EXHIBIT 4.1
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of April 13, 1998
(the "Agreement"), among the entities listed on Schedule A attached hereto
(referred to as the "Investor"), Settondown Capital International Ltd. (the
"Placement Agent") located at ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇.
▇▇▇▇, ▇▇▇▇▇▇, Bahamas, organized and existing under the laws of the Bahamas, and
Xybernaut Corporation, a corporation organized and existing under the laws of
the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase, up to
$11,000,000 (the "Aggregate Purchase Price") of the Common Stock (as defined
below) and Warrant A and Warrant B (as defined below); and
WHEREAS, the Company shall issue to the Placement Agent, in return
for services rendered (in addition to the fees set forth in Section 13.7 below),
(a) upon the Closing for the Initial Shares (as defined below), (i) 50,000
shares of Common Stock (restricted as set forth below in Section 13.7 (i)
below), and (ii) a Warrant A (as defined below) to purchase 20,000 shares of
Common Stock; and (b) upon the Closing of each Put, five (5%) percent of that
number of Put Shares issued on the Closing of each Put in shares of Common Stock
(which shall not be included in the definition of Registrable Securities); and
WHEREAS, such investments will be made in reliance upon the
provisions of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of
the United States Securities Act of 1933, as amended, and the regulations
promulgated thereunder (the "Securities Act"), 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 in Common Stock to be made
hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Bid Price" shall mean the closing bid price (as reported
by Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.2 "Capital Shares" shall mean the Common Stock and any
shares of any other class of common stock whether now or hereafter authorized,
having the right to participate in the distribution of earnings and assets of
the Company (except those issued, or to be issued to consultants, employees, or
directors of the Company in the ordinary course of business).
Section 1.3 "Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for or giving
any right to subscribe for any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities (except those issued, or to be issued to
consultants, employees, or directors of the Company in the ordinary course of
business).
Section 1.4 "Closing" shall mean one of the closings of a purchase
and sale of the Common Stock pursuant to Section 2.1.
Section 1.5 "Closing Date" shall mean, with respect to a Closing, the
Fourth Trading Day following the Put Date related to such Closing, provided all
conditions to such Closing have been satisfied on or before such Trading Day,
except with reference to the purchase of the Initial Shares which Closing shall
be deemed to be the Subscription Date.
Section 1.6 "Commitment Amount" shall mean up to the $11,000,000
which the Investor has agreed to provide to the Company in order to purchase the
Initial Shares and Put Shares pursuant to the terms and conditions of this
Agreement.
Section 1.7 "Commitment Period" shall mean the period commencing on
the earlier to occur of (i) the Effective Date or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earliest to occur of (x) the date on which the Investor shall have purchased Put
Shares pursuant to this Agreement for an aggregate Purchase Price of
$10,000,000, (y) the date this Agreement is terminated pursuant to Section 2.4,
or (z) the date occurring two years after the Effective Date.
Section 1.8 "Common Stock" shall mean the Company's common stock, par
value $0.01 per share.
Section 1.9 "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2.
Section 1.10 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.11 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.12 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.13 "Initial Shares" shall have the meaning set forth in
Section 2.8.
Section 1.14 "Initial Shares Investment Amount" shall mean
$1,000,000.
Section 1.15 "Investment Amount" shall mean the dollar amount to be
invested by the Investor to purchase Put Shares with respect to any Put Date as
notified by the Company to the Investor, all in accordance with Section 2.2
hereof.
Section 1.17 "Legend" shall have the meaning set forth in Section
9.1.
Section 1.18 "Market Price" on any given date shall mean the three
lowest closing Bid Prices of the Common Stock during the Valuation Period.
Section 1.19 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects, or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement,
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the Registration Rights Agreement, the Escrow Agreement, or the Warrants in any
material respect, or in the event the Bid Price shall be under $1.00 for three
consecutive Trading Days prior to a Put Notice.
Section 1.20 "Maximum Put Amount" shall mean the amount indicated in
the Table below:
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Closing Price 30-Day Avg. Daily 30-Day Avg. Daily 30-Day Avg. Daily 30-Day Avg. Daily
Trading Volume Trading Volume Trading Volume Trading Volume
5,000-25,000 25,001-50,000 50,001-75,000 75,001-Above
------------------------------------------------------------------------------------------------
$ 0.00 - $3.00 $ 200,000 $ 250,000 $300,000 $ 400,000
------------------------------------------------------------------------------------------------
$ 3.01 - $6.00 $ 300,000 $ 400,000 $500,000 $ 600,000
------------------------------------------------------------------------------------------------
$ 6.01 - $8.00 $ 500,000 $ 600,000 $700,000 $ 800,000
------------------------------------------------------------------------------------------------
$ 8.01 - $10.00 $ 700,000 $ 800,000 $900,000 $1,000,000
------------------------------------------------------------------------------------------------
$10.01 - $12.00 $ 900,000 $1,000,000 $1,100,000 $1,200,000
------------------------------------------------------------------------------------------------
$12.01 - $14.00 $1,100,000 $1,200,000 $1,300,000 $1,400,000
------------------------------------------------------------------------------------------------
$14.01 - Above $1,300,000 $1,400,000 $1,500,000 $1,600,000
------------------------------------------------------------------------------------------------
Section 1.21 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.22 "Outstanding" when used with reference to shares of
Common Stock or Capital Shares (collectively the "Shares"), shall mean, at any
date as of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any such Shares
then directly or indirectly owned or held by or for the account of the Company.
Section 1.23 "Person" shall mean an individual, a corporation, a
partnership, an association, a limited liability company, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.24 "Principal Market" shall mean the Nasdaq National
Market, the Nasdaq SmallCap Market or Nasdaq bulletin board, whichever is at the
time the principal trading exchange or market for the Common Stock.
Section 1.25 "Purchase Price" shall mean (a) with respect to the
Initial Shares $1.27 and (b) with respect to Put Shares, ninety (90%) percent
(the "Purchase Price Percentage") of the Market Price upon a Put Date (or such
other date on which the Purchase Price is calculated in accordance with the
terms and conditions of this Agreement).
