Escrow Agreement, dated May 15, 1998,
among the Company, Purchasers and Escrow Agent (the "Escrow Agreement"),
attached hereto as Attachment 1, as payment in full for the Shares.
(b) Company shall deliver or cause to be delivered to Escrow
Agent a certificate representing the Shares, registered in the name of Purchaser
(or any nominee designated by Purchaser on the Closing Date), free and clear of
all liens, claims, charges and encumbrances.
(c) Wire instructions for ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl,
LLP are as follows:
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Citibank, N.A.
ABA No. ▇▇▇▇▇▇▇▇▇
For Further Credit to
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP, Attorney Trust Account
Account No. ▇▇▇▇▇▇▇▇
All subscription funds shall be held in escrow by the Escrow Agent pursuant to
the terms and conditions set forth in the Escrow Agreement among the Company,
the Purchasers and the Escrow Agent.
Section 3. General Representations and Warranties of the Company.
The Company hereby represents and warrants to, and covenants with, the
Purchasers that the following are true and correct as of the date hereof and as
of the Closing Date.
3.1 Organization; Qualification. The Company is a corporation duly
organized and validly existing under the laws of the State of Delaware and is in
good standing under such laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets, and to carry on
its business as presently conducted. The Company is qualified to do business as
a foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except where
failure to so qualify would not have a material adverse effect on the Company.
3.2 Capitalization. The authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, $0.01 par value per share, and
6,000,000 shares of nonvoting Preferred Stock, $0.01 par value, of 3,000 shares
have been designated Series A Convertible Preferred Stock, par value $0.01 per
share, 4,180 have been designated as Series B Convertible Preferred Stock, par
value $.01 per share, and 375 have been designated as Series C Convertible
Preferred Stock, par value $.01 per share. As of May 15, 1998, none of such
Series A or Series B Preferred Stock is outstanding. All issued and outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. The Company will reserve from its authorized but
unissued shares of Common Stock a sufficient number of shares of Common Stock to
permit the conversion in full of the Convertible Preferred Stock subject of this
Agreement. As of the Closing Date, the Company had reserved sufficient shares of
Common Stock for issuance upon exercise of the Convertible Preferred Stock which
are convertible, at Purchaser's option, at the Conversion Price, as per Section
9 of this Agreement.
3.3 Authorization. The Company has all requisite corporate right,
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Shares and the performance of
the Company's obligations hereunder has been taken. This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company enforceable in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 7.3 of this Agreement.
Upon their issuance and delivery pursuant to this
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Agreement, the Shares will be validly issued, fully paid and nonassessable and
will be free of any liens or encumbrances; provided, however, that the Shares
are subject to restrictions on transfer under state and/or federal securities
laws. The issuance and sale of the Shares will not give rise to any preemptive
right or right of first refusal or right of participation on behalf of any
person.
3.4 No Conflict. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default, or give rise to a
right of termination, cancellation or acceleration of any material obligation or
to a loss of a material benefit, under, any provision of the Articles of
Incorporation, and any amendments thereto, Bylaws, Stockholders Agreements and
any amendments thereto of the Company or any material mortgage, indenture, lease
or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree statute, law, ordinance, rule or regulation applicable
to the Company, its properties or assets and which would have a material adverse
effect on the Company's business and financial condition.
3.5 Accuracy of Reports and Information. The Company is in full
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12 (g) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company has registered its Common Stock
pursuant to Section 12 of the Exchange Act and the Common Stock is listed and
trades on the Nasdaq National Small Cap Market.
The Company has filed all material required to be filed pursuant to
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
to sale of the Shares (or for such shorter period that the Company has been
required to file such material).
3.6 SEC Filings/Full Disclosure. Since completion of the Company's
initial public offering in July 1996, none of the Company's filings with the
Securities and Exchange Commission 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 light of the circumstances under
which they were made, not misleading. The Company has timely filed all requisite
forms, reports and exhibits thereto with the Securities and Exchange Commission.
There is no fact known to the Company (other than general economic
conditions known to the public generally) that has not been disclosed in writing
to the Purchasers which (i) could reasonably be expected to have a material
adverse effect on the business or financial condition, properties or assets of
the Company, or (ii) could reasonably be expected to materially and adversely
affect the ability of the Company to perform its obligations pursuant to this
Agreement.
3.7 Absence of Undisclosed Liabilities. The Company has no
material liabilities or obligations, absolute or contingent (individually or in
the aggregate), except as set forth in the financial statements or as incurred
in the ordinary course of business after the date of the financial statements.
