SERIES B-2 PREFERRED STOCK PURCHASE AGREEMENT
As of August 4, 2004
To Each of the Persons listed on Schedule 1.01 hereto
Re: Series B-2 Preferred Stock
Ladies and Gentlemen:
WARP Technology Holdings, Inc. (together with any predecessors-in-interest and
its successors and assigns, the "Company"), a Nevada corporation, located at 000
0xx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, XX 00000, agrees with each of you as follows:
ARTICLE I.
PURCHASE, SALE AND TERMS OF SECURITIES
Section 1.01. The Securities. The Company has authorized the issuance and
sale of (a) 2,000 shares (the "Series B-2 Preferred Shares") of its authorized
but unissued shares of Preferred Stock, $0.00001 par value per share (as defined
in the Certificate of Incorporation, the "Preferred Stock"), designated Series
B-2 Preferred Stock (the "Series B-2 Preferred Stock") at a purchase price of
$1,000 per share and (b) warrants to purchase an aggregate of 2,000 shares of
Series B-2 Preferred Stock (the "Warrants" and together with the Series B-2
Preferred Shares, collectively, the "Securities") to the persons (collectively,
the "Purchasers" and, individually, a "Purchaser") identified in, and in the
respective amounts set forth in, Schedule 1.01 hereto. Upon the Initial Closing,
the designation, rights, preferences and other terms and provisions of the
Series B-2 Preferred Stock are set forth in the Certificate of Incorporation as
amended by the Certificate of Designations.
Section 1.02. The Conversion Shares. The Company has authorized and has
reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of shareholders, a sufficient number of its
authorized but unissued shares of Series B-2 Preferred Stock to satisfy the
rights of the holders of the Warrants upon exercise thereof. The Company has
authorized and has reserved and covenants to continue to reserve, free of
preemptive rights and other similar contractual rights of shareholders, a
sufficient number of its authorized but unissued shares of Common Stock to
satisfy the rights of the holders of the Series B-2 Preferred Shares and the
rights of the holders of the Series B-2 Preferred Stock issuable upon exercise
of the Warrants. Any shares of Common Stock issuable upon conversion of the
Series B-2 Preferred Shares (and such shares when issued), any shares of Series
B-2 Preferred Stock issuable upon exercise of the Warrants (and such shares when
issued) and any shares of Common Stock issuable upon conversion of the shares of
Series B-2 Preferred Stock issuable upon exercise of the Warrants (and such
shares when issued) are herein referred to as the "Conversion Shares".
Section 1.03. Purchase Price and Closings. In consideration of and in
express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement (including, without limitation, the receipt of the
purchase price from each of the Purchasers), the Company agrees to issue and
sell to the Purchasers and, in consideration of and in express reliance upon the
representations, warranties, covenants, terms and conditions of this Agreement,
the Purchasers, severally but not jointly, agree to purchase, those numbers of
the Series B-2 Preferred Shares and Warrants set forth opposite their respective
names in Schedule 1.01. The aggregate purchase price of the Securities being
acquired by each Purchaser at the Initial Closing and a subsequent Closing is
set forth opposite such Purchaser's name in Schedule 1.01. The closings of the
purchase and sale of the Securities to be acquired by the Purchasers from the
Company under this Agreement (each a "Closing" and together, the "Closing")
shall take place at the offices of ISIS Capital Management, LLC 000 Xxxxxxxx
Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxx, 00000. One or more Closings shall be scheduled,
with the initial Closing at 10:00 a.m. on August 4, 2004 (the "Initial Closing
Date" or the "Initial Closing") and the final Closing no later than September 1,
2004. At each Closing, the Company will deliver an irrevocable instruction to
its transfer agent to issue to each Purchaser participating in such Closing
certificates for the number of Series B-2 Preferred Shares and will deliver to
each Purchase a Warrant to purchase the number of shares of Series B-2 Preferred
Stock set forth
opposite its name under the headings "Number of Series B-2 Preferred Shares" and
"Number of Warrants" in Schedule 1.01, registered in such Purchaser's name (or
its nominee), against delivery of a check or checks payable to the order of the
Company, or a transfer of funds to the account of the Company by wire transfer,
representing the net cash consideration set forth opposite each such Purchaser's
name on Schedule 1.01, as payment in full of the purchase price of the
Securities.
Section 1.04. Use of Proceeds. The Company shall use the cash proceeds
from the sale of the Securities solely in furtherance of the Company's business
goals under its business plan as approved by the Board of Directors, subject to
amendment and modification by the Board of Directors from time to time.
Section 1.05. Representations by and Covenants of the Purchasers.
(a) Investment Representations. Each of the Purchasers represents
severally, but not jointly, that it is its present intention to acquire the
Securities to be acquired by it for its own account and that the Securities are
being and will be acquired by it for the purpose of investment and not with a
view to distribution or resale thereof except pursuant to registration under the
Securities Act or exemption therefrom. The acquisition by each Purchaser of the
Securities acquired by it shall constitute a confirmation of this representation
by each such Purchaser. Each of the Purchasers further represents that it
understands and agrees that, until registered under the Securities Act or
transferred pursuant to the provisions of Rule 144 or Rule 144A as promulgated
by the Commission, all certificates evidencing any of the Securities, whether
upon initial issuance or upon any transfer thereof, shall bear a legend,
prominently stamped or printed thereon, reading substantially as follows:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or applicable state
securities laws. These securities have been acquired for investment
and not with a view to distribution or resale. These securities may
not be offered for sale, sold, delivered after sale, transferred,
pledged or hypothecated in the absence of an effective registration
statement covering such shares under the Act and any applicable
state securities laws, or the availability, in the opinion of
counsel, of an exemption from registration thereunder."
(b) Access to Information. Each of the Purchasers represents severally,
but not jointly, that such Purchaser or its representative during the course of
this transaction, and prior to the purchase of any Securities, has had the
opportunity to ask questions of and receive answers from management of the
Company concerning the terms and conditions of the offering of the Securities
and the additional information, documents, records and books relative to its
business, assets, financial condition, results of operations and liabilities
(contingent or otherwise) of the Company.
(c) General Access. Each of the Purchasers represents severally, but not
jointly, that such Purchaser or its representative has received and read or
reviewed, and is familiar with, this Agreement and the other agreements executed
or delivered herewith, including the terms of the Securities, and confirms that
all documents, records and books pertaining to such Purchaser's investment in
the Company and requested by such Purchaser or his representative have been made
available or delivered to him.
(d) Sophistication and Knowledge. Each of the Purchasers represents
severally, but not jointly, that such Purchaser or its representative has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the purchase of the Securities. Each
Purchaser can bear the economic risks of this investment and can afford a
complete loss of his investment.
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(e) Transfer Restrictions Imposed by Securities Laws. Each of the
Purchasers represents severally, but not jointly, that such Purchaser
understands that the Securities have not been registered under the Securities
Act and applicable state securities laws, and, therefore, cannot be resold
unless they are subsequently registered under the Securities Act and applicable
state securities laws or unless an exemption from such registration is
available. Each of the Purchasers represents severally, but not jointly, that
such Purchaser is and must be purchasing the Securities for investment for the
account of such Purchaser and not with any present view toward resale or other
distribution thereof. Each Purchaser agrees severally, but not jointly, not to
resell or otherwise dispose of all or any part of the Securities purchased by
it, except as permitted by law, including, without limitation, any regulations
under the Securities Act and applicable state securities laws; the Company does
not have any present intention and is under no obligation to register the
Securities under the Securities Act and applicable state securities laws, except
as provided in the Stockholders Agreement; and Rule 144 or Rule 144A under the
Securities Act may not be available as a basis for exemption from registration
of the Securities thereunder.