Section 1.26 "Put" shall mean each occasion the Company elects to
exercise its right to tender a Put Notice requiring the Investor to purchase
shares of the Company's Common Stock, subject to the terms of this Agreement.
Section 1.27 "Put Date" shall mean the Trading Day during the
Commitment Period that a Put Notice to issue and sell Common Stock to the
Investor is deemed delivered pursuant to Section 2.2(b) hereof.
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Section 1.28 "Put Notice" shall mean a written notice to the Investor
setting forth the Investment Amount that the Company intends to Put to the
Investor, including the certification that the Company has complied in all
material respects with all obligations and conditions contained in this
Agreement.
Section 1.29 "Put Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to a Put that has occurred or may
occur in accordance with the terms and conditions of this Agreement.
Section 1.30 "Registrable Securities" shall mean any of the shares of
Common Stock issued to the Placement Agent (excluding those issued as a result
of a Closing for a Put), Initial Shares, Put Shares, Repricing Shares, and the
Warrant Shares (i) in respect of which the Registration Statement has not been
declared effective by the SEC, (ii) which have not been sold under circumstances
under which all of the applicable conditions of Rule 144 (or any similar
provision then in force) under the Securities Act ("Rule 144") are met, (iii)
which have not been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities bearing a
restrictive legend or (iv) the sales of which, in the opinion of counsel to the
Company, are subject to any time, volume or manner limitations pursuant to Rule
144(k) (or any similar provision then in effect) under the Securities Act.
Section 1.31 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor on the
Subscription Date annexed hereto as Exhibit A.
Section 1.32 "Registration Statement" shall mean a registration
statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement, the Registration Rights Agreement, and the Warrant
and in accordance with the intended method of distribution of such securities),
for the registration of the resale by the Investor of the Registrable Securities
under the Securities Act.
Section 1.33 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.34 "Reset Price" shall mean ninety (90%) percent of the
Market Price on the applicable Repricing Date as set forth in Section 2.9 below.
Section 1.35 "SEC" shall mean the Securities and Exchange Commission.
Section 1.36 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.37 "Securities" shall mean any of the shares of Common
Stock issued to the Placement Agent, the Additional Shares, the Initial Shares,
Put Shares, Repricing Shares, and the Warrant Shares.
Section 1.38 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.39 "SEC Documents" shall mean the Company's latest Form
10-K or 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K
filed thereafter, and the Proxy Statement for its latest fiscal year as of the
time in question until such time the Company no longer has an obligation to
maintain the effectiveness of a Registration Statement as set forth in the
Registration Rights Agreement.
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Section 1.40 "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto and all of the
conditions relating to the Initial Shares shall have been fulfilled.
Section 1.41 "Trading Cushion" shall mean the mandatory ten (10)
Trading Days between Put Dates.
Section 1.42 "Trading Day" shall mean any day during which the New
York Stock Exchange shall be open for business.
Section 1.43 "Valuation Event" shall mean an event in which the
Company at any time during a Valuation Period takes any of the following
actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Shares or makes any other
distribution of its Capital Shares;
(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing Subsections (a) and (b)
above, at a price per share less, or for other consideration lower, than the Bid
Price in effect immediately prior to such issuance, or without consideration;
(d) issues any warrants, options or other rights to subscribe
for or purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Bid Price in
effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable for
Capital Shares and the consideration per share for which Additional Capital
Shares may at any time thereafter be issuable pursuant to the terms of such
convertible or exchangeable securities shall be less than the Bid Price in
effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a dividend in liquidation
or by way of return of capital or other than as a dividend payable out of
earnings or surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Company's assets (other than under the circumstances provided for in
the foregoing subsections (a) through (e)); or
(g) takes any action affecting the number of Outstanding
Capital Shares, other than an action described in any of the foregoing
Subsections (a) through (f) hereof, inclusive, which in the opinion of the
Company's Board of Directors, determined in good faith, would have a Material
Adverse Effect upon the rights of the Investor at the time of a Put or exercise
of the Warrant.
Section 1.44 "Valuation Period" shall mean, with respect to the
Purchase Price on any Put Date, the five (5) day trading period consisting of
the three (3) Trading Days immediately preceding and the one (1) Trading Day
following the Trading Day on which a Put Notice is deemed to be delivered, and
the Trading Day on which such notice is deemed to be delivered; provided,
however, that if a Valuation Event occurs during a Valuation Period, a new
Valuation Period shall begin on the Trading Day immediately after the occurrence
of such Valuation Event and end on the seventh Trading Day thereafter.
Section 1.45 "Warrant A" shall have the meaning set forth in Section
2.5 and substantially in the form of Exhibit B.
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Section 1.46 "Warrant B" shall have the meaning set forth in Section
2.6 and substantially in the form of Exhibit C.
Section 1.47 "Warrant Shares" shall mean all shares of Common Stock
or other securities issued or issuable pursuant to exercise of Warrant A or
Warrant B.
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ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Investments.
(a) Puts. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII hereof), on any
Put Date the Company may make a Put by the delivery of a Put Notice/ Compliance
Certificate in the form attached hereto as Exhibit D. The number of Put Shares
that the Investor shall receive pursuant to such Put shall be determined by
dividing the Investment Amount specified in the Put Notice by the Purchase Price
on such Put Date, which number of shares shall not exceed the Maximum Put Amount
on such date.
(b) Maximum Aggregate Amount of Puts. Unless the Company
obtains Shareholder approval pursuant to the applicable corporate governance
rules of the Nasdaq Stock Market, the Investor may not be compelled to make a
purchase which results in the issuance to the Investor of more than 19.99% of
the shares of Common Stock (measured from the Subscription Date) as a result of
the transactions contemplated by this Agreement.
Section 2.2 Mechanics.
(a) Put Notice. At any time during the Commitment Period, the
Company may deliver a Put Notice to the Investor, subject to the conditions set
forth in Section 7.1; provided, however, the Investment Amount for each Put as
designated by the Company in the applicable Put Notice shall be neither less
than $100,000 nor more than the Maximum Put Amount.
