EXHIBIT 4.5
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COMMON STOCK AND WARRANT PURCHASE AGREEMENT
DATED AS OF MAY 4, 2001
BY AND BETWEEN
XYBERNAUT CORPORATION
AND
THE PURCHASERS LISTED THEREIN
TABLE OF CONTENTS
PAGE
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ARTICLE I PURCHASE AND SALE OF THE SHARES AND THE WARRANTS........................................................1
Section 1.1 Purchase and Sale of the Shares..............................................................1
Section 1.2 The Securities...............................................................................1
Section 1.3 Purchase Price and Closing...................................................................2
Section 1.4 Warrant......................................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES.........................................................................2
Section 2.1 Representation and Warranties of the Company.................................................2
(a) Organization, Good Standing and Power.............................................................2
(b) Authorization; Enforcement........................................................................3
(c) Capitalization....................................................................................3
(d) Issuance of Securities............................................................................4
(e) No Conflicts......................................................................................4
(f) Commission Documents, Financial Statements........................................................5
(g) Subsidiaries......................................................................................5
(h) No Material Adverse Change........................................................................5
(i) No Undisclosed Liabilities........................................................................6
(j) No Undisclosed Events or Circumstances............................................................6
(k) Title to Assets...................................................................................6
(l) Actions Pending...................................................................................6
(m) Compliance with Law...............................................................................6
(n) Taxes.............................................................................................6
(o) Certain Fees......................................................................................7
(p) Operation of Business.............................................................................7
(q) Material Agreements...............................................................................7
(r) Securities Act of 1933............................................................................7
(s) Governmental Approvals............................................................................8
(t) Employees.........................................................................................8
(u) Use of Proceeds...................................................................................8
(v) Public Utility Holding Company Act and Investment Company Act Status..............................8
(w) ERISA.............................................................................................9
(x) No Integrated Offering............................................................................9
(y) Eligibility.......................................................................................9
Section 2.2 Representations and Warranties of the Purchasers.............................................9
(a) Organization and Standing of the Purchasers.......................................................9
(b) Authorization and Power...........................................................................9
(c) No Conflicts.....................................................................................10
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(d) Acquisition for Investment.......................................................................10
(e) Accredited Purchasers............................................................................11
(f) Rule 144.........................................................................................11
(g) Information......................................................................................11
(h) No Solicitation..................................................................................11
(i) No Endorsement...................................................................................11
(j) General..........................................................................................11
(k) No Commissions or Similar Fees...................................................................12
ARTICLE III COVENANTS............................................................................................12
Section 3.1 Securities Compliance.......................................................................12
Section 3.2 Compliance with Laws........................................................................12
Section 3.3 Keeping of Records and Books of Account.....................................................12
Section 3.4 Amendments..................................................................................13
Section 3.5 Other Agreements............................................................................13
Section 3.6 Reservation of Shares.......................................................................13
Section 3.7 Transfer Agent Instructions.................................................................13
ARTICLE IV CONDITIONS TO CLOSING.................................................................................14
Section 4.1 Conditions Precedent to the Obligation of the Company to Sell the Securities................14
(a) Accuracy of Purchasers's Representations and Warranties..........................................14
(b) Performance by the Purchasers....................................................................14
(c) No Injunction....................................................................................14
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to Purchase the
Shares at the Closing.......................................................................14
(a) Accuracy of the Company's Representations and Warranties.........................................14
(b) Performance by the Company.......................................................................15
(c) No Suspension, Etc...............................................................................15
(d) No Injunction....................................................................................15
(e) No Proceedings or Litigation.....................................................................15
(f) Opinion of Counsel, Etc..........................................................................15
(g) Registration Rights Agreement....................................................................15
(h) Stock and Warrant Certificates...................................................................15
(i) Resolutions......................................................................................15
(j) Reservation of Shares............................................................................16
(k) Transfer Agent Instructions......................................................................16
ARTICLE V STOCK CERTIFICATE LEGEND...............................................................................16
Section 5.1 Legend......................................................................................16
ARTICLE VI INDEMNIFICATION.....................................................................................17
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Section 6.1 General Indemnity...........................................................................17
Section 6.2 Indemnification Procedure...................................................................17
ARTICLE VII MISCELLANEOUS........................................................................................19
Section 7.1 Fees, Costs and Expenses....................................................................19
Section 7.2 Consent to Jurisdiction.....................................................................19
Section 7.3 Entire Agreement; Amendment.................................................................19
Section 7.4 Notices.....................................................................................19
Section 7.5 Waivers.....................................................................................20
Section 7.6 Headings....................................................................................20
Section 7.7 Successors and Assigns......................................................................20
Section 7.8 No Third Party Beneficiaries................................................................21
Section 7.9 Governing Law...............................................................................21
Section 7.10 Counterparts...............................................................................21
Section 7.11 Severability...............................................................................21
Section 7.12 Further Assurances.........................................................................21
Section 7.13 Publicity..................................................................................21
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SCHEDULES OF THE COMPANY
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Schedule 2.1(c) Capitalization
Schedule 2.1(e) No Conflicts
Schedule 2.1(g) Subsidiaries
Schedule 2.1(h) No Material Adverse Effect
Schedule 2.1(i) No Undisclosed Liabilities
Schedule 2.1(k) Title to Assets
Schedule 2.1(l) Actions Pending
Schedule 2.1(m) Compliance with Law
Schedule 2.1(n) Taxes
Schedule 2.1(o) Certain Fees
Schedule 2.1(p) Operation of Business
Schedule 2.1(q) Material Agreements
Schedule 2.1(s) Governmental Approvals
Schedule 2.1(t) Employees
SCHEDULES OF THE PURCHASERS
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Schedule 2.2(l) No Commissions or Similar Fees
EXHIBITS
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Exhibit A List of Purchasers
Exhibit B Form of Warrant
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Irrevocable Transfer Agent Instructions
Exhibit E Form of Opinion of Counsel
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COMMON STOCK AND WARRANT PURCHASE AGREEMENT
This COMMON STOCK AND WARRANT PURCHASE AGREEMENT dated as of May 4,
2001 (this "Agreement"), by and between XYBERNAUT CORPORATION, INC., a Delaware
corporation (the "Company"), and each of the Purchasers whose names are set
forth on Exhibit A hereto (individually, a "Purchasers" and collectively, the
"Purchasers").