(f) Lack of Liquidity. Each of the Purchasers represents severally, but
not jointly, that such Purchaser does not have a present need for liquidity in
connection with its purchase of the Securities.
(g) Suitability and Investment Objectives. Each of the Purchasers
represents severally, but not jointly, that the purchase of the Securities by
such Purchaser is consistent with the general investment objectives of such
Purchaser. Each of the Purchasers represents severally, but not jointly, that
such Purchaser understands that the purchase of the Securities involves a high
degree of risk in view of the fact that, among other things, the Company is a
development stage enterprise, and the Company's Common Stock is subject to the
"xxxxx stock" restrictions under the regulations adopted by the Commission.
(h) Accredited Investor Status. Each of the Purchasers represents
severally, but not jointly, that such Purchaser is an "Accredited Investor" as
that term is defined in Rule 501 of Regulation D promulgated under the
Securities Act.
(i) Power and Authority. Each of the Purchasers that is a partnership,
corporation, limited liability company or trust represents severally, but not
jointly, that such Purchaser has full power and authority to execute and deliver
this Agreement and the Stockholders Agreement and to perform its respective
obligations hereunder and thereunder and has taken all action and received all
authorizations, consents and approvals necessary to execute and deliver this
Agreement and the Stockholders Agreement and to perform its respective
obligations hereunder and thereunder.
Section 1.06. Brokers or Finders. Each Purchaser severally, and not
jointly, represents that no Person has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or valid claim
against or upon the Company for any commission, fee or other compensation as a
finder or broker because of any act or omission by such Purchaser or its
respective agents (other than any agreements entered into by the Company with
any broker or finder).
Section 1.07. Participation Rights of Series B Preferred Stock. Each
Purchaser understands and agrees that the grant of "participating preferred"
rights to the shares of Series B-2 Preferred Stock was premised on the Company's
interpreting the Certificate of Designations, Rights and Preferences of the
Series B Preferred Stock (the "Series B Certificate of Designation") such that
the Series B Preferred has these same "participating preferred" rights on a pari
passu basis with the Series B-2 Preferred Stock. Each Purchaser agrees with, and
agrees not to challenge or otherwise oppose, such interpretation of the Series B
Certificate of Designation.
ARTICLE II.
CONDITIONS TO CLOSING
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The obligation of each Purchaser to purchase and pay for the Securities to
be purchased by it at the Initial Closing is subject to the following conditions
set forth in Sections 2.01 and 2.02 (all of which shall be deemed satisfied or
waived by the Purchasers at or prior to the Initial Closing, in the event that
all of the transactions contemplated to be effected at the Closing have been
consummated). The obligation of the Company to issue and sell the Securities at
the Initial Closing to the Purchasers is subject to the conditions set forth in
Section 2.03 (all of which shall be deemed satisfied or waived by the Company at
or prior to the Closing, in the event that all of the transactions contemplated
to be effected at the Closing have been consummated). By execution of this
Agreement, each Purchaser has made an unconditional and irrevocable commitment
to purchase the Shares in a subsequent Closing as listed opposite such person's
name on Schedule 1.01 hereof, except for the following two conditions: (i) the
Initial Closing shall have occurred, and (ii) no Purchaser shall have failed to
accept delivery of or make payment for the Securities to be purchased by such
Purchaser on or before such subsequent Closing, provided, however, that this
provision (ii) shall not apply if the aggregate Purchase Price received (x) in
the initial Closing and (y) from the Purchasers who have not failed to make
payment for the Securities in the final Closing shall equal or exceed
$1,500,000.
Section 2.01. Representations and Warranties. Each of the representations
and warranties set forth in Article III hereof shall be true, correct and
complete on the Initial Closing Date.
Section 2.02. Documentation at Closing. The Purchasers shall have received
prior to or at the Initial Closing, all of the following materials, each in form
and substance satisfactory to the Purchasers and their special counsel, and each
of the following events shall have occurred, or each of the following documents
shall have been delivered, prior to or simultaneous with the Closing:
(a) A certificate of the Secretary or an Assistant Secretary of the
Company, dated the Initial Closing Date, (i) attesting to all corporate and
stockholder action taken by the Company including the resolutions of the Board
of Directors authorizing (A) the approval of the Certificate of Designations,
(B) the execution, delivery and performance by the Company of this Agreement and
each Related Agreement, (C) the issuance of the Securities and (D) the
execution, delivery and performance by the Company of all other agreements or
matters contemplated hereby or executed in connection herewith, (ii) certifying
the names and true signatures of the officers of the Company authorized to sign
this Agreement, each Related Agreement, the certificates for the Series B-2
Preferred Shares and the Warrants and the other documents, instruments or
certificates to be delivered pursuant hereto and thereto, together with the true
signatures of such officers and (iii) verifying that the Certificate of
Incorporation and the restated By-laws (as attached thereto) are true, correct
and complete as of the Initial Closing Date.
(b) A certificate of the President and the Treasurer of the Company
stating that the representations and warranties of the Company contained in
Article III hereof and otherwise made by the Company in writing in connection
with the transactions contemplated hereby are true, correct and complete as of
the Initial Closing Date and that all conditions required to be performed prior
to or at the Initial Closing have been performed as of the Initial Closing.
(c) The Company shall have obtained any consents or waivers necessary to
be obtained at or prior to the Initial Closing to execute and deliver this
Agreement, each Related Agreement, the Securities and the other agreements and
instruments executed and delivered by the Company in connection herewith and
therewith and to carry out the transactions contemplated hereby and thereby,
including, without limitation, the Waiver in the form set forth in Schedule
2.02(c) (the "Waiver") which shall have been executed and delivered by the
holders of a majority of the outstanding shares of Series B Preferred Stock, and
all such consents and waivers shall be in full force and effect at the Initial
Closing. All corporate and other action and
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governmental filings necessary to effectuate the terms of this Agreement, each
Related Agreement, the Securities and the other agreements and instruments
executed and delivered by the Company in connection herewith and therewith shall
have been made or taken.
(d) No action, suit or proceeding before any arbitrator or any
governmental authority shall have been commenced and no investigation by any
governmental authority shall have been threatened against the Company, any
Subsidiary, or any of the officers or directors of the Company or such
Subsidiary seeking to restrain, prevent or change the transactions contemplated
by this Agreement or any Related Agreement or seeking damages in connection with
such transactions.
(e) The Certificate of Designations of the Company setting forth,
without limitation, the designations, preferences, powers, qualifications,
special or relative rights and privileges of the Series B-2 Preferred Stock (the
"Certificate of Designations"), in the form of Schedule 2.02(e) shall have been
filed with the Secretary of State of Nevada.
(f) The members of the Board of Directors immediately following the
Initial Closing shall consist of Xxxxxx Xxxxxxxx and Xxx Xxxxxxxx, and three
vacancies to be filled in accordance with the terms of the Stockholders
Agreement. The Board of Directors shall have taken all actions necessary to
comply with the provisions of the Stockholders Agreement.