(b) Date of Delivery of Put Notice. A Put Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or otherwise
by the Investor if such notice is received prior to 2:00 p.m. Eastern Time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 2:00 p.m. Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day. No Put Notice may be deemed delivered, on a day that
is not a Trading Day.
Section 2.3 Closings. On each Closing Date for a Put (i) the Company
shall deliver (a) to the Escrow Agent for the benefit of the Investor one or
more certificates, at the Investor's option, representing the Put Shares to be
purchased by the Investor pursuant to Section 2.1 herein, registered in the name
of the Investor or, at the Investor's option, deposit such certificate(s) into
such account or accounts previously designated by the Investor, and (b) to the
Escrow Agent for the Placement Agent that number of shares of Common Stock set
forth in Section 13.7; and (ii) the Investor shall deliver to escrow the
Investment Amount specified in the Put Notice by wire transfer of immediately
available funds to the Escrow Agent on or before the Closing Date. In addition,
on or prior to the Closing Date, each of the Company, the Placement Agent, and
the Investor shall deliver to the Escrow Agent all documents, instruments and
writings required to be delivered or reasonably requested by either of them
pursuant to this Agreement in order to implement and effect the transactions
contemplated herein. Payment of funds to the Company and delivery of the
certificates to the Investor and the Placement Agent shall occur on the Closing
Date out of escrow in accordance with the escrow agreement referred to in
Section 7.2 (m); provided, however, that to the extent the Company has not paid
the fees, expenses, and disbursements of the Investor's counsel, and Placement
Agent in accordance with Section 13.7, the amount of such fees, expenses, and
disbursements shall be paid in immediately available funds, at the direction of
the Investor, to Investor's counsel with no reduction in the number of Put
Shares issuable to the Investor on such Closing Date.
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Section 2.4 Termination of Investment Obligation. The obligation of
the Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Closing Date that has not yet occurred) in the
event that (i) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement for an aggregate of twenty (20)
Trading Days during the Commitment Period, for any reason other than deferrals
or suspensions in accordance with the Registration Rights Agreement as a result
of corporate developments subsequent to the Subscription Date that would require
such Registration Statement to be amended to reflect such event in order to
maintain its compliance with the disclosure requirements of the Securities Act
or (ii) the Company shall at any time fail to comply with the requirements of
Section 6.3, 6.4 or 6.6; provided, that in the case of clause (i) above, the
Investor's obligation to purchase shares of Common Stock shall be reinstated
when the Investor receives copies of the supplemented or amended prospectus
contemplated by the Registration Rights Agreement.
Section 2.5 The Warrants.
(a) Warrant A. On the Subscription Date, the Company will
issue to the Investor and the Placement Agent Warrant A exercisable beginning
six months from the Subscription Date and then exercisable any time over the
five year period there following, to purchase an aggregate of 20,000 Warrant
Shares for the Investor and 20,000 Warrant Shares for the Placement Agent at the
Exercise Price (as defined in the Warrant). Warrant A shall be delivered by the
Company to the Escrow Agent, and delivered to the Investor and Placement Agent
pursuant to the terms of this Agreement and the Escrow Agreement. The Warrant
Shares shall be registered for resale pursuant to the Registration Rights
Agreement.
(b) Warrant B. On the Subscription Date, the Company will
issue to the Investor Warrant B exercisable beginning six months from the
Subscription Date and then exercisable any time over the five year period there
following, to purchase an aggregate of 20,000 Warrant Shares at the Exercise
Price (as defined in the Warrant). Warrant B shall be delivered by the Company
to the Escrow Agent, and delivered to the Investor pursuant to the terms of this
Agreement and the Escrow Agreement. The Warrant Shares shall be registered for
resale pursuant to the Registration Rights Agreement.
Section 2.6 Additional Shares. In the event that (a) within five
Trading Days of the date the Investor receives any of the Securities issued
hereunder, of an impending "blackout period" in accordance with the Sections
3(g) and 3(h) of the Registration Rights Agreement, and (b) the Bid Price on the
Trading Day immediately preceding such "blackout period" (the "Old Bid Price")
is greater than the Bid Price on the first Trading Day following such "blackout
period" (the "New Bid Price"), the Investor may sell its Registrable Securities
at the New Bid Price pursuant to an effective Registration Statement, and the
Company shall issue to the Investor a number of additional shares equal to the
difference between (y) the product of the number of Registrable Securities held
by the Investor during such "blackout period" that are not otherwise freely
tradeable and the Old Bid Price, divided by the New Bid Price and (z) the number
of Registrable Securities held by the Investor during such "blackout period"
that are not otherwise freely tradeable.
Section 2.7 Liquidated Damages. In the event that the Company does
not deliver unlegended Common Stock in connection with the sale of such Common
Stock by the Investor as set forth in Article IX below, within five (5) Trading
Days of surrender by the Investor of the Common Stock certificate as is set
forth in Article IX below (such date of receipt is referred to as the "Receipt
Date"), the Company shall pay to the Investor, in immediately available funds,
upon demand, as liquidated damages for such failure and not as a penalty, one
(1%) percent of the Purchase Price of the Common Stock undelivered for every day
thereafter for the first ten (10) days and two (2%) percent for every day
thereafter that the unlegended shares of Common Stock are not delivered, which
liquidated damages shall run from the sixth (6th) Trading Day after the Receipt
Date.
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Any and all payments required pursuant to this paragraph shall be payable only
in cash. The parties hereto acknowledge and agree that the sum payable pursuant
to the Registration Rights Agreement and as set forth above, and the obligation
to issue Registrable Securities under Section 2.6 above shall constitute
liquidated damages and not penalties. The parties further acknowledge that the
amount of loss or damages likely to be incurred is incapable or is difficult to
precisely estimate, and the parties are sophisticated business parties and have
been represented by sophisticated and able legal and financial counsel and
negotiated this Agreement at arm's length.
Section 2.8 Initial Purchase.
