EXHIBIT 10.37
INVESTORS' AGREEMENT
This Investors' Agreement (this "Agreement") is entered into this ___ day
of January, 2005 by and among WARP Technology Holdings, Inc., a Nevada
corporation (the "Company"), and the persons listed on Exhibit A hereto (the
"Investors").
RECITALS
1. The Company and certain of the Investors have entered into certain
subscription agreements (collectively, the "Subscription Agreements") for the
purchase and sale of certain Series C Convertible Notes, in an aggregate
principal amount of up to $14,000,000 (the "Notes"), which are convertible,
automatically upon the occurrence of certain events, into (i) an aggregate of up
to 14,000,000 shares (the "Series C Shares") of the Company's Series C Preferred
Stock, par value $.00001 per share (the "Series C Stock"), and (ii) warrants to
acquire up to an aggregate of up to 14,000,000 shares of the Company's common
stock, par value $.00001 per share (the "Common Stock"), all on the terms and
conditions set forth herein and in such other documents referenced in that
certain Confidential Private Offering Memorandum dated as of January 15, 2005
(as amended and completed, the "Memorandum").
2. The Company and certain of the Investors have entered in to a Senior
Note and Warrant Purchase Agreement (the "Senior Note Agreement") and the
Company and certain of the Investors have entered into a Senior Subordinated
Note and Warrant Purchase Agreement (the "Mezz Note Agreement"). The notes
issues pursuant to the Senior Note Agreement and the Mezz Note Agreement are
referred to collectively as the "Other Notes".
3. The warrants described in Recital 1 and the warrants issued pursuant to
the Senior Note Agreement (both the Initial Warrants and the Additional
Warrants, as defined in such Senior Note Agreement) and the Mezz Note Agreement
are collectively referred to herein as the "Warrants". All capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the
Subscription Agreements or the Certificate of Designations, Preferences and
Rights of the Series C Stock (the "Certificate of Designations").
4. A condition to each Investor's obligations under the Subscription
Agreements, the Senior Note Agreement and the Mezz Note Agreement, as
applicable, is that the parties hereto enter into this Agreement in order to
provide the Investors with certain rights to register the Conversion Shares.
AGREEMENT
The parties hereby agree as follows:
1. Definitions. For purposes of this Agreement (terms defined in the
singular shall apply to the plural form and vice-versa):
1.1 The terms "register," "registered," and "registration" refer to
a registration effected by preparing and filing a Registration Statement or
similar document in compliance with
the Securities Act of 1933, as amended (the "Act"), and the declaration or
ordering of effectiveness of such Registration Statement or document by the SEC;
1.2 The term "Conversion Shares" means (i) the shares of Common
Stock issuable on conversion of the shares of Series C Stock, on exercise of the
Warrants and on conversion of certain of the notes issued pursuant to the Mezz
Note Agreement (but not the Gupta Note, as defined therein), and (ii) any other
shares of Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, such shares. Notwithstanding the foregoing, Common Stock or
other securities shall only be treated as Conversion Shares if and so long as
they have not (A) been sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, or (B) been sold in a
transaction exempt from the registration and prospectus delivery requirements of
the Act under Section 4(1) thereof so that all transfer restrictions, and
restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale or (C) with regard to any individual Investor, become
eligible for sale pursuant to Rule 144(k).
