Document/Exhibit Description Pages Size
1: 8-K Date of Report: June 30, 1997 4 15K
2: EX-4 Certificate of Designation - Series A Preferred 9 38K
3: EX-99 Press Release Dated July 8, 1997 2 11K
EX-4 — Certificate of Designation – Series A Preferred
Exhibit Table of Contents
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CERTIFICATE OF DESIGNATION
OF
XYBERNAUT CORPORATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
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SERIES A PREFERRED STOCK
Xybernaut Corporation, a Delaware corporation (the "Corporation"),
hereby certifies that the following resolution has been duly adopted by the
Board of Directors of the Corporation:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of the
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), there hereby is created, out of the 5,000,000 shares of
Preferred Stock, par value $0.01 per share, of the Corporation authorized in
Article Fourth of the Certificate of Incorporation (the "Preferred Stock"), a
series of the Preferred Stock of the Corporation consisting of 3,000 shares,
which series shall have the following powers, designations, preferences and
relative, participating, optional and other rights, and the following
qualifications, limitations and restrictions:
1. DESIGNATION AND AMOUNT. This series of Preferred Stock shall be
designated "Series A Preferred Stock" and the authorized number of
shares constituting such series shall be 3,000. The par value of the
Series A Preferred Stock shall be $0.01 per share. The Series A
Preferred Stock shall have a stated value of $1,000 per share.
2. DIVIDENDS.
(a) The holders of shares of Series A Preferred Stock shall
be entitled to receive, out of any assets at the time legally
available therefor and when and as declared by the Board of
Directors, dividends at the rate of five percent (5%) of the stated
Liquidation Preference (as defined below) per share per annum, and no
more, payable, in the discretion of the Board of Directors of the
Corporation in shares of the common stock of the Corporation, par
value $0.01 per share (the "Common Stock"), or in cash. Such
dividends on the Series A Preferred Stock shall be payable only at
conversion of the Series A Preferred Stock into shares of Common
Stock. Such dividends on the Series A Preferred Stock are prior and
in preference to any declaration or payment of any distribution (as
defined below) on any outstanding shares of Common Stock or any other
equity securities of the Corporation ranking junior to the Preferred
Stock as to the
payment of dividends. Such dividends shall accrue on each share of
Series A Preferred Stock from day to day from the date of initial
issuance thereof whether or not earned or declared so that if such
dividends with respect to any previous dividend period at the rate
provided for herein have not been paid on, or declared and set apart
for, all shares of Series A Preferred Stock at the time outstanding,
the deficiency shall be fully paid on, or declared and set apart for,
such shares on a pro rata basis with all other equity securities of
the Corporation ranking on a parity with the Preferred Stock as to
the payment of dividends before any distribution shall be paid on, or
declared and set apart for Common Stock or any other equity
securities of the Corporation ranking junior to the Preferred Stock
as to the payment of dividends.
(b) For purposes hereof, unless the context otherwise
requires, "distribution" shall mean the transfer of cash or property
without consideration, whether by way of dividend or otherwise,
payable other than in shares of Common Stock or other equity
securities of the Company, or the purchase or redemption of shares of
the Corporation (other than redemptions set forth in Paragraph 5
below or repurchases of Common Stock held by employees or consultants
of the Corporation upon termination of their employment or services
pursuant to agreements providing for such repurchase) for cash or
property.
3. PREFERENCES ON LIQUIDATION.
(a) In the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation, the
holders of shares of the Series A Preferred Stock then outstanding,
shall be entitled to be paid, out of the assets of the Corporation
available for distribution to its stockholders, whether from capital,
surplus or earnings, before any payment shall be made in respect of
the Corporation's Common Stock, an amount equal to the sum of one
thousand dollars ($1,000.00) per share of Series A Preferred Stock
(the "Liquidation Preference"), plus all accrued and unpaid dividends
thereon to the date of payment.
