STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement") is entered into this 4th
day of August, 2004 by and among WARP Technology Holdings, Inc., a Nevada
corporation (the "Company"), the Persons listed on Exhibit A hereto (the "New
Investors"), the Persons listed on Exhibit B hereto (the "Participating
Investors" and together with the New Investors, the "Investors"), Xxxxxx X.
Xxxxxxxx, Xx. ("Xxxxxxxx") and Xxx Xxxxxxxx ("Xxxxxxxx" and together with the
Investors, and Xxxxxxxx, the "Stockholders").
RECITALS
1. The Company and the Investors have entered into a Series B-2
Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
herewith pursuant to which the Company has agreed to sell to the Investors and
the Investors have agreed to purchase from the Company shares of the Company's
Series B-2 Preferred Stock (the "Series B-2 Preferred Shares") and warrants (the
"Warrants") to purchase shares of the Company's Series B-2 Preferred Stock.
2. Pursuant to the Certificate of Designations, the Investors have
certain rights to elect directors of the Company.
3. All capitalized terms not otherwise defined herein shall have the
meanings ascribed in the Purchase Agreement.
4. A condition to each Investor's obligations under the Purchase
Agreement is that the parties hereto enter into this Agreement in order to
provide the Investors with certain rights to register the Conversion Shares (as
defined below) and to agree to vote their shares of the Company's voting stock
in favor of certain designees to the Company's Board of Directors. The Company
and the Investors each desire to induce the Investors to purchase the Series B-2
Preferred Shares and the Warrants pursuant to the Purchase Agreement by agreeing
to the terms and conditions set forth herein.
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 B-2 Preferred
Stock sold pursuant to the Purchase Agreement and on conversion of the shares of
Series B-2 Preferred Stock issuable on exercise of the Warrants, 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.
2. REGISTRATION RIGHTS FOR CONVERSION SHARES.
2.1 REGISTRATION OF CONVERSION SHARES. Upon receipt of a
written request for registration delivered by the Investors holding a majority
of the outstanding shares of Series B-2 Stock, the Company, within thirty (30)
days after the date designated by the Investors in such written request
(provided that such date is no fewer than ninety (90) days after the final
Closing under the Purchase Agreement), 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, and
certain other shares issued by the Company for resale, and shall use its best
efforts to cause such registration statement to be declared effective by the
Securities and Exchange Commission (the "SEC") as soon as possible thereafter.
If the Registration Statement has not been declared effective by the SEC before
the date that is ninety (90) days after the date that the Registration Statement
was required to be filed, (the "Effectiveness Deadline"), the Company will issue
to each of the Investors a warrant to purchase shares of Common Stock in an
amount equal to 2% of the number of Conversion Shares then held by such Investor
(and including, for this purposes, the Conversion Shares underlying the shares
of Series B-2 Stock then held by such Investor) (a "Monthly Penalty Warrant"),
as set forth on Exhibit C hereto. If the Registration Statement has not been
declared effective before the date that is thirty (30) days after the
Effectiveness Deadline, the Company will issue to each Investor an additional
Monthly Penalty Warrant, and provided further that the Company will issue an
additional Monthly Penalty Warrant to each Investor on the date that is sixty
(60) days after the Effectiveness Deadline, and every thirtieth day thereafter,
if the Registration Statement has not been declared effective before such
monthly anniversary of the Effectiveness Deadline, provided however that the
total number of shares issuable pursuant to the Monthly Penalty Warrants issued
to an Investor shall not exceed 12% of such Investor's Conversion Shares. The
per share exercise price for the shares of Common Stock underlying the Monthly
Penalty Warrants shall be $0.05 per share. The Company will use its best
efforts to keep the Registration Statement effective (subject to reasonable
blackout provisions as may be required in order to comply with the securities
laws) until the earlier of: (i) 12 months after the date that the Registration
Statement is declared effective by the SEC; (ii) the date when all of the
Registrable Securities covered by the Registration Statement are sold; or (iii)
the date when Rule 144 is available with respect to all of the securities
covered by such 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 and 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 D 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, and has executed this Agreement with such knowledge.
3. BOARD OF DIRECTORS.
3.1 COMPOSITION OF THE BOARD OF DIRECTORS. For the period
set forth in Section 3.2(d) below, the number of directors comprising the entire
Board of Directors shall be fixed at five (5) members, to be qualified, elected,
removed and replaced as set forth herein; provided, however, that such number
may be increased by resolution of the Board of Directors to a number greater
than five (5) to the extent as may be required to provide for such number of
independent directors as required by applicable SEC rules and regulations or the
rules and regulations of any stock market or exchange on which the Company's
Common Stock is traded.