2. Registration Rights for Conversion Shares.
2.1 Registration of Conversion Shares. The Company shall, within
forty-five (45) days after the closing (the "Closing") of the sale of the Notes
and the transactions described in the Senior Note Agreement and the Mezz Note
Agreement, complete all required audits and make all related filings concerning
the acquisition of Gupta Technologies, LLC ("Gupta"). Within fifteen (15) days
after the end of the 45-day period referred to in the preceding sentence (the
"Filing Deadline"), the Company shall file a registration statement on Form SB-2
or an equally suitable registration statement (the "Registration Statement") for
the purpose of registering all of the Conversion Shares for resale. The Company
shall use its best efforts to cause such Registration Statement to be declared
effective by the Securities and Exchange Commission (the "SEC") at the earliest
practicable date thereafter. If (i) the Registration Statement has not been
filed with the SEC by the Filing Deadline or (ii) the Registration Statement has
not been declared effective by the SEC before the date that is ninety (90) days
after the Filing Deadline or, in the event of a review of the Registration
Statement by the SEC, one hundred and twenty (120) days after the Filing
Deadline (the "Effectiveness Deadline") or (iii) after the Registration
Statement is declared effective, the Registration Statement or related
prospectus ceases for any reason to be available to the Investors as to all
Conversion Shares the offer and sale of which it is required to cover at any
time prior to the expiration of the Effectiveness Period (as defined below)
(whether due to the Registration Statement ceasing for any reason to be
effective or because use of the prospectus has been suspended for any reason,
including, without limitation, pursuant to Section 3(j) hereof) for an aggregate
of more than twenty (20) consecutive trading days or an aggregate of forty (40)
trading days (which need not be consecutive) in any twelve (12) month period,
the Company will pay to the Investors an amount in cash equal to 2% of the
Series C Face Amount of the Series C Preferred Stock and 2% of the face value of
the Other Notes. If the Registration Statement has not been filed or declared
effective before the date that is thirty (30) days after the Filing Deadline or
the Effectiveness Deadline, as applicable, or continues to be unavailable to the
Investors for longer than the periods described above, the Company will pay to
each Investor an additional amount equal to 2% of the Series C Face Amount of
the Series C Preferred Stock and/or 2% of the face value of
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the Other Notes held by such Investor, and will continue to pay such 2% monthly
penalties every thirty days until such Registration Statement is filed, declared
effective and available to the Investors. All such payments will be treated as
liquidated damages, and shall be the sole and exclusive remedy for delay in
having the Registration Statement filed, declared effective and remain available
to Investors throughout the Effectiveness Period. The Company will use its best
efforts to keep the Registration Statement effective (the "Effectiveness
Period") (subject to reasonable blackout provisions as may be required in order
to comply with the securities laws) until the earlier of: (i) twenty four (24)
months after the date that the Registration Statement is declared effective by
the SEC; (ii) the date when all of the Conversion Shares covered by the
Registration Statement are sold; or (iii) the date when Rule 144(k) is available
with respect to all of the securities covered by such Registration Statement. It
is agreed and understood that the Company shall, from time to time, be obligated
to file an additional Registration Statement (or an amendment to the
Registration Statement) to cover any Conversion Shares which are not registered
for resale pursuant to a pre-existing Registration Statement.
2.2 Representations of Investors. Each Investor hereby represents to
and covenants with the Company that, during the period in which any Registration
Statement effected pursuant to Section 2 remains effective, such Investor will:
(a) not engage in any stabilization activity in connection
with any of the Company's securities;
(b) cause to be furnished to any purchaser of the Conversion
Shares and to the broker-dealer, if any, through whom Conversion Shares may be
offered, a copy of the final prospectus relating to such Registration Statement;
and
(c) not bid for or purchase any securities of the Company or
any rights to acquire the Company's securities, or attempt to induce any person
to purchase any of the Company's securities or any rights to acquire the
Company's securities, in each case, other than as permitted under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
2.3 Information for Use in Registration Statement. Each Investor
covenants to the Company that such Investor will complete the information
requested by the Selling Investor's Questionnaire attached as Exhibit B hereto
(the "Questionnaire"), and further covenants to the Company that all information
provided by such Investor in the Questionnaire will be true, accurate and
complete as of the date provided. Each Investor understands that the written
information in the Questionnaire and all written representations made in this
Agreement are being provided to the Company specifically for use in, or in
connection with, the Registration Statement and the prospectus contained
therein, and has executed this Agreement with such knowledge.
2.4 Investors' Piggy-Back Registrations. If at any time after the
Filing Deadline and prior to the expiration of the Effectiveness Period there is
not an effective Registration Statement covering all of the Conversion Shares
and the Company shall determine to prepare and file, or has filed, with the SEC
a registration statement relating to an offering for its own account or the
account of others under the Act of any of its equity securities, other than (i)
on Form S-4 or Form S-8 (each as promulgated under the Act) or their then
equivalents
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relating to equity securities to be issued solely in connection with an
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans or (ii) on Form S-3
(as promulgated under the Act) or its then equivalent relating to equity
securities to be issued solely in connection with a dividend reinvestment plan,
then the Company shall send to each Investor written notice of such
determination and, if within fifteen (15) days after receipt of such notice, any
such Investor shall so request in writing, the Company shall include in such
registration statement all or any part of such Conversion Shares such Investor
requests to be registered, subject to customary underwriter cutbacks applicable
to all holders of registration rights.
3. Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Not less than five (5) trading days prior to the filing of a
Registration Statement or any related prospectus or any amendment or supplement
thereto, furnish to the Investors copies of all such documents proposed to be
filed which documents (other than those incorporated by reference) will be
subject to the review of such Investors. The Company shall not file a
Registration Statement or any such prospectus or any amendments or supplements
thereto to which the Investors holding a majority of the Conversion Shares shall
reasonably object in writing in good faith unless and until the Company shall
have reasonably responded to the written comments of such Investors, including,
without limitation, by making such changes to such Registration Statement or any
related prospectus or any amendment thereto as are necessary to reasonably
address such objection.
(b) (i) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement and the prospectus
used in connection therewith as may be necessary to (x) keep such Registration
Statement continuously effective for the Effectiveness Period, and (y) include
any Conversion Shares held by any person who becomes a successor or assign of an
Investor (a "Successor Holder"); such amendment shall be filed promptly after
notice of transfer by an Investor to such Successor Holder has been provided to
the Company (provided, that if the inclusion of Conversion Shares held by a
Successor Holder may be accomplished by a prospectus supplement, the Company
may, in lieu of filing an amendment to the Registration Statement, promptly
prepare and file pursuant to Rule 424 such prospectus supplement); (ii) cause
the related prospectus to be amended or supplemented by any required prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible, and in any event within ten
trading days, to any comments received from the SEC with respect to each
Registration Statement or any amendment thereto and, as promptly as reasonably
possible provide to the Investors true and complete copies of all correspondence
from and to the SEC relating to such Registration Statement that pertains to the
Investors as selling stockholders but not any comments that would result in the
disclosure to the Investors of material and non-public information concerning
the Company; (iv) prepare and file with the SEC such additional Registration
Statements as may be required in order to register for resale under the Act all
of the Conversion Shares; and (v) comply in all material respects with the
provisions of the Act and the Exchange Act with respect to each Registration
Statement and the disposition of all Conversion Shares covered by each
Registration Statement.
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(c) Notify the Investors in writing no later than two trading days
following the day (i)(A) when the SEC notifies the Company whether there will be
a "review" of such Registration Statement and whenever the SEC comments in
writing on such Registration Statement (the Company shall provide to each of the
Investors true and complete copies thereof and all written responses thereto
that pertain to the Investors as selling stockholders or to the Plan of
Distribution, but not information which the Company reasonably believes would
constitute material and non-public information); and (B) with respect to each
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the SEC or any other federal or state
governmental authority for amendments or supplements to a Registration Statement
or prospectus or for additional information that pertains to the Investors as
selling stockholders or the Plan of Distribution; (iii) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration Statement
covering any or all of the Conversion Shares or the initiation of any
proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Conversion Shares for sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose; and (v)
subject to Section 3(j), of the occurrence of any event or passage of time that
makes the financial statements included in a Registration Statement ineligible
for inclusion therein or any statement made in such Registration Statement or
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, prospectus or other documents so that, in the case of
such Registration Statement or the prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, to obtain the withdrawal of (i) any order suspending the effectiveness
of a Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Conversion Shares for sale in any
jurisdiction, at the earliest practicable moment.
(e) Furnish to each Investor, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto and all exhibits
to the extent requested by such Investor (including those previously furnished
or incorporated by reference) promptly after the filing of such documents with
the SEC.
(f) Promptly deliver to each Investor, without charge, as many
copies of each prospectus or prospectuses and each amendment or supplement
thereto as such Investor may reasonably request. The Company hereby consents to
the use of such prospectus and each amendment or supplement thereto by each of
the Investors in connection with the offering and sale of the Conversion Shares
covered by such prospectus and any amendment or supplement thereto.