(a) The Company agrees to sell and the Investors agree to
purchase that number of shares of Common Stock (the "Initial Shares") determined
by dividing the $1,000,000 by the Purchase Price for the Initial Shares on the
Subscription Date. The Initial Shares will be subject to repricing as described
in Section 2.9 herein.
(b) The right of the Company to receive the Initial Shares
Investment Amount from the Investors, and the right of the Investors to receive
the Initial Shares and Warrants A and B is subject to the satisfaction on the
Closing Date for the Initial Shares and Warrants A and B, of each of the
following conditions:
(i) acceptance by the Company, and by the Investor,
of this Agreement and all duly executed
Exhibits thereto by an authorized officer of
the Company;
(ii) deliveryinto escrow by Investor of good cleared
funds as the Initial Shares Investment Amount
(as more fully set forth in the Escrow
Agreement attached hereto as Exhibit E);
(iii) allrepresentations and warranties of the
Investor and of the Company contained herein
shall remain true and correct as of the
Subscription Date;
(iv) the Company shall have obtained all permits and
qualifications required by any state for the
offer and sale of the Common Stock and both the
Warrant A and Warrant B, or shall have the
availability of exemptions therefrom;
(v) the sale and issuance of the Common Stock, both
the Warrant A and Warrant B, and the proposed
issuance of the Common Stock underlying both
the Warrant A and Warrants B shall be legally
permitted by all laws and regulations to which
the Investor and the Company are subject; and
all duly executed Exhibits hereto for the sale
of the Securities;
(vi) delivery of the original Securities as
described herein; and
(vii) receipt by the Investor of an opinion of
counsel of the Company as set forth in Exhibit
F attached hereto.
Section 2.9 Repricing.
(a) First Repricing Date. Upon the Effective Date the Company
agrees to issue that number of additional shares of Common Stock (if any)
resulting from the deficiency between one third of that number of Initial Shares
which would have been issued had the Reset Price on the Effective Date (also
referred to as the "First Repricing Date") been utilized and one third of the
Initial Shares actually issued on the Subscription Date. Such shares shall be
delivered within three (3) Trading Days of the Effective Date.
(b) Second Repricing. Upon the thirtieth (30th) calendar day
after the Effective Date (the "Second Repricing Date"), the Company agrees to
issue that number of additional shares of Common Stock (if any) resulting from
the deficiency between one third of that number of Initial Shares which would
have been issued had the Reset Price on the Second Repricing Date been utilized
and one third of the Initial Shares actually issued
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on the Subscription Date. Such shares shall be delivered within three (3)
Trading Days of the Second Repricing Date.
(c) Third Repricing. Upon the sixtieth (60th) calendar day
after the Effective Date (the "Third Repricing Date"), the Company agrees to
issue that number of additional shares of Common Stock (if any) resulting from
the deficiency between one third of that number of Initial Shares which would
have been issued had the Reset Price on the Third Repricing Date been utilized
and one third of the Initial Shares actually issued on the Subscription Date.
Such shares shall be delivered within three (3) Trading Days of the Third
Repricing Date.
(d) All shares issued under this Section shall be referred to
as "Repricing Shares" and the Company agrees to that in the event there is an
insufficient number of shares of Common Stock being registered in the
Registration Statement for the inclusion of the Repricing Shares, the Company
agrees to file, and cause to be effective, any amendment necessary to the
Registration Statement to include the Repricing Shares. The Company shall only
be required to issue Repricing Shares based upon that number of shares of Common
Stock beneficially held by the Investor on each Repricing Date.
Section 2.10 Repurchase. In the event the Closing Bid Price of the
Common Stock is less than One ($1.00) Dollar, the Company may repurchase any
amount of shares of Common Stock then beneficially owned by the Investors
(repurchased pro rata amongst the Investors) issued pursuant to this Agreement
(except the Put Shares) in cash at one hundred ten (110%) percent of the
Investor's original Purchase Price of the Common Stock (the "Repurchase Price").
Upon receipt by Investor of notice by the Company (the "Repurchase Notice") of
its right to repurchase the aforementioned shares of Common Stock held by the
Investor (the "Repurchase Date"), the Company shall wire transfer the
appropriate amount of funds into an escrow account mutually agreed upon by both
the Company and Investor within three (3) business days of the Repurchase Date.
Additionally, if the Company has not deposited into escrow the Repurchase Price
for the benefit of the Investor, within three (3) business days after the
Repurchase Date, the Company shall have waived its right to repurchase at any
time, and shall pay to the Investors, in immediately available funds, liquidated
damages in the amount of ten (10%) percent of the Repurchase Price. However, in
no event shall the Company: (i) be allowed to send a Repurchase Notice to the
Investor within five (5) days of a Repricing Date, or within five (5) days after
any Repricing Date, or (ii) be entitled to repurchase any Put Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for
its own account and the Investor has no present arrangement (whether or not
legally binding) at any time to sell the Common Stock to or through any person
or entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an
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investment in the Common Stock. The Investor acknowledges that an investment in
the Common Stock is speculative and involves a high degree of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4 Not an Affiliate. The Investor is not an officer,
director or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company.
Section 3.5 Organization and Standing. Investors are corporations
duly organized, validly existing, and in good standing under the laws of the
countries of their incorporation or organization.
Section 3.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or, to
the Investor's knowledge, (a) violate any provision of any indenture, instrument
or agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound; (b) conflict with or constitute a material default
thereunder; (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party; or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
Section 3.7 Disclosure; Access to Information. Investor has received
all documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by Investor. The Company is
subject to the periodic reporting requirements of the Exchange Act, and Investor
has reviewed or received copies of any such reports that have been requested by
it.
Section 3.8 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9 Registration or Exemption Requirements. The Investor
further acknowledges and understands that the Securities 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. The Investor understands that the
certificate(s) evidencing these Securities will be imprinted with a legend that
prohibits the transfer of these Securities 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.
Section 3.10 No Legal, Tax or Investment Advice. The Investor
understands that nothing in this Agreement or any other materials present to the
Investor in connection with the purchase and sale of the Securities constitutes
legal, tax or investment advice. The Investor 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 Common
Stock.