3.2 NEW INVESTOR DESIGNEES AND PARTICIPATING INVESTOR
DESIGNEES:
(a) NEW INVESTOR DESIGNEES. For so long as the New
Investors beneficially own, in the aggregate, at least 375 of the total of the
shares (the "New Investor Shares") of Series B-2 Preferred Stock that the New
Investors purchase under the Purchase Agreement or the number of shares of
Common Stock issued upon conversion of such 375 shares of B-2 Preferred Stock
(excluding any shares of Series B-2 Preferred Stock received upon exercise of
the Warrants and subject to adjustment in the event of any stock split, stock
dividend or the like), the New Investors holding a majority of the New Investor
Shares then held by all the New Investors shall have the right, voting as a
separate class and series, to elect two members of the Board of Directors (each
a "New Investor Designee" and together, the "New Investor Designees"), to remove
any and all New Investor Designees, and to fill any vacancy on the Board of
Directors in the event of the resignation, death or removal of any New Investor
Designee from the Board of Directors; provided, that one of the New Investor
Designees shall be Xxxxxxxx or, in the
event that Xxxxxxxx is unable or unwilling to serve or continue to serve as a
director, an individual designated by Xxxxxxxx. For so long as Xxxxxxxx is
serving as a director, Xxxxxxxx shall be Chairman of the Board of Directors,
unless he elects to designate, subject to the approval of a majority of the
Board of Directors (including Xxxxxxxx) another director to serve as Chairman;
provided, however, that in the event that this Section 3.2(a) is no longer in
effect, the position of Chairman shall be filled pursuant to the Certificate of
Incorporation and the Bylaws.
(b) PARTICIPATING INVESTOR DESIGNEES. For so long as
the Participating Investors beneficially own, in the aggregate, at least 375 of
the shares (the "Participating Investor Shares") of Series B-2 Preferred Stock
that the Participating Investors purchase under the Purchase Agreement or the
shares of Common Stock issued upon conversion of such 375 shares of B-2
Preferred Stock (excluding any shares of Series B-2 Preferred Stock received
upon exercise of the Warrants and subject to adjustment in the event of any
stock split, stock dividend or the like)), the Participating Investors holding a
majority of the Participating Investor Shares then held by all the Participating
Investors, voting as a separate class and series, shall have right to elect two
members of the Board of Directors (each a "Participating Investor Designee" and
together the "Participating Investor Designees"), to remove any and all
Participating Investor Designees, and to fill any vacancy on the Board of
Directors in the event of the resignation, death or removal of any Participating
Investor Designee from the Board of Directors; provided that, for so long as
Bottazzi serves as an officer of the Company, one of the Participating Investor
Designees shall be Bottazzi.
(c) SERIES B-2 DESIGNEES. In the event that either (i)
the New Investors no longer beneficially own, in the aggregate, at least the
minimum number of the New Investor Shares set forth in Section 3.2(a), or (ii)
the Participating Investors no longer beneficially own, in the aggregate, at
least the minimum number of the Participating Investor Shares set forth in
Section 3.2(b), then a second Independent Director (as defined below) shall be
elected pursuant to Section 3.3, and the holders of the Series B-2 Preferred
Stock, voting as a separate class, shall have the right to elect one (1)
director of the Company (the "Series B-2 Designee"), provided, however, that (x)
if (ii) above is applicable, then for so long as Bottazzi is serving as an
officer of the Company, he shall be the Series B-2 Designee and (y) if (i) above
is applicable, then for so long as Xxxxxxxx is serving as an officer of the
Company he shall be the Series B-2 Designee; provided, further, that in the
event that Xxxxxxxx or Bottazi as applicable is not then serving as an officer
of the Company, the Series B-2 holders shall not have the right to elect one (1)
director, and, in place of thereof, a third Independent Director shall be
elected pursuant to Section 3.3
(d) TERM OF SPECIAL ELECTION RIGHTS. The special
director election rights under Section 4.3 of the Certificate of Designations
and this Agreement shall be in effect until neither (i) the New Investors
beneficially own, in the aggregate, at least the minimum number of the New
Investor Shares as set forth in Section 3.2(a), nor (ii) the Participating
Investors beneficially own, in the aggregate, at least the minimum number of the
Participating Investor Shares as set forth in Section 3.2(b).
