COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT is dated as of
November 15, 2001 (this "Purchase Agreement"), by and between XYBERNAUT
CORPORATION, a Delaware corporation, having its principal place of business
located at 12701 Fair Lakes Circle, Suite 550, Fairfax, Virginia 22033 (the
"Company"), and HOLLY INVESTMENTS LIMITED, a company incorporated under the laws
of Turks & Caicos Islands, British West Indies, having its principal place of
business located at Gretton House, P.O. Box 65, Duke Street, Grand Turk (the
"Investor").
W I T N E S S E T H
WHEREAS, the Company wishes to sell to the Investor, and the Investor
is willing to buy from the Company, subject to the terms and conditions set
forth herein, $4,000,000 of Common Stock, par value $.01 per share (the "Common
Stock"), of the Company.
NOW, THEREFORE, for and in consideration of the premises and the
mutual agreement contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. PURCHASE AND SALE; MUTUAL DELIVERIES. (a) Upon the following terms
and conditions, the Company shall issue and sell to the Investor and the
Investor shall purchase from the Company that number of shares of Common Stock
equal to $4,000,000 (the "Aggregate Amount") divided by the Purchase Price (as
hereinafter defined), resulting in 2,352,941 shares (the "Shares") to be issued
upon the payment of the Purchase Price. Upon receipt of the Purchase Price, the
Company shall deliver to the Investor one or more certificates representing the
Shares, bearing substantially the following legend:
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.
(b) As used herein "Purchase Price" shall be equal to the average
of the closing bid price of the Common Stock for the prior 15 trading days,
reduced by a 16% discount to such average price, or $1.70 per share.
(c) The Company shall also deliver, or cause to be delivered, the
original or execution copies of this Purchase Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Investor that:
(a) The Company has the corporate power and authority to enter
into this Purchase Agreement, and to perform its obligations hereunder. The
execution and delivery by the Company of this Purchase Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company.
This Purchase Agreement has been duly executed and delivered by the Company and
constitute the valid and binding obligation of the Company enforceable against
it in accordance with their respective terms, subject to the effects of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and to general equitable principles.
(b) Except as set forth in the SEC Documents (as hereinafter
defined), there is no pending, or to the knowledge of the Company, threatened,
judicial, administrative or arbitral action, claim, suit, proceeding or
investigation which might affect the validity or enforceability of this Purchase
Agreement or which involves the Company and which if adversely determined, could
reasonably be expected to have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(c) No consent or approval of, or exemption by, or filing with,
any party or governmental or public body or authority is required in connection
with the execution, delivery and performance under this Purchase Agreement or
the taking of any action contemplated hereunder or thereunder.
(d) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation.
(e) The execution, delivery and performance of this Agreement by
the Company, and the consummation of the transactions contemplated hereby, will
not (i) violate any provision of the Company's articles of incorporation or
bylaws, (ii) violate, conflict with or result in the breach of any of the terms
of, result in a material modification of the effect of, otherwise, give any
other contracting party the right to terminate, or constitute (or with notice or
lapse of time or both constitute) a default under, any contract or other
agreement to which the Company is a party or by or to which the Company or any
of the Company's assets or properties may be bound or subject, (iii) violate any
order, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body by which the Company, or the assets or
properties of
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the Company are bound and (iv) to the Company's knowledge, violate any statute,
law or regulation.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The Investor hereby
represents and warrants to the Company that:
(a) The Investor has the corporate power and authority to enter
into this Purchase Agreement and to perform its obligations hereunder. The
execution and delivery by the Investor of this Purchase Agreement, and the
consummation by the Investor of the transactions contemplated hereby, have been
duly authorized by all necessary corporate action on the part of the Investor.
This Purchase Agreement has been duly executed and delivered by the Investor and
constitute the valid and binding obligation of the Investor, enforceable against
it in accordance with their respective terms, subject to the effects of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and to general equitable principles.