(g) Prior to any public offering of Conversion Shares, use its
reasonable best efforts to register or qualify or cooperate with the Investors
in connection with the registration or qualification (or exemption from such
registration or qualification) of such Conversion Shares
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for offer and sale under the securities or Blue Sky laws of those jurisdictions
within the United States identified by each Investor to keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Conversion
Shares covered by the Registration Statements; provided, that the Company shall
not be required to qualify generally to do business or file a general consent to
service of process in any jurisdiction where it is not then so qualified or
subject the Company to any material tax in any such jurisdiction where it is not
then so subject .
(h) Cooperate with the Investors to facilitate the timely
preparation and delivery of certificates representing Conversion Shares to be
delivered to a purchaser pursuant to the Registration Statements, which
certificates shall be free of all restrictive legends, and to enable such
Conversion Shares to be in such denominations and registered in such names as
any such Investors may request.
(i) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the affected Registration Statement or
a supplement to the related prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, no Registration Statement nor any prospectus will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(j) The Company may require each selling Investor to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Investor and any affiliate thereof and as to any
other information for such Investor which the SEC requires to be disclosed in
any Registration Statements. For not more than twenty (20) consecutive days or
for a total of not more than forty (40) days in any twelve (12) month period,
the Company may suspend the use of any prospectus included in any Registration
Statement in connection with any of the events described in Section 3(c)(ii)-(v)
(an "Allowed Delay"); provided, that the Company shall promptly (a) notify the
Investors in writing of the existence of (but in no event, without the prior
written consent of an Investor, shall the Company disclose to such Investor any
of the facts or circumstances regarding) material non-public information giving
rise to an Allowed Delay, (b) advise the Investors in writing to cease all sales
under the Registration Statement until the end of the Allowed Delay and (c) use
reasonable efforts to terminate an Allowed Delay as promptly as practicable. The
periods set forth in Section 2.1 shall not be tolled during any Allowed Delay.
(k) Comply with all applicable rules and regulations of the SEC.
4. Registration Expenses. All fees and expenses incident to the Company's
performance of its obligation under this Agreement (excluding any underwriting
discounts and selling commissions and all legal fees and expenses of legal
counsel for any Investor, other than one counsel designated by the Investors of
no less than a majority of the Conversion Shares then outstanding, whose fees
and expenses shall be borne by the Company up to an aggregate amount of $50,000)
shall be borne by the Company whether or not any Conversion Shares are sold
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pursuant to a Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) payable to the
SEC in connection with the filing of a Registration Statement, (B) with respect
to filings required to be made with the trading market on which the Common Stock
is then listed for trading, and (C) in compliance with applicable state
securities or Blue Sky laws), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Conversion Shares and of
printing prospectuses if the printing of prospectuses is reasonably requested by
the holders of a majority of the Conversion Shares included in the Registration
Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company, (v) Act liability insurance, if the
Company so desires such insurance, and (vi) fees and expenses of all other
persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection with the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual or other audit
or review of its financial statements and the fees and expenses incurred in
connection with the listing of the Conversion Shares on any securities exchange
as required hereunder.
5. Indemnification.
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Investor, the officers, directors, agents, investment advisors, partners,
members, shareholders and employees of each of them, each person who controls
any such Investor (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) and the officers, directors, agents and employees of each such
controlling person, to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable costs of preparation and reasonable attorneys'
fees) and expenses (collectively, "Losses"), as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, any prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent (1) that such
untrue statements or omissions are based solely upon information regarding such
Investor furnished in writing to the Company by such Investor expressly for use
therein, or to the extent that such information relates to such Investor or such
Investor's proposed method of distribution of Conversion Shares and was reviewed
and expressly approved in writing by such Investor expressly for use in the
Registration Statement (it being understood that each Investor has approved the
Plan of Distribution attached hereto as Annex A for this purpose), such
prospectus or in any amendment or supplement thereto, (2) arising from any offer
or sale of Conversion Shares during a period in which the Company has suspended
use of the prospectus pursuant to Section 3(c)(ii)-(v) and of which suspension
such Investor has been provided notice by the Company prior to such offer or
sale, or (3) if such Investor fails to deliver, within the time required by the
Act, a prospectus that is amended or supplemented, to the extent, but only to
the extent, that such prospectus, as amended or supplemented, would have
corrected the untrue statement or omission or alleged
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untrue statement or omission of a material fact giving rise to such Loss
contained in the prospectus delivered by such Investor, so long as the
prospectus, as amended or supplemented, has been delivered to such Investor by
the Company reasonably prior to such time. The Company shall notify the
Investors promptly of the institution, threat or assertion of any proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement.
