Document:

ex10-45

 

Exhibit 10.45

FORM OF EXHIBIT A (“FPP EXHIBIT A”) TO

ADDENDUM TO AGREEMENT FOR WHOLESALE FINANCING -

FLEXIBLE PAYMENT PLAN (“FPP ADDENDUM”) DATED ______________, ____

Customer Names: Xybernaut Corporation, Xybernaut Solutions, Inc.

Customers’ Organization Identification Nos. (assigned by State of incorporation/organization):

________________________________________

Effective Date of this FPP Exhibit A: _________________, 2001

SECTION 1. FPP Credit Line Fees, Rates and Repayment Terms:

	 	(a)	 	FPP Application Processing Fee: $10,000;
	 
	 	(b)	 	FPP Credit Line: Three Million Dollars ($3,000,000);
	 
	 	(c)	 	Valuation Percentage:

	 	 	 	(i)  70% of the amount of Customers’ Eligible Accounts other than
Concentration Accounts as of the date of determination as reflected in
the Customers’ most recent Collateral Report;
	 
	 	 	 	(ii)  a percentage, determined from time to time by IBM Credit in its
sole discretion, of the amount of Customers’ Concentration Accounts
for a specific Concentration Account Debtor as of the date of
determination as reflected in the Customers’ most recent Collateral
Report; unless otherwise notified by IBM Credit, in writing, the
percentage for Concentration Accounts for a specific Concentration
Account Debtor shall be the same as the percentage set forth in
paragraph (i) of the Valuation Percentage;
	 
	 	 	 	(iii)  0% of the Customers’ Existing Finished Goods Inventory which
includes the prior MA series (not manufactured by International
Business Machines Corporation) and the associated peripherals.
	 
	 	 	 	(iv)  100% of the Customers’ Approved Inventory which is aged less than
150 days.
	 
	 	 	 	The AWF is hereby amended by deleting the definition of “Approved
Inventory” therein in its entirety and substituting, in lieu thereof,
the following:
	 
	 	 	 	         “Approved Inventory” shall mean computer hardware and software
products in Customers’ possession which are manufactured or
distributed by or bearing the trademarks and trade names of any
companies approved, in writing, by IBM Credit to receive financing
pursuant to the terms in the AWF, provided, however, IBM Credit has a
first priority security interest in such products and such products
are in new condition.
	 

	 	(d)	 	Payment Due Dates will be the 5th, 15th, and 25th of each calendar
month;
	 
	 	(e)	 	Monthly Service Fee: $1,000;
	 
	 	(f)	 	Financing Period: 60 days from the date of each invoice;
	 
	 	(g)	 	No-Charge Financing Days: For products subsidized by a manufacturer
there will be no charge for a certain period of time from the date of
the invoice; or

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	 	 	 	Basis Points: Unless informed otherwise, for products not subsidized
by a manufacturer there will be a one-time charge of 25 basis points
for each invoice which is in addition to the Finance Charge Rate
beginning on day 1;
	 
	 	(h)	 	FPP Financing Charge: Prime Rate plus 2.0%;
	 
	 	(i)	 	FPP Working Capital Option (“WCO”): Outstanding advances authorized up
to the amount of eligible collateral. Total Outstanding Indebtedness
not to exceed the FPP credit line amount;
	 
	 	(j)	 	WCO Term: 180 days;
	 
	 	(k)	 	FPP WCO Financing Charge: Prime Rate plus 2.0%;
	 
	 	(l)	 	Maximum Payment Reschedule Option (“PRO”) Term: 30 days;
	 
	 	(m)	 	FPP PRO Financing Charge: Prime Rate plus 2.0%
	 
	 	(n)	 	Delinquency Fee: Prime Rate plus 6.50%;
	 
	 	(o)	 	**Shortfall Transaction Fee: Shortfall Amount multiplied by 0.30%.

Financing Charges will be based on the Average Daily Balance (“ADB”) and will
be billed monthly. WCO Advances will become part of Customers’ Outstanding
Indebtedness to IBM Credit.

SECTION 2. Bank and Lockbox Information

Each Customer’s Lockbox and Special Account shall be maintained at the
following Banks:

1)     NAME OF BANK: _____________________________________________

         ADDRESS: _________________________________________________

         PHONE NO.: ________________________________________________

         LOCKBOX ADDRESS: __________________________________________

         SPECIAL ACCOUNT NO.: ______________________________________

2)     NAME OF BANK: _____________________________________________

         ADDRESS: __________________________________________________

         PHONE NO.: _________________________________________________

         LOCKBOX ADDRESS: __________________________________________

         SPECIAL ACCOUNT NO.: ______________________________________

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SECTION 3. Financial Covenants:

Definitions: The following terms shall have the following respective meanings
in this Exhibit. All amounts shall be determined in accordance with U.S.
generally accepted accounting principles (GAAP).