RECITALS
WHEREAS, upon the terms and subject to the conditions contained herein,
the Company desires to issue and sell to the Purchasers, and the Purchasers
desire to purchase from the Company in the aggregate 1,428,571 shares of the
Company's common stock, par value $.01 per share (the "Common Stock"), and
warrants to purchase up to in the aggregate 428,571 shares of Common Stock
purchased by the Purchasers, in the form attached hereto as Exhibit B (the
"Warrants").
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), including Regulation
D ("Regulation D"), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES AND THE WARRANTS
Section 1.1 Purchase and Sale of the Shares. Upon the following terms
and subject to the conditions contained herein, the Company shall issue and sell
to the Purchasers and the Purchasers shall purchase from the Company an
aggregate of 1,428,571 shares of Common Stock as set forth with respect to each
Purchaser on Exhibit A hereto (collectively, the "Shares"). Upon the following
terms and subject to the conditions contained herein, the Purchasers shall be
issued Warrants. The purchase price per share of Common Stock shall be $2.10.
Section 1.2 The Securities. The Company has authorized and has reserved
and covenants to continue to reserve, free of preemptive rights and other
similar contractual rights of stockholders, a sufficient number of its
authorized but unissued shares of its Common Stock to effect the issuance of the
Shares and exercise of the Warrants. Any shares of Common Stock issuable upon
exercise of the Warrants (and such shares when issued) are herein referred to as
(the "Warrant Shares"). The Shares, the Warrants and the Warrant Shares are
sometimes collectively referred to herein as the "Securities".
Section 1.3 Purchase Price and Closing. In consideration of and in
express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement, the Company agrees to issue and sell to the
Purchasers and the Purchasers, severally but not jointly, agree to purchase that
number of Shares set forth opposite their respective names on Exhibit A for an
aggregate purchase price of $3,000,000, which purchase price for each Purchaser
is set forth on Exhibit A. The closing under this Agreement shall take place at
the offices of Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, The Chrysler Building, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Closing") at 10:00 a.m. E.S.T.
on (i) the date on which the last to be fulfilled or waived of the conditions
set forth in Article IV hereof and applicable to the Closing shall be fulfilled
or waived in accordance herewith or (ii) such other time and place or on such
date as the Purchasers and the Company may agree upon (the "Closing Date").
Section 1.4 Warrant. Concurrently with the issuance of the Shares, the
Company shall issue to the Purchasers Warrants to purchase an aggregate of
428,571 shares of Common Stock, as set forth on Exhibit A. The Warrants shall
have an exercise price equal to the Exercise Price (as defined in the Warrant)
and shall expire on the fourth (4th) anniversary of the issuance date of such
Warrants.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representation and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchasers,
except as set forth in the Company's disclosure schedules delivered with this
Agreement:
(a) Organization, Good Standing and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power to own, lease and
operate its properties and assets and to conduct its business as it is now being
conducted and to enter into this Agreement and to perform its obligations
hereunder. The Company does not have any subsidiaries or own securities of any
kind in any other entity, except as set forth in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000 (the "Form 10-K); and (ii)
all of the Company's filings with the Securities and Exchange Commission (the
"SEC") prior to the date hereof (collectively, the "Commission Documents") or in
Schedule 2.1(g) hereto. The Company and each subsidiary is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary except for any jurisdiction(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect (as defined hereinafter) on the Company's financial condition.
For the purposes of this Agreement, "Material Adverse Effect" means any adverse
effect on the business, operations, properties, prospects, assets or financial
condition of the Company or its subsidiaries and which is material to such
entity or other entities controlling or controlled by such entity or which is
likely to materially hinder the performance
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by the Company of its obligation hereunder and under the other Transaction
Documents (as defined in Section 2.1(b) hereof).
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement attached as Exhibit C hereto (the
"Registration Rights Agreement"), the Transfer Agent Instructions (as defined in
Section 3.7 hereof) and the Warrants (collectively, the "Transaction Documents")
and to issue and sell the Shares in accordance with the terms hereof and the
Warrants. The execution, delivery and performance of each of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action, and no further consent or authorization of the
Company or the Company's board of directors or its stockholders is required.
