THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT
AND UNDER APPLICABLE STATE SECURITIES LAWS OR XYBERNAUT CORPORATION, A DELAWARE
CORPORATION (THE "COMPANY"), SHALL HAVE RECEIVED AN OPINION IN FORM, SCOPE AND
SUBSTANCE REASONABLY ACCEPTABLE TO THE COMPANY, OF COUNSEL, WHO IS REASONABLY
ACCEPTABLE TO THE COMPANY, THE PROPOSED SALE, TRANSFER, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE FEDERAL AND STATE
SECURITIES LAWS.
COMMON STOCK PURCHASE WARRANT
XYBERNAUT CORPORATION
Expires April 18, 2006
No.: W-00001 Number of Shares: 200,000
Date of Issuance: April 18, 2001
1. Issuance. In consideration of good and valuable consideration, the receipt
of which is hereby acknowledged by Xybernaut Corporation, a Delaware
corporation (the "Company"), Texas Instruments Incorporated, 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 April 18, 2006 (the
"Expiration Date"), Two Hundred Thousand (200,000) fully paid and
nonassessable shares (the "Warrant Shares") of the Company's Common Stock,
par value $.01 per share (the "Common Stock"), at an exercise price per
share equal to $5.00 (the "Exercise Price").
The Exercise Price and the number of Warrant Shares for which this Warrant
is exercisable shall be subject to adjustment as provided herein. This
Warrant is being issued in connection with Speech Recognition Software
License Agreement dated as of April 18, 2001.
2. Exercise of Warrant.
(a) Except as provided in Section 4 below, exercise of the purchase rights
represented by this Warrant may be made in whole or in part, at any time or
from time to time, before the Expiration Date, or such earlier date on
which this Warrant, by the surrender of this Warrant and a Notice of
Exercise, in the form attached hereto as Exhibit A, duly executed, at the
office of the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered holder hereof at the
address of such holder appearing in the books of the Company) and upon
payment of an amount of consideration therefor equal to the Exercise Price
multiplied by the number of shares of Common Stock thereby purchased, such
consideration payable by certified check or cashier's check or by wire
transfer of immediately available funds to a bank account designated by the
Company.
Page No. 1
(b) In the event of an exercise of this Warrant in accordance with this
Section 2, the Holder shall be entitled to receive a certificate for the
number of shares of Common Stock so purchased. Certificates for the shares
of Common Stock purchased hereunder shall be delivered to the Holder hereof
within five (5) business days after the date on which this Warrant shall
have been exercised as aforesaid.
3. Reservation of Shares. The Company hereby covenants that at all times
during the term of this Warrant there shall be reserved a sufficient number
of shares of its Common Stock as shall be required for issuance upon
exercise of this Warrant.
4. No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant.
5. Loss, Theft, Destruction or Mutilation 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 indemnification reasonably satisfactory to the Company, and (in
the case of mutilation) upon surrender and cancellation of this Warrant,
the Company will execute and deliver to the Holder a new Warrant of like
tenor and date and any such lost, stolen, destroyed or mutilated Warrant
shall thereupon become void.
6. 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.
7. Adjustments of Exercise Price and Number of Warrant Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following:
in case the Company shall (i) declare or pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii) subdivide its outstanding shares of Common
Stock, (iii) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock or (iv) issue any shares of its capital
stock in a reclassification of the Common Stock, then the number of Warrant
Shares purchasable upon exercise of this Warrant immediately prior thereto
shall be adjusted so that the Holder shall be entitled to receive the kind
and number of Warrant Shares or other securities of the Company which he
would have owned or have been entitled to receive had such Warrant been
exercised in advance thereof. Upon each such adjustment of the kind and
number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter be entitled to purchase
the number of Warrant Shares or other securities resulting from such
adjustment at an Exercise Price per such Warrant Share or other security
obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Shares purchasable pursuant hereto
immediately prior to such adjustment and dividing by the number of Warrant
Shares or other securities of the Company resulting from such adjustment.
An adjustment made pursuant to this Section 7 shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such event.
Page No. 2
8. Notice of Adjustment. Whenever the number of Warrant Shares or number or
kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt
requested, to the Holder notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of
such Warrant Shares (and other securities or property) after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was
made.
