Document:

ex10-43

 

Exhibit 10.43

IBM Credit Corporation

FORM OF AMENDED AND RESTATED

AGREEMENT FOR WHOLESALE FINANCING

(SECURITY AGREEMENT)

         This Amended and Restated Agreement for Wholesale Financing (as amended,
supplemented or otherwise modified from time to time, this “Agreement”) dated
December     , 2001 is by and among IBM
Credit Corporation, a Delaware corporation
with a place of business at 1500 RiverEdge Parkway, Atlanta, GA (“IBM Credit”),
Xybernaut Corporation, a Delaware corporation with its principal office at 12701
Fair Lakes Circle, Fairfax, VA 22033 (“XC”) and Xybernaut Solutions, Inc., a
Virginia corporation with its principal office at 8618 Westwood Center Drive,
Vienna, VA             (“XSI”). XC and XSI are each referred to herein as a
“Customer” or, collectively, the “Customers”. Notwithstanding the foregoing, any
obligation of a Customer or Customers herein shall be the joint and several
obligation of XC and XSI. IBM Credit and Customers agree as follows:

WITNESSETH

         WHEREAS, Xybernaut Corporation has heretofore entered into an Agreement for
Wholesale Financing (Security Agreement) dated as of December 1, 1999 (as
heretofore amended, supplemented or modified, the “Existing Agreement”) with IBM
Credit;

         WHEREAS, Xybernaut Corporation desires to provide additional collateral to
IBM Credit to further secure its obligations;

         WHEREAS, Xybernaut Solutions, Inc. holds accounts receivable (“Accounts”)
as a result of products and services it provides to its customers and the
Customers would like to pledge these Accounts to IBM Credit as further
collateral;

         WHEREAS, the parties hereto desire to further amend and restate the
Existing Agreement for the purpose of, among other things, reflecting the
addition of Xybernaut Solutions, Inc. as a Customer under the Existing Agreement
and the addition of its Accounts as further collateral to secure the obligations
under this Existing Agreement, as set forth herein;

         WHEREAS, IBM Credit is willing to so amend and restate the Existing
Agreement on the terms and conditions hereinafter set forth;

         NOW,
THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiently of which are hereby
acknowledged, the parties agree the Existing Agreement is amended and restated
in its entirety to read as follows:

         In the course of Customers’ business, Customers acquire products and want
IBM Credit to finance Customers’ purchases of such products under the following
terms and conditions:

1.     IBM Credit may in its sole discretion from time to time decide the amount
of credit IBM Credit extends to Customers, notwithstanding any prior course of
conduct between the parties. IBM Credit may combine all of its advances to make
one debt owed by Customers.

2.     IBM Credit may in its sole discretion decide the amount of funds, if any,
IBM Credit will advance on any products Customers may seek to acquire. Customers
agree that any decision to finance products will not be binding on IBM Credit
until such time as the funds are actually advanced by IBM Credit.

3.     In the course of Customers’ operations, Customers intend to purchase from
persons approved in writing by IBM Credit for the purpose of this Agreement (the
“Authorized Suppliers”) computer hardware and software products manufactured or
distributed by or bearing any trademark or trade name of such

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Authorized Suppliers (the “Approved Inventory”). When IBM Credit advances
funds, IBM Credit may send Xybernaut Corporation, for itself and on behalf of
and as agent for Xybernaut Solutions, Inc., a Statement of Transaction or other
statement. If IBM Credit does, the Customers will have acknowledged the debt to
be an account stated and Customers will have agreed to the terms set forth on
such statement unless Xybernaut Corporation notifies IBM Credit in writing of
any question or objection within seven (7) days after such statement is mailed
to Xybernaut Corporation.

4.     (A) To secure payment of all Customers’ current and future obligations to
IBM Credit whether under this Agreement, any guaranty that Customers now or
hereafter execute, or any other agreement between Customers and IBM Credit,
whether direct or contingent, Customers grant IBM Credit a security interest in
all of Customers’ inventory, equipment, fixtures, accounts, contract rights,
chattel paper, instruments, reserves, documents of title, deposit accounts,
price protection payments, credits, discounts, incentive payments, rebates, and
refunds, whether now owned or hereafter acquired, and all attachments,
accessories, accessions, substitutions and/or replacements thereto and all
proceeds thereof. All of the above assets are defined pursuant to the
provisions of Article 9 of the Uniform Commercial Code and are hereinafter
collectively referred to as the “Collateral”. This security interest is also
granted to secure Customers’ obligations to all of IBM Credit’s affiliates.
Customers will hold all of the Collateral financed by IBM Credit, and the
proceeds thereof, in trust for IBM Credit and Customers will immediately
account for and remit directly to IBM Credit all such proceeds when payment is
required under the terms set forth in the billing statement or as otherwise
provided in this Agreement. IBM Credit may directly collect any amount owed to
Customers from Authorized Suppliers with respect to the Collateral and credit
Customers with all such sums received by IBM Credit from Authorized Suppliers.
IBM Credit’s title, lien or security interest will not be impaired by any
payments Customers make to the seller or anyone else or by their failure or
refusal to account to IBM Credit for proceeds.

Each Customer covenants and agrees with IBM Credit that: (a) the security
constituted by this Agreement is in addition to any other security from time to
time held by IBM Credit; (b) the security interest hereby created is a
continuing security interest and will cover and secure the payment of all
obligations both present and future of the Customers to IBM Credit; and (c) any
transfer of assets by and between Xybernaut Corporation and/or Xybernaut
Solutions, Inc. is subject to IBM Credit’s continuing security interest in the
Collateral of the transferor as well as IBM Credits continuing
security interest in the Collateral of the transferee.

         (B)  Additional Collateral. To secure each Customer’s full and punctual
payment and performance of any obligations to each other, when due whether at
the stated maturity, by acceleration or otherwise), each Customer hereby grants
to the other Customer a security interest in all of the its right, title and
interest in and to the following property, whether now owned or hereafter
acquired or existing and wherever located: (i) all inventory and equipment, and
all parts thereof, attachments, accessories and accessions thereto, products
thereof and documents therefor; (ii) all accounts, contract rights, chattel
paper, instruments, deposit accounts, obligations of any kind owing to
Customer, whether or not arising out of or in connection with the sale of lease
of collateral or the rendering of services and all books, invoices, documents
and other records in any form evidencing or relating to any of the foregoing;
(iii) price protection payments, credits, discounts, incentive payments,
rebates and refunds; (iv) all rights now or hereafter existing in and to all
mortgages, security agreements, leases or other contracts securing or otherwise
relating to any of the foregoing; and (v) all substitutions and replacements
for all of the foregoing, all proceeds of all of the foregoing and, to the
extent not otherwise included, all payments under insurance of any indemnity,
warranty or guaranty, payable by reason of loss or damage to or otherwise with
respect to any of the foregoing.

All of the assets described in this Section 4(B) shall be collectively defined
herein as the “Intercompany Collateral”. Each Customer shall, from time to
time upon the request of IBM Credit, execute and deliver to the other and to
IBM Credit, or cause to be executed and delivered, at such time or times as IBM
Credit may request UCC financing statements and such other and further
documents, certificates and instruments necessary to perfect and maintain
perfected its security interests in the Intercompany Collateral and in order to
fully consummate all of the transactions contemplated under this Agreement and

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any other documents. Each Customer shall make appropriate entries on its books
and records disclosing the security interests in the Intercompany Collateral.

         (C)  Assignment of Additional Collateral. (i) As additional Collateral,
each Customer hereby assigns to IBM Credit the security interest each Customer
has in the Intercompany Collateral of the other Customer. The UCC financing
statements delivered to IBM Credit pursuant to Section 4(A) shall disclose the
assignment of the security interest in the Intercompany Collateral and indicate
the name and address of IBM Credit as assignee. (ii) Each Customer agrees that
IBM Credit has the right to take possession of or dispose of the Intercompany
Collateral in the same manner as IBM Credit may take possession of or dispose of
the Collateral, pursuant to Section 11 of this Agreement.

5.     The principal place of business for each of the Customers is as follows:

	(1)	 	Xybernaut Corporation: 12701 Fair Lakes Circle, Fairfax, VA 22033
	 
	(2)	 	Xybernaut Solutions, Inc.: 8618 Westwood Center Drive, Vienna, VA

Each Customer represents that its business is conducted as a corporation. Each
Customer will notify IBM Credit, in writing, prior to any change in its
identity, name, form of ownership or management, and of any change in its
principal place of business, or any additions or discontinuances of other
business locations. The respective Collateral of each Customer will be kept at
its principal place of business. Each Customer will notify IBM Credit, in
writing, thirty (30) days prior to moving any of the Collateral to any other
address. Each of Xybernaut Corporation and Xybernaut Solutions, Inc. and their
predecessors have done business during the last six (6) months only under the
following names:

This paragraph is not in any manner intended to limit the extent of IBM Credit’s
security interest in the Collateral. Customers agree to pay all additional
charges related to the movement of Collateral including, but not limited to,
taxes, license or recording fees.

6.     Each Customer represents and covenants that the Collateral is and will
remain free from all claims and liens superior to IBM Credit’s unless otherwise
agreed to by IBM Credit in writing, and that they will defend the Collateral
against all other claims and demands. Customers will not sell, rent, lease,
lend, demonstrate, pledge, transfer or secrete any of the Collateral or use any
of the Collateral for any purpose other than exhibition and sale to buyers in
the ordinary course of business, without IBM Credit’s prior written consent.
Each Customer will execute all documents IBM Credit may request to confirm or
perfect IBM Credit’s security interest in the Collateral. Each Customer warrants
and represents that it is not in default in the payment of any principal,
interest or other charges relating to any indebtedness owed to any third party,
and no event has occurred, as of the effective date of this Agreement or as of
the date of any request by Customer to IBM Credit for financing in the future,
under the terms of any agreement, document, promissory note or other instrument,
which with or without the passage of time and/or the giving of notice
constitutes or would constitute an event of default thereunder. Xybernaut
Corporation will promptly provide its year-end financial statement, in form and
detail satisfactory to IBM Credit, to IBM Credit within ninety (90) days after
the end of each fiscal year of Xybernaut Corporation, and, if requested by IBM
Credit, Xybernaut Corporation will also promptly provide its financial statement
to IBM Credit for each fiscal quarter within forty five (45) days after the end
of each fiscal quarter. Customers represent and covenant that each financial
statement that is submitted to IBM Credit will be prepared according to
generally accepted accounting principles in effect in the United States from
time to time, and is and will be correct and will accurately represent
Customers’ financial condition. Customers further acknowledge IBM Credit’s
reliance on the truthfulness and accuracy of each financial statement submitted
to IBM Credit in IBM Credit’s extension of various financial accommodations to
Customers.