(b) Indemnification by Investors. Each Investor shall,
notwithstanding any termination of this Agreement, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and
employees, each person who controls the Company (within the meaning of Section
15 of the Act and Section 20 of the Exchange Act), and the directors, officers,
agents or employees of such controlling persons, to the fullest extent permitted
by applicable law, from and against all Losses, as incurred, arising solely out
of or based solely upon: any untrue statement of a material fact contained in
any Registration Statement, any prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent (1) that such
untrue statements or omissions are based solely upon information regarding such
Investor furnished in writing to the Company by such Investor expressly for use
therein, or to the extent that such information relates to such Investor or such
Investor's proposed method of distribution of Conversion Shares and was reviewed
and expressly approved in writing by such Investor expressly for use in the
Registration Statement (it being understood that each Investor has approved the
Plan of Distribution attached hereto as Annex A for this purpose), such
prospectus or in any amendment or supplement thereto, (2) arising from any offer
or sale of Conversion Shares during a period in which the Company has suspended
use of the prospectus pursuant to Section 3(c)(ii)-(v) and of which suspension
such Investor has been provided notice by the Company prior to such offer or
sale, or (3) if such Investor fails to deliver, within the time required by the
Act, a prospectus that is amended or supplemented, to the extent, but solely to
the extent, that such prospectus, as amended or supplemented, would have
corrected the untrue statement or omission or alleged untrue statement or
omission of a material fact giving rise to such Loss contained in the prospectus
delivered by such Investor, so long as the prospectus, as amended or
supplemented, has been delivered to such Investor by the Company reasonably
prior to such time. In no event shall the liability of any selling Investor
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Investor upon the sale of the Conversion Shares giving rise to
such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any proceeding shall
be brought or asserted against any person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with the defense thereof; provided,
that the failure of any Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.
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An Indemnified Party shall have the right to employ separate counsel
in any such proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (2) the Indemnifying Party shall have failed promptly to
assume the defense of such proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such proceeding; or (3) the named
parties to any such proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and such Indemnified Party
shall have been advised by counsel that a conflict of interest is likely to
exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party), provided, that the Indemnifying Party shall not be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all Indemnified Parties. The
Indemnifying Party shall not be liable for any settlement of any such proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending proceeding in respect of
which any Indemnified Party is or could have been a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such proceeding.
All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or defending such proceeding) shall be paid to the Indemnified
Party, as incurred, within ten trading days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the
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immediately preceding paragraph. Notwithstanding the provisions of this Section
5(d), no Investor shall be required to contribute, in the aggregate, any amount
in excess of the amount by which the proceeds actually received by such Investor
from the sale of the Conversion Shares subject to the proceeding exceeds the
amount of any damages that such Investor has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Shares. The term "Shares" as used herein shall mean shares of Series C
Stock and the shares of Common Stock issued upon the conversion of the Series C
Stock or upon the exercise of the Warrants. Nothing contained herein shall be
construed as to restrict the ability of an Investor to sell, transfer or
otherwise dispose of any Shares owned by such Investor.
7. Transferability.
7.1 In General. Nothing herein shall limit the right of an Investor
to sell, convey or transfer any of his Shares. The Shares may be disposed of
only pursuant to an effective registration statement under the Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Act, and in compliance with any
applicable state securities laws. In connection with any transfer of the Shares
other than pursuant to an effective registration statement, to the Company, to
an affiliate of an Investor or in connection with a pledge as contemplated
below, the Company may require the transferor thereof to provide to the Company
an opinion of counsel selected by the transferor and acceptable to the Company
(such acceptance not to be unreasonably withheld), the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Shares
under the Act. The Company acknowledges and agrees that an Investor may from
time to time pledge, and/or grant a security interest in some or all of the
Shares, in accordance with applicable securities laws, pursuant to a bona fide
margin agreement in connection with a bona fide margin account and, if required
under the terms of such agreement or account, such Investor may transfer pledged
or secured Shares to the pledgees or secured parties. Such a pledge or transfer
would not be subject to approval or consent of the Company and no legal opinion
of legal counsel to the pledgee, secured party or pledgor shall be required in
connection with the pledge, but such legal opinion may be required in connection
with a subsequent transfer, following default by the Investor, to the transferee
of the pledge. No notice shall be required of such pledge. The Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Shares may reasonably request in connection with a pledge or transfer of the
Shares including, without limitation, the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Act or other applicable
provision of the Act to appropriately amend the list of selling stockholders
thereunder.
