THE SECURITIES REPRESENTED HEREBY (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION
OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED.
XYBERNAUT CORPORATION
COMMON STOCK PURCHASE WARRANT
1. Issuance. For good and valuable consideration, the receipt
of which is hereby acknowledged by Xybernaut Corporation, a Delaware corporation
(the "Company"), Archway Holdings Limited, or its registered assigns (the
"Holder") is hereby granted the right to purchase at any time until 5:00 P.M.,
New York City time, on September 29, 2005 (the "Expiration Date"), One Hundred
Nineteen Thousand Eight Hundred Eighty (119,880) shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock") at an initial exercise
price of $6.25 per share (the "Exercise Price"), subject to further adjustment
as set forth in Section 6 hereof.
2. Exercise of Warrants. (a) This Warrant is exercisable in
whole or in part at the Exercise Price per share of Common Stock payable
hereunder, payable in cash or by certified or official bank check. Upon
surrender of this Warrant Certificate with the annexed Notice of Exercise Form
duly executed, together with payment of the Exercise Price for the shares of
Common Stock purchased, the Holder shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased.
(b) The Warrants shall be callable by the Company if
the market price of the Common Stock exceeds $10.00 for any ten (10) trading
days during a fifteen (15) trading day period.
3. Reservation of Shares. The Company hereby agrees that at
all times during the term of this Warrant there shall be reserved for issuance
upon exercise of this Warrant such number of shares of its Common Stock as shall
be required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company
of evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in this
Warrant and are not enforceable against the Company except to the extent set
forth herein.
6. Protection Against Dilution.
(a) Adjustment Mechanism. If an adjustment of the
Exercise Price is required pursuant to this Section 6, the Holder shall be
entitled to purchase such number of additional shares of Common Stock as will
cause (i) the total number of shares of Common Stock Holder is entitled to
purchase pursuant to this Warrant, multiplied by (ii) the adjusted purchase
price per share, to equal (iii) the dollar amount of the total number of shares
of Common Stock Holder is entitled to purchase before adjustment multiplied by
the total purchase price before adjustment.
(b) Capital Adjustments. In case of any stock split
or reverse stock split, stock dividend, reclassification of the Common Stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company, the provisions of this Section 6 shall be
applied as if such capital adjustment event had occurred immediately prior to
the date of this Warrant and the original purchase price had been fairly
allocated to the stock resulting from such capital adjustment; and in other
respects the provisions of this Section 6 shall be applied in a fair, equitable
and reasonable manner so as to give effect, as nearly as may be, to the purposes
hereof. A rights offering to stockholders of the Company shall be deemed a stock
dividend to the extent of the bargain purchase element of the rights.
7. Transfer to Comply with the Securities Act; Registration
Rights.
(a) This Warrant has not been registered under the
Securities Act of 1933, as amended (the "Act"), or any applicable state
securities laws, and has been issued to the Holder for investment and not with a
view to the distribution of either the Warrant or the Warrant Shares. Neither
this Warrant nor any of the Warrant Shares or any other security issued or
issuable upon exercise of this Warrant may be sold, transferred, pledged or
hypothecated in the absence of an effective registration statement under the Act
relating to such security or an opinion of counsel satisfactory to the Company
that registration is not required under the Act. Each certificate for the
Warrant, the Warrant Shares and any other security issued or issuable upon
exercise of this Warrant shall contain a legend on the face thereof, in form and
substance satisfactory to counsel for the Company, setting forth the
restrictions on transfer contained in this Section.
(b) The Company agrees to file a registration
statement, which shall include the Warrant Shares, on Form S-3 or another
available form (the "Registration Statement"), pursuant to the Common Stock
Purchase Agreement between the Company and the Holder dated as of September 29,
2000 (the "Purchase Agreement").
8. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by
2
facsimile transmission or sent by certified, registered or express mail, postage
pre-paid. Any such notice shall be deemed given when so delivered personally,
telegraphed, telexed or sent by facsimile transmission, or, if mailed, two (2)
days after the date of deposit in the United States mails, as follows:
(i) if to the Company, to:
Xybernaut Corporation
12701 Fair Lakes Circle
Suite 550
Fairfax, Virginia 22033
Attn: John F. Moynahan, Sr. Vice President
and Chief Financial Officer
Telephone No.: (703) 631-6925
Facsimile No.: (703) 631-3903
with a copy to:
Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Attn: Martin Eric Weisberg, Esq.
Telephone No.: (212) 704-6000
Facsimile No.: (212) 704-6288
(ii) if to the Holder, to:
Archway Holdings Limited
Gretton House, P.O. Box 65
Duke Street, Grand Turk
Turks & Caicos Islands
British West Indies
Attn: C.B. Williams
Any party may be notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
9. Supplements and Amendments; Whole Agreement. This Warrant
may be amended or supplemented only by an instrument in writing signed by the
parties hereto. This Warrant of even date herewith and the Purchase Agreement
contain the full understanding of the parties hereto with respect to the subject
matter hereof and thereof and there are no representations, warranties,
agreements or understandings other than expressly contained herein and therein.
3
10. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State.
11. Counterparts. This Warrant may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
12. Descriptive Headings. Descriptive headings of the several
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the 29th day of September 2000.
XYBERNAUT CORPORATION
By:
---------------------------------------
Name:
Title:
4
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate No. W-__ dated as of __________, 2000, to
purchase __________ shares of the Common Stock, par value $.01 per share, of
Xybernaut Corporation and tenders herewith payment in accordance with Section 1
of said Common Stock Purchase Warrant.
Please deliver the stock certificate to:
Dated:______________________
By:__________________________________
5