(b) If upon liquidation, dissolution, or winding up of the
Corporation, the assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of the
Series A Preferred Stock the full Liquidation Preference plus accrued
and unpaid dividends to which they respectively shall be entitled,
the holders of the Series A Preferred Stock together with the holders
of any other series of Preferred Stock ranking on a parity with the
Series A Preferred Stock as to the payments of amounts upon
liquidation, dissolution or winding up shall share ratably in any
distribution of assets according to the respective amounts which
would be payable in respect of all such shares held by the respective
stockholders thereof upon such distribution if all amounts payable on
or with respect to said shares were paid in full.
(c) For purposes of this Paragraph 2, the sale or other
disposition (for cash,
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shares of stock, securities or other consideration), of all or
substantially all of the assets of the Corporation shall be deemed to
be a liquidation, dissolution or winding up of the Corporation but
the merger or consolidation of the Corporation into or with another
corporation into or with the Corporation, shall not be deemed to be a
liquidation, winding up or dissolution of the Corporation.
(d) The holders of Series A Preferred Stock shall have no
priority or preference with respect to distributions made by the
Corporation in connection with the repurchase of shares of Common
Stock issued to or held by employees, directors or consultants upon
termination of their employment or services pursuant to agreements
providing for the right of said repurchase between the Corporation
and such persons.
4. CONVERSION RIGHTS.
The holders of Series A Preferred Stock shall have
conversion rights as follows:
(a) No shares of Series A Preferred Stock may be converted
prior to September 28, 1997. At any time after September 28, 1997
through December 31, 1997, up to twenty-five (25%) percent of the
shares of Series A Preferred Stock then outstanding may be converted,
at the option of the holders thereof, and thereafter on January 1,
1998, April 1, 1998 and July 1, 1998, an additional twenty-five (25%)
percent of the shares of Series A Preferred Stock then outstanding
may be converted, on a cumulative and pro rata basis, at the option
of the holders thereof. The number of shares of fully paid and
nonassessable Common Stock into which each share of Series A
Preferred Stock may be converted shall be determined by dividing the
Liquidation Preference by the Conversion Price (as hereinafter
defined) in effect on the Conversion Date.
(b) For purposes of this Paragraph 4, (i) "Conversion
Price" means an amount equal to the lesser of (A) eighty-two (82%)
percent of the average closing bid price of the Common Stock as
reported on the Nasdaq Small Cap Market or any successor exchange in
which the Common Stock is listed for the five (5) trading days
preceding the Conversion Date, and (B) $3.50; and (ii) "Conversion
Date" means the date on which the holder of the Series A Preferred
Stock has telecopied the Notice of Conversion (as hereinafter
defined) to the Corporation.
(c) A holder may convert in whole or in part, the Series A
Preferred Stock into Common Stock held by such holder by telecopying
an executed and completed Notice of Conversion in the form annexed
hereto as Exhibit A (a "Notice of Conversion") to the Corporation and
delivering the original Notice of Conversion and the certificate
representing the shares of Series A Preferred Stock to the
Corporation by express courier within five (5) business days after
the date of the Notice of Conversion. Each date on which a Notice of
Conversion is telecopied to and received by the Corporation in
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accordance with the provisions hereof shall be deemed a Conversion
Date. The Corporation will transmit the certificates representing the
Common Stock issuable upon conversion of all or any part of the
shares of Series A Preferred Stock (together with the certificate
representing portions of the shares of Series A Preferred Stock not
so converted) to the holder via express courier within five (5)
business days after the Corporation has received the original Notice
of Conversion and shares certificate being so converted. The Notice
of Conversion and certificate representing the portion of the shares
of Series A Preferred Stock converted shall be delivered to the
Corporation at its principal executive offices or to such other
person at such other place as the Corporation designates to the
holder in writing. In the event the shares of Series A Preferred
Stock are not converted within ten (10) business days of receipt by
the Corporation of a valid Notice of Conversion and certificates
representing the shares of Series A Preferred Stock to be converted,
the Corporation shall pay to the holder, by wire transfer, as
liquidated damages for such failure and not as a penalty, an amount
in cash equal to one (1%) percent per day of the purchase price of
the shares of Series A Preferred Stock to be converted which shall
run from the initial Conversion Date and the holder has the option to
withdraw the Notice of Conversion previously sent; provided, that the
Corporation shall not be responsible for or required to pay such
liquidated damages if such failure to convert was not caused by any
actions or omissions of the Corporation.