This Agreement has been duly executed and delivered by the Company. The
Registration Rights Agreement will have been duly executed and delivered by the
Company on or before the Closing Date. Each of the Transaction Documents
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company and the
shares thereof issued and outstanding as of the date hereof are set forth on
Schedule 2.1(c) hereto. All of the outstanding shares of the Company's Common
Stock have been duly and validly authorized. Except as set forth in this
Agreement and the Registration Rights Agreement and as set forth in the
Commission Documents or on Schedule 2.1(c) hereto, no shares of Common Stock or
any other securities issued by the Company are entitled to preemptive rights and
there are no outstanding options, warrants, scrip, rights to subscribe to, call
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and the Registration Rights Agreement and
as set forth in the Commission Documents or on Schedule 2.1(c), there are no
contracts, commitments, understandings, or arrangements by which the Company is
or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into shares of capital
stock of the Company. Except for customary transfer restrictions contained in
agreements entered into by the Company in order to sell restricted securities or
as provided on the Commission Documents or Schedule 2.1 (c) hereto, the Company
is not a party to or bound by any agreement or understanding granting
anti-dilution rights to any person with respect to any of its equity or debt
securities. The Company is not a party to, and it has no knowledge of, any
agreement or understanding restricting the voting or transfer of any shares of
the capital stock of the Company. Except as set forth on the Commission
Documents or Schedule 2.1(c) hereto, the offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued prior
to the Closing complied with all applicable federal and state securities laws,
and no holder of such securities has a right of rescission or claim for damages
with respect thereto which could have a Material
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Adverse Effect. The Company has furnished or made available to the Purchasers
true and correct copies of the Company's Articles of Incorporation as in effect
on the date hereof (the "Articles"), and the Company's Bylaws as in effect on
the date hereof (the "Bylaws").
(d) Issuance of Securities. The Shares to be issued at the Closing have
been duly authorized by all necessary corporate action and, when paid for or
issued in accordance with the terms hereof, the Shares shall be validly issued
and outstanding, fully paid and nonassessable, and free from preemptive rights,
taxes upon issuance, liens and similar charges caused by the Company and
entitled to all applicable rights and preferences set forth in the Articles.
When the Warrant Shares are issued in accordance with the terms of this
Agreement and as set forth in the Warrants, such shares will be duly authorized
by all necessary corporate action and validly issued and outstanding, fully paid
and non-assessable, and free from preemptive rights, taxes upon issuance, liens
and other similar charges caused by the Company, and the holders shall be
entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. Except as set forth in the Commission Documents or
Schedule 2.1(e) attached hereto, the execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated herein and therein do not and will not (i) violate any
provision of the Company's Articles or Bylaws, (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, mortgage, deed of trust,
indenture, note, bond, license, lease agreement, instrument or obligation to
which the Company is a party or by which any of its respective properties or
assets are bound, (iii) create or impose a lien, mortgage, security interest,
charge or encumbrance of any nature whatsoever on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases other than violations
pursuant to clause (i) above, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company and its subsidiaries is not being conducted in violation of any
laws, ordinances or regulations of any governmental entity, except for possible
violations which singularly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under the
Transaction Documents, or issue and sell the Shares and the Warrant Shares in
accordance with the terms hereof or thereof (other than any filings which may be
required to be made by the Company with the Commission or state securities
administrators subsequent to a Closing, and any registration statement which may
be filed pursuant hereto); provided that, for purposes of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the relevant representations and agreements of the Purchasers herein.
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(f) Commission Documents, Financial Statements. The Company has
provided to the Purchasers prior to the date hereof copies of its annual report
on Form 10-KSB for the fiscal year ended December 31, 2000. The Company has not
provided to the Purchasers any material non-public information or other
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. The
financial statements of the Company furnished to the Purchasers comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case
of unaudited interim statements, to the extent they may not include footnotes or
may be condensed or summary statements), and fairly present in all material
respects the financial position of the Company and its subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Subsidiaries. The Commission Documents or Schedule 2.1(g) hereto
sets forth each subsidiary of the Company showing the jurisdiction of its
incorporation or organization and showing the percentage of the Company's
ownership of the outstanding stock or other interests of such subsidiary. For
the purposes of this Agreement, "subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by the Company and/or any of its other
subsidiaries. All of the outstanding shares of capital stock of each subsidiary
have been duly authorized and validly issued, and are fully paid and
non-assessable. Except as disclosed on Schedule 2.1(g) there are no outstanding
preemptive, conversion or other rights, options, warrants or agreements granted
or issued by or binding upon any subsidiary for the purchase or acquisition of
any shares of capital stock of any subsidiary or any other securities
convertible into, exchangeable for or evidencing the rights to subscribe for any
shares of such capital stock. Neither the Company nor any subsidiary is subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of the capital stock of any subsidiary or any convertible
securities, rights, warrants or options of the type described in the preceding
sentence. Neither the Company nor any subsidiary is party to, nor has any
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of any subsidiary.
(h) No Material Adverse Change. Since December 31, 2000, the date
through which the most recent report of the Company has been prepared and filed
with the Commission (a copy of which is included in the Commission Documents)
the Company has not experienced or suffered any Material Adverse Effect, except
as disclosed on Schedule 2.1(h) hereto.
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(i) No Undisclosed Liabilities. Except as disclosed in the Commission
Documents or on Schedule 2.1(i) hereto, neither the Company nor any of its
subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent
or otherwise) other than those incurred in the ordinary course of the Company's
or its subsidiaries respective businesses since December 31, 2000, and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.
(j) No Undisclosed Events or Circumstances. No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Title to Assets. Each of the Company and its subsidiaries has good
and marketable title to all of its real and personal property, free of any
mortgages, pledges, charges, liens, security interests or other encumbrances,
except for those indicated in the Commission Documents or on Schedule 2.1(k)
hereto or such that, individually or in the aggregate, do not cause a Material
Adverse Effect on the Company's financial condition or operating results. Except
as described in the Commission Documents or on Schedule 2.1(k) hereto, all said
leases of the Company and each of its subsidiaries are valid and subsisting and
in full force and effect.