(g) A Certificate of the Secretary of State of the State of Nevada with
respect to the Company, as to the due incorporation and good standing of the
Company, and a certificate of the Secretary of State of the State of New York,
as to the Company's qualification to do business as a foreign corporation, shall
have been provided to the Purchasers and their special counsel.
(h) Payment for the costs, attorneys' fees, consulting fees, expenses,
taxes and filing fees identified in Section 6.04.
(i) Each of the employees listed on Schedule 2.02(i) and each of the Key
Employees shall have entered into Nondisclosure, Assignment of Inventions and
Non-Solicitation Agreements in form and substance reasonably satisfactory to the
Purchasers, and each of the Key Employees shall have entered into employment
agreements and stock option agreements with the Company (on mutually acceptable
terms), and copies of all such agreements shall have been delivered to the
Purchasers and all such agreements shall be in full force and effect.
(j) Each of the Purchasers, the Company and the other parties thereto
shall have entered into a Stockholders Agreement in the form attached as
Schedule 2.02(j) hereto (the "Stockholders Agreement") and such agreement shall
be in full force and effect.
(k) No Purchaser shall have failed to execute and deliver this Agreement
or to accept delivery of or make payment for the Securities to be purchased by
such Purchaser on the Initial Closing Date.
(l) The By-laws of the Company shall have been restated in form and
substance reasonably satisfactory to the Purchasers.
(n) All proceedings taken in connection with the issuance and sale of
the Securities and all documents and papers relating thereto shall be reasonably
satisfactory in form and substance to the Purchasers. Each Purchaser shall have
received copies of such documents and papers as such Purchaser may reasonably
request in connection with this Agreement, each Related Agreement and the
Securities.
(o) The Company shall have delivered the Disclosure Letter in form and
substance satisfactory to the Purchasers, in their sole discretion.
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2.03 Conditions to the Company's Obligations to Close.
(a) Each of the representations and warranties set forth in Section 1.05
hereof shall be true, correct and complete in all material respects with respect
to each Purchaser on the Initial Closing Date.
(b) Each of the Purchasers and the parties thereto (other than the
Company) shall have entered into the Stockholders Agreement, and such agreement
shall be in full force and effect.
(c) The Purchasers shall not have failed to execute and deliver this
Agreement or to accept delivery of or make payment for the Securities to be
purchased by the Purchasers on the Initial Closing Date.
(d) The holders of a majority of the shares of Series B Preferred Stock
outstanding shall have executed and delivered the Waiver.
(e) No action, suit or proceeding before any arbitrator or any
governmental authority shall have been commenced and no investigation by any
governmental authority shall have been threatened against the Company, any
Subsidiary, or any of the officers or directors of the Company or such
Subsidiary seeking to restrain, prevent or change the transactions contemplated
by this Agreement or any Related Agreement or seeking damages in connection with
such transactions.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as of the Initial Closing Date as
follows (except as disclosed to the Purchasers in a letter separately delivered
to counsel for the Purchasers as of the date hereof (the "Disclosure Letter")):
Section 3.01. Organization and Standing. Each of the Company and the
Subsidiaries is a duly organized and validly existing corporation in good
standing under the laws of the State of Nevada, with respect to the Company, or
Delaware, with respect to the Subsidiaries, and has all requisite corporate
power and authority for the ownership and operation of its properties and for
the carrying on of its business as now conducted and as now proposed to be
conducted and to execute and deliver this Agreement and each Related Agreement,
to issue, sell and deliver the Securities and to issue and deliver the
Conversion Shares and to perform its other obligations pursuant hereto and
thereto, as the case may be. Each of the Company and the Subsidiaries is duly
licensed or qualified and in good standing as a foreign corporation authorized
to do business in all jurisdictions wherein the character of the property owned
or leased or the nature of the activities conducted by it makes such licensing
or qualification necessary, except where the failure to be so licensed or
qualified would not have a material adverse effect on the business, operations,
prospects or financial condition of the Company or such Subsidiary, taken as a
whole (a "Material Adverse Effect").
Section 3.02. Corporate Action. This Agreement, each Related Agreement and
the other agreements executed in connection herewith and therewith have been
duly authorized, executed and delivered by the Company and constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms. The Securities have been duly
authorized. The issuance, sale and delivery of the Securities and the issuance
and delivery of the Conversion Shares have been duly authorized by all required
corporation and shareholder action; the Securities have been validly issued, are
fully paid and nonassessable with no personal liability attaching to the
ownership thereof and are free and clear of all liens, charges, restrictions,
claims and encumbrances imposed by or through the Company except as set forth in
this Agreement and the Stockholders Agreement; and the Conversion Shares have,
as of the Closing, been duly reserved for issuance and, when
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so issued, will be duly authorized, validly issued, fully paid and nonassessable
with no personal liability attaching to the ownership thereof and will be free
and clear of all liens, charges, restrictions, claims and encumbrances imposed
by or through the Company except as set forth in this Agreement and the
Stockholders Agreement.
Section 3.03. Governmental Approvals. Except for the filing of any notice
prior or subsequent to the Closing that may be required under applicable state
and/or Federal securities laws (which, if required, shall be filed on a timely
basis), no authorization, consent, approval, license, exemption of or filing or
registration with any court of governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the execution and delivery by the Company of this
Agreement or any Related Agreement, for the offer, issue, sale, execution or
delivery of the Securities, or for the performance by the Company of its
obligations under this Agreement, any Related Agreement or the Securities. Each
of the Company and the Subsidiaries has all franchises, permits, licenses,
consents and other governmental or regulatory authorizations and approvals
necessary for the conduct of its business as now being conducted by it, except
where the failure to have any such permit, license, consent and other
governmental authorization or approval would not be reasonably expected to have
a Material Adverse Effect.
Section 3.04. Litigation. Except as disclosed in the Disclosure Letter,
there is no litigation or governmental proceeding or investigation pending or,
to the knowledge of the Company, threatened against the Company or any
Subsidiary affecting any of their respective properties or assets, or, to the
knowledge of the Company, against any officer, Key Employee or the holder of
more than ten percent (10%) of any class or series of the capital stock of the
Company relating to the Company or any Subsidiary or their respective business.
To the best knowledge of the Company, no event has occurred nor does there exist
any condition on the reasonable basis of which any litigation, governmental
proceeding or investigation might properly be instituted against the Company or
any Subsidiary that would reasonably be expected to have a Material Adverse
Effect. Neither the Company or any Subsidiary nor, to the best knowledge of the
Company, any officer, Key Employee or holder of more than ten percent (10%) of
any class or series of the capital stock of the Company is in default with
respect to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency, which such default might be
reasonably expected to have a Material Adverse Effect. There are no actions or
proceedings pending or, to the Company's knowledge, threatened (or any
reasonable basis therefor known to the Company) which might reasonably be
expected to result, either in any case or in the aggregate, in a Material
Adverse Effect, or which might call into question the validity of this
Agreement, any Related Agreement or any action taken or to be taken pursuant
hereto or thereto.
Section 3.05. Certain Agreements of Officers and Employees.