(b) The execution, delivery and performance by the Investor of
this Purchase Agreement, and the consummation of the transactions contemplated
hereby, do not and will not breach or constitute a default under any applicable
law or regulation or of any agreement, judgment, order, decree or other
instrument binding on the Investor.
(c) The Investor has such knowledge and prior substantial
investment experience in financial and business matters, including investment in
non-listed and non-registered securities, and has had the opportunity to engage
the services of an investment advisor, attorney or accountant to read the SEC
Documents and to evaluate the merits and risks of investment in the Company and
the Securities.
(d) The Investor is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D promulgated under the Securities Act of
1933, as amended (the "Securities Act").
(e) The Investor is not a "U.S. Person" as that term is defined in
Regulation S promulgated under the Securities Act.
(f) The Investor is acquiring the Shares, the Investor Warrants
(as defined in Section 4(d)) and the shares of Common Stock issuable upon
exercise of the Investor Warrants (the "Warrant Shares") solely for the
Investor's own account for investment and not with a view to or for sale in
connection with a distribution of any of the Shares or the Warrant Shares (the
Shares, Warrants and Warrant Shares collectively, the "Securities");
(g) The Investor does not have a present intention to sell the
Securities, nor a present arrangement or intention to effect any distribution of
any of the Securities to or through any person or entity for purposes of
selling, offering, distributing or otherwise disposing of any of the Securities;
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(h) The Investor may be required to bear the economic risk of the
investment indefinitely because none of the Securities may be sold, hypothecated
or otherwise disposed of unless subsequently registered under the Securities Act
and applicable state securities laws or an exemption from registration is
available. Any resale of any of the Securities can be made only pursuant to (i)
a registration statement under the Securities Act which is effective and current
at the time of sale or (ii) a specific exemption from the registration
requirements of the Securities Act. In claiming any such exemption, the Investor
will, prior to any offer or sale or distribution of any Securities advise the
Company and, if requested, provide the Company with a favorable written opinion
of counsel, in form and substance satisfactory to counsel to the Company, as to
the applicability of such exemption to the proposed sale or distribution;
(i) The Investor understands that the exemption afforded by Rule
144 promulgated by the Securities and Exchange Commission under the Securities
Act ("Rule 144") will not become available for at least one year from the date
of payment for the Securities and any sales in reliance on Rule 144, if then
available, can be made only in accordance with the terms and conditions of that
rule, including, among other things, a requirement that the Company then be
subject to, and current, in its periodic filing requirements under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, among
other things, a limitation on the amount of shares of Common Stock that may be
sold in specified time periods and the manner in which the sale can be made;
that, while the Company's Common Stock is registered under the Exchange Act and
the Company is presently subject to the periodic reporting requirements of the
Exchange Act, there can be no assurance that the Company will remain subject to
such reporting obligations or current in its filing obligations; and that, in
case Rule 144 is not applicable to a disposition of the Securities, compliance
with the registration provisions of the Securities Act or some other exemption
from such registration provisions will be required; and
(j) The Investor understands that legends shall be placed on the
certificates evidencing the Securities to the effect that the Securities have
not been registered under the Securities Act or applicable state securities laws
and appropriate notations thereof will be made in the Company's stock books.
Stop transfer instructions will be placed with the transfer agent of the
securities constituting the Common Stock.
4. COVENANTS OF THE COMPANY. (a) The Company covenants and agrees to
enter into a registration rights agreement governing the registration of the
Securities with the Investor dated as of the date hereof.
(b) Current Public Information. The Company has furnished or made
available to the Investor true and correct copies of all registration
statements, reports and documents, including proxy statements (other than
preliminary proxy statements), filed with the Securities and Exchange Commission
(the "SEC") by or with respect to the Company since December 31, 2000 and prior
to the date of this Agreement, pursuant to the Securities Act or the Exchange
Act (collectively, the "SEC Documents"). The SEC
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Documents are the only filings made by or with respect to the Company since
December 31, 2000 pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act or pursuant to the Securities Act. The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act since November 1,
2000 and prior to the date of this Agreement. The Company meets the "Registrant
Requirement" for eligibility to use Form S-3 under the Securities Act in order
to register the Company's Common Stock for resales.