7.     Customers will pay all taxes, license fees, assessments and charges on the
Collateral when due. Customers will immediately notify IBM Credit of any loss,
theft, or destruction of or damage to any of the Collateral. Customers will be
responsible for any loss, theft or destruction or damage of Collateral. Each

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Customer will keep the Collateral insured for its full insurable value against
loss or damage under an “all risk” insurance policy. Each Customer will obtain
insurance under such terms and in such amounts acceptable to IBM Credit, from
time to time, with companies acceptable to IBM Credit, with a lender loss-payee
or mortgagee clause payable to IBM Credit to the extent of any loss to the
Collateral and containing a waiver of all defenses against Customer that is
acceptable to IBM Credit. Each Customer agrees to provide IBM Credit with
written evidence of the required insurance coverage and lender loss-payee or
mortgagee clause. Each Customer assigns to IBM Credit all amounts owed to any
Customer under any insurance policy, and Customer directs any insurance company
to make payment directly to IBM Credit to be applied to the unpaid obligations
owed IBM Credit. Each Customer further grants IBM Credit an irrevocable power of
attorney to endorse any checks or drafts and sign and file any of the papers,
forms and documents required to initiate and settle any insurance claims with
respect to the Collateral. If Customers fail to pay any of the above-referenced
costs, charges, or insurance premiums, or if a Customer fails to insure the
Collateral, IBM Credit may, but will not be obligated to, pay such costs,
charges and insurance premiums, and the amounts paid will be considered an
additional obligation owed by Customers to IBM Credit.

8.     IBM Credit has the right to enter upon Customers’ premises from time to
time, as IBM Credit in its sole discretion may determine for IBM Credit’s sole
benefit, and all without any advance notice to Customers to: examine the
Collateral; appraise it as security; verify its condition and non-use; verify
that all Collateral have been properly accounted for; verify that Customers have
complied with all terms and provisions of this Agreement; and assess, examine,
and make copies of Customers’ respective books and records. Any collection by
IBM Credit of any amounts owed by any Customer at or during IBM Credit’s
examination of the Collateral does not relieve any Customers of their continuing
obligation to pay their obligations owed to IBM Credit in accordance with such
terms.

9.     Customers agree to immediately pay IBM Credit the full amount of the
principal balance owed IBM Credit on each item of Approved Inventory financed by
IBM Credit at the time such Approved Inventory is sold, lost, stolen, destroyed,
or damaged, whichever occurs first, unless IBM Credit has agreed in writing to
provide financing to Customers on other terms. Xybernaut Corporation also
agrees, for itself and on behalf of and as agent for Xybernaut Solutions, Inc.,
to provide IBM Credit upon IBM Credit’s request, an inventory report which
describes all the Approved Inventory in Customers’ possession (excluding any
Approved Inventory financed by IBM Credit under the Demonstration and Training
Equipment Financing Option). Regardless of the repayment terms set forth in any
billing statement, if IBM Credit determines, after conducting an inspection of
all of Customers’ inventory, that the current outstanding obligations owed by
Customers to IBM Credit exceeds the aggregate wholesale invoice price, net of
all applicable price reduction credits, of the Approved Inventory in Customers’
possession that is new and in manufacturer sealed boxes and in which IBM Credit
has a perfected first priority security interest, Customers agree to immediately
pay to IBM Credit an amount equal to the difference between such outstanding
obligations and the aggregate wholesale invoice price, net of all applicable
price reduction credits, of such Approved Inventory. Customers will make all
payments to IBM Credit according to the remit to instructions in the billing
statement. Any checks or other instruments delivered to IBM Credit to be applied
against Customers’ outstanding obligations will constitute conditional payment
until the funds represented by such instruments are actually received by IBM
Credit. IBM Credit may apply payments to reduce finance charges first and then
principal, irrespective of Customers’ instructions. Further, IBM Credit may
apply principal payments to the oldest (earliest) invoice for the Approved
Inventory financed by IBM Credit, or to such Approved Inventory which is sold,
lost, stolen, destroyed, damaged, or otherwise disposed of. If any Customer
signs any instrument for any outstanding obligations, it will be evidence of
Customer’s obligation to pay and will be not be payment. Any discount, rebate,
bonus, or credit for Approved Inventory granted to Customer by any Authorized
Supplier will not, in any way, reduce the obligations Customers owe IBM Credit,
until IBM Credit has received payment in good funds.

10.     Customers will pay IBM Credit finance charges on the total amount of
credit extended to them in the amount agreed to between the parties from time to
time. The period of any financing will begin on the invoice date for the
Approved Inventory whether or not IBM Credit advances payment on such date. This
period will be included in the calculation of the annual percentage rate of the
finance charges. Such finance charges may be applied by IBM Credit to cover any
amounts expended for IBM Credit’s appraisal

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and examination of the Collateral; maintenance of facilities for payment; IBM
Credit’s commitments to Authorized Suppliers to finance shipments of Approved
Inventory to a Customer; recording and filing fees; expenses incurred in
obtaining additional collateral or security; and any costs and expenses
incurred by IBM Credit arising out of the financing IBM Credit extends to
Customers. Customers also agree to pay IBM Credit additional charges which will
include: late payment fees at a per annum rate equal to the Prime Rate plus 6.5%;
flat charges; charges for receiving NSF checks from a Customer; renewal
charges; and any other charges agreed to by Customers and IBM Credit from time
to time. For purposes of this Agreement, “Prime Rate” will mean the average of
the rates of interest announced by banks which IBM Credit uses in its normal
course of business of determining prime rate. Unless Customers hereafter
otherwise agree in writing, the finance charges and additional charges agreed
upon will be IBM Credit’s applicable finance charges and additional charges for
the class of Approved Inventory involved prevailing from time to time at IBM
Credit’s principal place of business, but in no event greater than the highest
rate from time to time permitted by applicable law. If it is determined that
amounts received from Customers were in excess of such highest rate, then the
amount representing such excess will be considered reductions to the
outstanding principal of IBM Credit’s advances to Customers. IBM Credit will
send Xybernaut Corporation, for itself and on behalf of and as agent for
Xybernaut Solutions, Inc., at monthly or other intervals, a statement of all
charges due on Customer’s account with IBM Credit. The Customers will have
acknowledged the charges due, as indicated on the statement, to be an account
stated, unless Xybernaut Corporation, for itself or on behalf of as agent for
Xybernaut Solutions, Inc., objects in writing to IBM Credit within seven (7)
days after such statement is mailed to Xybernaut Corporation. This statement
may be adjusted by IBM Credit at any time to conform to applicable law and this
Agreement. IBM Credit shall calculate any free financing period utilizing a
methodology that is consistent with the methodologies used for similarly
situated customers of IBM Credit. The Customers understand that IBM Credit may
not offer, may change or may cease to offer a free financing period for the
Customers’ purchases of Approved Inventory. If any Authorized Supplier fails to
provide payment for a finance charge for Customers, as agreed, Customers will
be responsible for and pay to IBM Credit all finance charges billed to
Customer’s account.

11.     Any of the following events will constitute an event of default by
Customers under this Agreement: Any Customer breaches any of the terms,
warranties or representations contained in this Agreement or in any other
agreements between any Customer and IBM Credit or between any Customer and any
of IBM Credit’s affiliates unless such breach results from the actions or
inactions of any IBM affiliate; any guarantor of a Customer’s obligations to
IBM Credit under this Agreement or any other agreements breaches any of the
terms, warranties or representations contained in such guaranty or other
agreements between such guarantor and IBM Credit; any representation,
statement, report or certificate made or delivered by any Customer or any of a
Customer’s owners, representatives, employees or agents or by any guarantor to
IBM Credit is not true and correct; any Customer fails to pay any of the
liabilities or obligations owned to IBM Credit or any of IBM Credit’s affiliates
when due and payable under this Agreement or under any other agreements between
such Customer and IBM Credit or between such Customer and any of IBM Credit’s
affiliates; IBM Credit determines that IBM Credit is insecure with respect to
any of the Collateral or the payment of Customer’s obligations owned to IBM
Credit; any Customer abandons the Collateral or any part thereof; any Customer
or any guarantor becomes in default in the payment of any indebtedness owned to
any third party; a judgement issues on any money demand against any Customer or
any guarantor; an attachment, sale or seizure is issued against any Customer or
any of the Collateral; any part of the Collateral is seized or taken in
execution; the death of the undersigned if the business is operated as a sole
proprietorship; or the death of a partner is the business is operated as a
partnership, or the death of any guarantor; any Customer ceases or suspends its
business; any Customer or any guarantor makes a general assignment for the
benefit of creditors; any Customer or any guarantor becomes insolvent or
voluntarily or involuntarily becomes subject to the Federal Bankruptcy Code,
state insolvency laws or any act for the benefit of creditors; any receiver is
appointed for any of Customers’ or any guarantor’s assets, or any guaranty
pertaining to any Customer’s obligations to IBM Credit is terminated for any
reason whatsoever; any guarantor disclaims any obligations under any guaranty;
any Customer loses any franchise, permission, license or right to sell or deal
in any Approved Inventory; any Customer or any guarantor misrepresents its
respective financial condition or organizational structure; or IBM Credit
determines in its sole discretion, that the Collateral, any other collateral given
to IBM Credit to secure Customers’ obligations to IBM Credit, any guarantor’s
guaranty, or any Customer’s or any guarantor’s net

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worth has decreased in value, and Customers have been unable, within the time
period prescribed by IBM Credit, to either provide IBM Credit with additional
collateral in a form and substance satisfactory to IBM Credit or reduce
Customers’ total obligations by an amount sufficient to satisfy IBM Credit.
Following an event of a default:

         (a)  IBM Credit may, at any time at IBM Credit’s election, without notice
or demand to Customers do any one or more of the following: declare all or any
part of the obligations customers owe IBM Credit immediately due and payable,
together with all court costs and all costs and expenses of IBM Credit’s
repossession and collection activity, including, but not limited to, all
attorney’s fees; exercise any or all rights of a secured party under applicable
law; cease making any further financial accommodations or extending any
additional credit to Customers; and/or exercise any or all rights available at
law or in equity. All of IBM Credit’s rights and remedies are cumulative.

         (b)  Customers will segregate, hold and keep the Collateral in trust, in
good order and repair, only for IBM Credit’s benefit, and Customers will not
exhibit, transfer, sell, further encumber, otherwise dispose of or use for any
other purpose whatsoever any of the Collateral.

         (c)  Upon IBM Credit’s oral or written demand, Customers will immediately
deliver the Collateral to IBM Credit, in good order and repair, at a place
specified by IBM Credit, together with all related documents; or IBM Credit
may, in its sole discretion and without notice or demand to Customers, take
immediate possession of the Collateral, together with all related documents.

         (d)  Customers waive and release: any claims and causes of action which
they may now or ever have against IBM Credit as a direct or indirect result of
any possession, repossession, collection or sale by IBM Credit of any of the
Collateral and the benefit of all valuation, appraisal and exemptions laws. If
IBM Credit seeks to take possession of any of the Collateral by court process,
each Customer irrevocably waives any notice, bonds, surety and security
relating thereto required by any statute, court rule or otherwise.

         (e)  Each Customer appoints IBM Credit or any person IBM Credit may
delegate as such Customer’s duly authorized Attorney-In-Fact to do, in IBM
Credit’s sole discretion, any of the following in the event of a default:
endorse Customer’s name on any notes, checks, drafts or other forms of exchange
constituting Collateral or received as payment on any Collateral for deposit in
IBM Credit’s account; sell, assign, transfer, negotiate, demand, collect,
receive, settle, extend, or renew any amounts due on any of the Collateral; and
exercise any rights Customers have in the Collateral.

If any Customer brings any action or asserts any claim against IBM Credit which
arises out of this Agreement, any other agreement or any of the business
dealings between IBM Credit and a Customer, in which Customer does not prevail,
Customers agree to pay IBM Credit all costs and expenses of IBM Credit’s
defense of such action or claim including, but not limited to, all attorney’s
fees. If IBM Credit fails to exercise any of IBM Credit’s rights or remedies
under this Agreement, such failure will in no way or manner waive any of IBM
Credit’s right or remedies as to any past, current or future default.