3.3 INDEPENDENT DIRECTOR. During the period set forth in
Section 3.2(d), the Board of Directors (or a nominating committee thereof
delegated such responsibility) shall nominate a candidate for election to
fill the one (1) directorship not elected pursuant to Sections 3.2(a) and
3.2(b), and, in the event that Section 3.2(c) is applicable, the Board of
Directors shall nominate candidates to fill the second, and, if applicable,
third, directorship(s) made available by such Section. In all such cases, such
candidates are to be designated by unanimous agreement of the other directors
and elected by all of the Company's stockholders entitled to vote for the
election of directors (as so elected, each an "Independent Director" and,
together, the "Independent Directors"). In the event that an Independent
Director shall resign, die or be removed as a director for any reason, the
vacancy resulting thereby shall be filled by the Board of Directors by
nomination of a candidate pursuant to this Section 3.3 and by election by the
stockholders as provided in the Certificate of Incorporation and Bylaws.
Notwithstanding any provision hereof to the contrary, during the period set
forth in Section 3.2(d), no Independent Director shall be an Affiliate of any of
the Investors, and the directors elected pursuant to Section 3.2(a), 3.2(b)
and/or 3.2(c) shall not vote to remove any Independent Director without cause,
except if required under their fiduciary obligations.
3.4 CHANGES IN THE ELECTION OF DIRECTORS. After the
expiration of the period set forth in Section 3.2(d), the directors shall be
elected by all of the Company's stockholders entitled to vote for the election
of directors, with any vacancies filled by the Board of Directors and the
stockholders, all as provided in the Certificate of Incorporation and Bylaws.
3.5 VOTING OF SHARES. During the term of this Agreement,
each Stockholder covenants and agrees, for so long as such Stockholder shall be
the owner of any Shares (as defined below), to vote (which term shall include
taking action without a meeting by written consent) such number of Shares that
may be voted by such Stockholder in favor of, and to take such other reasonable
actions in such Stockholder's capacity as a stockholder of the Company as may be
permitted to cause and maintain, the election and reelection as a director of
the Company of the New Investor Designees, Xxxxxxxx, the Participating Investor
Designees, Bottazzi, the Series B-2 Designees and the Independent Directors in
accordance with Section 3.2. Upon the removal, resignation, death or failure to
stand for reelection of any of the New Investor Designees, the Participating
Investor Designees, or the Series B-2 Designees, each of the Stockholders agrees
to vote in favor of a successor designated in writing by the requisite New
Investors (in the case of a New Investor Designee), the requisite Participating
Investors (in the case of a Participating Investor Designee), or the requisite
Series B-2 Preferred Stock holders (in the case of a Series B-2 Designee) and to
take such reasonable actions in such Stockholder's capacity as a stockholder of
the Company as may be permitted to cause the members of the Board of Directors
to elect a successor designated by a majority in interest of the New Investors,
Participating Investors, or holders of the Series B-2 Preferred Stock, as the
case may be.
3.6 COMPANY ACTIONS. The Company shall take all actions
required under the Revised Statutes of the State of Nevada (the "NRS"), the
Certificate of Incorporation and the Bylaws, to ensure that the New Investor
Designees, the Participating Investor Designees, and the Series B-2 Designees,
are submitted for approval at each annual and each special stockholder meeting
at which directors are to be elected.
3.7 QUALIFICATIONS AND STANDARDS.
(a) Nothing herein shall require a Stockholder to vote
in favor of any New Investor Designee, Participating Investor Designee or Series
B-2 Designee as to whom disclosure would be required pursuant to Item 401(d) of
Regulation S-B promulgated by the SEC or who does not possess the necessary
skills and qualifications to serve as a director, as required by applicable law
or SEC rules and regulations, the rules and regulations of any stock market or
exchange on which the Company's Common Stock is traded, or the governance
policies of the Company, as adopted and amended from time to time (provided,
however, that all such standards shall be applied consistently and in good
faith).
(b) The Investor Designees shall be required to
complete a Director and Officer questionnaire in the Company's standard form.
Subject to the fiduciary obligations of the Board of Directors to the Company's
stockholders based on advice of legal counsel and the directors' review and
approval (not to be unreasonably withheld) of such questionnaire and any other
relevant information, in each case as applied on a consistent basis to each
other director and each nominee, the Company shall (i) nominate and recommend in
the Company's proxy statement and/or other materials the New Investor Designees,
the Participating Investor Designees, the Series B-2 Investor Designees and the
Independent Director nominees as directors of the Company's Board of Directors
at each annual or special meeting of stockholders of the Company entitled to
vote with respect thereto, and (ii) in the event that any such directors shall
resign or be removed as a director for any reason during the period that Section
3.2(d) is in effect, fill the vacancy resulting thereby with another Investor
Designee, Participating Investor Designee, Series B-2 Investor Designee or
Independent Director nominees, as applicable.