(c) SEC Documents. The Company has not provided to the Investor
any information which 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, and all similar documents filed with the SEC prior to the Closing Date
will comply, 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 other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents
contained, nor will any similar document filed with the SEC prior to the Closing
Date contain, 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, as of the dates thereof, complied, and all similar documents filed
with the SEC prior to the Closing Date will comply, as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC and other applicable rules and regulations with respect
thereto. Such financial statements were 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
as permitted by Form 10-Q of the SEC) and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of the dates thereof and the consolidated results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(d) Warrants. The Company agrees to issue to the Investor at the
Closing, transferable divisible warrants (the "Investor Warrants" and, together
with the Finder's Warrants, the "Warrants") to purchase up to 588,235 shares of
Common Stock. Such Investor Warrants shall bear an exercise price per share of
Common Stock equal to $2.55 and shall be exercisable, immediately upon issuance,
and for a period of five (5) years thereafter. Subject to the terms and
conditions of the Investor Warrants, the Company, at its option, may, upon
written notice to the Investor, call up to one hundred percent (100%) of the
Investor Warrants if the Common Stock trades at a price equal to or greater than
$3.25 per share for five (5) consecutive trading days prior to the date the
Company calls the Investor Warrants.
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(e) Reimbursement. If (i) the Investor, other than by reason of
its gross negligence or willful misconduct, becomes involved in any capacity in
any action, proceeding or investigation brought by any stockholder of the
Company, in connection with or as a result of the consummation of the
transactions contemplated by this Purchase Agreement, or if such Investor
impleaded in any such action, proceeding or investigation by any Person, or (ii)
the Investor, other than by reason of its gross negligence or willful misconduct
or by reason of its trading of the Common Stock in a manner that is illegal
under the federal securities laws or other actions, becomes involved in any
capacity in any action, proceeding or investigation brought by the Commission
against or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by this Purchase Agreement, or if
the Investor is impleaded in any such action, proceeding or investigation by any
Person, then in any such case, the Company will reimburse the Investor for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred. In
addition, other than with respect to any such matter in which the Investor is a
named party, the Company will pay the Investor the charges, as reasonably
determined by the Investor, for the time of any officers or employees of the
Investor devoted to appearing and preparing to appear as witnesses, assisting in
preparation for hearings, trials or pretrial matters, or otherwise with respect
to inquiries, hearing, trials, and other proceedings relating to the subject
matter of this Agreement. The reimbursement obligations of the Company under
this paragraph shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
Affiliates of the Investors who are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of the Investors and any such Affiliate,
and shall be binding upon and inure to the benefit of any successors, assigns,
heirs and personal representatives of the Company, the Investors and any such
Affiliate and any such Person. The Company also agrees that neither the Investor
nor any such Affiliate, partners, directors, agents, employees or controlling
persons shall have any liability to the Company or any person asserting claims
on behalf of or in right of the Company in connection with or as a result of the
consummation of the transactions contemplated by this Purchase Agreement except
to the extent that any losses, claims, damages, liabilities or expenses incurred
by the Company result from the gross negligence or willful misconduct of the
Investor or any such Affiliate. The Company further agrees to reimburse the
Investor for its reasonable attorney's and other professional fees in connection
with the negotiation and execution of this Purchase Agreement.
5. DELIVERY OF SHARES. (a) Promptly following the delivery by the
Investor of the Total Purchase Price for the Shares in accordance with Section 1
hereof, the Company will irrevocably instruct its transfer agent to issue to the
Investor legended certificates representing the Shares.