(d) No fractional shares of Common Stock shall be issued
upon conversion of the Series A Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled,
the Corporation shall pay cash equal to such fraction multiplied by
the fair market value of the Common Stock on the Conversion Date, as
determined by the Corporation's Board of Directors. The Corporation
shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon conversion unless either the certificates
evidencing such shares of Series A Preferred Stock are delivered to
the Corporation or its transfer agent as provided above, or the
holder notifies the Corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such
certificates.
(e) Subject to subparagraph (b) above, the Corporation
shall, as soon as practicable after such delivery, or after such
agreement and indemnification, issue and deliver at such office to
such holder of Series A Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which the
holder shall be entitled as aforesaid and a check payable to the
holder, or order, in the amount of any cash amounts payable as the
result of a conversion into fractional shares of Common Stock, plus
any accrued and unpaid dividends on the converted Series A Preferred
Stock, and a certificate for any shares of Series A Preferred Stock
not so converted.
(f) Upon any conversion of Series A Preferred Stock
pursuant to this Paragraph 4 the shares of Series A Preferred Stock
which are converted shall not be
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reissued and shall not be considered outstanding for any purposes.
Upon conversion of all of the then outstanding Series A Preferred
Stock pursuant to this Paragraph 4 and upon the taking of any action
required by law, all matters set forth in this Certificate of
Designation shall be eliminated from the Certificate of
Incorporation, shares of Series A Preferred Stock shall not be deemed
outstanding for any purpose whatsoever and all such shares shall be
retired and canceled and shall not be reissued.
(g) Any transmittal or other communications required by the
provisions of this Paragraph 4 to be given to the holders of shares
of Series A Preferred Stock shall be deemed given if deposited in the
United States mail, first class, postage prepaid and addressed to
each holder of record at its address appearing on the books of the
Corporation.
(h) On June 30, 1999, the holder shall be required to
convert all of its outstanding shares of Series A Preferred Stock
into shares of Common Stock. Until converted in accordance with the
terms of this Paragraph 4, the Company shall be entitled to redeem
shares of Series A Preferred Stock in accordance with Paragraph 5
hereof, regardless of whether or not a Notice of Conversion has been
received by the Corporation with respect to such shares.
(i) The Corporation shall at all times when any shares of
Series A Preferred Stock shall be outstanding, reserve and keep
available out of its authorized but unissued stock, such number of
shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of Series A Preferred
Stock.
5. REDEMPTION.
(a) At any time after September 28, 1997, the Corporation
may, at the option of the Board of Directors, redeem up to 50% of the
outstanding shares of the Series A Preferred Stock at the redemption
price set forth in subparagraph (b) below, provided, that (x) the
Corporation shall have received a Notice of Conversion, and (y) the
Conversion Price is at or below $2.625. At any time after September
28, 1997, the Corporation may, at the option of the Board of
Directors, redeem all or a portion of the remaining 50% of the
outstanding shares of the Series A Preferred Stock at the redemption
price set forth in subparagraph (b) below, provided, that (x) the
Corporation shall have received a Notice of Conversion, and (y) the
Conversion Price is at or below $1.00. The Corporation shall give
written notice by telecopy, to the holder of Series A Preferred Stock
to be redeemed at least one (1) business day after receipt of the
Notice of Conversion prior to the date specified for redemption (the
"Redemption Date"). Such notice shall be addressed to each such
stockholder at the address of such holder appearing on the books of
the Corporation or given by such holder to the Corporation for the
purpose of notice, or if no such address appears or is so given, at
the place where the principal office of the Corporation is located.