3.8 Governmental Consent, etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Shares, or the consummation of any other transaction contemplated hereby, except
the filing with the SEC of a registration
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statement on Form S-3 for the purpose of registering the Conversion Shares
underlying the Convertible Preferred Stock.
3.9 Intellectual Property Rights. Except as disclosed in the Form
10-KSB, Form 10-QSBs and Form 8-Ks filed by the Company for a period of at least
twelve (12) months immediately preceding this offer (the "Reports"), the Company
has sufficient trademarks, trade names, patent rights, copyrights and licenses
to conduct its business as presently conducted in the Reports. To the Company's
knowledge, neither the Company nor its products is infringing or will infringe
any trademark, trade name, patent right, copyright, license, trade secret or
other similar right of others currently in existence; and there is no claim
being made against the Company regarding any trademark, trade name, patent,
copyright, license, trade secret or other intellectual property right which
could have a material adverse effect on the business or financial condition of
the Company.
3.10 Material Contracts. Except as set forth in the Reports, the
agreements to which the Company is a party described in the Reports are valid
agreements, in full force and effect the Company is not in material breach or
material default under any of such agreements.
3.11 Litigation. Except as disclosed in the Reports, there is no
action, proceeding or investigation pending, or to the Company's knowledge
threatened, against the Company which might result, either individually or in
the aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Company. The Company is not a party to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality.
3.12 Title to Assets. Except as set forth in the Reports, the
Company has good and marketable title to all properties and material assets
described in the Reports as owned by it, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest other than such as
are not material to the business of the Company.
3.13 Subsidiaries. Except as disclosed in the Reports, the Company
does not presently own or control, directly or indirectly, any interest in any
other corporation, partnership, association or other business entity.
3.14 Required Governmental Permits. The Company is in possession of
and operating in compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities which are material to the conduct of its business, all of which are
valid and in full force and effect.
3.15 Listing. The Company will maintain the listing of its Common
Stock on the Nasdaq National Small Cap Market or other organized United States
market or Quotation system.
3.16 Other Outstanding Securities/Financing Restrictions. Other
than warrants and options to acquire shares of Common Stock as disclosed in the
Reports, there are no other outstanding securities debt or equity presently
convertible into Common Stock. Other than as set forth in the Reports, the
Company has no outstanding restricted shares, or shares of Common Stock sold
under Regulation S, Regulation D or outstanding under any other exemption from
registration, which are available for sale as unrestricted ("free trading")
stock.
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3.17 Legal Opinion. Purchasers shall, upon purchase of the Shares,
receive an opinion letter from counsel to the Company, and the Company
represents that it will immediately obtain such an opinion from counsel to the
satisfaction of the Transfer Agent, to the effect that:
(i) The Company is incorporated and validly existing in the
jurisdiction of its incorporation. The Company and/or its subsidiaries are duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company and/or subsidiaries owns or leases properties,
maintains employees or conducts business, except for jurisdictions in which the
failure to so qualify would not have a material adverse effect on the Company,
and has all requisite corporate power and authority to own its properties and
conducts its business.
(ii) There is no action, proceeding or investigation pending,
or to such counsel's knowledge, threatened against the Company which might
result, either individually or in the aggregate, in any material adverse change
in the business or financial condition of the Company.
(iii) To counsel's knowledge, the Company is not a party to or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
(iv) To counsel's knowledge, there is no action, suit,
proceeding or investigation by the Company currently pending.
(v) The Common Shares and the Convertible Preferred Stock,
which shall be issued at the Closing, are duly authorized and validly issued
under the Company's Certificate of Incorporation.
(vi) This Purchase Agreement, the issuance of the Common
Shares, the Convertible Preferred Stock and the Conversion Shares have been duly
approved by all required corporate action and that all such securities, upon
delivery, shall be validly issued and outstanding, fully paid and nonassessable.
(vii) The issuance of the Shares will not violate the
applicable listing agreement between the Company and any securities exchange or
market on which the Company's securities are listed.
(viii)Assuming the accuracy of the representation and
warranties of the Company and the Purchasers set forth in this Purchase
Agreement, the offer, issuance and sale of the Common Shares, the Convertible
Preferred Stock and the Conversion Shares to be issued to the Purchasers
pursuant to this Purchase Agreement, are exempt from the registration
requirements of the Securities Act.