(l) Actions Pending. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. To the knowledge of the Company, there is no action, suit,
claim, investigation or proceeding pending or threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets,
except as set forth in the Commission Documents or Schedule 2.1(l) hereto. There
are no outstanding orders, judgments, injunctions, awards or decrees of any
court, arbitrator or governmental or regulatory body against the Company or any
subsidiary or any officers or directors of the Company or subsidiary in their
capacities as such.
(m) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, except as set forth in the Commission Documents or Schedule 2.1(m)
hereto or such that, individually or in the aggregate, the noncompliance
therewith would not have a Material Adverse Effect. The Company and each of its
subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(n) Taxes. Except as set forth in the Commission Documents or Schedule
2.1(n) hereto, the Company and each of the subsidiaries has accurately prepared
and filed all
6
federal, state and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected in
the financial statements of the Company and the subsidiaries for all current
taxes and other charges to which the Company or any subsidiary is subject and
which are not currently due and payable. Except as disclosed on Schedule 2.1(n)
hereto, none of the federal income tax returns of the Company or any subsidiary
have been audited by the Internal Revenue Service. The Company has no knowledge
of any additional assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or threatened
against the Company or any subsidiary for any period, nor of any basis for any
such assessment, adjustment or contingency.
(o) Certain Fees. The Company has not employed any broker or finder or
incurred any liability for any brokerage or investment banking fees,
commissions, finders' or structuring fees, financial advisory fees or other
similar fees in connection with the Transaction Documents, except as set forth
on Schedule 2.1(o) hereto which fees shall be paid by the Company. All those
entities listed on Schedule 2.1(o) hereto are broker/dealers (i) registered and
in good standing with the National Association of Securities Dealers, Inc. and
(ii) registered pursuant to Section 15 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(p) Operation of Business. The Company and each of the subsidiaries
owns or possesses all patents, trademarks, domain names (whether or not
registered) and any patentable improvements or copyrightable derivative works
thereof, websites and intellectual property rights relating thereto, service
marks, trade names, copyrights, licenses and authorizations and all rights with
respect to the foregoing, which are necessary for the conduct of its business as
now conducted without any conflict with the rights of others except as disclosed
in the Commission Documents or on Schedule 2.1(p).
(q) Material Agreements. Except as set forth in the Commission
Documents or on Schedule 2.1(q) hereto, or as previously disclosed by the
Company to Purchasers, neither the Company nor any subsidiary is a party to any
written or oral contract, instrument, agreement, commitment, obligation, plan or
arrangement, a copy of which would be required to be filed with the Commission
as an exhibit to a registration statement on Form S-3 or applicable form
(collectively, "Material Agreements") if the Company or any subsidiary were
registering securities under the Securities Act. Except as set forth in the
Commission Documents or on Schedule 2.1(q) hereto, the Company and each of its
subsidiaries has in all material respects performed all the obligations required
to be performed by them to date under the foregoing agreements, have received no
notice of default and, to the best of the Company's knowledge are not in default
under any Material Agreement now in effect, the result of which could cause a
Material Adverse Effect. No written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement of the Company or of any subsidiary
limits or shall limit the payment of dividends on the Company's Common Stock.
(r) Securities Act of 1933. The Company has complied and will comply
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of
7
the Shares and the Warrants hereunder. Neither the Company nor anyone acting on
its behalf, directly or indirectly, has or will sell, offer to sell or solicit
offers to buy any of the Shares, or similar securities to, or solicit offers
with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person, or has taken or will take any
action so as to bring the issuance and sale of any of the Shares under the
registration provisions of the Securities Act and any other applicable federal
and state securities laws. Assuming the representations set forth in Section 2.2
hereof are true, the Securities may be issued without registration under the
Securities Act of 1933. Neither the Company nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with any of the Shares.
(s) Governmental Approvals. Except as set forth in the Commission
Documents or on Schedule 2.1(s) hereto, and except for the filing of any notice
prior or subsequent to the Closing that may be required under applicable state
or federal securities laws (which if required, shall be filed on a timely
basis), including, but not limited to, the filing of a registration statement or
statements pursuant to the Registration Rights Agreement, no authorization,
consent, approval, license exemption of, filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the execution or delivery of the Shares, or for the performance
by the Company of its obligations under the Transaction Documents.
(t) Employees. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the Commission Documents or on Schedule 2.1(t) hereto.
Except as set forth in the Commission Documents or on Schedule 2.1(t) hereto,
neither the Company nor any subsidiary has any employment contract, agreement
regarding proprietary information, non-competition agreement, non-solicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such subsidiary. Since
December 31, 2000, no officer, consultant or key employee of the Company or any
subsidiary whose termination, either individually or in the aggregate, could
have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any subsidiary.
(u) Use of Proceeds. The proceeds from the sale of the Shares and the
Warrants will be used by the Company for working capital and general corporate
purposes.
(v) Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon any Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
8
(w) ERISA. No liability to the Pension Benefit Guaranty Corporation has
been incurred with respect to any Plan by the Company or any of its subsidiaries
which is or would be materially adverse to the Company and its subsidiaries. The
execution, delivery and performance of this Agreement and the other Transaction
Documents and the issue and sale of the Shares and the Warrants will not involve
any transaction which is subject to the prohibitions of Section 406 of ERISA or
in connection with which a tax could be imposed pursuant to Section 4975 of the
Internal Revenue Code of 1986, as amended, provided that, if any of the
Purchasers, or any person or entity that owns a beneficial interest in any of
the Purchasers, is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a "party in
interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 2.1(z), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(x) No Integrated Offering. To the best of the Company's knowledge,
neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under circumstances that
would require registration of any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the Securities of the
Company are listed or designated, nor will the Company or any of its
subsidiaries take any actions or steps that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
(y) Eligibility. The Company is currently eligible to register the
resale of the Securities on a registration statement on Form S-3 under the 1933
Act.