Such notice shall state the Redemption
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Date, the Redemption Price (as hereinafter defined), the number of
shares of Series A Preferred Stock of such holders to be redeemed and
shall call upon such holders to surrender to the Corporation on the
Redemption Date at the place designated in the notice such holders'
redeemed stock. If fewer than all the outstanding shares of Series A
Preferred Stock are to be redeemed, the redemption shall be pro rata
among the holders of Series A Preferred Stock and subject to such
other provisions as may be determined by the Board of Directors. The
Redemption Date shall be no more than ten (10) days after receipt of
written notice from the Corporation. If the Corporation fails to pay
the Redemption Price on the Redemption Date, the Corporation shall
pay to the holder a penalty in an amount in cash equal to two (2%)
percent of the Redemption Price to be paid on such Redemption Date.
If the Corporation fails to pay the Redemption Price on the
Redemption Date, the holder shall have the right to convert the
Series A Preferred Stock previously presented to the Corporation and
not redeemed. The Corporation shall have the right to redeem the
Series A Preferred Stock in accordance with the terms of this
subparagraph (a) in any subsequent redemption; provided, however,
that if the Corporation fails to pay the Redemption Price in a
subsequent redemption within ten (10) days, the Corporation shall
have the right to redeem the Series A Preferred Stock thereafter,
only upon wiring the Redemption Price to the holders simultaneously
with sending the notice of redemption. On or after the Redemption
Date, the holders of shares of Series A Preferred Stock called for
redemption shall surrender the certificates evidencing the shares
called for redemption to the Corporation at the place designated in
such notice and shall thereupon be entitled to receive payment of the
Redemption Price.
(b) Subject to the terms of Paragraph 5(a) above, the
Company shall have the option to redeem (i) any portion of the first
twenty-five (25%) percent of the outstanding shares of Series A
Preferred Stock at a cash price equal to one hundred ten (110%)
percent of the Liquidation Preference per share, together with all
unpaid dividends to and including the Redemption Date (the
"Redemption Price"), or issue shares of Common Stock at a conversion
rate equal to (x) $1,000 divided by (y) eighty-two (82%) percent of
the average closing bid price of the Common Stock as reported on the
Nasdaq Small Cap Market or any successor exchange in which the Common
Stock is listed for the five (5) trading days preceding the
Conversion Date (ii) any portion of the second twenty-five (25%)
percent of the outstanding shares of the Series A Preferred Stock at
a cash price equal to one hundred twenty (120%) percent of the
Liquidation Preference per share, together with all unpaid dividends
to and including the Redemption Date, or issue shares of Common Stock
at a conversion rate equal to (x) $1,000 divided by (y) eighty-two
(82%) percent of the average closing bid price of the Common Stock as
reported on the Nasdaq Small Cap Market or any successor exchange in
which the Common Stock is listed for the five (5) trading days
preceding the Conversion Date, and (iii) any portion of the remaining
fifty (50%) percent of the outstanding shares of Series A Preferred
Stock, if the Corporation receives a Notice of Conversion and the
Conversion Price of the Series A Preferred Stock is below $1.00, at a
cash price equal to one hundred ten (110%) percent of the Liquidation
Preference per share, together with all accrued and unpaid dividends
to
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and including the Redemption Date; provided, however, that payment of
the Redemption Price shall be made from any funds of the Corporation
legally available therefor.
(c) From and after the Redemption Date (unless default
shall be made by the Corporation in duly paying the Redemption Price
in which case all the rights of the holders of such shares shall
continue), the holders of the shares of the Series A Preferred Stock
called for redemption shall cease to have any rights as stockholders
of the Corporation, except the right to receive, without interest,
the Redemption Price thereof upon surrender of certificates
representing the shares of Series A Preferred Stock, and such shares
shall not thereafter be transferred (except with the consent of the
Corporation) on the books of the Corporation and shall not be deemed
outstanding for any purpose whatsoever.