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Section 3.11 Put/Short Positions. Neither the Investor, nor any
affiliate of the Investor, has any present intention of entering into any put
option, short position or other similar position with respect to the Securities.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1 Organization of the Company. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted except as described in the SEC
Documents. Except for Tech International of Virginia, Inc., the Company does not
have any subsidiaries and does not own or control any other business entity. The
Company is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, other than those in
which the failure so to qualify would not reasonably be expected to have a
Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and both
Warrants A and B and to issue the Initial Shares, Additional Shares, Put Shares,
Repricing Shares, both Warrants A and B and the Warrant Shares, (ii) the
execution, issuance and delivery of this Agreement, the Registration Rights
Agreement, the Escrow Agreement, and both Warrants A and B by the Company and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, and (iii) this Agreement, the Registration Rights Agreement, the
Escrow Agreement, and both Warrants A and B have been duly executed and
delivered by the Company and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Section 4.3 Capitalization. The authorized capital stock of the
Company consists of 40,000,000 shares of Common Stock, par value $0.01, of which
15,708,015 shares were issued and outstanding as of March 31, 1998, and
6,000,000 shares of Preferred Stock, par value $0.01, of which 4,895shares were
issued and outstanding as of March 31, 1998. Except as set forth in the SEC
Documents, there are no outstanding Capital Shares Equivalents. All of the
outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable.
Section 4.4 Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and the Company has maintained all
requirements for the continued listing or quotation of its Common Stock, and
such Common Stock is currently listed or quoted on the Principal Market. As of
the date hereof, the Principal Market is the Nasdaq Small Cap Market.
Section 4.5. SEC Documents. The Company has delivered or made
available to the Investor true and complete copies of the SEC Documents filed by
the Company with the SEC during the twelve (12) months immediately preceding the
Subscription Date (including, without limitation, proxy information and
solicitation
12
materials). The Company has not provided to the Investor any information that,
according to applicable law, rule or regulation, should have been disclosed
publicly prior to the date hereof by the Company, but which has not been so
disclosed. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and rules and regulations of the SEC promulgated
thereunder and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles 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 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).
Section 4.6 Valid Issuances. When issued, the Initial Shares, the Put
Shares, the Additional Shares, the Repricing Shares, and the Warrant Shares will
be duly and validly issued, fully paid, and nonassessable. Neither the sales of
the Initial Shares, the Additional Shares, the Put Shares, the Repricing Shares,
Warrants A and B, or the Warrant Shares pursuant to, nor the Company's
performance of its obligations under, this Agreement, the Registration Rights
Agreement, the Escrow Agreement, or Warrants A and B will (i) result in the
creation or imposition by the Company of any liens, charges, claims or other
encumbrances upon the Initial Shares, the Additional Shares, the Put Shares, the
Repricing Shares, the Warrant Shares or any of the assets of the Company, or
(ii) entitle the holders of Outstanding Capital Shares to preemptive or other
rights to subscribe to or acquire the Capital Shares or other securities of the
Company.
Section 4.7 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Put Shares, the Additional
Shares, the Repricing Shares, Warrants A and B, or the Warrant Shares, or (ii)
made any offers or sales of any security or solicited any offers to buy any
security under any circumstances that would require registration of the Initial
Shares, the Additional Shares, the Put Shares, the Repricing Shares, Warrants A
and B, or the Warrant Shares under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
available to the Investor true and correct copies of the Company's Articles of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"By-Laws").
Section 4.9 No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Common Stock and Warrants A and B do not and will not (i) result in a
violation of the Company's Articles of Incorporation or By-Laws or (ii) conflict
with, or constitute a material default (or an event that 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 material agreement,
indenture, instrument or any "lock-up" (except those shares of Common Stock
issued to the Placement Agent as set forth in Section 13.7 below) or similar
provision of any underwriting or similar agreement to which the Company is a
party, or (iii) result in a violation of any federal, state or local law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any property or
asset of the
13
Company is bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect) nor is the Company otherwise in violation of, conflict with or in
default under any of the foregoing as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. The business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental entity, except for possible violations that either singly or
in the aggregate would not reasonably be expected to 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 this Agreement or issue
and sell the Common Stock or Warrants A and B in accordance with the terms
hereof (other than any SEC, NASD, Nasdaq or state securities filings that may be
required to be made by the Company subsequent to any Closing, any registration
statement that may be filed pursuant hereto, and any shareholder approval
required by the rules applicable to companies whose common stock trades on the
Nasdaq Small Cap Market ); 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 agreemens of the Investor herein.
Section 4.10 No Material Adverse Change. Since April 1, 1997, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
Section 4.11 No Undisclosed Liabilities. The Company has no
liabilities or obligations which are material, individually or in the aggregate,
and are not disclosed in the SEC Documents or otherwise publicly announced,
other than those set forth in the Company's financial statements or as incurred
in the ordinary course of the Company's businesses since April 1, 1997, and
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.
Section 4.12 No Undisclosed Events or Circumstances. Since April 1,
1997, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 4.13 No Integrated Offering. To 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, other than pursuant to
this Agreement, under circumstances that would require registration of the
Common Stock under the Securities Act.
Section 4.14 Litigation and Other Proceedings. Except as may be set
forth in the SEC Documents, there are no lawsuits or proceedings pending or to
the best knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which would reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, so far as is known by the
Company, requested of any court, arbitrator or governmental agency which would
be reasonably expected to result in a Material Adverse Effect.
ARTICLE V
COVENANTS OF THE INVESTOR
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Section 5.1 Compliance with Law. The Investor's trading activities
with respect to shares of the Company's Common Stock will be in compliance with
all applicable state and federal securities laws, rules and regulations and
rules and regulations of the Principal Market on which the Company's Common
Stock is listed.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect so long as any
Registrable Securities remain outstanding and the Company shall comply in all
material respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the Put
Shares and the Warrant Shares; such amount of shares of Common Stock to be
reserved shall be calculated based upon the minimum Purchase Price therefor
under the terms of this Agreement and Warrant A and Warrant B . The number of
shares so reserved from time to time, as theretofore increased or reduced as
hereinafter provided, may be reduced by the number of shares actually delivered
hereunder and the number of shares so reserved shall be increased or decreased
to reflect potential increases or decreases in the Common Stock that the Company
may thereafter be so obligated to issue by reason of adjustments to Warrants A
and/or B.
