21 Jul 2005 18:20 ET DJ Xybernaut Faces Purported Holder Derivative Lawsuit
WASHINGTON (Dow Jones)--Xybernaut Corp. (XYBR, XYBRE), which has warned of a severe liquidity crisis and possible insolvency, said Thursday the company and some of its officials face a purported shareholder derivative lawsuit.
In a filing with the Securities and Exchange Commission, the maker of "wearable" computers said the suit, filed June 19, alleges that defendants breached their fiduciary duties and abused their ability to control and influence the company.
The SEC filing didn't say in which court the suit was filed.
The lawsuit "specifically alleges that Edward G. Newman, the company's former chairman of the board and chief executive officer, breached his fiduciary duties for insider selling and for the misappropriation of non-public information," according to the regulatory filing.
Xybernaut said the company and all of its current directors and certain of its former officers and directors were named in the suit.
The company said it can't predict the outcome of the purported derivative action or estimate the possible effects on Xybernaut's financial condition or operations results.
In shareholder derivative lawsuits, a shareholder brings suit on behalf of the company to redress alleged breaches of duty to the company and to its shareholders.
Earlier this month, Xybernaut said that it had been working to secure financing for a potential bankruptcy filing, but the lender it was negotiating with decided not to commit to a deal. The company didn't give further details.
Last week, the company disclosed that Chief Financial Officer Bruce C. Hayden resigned from the company, but it didn't say why.
In May, Xybernaut retained an adviser to make suggestions on cost reductions, restructuring and "other alternatives to attempt to maximize shareholder value" because of its cash problems.
Later in May, the company's shares were delisted from the Nasdaq Stock Market.
-By Bhattiprolu Murti, Dow Jones Newswires; 202-862-1357
(END) Dow Jones Newswires
July 21, 2005 18:20 ET (22:20 GMT)
Copyright (c) 2005 Dow Jones & Company, Inc.
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