(a) No officer, employee or consultant of the Company or any Subsidiary
is, or is now, to the Company's knowledge, expected to be, in violation of any
term of any employment contract, patent disclosure agreement, proprietary
information agreement, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or agreement or any
restrictive covenant, relating to the right of any such officer, employee, or
consultant to be employed or engaged by the Company or such Subsidiary because
of the nature of the business conducted or to be conducted by the Company or
such Subsidiary or relating to the use of trade secrets or proprietary
information of others, and to the Company's best knowledge and belief, the
continued employment or engagement of the Company's or such Subsidiary's
officers, employees or consultants does not subject the Company, such Subsidiary
or any Purchaser to any liability with respect to any of the foregoing matters.
(b) No officer, consultant or Key Employee of the Company or any
Subsidiary whose termination, either individually or in the aggregate, could
have a material adverse effect on the Company or such Subsidiary, has terminated
since the date
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hereof, or, except as set forth in the Disclosure Letter, to the best knowledge
of the Company, has any present intention of terminating, his employment or
engagement with the Company or such Subsidiary.
Section 3.06. Compliance with Other Instruments. Each of the Company and
the Subsidiaries is in compliance in all respects with the terms and provisions
of this Agreement and of their respective certificates of incorporation or other
charter documents and By-laws, each as amended and/or restated to date, and in
all respects with the material terms and provisions of all mortgages,
indentures, leases, agreements and other instruments by which it is bound or to
which it or any of its properties or assets are subject and which have been (or
which were required to have been or which would have been, had they existed at
such time, required to have been) filed as exhibits to the Company Reports
(collectively, the "Material Contracts"). Each of the Company and the
Subsidiaries is in compliance in all material respects with all judgments,
decrees, and governmental orders (collectively, "Orders"), and all laws,
statutes, rules or regulations (collectively, "Laws") by which it is bound or to
which it or any of its properties or assets are subject. Neither the execution,
issuance and delivery of this Agreement, any Related Agreement, nor the
issuance, sale and delivery of the Securities nor the issuance and delivery of
the Conversion Shares, nor the consummation of any transaction contemplated
hereby or thereby, has constituted or resulted in or will constitute or result
in a default or violation of any term or provision of any of the Material
Contracts, Orders or Laws.
Section 3.07. Indebtedness. A schedule of Indebtedness of the Company and
the Subsidiaries as of March 31, 2004 (including lease obligations required to
be capitalized in accordance with generally accepted accounting principles) is
included in the Disclosure Letter.
Section 3.08. Title to Assets. Each of the Company and the Subsidiaries
has good and marketable title in fee to such of its fixed assets as are real
property, and good and merchantable title to all of its other assets, now
carried on its books, which assets consist of those reflected in the most recent
consolidated balance sheet of the Company included in the Financial Statements,
or acquired since the date of such balance sheet (except personal property
disposed of since said date in the ordinary course of business) free of any
mortgages, pledges, charges, liens, security interests or other encumbrances
other than (a) any such created in accordance with the terms of the leases,
security agreements and other financing documents listed in the Disclosure
Letter, (b) liens for taxes not yet due and payable, (c) liens imposed by law
and incurred in the ordinary course of business for obligations not yet due and
payable to landlords, carriers, warehousemen, materialmen and the like, and (d)
unperfected purchase money security interests existing in the ordinary course of
business without the execution of a separate security agreement.
Section 3.09. Intellectual Property.
(a) Each of the Company and the Subsidiaries owns or has a valid right
to use the Intellectual Property Rights being used to conduct its business as
now operated and as now proposed to be operated; and the conduct of its business
as now operated and as now proposed to be operated does not and will not
conflict with or infringe upon the Intellectual Property Rights of others.
Except as set forth in the Disclosure Letter, (x) neither the Company nor any
Subsidiary has knowledge of any fact which in their respective reasonable
judgment indicates a reasonable likelihood of any conflict with the asserted
Intellectual Property Rights of other Persons and (y) neither the Company's nor
any Subsidiary's business has infringed or misappropriated any Intellectual
Property Rights of other Persons and, to the best of the Company's knowledge,
the Intellectual Property Rights owned by the Company and the Subsidiaries are
not currently being infringed or misappropriated by other Persons. No expiration
of any material Intellectual Property Right used by the Company or any
Subsidiary is pending or, to the Company's knowledge, threatened. Except as set
forth in the Disclosure Letter, no claim is pending or threatened against the
Company or any Subsidiary and/or, to the knowledge of the Company, against their
respective officers,
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employees and consultants to the effect that any such Intellectual Property
Right owned or licensed by the Company or such Subsidiary, or which the Company
or such Subsidiary otherwise has the right to use, is invalid or unenforceable
by the Company or such Subsidiary.
(b) Each of the Company and the Subsidiaries has taken all reasonable
measures to protect and preserve the security, confidentiality and value of its
Intellectual Property Rights, including its trade secrets and other confidential
information. All employees and consultants of the Company and each Subsidiary
involved in the design, review, evaluation or development of products or
Intellectual Property Rights have executed a nondisclosure and assignment of
inventions agreements sufficient to protect the confidentiality and value of the
Company's or such Subsidiary's Intellectual Property Rights and to vest in the
Company or such Subsidiary exclusive ownership of such Intellectual Property
Rights. To the best knowledge of the Company, all trade secrets and other
confidential information of the Company and the Subsidiaries are presently valid
and protectable and are not part of the public domain or knowledge, nor, to the
best knowledge of the Company, have they been used, divulged or appropriated for
the benefit of any person other than the Company or the Subsidiaries or
otherwise to the detriment of the Company or the Subsidiaries. To the best of
the Company's knowledge, no employee or consultant of the Company or any
Subsidiary has used any trade secrets or other confidential information of any
other person in the course of their work for the Company or such Subsidiary.
Each of the Company and the Subsidiaries is the exclusive owner of all right,
title and interest in its Intellectual Property Rights as purported to be owned
by the Company or such Subsidiary, and such Intellectual Property Rights are
valid and in full force and effect. Neither the Company, any Subsidiary, nor any
of their respective employees or consultants has received notice of, and to the
best of the Company's knowledge after reasonable investigation, there is no
reasonable basis for a claim that the Company's or such Subsidiary's
Intellectual Property Rights or the use or ownership thereof by the Company or
such Subsidiary infringes, violates or conflicts with any such right of any
third party. No university, hospital, government agency (whether federal or
state) or other organization which sponsored research and development conducted
by the Company or any Subsidiary has any claim of right to or ownership of or
other encumbrance upon the Intellectual Property Rights of the Company or such
Subsidiary.
Section 3.10. Filings; Financial Information; Absence of Certain
Developments.
(a) The Company has made available to the Purchasers all registration
statements, prospectuses, reports and documents (including all exhibits and
amendments thereto) filed by the Company with the Commission (collectively, the
"Company Reports"). The Company Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such Company Reports
or necessary in order to make the statements in such Company Reports, in the
light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Company Reports, complied, as of their
respective dates, in all material respects with all applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, was prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved and
fairly presented, in all material respects, the consolidated financial position
of the Company and its Subsidiaries as at the respective dates and the
consolidated results of its operations and cash flows for the periods indicated,
except in the case of the unaudited interim financial statements as permitted by
Form 10-Q under the Exchange Act (and subject to the lack of footnote disclosure
and normal year-end audit adjustments).