Section 2.2 Representations and Warranties of the Purchasers. Each of
the Purchasers hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchasers. Each of the Purchasers
is a corporation, limited liability company or partnership duly incorporated or
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, and each of the Purchasers
was not formed for the specific purpose of acquiring the Securities.
(b) Authorization and Power. Each of the Purchasers has the requisite
power and authority to enter into and perform this Agreement and the
Registration Rights Agreement and to purchase the Shares and the Warrants being
sold to it hereunder. The execution, delivery and performance of this Agreement
and the Registration Rights Agreement and the documents
9
contemplated hereby by the Purchasers and the consummation by them of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action and no further consent or authorization of the
Purchasers or its board of directors, stockholders, members, managers or
partners, as the case may be, is required. Each of this Agreement and the
Registration Rights Agreement will have been duly executed and delivered by the
Purchasers on the Closing Date. Each of this Agreement and the Registration
Rights Agreement constitutes, or shall constitute when executed and delivered, a
valid and binding obligation of each of the Purchasers enforceable against each
of the Purchasers in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership, or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the documents contemplated
hereby and thereby and the consummation by the Purchaser of the transactions
contemplated hereby or thereby or relating hereto or thereto do not and will not
(i) result in a violation of the Purchaser's charter documents, by-laws,
partnership agreement, operating agreement or other organizational documents, or
(ii) conflict with, constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement, indenture
or instrument to which the Purchaser is a party, or result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Purchaser or its properties, except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Purchaser to
enter into and perform its obligations under this Agreement in any material
respect. The Purchaser is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Registration Rights Agreement or the documents
contemplated hereby and thereby or to purchase the Shares or the Warrants in
accordance with the terms hereof; provided that for purposes of the
representation made in this sentence, the Purchasers is assuming and relying
upon the accuracy of the relevant representations and agreements of the Company
herein.
(d) Acquisition for Investment. The Purchaser is purchasing the Shares
and the Warrants and will be acquiring the Warrant Shares solely for its own
account, for investment only and not with a view towards the public sale or
distribution thereof. The Purchaser agrees not to sell, assign or otherwise
transfer any of its Securities except in accordance with federal and state
securities laws applicable to such disposition. The Purchaser acknowledges that
it is able to bear the financial risks associated with an investment in the
Securities and that it has been given full access to such records of the Company
and its subsidiaries and to the officers of the Company and its subsidiaries as
it has deemed necessary or appropriate to conduct its due diligence
investigation. The Purchaser is capable of evaluating the risks and merits of an
investment in the Securities by virtue of its experience as an investor and its
knowledge,
10
experience and sophistication in financial and business matters and the
Purchaser is capable of bearing the entire loss of its investment in the
Securities.
(e) Accredited Purchasers. The Purchaser is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act and is incorporated
in the state indicated on Exhibit A hereto.
(f) Rule 144. The Purchaser understands that the Securities must be
held indefinitely unless such Securities are registered under the Securities Act
or an exemption from registration is available. The Purchaser acknowledges that
the Purchaser is familiar with Rule 144 of the rules and regulations promulgated
pursuant to the Securities Act ("Rule 144"), and that the Purchaser has been
advised that Rule 144 permits resales only under certain circumstances. The
Purchaser understands that to the extent that Rule 144 is not available, it will
be unable to sell any Securities without either registration under the
Securities Act or the existence of another exemption from such registration
requirement.
(g) Information. The Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Purchaser. The Purchaser and its advisors, if
any, have been afforded the opportunity to ask questions of and receive answers
from, or obtain additional information from, the executive officers of the
Company the financial and other affairs of the Company. The Purchaser has sought
such accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
The Purchaser understands that it (and not the Company) shall be responsible for
its own tax liabilities that may arise as a result of this investment or the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, the Purchaser has also had the opportunity to obtain and to
review the Commission Documents.
(h) No Solicitation. The Purchaser acknowledges that the Shares and the
Warrants were not offered to the Purchaser by means of any form of general or
public solicitation or general advertising, or publicly disseminated
advertisements or sales literature, including (i) any advertisement, articles,
notice or other communication published in any newspaper, magazine, or similar
media, or broadcast over television or radio, or (ii) any seminar or meeting to
which the Purchaser was invited by any of the foregoing means of communications.
(i) No Endorsement. The Purchaser understands that no United States
federal or state agency or any other government or governmental agency
(including, without limitation, the SEC) has passed on or made any
recommendation or endorsement of the Securities.
(j) General. The Purchaser understands that the Shares and the Warrants
are being offered and sold, and the Warrant Shares are being offered, to the
Purchaser in reliance on specific exemptions from the registration requirement
of federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the compliance with, the
11
representations, warranties, agreements, acknowledgments and understanding of
the Purchaser set forth herein in order to determine the applicability of such
exemptions and the eligibility of the Purchaser to acquire the Shares and the
Warrants and to receive an offer of the Warrant Shares.
(k) No Commissions or Similar Fees. In connection with the purchase of
the Shares and Warrants by the Purchaser, the Purchaser has not and will not
pay, and has no knowledge of the payment of, any commission or other direct or
indirect remuneration to any person or entity for soliciting or otherwise
coordinating the purchase of such securities, except as set forth on Schedule
2.2(k) hereto. All such persons or entities listed on Schedule 2.2(k) hereto are
duly licensed and/or registered to engage in securities offering and selling
activities (or are exempt from such licensing and/or registration requirements)
under applicable federal laws and the laws of the state(s) in which such
activities have taken place in connection with the transaction contemplated by
this agreement.