12.     Customers agree that if IBM Credit conducts a private sale of any
Collateral by soliciting bids from ten (10) or more other dealers or
distributors in the type of Collateral repossessed by or returned to IBM Credit
hereunder, any sale by IBM Credit of such property will be deemed to be a
commercially reasonable disposition under the Uniform Commercial Code. IBM
Credit agrees that commercially reasonable notice of any public or private sale
will be deemed given to Customer if IBM Credit sends any Customer a notice of
sale at least seven (7) day prior to the date of any public sale or the time
after which a private sale will be made. If IBM Credit disposes of any such
Collateral other than as herein contemplated, the commercial reasonableness of
such sale will be determined in accordance with the provisions of the Uniform
Commercial Code as adopted by the state whose laws govern this Agreement.

Customers agree that IBM Credit does not warrant the Approved Inventory.
Customers will pay IBM Credit in full even if the Approved Inventory is
defective or fails to conform to any warranties extended by any third party.
Customers’ obligations to IBM Credit will not be affected by any dispute any
Customer

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may have with any third party. Customers will not assert against IBM Credit any
claim or defense any Customer may have against any third party. Each Customer
shall jointly and severally indemnify and hold IBM Credit harmless against any
claims or defenses asserted by any buyer of the Approved Inventory by reason
of: the condition of any Approved Inventory; any representations made about the
Approved Inventory; or for any and all other reasons whatsoever.

13.     Each Customer grants to IBM Credit a power of attorney authorizing any of
IBM Credit’s representatives to: execute or endorse on Customer’s behalf any
documents, financing statements and instruments evidencing Customer’s
obligations to IBM Credit; supply any omitted information and correct errors in
any documents or other instruments executed by or for Customer; do any and
every act which Customer is obligated to perform under this Agreement; and do
any other things necessary to preserve and protect the Collateral and IBM
Credit’s security interest in the Collateral. Each Customer further authorizes
IBM Credit to provide to any third party any credit, financial or other
information about Customer that is in IBM Credit’s possession.

14.     Each party may electronically transmit to or receive from the other party
certain documents specified in the E-Business Schedule A attached hereto
(“E-Documents”) via the Internet or electronic data interchange (“EDI”). Any
transmission of data which is not an E-Document shall have no force or effect
between the parties. EDI transmissions may be transmitted directly or through
any third party service provider (“Provider”) with which either party may
contract. Each party will be liable for the acts or omissions of its Provider
while handling E-Documents for such party, provided, that if both parties use
the same Provider, the originating party will be liable for the acts or
omissions of such Provider as to such E-Document. Some information to be made
available to Customer will be specific to Customer and will require Customer to
register with IBM Credit before access is provided. After IBM Credit has
approved the registration submitted by Customer, IBM Credit will provide an ID
and password(s) to an individual designated by Customer (“Customer Recipient”).
Customers accept responsibility for the designated individual’s distribution of
the ID and password(s) within its organization and Customers will take
reasonable measures to ensure that passwords are not shared or disclosed to
unauthorized individuals. Each Customer will conduct an annual review of all
IDs and passwords to ensure that they are accurate and properly authorized. IBM
CREDIT MAY CHANGE OR DISCONTINUE USE OF AN ID OR PASSWORD AT ITS DISCRETION AT
ANY TIME. E-Documents will not be deemed to have been properly received, and no
E-Document will give rise to any obligation, until accessible to the receiving
party at such party’s receipt computer at the address specified herein. Upon
proper receipt of an E-Document, the receiving party will promptly transmit a
functional acknowledgment in return. A functional acknowledgment will
constitute conclusive evidence that an E-Document has been properly received.
If any transmitted E-Document is received in an unintelligible or garbled form,
the receiving party will promptly notify the originating party in a reasonable
manner. In the absence of such a notice, the originating party’s records of the
contents of such E-Document will control.

Each party will use those security procedures which are reasonably sufficient
to ensure that all transmissions of E-Documents are authorized and to protect
its business records and data from improper access. Any E-Document received
pursuant to this paragraph 14 will have the same effect as if the contents of
the E-Document had been sent in paper rather than electronic form. The conduct
of the parties pursuant to this paragraph 14 will, for all legal purposes,
evidence a course of dealing and a course of performance accepted by the
parties. The parties agree not to contest the validity or enforceability of
E-Documents under the provisions of any applicable law relating to whether
certain agreements are to be in writing or signed by the party to be bound
thereby. The parties agree, as to any E-Document accompanied by Customer’s ID,
that IBM Credit can reasonably rely on the fact that such E-Document is
properly authorized by Customer. E-Documents, if introduced as evidence on
paper in any judicial, arbitration, mediation or administrative proceedings,
will be admissible as between the parties to the same extent and under the same
conditions as other business records originated and maintained in documentary
form. Neither party will contest the admissibility of copies of E-Documents
under either the business records exception to the hearsay rule or the best
evidence rule on the basis that the E-Documents were not originated or
maintained in documentary form.

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Neither party will be liable to the other for any special, incidental,
exemplary or consequential damages arising from or as a result of any delay,
omission or error in the electronic transmission or receipt of any E-Document
pursuant to this paragraph 14, even if either party has been advised of the
possibility of such damages. In the event a Customer requests IBM Credit to
effect a withdrawal or debit of funds from an account of Customer, then in no
event will IBM Credit be liable for any amount in excess of any amount
incorrectly debited, except in the event of IBM Credit’s gross negligence or
willful misconduct. No party will be liable for any failure to perform its
obligations pursuant to this paragraph 14 in connection with any E-Document,
where such failure results from any act of God or other cause beyond such
party’s reasonable control (including, without limitation, any mechanical,
electronic or communications failure) which prevents such party from
transmitting or receiving E-Documents.

CUSTOMER RECIPIENT for Internet transmissions:

(PLEASE PRINT)

Name of Customer’s Designated Central Contact Authorized to Receive IDs and Passwords:

 

e-mail Address:                                                          

Phone Number:                                                 

15.     Time is of the essence in this Agreement. This Agreement will be effective
from the date of its acceptance at IBM Credit’s office. Customers acknowledge
receipt of a true copy and waives notice of IBM Credit’s acceptance of it. If
IBM Credit advances funds under this Agreement, IBM Credit will have accepted
it. This Agreement will remain in force until one of the parties gives notice
to the others that it is terminated. If any Customer terminates this Agreement,
IBM Credit may declare all or any part of the obligations Customers owe IBM
Credit due and payable immediately. If this Agreement is terminated, Customers
will not be relieved from any obligations to IBM Credit arising out of IBM
Credit’s advances or commitments made before the effective date of termination.
IBM Credit’s rights under this Agreement and IBM Credit’s security interest in
present and future Collateral will remain valid and enforceable until all
Customers’ obligations to IBM Credit are paid in full. This Agreement shall be
binding upon and inure to the benefit of IBM Credit and each Customer and their
respective successors and assigns; provided, that a Customer shall have no
right to assign this Agreement without the prior written consent of IBM Credit.
This Agreement will protect and bind IBM Credit’s and Customers’ respective
heirs, representatives, successors and assigns. It can be varied only by a
document signed by IBM Credit’s and each Customer’s authorized representatives.
If any provision of this Agreement or its application is invalid or
unenforceable, the remainder of this Agreement will not be impaired or affected
and will remain binding and enforceable. This Agreement is executed with the
authority of the Board of Directors of each Customer, and with respective
shareholder approval, if required by the law. All notices IBM Credit sends to
Xybernaut Corporation shall be deemed to have been sent to and received by
Xybernaut Solutions, Inc., and will be sufficiently given if mailed or
delivered to Xybernaut Corporation at its address shown in paragraph 5.

16.     The laws of the State of New York will govern this Agreement. Customers
agree that venue for any lawsuit will be in the State or Federal Court within
the country, parish, or district where IBM Credit’s office, which provides the
financial accommodations, is located. Each Customer hereby waives any right to
change the venue of any action.

17.     If any Customer has previously executed any security agreement relating to
the Collateral with IBM Credit, such Customer or Customers agree that this
Agreement is intended only to amend and supplement such written agreements, and
will not be deemed to be a novation or termination of such written agreements.
In the event the terms of this Agreement conflict with the terms of any prior
security agreement that any Customer previously executed with IBM Credit, the
terms of this Agreement will control in determining the agreement between such
Customer and IBM Credit.

Page 8 of 12

 

18.     EACH CUSTOMER WAIVES ALL EXEMPTIONS AND HOMESTEAD LAWS TO THE MAXIMUM EXTENT
PERMITTED BY LAW. EACH CUSTOMER WAIVES ANY STATUTORY RIGHT TO NOTICE OR HEARING
PRIOR TO IBM CREDITS ATTACHMENT, REPOSSESSION OR SEIZURE OF THE GOODS. EACH
CUSTOMER FURTHER WAIVES ANY AND ALL RIGHTS OF SETOFF IT MAY HAVE AGAINST IBM
CREDIT. EACH CUSTOMER AGREES THAT ANY PROCEEDING IN WHICH A CUSTOMER, OR IBM
CREDIT OR ANY OF IBM CREDIT’S AFFILIATES, OR A CUSTOMER’S OR IBM CREDIT’S
ASSIGNS ARE PARTIES, AS TO ALL MATTERS AND THINGS ARISING DIRECTLY OR INDIRECTLY
OUT OF THIS AGREEMENT, OR THE RELATIONS AMONG THE PARTIES LISTED IN THIS
PARAGRAPH WILL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A
JUDGE WITHOUT A JURY. EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ANY RIGHT TO A
JURY TRIAL IN ANY SUCH PROCEEDING.

	 	 	 
	 	 	 
	
	
	
	

	(1) Dated:
                        	 	
(2) Dated:
                    
	
	
	
	

	 	 	 
	
	
	
	

	XYBERNAUT CORPORATION	 	
XYBERNAUT SOLUTIONS, INC.
	
	
	
	

	 	 	 
	
	
	
	

	By:                               	 	
By:                                     
	
	
	
	

	Print Name:                                     	 	
Print Name:                                     
	
	
	
	

	Title:                                     	 	
Title:                                     
	
	
	
	

	 	 	 
	
	
	
	

	 	 	 
	
	
	
	

	ACCEPTED ON
              	 	
By                                                 
	
	
	
	

	IBM CREDIT CORPORATION	 	
                                                            
	
	
	
	

	By:                                     	 	
                                                                  
	
	
	
	

	Print Name:                                     	 	 
	
	
	
	

	Title:                               	 	 

Page 9 of 12

 

	 	 	 
	 	 	
E-BUSINESS SCHEDULE A (“SCHEDULE A”)
	
	
	
	

	 	 	 
	
	
	
	

	CUSTOMER NAMES:	 	
(1) Xybernaut Corporation
     
	
	
	
	

	 	 	
(2) Xybernaut Solutions, Inc.
     