9
(c) Except as and to the extent set forth in the audited consolidated
financial statements for the Company and its Subsidiaries for the year ended
June 30, 2003 and the related balance sheet as of June 30, 2003 and the
unaudited consolidated financial statements for the nine months ending March 31,
2004, and the related balance sheet as of March 31, 2004, including all notes
thereto (collectively, the "Financial Statements") or as set forth in the
Company Reports, neither the Company nor any Subsidiary has, and neither has
reasonable grounds to know of, any material liability, contingent or otherwise,
that would have been required to be reflected on or reserved against in a
balance sheet of the Company or in the notes thereto, prepared in accordance
with generally accepted accounting principles consistently applied, except
liabilities arising in the ordinary course of business since March 31, 2004.
(d) Except as set forth in the Disclosure Letter, since March 31, 2004,
(i) there has been no Material Adverse Effect; and (ii) neither the Company nor
any Subsidiary has entered into any material transaction other than in the
ordinary course of business, made any distribution on its capital stock, or
redeemed or repurchased any of its capital stock, except as set forth in the
Disclosure Letter.
Section 3.11. Taxes. Each of the Company and the Subsidiaries has
accurately prepared and timely filed all federal, state and other tax returns
required by law to be filed by it, has paid or made provision for the payment of
all taxes shown to be due and all additional assessments, and adequate
provisions have been made and are reflected in the Company's consolidated
financial statements for all current taxes and other charges to which the
Company and each Subsidiary is subject and which are not currently due and
payable. None of the federal income tax returns of the Company or any Subsidiary
have been audited by the Internal Revenue Service or any foreign government
authority. Neither the Company nor any Subsidiary knows of any additional
assessments, adjustments or contingent tax liability (whether federal or state)
pending or threatened for any period, nor of any basis for any such assessment,
adjustment or contingency. There have been no waivers or extensions of statutes
of limitations executed by the Company or any Subsidiary in connection with its
tax returns. Neither the Company or any Subsidiary nor, to the best of the
Company's knowledge, any of the Company's or such Subsidiary's stockholders, has
ever filed a consent pertaining to the Company or such Subsidiary pursuant to
Section 341(f) of the Internal Revenue Code of 1986, as amended, relating to
collapsible corporations. All taxes that the Company and each Subsidiary has
been required to collect or withhold (including amounts to be withheld or paid
in connection with amounts paid or owing to any employee, creditor, independent
contractor or other third party) have been duly collected or withheld and, to
the extent required when due, have been or will be duly and timely paid to the
proper taxing authority.
Section 3.12. ERISA. Neither the Company nor any Subsidiary makes any
contributions to any employee pension benefit plans for its employees which are
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Neither the Company nor any Subsidiary has ever maintained any plan
which is subject to ERISA.
Section 3.13. Investments in Other Persons. Except as set forth in the
Disclosure Letter, neither the Company nor any Subsidiary has made any loans or
advances to any Person which is outstanding on the date of this Agreement, nor
is it committed or obligated to make any such loan or advance, nor does the
Company own any capital stock, assets comprising the business of, obligations
of, or any interest in, any Person other than the Subsidiaries.
Section 3.14. Securities Act of 1933. The Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Securities hereunder. Neither the Company
nor anyone acting on its behalf has or will sell, offer to sell or solicit
offers to buy the Securities
10
so as to bring the issuance and sale of the Securities under the registration
provisions of the Securities Act and applicable state securities laws.
Section 3.15. Disclosure. Neither this Agreement, the Financial
Statements, nor any other agreement, document or certificate required to be
delivered at or before Initial Closing to any of the Purchasers or their special
counsel by or on behalf of the Company or any Subsidiary in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances in which made, not
misleading.
Section 3.16. Brokers or Finders. No Person has or will have, as a result
of the transactions contemplated by this Agreement, any right, interest or valid
claim against or upon the Company or any Subsidiary for any commission, fee or
other compensation as a finder or broker because of any act or omission by the
Company, any Subsidiary or their respective agents.
Section 3.17. Capitalization; Status of Capital Stock.
(a) As of the initial Closing, the Company will have a total authorized
capitalization consisting of (i) 500,000,000 shares of Common Stock, $0.00001
par value, and (ii) 50,000,000 shares of Preferred Stock, $0.00001 par value, of
which 18,234 shares will be designated as Series B Preferred Stock and of which
4,000 shares will be designated as Series B-2 Preferred Stock.
(b) As of the Initial Closing, 97,919,948 shares of Common Stock will be
issued and outstanding, 2915.1 shares of the Company's Series B Preferred Stock
will be issued and outstanding and, without giving effect to the transactions
contemplated hereby, no shares of Series B-2 Preferred Stock will be issued or
outstanding. A complete list of the outstanding shares of capital stock,
convertible securities, exchangeable securities, rights, options, warrants,
stock appreciation rights, subscription rights, rights to payment based on the
financial performance of the Company (including rights to payment based on the
Company's revenues or earnings) and shares of phantom stock of the Company is
set forth in the Disclosure Letter hereto. All the outstanding shares of capital
stock of the Company have been duly authorized, and are validly issued, fully
paid and non-assessable. The Securities when issued and delivered in accordance
with the terms hereof and the Conversion Shares, when issued and delivered upon
conversion thereof, will be duly authorized, validly issued, fully-paid and
non-assessable.
(c) Except as set forth in the Disclosure Letter and except for
10,689,882 shares of Common Stock that are reserved for issuance upon exercise
of outstanding stock options, 66,971,236 shares of Common Stock reserved for
issuance upon exercise of authorized stock options, 17,079,781shares of Common
Stock that are reserved for issuance upon exercise of outstanding warrants (as
further set forth in the Disclosure Letter), 58,302,000 shares of Common Stock
that are reserved for issuance upon exercise of the Series B Preferred Stock (as
further set forth in the Disclosure Letter), 3,466,800 shares of Common Stock
reserved for issuance as payment of dividends accrued to date on the Series B
Preferred Stock, 426,554 shares of Common Stock issuable upon conversion of the
outstanding preferred stock in the 6043577 Canada, Inc. Subsidiary, 2,000 shares
of Series B-2 Preferred Stock that are reserved for issuance upon exercise of
the Warrants (as further set forth in the Disclosure Letter), 40,000,000 shares
of Common Stock reserved for issuance upon conversion of the Series B-2
Preferred Stock issuable pursuant to this Agreement and 40,000,000 shares of
Common Stock reserved for issuance upon conversion of the Series B-2 Preferred
Stock issuable upon exercise of the Warrants (as further described in the
Disclosure Letter), no options, warrants, subscriptions or purchase rights of
any nature to acquire from the Company, or commitments of the Company to issue,
shares of capital stock or other securities are authorized, issued or
outstanding, nor is the Company obligated in any other manner to issue shares or
rights to acquire any of its capital stock or other securities except as
contemplated by this Agreement.
11
(d) Except as set forth in the Disclosure Letter or the Certificate of
Designations, none of the Company's outstanding securities or authorized capital
stock are subject to any rights of redemption, repurchase, rights of first
refusal, preemptive rights or other similar rights, whether contractual,
statutory or otherwise, for the benefit of the Company, any stockholder, or any
other Person, except pursuant to this Agreement or the Related Agreements.