(b) Within five (5) business days (such third business day, the
"Delivery Date") after the business day on which the Company has received both
the notice of sale (by facsimile or other delivery) and the original Common
Stock certificate (and if the same are not delivered to the Company on the same
date, the date of delivery
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of the second of such items), the Company (i) shall deliver, and shall cause
legal counsel selected by the Company to deliver, to its transfer agent (with
copies to Investor) an appropriate instruction and opinion of such counsel, for
the delivery of unlegended Shares issuable upon the sale of the Shares pursuant
to the registration statement for the Shares; provided that such registration
statement at the time of sale has been declared effective by the Commission and
is current (the "Unlegended Shares"); and (ii) transmit the certificates
representing the Unlegended Shares (together, unless otherwise instructed by the
Investor, with Common Stock not sold), to the Investor at the address specified
in a notice of sale (which address may be the Investor's address for notices as
contemplated by Section 6 hereof or a different address) via express courier, by
electronic transfer or otherwise.
(c) In lieu of delivering physical certificates representing the
Unlegended Shares, if the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program,
upon request of the Investor and its compliance with the provisions contained in
this paragraph, so long as the certificates therefor do not bear a legend and
the Investor thereof is not obligated to return such certificate for the
placement of a legend thereon, the Company shall use its best efforts to cause
its transfer agent to electronically transmit the Unlegended Shares by crediting
the account of Investor's Prime Broker with DTC through its Deposit Withdrawal
Agent Commission system.
6. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given upon personal delivery or seven (7) business days after deposit in the
United States Postal Service, by (a) advance copy by fax, and (b) mailing by
express courier or registered or certified mail with postage and fees prepaid,
addressed to each of the other parties thereunto entitled at the following
addresses, or at such other addresses as a party may designate by ten days
advance written notice to each of the other parties hereto.
COMPANY: XYBERNAUT CORPORATION
12701 Fair Lakes Circle
Suite 550
Fairfax, Virginia 22033
ATTN: John F. Moynahan, Chief Financial Officer
Telephone No.: (703) 631-6925
Facsimile No.: (703) 631-3903
with a copy to: Jenkens & Gilchrist 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
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Investor: HOLLY INVESTMENTS LIMITED
Gretton House
P.O. Box 65
Duke Street, Grand Turk
Turks & Caicos Islands, British West Indies
ATTN: C.B. Williams
Telephone No.: (649) 946-2133
Facsimile No.: (649) 946-2933
with a copy to: Krieger & Prager, LLP
39 Broadway, Suite 1440
New York, New York 10006
ATTN: Samuel Krieger, Esq.
Telephone No.: (212) 363-2900
Facsimile No.: (212) 363-2999
7. SEVERABILITY. If a court of competent jurisdiction determines that
any provision of this Purchase Agreement is invalid, unenforceable or illegal
for any reason, such determination shall not affect or impair the validity,
legality and enforceability of the other provisions of this Purchase Agreement.
If any such invalidity, unenforceability or illegality of a provision of this
Purchase Agreement becomes known or apparent to any of the parties hereto, the
parties shall negotiate promptly and in good faith in an attempt to make
appropriate changes and adjustments to such provision specifically and this
Purchase Agreement generally to achieve as closely as possible, consistent with
applicable law, the intent and spirit of such provision specifically and this
Purchase Agreement generally.
8. EXECUTION IN COUNTERPARTS. This Purchase Agreement may be executed
in counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same Purchase Agreement.
9. CONSENT TO JURISDICTION. Each of the Company and the Investor (i)
hereby irrevocably submits to the jurisdiction of the United States District
Court sitting in the Southern District of New York and the courts of the State
of New York located in New York county for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby and (ii) hereby waives, and agrees not to assert in any such
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Investor consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 9 shall affect or limit any right to serve
process in any other manner permitted by law.
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10. GOVERNING LAW. This Purchase Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without giving
effect to choice of law provisions.
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IN WITNESS WHEREOF, the parties have executed this Purchase Agreement
as of the date first written above.
XYBERNAUT CORPORATION
By: ________________________________
Name:
Title:
HOLLY INVESTMENTS LIMITED
By: ________________________________
Name:
Title:
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