	 	 	“Consolidated Net Income” shall mean, for any period, the net income (or
loss), after taxes, of Customers on a consolidated basis for such period
determined in accordance with GAAP.
	 
	 	 	“Current” shall mean within the ongoing twelve month period.
	 
	 	 	“Current Assets” shall mean assets that are cash or expected to become
cash within the ongoing twelve months.
	 
	 	 	“Current Liabilities” shall mean payment obligations resulting from past
or current transactions that require settlement within the ongoing twelve
month period. All indebtedness to IBM Credit shall be considered a Current
Liability for purposes of determining compliance with the Financial
Covenants.
	 
	 	 	“EBITDA” shall mean, for any period (determined on a consolidated basis in
accordance with GAAP), (a) the Consolidated Net Income of Customers for
such period, plus (b) each of the following to the extent reflected as an
expense in the determination of such Consolidated Net Income: (i) the
Customers’ provisions for taxes based on income for such period; (ii)
Interest Expense for such period; and (iii) depreciation and amortization
of tangible and intangible assets of Customers for such period.
	 
	 	 	“Fixed Charges” shall mean, for any period, an amount equal to the sum,
without duplication, of the amounts for such as determined for the
Customers on a consolidated basis, of (i) scheduled repayments of principal
of all indebtedness (as reduced by repayments thereon previously made),
(ii) Interest Expense, (iii) capital expenditures (iv) cash dividends
paid, (v) leasehold improvement expenditures and (vi) all provisions for
U.S. and non U.S. Federal, state and local taxes.
	 
	 	 	“Fixed Charge Coverage Ratio” shall mean the ratio as of the last day of
any fiscal period of (i) EBITDA as of the last day of such fiscal period to
(ii) Fixed Charges.
	 
	 	 	“Interest Expense” shall mean, for any period, the aggregate consolidated
interest expense of Customers during such period in respect of Indebtedness
determined on a consolidated basis in accordance with GAAP, including,
without limitation, amortization of original issue discount on any
Indebtedness and of all fees payable in connection with the incurrence of
such Indebtedness (to the extent included in interest expense), the
interest portion of any deferred payment obligation and the interest
component of any capital lease obligations.
	 
	 	 	“Long Term” shall mean beyond the ongoing twelve month period.
	 
	 	 	“Long Term Assets” shall mean assets that take longer than a year to be
converted to cash. They are divided into four categories: tangible assets,
investments, intangibles and other.
	 
	 	 	“Long Term Debt” shall mean payment obligations of indebtedness which
mature more than twelve months from the date of determination, or mature
within twelve months from such date but are renewable or extendible at the
option of the debtor to a date more than twelve months from the date of
determination.
	 
	 	 	“Net Profit after Tax” shall mean Revenue plus all other income, minus all
costs, including applicable taxes.

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	 	 	“Revenue” shall mean the monetary expression of the aggregate of products
or services transferred by an enterprise to its customers for which said
customers have paid or are obligated to pay, plus other income as allowed.
	 
	 	 	“Subordinated Debt” shall mean Customers’ indebtedness to third parties as
evidenced by an executed Notes Payable Subordination Agreement in favor of
IBM Credit.
	 
	 	 	“Tangible Net Worth” shall mean:

	 	 	 	Total Net Worth minus;

	 	 	 	(a) goodwill, organizational expenses, pre-paid expenses,
deferred charges, research and development expenses, software
development costs, leasehold expenses, trademarks, trade names,
copyrights, patents, patent applications, privileges, franchises,
licenses and rights in any thereof, and other similar intangibles
(but not including contract rights) and other current and
non-current assets as identified in Customers’ financial
statements;
	 
	 	 	 	(b) all accounts receivable from employees, officers, directors,
stockholders and affiliates; and
	 
	 	 	 	(c) preferred stock that is callable or redeemable at the option
of the holders.

	 	 	“Total Assets” shall mean the total of Current Assets and Long Term Assets.
	 
	 	 	“Total Liabilities” shall mean the Current Liabilities and Long Term Debt
less Subordinated Debt, resulting from past or current transactions, that
require settlement in the future.
	 
	 	 	“Total Net Worth” (the amount of owner’s or stockholder’s ownership in an
enterprise) is equal to Total Assets minus Total Liabilities.
	 
	 	 	“Working Capital” shall mean Current Assets minus Current Liabilities.