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7.2 Legend. Certificates evidencing the Shares will contain the
following legend, so long as is required by this Section 7 and applicable law:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH
SECURITIES.
7.3 Removal of Legend. Certificates evidencing the Shares shall not
contain any legend (including, without limitation, the legend set forth in
Section 7.2: (i) while a registration statement (including, without limitation,
the Registration Statement) covering the resale of such Shares is effective
under the Act or (ii) following any sale of such Shares pursuant to Rule 144, or
(iii) while such Shares are eligible for sale under Rule 144(k), or (iv) if such
legend is not required under applicable requirements of the Act (including,
without limitation, judicial interpretations and pronouncements issued by the
Staff of the SEC). The Company shall use its best efforts to cause its counsel
to issue any legal opinion or instruction required by the Company's transfer
agent to comply with the requirements set forth in this Section. At such time as
a legend is no longer required for the Shares under this Section 7.3, the
Company will, no later than five trading days following the delivery by an
Investor to the Company or the Company's transfer agent of a certificate
representing Shares containing a restrictive legend, deliver or cause to be
delivered to such Investor a certificate representing such Shares that is free
from all restrictive and other legends. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section except as it may
reasonably determine, upon written advice of counsel, are necessary to comply or
to ensure compliance with applicable laws; provided, however, that at such time
as such notation or enlarged restrictions are no longer necessary to comply or
to ensure compliance with applicable laws, the Company shall take such actions
as are necessary to immediately eliminate such notation or enlarged
restrictions.
8. Governing Law. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of New York,
without giving effect to principles of conflicts of law.
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9. Successors and Assigns. No party may assign its rights or obligations
under this Agreement, except with the prior written consent of the other party,
provided that an Investor may assign its rights and its obligations without
consent to the extent such Investor transfers Shares in accordance with the
terms hereof. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their permitted successors and assigns.
10. Entire Agreement; Amendment; Termination. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subject matter hereof and
thereof and supersede all prior agreements and understandings among the parties
relating to the subject matter hereof. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the Company and a majority in interest of the Investors and
the Company.
11. Notices. Unless otherwise provided herein, any notice required or
permitted by this Agreement shall be in writing and shall be deemed duly given
upon delivery, when delivered personally or by overnight courier and addressed
to the party to be notified at such party's address as set forth on the
signature page hereto, or as subsequently modified by written notice. In the
event that any date provided for in this Agreement falls on a Saturday, Sunday
or legal holiday, such date shall be deemed extended to the next business day.
12. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
13. Captions and Headings. The captions and headings used herein are for
convenience and ease of reference only and are not intended to be a part of or
to affect the meaning or interpretation of this Agreement.
14. Waiver of Jury Trial. THE COMPANY AND EACH OF THE INVESTORS HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
RELATING TO OR ARISING OUT OF THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY.
14. Counterparts. This Agreement may be executed in counterparts, and each
such counterpart shall be deemed an original for all purposes.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized representatives as of the date first
written above.
COMPANY:
WARP TECHNOLOGY HOLDINGS, INC.
By: ________________________________________
Name: __________________________________
Title: _________________________________
INVESTORS:
PRINT LEGAL NAME: __________________________
By: ________________________________________
Name: __________________________________
Title: _________________________________
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EXHIBIT A
LIST OF INVESTORS
SUBSCRIPTION AGREEMENTS
NAME OF INVESTOR
Crestview Capital Master, LLC
ISIS Capital Management, LLC
Carmignac Portfolio A/C Carmignac Infotech
Carmignac Gestion A/C Carmignac Technologies
SEB Asset Management
Gupta Holdings, LLC
TCMP(3) Partners
Xxxxxx Xxxxxx
SENIOR NOTE AGREEMENT
NAME OF INVESTOR
Crestview Capital Master, LLC
DCOFI Master LDC
Asset Managers International Ltd.