Except as set forth in the Disclosure Letter, there are no restrictions on the
transfer of shares of capital stock of the Company other than those imposed by
relevant federal and state securities laws and as otherwise contemplated by this
Agreement and the Related Agreements. Except for the Related Agreements and as
set forth in the Disclosure Letter, the Company has no knowledge of any
agreements, understandings, trusts or other collaborative arrangements or
understandings concerning the voting or transfer of the capital stock of the
Company. The offer and sale of all capital stock and other securities of the
Company issued before the Initial Closing complied with or were exempt from all
applicable federal and state securities laws.
Section 3.18. Registration Rights. Except as set forth in the Disclosure
Letter, and except for the rights granted under the Stockholders Agreement and
the Certificate of Designations, no Person has demand, piggyback or other rights
to cause the Company or any Subsidiary to file any registration statement under
the Securities Act relating to any securities of the Company or such Subsidiary
or any right to participate in any such registration statement.
Section 3.19. Material Agreements. Except as set forth in the Disclosure
Letter, neither the Company nor any Subsidiary is a party to any Material
Contracts. Each of the Company and the Subsidiaries, and to the best of the
Company's knowledge, each other party thereto, have in all material respects
performed all the obligations required to be performed by them to date, have
received no notice of default and are not in default under any lease, agreement
or contract now in effect to which the Company or such Subsidiary is a party or
by which it or its property may be bound, the result of which could be or cause
a Material Adverse Effect. Except as set forth in the Disclosure Letter, each of
the Material Contracts is in full force and effect with no default, nor, to the
Company's knowledge, any anticipated or threatened default or failure of
performance or observance of any obligations or conditions contained therein,
and none of the foregoing parties nor the Company or any Subsidiary has provided
any notice of default or of its intention to terminate these agreements.
Section 3.20. Employees. Neither the Company nor any Subsidiary has any
collective bargaining arrangements or agreements covering any of its employees.
Section 3.21. Subsidiaries. The Disclosure Letter sets forth each
Subsidiary, showing the jurisdiction of its incorporation or organization and
showing the percentage of each Person's ownership of the outstanding shares of
capital stock or other interests of such Subsidiary. All of the outstanding
shares of capital stock of each Subsidiary have been duly authorized and validly
issued, and are fully paid and non-assessable. There are no outstanding
preemptive, conversion or other rights, options, warrants or agreements granted
or issued by or binding upon any Subsidiary for the purchase or acquisition of
any shares of capital stock of any Subsidiary or any other securities
convertible into, exchangeable for or evidencing the right to subscribe for any
shares of such capital stock. Neither the Company nor any Subsidiary is subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of capital stock of any Subsidiary or any convertible
securities, rights, options or warrants. Except as set forth herein, neither the
Company nor any Subsidiary is a party to, nor has any knowledge of, any
agreement restricting the voting or transfer of any shares of the capital stock
of any Subsidiary.
12
ARTICLE IV.
DEFINITIONS AND ACCOUNTING TERMS
Section 4.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Agreement" means this Series B-2 Preferred Stock Purchase Agreement as
from time to time amended and in effect between the parties, including all
Schedules hereto.
"Board of Directors" means the board of directors of the Company.
"Certificate of Designations" shall have the meaning assigned to that term
in Section 2.02(f).
"Certificate of Incorporation" means the Company's Certificate of
Incorporation, filed with the Secretary of State of the State of Nevada on June
22, 2000, as amended by such amendments filed with the Secretary of State of the
State of Nevada through the Closing Date, including the Certificate of
Designations.
"Closing" shall have the meaning assigned to that term in Section 1.03.
"Closing Date" shall have the meaning assigned to that term in
Section 1.03.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act or Exchange Act.
"Common Stock" includes (a) the Company's Common Stock, $0.00001 par
value, as authorized on the date of this Agreement, (b) any other capital stock
of any class or classes (however designated) of the Company authorized on or
after the date hereof, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies or in the absence of any
provision to the contrary in the Company's Certificate of Incorporation, be
entitled to vote for the election of a majority of directors of the Company
(even though the right so to vote has been suspended by the happening of such a
contingency or provision), and (c) any other securities into which or for which
any of the securities described in (a) or (b) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
"Company" shall have the meaning assigned to that term in the introductory
sentence of this Agreement.
"Company Reports" shall have the meaning assigned to that term in
Section 3.10.
"Conversion Shares" shall have the meaning assigned to that term in
Section 1.02.
"Disclosure Letter" shall have the meaning assigned to that term in
Article III.
"ERISA" shall have the meaning assigned to that term in Section 3.12.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission (or
of any other Federal agency then administering the Exchange Act) thereunder, all
as the same shall be in effect from time to time.
13
"Financial Statements" shall have the meaning assigned to that term in
Section 3.10.
"Indebtedness" means (i) any liability for borrowed money or evidenced by
a note or similar obligation given in connection with the acquisition of any
property or other assets (other than trade accounts payable incurred in the
ordinary course of business); (ii) all guaranties, endorsements and other
contingent obligations, in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's consolidated balance sheet (or
the notes thereto), except guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business, and (iii) the present value of any lease payments due under leases
required to be capitalized in accordance with applicable Statements of Financial
Accounting Standards, determined by discounting all such payments at the
interest rate determined in accordance with applicable Statements of Financial
Accounting Standards.
"Intellectual Property Rights" means, whether domestic or foreign,
patents, patent applications, patent right, trade secrets, confidential business
information, designs, concepts, drawings, know-how, data, source and object
codes, formula, processes, laboratory notebooks, algorithms, copyrights,
copyright applications, mask works, claims of infringement against third
parties, licenses, permits, license rights, assignment of inventions, work for
hire, and other intellectual property contract rights with employees,
consultants and third parties, trademarks, trademark rights, service marks,
inventions and discoveries, and other such rights generally classified as
intangible, intellectual property assets in accordance with generally accepted
accounting principles including, without limitation, any and all of the
foregoing related to SpiderCache and other Company products and the Company's
domain name (xxx.xxxxxxxxxxxxx.xxx).
"Key Employee" means and includes Xxx Xxxxxxxx and Xxxxxxx Xxxx, and,
effective upon execution of their employment agreements to be delivered at the
Initial Closing, Xxxxxx X. Xxxxxxxx, Xx. and Xxxxxx X. Xxxxxxxxx.
"Laws" shall have the meaning assigned to that term in Section 3.06.
"Material Adverse Effect" shall have the meaning assigned to that term in
Section 3.01.
"Material Contracts" shall have the meaning assigned to that term in
Section 3.06.
"Orders" shall have the meaning assigned to that term in Section 3.06.
"Person" means an individual, corporation, partnership (general or
limited), limited liability company, joint venture, trust, estate, university,
other legal entity or unincorporated organization, or a government, or any
agency or political subdivision thereof.
"Preferred Stock" shall have the meaning assigned to that term in
Section 1.01.
"Purchaser" and "Purchasers" shall have the meaning assigned to that term
in Section 1.01 of this Agreement and shall include the original Purchasers and
also any other holder of any of the Securities.
"Related Agreements" means the Certificate of Designations, the
Stockholders Agreement, and the employment agreements and stock option
agreements with Key Employees, including all amendments, modifications or
supplements to any of the foregoing.
