Exhibit 4.2
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.
COMMON STOCK PURCHASE WARRANT
XYBERNAUT CORPORATION
Expires June 19, 2005
No.: W-D04-2 Number of Shares: 2,696,290
Date of Issuance: December 20, 2004
1. Issuance. For good and valuable consideration, the receipt of which
is hereby acknowledged by Xybernaut Corporation, a Delaware corporation (the
"Company"), Western Ventures Ltd., a company organized under the laws of
Anguilla 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 June 19, 2005 (the
"Expiration Date"), Two Million Six Hundred Ninety-Six Thousand Two Hundred
Ninety (2,696,290) shares of the Company's common stock, par value $.01 per
share (the "Common Stock") at an exercise price (the "Exercise Price") at any
time from the date hereof through and including the Expiration Date the exercise
price shall be $1.16 cents per share (the "Initial Exercise Price"). The
Exercise Price shall be subject to further adjustment as set forth in Section 6
hereof.
2. Exercise of Warrants. 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.
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.
(c) Adjustment for Spin Off. If, for any reason, prior to the
exercise of this Warrant in full, the Company spins off or otherwise divests
itself of a part of its business or operations or disposes all or a part of its
assets in a transaction (the "Spin Off") in which the Company does not receive
compensation for such business, operations or assets, but causes securities of
another entity (the "Spin Off Securities") to be issued to security holders of
the Company, then
(i) the Company shall cause (a) to be reserved Spin Off Securities
equal to the number thereof which would have been issued to the Holder in
the event all of the Holder's unexercised Warrants outstanding on the
record date (the "Record Date") for determining the number of Spin Off
Securities to be issued to security holders of the Company (the
"Outstanding Warrants") been exercised as of the close of business on the
trading day immediately prior to the Record Date (the "Reserved Spin Off
Shares"), and
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(b) to be issued to the Holder on the exercise of all or any of the
Outstanding Warrants, such amount of the Reserved Spin Off Shares equal to
(x) the Reserved Spin Off Shares multiplied by (y) a fraction, of which (I)
the numerator is the amount of the Outstanding Warrants then being
exercised, and (II) the denominator is the amount of the Outstanding
Warrants; and
(ii) the Exercise Price on the Outstanding Warrants shall be
adjusted immediately after consummation of the Spin Off by multiplying the
Exercise Price by a fraction (if, but only if, such fraction is less than
1.0), the numerator of which is the average Closing Bid Price of the Common
Stock for the five (5) trading days immediately following the fifth trading
day after the Record Date, and the denominator of which is the average
Closing Bid Price of the Common Stock on the five (5) trading days
immediately preceding the Record Date; and such adjusted Exercise Price
shall be deemed to be the Exercise Price with respect to the Outstanding
Warrants after the Record Date.
7. Warrant Call. At any time or from time to time after the
Registration Statement (as defined in Section 9(b) hereof) has been declared
effective, the Company, at its option, may, upon written notice to the Holder
(the "Call Notice"), call up to one hundred percent (100%) of this Warrant if
the Common Stock trades at a price equal to or greater than $3.00 per share for
five (5) consecutive trading days prior to the date the Company calls the
Warrant. To be effective, the Call Notice must be given within ten (10) days
after the aforementioned five (5) day period. The rights and privileges granted
pursuant to this Warrant with respect to such Warrant Shares subject to the Call
Notice shall terminate if this Warrant is not exercised with respect to such
Warrant Shares by the Holder within ten (10) days after the Call Notice is
received by the Holder. In the event that this Warrant is not exercised by the
Holder with respect to the Warrant Shares subject to the Call Notice, this
Warrant shall expire at 5:00 p.m. New York City time on the call date and the
Company will remit to the Holder $0.01 per Warrant Share and a new Warrant
certificate representing the number of Warrant Shares, if any, with respect to
which this Warrant has not been exercised or subject to a Call Notice upon such
Holder tendering to the Company the expired Warrant certificate.
8. Limitation on Exercise. Notwithstanding anything to the contrary set
forth in this Warrant or the Common Stock and Warrant Purchase Agreement of even
date herewith (the "Purchase Agreement"), the Holder shall not be entitled to
exercise this Warrant and the Company shall have no obligation to issue shares
of Common Stock upon such exercise of all or any portion of this Warrant to the
extent that, following such exercise, the Beneficial Ownership Number (as
defined below) is equal to or greater than 4.99% of the outstanding shares of
Common Stock (including the shares to be issued to the Holder upon such
exercise). Notwithstanding the foregoing, this Section 8 shall have no further
force and effect if there is an outstanding tender offer for any or all of the
shares of the Company's Common Stock, or the Holder, at its option, provides at
least sixty-five (65) days' advance written notice from the Holder that this
Section 8 shall have no further force and effect. For purposes of this Section,
"Beneficial Ownership Number" shall equal the sum of (i) the number of shares of
Common Stock owned by the Holder and its affiliates (other than shares of Common
Stock which may be
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deemed beneficially owned through the ownership of the unexercised portion of
this Warrant or other rights to purchase Common Stock or through the ownership
of convertible securities), and (ii) the number of shares of Common Stock
issuable upon the exercise of this Warrant. For purposes of this Section,
"beneficial ownership" shall be defined in accordance with Rule 13(d)-3 of the
Securities Exchange Act of 1934, as amended. The Holder, by its acceptance of
this Warrant, further agrees that if the Holder transfers or assigns any of the
Warrants to any party, such assignment shall be made subject to the transferee's
or assignee's specific agreement to be bound by the provisions of this Section 8
as if such transferee or assignee were the original Holder hereof.
9. Transfer to Comply with the Securities Act; Registration Rights.
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(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 Registration Rights Agreement between
the Company and the Holder dated as of even date herewith (the "Registration
Rights Agreement").
10. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, 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, 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: Chief Financial Officer
Telephone No.: (703) 631-6925
Facsimile No.: (703) 631-3903
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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
(ii) if to the Holder, to:
Western Ventures Ltd.
3 Dov Karmi Street
Tel Aviv, Israel
Attn: Amit Lederman
Telephone No.: _____________
Facsimile No.: ______________
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
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.
11. 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 and the Purchase Agreement, of even date herewith, by and
between the Company and the Holder 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.
12. Governing Law; Waiver of Jury. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law thereof. This Agreement shall not be
interpreted or construed with any presumption against the party causing this
Agreement to be drafted. In any action, suit or proceeding in any jurisdiction
arising out of or related directly or indirectly to this Agreement, whether
brought by the Company against the Holder or the Holder against the Company, the
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Company and the Holder each hereby absolutely, unconditionally, irrevocably and
expressly waives forever trial by jury.
13. 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.
14. 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
this ___ day of December __, 2004.
XYBERNAUT CORPORATION
By:
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Name:
Title:
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NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate No. W-D04-2 dated as of December __,
2004, to purchase 2,696,290 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:
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Dated: _____ day of __________, 200__
Western Ventures Ltd.
By:
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Name:
Title:
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