3.18 Use of Proceeds. The Company represents that the net proceeds
from this offering will be used for general corporate purposes.
3.19 Dilution. The Company is aware and acknowledges that
conversion of the Convertible Preferred Stock could cause dilution to existing
shareholders and could significantly increase the outstanding number of shares
of Common Stock.
Section 4. Representations, Warranties and Covenants of the
Purchasers . Each Purchaser represents and warrants to, and covenants with, the
Company that the following are true and correct as of the date hereof and as of
the Closing Date.
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4.1 Authority. The Purchaser's signatory has all right, power,
authority and capacity to execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 7.3 of this Agreement.
4.2 Investment Experience. Purchaser is an "accredited investor"
as defined in Rule 501(a) under the Securities Act. Purchaser is aware of the
Company's business and financial condition and has had access to and has
acquired sufficient information about the Company, including the Reports, to
reach an informed and knowledgeable decision to acquire the Shares. Purchaser
has such business and financial experience as is required to give it the
capacity to protect its own interests in connection with the purchase of the
Shares. Purchaser has the ability to bear the economic risk of Purchaser's
investment pursuant to this Purchase Agreement. Purchaser has not been organized
for the purpose of investing in securities of the Company, although such
investment is consistent with Purchaser's purpose.
4.3 Investment Intent. Without limiting its ability to resell the
Shares and the Conversion Shares pursuant to an effective registration
statement, Purchaser represents that it is purchasing the Shares for its own
account as principal for investment purposes. Purchaser understands that its
acquisition of the Shares has not been registered under the Securities Act or
registered or qualified under any State securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Purchaser's investment intent as expressed herein. Purchaser
will not, directly or indirectly, offer, sell, pledge, transfer, hypothecate or
otherwise dispose of (or solicit any offers to buy, purchaser or otherwise
acquire or take a pledge of) any of the Shares except in compliance with the
Securities Act and any applicable state securities laws, and the rules and
regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Shares may not be transferred, resold or
otherwise disposed of except in a transaction registered under the Securities
Act and any applicable State securities laws or unless an exemption from such
registration is available. Purchaser understands that the certificate(s)
evidencing the Shares will be imprinted with a legend that prohibits the
transfer of the Shares unless (i) they are registered or such registration is
not required, and (ii) if the transfer is pursuant to an exemption from
registration other than Rule 144 under the Securities Act and, if the Company
shall so request in writing, an opinion of counsel reasonably satisfactory to
the Company is obtained to the effect that the transaction is so exempt.
4.5 No Legal, Tax or Investment Advice. Purchaser understands that
nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. Purchaser has relied on, and has consulted with, such legal,
tax and investment advisors as it, in its sole discretion, has deemed necessary
or appropriate in connection with its purchase of the Shares.
4.6 Purchaser Review. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the Reports and the financial
statements contained therein. The Purchaser acknowledges that the Company has
made available to the Purchaser all documents and information that it has
requested relating to the Company and has provided answers to all of its
questions concerning the Company and the Shares.
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Nothing stated in the previous two sentences, however, shall be deemed to affect
the representations and warranties of the Company contained in this Agreement.
4.7 Restrictions on Conversion of Shares. The Purchaser or any
subsequent holder of the shares (the "Holder") shall be prohibited from
converting any portion of the Convertible Preferred Stock which would result in
the Purchaser or the Holder being deemed the beneficial owner, in accordance
with the provisions of Rule 13d-3 of the Exchange Act, of 4.99% or more of the
then issued and outstanding Common Stock of the Company.
Section 5. Conditions to the Purchaser's Obligation to Purchase. The
Company understands that each Purchaser's obligation to purchase the Shares is
conditioned upon:
(a) Acceptance by Purchaser of this Agreement for the purchase of
the Shares, as evidenced by the execution of this Agreement by an authorized
officer;
(b) Delivery of the Shares into Escrow;
(c) Execution and delivery by the Company of the Escrow Agreement
and the Registration Rights Agreement in the form of Attachment I and Attachment
11;
(d) Delivery of a filed Certificate of Designation; and
(e) Delivery of an Opinion of Counsel as per Section 3.17 herein.
Section 6. Conditions to Company's Obligation to Sell. Purchasers
understand that the Company's obligation to sell the Shares is conditioned upon:
(a) The receipt and acceptance by the Company of this Agreement
for all of the Shares as evidenced by execution of this Agreement by an
authorized officer.