ARTICLE III
COVENANTS
The Company covenants with each of the Purchasers, for so long as the
Shares and/or the Warrants remain outstanding, as follows (which covenants are
for the benefit of the Purchasers and its permitted assignees):
Section 3.1 Securities Compliance.
(a) The Company shall notify the Commission in accordance with their
rules and regulations of the transactions contemplated by any of the Transaction
Documents, as may be required, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Shares and the Warrant
Shares to the Purchasers or subsequent holders and will take no action to cause
integration under the 1933 Securities Act or the rules of Nasdaq.
(b) The Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Purchasers set forth herein in order to determine the applicability of
federal and state securities laws exemptions and the suitability of the
Purchasers to acquire the Shares and the Warrants.
Section 3.2 Compliance with Laws. The Company shall comply, and cause
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
Section 3.3 Keeping of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which entries will be made in accordance with United States generally accepted
accounting principles consistently
12
applied, reflecting all material financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 3.4 Amendments. The Company shall not amend or waive any
provision of the Articles or Bylaws of the Company, or the Registration Rights
Agreement in any way that would adversely affect the dividend rights, exercise
rights, voting rights or redemption rights of the holders of the Shares, the
Warrants or the Warrant Shares.
Section 3.5 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any subsidiary under any
Transaction Document.
Section 3.6 Reservation of Shares. So long as any of the Warrants
remain outstanding, the Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, no less than 100% of
the aggregate number of shares of Common Stock needed to provide for the
issuance of the Warrant Shares.
Section 3.7 Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent, and any subsequent transfer
agent, to issue certificates, registered in the name of each of the Purchasers
or its respective nominee(s), for the Shares and the Warrant Shares in such
amounts as specified from time to time by each Purchaser to the Company upon
issuance of the Shares or exercise of the Warrants in the form of Exhibit C
attached hereto (the "Irrevocable Transfer Agent Instructions"). Prior to
registration of the Shares and the Warrant Shares under the Securities Act, all
such certificates shall bear the restrictive legend specified in Section 5.1 of
this Agreement. The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 3.7 will be
given by the Company to its transfer agent and that the Shares and the Warrant
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section 3.7 shall affect in any way the
Purchasers's obligations and agreements set forth in Section 5.1 to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Shares or the Warrant Shares. If a Purchasers provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect that a public
sale, assignment or transfer of the Shares or Warrant Shares may be made without
registration under the Securities Act or such Purchasers provides the Company
with reasonable assurances that the Shares or the Warrant Shares can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold, the Company
shall permit the transfer, and, in the case of the Shares and the Warrant
Shares, promptly instruct its transfer agent to issue one (1) or more
certificates in such name and in such denominations as specified by such
Purchasers and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations under this Section 3.7 will cause irreparable
harm to the Purchasers by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Section 3.7 will be inadequate
and agrees, in the event of a breach or threatened breach by the
13
Company of the provisions of this Section 3.7, that the Purchasers shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
ARTICLE IV
CONDITIONS TO CLOSING
Section 4.1 Conditions Precedent to the Obligation of the Company to
Sell the Securities. The obligation hereunder of the Company to issue and sell
the Shares and the Warrants to the Purchasers is subject to the satisfaction or
waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion.
(a) Accuracy of Each Purchasers's Representations and Warranties. The
representations and warranties of Purchasers shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
at that time, except for representations and warranties that are expressly made
as of a particular date, which shall be correct in all material respects as of
such date.
(b) Performance by the Purchasers. Purchasers shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by Purchasers at or prior to the Closing, including having paid by wire
transfer of funds to the Company in accordance with this Agreement the Purchase
Price and Purchasers shall have executed and delivered this Agreement and the
Registration Rights Agreement of the Company.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
Section 4.2 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Shares at the Closing. The obligation hereunder of each Purchaser
to acquire and pay for the Shares and Warrants is subject to the satisfaction or
waiver, at or before the Closing, of each of the conditions set forth below.
These conditions are for each Purchaser's sole benefit and may be waived by such
Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. Each of
the representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of the Closing as though
made at that time (except for representations and warranties that speak as of a
particular date), which shall be true and correct in all material respects as of
such date.
14
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.
(c) No Suspension, Etc. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the
Commission, and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets ("Bloomberg") shall not
have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the New
York Stock Exchange, nor shall a banking moratorium have been declared either by
the United States, or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of such Purchasers, makes it impracticable or inadvisable to acquire
the Shares and Warrant.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) No Proceedings or Litigation. No action, suit or proceeding before
any arbitrator or any governmental authority shall have been commenced, and no
investigation by any governmental authority shall have been threatened, against
the Company, or any of the officers, directors or affiliates of the Company
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
(f) Opinion of Counsel, Etc. At the Closing, the Purchasers shall have
received an opinion of counsel to the Company, dated the date of such Closing,
in the form of Exhibit D hereto.
(g) Registration Rights Agreement. Prior to the Closing, the Company
shall have executed and delivered the Registration Rights Agreement to
Purchasers.
(h) Stock and Warrant Certificates. The Company shall have agreed to
deliver to the Purchasers, the certificates (in such denominations as the
Purchasers shall request) for the Shares and the Warrants being purchased by
such Purchasers as soon as practicable following the Closing.
(i) Resolutions. Prior to the Closing, the Board of Directors of the
Company shall have adopted resolutions consistent with Section 2.1(b) above in a
form reasonably acceptable to the Purchasers (the "Resolutions").