	
	
	
	

	 	 	
(3)  ______________________________
	
	
	
	

	 	 	
(4)  ______________________________

EFFECTIVE DATE OF THIS SCHEDULE A:     

E-DOCUMENTS AVAILABLE TO SUPPLIERS:___________________________

Invoices

Payment Report/Remittance Advisor

E-DOCUMENTS AVAILABLE TO CUSTOMERS:

Invoices

Remittance Advisor

Transaction Approval

Billing Statement

Payment Planner

Auto Cash

Statements of Transaction

Common Dispute Form

Page 10 of 12

 

SECRETARY’S CERTIFICATE OF RESOLUTION

         I
certify that I am the Secretary and the official custodian of certain
records, including the certificate of incorporation, charter, by-laws and
minutes of the meeting of the Board of Directors of the corporation named below,
and that the following is a true, accurate and compared extract from the minutes
of the Board of Directors of the corporation adopted at a special meeting
thereof held on due notice, at which meeting there was present a quorum
authorized to transact the business described below, and that the proceedings of
the  meeting were in accordance with the certificate of
incorporation, charter and by-laws of the corporation, and that they have not been revoked, annulled or amended in any
manner whatsoever.

         Upon motion duly made and seconded, the following resolution was
unanimously adopted after full discussion: “RESOLVED, that the president, chief
executive officer or chief financial officer, or any one of them, or the board
of directors, acting as a whole, are hereby authorized and empowered on behalf
of this corporation: to obtain financing from IBM Credit Corporation (“IBM
Credit”) in such amounts and on such terms as such officers, directors or agents
deem proper; to enter into security and other agreements with IBM Credit
relating to the terms upon which financing may be obtained and security to be
furnished by this corporation therefor; from time to time, to supplement or
amend any such agreements; and, from time to time, to pledge, assign, guaranty,
mortgage, grant security interest in and, otherwise transfer to IBM Credit as
collateral security for any obligations of this corporation to IBM Credit and
its affiliated companies, whenever and however arising, any assets of this
corporation, whether now owned or hereafter acquired; hereby ratifying,
approving and confirming all that any of said officers, directors or agents have
done or may do in the premises.”

         IN WITNESS WHEREOF, I have executed and affixed the seal of the corporation
on the date stated below.

	 	 	 
	Dated: 	 	
 
	 	 	

	 	 	
 
	
	
	
	

	 	 	 
	
	
	
	

	 	 	
Xybernaut Corporation
	 	 	

	 	 	
Corporate Name

Page 11 of 12

 

SECRETARY’S CERTIFICATE OF RESOLUTION

         I certify that I am the Secretary and the official custodian of certain
records, including the certificate of incorporation, charter, by-laws and
minutes of the meeting of the Board of Directors of the corporation named below,
and that the following is a true, accurate and compared extract from the minutes
of the Board of Directors of the corporation adopted at a special meeting
thereof held on due notice, at which meeting there was present a quorum
authorized to transact the business described below, and that the proceedings of
the meeting were in accordance with the certificate of incorporation, charter
and by-laws of the corporation, and that they have not been revoked, annulled or
amended in any manner whatsoever.

         Upon motion duly made and seconded, the following resolution was
unanimously adopted after full discussion: “RESOLVED, that either a) the
president, chief executive officer or vice president of finance of Xybernaut
Solutions, Inc., or any one of them, acting in combination with the president,
chief executive officer or chief financial officer of Xybernaut Corporation, or
any one of them, or b) the board of directors of Xybernaut Solutions, Inc.,
acting as a whole, are hereby authorized and empowered on behalf of this
corporation: to obtain financing from IBM Credit Corporation (“IBM Credit”) in
such amounts and on such terms as such officers, directors or agents deem
proper; to enter into security and other agreements with IBM Credit relating to
the terms upon which financing may be obtained and security to be furnished by
this corporation therefor; from time to time, to supplement or amend any such
agreements; and, from time to time, to pledge, assign, guaranty, mortgage, grant
security interest in and, otherwise transfer to IBM Credit as collateral
security for any obligations of this corporation to IBM Credit and its
affiliated companies, whenever and however arising, any assets of this
corporation, whether now owned or hereafter acquired; hereby ratifying,
approving and confirming all that any of said officers, directors or agents have
done or may do in the premises.”

         IN WITNESS WHEREOF, I have executed and affixed the seal of the corporation
on the date stated below.

	 	 	 	 	 
	Dated: December____, 2001	 	 
	 	 
	 	 	

	 	

	 	 	
 	 	 
	
	
	
	

	 	 	 	 	 
	
	
	
	

	 	 	 	 	Xybernaut Solutions, Inc.
	 	 	 	 	

	 	 	 	 	Corporate Name

Page 12 of 12ex10-44

 

Exhibit 10.44

IBM Credit Corporation

FORM OF ADDENDUM TO AGREEMENT FOR WHOLESALE FINANCING

FLEXIBLE PAYMENT PLAN

This Addendum (“Addendum”) to the Agreement for Wholesale Financing is hereby
dated this      day of      , 2001 by and among IBM Credit
Corporation, a Delaware corporation with a place of business at 1500 RiverEdge
Parkway, Atlanta, GA 30328 (“IBM Credit”), Xybernaut Corporation, a corporation
duly organized under the laws of the State of Delaware, with its principal
place of business at 12701 Fair Lakes Circle, Fairfax, VA 22033 (“XC”) and
Xybernaut Solutions, Inc., a corporation duly organized under the laws of the
State of Virginia, with its principal place of business at 8618 Westwood Center
Drive, Vienna, VA      (“XSI”). XC and XSI are each referred to herein as a
“Customer” or, collectively, the “Customers”. Notwithstanding the foregoing,
any obligation of a Customer or Customers herein shall be the joint and several
obligation of XC and XSI. IBM Credit and Customers agree as follows:

WITNESSETH

         WHEREAS, Customers and IBM Credit have entered into that certain Agreement
for Wholesale Financing dated as of December 1, 1999, as amended, modified or
otherwise supplemented from time to time, the “AWF”)(the AWF and this Addendum
together hereinafter referred to as the “Agreement”);

         WHEREAS, pursuant to the AWF, Customers purchase from Persons approved in
writing by IBM Credit for the purposes of this Addendum and the AWF (the
“Authorized Suppliers”) computer hardware and software products manufactured or
distributed by or bearing any trademark or trade name of such Authorized
Suppliers (the “Products”);

         WHEREAS, Customers have also requested that IBM Credit finance Customers’
working capital requirements, and IBM Credit is willing to provide such
financing to Customers subject to the terms and conditions set forth in this
Addendum.

         NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree that the AWF is hereby amended as follows:

Section 1.0 Definitions.

The definitions contained in the AWF apply to this Addendum unless otherwise
indicated.

“Accounts” as defined in the U.C.C.

“Account Debtor” shall mean any Person required to make payment to any Customer
for the purchase of inventory, acquisition of software and/or services or any
other Person who has a debt obligation owing to any Customer.

“Affiliate” shall mean with respect to any Person, any other Person (the
“Affiliate”) meeting one of the following unless agreed to otherwise in
writing: (i) at least 10% of the Affiliate’s equity is owned, directly or
indirectly, by such Person; (ii) at least 10% of such Person’s equity is owned,
directly or indirectly, by the Affiliate; or (iii) at least 10% of such
Person’s equity and at least 10% of the Affiliate’s equity is owned, directly
or indirectly, by the same Person or Persons. All of any Customer’s officers,
directors, joint venturers, and partners shall also be deemed to be Affiliates
of Customers for purposes of this Agreement.

 Page 1 of 19

 

“AWF Outstanding Indebtedness” shall mean the total amount of Customers’
indebtedness for all loans and advances outstanding under the AWF from time to
time and all accrued and unpaid financing charges and fees relating thereto.

“Collateral” as defined in Section 5 of this Agreement.

“Concentration Accounts” shall mean an Eligible Account that, individually, or
when aggregated with all Customers’ other outstanding Accounts of the same
Account Debtor and such Account Debtor’s Affiliates, constitute more than five
percent (5%) of the net outstanding balance of all Eligible Accounts of any
Customer then outstanding for all Account Debtors.

“Concentration Account Debtor” shall mean, at any time, any Account Debtor
obligated to Customers with respect to, or on account of, a Concentration
Account.

“Equipment” shall mean all of Customers’ equipment including software, now owned
or hereafter acquired, bearing the trademarks or trade names that IBM Credit has
approved any Customer for financing under the terms of the AWF and all
attachments, accessories, additions and accessions thereto, and returns,
repossessions, exchanges, substitutions and replacements thereof and all
documents relating thereto.

“FPP Outstanding Indebtedness” shall mean the total amount of Customers’
indebtedness for all loans and advances outstanding under this Addendum from
time to time (including, but not limited to Product Advances, Takeout Advances,
PRO Advances and WCO Advances as such terms are defined herein), and all accrued
and unpaid financing charges and fees relating thereto.

“Inventory” shall mean all of Customers’ inventory including software, now owned
or hereafter acquired, bearing the trademarks or trade names that IBM Credit has
approved any Customer for financing under the terms of the AWF and all
attachments, accessories, additions and accessions thereto, and returns,
repossessions, exchanges, substitutions and replacements thereof.

“Obligations” shall mean all loans and advances, including but not limited to
AWF Outstanding Indebtedness and FPP Outstanding Indebtedness; covenants;
agreements; warranties; duties; representations; any third party claims against
Customers satisfied or acquired by IBM Credit; liabilities and indebtedness of
any kind and nature whatsoever now or hereafter arising, owing, due or payable
from any Customer to IBM Credit, whether primary or secondary, joint or several,
direct, contingent, fixed or otherwise, secured, unsecured or arising under the
Agreement, or any agreements or documents previously, now or hereafter executed
by any Customer and delivered to IBM Credit or by oral agreement or operation of
law and whether or not evidenced by instruments of indebtedness.

“Person” shall mean any individual, association, firm, corporation, partnership,
trust, unincorporated organization or other entity whatsoever.

“Prime Rate” shall mean, as of the date of determination, the average of the rates
of interest announced by Citibank, N.A., Chase Manhattan Bank and Bank of
America National Trust & Savings Association (or any bank which IBM Credit uses
in its normal course of business of determining Prime Rate) as their prime or
base rate, as of the last business day of the calendar month immediately
preceding the date of determination, whether or not such announced rates are the
actual rates charged by such banking institutions to their most creditworthy
borrowers.

“PRO Advances” shall have the meaning ascribed thereto in Section 4.2 hereof.

“Products” shall mean Inventory, Equipment and Services.

“Product Advances” shall have the meaning ascribed thereto in Section 2.2
hereof.

“Takeout Advances” shall have the meaning ascribed thereto in Section 4.1
hereof.

 Page 2 of 19

 

“Total Outstanding Indebtedness” shall mean the total of AWF Outstanding
Indebtedness and FPP Outstanding Indebtedness.

“Total Qualifying Collateral Value” shall mean the total of: (a) the aggregate
wholesale invoice price, net of all applicable price reduction credits, of all
Inventory in Customers’ possession as reflected on the most recent Monthly
Report furnished pursuant to Paragraph 7.1 hereof, plus (b) the value of
Customers’ Eligible Accounts as reflected on the most recent Monthly Report
furnished pursuant to Paragraph 7.1 hereof multiplied by the Valuation
Percentage of Eligible Accounts set forth in Exhibit A hereto, plus (c) the
value of any additional collateral acceptable to IBM Credit which Customers
have or may hereafter provide (the “Additional Collateral”) multiplied by the
Valuation Percentage of Additional Collateral, all as set forth in Exhibit A
hereto.

“WCO Advances” shall have the meaning ascribed thereto in Section 4.3 hereof.

Section 2.0 General Terms and
Provisions.