(b) Delivery into escrow by Purchasers of good funds as payment in
full for the purchase of the Shares; and
(c) Execution and delivery by the Purchasers of the Escrow
Agreement and the Registration Rights Agreement in the forms of Attachment I and
Attachment II.
Section 7. Compliance with the Securities Act.
7.1 Registration Rights Agreement. The parties will enter into a
Registration Rights Agreement, annexed hereto as Attachment II.
7.2 Underwriter. The Company understands that the Purchasers
disclaim being an "underwriter" (as such term is defined under the Securities
Act and the rules and regulations promulgated thereunder (an "Underwriter")),
but Purchasers being deemed an Underwriter shall not relieve the Company of any
obligation it has hereunder, except as may be required by law.
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7.3 Indemnification. Each of the Company and the Purchasers agree
to indemnify the other and to hold the other harmless from and against any and
all losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty or covenant
made by it in this Agreement.
7.4 Information Available. So long as any registration statement
is effective covering the resale of the Common Shares and the Conversion Shares,
the Company will furnish to Purchasers :
(a) as soon as possible after available (but in the case of the
Company's Annual Report to Stockholders, within 150 days after the end of each
fiscal year of the Company), one copy of (i) its Annual Report to Stockholders
(which Annual report shall contain financial statements audited in accordance
with generally accepted accounting principles in the United States of America by
a national firm of certified public accountants); (ii) each of its Quarterly
Reports to Stockholders, and its Quarterly Reports on Form 10-QSB; and (iii) a
full copy of the registration statement covering the Conversion Shares (the
foregoing, in each case, including exhibits); and
(b) upon the reasonable request of Purchasers , such other
information that is generally available to the public.
7.5 Temporary Cessation of Offers and Sales by Purchasers . The
Purchasers acknowledge that there may occasionally be times when the Company may
be required to suspend the use of the prospectus forming part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the
Commission, until the prospectus is supplemented or amended to comply with the
Securities Act, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act. The Company agrees to
file any necessary amendments, supplements and reports as soon as practicable
under the circumstances. Purchasers hereby covenant that it will not sell any
Common Stock pursuant to said prospectus during a period of not more than 45
days commencing at the time at which the Company gives the Purchasers notice of
the suspension of the use of said prospectus and ending at the time the Company
gives the Purchasers notice that the Purchasers may thereafter effect sales
pursuant to said prospectus, as the same may have been supplemented or amended.
7.6 Transfer of Common Stock After Registration. Purchasers hereby
covenant with the Company not to make any sale of the Common Stock except either
(i) in accordance with the Registration Statement, in which case Purchasers
covenant to comply with the requirement of delivering a current prospectus, or
(ii) such time as all of the Common Stock may be sold in any three-month period
pursuant to Rule 144 under the Securities Act.
7.7 Termination of Obligations. The obligations of the Company
pursuant to the Registration Rights Agreement shall cease and terminate upon the
earlier to occur of (i) such time as, all of the Conversion Shares have been
sold by Purchasers , or (ii) such time as all of the Conversion Shares may be
sold in any three month period pursuant to Rule 144 under the Securities Act.
7.8 Legend. The certificate or certificates representing the
Shares and, upon conversion, the Conversion Shares shall be subject to a legend
restricting transfer under the Securities Act of 1933, such legend to be
substantially as follows:
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"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND MAY NOT BE TRANSFERRED OR DISPOSED OF UNLESS (1) A REGISTRATION
STATEMENT UNDER THE ACT IS THEN IN EFFECT WITH RESPECT THERETO AND SUCH SALE IS
MADE PURSUANT TO SUCH REGISTRATION STATEMENT OR (2) A WRITTEN OPINION FROM
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT
SUCH TRANSFER OR DISPOSITION WILL NOT VIOLATE THE ACT AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER."
Such securities shall also include any legends required by any
applicable state securities laws.
With respect to the Shares and the Conversion Shares, the legend(s)
shall be removed and the Company shall issue a replacement certificate without
such legend to the holder of such certificate if such holder provides to the
Company an opinion of counsel reasonably acceptable to the Company, to the
effect that a sale, transfer or assignment of such securities may be made
without registration.
7.10 Permissive Redemption. The Company has the right to redeem the
Convertible Preferred Stock, in whole or in part, in cash or in Common Stock, as
follows:
When a conversion request is submitted and when the Conversion Price
is below $3.40, the Company has the option to redeem all or a portion of the
outstanding Convertible Preferred Stock for a redemption price equal to $3.40
multiplied by the number of shares the Convertible Preferred Stock would convert
into on the date of redemption (the "Redemption Price").