Customers will be required to maintain the following financial ratios,
percentages and amounts as of the last day of the fiscal period under review by
IBM Credit:

	 	 	 	 	 
	 	 	 	 	Covenant
	 	 	Covenant	 	Requirements
	 	 	
	 	

	(i)	 	
Total Liabilities to Tangible
Net Worth
	 	Less than or Equal to 3.0
	
	
	
	

	(ii)	 	
Current Assets to Current
Liabilities
	 	Equal to or Greater than 1.2
	
	
	
	

	(iii)	 	
Minimum Cash Balance
	 	Equal to or Greater than $1,000,000

SECTION 4. Insurance Covenant:

Customers agree to maintain standard all-risk insurance coverage on all
locations in the amount of at least Three Million Dollars ($3,000,000) and
provide IBM Credit with a copy of the insurance policy. IBM Credit Corporation
must be named as a lender loss payee.

SECTION 5. Financial Report Preparation Requirements:

Reports due under the terms of the FPP Addendum shall be prepared as follows:

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Annual Reports shall be audited by an independent certified public accountant
and submitted no later than ninety (90) days after the close of the fiscal year
on a consolidated and consolidating (US operation) basis.

Quarterly Reports shall be prepared internally by the Customers and delivered
to IBM Credit no later than forty-five (45) days after the close of the quarter
on a consolidated and consolidating (US operation) basis.

Customers must submit the following within forty (45) days after the end of
Customers’ fiscal quarter:

	 	•	 	Covenant Compliance Certificate
	 
	 	•	 	Inventory Location Certificate

Customers must submit the following within ninety (90) days after the end of
Customers’ fiscal year, and as requested by IBM Credit from time to time:

	 	•	 	A forecast income statement, balance sheet and cash flow statement
for the next 12 months or through the current fiscal year and the
following fiscal year; and
	 
	 	•	 	business narrative that at a minimum should include an explanation on
how Customers plan to accomplish significant changes in revenue,
gross profit margin, expenses, operating profit margin and net profit.
The Customers’ business strategy, anticipated business climate, and
the headcount that will produce the projected financial results should
also be included.

SECTION 6. Documentation Requirements:

	 	•	 	Executed Amended and Restated AWF
	 
	 	•	 	Executed FPP Addendum
	 
	 	•	 	Executed Contingent Blocked Account Amendment to a Lockbox Agreement;
	 
	 	•	 	Subordination or Intercreditor Agreements from all creditors having a
lien which is superior to IBM Credit’s in any Collateral;
	 
	 	•	 	Executed Waiver of Landlord Lien for all premises in which a landlord
has the right of levy for rent;
	 
	 	•	 	Bank Statement or other evidence acceptable by IBM Credit that
demonstrates Xybernaut First & Second round $10.2M equity funding
from private placement is in place prior to IBM Credit funding;
	 
	 	•	 	ILOC Addendum
	 
	 	•	 	Any and all other documents and/or agreements IBM Credit, in its sole
discretion, deems reasonably necessary.
	 
	 	•	 	Listing of all creditors providing accounts receivable financing to
Customer;
	 
	 	•	 	Termination of release of Uniform Commercial Code filing;

SECTION 7. Additional Collateral Requirements:

Customers will cause an institution acceptable to IBM Credit to issue in favor
of IBM Credit an Irrevocable Letter of Credit (ILOC), in the amount of
$1,000,000. Such ILOC shall be in a form, and for a term, acceptable to IBM
Credit.

Page 5 of 5ex10-46

 

Exhibit 10.46

FORM OF PROMISSORY NOTE

	 	 
	$1,026,708	As of December 31, 2001

      For value received, the undersigned, EDWARD G. NEWMAN (the “Maker”),
hereby promises to pay to Xybernaut Corporation, a Delaware corporation (the
“Holder”), at the office of the Holder or at such other place as the Holder may
designate in writing, the principal sum of ONE MILLION TWENTY-SIX THOUSAND
SEVEN HUNDRED EIGHT ($1,026,708), together with interest on the unpaid
principal amount of this Note as set forth herein.

      1. Principal and Interest. The outstanding principal amount of this Note
shall be payable in full, together with accrued interest thereon on December
31, 2002 (the “Maturity Date”). Interest on the outstanding principal amount
of this Note shall accrue, in arrears, at the rate per annum equal to the six
percent (6%), calculated on the basis of a year three hundred and sixty (360)
days. Accrued interest shall be paid semi-annually and on the Maturity Date.
In lieu of paying the accrued interest in cash, at the option of the makers,
other than the amount of interest due on the maturity date or upon the
acceleration of this note, the accrued interest shall be capitalized an added
to the outstanding principal amount of this note.