	2.1	 	Addendum.

         (a)  The provisions of this Addendum are incorporated into and supplement
the AWF as if fully set forth as additional terms therein. In the event of a
conflict between the terms of this Addendum and the terms of the AWF, the terms
of this Addendum will control in determining the agreement between IBM Credit
and Customers.

         (b)  Exhibit A is incorporated herein. IBM Credit may modify Exhibit A
from time to time by providing Customers with a new Exhibit A. Any such new
Exhibit A shall be effective as of the date specified in the new Exhibit A.
Customers will have accepted the new Exhibit A if a Customer does not notify
IBM Credit in writing of its rejection of the new Exhibit A within thirty (30)
days of the date IBM Credit mails any such new Exhibit A to Customers. In the
event any Customer rejects a new Exhibit A, IBM Credit shall have no further
obligation under this Addendum to make loans or advances or other financial
accommodations to Customers effective on the earlier of (i) the date of the
written rejection or (ii) the thirty-first day after IBM Credit mailed to
Customers the new Exhibit A which was not accepted by a Customer, and all of
Customers’ FPP Outstanding Indebtedness to IBM Credit shall be due and payable
in its entirety in accordance with the then prevailing terms. Only one Exhibit
A, the one with the most recent Effective Date, shall be in force at any time
(“Current Exhibit A”).

         (c)  Any Addendum to the AWF for the Extended Scheduled Payment Program or
Large Sale Financing Option executed by any Customer and IBM Credit prior to
this Addendum is hereby superseded by this Addendum and terminated.

	2.2	 	 General Description of Credit Offerings.

         (a)  The primary purpose of this Addendum is to enable Customers to
participate in IBM Credit’s Flexible Payment Plan (“FPP”) pursuant to which
Customers may extend the due date for repayment of advances from IBM Credit for
the purchase of Products (“Product Advances”) for the period set forth in
Exhibit A hereto (the “Financing Period”).

         (b)  The secondary purpose of this Addendum is to provide Customers with
three options (collectively, the “FPP Options”) for requesting cash or credit
advances for various purposes. The FPP Options consist of the Takeout Advance
Option, the Payment Reschedule Option and the Working Capital Option described
in Section 5 of this Addendum.

 Page 3 of 19

 

	2.3	 	 Maximum Allowable Indebtedness.

         Customers’ Total Outstanding Indebtedness shall at no time exceed an amount
(the “Maximum Allowable Indebtedness”) equal to the lesser of: (a) the amount
set forth in Exhibit A as the “FPP Credit Line”, or (b) Customers’ Total
Qualifying Collateral Value.

	2.4	 	 Available Credit.

         The maximum amount which Customers may borrow under this Addendum in any
given instance (“Available Credit”) shall be equal to (a) the Maximum Allowable
Indebtedness, less (b) Customers’ Total Outstanding Indebtedness.

	2.5	 	 Shortfall Amount.

         If
at any time the amount of Customers’ Total Outstanding Indebtedness
exceeds the amount of Customers’ Maximum Allowable Indebtedness, Customers agree
to pay immediately to IBM Credit an amount equal to such excess (“Shortfall
Amount”) upon the earliest to occur of (a) demand for payment by IBM Credit, (b)
the delivery of Customers’ Collateral Report, delivered in accordance with
Paragraph 7.1, indicating such Shortfall Amount or (c) any Customer’s
independent determination of such Shortfall Amount.

	2.6	 	 Shortfall Transaction Fee.

         IBM Credit will charge Customers a fee
(“Shortfall Transaction Fee”) for each occurrence of a Shortfall Amount unless
Customers have timely paid IBM Credit the amount of such Shortfall Amount in
accordance with Paragraph 2.5. Shortfall Transaction Fees are calculated by
multiplying the Shortfall Amount times the rate specified in Exhibit A.

	2.7	 	Calculation of Financing Charges and Delinquency Fee.

         All financing charges and the Delinquency Fee provided for herein are
computed on the basis of an actual-day, 360-day year and are calculated by
multiplying the applicable period rate for the billing period times the
applicable Average Daily Balance of Customers’ FPP Outstanding Indebtedness
during said period. The “Average Daily Balance” of Customers’ FPP Outstanding
Indebtedness shall equal the sum of the outstanding principal balances as of
each day during the billing period divided by the number of days in the billing
period. The financing charges and the Delinquency Fee shall accrue at the lesser
of (a) the applicable per annum rate specified in Exhibit A, or (b) the highest
rate of interest from time to time permitted by applicable law. Any amount
received from Customers in excess of the highest rate of interest from time to
time permitted by applicable law shall be considered reductions to principal to
the extent of such excess. The financing charges and the Delinquency Fee shall
be based upon floating rates which shall be adjusted as of the first day of each
month based upon the prevailing Prime Rate in effect as of the last day of the
immediately preceding month.

	2.8	 	 Delinquency Fee.

         In the event any Customer is delinquent in making any payment to IBM Credit
when due hereunder, IBM Credit will charge a fee (“Delinquency Fee”) to Customer
at the per annum rate specified in Exhibit A, based on the Average Daily Balance
of the delinquent amount from the original due date of the delinquent payment to
the date of payment. Customers shall pay such fee to IBM Credit as specified and
set forth in its monthly billing statement.

	2.9	 	 FPP Application Processing Fee.

         IBM Credit will charge a one-time fee to Customers, in an amount specified
by IBM Credit in Exhibit A, and Customers shall pay such fee to IBM Credit when
invoiced by IBM Credit. Such fee shall not be deemed to be an origination or
commitment fee.

 Page 4 of 19

 

	2.10	 	 FPP Monthly Service Fee.

         IBM Credit will charge a flat fee to Customers, in the amount specified
by IBM Credit in Exhibit A. This fee will be set forth in Customers’ monthly
billing statement from IBM Credit and will be due in accordance with the terms
stated on the monthly billing statement. Such fee shall not be deemed to be an
origination or commitment fee.

	2.11	 	 Statement of Transaction.

         In accordance with the terms of the AWF, IBM Credit will send the
requesting Customer a Statement of Transaction notifying such Customer of each
advance under this Addendum. Upon receipt of such Statement of Transaction,
Customers shall be considered to have acknowledged the advance in the amount
indicated on the Statement of Transaction unless such Customer notifies IBM
Credit, in writing, of any correction or objection claimed within seven (7)
business days after such Statement of Transaction is delivered to Customers by
IBM Credit.

	2.12	 	 Billings.

         IBM Credit shall send to Customers, at monthly or other intervals, a
statement of all amounts, including principal, accrued financing charges, fees
and costs due and not paid with respect to this Addendum. All such amounts shall
be due and payable in accordance with the terms of such billing statement.
Customers shall be considered to have acknowledged as due such amounts indicated on
any such statement unless Customers object to IBM Credit in writing, within
seven (7) business days after such statement is delivered to Customers by IBM
Credit.

	2.13	 	 Place of Payment.

         All payments of sums due from Customers to IBM Credit shall be delivered
to IBM Credit at the address first above written, or at such other address as
IBM Credit may from time to time, in writing, designate.

	2.14	 	 Prepayment.

         Customers may elect, at any time, without premium or penalty to prepay
all or part of the principal amount outstanding as IBM Product Advances or under
an FPP Option. Customers will indicate to IBM Credit, in its remittance advice
report, which amounts are to be prepaid (“PrePayments”).

Section 3.0   FPP Provisions

	3.1	 	 Product Advances.

         Provided that Customers have adequate Available Credit and provided that no
Event of Default has occurred under the Agreement, pursuant to the FPP Addendum,
IBM Credit shall advance funds for the account of the applicable Customer in
payment of invoice rendered to such Customer for such Customer’s authorized
purchases of Products. Each such advance shall be deemed to be a Product
Advance. Confirmation of each such advance shall be reflected in a Statement of
Transaction which shall identify the date upon which an advance is made; said
date shall be described in the Statement of Transaction as the “Date of Note”.

	3.2	 	 FPP Financing Charge.

No finance charge shall accrue on any Product Advance during the No Charge
Financing Days, if any, applicable to such Product Advance. Each Product Advance
shall be due and payable on the Common Due Date for such Product Advance.
Customers may, at their option, repay a Product Advance by requesting IBM Credit
to apply all or any part of the principal amount of a WCO Advance to the

 Page 5 of 19

 

outstanding Product Advance. Customers’ request for such application shall be
made in accordance with Section 4.3. When so requested and subject to the terms
and conditions of this Addendum, IBM Credit shall apply the amount so requested
to the amounts due in respect of the outstanding Product Advances. Nothing
contained herein shall relieve Customers of their obligation to repay Product
Advances when due. Each Product Advance shall accrue a finance charge on the
Average Daily Balance thereof from and including the first (1st) day following
the end of the No Charge Financing Days, if any, for such Product Advance, or if
no such No Charge Financing Days shall be in effect, from and including the Date
of Note for such Product Advance, in each case, to and including the date such
Product Advance shall become due and payable in accordance with the terms of
this Addendum, at a per annum rate equal to the lesser of (a) the finance charge
set forth in Exhibit A to this Addendum as the “FPP Financing Charge” and (b)
the highest rate from time to time permitted by applicable law.

         In addition, for any Product Advance with respect to which No Charge
Financing Days shall not be in effect, Customers shall pay a Free Financing
Period Exclusion Fee for such Product Advance multiplied by the rate set forth
in Exhibit A. Such fee shall be due and payable on the Common Due Date for such
Product Advance. If it is determined that amounts received from Customers were
in excess of the highest rate permitted by law, then the amount representing
such excess shall be considered reductions to principal of Advances.

	3.3	 	 Repayment of Product Advances.

         The Financing Period specified in Exhibit A shall commence to run on the
Date of Note applicable to each Product Advance. At the expiration of the
Financing Period for each Product Advance, repayment of the total amount of such
advance shall be due to IBM Credit on the date determined as follows: If the
expiration of the Financing Period occurs on a date from: (i) the first through
the tenth of a month, then payment shall be due on the fifth day of such month;
(ii) the eleventh through the twentieth of the month; then payment shall be due
on the fifteenth day of such month; and (iii) the twenty-first through the
thirty-first of the month, then payment shall be due on the twenty-fifth date of
such month. Said dates are referred to as “Common Payment Due Dates”.

         Customers hereby acknowledge that IBM Credit shall have the right, in
accordance with the terms of the AWF, to apply and reapply any Product Advance
payments, other than PrePayments, to any Product invoices or Product Advance
payments due, as IBM Credit may deem advisable, notwithstanding any entry by IBM
Credit upon its books and records.

Section 4.0   FPP Options

         IBM Credit reserves the right, in its sole discretion, to amend or
terminate any FPP Option requested by Customers and approved by IBM Credit at
any time upon thirty (30) days written notice. All advances made by IBM Credit
prior to the effective date of any proposed termination or amendment of any FPP
Option will not be impaired by such proposed termination or amendment.

	4.1	 	 Takeout Advance Option.

         Provided that Customers have adequate Available Credit and provided that no
Event of Default has occurred under the Agreement, pursuant to the Takeout
Advance Option, Customers may in writing request an advance (“Takeout Advance”)
in an amount sufficient to pay off and discharge all remaining indebtedness it
has with other lenders to meet IBM Credit’s requirements for acceptance of this
Addendum. IBM CREDIT MAY, IN ITS SOLE DISCRETION, PROVIDE SUCH TAKEOUT ADVANCE.