4. SHARES. The term "Shares" as used herein shall mean any and all
shares of capital stock of the Company which carry voting rights (including any
voting rights which arise by reason of default) and shall include shares of
Preferred Stock or Common Stock of the Company now owned or subsequently
acquired by such Stockholder through purchase, gift, stock splits, stock
dividends and exercise of stock options, warrants or other convertible
securities; provided, however, nothing contained herein shall be construed as to
restrict the ability of a Stockholder to sell, transfer or otherwise dispose of
any Shares owned by such Stockholder.
5. TRANSFERABILITY.
5.1 IN GENERAL. Nothing herein shall limit the right of a
Stockholder to sell, convey or transfer any of his Shares; provided, however,
that prior to an Investor transferring shares of Series B-2 Preferred Stock
purchased by an Investor under the Purchase Agreement or Conversion Shares
received upon conversion of such shares of Series B-2 Preferred Stock, such
transferring Investor shall require any transferee to execute and deliver to the
Company a Joinder Agreement and such transferee shall be bound by the provisions
of this Agreement as an Investor and shall also be treated as a New Investor or
a Participating Investor, as applicable based on the status of the transferring
Investor. No Stockholder shall transfer any Shares other than registered share
of Common Stock through an open market transaction, unless such transfer is in
accordance with an exemption from the registration requirements under the Act
and applicable law including federal and state securities laws.
5.2 LEGEND. In addition to such other legends as may be required
by applicable law, each certificate representing Shares beneficially owned by
the Stockholders shall bear a legend in substantially the following form, until
such time as such Shares represented thereby is no longer subject to the
provisions hereof:
"The sale, transfer or assignment of the securities
represented by this certificate are subject to the terms and
conditions of a certain Stockholders Agreement, dated as of
July ___, 2004, as amended from time to time, among the
Company and certain holders of its capital stock. Copies of
such Agreement may be obtained at no cost by written request
made by the holder of record of this certificate to the
Secretary of the Company."
6. NO REVOCATION. The voting agreement contained herein is coupled with
an interest and may not be revoked prior to the end of the period set forth in
Section 3.2(d) or earlier termination in accordance with Section 9, except by
written consent of a majority in interest of the New Investors, a majority in
interest of the Participating Investors, a majority in interest of the
Investors, the Company, Xxxxxxxx and Xxxxxxxx (provided Bottazzi serves as an
officer of the Company).
7. 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, provided, however, that
the NRS shall govern the enforceability of the voting agreements set forth
herein.
8. 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.
9. ENTIRE AGREEMENT; AMENDMENT; TERMINATION. This Agreement, the
Purchase Agreement, the Warrant 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 New Investors, a majority in
interest of the Participating Investors, and a majority in interest of the
Investors, provided however that any waiver, amendment or termination of Section
3.2 shall in addition require the written consent of Xxxxxxxx and Xxxxxxxx
(provided Bottazzi is then serving as an officer of the Company).
10. 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. COUNTERPARTS. This Agreement may be executed in counterparts, and
each such counterpart shall be deemed an original for all purposes.
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.
The COmpany:
WARP TECHNOLOGY HOLDINGS, INC.
By: /s/ Xxx Xxxxxxxx
-------------------------------
Name: Xxx Xxxxxxxx
Title: CEO
The INVESTORS:
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 Xxxx
XXXXXXXX:
/s/ Xxx Xxxxxxxx
-----------------------------------
Xxx Xxxxxxxx
XXXXXXXX:
/s/ Xxx Xxxxxxxx
-----------------------------------
Xxx Xxxxxxxx
EXHIBIT A - NEW INVESTORS
ISIS Acquisition Partners II LLC
EXHIBIT B - PARTICIPATING INVESTORS
OXA Trade & Finance, Inc.
Xxxxxxxxx Xxxxxxxx
Xxxxxx Xxxxxx
Xxxxx Family Trust
Xxxxxx Xxxxx
Xxxxxxx X. Xxxxx
Xxxxxxx Xxxxxx
RBW, Inc.
Xxxx Xxxxx
Mirco Teta
EXHIBIT C - FORM OF WARRANT
EXHIBIT D - FORM OF QUESTIONNAIRE
