Retention Agreement - Xybernaut Corporation and James J. Ralabate
JAMES J. RALABATE, ESQ.
LAW OFFICES OF JAMES J. RALABATE
5792 Main Street
Williamsville, NY 14221
As of August 1, 2003
Xybernaut Corporation
12701 Fair Lakes Circle, Suite 550
Fairfax, VA 22033
Re: Retention Agreement
Ladies and Gentlemen:
This retention agreement shall set forth the understanding and
agreement between the Law Offices of James J. Ralabate (the "Firm") and
Xybernaut Corporation, a Delaware corporation (together with its subsidiaries,
collectively the "Company"), with respect to the engagement of the Firm by the
Company as more fully described herein.
ENGAGEMENT
The Company hereby engages the Firm for the purpose of advising the
Company in connection with patent, trademark, tradename and other intellectual
property matters including with regard to joint ventures involving intellectual
property as well as licensing matters. In the event that in the future the
Company wishes to engage the Firm for another purpose, the Firm will confirm
that purpose by a separate retention agreement to be signed by the Company and
the Firm.
The Company should expect high quality, responsive legal representation
from the Firm. If the Company has any experience that does not meet its
expectations, the Company will let the Firm know immediately so that the Firm
can address the problem.
The Firm will have no obligation to provide legal services to the
Company, until the Firm receives a fully executed copy of this Agreement.
The Firm shall, if requested by the Company, provide the services of
James J. Ralabate, Esq., on a full-time basis (if not less than 40 hours per
week) in connection with the performance
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Xybernaut Corporation
As of January 1, 2004
Page 2
of the Firm's services to the Company as contemplated hereby. The Firm shall
also supply the services of its other employees (lawyers, paralegals and
non-lawyers), as may be necessary to furnish the services to the Company
contemplated hereby.
This retention agreement shall cover the period from August 1, 2003
through July 31, 2004 (the "Term"). During the Term, the Firm agrees not to
agree to provide legal services to any other client without the prior written
consent of the Company.
DISCLAIMER OF GUARANTEE
As you know, it is impossible to predict the result or success of any
engagement. Nothing in this retention agreement and nothing in any attorney's
statement to the Company will be construed as a promise or guarantee about the
outcome of the matter. The Firm makes no such promises or guarantees.
BILLING AND FEES
As full compensation for the services to be provided to the Company by
the Firm, the Company shall pay the Firm a monthly retainer fee, which shall be
payable in cash, at the rate of $30,000 per month. The monthly retainer fee will
be payable in arrears at the end of each month and shall be payable regardless
of the amount of time expended by professionals and others employed by the Firm
during the month.
In addition, in consideration of all of the services to be provided by
the Firm for all of the Term, the Company shall issue to the Firm 50,000 shares
(the "Shares") of the Company's common stock, par value $0.01 per share ("Common
Stock"). The Shares will be restricted and will bear an appropriate legend. The
firm acknowledges and agrees that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Act"), or under any applicable state
securities laws and may not be sold, transferred, assigned, pledged or
hypothecated nor may a lien or security interest be granted therein, without a
registration statement with respect to the Shares in effect or pursuant to an
exemption from registration under the Act, as determined by the Company's
corporate counsel.
The Company intends to register the Shares for resale on a registration
statement issued on Form S-3 (or any other appropriate registration form) at
such time as the Company considers it to be reasonable to do so, taking into
account, among other things, the rights of the other shareholders whose shares
of Common Stock are included in such registration statement, as well as the
impact of the price of the Company's Common Stock that the registration of the
Shares might have.
In order to induce the Company to issue the Shares to the Firm, the
Firm hereby represents and warrants to the Company as follows: (i) the Firm is
acquiring the Shares for its
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Xybernaut Corporation
As of January 1, 2004
Page 3
own account and for investment purposes only and not with any intention to
dispose, transfer or assign the shares, directly or indirectly; (ii) the
principal and sole owner of the Firm, James J. Ralabate, Esq., is an "accredited
investor", as that term is defined in Regulation D promulgated under the Act;
(iii) the Firm acknowledges that an investment in the Shares is speculative and
involves a high degree of risk and the Firm can bear an entire loss of its
investment in the Shares; (iv) the Shares have not been registered under the Act
or under any applicable state securities laws and may never be so registered;
(v) no governmental agency or regulatory body (including, without limitation,
the Securities and Exchange Commission) has passed upon or approved the issuance
of the Shares; and (vi) the Firm has not relied upon any representation or
warranty by the Company or anyone on its behalf (including, without limitation,
the Company's directors, officers, employees or corporate counsel) in deciding
to acquire the Shares.