         Customers must complete all of the IBM Credit required documents (“Other
Documents” as identified in Exhibit A), which are required to assure IBM Credit
a valid and enforceable first priority security position in Customers’
Collateral

 Page 6 of 19

 

         The Takeout Advance shall accrue a finance charge during the period from the
date such advance is made to maturity at the per annum rate specified in Exhibit
B as the “FPP Takeout Advance Financing Charge”. From and after maturity, the
delinquent portion of the Takeout Advance shall accrue a Delinquency Fee in
accordance with Paragraph 2.8 hereof.

         Customers shall repay the Takeout Advance according to the repayment
schedule set forth in Exhibit B. All amounts due and unpaid will be set forth in
Customers’ monthly billing statement.

	4.2	 	 Payment Reschedule Option.

         Provided that Customers have adequate Available Credit and provided that no
Event of Default has occurred under the Agreement, pursuant to the Payment
Reschedule Option (“PRO”), a Customer may request IBM Credit to provide a credit
advance to repay, all or any part of any Product Advance when due. Such Customer
shall provide IBM Credit with a written request (“Reschedule Request”) for a PRO
advance (“PRO Advance”) for periods of 10 day increments (“PRO Term”) up to the
maximum approved term set forth in Exhibit A (“Maximum PRO Term”).

         The Rescheduled Request must state the PRO Advance amount requested, and
the month, day and year of the Common Payment Due Date, as set forth in
Customers’ applicable monthly billing statement from IBM Credit, or the Product
Advance or part thereof to be rescheduled. Each Reschedule Request is subject
to IBM Credit’s written approval and shall not exceed the Maximum PRO Term. IBM
CREDIT MAY, IN ITS SOLE DISCRETION, PROVIDE SUCH PRO ADVANCE.

         If a Reschedule Request is approved by IBM Credit, the PRO Term shall
commence on the Common Payment Due Date for the Product Advance or part thereof
being paid by the PRO Advance and shall end on the last day of the approved PRO
Term. Payment for the PRO Advance shall be due on the last day of the PRO Term.
Payments due for PRO Advances are not eligible for rescheduling under the PRO.

         Customers cannot use the PRO to reschedule any Product Advance or part
thereof on any Common Payment Due Date on which any Customer will take a
discount offered by IBM Credit for invoice amounts paid in full within fifteen
(15) days of IBM Credit’s Date of Note. This discount is referred to as the High
Turnover Option (“HTO”).

         Each PRO Advance shall accrue a finance charge during the period from the
date such advance is made of maturity at the per annum rate specified in Exhibit
A as the “FPP PRO Financing Charge”. From and after maturity, the delinquent
portion of a PRO Advance shall accrue a Delinquency Fee in accordance with
Paragraph 2.8 hereof.

	4.3	 	 Working Capital Option.

         Provided that Customers have adequate Available Credit and provided that no
Event of Default has occurred under the Agreement, pursuant to the Working
Capital Option (“WCO”), Customers may request IBM Credit to provide cash
advances (“WCO Advances”). Customers shall provide IBM Credit with a written
request (“WCO Advance Request”) for a period (“WCO Term”) up to the maximum
approved term set forth in Exhibit A (“Maximum WCO Term”).

         The WCO Advance Request must state the WCO Advance amount requested. Each
WCO Advance Request is subject to IBM Credit’s approval and shall not exceed the
Maximum WCO Term. IBM CREDIT MAY, IN ITS SOLE DISCRETION, PROVIDE SUCH WCO
ADVANCE.

         If a WCO Advance Request is approved by IBM Credit, the WCO Term shall
commence on the date that the WCO Advance is made and shall end on the last day
of the approved WCO Term.

         At the conclusion of the WCO Term applicable to the WCO Advance, the
outstanding WCO Advance will be automatically renewed for another period equal
to the Maximum WCO Term unless IBM

 Page 7 of 19

 

Credit informs Customers, in writing, at least thirty (30) days prior to the
conclusion of the current WCO Term that such WCO Advance will not be renewed. If
the outstanding WCO Advance is not renewed by IBM Credit, Customers agree to
repay the outstanding WCO Advance to IBM Credit no later than the last day of
the current WCO Term.

         Each WCO Advance shall accrue a finance charge during the period from the
date such advance is made to maturity at the per annum rate specified in Exhibit
A as the “FPP WCO Financing Charge”. From and after maturity, the delinquent
portion of a WCO Advance shall accrue a Delinquency Fee in accordance with
Paragraph 2.8 hereof.

Section 5.0 Security — Collateral.

	5.1	 	 Collateral Grant.

         To secure Customers’ full and punctual payment and performance of the
Obligations (including obligations under any leases Customers may enter into,
now or in the future, with IBM Credit) when due (whether at the stated maturity,
by acceleration or otherwise), Customers hereby grant IBM Credit a security
interest in all of Customers’ personal property, whether now owned or hereafter
acquired or existing and wherever located, including the following: all goods,
including inventory and equipment, and all parts thereof, attachments,
accessories and accessions thereto, products thereof and documents therefor, and
all price protection payments, credits, discounts, incentive payments, rebates
and refunds arising therefrom; all accounts, chattel paper, instruments,
negotiable documents, promissory notes, deposit accounts, commercial tort
claims, investment property, pledged notes, letter of credit rights, supporting
obligations, obligations of any kind owing to Customers, all substitutions and
replacements for all of the foregoing, and all products or proceeds of all of
the foregoing. All of the above assets are defined pursuant to the provisions of
Article 9 of the U.C.C. and are hereinafter collectively referred to as the
“Collateral”.

	5.2	 	 Collateral Covenants.

         Customers covenant and agree with IBM Credit that:

         (a)  IBM Credit may file with any filing office such financing statements,
amendments, addenda and other records naming IBM Credit as the secured party,
Customers as the debtors and identifying IBM Credit’s security interest in the
Collateral that IBM Credit deems necessary to perfect and maintain perfected the
security interest of IBM Credit in the Collateral. Customers shall, upon IBM
Credit’s request, execute and deliver to IBM Credit, or cause to be executed and
delivered, such other and further documents, certificates, consents, instruments
and records that IBM Credit may deem necessary to perfect and maintain perfected
IBM Credit’s security interests in the Collateral and will perform all acts
specified in Exhibit A of this Addendum to ensure that IBM Credit’s security
interest in Collateral shall at all times constitute a perfected, first priority
security interest, and that there are not and shall at no time be, any creditors
who have or claim a lien superior to IBM Credit’s in Collateral;

         (b)  the security interest granted to IBM Credit under this Addendum is in
addition to any other security held from time to time by IBM Credit;

         (c)  in the event of default, IBM Credit may realize upon all or part of
any Collateral, to the extent of Customers’ Total Outstanding Indebtedness, in
any order it desires and any realization by any means upon any Collateral will
not bar realization upon any other Collateral;

         (d)  Customers will, at IBM Credit’s request, cause any guarantors of their
debt to IBM Credit to grant IBM Credit a security interest in its Collateral,
and be bound by any covenants relating to the Collateral as may be specified by
IBM Credit in its sole discretion;

         (e)  Customers warrant, represent and covenant that Customers have good and
valid title to all the Collateral;

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         (f)  Customers shall furnish to, and inform IBM Credit of, all material
adverse information relating to the financial condition of any Account Debtor
immediately upon a Customer’s receipt or learning thereof;

         (g)  Customers covenant and agree that all inventory rejected or
returned by any Account Debtor and all inventory repossessed or stopped in
transit by a Customer from any Account Debtor will be segregated from other
property of such Customer, and will not be treated, for the purposes of
calculating Available Credit under Paragraph 2.4, as inventory until the
Accounts which resulted from such inventory are paid or appropriately credited
to the Account Debtor.

         (h)  IBM Credit may, in its sole discretion, at any time, take control
in any manner of any cash or noncash items of payment or proceeds of Collateral
and of any rejected, returned, repossessed or stopped-in-transit inventory;

         (i)  Customers will stamp or otherwise mark all material chattel paper
and instruments now owned or hereafter acquired by it to show that the same are
subject to IBM Credit’s security interest and immediately thereafter deliver or
cause such chattel paper and instruments to be delivered to IBM Credit or any
agent designated by IBM Credit with appropriate endorsements and assignments to
vest title and possession in IBM Credit;

         (j)  Customers will promptly notify IBM Credit in writing if any
Customer shall at any time hold or acquire a commercial tort claim, providing
the details thereof, and shall grant IBM Credit a security interest therein and
in the proceeds thereof;

         (k)  Customers shall promptly notify IBM Credit if any Customer is or
becomes a beneficiary under a letter of credit now or hereafter issued in favor
of any Customer; and

         (l)  Collateral shall not be stored with a bailee, warehouseman or
similar party unless Customers will, concurrently with the deliver of such
Collateral to such party, cause such party to enter into an agreement
acknowledging that such party holds possession of Collateral for the benefit of
IBM Credit.

Section 6.0 Accounts.

	6.1	 	 Ineligible Accounts.

         IBM Credit shall have the sole right to determine eligibility of Accounts
from an Account Debtor. Without limiting IBM Credit’s discretion in that regard,
and unless otherwise designated in writing by IBM Credit in Exhibit A, the
following Accounts will be deemed ineligible Accounts (“Ineligible Accounts”):

         (a)  Accounts created from the sale of inventory and/or performance of
services that allow for payment to be made later than, (i) thirty (30) days from
the date of sale or performance for commercial Account Debtors, or (ii) sixty
(60) days from the date of sale or performance for state, local or United States
government Account Debtors;

         (b)  Accounts unpaid more than ninety (90) days from date of invoice,
except for state, local or United States government Accounts, which shall be
deemed ineligible if unpaid more than one hundred twenty (120) days from date of
invoice;

         (c)  Accounts of any Account Debtor, including current Accounts, with
fifty percent (50%) or more of the outstanding balance unpaid for more than
ninety (90) days from the date of invoice, except for Accounts payable by state,
local or United States government Account Debtors which shall be deemed
ineligible if fifty percent (50%) or more of the aggregate outstanding balance
of all such Accounts remain unpaid for more than one hundred twenty (120) days
from the date of invoice;

 Page 9 of 19

 

         (d)  Accounts with respect to which the Account Debtor is an officer,
employee, agent, stockholder, parent, guarantor, subsidiary of Affiliate of any
Customer or is otherwise related to, or has common shareholders holding 5% or
more ownership or equity interest in such Account Debtor, officers or directors
with, any Customer;

         (e)  Accounts arising from consignment sales;

         (f)  except for state, local and United States government institutions and
public educational institutions, Accounts with respect to which the payment by
the Account Debtor is or may be conditional;

         (g)  except for state, local and United States government institutions, and
public educational institutions, all other Accounts with respect to which;

		
	 	         (i) the Account Debtor is not a commercial entity; or

		
	 	         (ii) The Account Debtor is not a resident of the United States or
Canada;

         (h)  Accounts with respect to which any Customer is or may become liable to
the Account Debtor thereof for inventory sold or services rendered by such
Account Debtor to such Customer;

         (i)  Accounts arising from the sale of goods purchased for a personal,
family or household purpose;

         (j)  Accounts which represent inventory or equipment that have been used
for demonstration purposes or loaned by any Customer to another party;

         (k)  Accounts which are progress or milestone payment accounts or subject
to offset or recoupment by the Account Debtor;