9. Transfer to Comply with the Securities Act; Registration by Company.
(a) Compliance with Securities Laws. This Warrant and the Warrant Shares
have not been registered under the Securities Act of 1933, as amended (the
"Act"), or under any applicable state or foreign securities laws, and this
Warrant has been issued to the Holder for investment purposes only and not
with a view to the distribution of either this 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, assigned, pledged, hypothecated or otherwise disposed of in
the absence of an opinion, in form, scope and substance reasonably
acceptable to the Company, of counsel reasonably acceptable to the Company
that registration is not required under the Act, or under the provisions of
applicable federal and state securities laws, except that with respect to
any transfer of this Warrant or the Warrant Shares or any other security
issued or issuable upon exercise of this Warrant to an affiliate of the
Holder where the beneficial ownership of such security or securities by the
Holder's ultimate parent has not changed, the counsel rendering the opinion
may be in-house legal counsel to the Holder. After satisfaction of the
requirements of this Section 9(a), the Company shall immediately transfer
this Warrant on the books of the Company and shall execute and deliver a
new Warrant of like tenor to the appropriate assignee(s) expressly
evidencing the right to purchase the aggregate number of shares of Common
Stock purchasable hereunder or such portion of such number shares of Common
Stock as shall be contemplated by any such assignment. 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, substance and scope satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section 9(a).
(b) Registration. Within six (6) months from the date hereof, the Company
shall file a registration statement under the Act (a "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
registering for re-offer and re-sale the Warrant Shares and/or offer
piggyback registration rights to the Holder with respect to the Warrant
Shares under a Registration Statement filed by the Company with respect to
its Common Stock (other than another Registration Statement on Form S-4 or
Form S-8 or any successor thereto). The Company shall use its best efforts
to cause the Registration Statement to be declared effective by the
Commission no later than the last day of such six (6) moth period. Once any
such Registration Statement is declared effective by the Commission, the
Company shall use its best efforts to keep the Registration Statement or
Registration Statements, as applicable, effective and current until all the
Warrant Shares registered thereunder are sold or
Page No. 3
may be sold in any 90-day period without registration under Rule 144 or
another appropriate exemption under the Act. If no Registration Statement
is declared effective by the Commission within sixty (60) days of the end
of such six (6) month period, or if a Registration Statement is declared
effective but after becoming effective becomes subject to a stop order or
is not otherwise available for use by the Holder (other than as a result of
the application of standard black-out periods) for a period of forty-five
(45) days, then thereafter the Holder may demand on up to an aggregate of
three (3) separate occasions that the Warrant Shares be registered on a
registration statement filed with the Commission or have the Warrant Shares
included on any other applicable Registration Statement filed by the
Company, which "demand" and "piggyback" registration rights will be subject
to such reasonable terms as are ordinarily offered to investors purchasing
similar securities to this Warrant acquired in a similar manner, until all
the Warrant Shares are sold.
(c) Registration Expenses. All fees and expenses incident to the
registration of the Warrant Shares shall be borne by the Company, other
than fees and expenses of any counsel retained by the Holder in connection
with the Registration Statement, which fees and expenses shall be borne
exclusively by the Holder whether or not the registration statement is
filed or becomes effective and the Holder's pro rata payment of any
underwriter's commission in the case of an underwritten offering. The fees
and expenses to be borne by the Company shall include, without limitation,
the following: (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be
made with the Nasdaq and each other securities exchange or market on which
Warrant Shares are required hereunder to be listed, and (B) with respect to
filings required to be made with the Commission; (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Warrant Shares and of printing prospectuses if the printing of prospectuses
is requested by the holders of a majority of the Warrant Shares included in
the registration statement), (iii) messenger, telephone and delivery
expenses; and (iv) fees and disbursements of counsel for the Company.
(d) Right to Suspend or Abandon. Subject to the rights of the Holder in
Section 9(b) hereof, nothing in this Section 9 shall create any liability
or obligation on the part of the Company to the Holder if the Company in
its reasonable discretion should decide (i) not to file a registration
statement for which a notice of a piggyback registration right has been
sent to the Holder; (ii) to withdraw such registration statement subsequent
to its filing and prior to the later of its effectiveness offering; or
(iii) to suspend or terminate any offering or the effectiveness of any
registration statement by the Company or at the request of any person,
entity or governmental authority.