Gupta Holdings, LLC
B/T Investors, a General Partnership
Xxxxxxx Crossover Fund
MEZZ NOTE AGREEMENT
NAME OF INVESTOR
Crestview Capital Master, LLC
DCOFI Master LDC
ANNEX A
PLAN OF DISTRIBUTION
The selling stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of common stock or
interests in shares of common stock received after the date of this prospectus
from a selling stockholder as a gift, pledge, partnership distribution or other
transfer, may, from time to time, sell, transfer or otherwise dispose of any or
all of their shares of common stock or interests in shares of common stock on
any stock exchange, market or trading facility on which the shares are traded or
in private transactions. These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at
negotiated prices.
The selling stockholders may use any one or more of the following methods
when disposing of shares or interests therein:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent, but may position and resell a portion of the block as principal to
facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- short sales;
- through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
- broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling stockholders may, from time to time, pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock, from
time to time, under this prospectus, or under an amendment to this
prospectus under Rule 424(b)(3) or other applicable provision of the Securities
Act amending the list of selling stockholders to include the pledgee, transferee
or other successors in interest as selling stockholders under this prospectus.
The selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of our common stock or interests therein, the
selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling stockholders from the sale of the
common stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any. Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering. Upon
any exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.
The selling stockholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act of
1933, provided that they meet the criteria and conform to the requirements of
that rule.
The selling stockholders and any underwriters, broker-dealers or agents
that participate in the sale of the common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling stockholders who are "underwriters" within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act.
To the extent required, the shares of our common stock to be sold, the
names of the selling stockholders, the respective purchase prices and public
offering prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable,
the common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states the common stock may
not be sold unless it has been registered or
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qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.
We have advised the selling stockholders that the anti-manipulation rules
of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling stockholders and their affiliates.
In addition, we will make copies of this prospectus (as it may be supplemented
or amended from time to time) available to the selling stockholders for the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The selling stockholders may indemnify any broker-dealer that participates
in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We have agreed to indemnify the selling stockholders against liabilities,
including liabilities under the Securities Act and state securities laws,
relating to the registration of the shares offered by this prospectus.
We have agreed with the selling stockholders to keep the registration
statement of which this prospectus constitutes a part effective until the
earlier of (1) 24 months after the registration statement is declared effective
by the Securities and Exchange Commission, (2) the date when all of the shares
covered by this prospectus have been disposed of pursuant to and in accordance
with the registration statement or (3) the date on which all of the shares
covered by this prospectus may be sold pursuant to Rule 144(k) of the Securities
Act.
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EXHIBIT B
WARP TECHNOLOGY HOLDINGS, INC.
SELLING INVESTOR'S QUESTIONNAIRE AND COVENANT
[TO BE COMPLETED AND EXECUTED PRIOR TO THE FILING OF THE
REGISTRATION STATEMENT.]
In connection with the WARP Technology Holdings, Inc. (the "Company")
Registration on Form SB-2 (the "Registration Statement")to be filed on or about
______________, 2005 with the Securities and Exchange Commission (the "SEC")
registering certain shares (the "Shares") of the Company's Common Stock that are
issuable on (i) conversion of the outstanding shares of Series C Preferred Stock
and (ii) exercise of certain Warrants to purchase shares of Common Stock, the
undersigned represents, warrants and covenants as follows:
1. As of the date hereof, the undersigned beneficially owns the number of
shares of the Company's Common Stock set forth opposite his, her or its name on
Exhibit A attached hereto.
2. The persons listed on Exhibit A represent all of the individuals who
exercise voting or dispositive power over the Shares to be included pursuant to
the Registration Statement.
3. The undersigned hereby represents that it understands that, pursuant to
Interpretation A.65 in the SEC Division of Corporation Finance, Manual of
Publicly Available Telephone Interpretations dated July 1997, a copy of which is
attached as Exhibit B hereto, the undersigned may not make any short sale of the
Shares prior to the effectiveness of the Registration Statement.