         (l)  Accounts which are, or any Customer knows will become, subject to
proceedings under United States Bankruptcy Code or other Laws for the relief of
debtors;

         (m) 
Accounts which are not payable in US Dollars;

         (n)  Accounts payable by any Account Debtor that is a remarketer of
computer hardware and software products and whose purchases of such products
from Customer have been financed by another Person, other than IBM Credit, who
pays the proceeds of such financing directly to Customer on behalf of such
debtor (“Third Party Financer”) unless (i) such Third Party Financer does not
have a separate financing relationship with Customer or (ii) such Third Party
Financer has a separate financing relationship with Customer and has waived its
right to set off its obligations to Customer;

         (o) 
Accounts of any items which are billed to any Account Debtor before
they are shipped by any Customer;

         (p)  Accounts with respect to which any Customer has permitted or agreed to
any extension, compromise or settlement, or made any material change or
modification of any kind or nature, including, but not limited to, any change or
modification to the terms relating thereto;

         (q)  Accounts which do not represent undisputed bona fide transactions
completed in accordance with the terms and conditions contained in the invoices
and purchase orders relating thereto;

         (r)  Accounts which are discounted for the full payment term specified in
any Customer’s terms and conditions with its Account Debtors, or for any longer
period of time;

         (s)  Accounts on Cash on Delivery (COD) terms;

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         (t)  Accounts arising from maintenance or service contracts which are
billed in advance of full performance of service;

         (u)  Accounts arising from bartered transactions;

         (v)  Accounts arising from incentive payments, rebates, discounts, credits,
and refunds from a supplier;

         (w)  Accounts of Xybernaut Solutions, Inc., until such time as IBM Credit
determines, in its sole discretion, that XSI’s reporting is acceptable; and,

         (x)  any and all other Accounts which IBM Credit deems, in its sole
discretion, to be unacceptable.

         If
IBM Credit notifies a Customer that it has determined that any account
is or has become an Ineligible Account, and if IBM Credit has provided any
financing to Customers based on IBM Credit’s belief that such Ineligible account
is or was an Eligible Account, and if a Shortfall Amount has been thus created,
then Customers shall pay such Shortfall Amount to IBM Credit immediately.

	6.2	 	 Eligible Accounts.

         The aggregate of all Accounts of Customers which are not deemed to be
Ineligible Accounts by IBM Credit, shall be eligible Accounts for purposes of
Total Qualifying Collateral Value (“Eligible Accounts”).

	6.3	 	 Concentration Accounts.

         Without limiting IBM Credit’s other rights, IBM Credit reserves the right
to, from time to time in its sole discretion, reasonably modify the percentage
of the amount of Customers’ Concentration Accounts used in calculating
Customers’ Valuation Percentage or eliminate Concentration Accounts in
calculating Customers’ Valuation Percentage.

Section 7.0 Reports.

	7.1	 	 Collateral Reports.

         Collateral Report: To facilitate Customers’ borrowings and the
maintenance of IBM Credit’s records, Customers shall, by the fifth (5th)
business day of each month or as otherwise agreed in writing, furnish IBM
Credit with a collateral report (“Collateral Report”), the requirements of
which will be specified by IBM Credit and will include, but not be limited to,
a summary of Customers’ Inventory, Eligible Accounts, Total Qualifying
Collateral Value, Total Outstanding Indebtedness and any Shortfall Amount, in
each case as of the last business day of the previous month or as otherwise
agreed in writing.

         In addition, Customers shall submit the following reports which shall be
included as attachments to the Collateral Report:

         (a)  Accounts Aging Report — This report will disclose the amounts and
aging of all of Customers’ Accounts.

         (b)  Inventory Report — This report will list Customers’ Inventory by
quantity, type, model, IBM Credit’s Invoice price to Customers, and the total
of the line item values (quantity times invoice price) for all Inventory listed
on the report.

         (c)  Accounts Payable Report — This report will disclose the amounts and
aging of all of Customers’ accounts payable.

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         (d)  Additional Collateral Report — This report will list any other
collateral which may be required by IBM Credit.

         On the effective date of this Addendum, and once per quarter thereafter,
Customers shall also submit to IBM Credit the name, address and phone number
of each of its Account Debtor’s primary contacts for each Account on the
Accounts Aging Report.

	7.2	 	 Financial Reports and Notices.

         Customers shall provide to IBM Credit the following items which must be
prepared as set forth in Exhibit A and in accordance with generally accepted
accounting principles (“GAAP”) consistently applied:

         (a)  Annual Report: This report shall be delivered by Customers annually
within ninety (90) days after the end of Customers’ fiscal year. The report
will include a reasonably detailed balance sheet, profit and loss statement,
statement of retained earnings, and statement of cash flows, covering
Customers’ operations for such fiscal year on a consolidated and consolidating
(US operation) basis.

         (b)  Quarterly Report: This report shall be delivered by Customers within
forty-five (45) days after the end of each of Customers’ fiscal quarters and
shall be current as of the last day of the quarter. Each report shall include a
reasonably detailed balance sheet, profit and loss statement,
statement of retained
earnings, and statement of cash flows, covering Customers’ operations for such
quarter on a consolidated and consolidating (US operation) basis.

         (c)  Monthly Interim Statements: These statements shall be delivered
within thirty (30) days after written request by IBM Credit and shall be
current as of the last day of the preceding month. The statement may be
prepared by Customers and shall include a reasonably detailed balance sheet, a
detailed profit and loss statement, statement of retained earnings, and
statement of cash flows, covering Customers’ operations for such month on a
consolidated and consolidating (US operation) basis.

         (d)  Other Reports: Any other report reasonably requested by IBM Credit
which relates to the Collateral or the financial condition of Customers, which
report shall be due within ten (10) business days after the request by IBM
Credit for such report.

         (e)  Notice of Material Adverse Change: Customers agree to provide to IBM
Credit written notice of any event or development that reasonably would have or
would reasonably be likely to have a material adverse change or effect on any
Customer’s condition (financial or otherwise), operations or properties as soon
as such event or development is known or available for disclosure and in any
event within forty-five (45) days after the end of each of Customers’ fiscal
quarters; but in no event before permitted by applicable law.

Section 8.0 Collections.

         (a)  Customers shall establish and maintain a lockbox (“Lockbox”) at the
address set forth in Exhibit A with the financial institution listed in Exhibit
A (the “Bank”), pursuant to an agreement between Customers and Bank in form and
substance satisfactory to IBM Credit. Customers shall also establish and
maintain a deposit account which shall contain only proceeds of Customers’
Accounts (“Special Account”) with Bank. Customers shall enter into a control
agreement with Bank and IBM Credit in form and substance satisfactory to IBM
Credit pursuant to which, among other things, Bank shall agree that its
security interest in the deposit account is subordinate to IBM Credit’s
security interest and that upon notice from IBM Credit, disbursements from the
Lockbox or the Special Account shall be made only as IBM Credit shall direct,
without further consent by Customers.

         (b)  Customers shall direct all Account Debtors to send all payments to
Customers’ lockbox. In addition, Customers shall have such instruction printed
in conspicuous type on all invoices. Customers shall instruct Bank to deposit
all remittances to the Lockbox into the Special Account. Customers further

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agree that they shall not deposit or permit any deposits of funds other than
remittances paid in respect of the Accounts into the Special Account or permit
any commingling of funds with such remittances in the Lockbox or Special
Account.

         (c)  Without limiting the Customers’ foregoing obligations, if, at any
time, any Customer receives a remittance directly from an Account Debtor, then
such Customer shall make entries on its books and records in a manner that
shall reasonably identify such remittances and shall keep a separate account on
its record books of all remittances so received and deposit the same into
Special Account. Until so deposited into the Special Account, Customers shall
keep all remittances received in respect of Accounts separate from Customers’
other property so that they are capable of identification as the proceeds of
Accounts in which IBM Credit has a security interest.

Section 9.0 Power of Attorney.

         Each Customer hereby irrevocably appoints IBM Credit (and any person
designated by it) as its true and lawful attorney-in-fact with full power, as
it pertains to the loan, at any time, in the sole discretion of IBM Credit, to:

         (a)  demand payment, enforce payment and otherwise exercise all of the
applicable Customer’s rights and remedies with respect to the collection of any
Accounts in the name of such Customer or IBM Credit;

         (b)  prepare, file and sign the applicable Customer’s name on any proof of
claim in bankruptcy or similar document against any Account Debtor;

         (c)  endorse the name of the applicable Customer upon any check, chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Collateral;

         (d)  sign the name of the applicable Customer to verifications of Accounts
and notices thereof to Account Debtors; and

         (e)  subject to any agreement between IBM Credit and such Bank, direct the
Bank maintaining any Lockbox or Special Account to pay the funds on deposit to
IBM Credit for application to the Obligations, or as otherwise directed by IBM
Credit.

Section 10.0 Release.

         IBM Credit shall have no obligation to preserve rights
to Accounts against others and Customers hereby waive and release IBM Credit
from any and all claims and causes of action which Customers may now or
hereafter have for any loss or damage to Customers claimed by Customers to be
caused by, or arising from, IBM Credit’s actions and/or omissions relating to
any Account Debtors, including but not limited to:

         (a)  any failure of IBM Credit to protect, enforce or collect, in whole or
in any part, an Account;

         (b)  IBM Credit’s notification to any Account Debtor thereon of IBM
Credit’s security interest in any of the Accounts; and

         (c)  any other act or omission to act on the part of IBM Credit, its
officers, agents or employees, except for willful misconduct or gross
negligence.

 Page 13 of 19

 

Section 11.0   Audit.

	11.1	 	Books and Records/Location of Collateral.

         Each Customer represents and warrants that it keeps and maintains all
of its books and records pertaining to the Accounts (including its Debtor
Invoices) and the Collateral (collectively referred to hereafter as “Books and
Records”) at its principal place of business as designated in this Addendum or
any Exhibit attached hereto. Customers agree to give IBM Credit at least thirty
(30) days written notice before moving any such Books and Records or Collateral
to any other location.

         Customers shall immediately notify IBM Credit of any change in address
for any inventory not stored at a Customer’s principal place of business; except
for inventory sold in the ordinary course of business and Collateral in transit.

         Customers shall make entries in their Books and Records disclosing IBM
Credit’s security interest in the Collateral.

	11.2	 	End User Invoices.

         Customers will maintain an invoice for each unit of Collateral sold
or licensed (“End User Invoice”).

         An End User Invoice will include the name and address of the Person
who acquires product and services from a Customer (“End User”), the shipped-to
address of End User, the billed-to address of End User, the date of sale or
license, the date of shipment of End User, and a description of the Collateral
sold or licensed. Such description shall include, where available, the product
type and model sold or licensed, the product serial number if applicable, and
the amount invoiced to End User. Customers will retain each End User Invoice
until the later of two years after the date of sale or license or one year after
final payment in full of said invoice.

	11.3	 	Proof of Shipment.

         Customers will maintain proof of shipment of the Collateral to End
User for each End User Invoice (“Proof of Shipment”). Each Proof of Shipment
will contain End User’s order authorization. Customers will retain each Proof
of Shipment for two years after the date of sale or license.

	11.4	 	Right of IBM Credit to Perform Audits.

         Each Customer authorizes IBM Credit from time to time, in its sole
discretion, without prior notice to any Customer, to enter its premises to
audit, examine, check and make copies of such Customer’s Books and Records,
files and business procedures and practices as they pertain to the Collateral.