Section 6.3 Listing of Common Stock. The Company hereby agrees to
maintain the listing of the Common Stock on a Principal Market, and as soon as
practicable (but in any event prior to the commencement of the Commitment
Period) to list the Initial Shares, the Additional Shares, the Put Shares, the
Repricing Shares, and the Warrant Shares. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Principal Market,
it will include in such application the Put Shares, the Additional Shares, the
Repricing Shares, and the Warrant Shares, and will take such other action as is
reasonably necessary or desirable in the opinion of the Investor to cause the
Common Stock to be listed on such other Principal Market as promptly as
possible. The Company will take all action to continue the listing and trading
of its Common Stock on the Principal Market (including, without limitation,
maintaining sufficient net tangible assets) and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the Principal Market.
Section 6.4 Exchange Act Registration. The Company will cause its
Common Stock to continue to be registered under Section 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, and will not take any action or file any document (whether or
not permitted by Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under said Act.
Section 6.5 Legends. The certificates evidencing the Common Stock to
be sold by the Investor pursuant to Section 9.1 shall be free of legends, except
as set forth in Article IX.
Section 6.6 Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
15
Section 6.7 Additional SEC Documents. The Company will deliver to the
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all SEC Documents so furnished or submitted to the SEC periodically
during the time period that this Agreement is in effect.
Section 6.8 Notice of Certain Events Affecting Registration;
Suspension of Right to Make a Put. The Company will immediately notify the
Investor upon the occurrence of any of the following events in respect of a
registration statement or related prospectus in respect of an offering of
Registrable Securities: (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the Registration Statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the foregoing events.
Section 6.9 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the Investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.
Section 6.10 Issuance of Put Shares and Warrant Shares. The sale of
the Put Shares and the issuance of the Warrant Shares pursuant to exercise of
Warrants A and B shall be made in accordance with the provisions and
requirements of Section 4(2) of Regulation D and any applicable state securities
law.
Section 6.11 Legal Opinion on Subscription Date. The Company's
independent counsel shall deliver to the Investor upon execution of this
Agreement, and upon the Closings for Put Shares as set forth in Section 7.2 (m)
below, an opinion in the form of Exhibit F annexed hereto.
ARTICLE VII
CONDITIONS TO DELIVERY OF PUTS AND CONDITIONS TO CLOSING
Section 7.1 Conditions Precedent to the Obligation of the Company to
Issue and Sell Common Stock. The obligation hereunder of the Company to issue
and sell the Put Shares to the Investor incident to each Closing is subject to
the satisfaction, at or before each such Closing, of each of the conditions set
forth below.
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(a) Accuracy of the Investor's Representation and Warranties.
The representations and warranties of the Investor shall be true and correct in
all material respects as of the date of this Agreement and as of the date of
each such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing.
Section 7.2 Conditions Precedent to the Right of the Company to
Deliver a Put Notice and the Obligation of the Investor to Purchase Put Shares.
The right of the Company to deliver a Put Notice and the obligation of the
Investor hereunder to acquire and pay for the Put Shares incident to a Closing
is subject to the satisfaction, on (i) the date of delivery of such Put Notice
and (ii) the applicable Closing Date (each a "Condition Satisfaction Date"), of
each of the following conditions:
(a) Registration of the Common Stock with the SEC. The Company
shall have filed with the SEC a Registration Statement with respect to the
resale of the Registrable Securities in accordance with the terms of the
Registration Rights Agreement. As set forth in the Registration Rights
Agreement, the Registration Statement (which includes all Put Shares in the Put
Notice) shall have previously become effective and shall remain effective on
each Condition Satisfaction Date and (i) neither the Company nor the Investor
shall have received notice that the SEC has issued or intends to issue a stop
order with respect to the Registration Statement or that the SEC otherwise has
suspended or withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless the
SEC's concerns have been addressed and the Investor is reasonably satisfied that
the SEC no longer is considering or intends to take such action), and (ii) no
other suspension of the use or withdrawal of the effectiveness of the
Registration Statement or related prospectus shall exist. The Registration
Statement must have been declared effective by the SEC prior to the first Put
Date.
(b) Authority. The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the Put Shares,
or shall have the availability of exemptions therefrom. The sale and issuance of
the Put Shares shall be legally permitted by all laws and regulations to which
the Company is subject.
(c) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company shall be true and correct in
all material respects as of each Condition Satisfaction Date as though made at
each such time (except for representations and warranties specifically made as
of a particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction
Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or the Investor.
(d) 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, the Registration Rights
Agreement and Warrants A and B to be performed, satisfied or complied with by
the Company at or prior to each Condition Satisfaction Date.
(e) 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 that prohibits or directly and adversely affects any of the
transactions contemplated by this Agreement, and no
17
proceeding shall have been commenced that may have the effect of prohibiting or
adversely affecting any of the transactions contemplated by this Agreement.
(f) Adverse Changes. Since the date of filing of the Company's
most recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(g) No Suspension of Trading In or Delisting of Common Stock.
The trading of the Common Stock (including, without limitation, the Put Shares)
is not suspended by the SEC or the Principal Market, and the Common Stock
(including, without limitation, the Put Shares) shall have been approved for
listing or quotation on and shall not have been delisted from the Principal
Market. The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval requirements of the
Principal Market. The Company shall not have received any notice threatening the
listing of the Common Stock on the Principal Market.