The Company shall give written notice by telecopy to the Purchasers
of its election to redeem the Convertible Preferred Stock one (1) business day
after receipt of the Notice of Conversion. Upon notice of its right to redeem
the Convertible Preferred Stock the Company shall wire transfer the appropriate
amount of funds which shall include Redemption Price, as defined in Certificate
of Designation filed May 15, 1998, and any and all penalties and liquidated
damages, if any, to Purchasers within ten (10) days of such notice. If the
Company does not wire the appropriate amounts of funds to Purchasers , the
Company shall pay to the Purchasers a penalty in an amount in cash equal to two
(2%) percent of the Redemption Price to be paid for such redemption. If the
Company fails to pay the Redemption Price on the Redemption Date, as defined in
the Certificate of Designation filed May 15, 1998, the Purchasers shall have the
right to convert the Convertible Preferred Stock previously presented to the
Company and not redeemed. The Company shall have the right to redeem the
Convertible Preferred Stock in accordance with the terms of this paragraph in
any subsequent redemption; provided, however, that if the Company fails to pay
the Redemption Price in a subsequent redemption within ten (10) days, the
Company shall have the right to redeem the Convertible Preferred Stock
thereafter, only upon wiring the Redemption Price to the holders simultaneously
with sending the notice of redemption. On or after the Redemption Date, the
holders of Convertible Preferred Stock called for redemption shall surrender the
certificates evidencing the shares called for redemption to the Company at the
place designated in such notice and shall thereupon be entitled to receive
payment of the Redemption Price.
Section 8. Legal Fees and Expenses. Each of the parties shall pay
its own fees and expenses (including the fees of any attorneys, accountants,
appraisers or others engaged by such party) in connection with this Agreement
and the transactions contemplated hereby.
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Section 9. Conversion. Conversion of the Convertible Preferred Stock
may be made at the Conversion Price as follows:
No shares of Series C Preferred Stock may be converted prior to
August 15, 1998. At any time after August 15, 1998 through November 14, 1998, up
to twenty-five (25%) percent of the shares of Convertible Preferred Stock then
outstanding may be converted, at the option of the holders thereof, and
thereafter on November 15, 1998, February 15, 1999 and May 15, 1999, an
additional twenty-five (25%) percent of the shares of Convertible Preferred
Stock then outstanding may be converted, on a cumulative and pro rata basis, at
the option of the holders thereof. The number of shares of fully paid and
nonassessable Common Stock into which each share of Convertible Preferred Stock
may be converted shall be determined by dividing the Liquidation Preference by
the Conversion Price in effect on the Conversion Date.
9.1 Notice of Conversion. Purchasers may convert, in whole or in
part, the Convertible Preferred Stock into Common Stock by telecopying an
executed and completed Notice of Conversion (in the form annexed hereto as
Exhibit A) to the Company and delivering the original Notice of Conversion and
the certificate representing the Convertible Preferred Stock to the Company by
express courier within five (5) business days of exercise. 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 Common Stock issuable upon conversion
of all or any part of the Convertible Preferred Stock (together with the
certificates representing portions of the Convertible Preferred Stock not so
converted) to the Purchasers via express courier within five (5) business days
after the Company has received the original Notice of Conversion and shares
certificate being so converted. The Notice of Conversion and certificate
representing the portion of the Convertible Preferred Stock converted shall be
delivered as follows and become effective upon delivery to each of the persons
below:
To the Company:
Xybernaut Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
(Tele) (▇▇▇) ▇▇▇-▇▇▇▇
(Fax) (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Xybernaut Corporation
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▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇, Treasurer
(tele) (▇▇▇) ▇▇▇-▇▇▇▇
(fax) (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(tele) (▇▇▇) ▇▇▇-▇▇▇▇
(fax) (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(tele) (▇▇▇) ▇▇▇-▇▇▇▇
(fax) (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
(tele) (▇▇▇) ▇▇▇-▇▇▇▇
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(fax) (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person at such other place as the Company shall designate to
the Purchasers in writing.