         Customers shall, if from time to time required by IBM Credit, deliver
to IBM Credit copies of End User Invoices, Proof of Shipment, delivery
documents, and other such documents relating to each of their End User accounts.

         IBM Credit may, in the name of any Customer or IBM Credit, at any time
verify the validity, amount or any other matter relating to any Account by mail,
telephone or by other means as agreed to by the parties.

Section 12.0   Warranties, Representations, and Covenants.

	12.1	 	 Covenants. Customers shall comply at all times with any covenants
outlined in the Agreement and Exhibit A.

 Page 14 of 19

 

	12.2	 	Affirmative Warranties, Representations and Covenants.

         (a)  The first paragraph of this Addendum states the exact name of each
Customer as set forth in its charter or other organizational record. In
addition, each Customer’s organization identification number assigned by its
State of organization is as set forth in Exhibit A.

         (b)  Each Customer is, and shall at all times during the term of this
Agreement and during the term of any other agreements executed between Customers
and IBM Credit be, in good standing under the laws of the state of its
incorporation and the laws of the state of its principal place of business, and
qualified and licensed to do business in each state, county, or parish, in which
the nature of its business or property required it be qualified or licensed,
unless the failure to so qualify does not have a material adverse effect.

         (c)  Customer shall provide IBM Credit at least thirty (30) days prior
written notice of any change in its chief executive office or principal place of
business, organization, ownership holdings or structure.

         (d)  Customer shall provide IBM Credit at least thirty (30) days written
notice before moving any Books and Records or Collateral to any jurisdiction
other than the jurisdictions identified to IBM Credit pursuant to Section 11.1 of
this Addendum.

         (e)  On the date of execution of this Addendum, there are no actions or
proceedings pending or threatened against any Customer which might result in any
material adverse change in such Customer’s financial or business condition or
which might in any way adversely affect any of such Customer’s assets.

         (f)  Customers shall maintain or arrange for the maintenance of all
properties at which the inventory is located in good condition and repair and
shall pay all costs relating thereto; Customers shall also make all rental and
mortgage payments and related charges pertaining thereto.

         (g)  Customers shall advise IBM Credit of the commencement or institution of
legal proceedings against any Customer before any court, administrative board or
tribunal.

         (h)  Customer shall inform IBM Credit immediately when any Customer receives
knowledge of any material rejection of inventory or services, nonperformance of
contracts and assertions of any claim, offset or counterclaim by any Account
Debtor.

         (i)  Customers shall maintain a system of accounting in accordance with GAAP
and ledger and account records which contain such information as may be
requested by IBM Credit.

         (j)  Customers have no Lockbox, Special account or other deposit account
with any bank except as provided in Exhibit A of this Agreement.

	12.3	 	Negative Covenants.

         Each Customer covenants with IBM Credit that it will not at any time
(without IBM Credit’s prior written consent, which shall not be unreasonably
withheld or delayed):

         (a)  change its name or its state of organization;

         (b)  other than in the ordinary course of its business, sell, lease or
otherwise dispose of or transfer any of its assets;

         (c)  merge or consolidate with another corporation;

         (d)  acquire any other corporation;

 Page 15 of 19

 

         (e)  enter into any material transaction not in the usual course of its
business;

         (f)  guaranty or indemnify or otherwise become in any way liable with
respect to the obligations of any Person, except by endorsement of instruments
or items of payment for deposit to the general account of such Customer in the
ordinary course of business or which are transmitted or turned over to IBM
Credit on account of such Customer’s Obligations;

         (g)  redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of its capital stock;

         (h)  make any change in its capital structure or operations which might in
any way adversely affect the ability of such Customer to repay its Obligations;

         (i)  declare or make any dividend payments or other distribution of assets
after the occurrence of any Event of Default, or that will create an Event of
Default;

         (j)  incur any debts outside of the ordinary course of its business except
renewals or extensions of existing debts and interest thereon;

         (k)  make any loans, advances, contributions or payments of money or
Collateral to any parent corporation or to any officer, director or stockholder
of such Customer or of any such corporation (except for reasonable compensation
for personal services actually rendered) or to any subsidiary or Affiliate
except as is reasonably consistent with everyday business operations;

         (l)  renew or extend the maturity date of that certain loan outstanding to
Edward G. Newman, with an original principal amount of $990,188.00 and
evidenced by the Promissory Note dated as of November 30, 2000, beyond December
31, 2002;

         (m)  permit any levy, attachment or restraint to be made affecting any of
the Collateral; and

         (n)  establish any Lockbox, Special Account or other deposit account with
any bank except as listed in Exhibit A of this Agreement.

Section 13.0   Claims and Obligations Regarding the Collateral.

         IBM Credit may perform any obligations of any customer in regards to the
Collateral that such Customer shall fail or refuse to perform, and IBM Credit
may but shall not be obligated to pay, acquire or accept any assignment of any
security interest, lien, encumbrance or claim asserted against the Collateral
by any person without waiving or releasing any default or obligation of
Customers under the Addendum. All sums paid by IBM Credit in performing in
satisfaction or on account for the foregoing and any expenses, including
reasonable attorneys’ fees and expenses, court costs, and other charges
relating thereto, shall be part of Customers’ Obligations, payable on demand
and secured by the Collateral.

Section 14.0   Default.

	14.1	 	 General Default Provisions.

         Any breach or failure on the part of any Customer to comply with or
observe any of the terms, conditions, covenants, warranties or representations
contained in (a) this Addendum, (b) the AWF, (c) the Other Documents between
any Customer and IBM Credit or (d) any other written agreement between any
Customer and IBM Credit or any affiliate of IBM Credit unless such breach or
failure results from the actions or inactions of an IBM affiliate, including
but not limited to IBM, shall constitute a default by Customers under the
Agreement (“Event of Default”).

 Page 16 of 19

 

	14.2	 	 Rights and Remedies Generally.

         Upon the occurrence of an Event of Default under the Agreement, IBM
Credit in addition to any other rights and remedies contained in the Agreement,
is entitled to (i) exercise any or all rights it has as a secured party under
applicable law; (ii) cease making financial accommodations or extending any
additional credit to Customers; and (iii) declare Customers’ Obligations to be
immediately due and payable. All rights and remedies of IBM Credit under the
Agreement are cumulative and non-exclusive to the extent permitted by law.

         IBM Credit may also, without notice, enter any Customer’s premises
and do either or both of the following:

         (a)  remain on such Customer’s premises and use the same, together
with such Customer’s Books and Records, for the purpose of liquidating such
Customer’s Accounts;

         (b)  remove the Books and Records to such place or places as IBM
Credit may deem convenient for the purpose of IBM Credit’s using the same in
connection with IBM Credit’s liquidation and collection of such Accounts.

Section 15.0      Term and Termination.

	15.1	 	 Term.

         This Addendum shall be in effect for a period of one (1) year
beginning on the effective date of this Addendum (the “Original Term”) and
shall automatically and continuously renew for successive additional terms of
one year each (a “Renewal Term”) unless terminated in accordance with
Paragraph 15.2.

	15.2	 	 Termination.

15.2.1 IBM Credit may terminate this Addendum (a) upon the occurrence of an
Event of Default as defined in the Agreement and (b) at the end of the Original
Term or at the end of any Renewal Terms by giving written notice of such
termination by registered or certified mail addressed to Customers at their
principal places of business as designated in this Addendum at least sixty (60)
days prior thereto.

15.2.2 Any Customer may terminate this Addendum at any time by giving IBM
Credit sixty (60) days prior written notice of such termination by registered
or certified mail. Notice of termination must be addressed to IBM Credit at the
address first above written. If any Customer terminates this Addendum,
Customers shall not be relieved from any Obligations to IBM Credit arising out
of IBM Credit’s advances or commitment made before the effective date of
termination.

15.2.3 Upon the termination of this Addendum by IBM Credit or a Customer, all
of Customers’ Obligations shall be immediately due and payable in their
entirety, even if they are not yet due under their terms, on the effective date
of termination, unless IBM Credit has agreed to continue to finance a
Customer’s inventory, in which case, if no Event of Default exists, any
outstanding obligations of Customers to IBM Credit for specific inventory
purchases shall be due and payable under their existing terms.

15.2.4 IBM Credit’s rights under the Agreement and IBM Credit’s security
interest in the Collateral shall continue after termination of this Addendum
until all of Customers’ Obligations to IBM Credit are paid in full. The
covenants, warranties and representations of this Addendum shall survive
termination of the Addendum.

 Page 17 of 19

 

Section 16.0      Alteration/Waiver.

         Except as otherwise provided, herein this Addendum may not be altered or
amended except by an agreement in writing signed by Customers and by IBM Credit.

Section 17.0      Ratification of AWF.

         Except as specifically provided in this Addendum, the AWF and any
amendments thereto shall remain in full force and effect and are hereby
ratified and confirmed. The execution, delivery and effectiveness of this
Addendum shall not waive any provision of the AWF or any right, power or remedy
of IBM Credit thereunder.

Section 18.0      Entire Agreement.

         This Addendum (including any and all Exhibits hereto), the AWF and the
Other Documents and any other documents to be delivered pursuant hereto and
thereto, constitute the entire agreement between the Customers and IBM Credit
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, negotiations and discussions, whether oral or written, with
respect to the subject matter hereof.

Section 19.0      Not Consumer Transaction. None of the Advances are consumer-goods
transactions or consumer transactions and none of the Collateral constitutes
consumer goods.

 Page 18 of 19

 

Section 20.0      Addendum Effective and Binding.

         This Addendum shall be effective and binding upon execution by Customers
and IBM Credit. This agreement may be executed in any number of counterparts
each of which shall be deemed to be an original when executed and delivered to
the other party of this Agreement, with the same effect as if the signatures
thereto and hereto were on the same instrument.

         IN WITNESS WHEREOF, the duly authorized representatives of the parties hereto
have executed this Addendum to the AWF.

	 	 	 
	(SEAL)	 	
Xybernaut Corporation
	
	
	
	

	
	
	
	
	
	
	
	
	
	
	
	

	
	
	
	
	
	
	
	

	
	
	
	

	 	 	
By:                                               
	
	
	
	

	 	 	
Name:                                               
	
	
	
	

	ATTEST:                                               	 	
Title:                                               
	
	
	
	

	 	 	
Date:                 
	
	
	
	

	 	 	 
	
	
	
	

	
	
	
	

	
	
	
	

	
	
	
	

	
	
	
	

	
	
	
	

	
	
	
	

	(SEAL)	 	
Xybernaut Solutions, Inc.
	
	
	
	

	
	
	
	

	
	
	
	

	
	
	
	

	
	
	
	

	
	
	
	

	
	
	
	

	 	 	
By:                                               
	
	
	
	

	 	 	
Name:                                               
	
	
	
	

	ATTEST:                                               	 	
Title:                                               
	
	
	
	

	           	 	
Date:
                  
	
	
	
	

	 	 	 
	
	
	
	

	 	 	
          By:                                               
	
	
	
	

	 	 	          
                                              
	
	
	
	

	 	 	          
                                              
	
	
	
	

	 	 	 
	
	
	
	

	 	 	
IBM Credit Corporation
	
	
	
	

	 	 	 
	
	
	
	

	 	 	
By:________________________________
	
	
	
	

	 	 	
Name:______________________________     
	
	
	
	

	ATTEST:
______________________________     	 	
Title:_______________________________      

 Page 19 of 19

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