15
(j) Reservation of Shares. As of the Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the issuance of the Shares and the exercise of the
Warrants, a number of shares of Common Stock equal to at least 100% of the
shares of Common Stock which would be issuable upon issuance of the Shares and
upon exercise of the Warrants following the Closing (after giving effect to the
Shares and Warrants to be issued on the Closing Date and assuming all such
Shares and Warrants were fully issuable and exercisable, as applicable, on such
date regardless of any limitation on the timing or amount of such issuances or
exercises).
(k) Transfer Agent Instructions. As of the Closing Date, the
Irrevocable Transfer Agent Instructions, in the form of Exhibit C attached
hereto, shall have been delivered to the Company's transfer agent.
ARTICLE V
STOCK CERTIFICATE LEGEND
Section 5.1 Legend. Each certificate representing the Shares, the
Warrants, and the securities issued upon exercise thereof, as applicable and
appropriate, shall be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any legend required by
applicable federal, provincial or state securities or "blue sky" laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED OR HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE
STATE SECURITIES LAWS OR XYBERNAUT CORPORATION (THE
"COMPANY") SHALL HAVE RECEIVED AN OPINION IN FORM, SCOPE AND
SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, OF COUNSEL,
WHO IS REASONABLY ACCEPTABLE TO THE COMPANY THAT REGISTRATION
OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS IS
NOT REQUIRED.
The Company agrees to reissue certificates representing the Shares,
Warrants or Warrant Shares, without the legend set forth above if at such time,
prior to making any transfer of any Shares, Warrants or Warrant Shares such
holder thereof shall give written notice to the Company describing the manner
and terms of such transfer and removal as the Company may reasonably request and
such holder otherwise complies with the terms of the Transaction Documents. The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Shares, Warrants or Warrant
Shares upon which it is stamped if,
16
unless otherwise required by federal or state securities laws, (a) the sale of
such Shares, Warrants or Warrant Shares is registered under the Securities Act
(including registration pursuant to Rule 416 thereunder) as contemplated by the
Registration Rights Agreement (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a sale or transfer of
such Shares, Warrants or Warrant Shares may be made without registration under
the Securities Act; or (c) such holder provides the Company with reasonable
assurances that such Shares, Warrants or Warrant Shares can be sold under Rule
144(k). Each of the Purchasers agrees that it will only sell Shares, Warrants or
Warrant Shares, including those represented by a certificate(s) from which the
legend has been removed, pursuant to an effective registration statement, under
an exemption from the registration requirements of the Securities Act or in
accordance with Rule 144(k). In the event the above legend is removed from any
Shares, Warrant or Warrant Shares and the effectiveness of a registration
statement covering such Shares, Warrants or Warrant Shares is suspended or the
Company determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to the
Purchasers the Company may require that the above legend be placed on any such
Shares, Warrants or Warrant Shares that cannot then be sold pursuant to an
effective registration statement, under an exemption from the registration
requirements of the Securities Act or under Rule 144(k) and the Purchasers shall
cooperate in the replacement of such legend. Such legend shall thereafter be
removed when such Shares, Warrants or Warrant Shares may again be sold pursuant
to an effective registration statement, under an exemption from the registration
requirements of the Securities Act or under Rule 144(k). The restrictions on
transfer contained in Section 5.1 shall be in addition to, and not by way of
limitation of, any other restrictions on transfer contained in any other section
of this Agreement.
ARTICLE VI
INDEMNIFICATION
Section 6.1 General Indemnity. The Company agrees to indemnify and hold
harmless the Purchasers (and its directors, officers, affiliates, agents,
successors and assigns) from and against any and all actual losses, liabilities,
deficiencies, costs, damages and reasonable expenses (including, without
limitation, reasonable attorney's fees, charges and disbursements) incurred by
the Purchasers as a result of any breach of the covenants, representations and
warranties made by the Company herein. Each of the Purchasers agrees, severally
and not jointly, to indemnify and hold harmless the Company and its directors,
officers, affiliates, agents, successors and assigns from and against any and
all actual losses, liabilities, deficiencies, costs, damages and reasonable
expenses (including, without limitation, reasonable attorneys' fees, charges and
disbursements) incurred by the Company as a result of any false representation
or warranty or any breach of the covenants made by such Purchaser herein,
provided, however, such Purchaser's indemnification obligations shall not exceed
the Purchase Price.
Section 6.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VI (an "indemnified party") will give written
notice to the indemnifying party of any
17
matters giving rise to a claim for indemnification; provided, that the failure
of any party entitled to indemnification hereunder to give notice as provided
herein shall not relieve the indemnifying party of its obligations under this
Article VII, except to the extent that the indemnifying party is actually
materially prejudiced by such failure to give notice. In case any action,
proceeding or claim is brought against an indemnified party in respect of which
indemnification is sought hereunder, the indemnifying party shall be entitled to
participate in, unless in the reasonable judgment of the indemnified party a
conflict of interest between it and the indemnifying party may exist with
respect of such action, an action, a proceeding or a claim, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party.