(h) 4.99% Percent Limitation. On each Closing Date, the number
of Put Shares then to be purchased by the Investor exceeding the number of such
shares which, when aggregated with all other shares of Common Stock then owned
by the Investor beneficially or deemed beneficially owned by the Investor, would
result in the Investor owning no more than 4.99% of all of such Common Stock as
would be outstanding on such Closing Date, as determined in accordance with Rule
13d-3 of the Exchange Act and the regulations promulgated thereunder. For
purposes of this Section 7.2(i), in the event that the amount of Common Stock
outstanding as determined in accordance with Rule 13d-3 of the Exchange Act and
the regulations promulgated thereunder is greater on a Closing Date than on the
date upon which the Put Notice associated with such Closing Date is given, the
amount of Common Stock outstanding on such Closing Date shall govern for
purposes of determining whether the Investor, when aggregating all purchases of
Common Stock made pursuant to this Agreement and, if any, Warrant Shares, would
own more than 4.99% of the Common Stock following such Closing.
(i) Minimum Average Trading Volume. The average trading volume
for the Common Stock over the previous thirty (30) Trading Days exceeds 5,000
shares per Trading Day.
(j) No Knowledge. The Company has no knowledge of any event
more likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective (which event is more likely than not to
occur within the ten Trading Days following the Trading Day on which such Notice
is deemed delivered).
(k) Trading Cushion. The Trading Cushion shall have elapsed
since the next preceding Put Date.
(l) Escrow Agreement. The parties hereto shall have entered
into a mutually acceptable escrow agreement.
(m) Legal Opinion. On the first Closing of the Put Shares the
Investor shall receive an opinion from counsel to the Company substantially in
the form of Exhibit F annexed hereto. The Investor shall only be entitled to
receive such an opinion of counsel on one occasion during each ninety (90) day
period following the Closing Date of the first Put. For example, the Investor
shall not be entitled to receive an opinion of Company counsel in the event the
Closing Date for a subsequent Put is within ninety (90) days after the Closing
Date for the preceding Put. However, the Investor is entitled to an opinion of
Company counsel in the event the Closing Date for the second Put is more than
ninety (90) days after the first Put.
(n) Other. On each Condition Satisfaction Date, the Investor
shall have received and been reasonably satisfied with such other certificates
and documents as shall have been reasonably requested by the Investor in
18
order for the Investor to confirm the Company's satisfaction of the conditions
set forth in this Section 7.2, including, without limitation, a certificate in
substantially the form and substance of Exhibit D hereto, executed in either
case by an executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date of each such
certificate.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1 Due Diligence Review. The Company shall make available
for inspection and review by the Investor, advisors to and representatives of
the Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2 Non-Disclosure of Non-Public Information
(a) The Company shall not disclose non-public information to
the Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(b) Nothing herein shall require the Company to disclose
non-public information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate non-public information to
any investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Investor and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section 8.2 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
19
such persons or entities from notifying the Company of their opinion that based
on such due diligence by such persons or entities, that the Registration
Statement contains an untrue statement of a material fact or omits a material
fact required to be stated in the Registration Statement or necessary to make
the statements contained therein, in light of the circumstances in which they
were made, not misleading.
ARTICLE IX
Legends
Section 9.1 Legends. Unless otherwise provided below, each
certificate representing Registrable Securities will bear the following legend
(the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED
IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR
OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT
IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF
THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE
COMPANY SET FORTH IN A PRIVATE EQUITY LINE OF CREDIT AGREEMENT DATED
AS OF APRIL 13, 1998. A COPY OF THE PORTION OF THE AFORESAID
AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM THE
COMPANY'S EXECUTIVE OFFICES.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit G hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investor to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and without consultation by the transfer agent with
the Company or its counsel and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Company or its
counsel or the Investor:
(a) at any time after the Effective Date, upon surrender of
one or more certificates evidencing Common Stock that bear the Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of the Legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective; (ii) the Investor confirms to the transfer
agent that it has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Common Stock in a bona fide transaction to a
third party that is not an affiliate of the Company; and (iii) the Investor
confirms to the transfer agent that the Investor has complied with the
prospectus delivery requirement. The requirements set forth in subsection
9.1(a)(ii) and 9.1(a)(iii) shall only apply in the event the Company registers
the Common Stock pursuant to a Form S-3
20
registration statement pursuant to the Registration Rights Agreement. In the
event the Company registers the Common Stock by means of a registration
statement other then a Form S-3 registration statement, than only the condition
in subsection 9.1(a)(i) herein shall apply.
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered and containing representations that (i) the
Investor is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor has sold, pledged or otherwise transferred
or agreed to sell, pledge or otherwise transfer such Registrable Securities in a
manner other than pursuant to an effective registration statement, to a
transferee who will upon such transfer be entitled to freely tradeable
securities.
Any of the notices referred to above in this Section 9.1 may be sent
by facsimile to the Company's transfer agent.
Section 9.2 No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article IX.
Section 9.3 Investor's Compliance. Nothing in this Article shall
affect in any way the Investor's obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE X
CHOICE OF LAW
Section 10.1 Choice of Law; Venue; Jurisdiction. This Agreement will
be construed and enforced in accordance with and governed by the laws of the
State of New York, except for matters arising under the Act, without reference
to principles of conflicts of law. Each of the parties consents to the
jurisdiction of the U.S. District Court sitting in the Southern District of the
State of New York or the state courts of the State of New York sitting in
Manhattan in connection with any dispute arising under this Agreement and hereby
waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens, to the bringing of any such proceeding
in such jurisdictions. Each party hereby agrees that if another party to this
Agreement obtains a judgment against it in such a proceeding, the party which
obtained such judgment may enforce same by summary judgment in the courts of any
country having jurisdiction over the party against whom such judgment was
obtained, and each party hereby waives any defenses available to it under local
law and agrees to the enforcement of such a judgment. Each party to this
Agreement irrevocably consents to the service of process in any such proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to such party at its address set forth herein. Nothing herein shall
affect the right of any party to serve process in any other manner permitted by
law.