"Securities" shall have the meaning assigned to that term in Section 1.01.
14
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission (or of
any other Federal agency then administering the Securities Act) thereunder, all
as the same shall be in effect at the time.
"Series B-2 Preferred Shares" shall have the meaning assigned to that term
in Section 1.01.
"Series B-2 Preferred Stock" shall have the meaning assigned to that term
in Section 1.01.
"Stockholders Agreement" shall have the meaning assigned to that term in
Section 2.02(k).
"Subsidiary" or "Subsidiaries" means any Person of which the Company
and/or any of its other Subsidiaries (as herein defined) directly or indirectly
owns at the time at least fifty percent (50%) of the outstanding voting shares
of every class of such corporation or trust other than directors' qualifying
shares.
"Waiver" shall have the meaning assigned to that term in Section 2.02(d).
"Warrants" shall have the meaning assigned to that term in Section 1.01.
Section 4.02. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistently applied, and all financial data submitted
pursuant to this Agreement shall be prepared in accordance with such principles.
ARTICLE V.
DISPUTE RESOLUTION; INDEMNIFICATION
Section 5.01.Jurisdiction; Remedies.
(a) Any action, suit or proceeding arising out of or relating to this
Agreement or any Related Agreement, or the breach, termination or validity
thereof, which has not been resolved by the parties involved in such dispute,
shall be litigated exclusively in the state courts of the State of New York, and
the federal courts for the Southern District of New York. Each of the parties
hereto hereby irrevocably and unconditionally (A) submits to the jurisdiction of
the New York state courts, (B) agrees not to commence any action, suit or other
proceeding except in such courts, (C) waives, and agrees not to plead or to
make, any objection to the venue of any action, dispute or proceeding brought in
the New York state courts, (D) waives, and agrees not to plead or to make any
claim that any action, suit or other proceeding brought in the New York state
courts has been brought in an improper or otherwise inconvenient forum, (E)
waives, and agrees not to plead or to make, any claim that the New York state
courts lacks personal jurisdiction over it, (F) waives its right to remove any
action, suit or other proceeding to the federal courts except where such courts
are vested with sole and exclusive jurisdiction by statute, and in such event,
then only to the federal district court for the Southern District of New York
and (G) understands and agrees that it shall not seek a jury trial or punitive
damages in any action, suit or other proceeding based upon or arising out of or
otherwise related to this Agreement or any Related Agreement or the breach,
termination or validity thereof, and waives any and all rights to any such jury
trial or to seek punitive damages.
(b) Neither party shall be precluded hereby from securing equitable
remedies in courts of any jurisdiction, including, but not limited to, temporary
restraining orders and preliminary injunctions to protect its rights and
interests but shall not be sought as a means to avoid or stay any action, suit
or proceeding in the New York state or federal courts, as applicable.
15
(c) Each party is required to continue to perform its obligations under
this Agreement and each Related Agreement pending final resolution of any
dispute arising out of or relating to this Agreement and/or any Related
Agreement, unless to do so would be impossible or impracticable under the
circumstances.
Section 5.02. Indemnification. The Company agrees to indemnify and save
harmless the Purchasers (and their respective directors, officers,
representatives, agents, affiliates, successors and assigns) from and against
any and all losses, liabilities, obligations, actions, judgments, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred by the Purchasers as a
result of any material inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein or in any of the Related
Agreements.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. No Waiver; Cumulative Remedies. No failure or delay on the
part of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
Section 6.02. Amendments, Waivers and Consents. Any provision in the
Agreement to the contrary notwithstanding, and except as hereinafter provided,
changes in, termination or amendments of or additions to this Agreement may be
made, and compliance with any covenant or provision set forth herein may be
omitted or waived, if the Company (i) shall obtain consent thereto in writing
from the holder or holders of at least a majority of the shares of Series B-2
Preferred Stock purchased hereunder or issued upon exercise of the Warrants and
(ii) shall deliver copies of such consent in writing to any holders who did not
execute such consent. Any waiver or consent may be given subject to satisfaction
of conditions stated therein and any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Notwithstanding anything to the contrary contained herein (x) no amendment,
consent or waiver shall be effective to reduce the percentage in interest of the
shares of Series B-2 Preferred Stock the consent of the holders of which is
required under this Section 6.02, and (y) any amendment, consent or waiver shall
not discriminate against any particular Purchaser or Purchasers.
Section 6.03. Addresses for Notices. All notices, requests, demands and
other communications provided for hereunder shall be in writing (including
telegraphic and facsimile communications with confirmation of receipt) and
mailed, telegraphed or delivered to each applicable party at the address set
forth in Schedule 1.01 hereto or at such other address as to which such party
may inform the other parties in writing in compliance with the terms of this
Section.
If to any other holder of the Securities: at such holder's address for
notice as set forth in the register maintained by the Company, or, as to each of
the foregoing, at the addresses set forth in Schedule 1.01 hereto or at such
other address as shall be designated by such Person in a written notice to the
other parties complying as to delivery with the terms of this Section.
If to the Company: at the address set forth on page 1 hereof, or at such
other address as shall be designated by the Company in a written notice to the
other parties complying as to delivery with the terms of this Section.
All such notices, requests, demands and other communications shall, when
mailed (which mailing must be accomplished by first class mail, postage prepaid;
electronic
16
facsimile transmission; express overnight courier service; or registered or
certified mail, return receipt requested) or telegraphed, and shall be
considered to be delivered three (3) days after dispatch or upon receipt.
Section 6.04. Costs, Expenses and Taxes. As a condition precedent to the
Initial Closing, the Company agrees to pay at the Initial Closing in connection
with the preparation, execution and delivery of this Agreement and the issuance
of the Securities at the Initial Closing, the reasonable fees and other
out-of-pocket expenses of the Purchasers, including, without limitation, the
reasonable fees and expenses of special counsel for the Purchasers, reasonable
technical due diligence review fees and other reasonable due diligence fees and
expenses of the Purchasers, and the reasonable fees and expenses of the
Purchasers' accountants. In addition, the Company shall pay the reasonable fees
and out-of-pocket expenses of legal counsel, independent public accountants,
consultants and other outside experts retained by the Purchasers in connection
with any amendment or waiver to this Agreement (initiated by the Company) or the
successful enforcement of this Agreement by the Purchasers. In addition, the
Company shall pay any and all stamp, or other similar taxes payable or
determined to be payable in connection with the execution and delivery of this
Agreement, the issuance of the Securities and the other instruments and
documents to be delivered hereunder or thereunder, and agrees to save the
Purchasers harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes.
Section 6.05. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the Company and the Purchasers and their
respective heirs, successors and assigns, except that neither the Company nor
the Purchasers shall have the right to delegate its obligations hereunder or to
assign its rights hereunder or any interest herein without, in the case of the
Company, the prior written consent of the holders of at least a majority of the
shares of Series B-2 Preferred Stock purchased hereunder or issued upon exercise
of the Warrants, or, in the case of a Purchaser, the prior written consent of
the Company. Notwithstanding the foregoing, in the event a Purchaser transfers
its shares of Series B-2 Preferred Stock, Warrants, or any Conversion Shares to
a third party in compliance with the terms of the Stockholders Agreement, such
Purchaser may assign its rights and delegate its obligations to such
transferee(s) and such transferee(s) agree to be bound by the terms hereof, then
no prior written consent of the Company shall be required.