In the event that the indemnifying party advises an indemnified party that it
will contest such a claim for indemnification hereunder, or fails, within thirty
(30) days of receipt of any indemnification notice to notify, in writing, such
person of its election to defend, settle or compromise, at its sole cost and
expense, any action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the indemnified party may, at its
option, defend, settle or otherwise compromise or pay such action or claim. In
any event, unless and until the indemnifying party elects in writing to assume
and does so assume the defense of any such claim, proceeding or action, the
indemnified party's costs and expenses arising out of the defense, settlement or
compromise of any such action, claim or proceeding shall be losses subject to
indemnification hereunder. The indemnified party shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense, unless in the reasonable judgment of the indemnified party a
conflict of interest between it and the indemnifying party may exist with
respect to such action or claim. The indemnifying party shall not be liable for
any settlement of any action, claim or proceeding effected without its prior
written consent. Notwithstanding anything in this Article VI to the contrary,
the indemnifying party shall not, without the indemnified party's prior written
consent (which consent shall not be unreasonable withheld), settle or compromise
any claim or consent to entry of any judgment in respect thereof which imposes
any future obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such claim. The
indemnification required by this Article VI shall be made by periodic payments
of the amount thereof during the course of investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred, so long as
the indemnified party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. The indemnity agreements contained herein shall
be in addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or others and (b) any liabilities the
indemnifying party may be subject to pursuant to the law.
18
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fees, Costs and Expenses. All fees, costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby will be paid by the party incurring such fees, costs and expenses.
Section 7.2 Consent to Jurisdiction. Each of the Company and the
Purchasers (i) hereby irrevocably submits to the jurisdiction of the United
States District Court sitting in the Southern District of New York and the
courts of the State of New York located in New York county for the purposes of
any suit, action or proceeding arising out of or relating to this Agreement or
any of the other Transaction Documents or the transactions contemplated
hereunder or thereunder and (ii) hereby waives, and agrees not to assert in any
such suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of such court, that the suit, action or proceeding is brought
in an inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and Purchasers consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to such party at
the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 7.2 shall affect or limit any right to serve
process in any other manner permitted by law.
Section 7.3 Entire Agreement; Amendment. This Agreement and the
exhibits attached hereto contain the entire understanding of the parties with
respect to the matters covered hereby, supersedes all prior agreements with
respect to subject matter hereof and, except as specifically set forth herein,
in the Shares or in the Warrants, neither the Company nor any of the Purchasers
makes any representations, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other than
by a written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
Section 7.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy, facsimile or e-mail 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 express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
19
If to the Company: Xybernaut Corporation
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with copies to:
Xybernaut Corporation
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▇▇▇▇▇ ▇▇▇
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Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and
Jenkens & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
The Chrysler Building
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▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
If to the Purchasers: At the address of such Purchasers as set
forth on Schedule A to this Agreement, with
copies to Purchasers's counsel as set forth
on Schedule A or as specified in writing by
such Purchasers
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section 7.5 Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 7.6 Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 7.7 Successors and Assigns. None of the Purchasers may assign
this Agreement to any person (other than to an affiliate (as defined in Rule
144) of the Purchasers) without the prior consent of the Company, which consent
will not be unreasonably withheld.
20
This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. The parties hereto may not amend this Agreement or
any rights or obligations hereunder without the prior written consent of the
Company and the Purchasers to be affected by the amendment. After the Closing,
the assignment by a party to this Agreement of any rights hereunder shall not
affect the obligations of such party under this Agreement.
Section 7.8 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 7.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section 7.10 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section 7.11 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 7.12 Further Assurances. From and after the date of this
Agreement, upon the request of any Purchaser or the Company, each of the Company
and the Purchasers shall execute and deliver such instrument, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement, the
Registration Rights Agreement and the Warrants.
Section 7.13 Publicity. The Company and each of the Purchasers, as the
case may be, shall not issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby of which the Purchasers or the Company, respectively, shall
not previously have been advised.
21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officer as of the date first above
written.
XYBERNAUT CORPORATION
By:
---------------------------------------
Name:
Title:
CRANSHIRE CAPITAL, L.P.
By:
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Name:
Title:
EURAM CAP STRAT. "A" FUND LIMITED
By:
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Name:
Title:
THE DOTCOM FUND, LLC
By:
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Name:
Title:
22
EXHIBIT A TO THE
COMMON STOCK AND WARRANTS PURCHASE AGREEMENT
XYBERNAUT CORPORATION
NUMBER OF SHARES AND PURCHASE
PURCHASERS WARRANTS TO BE PURCHASED PRICE NAME AND ADDRESS OF COUNSEL
---------- ------------------------ ----- ---------------------------
Cranshire Capital, L.P. Common Shares: 1,095,238 $2,300,000 Strategic Investment Counsel LLC
c/o Downsview Capital, Inc., Warrant Shares: 328,571 ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
the General Partner ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇ Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Tel. no.: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President Fax no.: ▇▇▇-▇▇▇-▇▇▇▇
of Downsview Capital, Inc.
Tel. no.: ▇▇▇-▇▇▇-▇▇▇▇
Fax no.: ▇▇▇-▇▇▇-▇▇▇▇
Euram Cap Strat. "A" Fund Limited Common Shares: 190,476 $ 400,000 Strategic Investment Counsel LLC
c/o JMJ Capital, Inc., the Investment Warrant Shares: 57,143 ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇ Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Tel. no.: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Fax no.: ▇▇▇-▇▇▇-▇▇▇▇
President of JMJ Capital, Inc.
Tel. no.: ▇▇▇-▇▇▇-▇▇▇▇
Fax no.: ▇▇▇-▇▇▇-▇▇▇▇
The dotCom Fund, LLC Common Shares: 142,857 $300,000 Strategic Investment Counsel LLC
c/o Minamax, LLC, the Managing Member Warrant Shares: 42,857 ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Attn: ▇▇▇▇ ▇. ▇▇▇▇, Manager of Tel. no.: ▇▇▇-▇▇▇-▇▇▇▇
Minamax, LLC Fax no.: ▇▇▇-▇▇▇-▇▇▇▇
Tel. no. ▇▇▇-▇▇▇-▇▇▇▇
Fax no.: ▇▇▇-▇▇▇-▇▇▇▇