ARTICLE XI
ASSIGNMENT; ENTIRE AGREEMENT, AMENDMENT; TERMINATION
Section 11.1 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions
21
of this Agreement shall inure to the benefit of, and be enforceable by, any
transferee of any of the Common Stock purchased or acquired by the Investor
hereunder with respect to the Common Stock held by such person, and (b) upon the
prior written consent of the Company, which consent shall not unreasonably be
withheld, the Investor's interest in this Agreement may be assigned at any time,
in whole or in part, to any affiliate of the Investor who agrees to make the
representations and warranties contained in Article III and who agrees to be
bound by the covenants of Article V.
Section 11.2 Termination. This Agreement shall terminate upon the
earliest of (i) the date that all the Registrable Securities have been sold by
the Investors pursuant to the Registration Statement; (ii) the date the
Investors receive an opinion from counsel to the Company that all of the
Registrable Securities may be sold under the provisions of Rule 144; (iii) the
Company's written election to the Investors, which may be made at any time after
the occurrence of both (A) the Closing on the Initial Shares, and (B) there has
been Closing(s) for Put Shares for an aggregate Purchase Price of more than One
Million ($1,000,000) Dollars; (iv) the Investors fail to timely provide the
funds for a Put Closing Date as set forth in Section 1.5 above; and (v) two
years after the commencement of the Commitment Period; provided, however, that
the provisions of Articles III, IV, V, VI, VII, VIII, IX, X, XI, and XII, herein
and the registration rights provisions for the Registrable Securities held by
the Investor set forth in this Agreement and the Registration Rights Agreement,
shall survive the termination of this Agreement.
ARTICLE XII
NOTICES
Section 12.1 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to Xybernaut Corporation: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ 2203
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
22
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor at the addresses set forth on Schedule A attached
hereto.
with a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
(shall not constitute notice) ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 12.1 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
Section 12.2 Indemnification. The Company agrees to indemnify and
hold harmless the Investor and each person, if any, who controls the Investor
within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees), to which the Investor may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon the breach of any
term of this Agreement. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
Each Investor agrees that it will indemnify and hold harmless the
Company, and each officer, director of the Company or person, if any, who
controls the Company within the meaning of the Securities Act, against any
losses, claims, damages or liabilities (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) to which the Company or any such officer,
director or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the breach of any term of this
Agreement. This indemnity agreement will be in addition to any liability which
the Investor or any subsequent assignee may otherwise have.
Promptly after receipt by an indemnified party under this Section 12
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party otherwise
than as to the particular item as to which indemnification is then being sought
solely pursuant to this Section. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such indemnified party of its
23
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Investor, the fees and expenses of such counsel shall be at the expense of
the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Investor and the indemnifying party and the Investor shall have been advised by
such counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Investor (in which case the indemnifying party shall not
have the right to assume the defense of such action on behalf of the Investor,
it being understood, however, that the indemnifying party shall, in connetion
with any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable only for the reasonable fees and expenses of one
separate firm of attorneys for the Investor, which firm shall be designated in
writing by the Investor). No settlement of any action against an indemnified
party shall be made without the prior written consent of the indemnified party,
which consent shall not be unreasonably withheld.
Section 12.3 Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 12.2 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 12.2 hereof
provide for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any indemnified party, then the
Company and the applicable Investor shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in Section 12.2 shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contributions from any person who was
not guilty of such fraudulent misrepresentation.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Counterparts; Facsimile; Amendments. This Agreement may
be executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
24
Section 13.2 Entire Agreement. This Agreement, the Exhibits or
Attachments hereto, which include, but are not limited to Warrant A and B, the
Escrow Agreement, and the Registration Rights Agreement set forth the entire
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits and Attachments
to this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as is fully set forth herein.
Section 13.3 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 13.4 Title and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.5 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Investor and the Company shall be required to employ any other reporting
entity.
Section 13.6 Replacement of Certificates. Upon (i) receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of a certificate representing the Put Shares and (ii) in the case
of any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company or (iii) in the case of any such mutilation, on surrender and
cancellation of such certificate, the Company at its expense will execute and
deliver, in lieu thereof, a new certificate of like tenor.
Section 13.7 Fees and Expenses. Each of the Company and the Investor
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay on the Subscription Date, to (i)
the Placement Agent, five (5%) percent of the Initial Shares Investment Amount
in cash, 50,000 shares of Common Stock (which are to be included in the
definition of "Registrable Securities" above, and are subject to a one year
lock-up from the Subscription Date), and a Warrant A to purchase 20,000 shares
of Common Stock, and (ii) to ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇, LLP, one (1%) percent
of the Initial Shares Investment Amount in cash. In addition to the fees set
forth above, the Company also agrees to pay the following upon the Closing for
each Put: (i) to the Placement Agent, five (5%) percent of the gross proceeds in
cash, and five (5%) percent of the number of shares of Common Stock issuable in
total to the Investors for each Put, and (ii) to ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇,
LLP one half of one (0.5%) percent of the gross proceeds, with a cap of Two
Thousand Five ($2,500) Dollars per Closing of Put Shares.
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
25
IN WITNESS WHEREOF, the parties hereto have caused this Private
Equity Line of Credit Agreement to be executed by the undersigned, thereunto
duly authorized, as of the date first set forth above.
XYBERNAUT CORPORATION
By_________________________
BALMORE FUNDS, S.A.
By_________________________
Francois Morax
AUSTOST ANSTALT ▇▇▇▇▇▇
By_________________________
▇▇▇▇▇▇ ▇▇▇▇▇
SETTONDOWN CAPITAL INTER-
NATIONAL LTD.
By_________________________
▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇ ▇▇▇▇▇
26
SCHEDULE A
INVESTORS:
1. BALMORE FUNDS, S.A.
Trident ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇
Tel.: ▇▇▇-▇▇▇-▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇-▇▇▇-▇▇▇▇
Attn: Francois Morax
Initial Investment Amount: $500,000.00
2. AUSTOST ANSTALT ▇▇▇▇▇▇
733 Fuerstentum
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
Tel: ▇▇▇ ▇▇▇.▇▇.▇▇▇.▇▇▇▇
Fax: ▇▇▇ ▇▇▇.▇▇.▇▇▇.▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇
Initial Investment Amount: $500,000.00
27