Section 6.06. Survival of Representations and Warranties. All
representations and warranties made in this Agreement, any Related Agreement,
the Securities, or any other instrument or document delivered in connection
herewith or therewith, shall survive the execution and delivery hereof or
thereof for a period ending forty-five (45) days after the filing of the
Company's audited financial statements for the fiscal year ending June 30, 2005.
Section 6.07. Prior Agreements. This Agreement, the terms of the
Securities, the Related Agreements and the other agreements executed and
delivered herewith constitute the entire agreement between the parties and
supersedes any prior understandings or agreements concerning the subject matter
hereof, including, without limitation, the Letter of Intent dated March 27, 2004
and the Letter of Intent dated June 10, 2004, each of which were made by and
between the Company and ISIS Capital Management, LLC and the Purchasers.
Section 6.08. Severability. The provisions of this Agreement are severable
and, in the event that any court of competent jurisdiction shall determine that
any one or more of the provisions or part of a provision contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision or part of a provision of this Agreement, but this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of a provision, had never been contained herein, and such
provisions or part reformed so that it would be valid, legal and enforceable to
the maximum extent possible.
17
Section 6.09. Confidentiality. Each Purchaser agrees that it will keep
confidential and will not disclose, divulge or use any confidential, proprietary
or secret information which such Purchaser may obtain from the Company pursuant
to financial statements, reports and other materials submitted by the Company to
such Purchaser pursuant to this Agreement, or pursuant to visitation or
inspection rights granted hereunder, or otherwise, unless such information is
known, or until such information becomes known, to the public other than as a
result of a breach of this obligation by such Purchaser; provided, however, that
a Purchaser may disclose such information (a) on a confidential basis to its
attorneys, accountants, consultants and other professionals to the extent
necessary to obtain their services in connection with its investment in the
Company, (b) to any prospective purchaser of any Securities or Conversion Shares
from such Purchaser as long as such prospective purchaser agrees in writing to
be bound by the provisions of this Section 6.09, (c) to any affiliate or partner
of such Purchaser, subject to these confidentiality restrictions, and (d) as
required by applicable law.
Section 6.10. Public Announcements. Neither the Company or any Subsidiary
nor any Purchaser shall use any Purchaser's name or refer to any Purchaser
directly or indirectly in connection with such Purchaser's relationship with the
Company, such Subsidiary or any other Purchaser in any advertisement, news
release or professional or trade publication, or in any other manner, unless
otherwise required by law or with such Purchaser's prior written consent.
Section 6.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York, and
without giving effect to choice of laws provisions.
Section 6.12. Headings. Article, section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 6.13. Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 6.14. Further Assurances. From and after the date of this
Agreement, upon the request of any Purchaser or the Company, the Company and the
Purchasers shall execute and deliver such instruments, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement and the
Securities.
Section 6.15. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES,
AND COVENANTS THAT HE OR IT WILL NOT ASSERT WHETHER AS PLAINTIFF, DEFENDANT, OR
OTHERWISE, ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR
BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. ANY
OF THE PARTIES HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
6.15 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH OF THE PARTIES
HERETO TO THE WAIVER OF HIS OR ITS RIGHT TO TRIAL BY JURY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed as of the date first above written.
WARP TECHNOLOGY HOLDINGS, INC.
By: /s/ Xxx Xxxxxxxx
-----------------------------
Name: Xxx Xxxxxxxx
Title: CEO
ISIS Acquisition Partners II, LLC
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Duly Authorized
OXA Trade & Finance, Inc.
By: /s/ Xxx X. Xxxxx
-----------------------------
Name: Xxx X. Xxxxx
Title: Investment Manager
/s/ Xxxxxxxxx Xxxxxxxx
---------------------------------
Xxxxxxxxx Xxxxxxxx
/s/ Xx. Xxxxxx X. Xxxxxx
---------------------------------
Xx. Xxxxxx X. Xxxxxx
Xxxxx Family Trust
By: /s/ Xxxxx Xxxxx
-----------------------------
Name: Xxxxx Xxxxx
Title: Trustee
/s/ Xxxxxx Xxxxx
---------------------------------
Xxxxxx Xxxxx
/s/ Xxxxxxx X. Xxxxx
---------------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxxxxx Xxxxxx
---------------------------------
Xxxxxxx Xxxxxx
RBW, Inc.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------
Name: Xxxxxx X. Xxxxx
Title: President
/s/ Xxxx Xxxxx
---------------------------------
Xxxx Xxxxx
/s/ Mirco Teta
---------------------------------
Mirco Teta
SCHEDULE 1.01
NUMBER OF NUMBER OF NUMBER OF
DOLLAR DOLLAR NUMBER OF SHARES OF WARRANT WARRANT
INVESTMENT INVESTMENT SHARES OF B-2 SHARES SHARES
INITIAL SUBSEQUENT B-2 INITIAL SUBSEQUENT INITIAL SUBSEQUENT
PURCHASER CLOSING CLOSING CLOSING CLOSING CLOSING CLOSING
--------- ---------- ---------- ----------- ----------- --------- -----------
ISIS Acquisition
Partners II LLC $ 250,000 $ 500,000 250 500 250 500
OXA Trade & Finance, Inc. $ 100,000 100 100
Xxxxxxxxx Xxxxxxxx $ 10,000 10 10
Xxxxxx Xxxxxx $ 50,000 50 50
Xxxxx Family Trust $ 20,000 20 20
Xxxxxx Xxxxx $ 10,000 10 10
Xxxxxxx X. Xxxxx $ 15,000 15 15
Xxxxxxx Xxxxxx $ 15,000 15 15
RBW, Inc. $ 30,000 30 30
Xxxx Xxxxx $ 250,000 250 250
Mirco Teta $ 350,000 350 350
---------- ---------- --- ----- --- -----
TOTAL $ 500,000 $1,100,000 500 1,100 500 1,100
========== ========== === ===== === =====
SCHEDULE 2.02(c) - Form of Waiver
WAIVER OF RIGHT OF BOARD REPRESENTATION OF HOLDERS OF
SERIES B 10% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF WARP TECHNOLOGY HOLDINGS, INC.
In connection with the sale and issuance of shares of Series B-2 Preferred Stock
and warrants to purchase shares of Series B-2 Preferred Stock of WARP Technology
Holdings, Inc., a Nevada corporation (the "Company"), pursuant to that certain
Series B-2 Preferred Stock Purchase Agreement to be entered into by and between
the Company and the purchasers identified therein (the "Purchasers") (the
"Financing") and in order to induce the Purchasers to consummate the Financing,
the undersigned holder of shares of the Company's Series B 10% Cumulative
Convertible Preferred Stock hereby forever waives and releases any and all
rights to designate or appoint persons for election to, or to serve as members
of, the Company's Board of Directors.
Date of Execution: __________________
_________________________________
(Print Name of Stockholder)
_________________________________
(Signature)
_________________________________
(Title, if entity)
SCHEDULE 2.02(e) - Form of the Certificate of Designations
SCHEDULE 2.02(i)
Xxxxxxx Xxxxxx
Xxxx Xxxxxx
Key Employees
SCHEDULE 2.02(j) - Form of Stockholders Agreement