(e) With a view to making available the benefits of Rule 144 promulgated
under the Act ("Rule 144"), which may permit the sale of the Warrant Shares
to the public without registration under the Act, subject to compliance
with the terms and provisions of the Act, the Company agrees to use its
best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144;
Page No. 4
(ii) file with the Commission in a timely manner all reports
and other documents required of the Company under the Act
and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); and
(iii) furnish to the Holder, so long as the Holder owns any of
the Warrant Shares, promptly upon receipt of a written
request from the Holder a written statement by the Company
as to its compliance with the reporting requirements of
the Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company filed with the
Commission under the Exchange Act, and such other reports
and documents of the Company and other information in the
possession of or reasonably obtainable by the Company as
the Holder may reasonably request in availing itself or
any rule or regulation of the Commission allowing the
Holder to sell any such securities without registration
under the Act.
10. Indemnification and Contribution.
(a) Indemnification By The Company. The Company shall indemnify and hold
harmless the Holder and the officers, directors, agents or employees of the
Holder and each person who controls the Holder (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) and the respective
present and former officers, directors, agents and employees of each such
controlling person, to the fullest extent permitted by applicable law, from
and against any and all claims, losses, damages, liabilities, penalties,
judgments, costs (including, without limitation, costs of investigation)
and expenses (including, without limitation, attorneys' fees and expenses)
(collectively, "Losses"), incurred by any of them, arising out of or
relating to any untrue or alleged untrue statement of a material fact
contained in the registration statement, any prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any prospectus or form of
prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, except to the extent that such untrue
statements or omissions are based upon information regarding the Holder
furnished in writing to the Company by the Holder expressly for use
therein, which information was reasonably relied on by the Company for use
therein.
(b) Indemnification By The Holder. The Holder shall indemnify and hold
harmless the Company, the directors, officers, agents and employees of the
Company, and each person who controls the Company (within the meaning of
Section 15 of the Act and Section 20 of the Exchange Act), and the
respective present and former directors, officers, agents or employees of
such controlling persons, to the fullest extent permitted by applicable
law, from and against all Losses, as incurred, arising solely out of or
based solely upon any untrue statement of a material fact contained in the
registration statement, any prospectus, or any
Page No. 5
form of prospectus, or arising solely out of or based solely upon any
omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any prospectus or form of
prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, to the extent, but only to the
extent, that such untrue statement or omission is contained in or omitted
from any information so furnished in writing by the Holder to the Company
specifically for inclusion in the registration statement or such prospectus
and that such information was reasonably relied upon by the Company for use
in the registration statement, such prospectus or such form of prospectus;
provided that the maximum amount of the indemnification payments by Holder
shall not exceed the net sale proceeds of any of the shares of Common Stock
sold by Holder pursuant to the registration statement.
(c) Conduct of Indemnification Proceedings. If any action, suit or other
proceeding (a "Proceeding") shall be brought or asserted against any person
entitled to indemnity hereunder (an "Indemnified Party"), such Indemnified
Party promptly shall notify the person from whom indemnity hereunder is
sought (the "Indemnifying Party") in writing, and the Indemnifying Party
shall assume the defense thereof, including, without limitation, the
employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Section 10, except, to the extent, that such
failure shall have adversely prejudiced the Indemnifying Party. An
Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay
such fees and expenses; or (2) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding;
or (3) the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the
defense thereof and such counsel shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect
any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such Proceeding. All fees and
expenses of the Indemnified Party (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to
defend such Proceeding in a manner not inconsistent with this Section)
shall be paid to the Indemnified Party, as incurred, within thirty (30)
business days of written notice thereof to the Indemnifying Party,
regardless of whether it is ultimately determined that an Indemnified Party
is not entitled to indemnification hereunder; provided
Page No. 6
that the Indemnifying Party may require such Indemnified Party to undertake
to reimburse all such fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is not entitled to
indemnification hereunder.