      2. Prepayment. The Maker may prepay all or a portion of the outstanding
principal amount of this Note, at any time and from time to time, without
premium or penalty, be accompanied by the payment of accrued interest on the
amount of principal being paid.

      3. Security. The obligations of the Maker under this Note are secured
pursuant to the terms of a pledge agreement, dated the date hereof, between the
Maker and the Holder (the “Pledge Agreement”). Pursuant to the pledge
agreement, the maker has pledged 250,000 shares of common stock, par value
$0.01 per share of the Xybernaunt Corporation (the “Pledged Shares”), to secure
the obligations of the Maker under this Note and the Pledge Agreement.

      4. Events of Default. The occurrence at any time of any one or more of
the following events shall constitute an “Event of Default” under this Note:
(a) the Maker’s failure to pay the principal of, or interest on, this Note or
other amount payable under this Note as and when due and payable; (b) a breach
by the Maker of any of the Maker’s representations, warranties, agreements,
covenants or obligations under the Pledge Agreement; (c) the appointment of an
executor or similar official over all or substantially all of the property or
assets of the Maker; (d) the commencement of any proceeding under any provision
of the Bankruptcy Code of the United States, as now in existence or hereafter
amended, or of any other proceeding under any federal or state law, now
existing or hereafter in effect, relating to bankruptcy, reorganization,
insolvency, liquidation or otherwise, for the relief of debtors or readjustment of
indebtedness, by or against the Maker and in the case of the commencement of
involuntary proceedings, such proceedings shall not be stayed or dismissed
within thirty (30) days after the commencement thereof; (e) the Maker shall (i)
die, (ii) admit in writing the Maker’s inability to

 

pay his debts as they
become due, or (iii) make a general assignment for the benefit of the Maker’s
creditors; or (f) the termination of the Maker’s employment with the Holder,
other than a termination of the Maker’s employment with the Holder under the
Maker’s then current employment agreement “without cause” or for “good reason”
(as these terms are defined in such employment agreement) or as a result of the
Maker’s death.

      5. Effect of Default. The Maker agrees that upon the occurrence and
continuance of an Event of Default, the entire outstanding principal amount
hereof together with accrued interest thereon shall, at the option of the
Holder, be immediately due and payable without presentment, demand, protest or
notice, all of which, to the fullest extent permitted by applicable law, are
hereby expressly unconditionally and irrevocably waived by the Maker. Failure
to exercise such option shall not constitute a waiver of the right to exercise
the same during the continuance of such Event of Default or in the event of the
occurrence of any subsequent Event of Default.

      6. Transfer. This Note may not be transferred, sold, pledged,
hypothecated or assigned by the Holder nor may the Holder grant a security
interest in this Note to any of its lenders or other third parties, without
the prior written consent of the maker, which consent may be granted or
withheld by the maker in the Maker’s sole discretion.

      7. Replacement. Upon receipt of a duly executed, notarized and unsecured
written statement from the Holder with respect to the loss, theft or
destruction of this Note (or any replacement hereof), and without requiring an
indemnity bond or other security to be issued by the holder, or, in the case of
a mutilation of this Note, upon surrender and cancellation of such Note, the
Maker shall issue a new Note, of like tenor and amount, in lieu of such lost,
stolen, destroyed or mutilated Note.

      8. Enforcement Expenses. The Maker shall pay all costs and expenses
incurred by the Holder in connection with the enforcement of this Note,
including, without limitation, all reasonable attorneys’ fees and expenses.

      9. Waiver, etc. Failure by the Holder to insist upon the strict
performance by the Maker of any terms and provisions herein shall not be deemed
to be a waiver of any terms and provisions herein, and the Holder shall retain
the right thereafter to insist upon strict performance by the Maker of any and
all terms and provisions of this Note or any document securing the repayment of
this Note. Any waiver of this Note shall be in writing and executed by the
Maker. Any such waiver shall be limited to the instance and purpose for which
it is given. This Note may not be amended, modified or altered, except by an
instrument in writing executed by each of the Maker and the Holder.

      10. Limited Recourse. Notwithstanding anything to the contrary set forth
herein, this Note shall be not to be recourse to the Maker and the Holder
hereof shall only have recourse to the Pledged Shares with respect to the
payment of the principal of, and accrued interest on, this note, except upon
the failure of the Pledged Shares to satisfy such amount upon the Maturity Date
or upon the acceleration of this Note upon the occurrence of an Event of
Default.

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      11. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia (without regard to
principles of conflicts of law provisions). This Note shall not be construed
or interpreted with any presumption against the party that caused this Note to
be drafted.

      IN WITNESS WHEREOF, the undersigned has executed this Note as of the day
and year first above written.

	 	 
		____________________________________________

EDWARD G. NEWMAN

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