For tax purposes, the Company will issue to the Firm on a Form(s) 1099
or other such IRS approved form(s) for the Shares based upon a value of $0.75
per share of Common Stock, such price being equal to the closing price of the
Common Stock on the day preceding the beginning of the Term.
The Firm will charge the Company for expenses reasonably incurred in
connection with the Company's matter for services performed in-house, such as
photocopying, long distance telephone calls, computer research and special
deliveries. In accordance with the Firm's normal billing procedures, we will
submit invoices to the Company on a monthly basis which will include a detailed
statement of services rendered and expenses incurred.
The Company has the right to terminate, in writing, the Firm's
representation at any time. In the event of termination of this engagement by
either party, all fees and expenses incurred on the Company's behalf, whether
billed or unbilled, shall (to the extent not already billed, due and payable) be
immediately become payable.
INFORMATION FROM THE COMPANY
The Firm will not be responsible for independently verifying the truth
and accuracy of information supplied by or on behalf of the Company to the Firm
in all material respects. The Company's delivery of such information to the Firm
constitutes a warranty of its accuracy and completeness in all material
respects. In addition, the Company understands that the Firm will be relying on
the Company to review for correctness all applications and other communications
drafted by the Firm that will or could be submitted to regulatory authorities or
be reviewed by examiners or other third parties.
E-MAIL COMMUNICATIONS
The Company recognizes that technology is ever-evolving and that
electronic communications cannot be fully protected from unauthorized
interception. In addition, human
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Xybernaut Corporation
As of January 1, 2004
Page 4
error may at times result in electronic communications being missent.
Nonetheless, for efficiency purposes, the Company authorizes the Firm and its
attorneys and staff to transmit information, including information of a
confidential nature, to and communicate with the Company, other authorized
recipients and each other by telecopy, cell phone, e-mail, internet and other
wired and wireless forms of communication.
COMPANY FILES AND DOCUMENT RETENTION
The Company's papers and property will be returned to the Company
promptly upon written request. The Firm's files pertaining to the matter,
including lawyer work product, will be retained by the Firm. The Firm's files
include, for example, its administrative records, time and expense reports,
personnel and staffing materials, and credit and accounting records and internal
lawyers' work product such as drafts, notes, internal memoranda, and legal and
factual research, including investigative reports, prepared by or for the
internal use of lawyers. For various reasons, including the minimization of
unnecessary storage expenses, the Firm reserves the right to destroy or
otherwise dispose of any such documents or other materials retained by the Firm
within a reasonable time after the termination of the engagement.
CONFLICTS OF INTEREST
As of the date of this letter, the Firm has conducted a search of its
other Company relationships in order to determine whether this representation
would create a conflict of interest in connection with any other
attorney-Company relationships of the Firm. Notwithstanding that fact, issues
involving the legal affairs, while not perceived to be present now, could arise
such that the interests of the Firm and the Company may become adverse at a
future date. In the event this occurs, the Firm could not represent the Company
in a matter adverse to another Firm Company, and the Company would be required
to retain new counsel to represent its interests in such matter. In such event,
the Firm will spend sufficient time with replacement counsel to educate them in
relation to the status of the engagement, to the extent of the Firm's
involvement, at no cost or expense to the Company.
DISPUTE RESOLUTION BY BINDING ARBITRATION
Please be advised that in the event of a fee dispute, you may seek to
resolve the dispute by arbitration under Rule 137 of the New York State Fee
Dispute Resolution Program, under such circumstances where that procedure
applies.
GOVERNING LAW; COMPLETE AGREEMENT
This retention agreement, and the relationship between the Company and
the Firm (including any dispute), shall be governed by and construed in
accordance with the laws of the
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Xybernaut Corporation
As of January 1, 2004
Page 5
State of New York, without regard to its conflicts of law principles which would
result in the application of the laws of another jurisdiction.
This retention agreement may not be modified, amended, altered or
supplemented except by a written agreement executed by the parties hereto. This
retention agreement contains the entire agreement and understanding of the
parties hereto with respect to the subject matter of this retention agreement
and supersedes all prior and/or contemporaneous agreements and understandings of
any kind and nature (whether written or oral) between the parties with respect
to such subject matter, all of which are merged herein.
Please execute and return the original of this retention agreement
indicating the Company's acceptance and agreement with these terms and
conditions of the Firm's engagement.
If you have any questions concerning any aspect of this retention
agreement or our employment, please contact me at your earliest convenience.
Yours very truly,
LAW OFFICES OF JAMES J. RALABATE
By: /s/ James J. Ralabate
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Name: James J. Ralabate, Esq.
Shareholder/Partner
ACCEPTED AND AGREED TO
as of January 1, 2004
Xybernaut Corporation
By: /s/ Edward G. Newman
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Name: Edward G. Newman
Title: Chief Executive Officer and
Chairman of the Board of Directors