4. The undersigned has not had a material relationship with the Company or
any of its predecessors or affiliates within the last three years.
The term "material relationship" has not been defined by the SEC. However,
the SEC has indicated that it will probably construe as a "material
relationship" any relationship which tends to prevent arms length bargaining in
dealings with a company, whether arising from a close business connection or
family relationship, a relationship of control or otherwise. It seems prudent,
therefore, to consider that the undersigned would have such a relationship, for
example, with any organization of which the undersigned is an officer, director,
trustee or partner or in which the undersigned owns, directly or indirectly, 10%
or more of the outstanding voting stock, or in which the undersigned has some
other substantial interest, and with any person or organization with whom the
undersigned has, or with whom any relative or spouse (or any other person or
organization as to which the undersigned has any of the foregoing other
relationships) has, a contractual relationship.
Exceptions:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
5. The undersigned hereby covenants to the Company that, during the period
in which the Registration Statement is effective, the undersigned will:
(a) not engage in any stabilization activity in connection with any
of the Company's securities;
(b) cause to be furnished to any purchaser of the Shares and to the
broker-dealer, if any, through which the Shares may be offered, a copy of the
final prospectus contained in the Registration Statement;
(c) not bid for or purchase any securities of the Company or any
rights to acquire the Company's securities, or attempt to induce any person to
purchase any of the Company's securities or any rights to acquire the Company's
securities other than as permitted under the Securities Exchange Act of 1934;
(d) not effect any sale or distribution of the Shares until after
the prospectus has been appropriately amended or supplemented, if required; and
(e) effect all sales, distributions or gifts of shares in accordance
with the plan of distribution described in the section of the Registration
Statement entitled "Plan of Distribution," a draft of which has been provided as
Annex A to the Investors' Agreement.
6. The undersigned acknowledges that the information set forth in this
questionnaire will be used by the Company in connection with the registration of
the Shares, and is true, accurate and complete.
IN WITNESS WHEREOF, the undersigned declares that the above
information is true, accurate and complete.
NAME OF INVESTOR:
_________________________________
(PRINT OR TYPE)
Dated: ____________________ By:______________________________
(signature)
Name:____________________________
Title:___________________________
(if applicable)
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EXHIBIT A
1. Shares of WARP Technology Holdings, Inc. stock beneficially owned as of
the date hereof (please complete):
Shares of Series C Preferred Stock:_________________________________.
Shares of Common Stock issuable on conversion of the Series C Preferred Stock:
_______________________________.
Shares of Common Stock issuable on exercise of all Warrants:__________________ .
Other WARP Technology shares held:____________________________________________ .
Other warrants or options to purchase shares of WARP Technology stock that are
exercisable within 60 days after the estimated filing date: ___________________.
2. If the shares are held by an entity, you must list the natural person who
holds sole voting and dispositive power over the shares held (or if more
than one natural person shares voting and dispositive power, you must list
all of the natural persons who share voting and dispositive power over the
shares). So, for example, a disclosure may read as follows:
"The shares held on behalf of [selling Investor] are managed by its
managing member, XYZ Corp., LLC. The [officers][managing directors] of XYZ
Corp., LLC, who share voting and dispositive power over the shares, are
Xxxx Xxxxx and Xxxxx Xxxxx."
Name of natural person(s) with voting and dispositive power over the
shares:
________________________________
________________________________
________________________________
The undersigned agrees with the information set forth on this Exhibit A
and acknowledges that such information will be used in connection with the
registration of the shares.
Name of Selling Investor:
Print Name: _____________________
By (signature): _________________
Title: __________________________
Date: ___________________________
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EXHIBIT B
Interpretation A.65 from the Securities and Exchange Commission, Division of
Corporation Finance, Manual of Publicly Available Telephone Interpretations
dated July 1997:
"An issuer filed a Form S-3 registration statement for a secondary
offering of common stock which is not yet effective. One of the
selling shareholders wanted to do a short sale of common stock
"against the box" and cover the short sale with registered shares
after the effective date. The issuer was advised that the short sale
could not be made before the registration statement becomes
effective, because the shares underlying the short sale are deemed
to be sold at the time such sale is made. There would, therefore, be
a violation of Section 5 if the shares were effectively sold prior
to the effective date."