(d) There shall be no redemption of any shares of Series A
Preferred Stock of the Corporation where such action would be in
violation of applicable law.
6. CALL OPTION.
(a) At any time on or before September 1, 1997, the
Corporation shall be entitled to call up to 2,000 shares of the
Series A Preferred Stock at a call price equal to one hundred ten
(110%) percent of the Liquidation Preference, plus all accrued and
unpaid dividends.
(b) In the event the Corporation closes on an offering for
its Common Stock at a price per share under $6.00, the Corporation
may, at its option, call all outstanding shares of Series A Preferred
Stock at a call price equal to two hundred (200%) percent of the
Liquidation Preference.
(c) In the event the Corporation has an offering for its
Common Stock at a price per share equal to or greater than $6.00,
then the holders of the Series A Preferred Stock shall be required to
convert all outstanding shares of Series A Preferred Stock into
shares of Common Stock five (5) business days prior to the scheduled
closing of such offering and each holder may, at its option, sell its
shares of Common Stock as part of such offering.
7. VOTING RIGHTS.
Except as otherwise required by law, the holders of the
Series A Preferred Stock shall not be entitled to vote upon any
matter relating to the business or affairs of the Corporation or for
any other purpose.
8. Status.
In case any outstanding shares of Series A Preferred Stock
shall be redeemed, the
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shares so redeemed shall be deemed to be permanently canceled and
shall not resume the status of authorized but unissued shares of
Series A Preferred Stock.
9. RANKING; CHANGES AFFECTING SERIES A.
(a) The Series A Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and
dissolution, (i) rank senior to any of the Corporation's Common Stock
and any other class or series of stock of the Company which by its
terms shall rank junior to the Series A Preferred Stock, and (ii)
rank junior to any other class or series of stock of the Company
which by its terms shall rank senior to the Series A Preferred Stock
and (iii) shall rank on a pari passu basis with any other series of
Preferred Stock of the Corporation..
(b) So long as any shares of Series A Preferred Stock are
outstanding, the Corporation shall not (i) alter or change any of the
powers preferences, privileges, or rights of the Series A Preferred
Stock; or (ii) amend the provisions of this Paragraph 9, in each
case, without first obtaining the approval by vote or written
consent, in the manner provided by law, of the holders of at least a
majority of the outstanding shares of Series A Preferred Stock, as to
changes affecting the Series A Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to by signed by its President this 30th day of June, 1997.
/s/ Edward G. Newman
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Edward G. Newman, President
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order
to Convert the Series A Preferred Stock)
The undersigned hereby irrevocably elects to convert ___ shares of Series A
Preferred Stock, Certificate No. ___ (the "Preferred Stock") into shares of
common stock of XYBERNAUT CORPORATION (the "Company") according to the
conditions hereof, as of the date written below.
The undersigned represents and warrants that
(i) All offers and sales by the undersigned of the shares of
Common Stock issuable to the undersigned upon conversion
of the Preferred Stock shall be made in compliance with
Regulation D, pursuant to an exemption from registration
under the Securities Act of 1933, as amended (the
"Securities Act"), or pursuant to registration of the
Common Stock under the Act, subject to any restrictions on
sale or transfer set forth in the Preferred Stock Purchase
Agreement between the Company and the original holder of
the Certificate submitted herewith for conversion.
(ii) Upon conversion pursuant to this Notice of Conversion, the
undersigned will not own or deemed to beneficially own
(within the meaning of the Securities Exchange Act of
1934, as amended) 4.9% or more of the then issued and
outstanding shares of the Company.
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Date of Conversion Applicable Conversion Price
--------------------------- ---------------------------
Number of Common Shares upon $ Amount of Conversion
Conversion
--------------------------- ---------------------------
Signature Name
Address: Delivery of Shares to:
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Dates Referenced Herein and Documents Incorporated by Reference
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