In the event that the Convertible Preferred Stock is not converted
within ten (10) business days of receipt by the Company of a valid Notice of
Conversion and certificates representing the Convertible Preferred Stock to be
converted (such date of receipt referred to as the "Conversion Date"), the
Company shall pay to the Purchasers , by wire transfer, as liquidated damages
for such failure and not as a penalty, an amount in cash equal to one (1%)
percent per day of the purchase price of the Convertible Preferred Stock to be
converted which shall run from the initial Conversion Date and Purchaser has the
option to withdraw the Notice of Conversion previously sent; provided, that the
Company shall not be responsible for (or required to pay) such liquidated
damages if such failure to convert was not caused by any actions or omissions of
the Company.
Section 10. [Intentionally blank]
Section 11. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, and shall be deemed given when
so mailed:
(a) if to the Company, to
Xybernaut Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
(Tele) (▇▇▇) ▇▇▇-▇▇▇▇
(Fax) (▇▇▇) ▇▇▇-▇▇▇▇
copy to:
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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(Tele) (▇▇▇) ▇▇▇-▇▇▇▇
(Fax) (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person at such other place as the Company shall designate to
the Purchasers in writing;
(b) if to the Purchasers , to
Libertyview Plus Fund
c/o Libertyview Capital Management
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ #▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
(tele) ▇▇▇-▇▇▇-▇▇▇▇
(fax) ▇▇▇-▇▇▇-▇▇▇▇
copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, P.C.
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
(tele) (▇▇▇) ▇▇▇-▇▇▇▇
(fax) (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address or addresses as may have been furnished to the Company
in writing; or
(c) if to any transferee or transferees of a Purchaser, at such
address or addresses as shall have been furnished to the Company at the time of
the transfer or transfers, or at such other address or addresses as may have
been furnished by such transferee or transferees to the Company in writing.
Section 12. Miscellaneous.
12.1 Entire Agreement. This Agreement embodies 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,
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covenant or agreement or 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.
12.2 Amendments. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and by the
Purchasers.
12.3 Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
12.4 Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
12.5 Governing Law/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 Securities Act, without reference to
principles of conflicts of law. Each of the parties consents to the jurisdiction
of the courts of or located in the State of New York, specifically the Southern
District of New York and/or the Supreme Court 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 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.
12.6 Certificate of Designation. In the event of any inconsistency
or conflict between the terms and provisions of this Agreement and the terms and
provisions of the Certificate of Designation, the terms and provisions of the
Certificate of Designation shall control.
12.7 Recovery of Attorney's Fees. Should any party bring an action
to enforce the terms of this Agreement then, if Purchasers prevail in such
action it should be entitled to recovery of its attorney's fees from the
Company, and if the Company prevails in such action it shall be entitled to
recovery of its attorney's fees from the Purchasers .
12.8 Fees. Notwithstanding Section 12.7, the Company acknowledges
that Purchasers shall have no responsibility for the payment of any of its fees
in connection with this offering.
12.9 Counterparts/Facsimile. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
12.10 Publicity. The Purchasers shall not issue any press releases
or otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Company,
except as may be required by applicable law or regulation.
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12.11 Survival. The representations and warranties in this Agreement
shall survive Closing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their duly authorized representatives the day and year first above
written.
XYBERNAUT CORPORATION
By ____________________________
Officer
LIBERTYVIEW PLUS FUND, Purchaser
By ____________________________
Officer
LIBERTYVIEW FUND, LLC, Purchaser
By ____________________________
Officer
CPR (USA) INC., Purchaser
By ____________________________
Officer
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
5% Series C Convertible Preferred Stock)
The undersigned hereby irrevocably elects to convert shares of 5%
Convertible Preferred Stock, Certificate No. (the "Preferred Stock") into shares
of common stock of Xybernaut Corporation (the "Company") according to the
conditions hereof, as of the date written below.
The undersigned represents and warrants that
(i) All offers and sales by the undersigned of the shares of
Common Stock issuable to the undersigned upon conversion of the Preferred Stock
shall be made in compliance with Regulation D, pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), or pursuant to registration of the Common Stock under the Act, subject to
any restrictions on sale or transfer set forth in the Preferred Stock Purchase
Agreement between the Company and the original holder of the Certificate
submitted herewith for conversion.
(ii) Upon conversion pursuant to this Notice of Conversion, the
undersigned will not own or deemed to beneficially own (within the meaning of
the Securities Exchange Act of 1934, as amended) 4.99% or more of the then
issued and outstanding shares of the company.
_________________________ ___________________________
Date of Conversion Applicable Conversion Price
_________________________ ___________________________
Number of Common Shares upon $ Amount of Conversion
Conversion
_________________________ ___________________________
Signature Name
Address: Delivery of Shares to:
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