(d) Contribution. If a claim for indemnification under Section 10(a) or
10(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then
the Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by the Indemnified Party as
a result of such Losses, in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party and Indemnified Party in
connection with the actions, statements or omissions that resulted in such
Losses, as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material
fact or omission or alleged omission of a material fact, has been taken or
made by, or relates to information supplied by, the Indemnifying, Party or
the Indemnified Party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action, statement
or omission. The payment obligations of Holder hereunder shall be limited
to the net sale proceeds of any of the shares of Common Stock sold by
Holder pursuant to the Registration Statement.
(e) Equitable Considerations. The Company and the Holder agree that it
would not be just and equitable if contribution pursuant to Section 10(d)
were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to
in Section 10(d). The indemnity and contribution agreements contained in
this Section 10 are in addition to any liability that the Indemnifying
Parties may have to the Indemnified Parties.
11. Notice. Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, sent by facsimile
transmission or sent by certified, registered or express mail, postage
pre-paid. Any such notice shall be deemed given when so delivered
personally or if sent by facsimile transmission, on a business day (for
which a mechanically generated receipt evidencing the time of
transmission), or, if mailed, three (3) days after the date of deposit in
the United States mails. The addresses for such notices or communications
shall be with respect to the Holder of this Warrant or of Warrant Shares
issued pursuant hereto:
Texas Instruments Incorporated
7839 Churchill Way
Mail Station 3995
Dallas, TX 75251
Facsimile no.: (972)-917-3804
ATT: Charles D. Tobin
Page No. 7
with a copy to:
Texas Instruments Incorporated
12500 TI Boulevard
Mail Station 8658
Dallas, TX 75243
Facsimile no.: (214) 917-4418
ATT: Joseph F. Hubach
or with respect to the Company, addressed to:
Xybernaut Corporation
12701 Fair Lakes Circle
Suite 550
Fairfax, Virginia 22033
Facsimile no.: (703) 631-3903
ATT: John F. Moynahan
Chief Financial Officer
With a copy to:
Martin Eric Weisberg, Esq.
Jenkens & Gilchrist Parker Chapin LLP
The Chrysler Building
405 Lexington Avenue
New York, New York 10174
Facsimile no.: (212) 704-6288
or to such other address or addresses or facsimile number or numbers as the
Holder or the Company, as the case may be, may most recently have designated in
writing to the other party hereto by notice given in accordance with this
Section 11.
12. Supplements and Amendments; Whole Agreement. This Warrant may be amended or
supplemented only by an instrument in writing signed by the Company and the
Holder. This Warrant contains the full understanding and agreement 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.
13. Governing Law. This Warrant shall be deemed to be a contract made under the
laws of the State of Delaware 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.
14. 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.
Page No. 8
15. 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.
[INTENTIONALLY LEFT BLANK]
Page No. 9
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
April 18, 2001.
XYBERNAUT CORPORATION
By:
-----------------------------------------
Name: Edward G. Newman
Title: Chairman and CEO
Page No. 10
EXHIBIT A
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by Warrant Certificate No. W____, dated as of __________, 2001, to
purchase __________ shares of the Common Stock, par value $0.01 per share, of
Xybernaut Corporation, a Delaware corporation, and tenders herewith payment in
accordance with Section 2 of said Warrant.
In exercising the Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, and for
investment, and that the undersigned will not offer sell or otherwise dispose of
any such shares of Common Stock, except under circumstances that will not result
in a violation of the United States Securities Act of 1933, as amended, or any
foreign or state securities laws.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below, and please issue a new Warrant for the unexercised portion of
the attached Warrant in such name, if applicable:
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(Name)
-----------------------------------------------
(Address)
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Dated:
---------------------
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Name:
Page No. 11
Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the
within Purchase Option):
FOR VALUE RECEIVED, _____________________________________ does hereby
sell, assign and transfer unto the right to purchase ______________________
shares of Common Stock to purchase _____________ shares of Common Stock of
Xybernaut Corporation, a Delaware corporation ("Company"), evidenced by the
within Warrant and does hereby authorize the Company to transfer such right on
the books of the Company.
Dated: _____________________, 20___
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Signature
Page No. 12