EXHIBIT 10.38
SENIOR NOTE AND WARRANT PURCHASE AGREEMENT
SENIOR NOTE AND WARRANT PURCHASE AGREEMENT
As of January 31, 2005
To the Persons listed on Exhibit 1.1A hereto (each a "Purchaser," and,
collectively, the "Purchasers")
Re: Senior Secured Notes and Warrants of WARP TECHNOLOGY HOLDINGS,
INC.
Gentlemen:
WARP TECHNOLOGY HOLDINGS, INC. (the "Company"), a Nevada corporation,
agrees with each of you as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to those terms defined above and elsewhere in
this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" means, with respect to any Person, any other Person
which directly or indirectly through one or more intermediaries Controls, is
controlled by, or is under common control with, such Person.
"Agreement" means this Senior Note and Warrant Purchase Agreement.
"Amendment" means an Amendment to the Company's Articles of
Incorporation, to increase the Company's authorized shares of Common Stock.
"Business Day" means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction of business.
"Company's Knowledge" means the actual knowledge of the executive
officers (as defined in Rule 405 under the Securities Act) of the Company, after
due inquiry.
"Confidential Information" means trade secrets, confidential
information and know-how (including but not limited to ideas, formulae,
compositions, processes, procedures and techniques, research and development
information, computer program code, performance specifications, support
documentation, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information).
"Collateral Agent" means Crestview Master Capital Master, LLC and
any successor collateral agent under the Collateral Agency Agreement.
"Collateral Agency Agreement" means the Collateral Agency Agreement
of this date among the Company, Collateral Agent, the Purchasers and the
purchasers of certain subordinated notes issued by the Company simultaneously
with the issuance of the Notes.
"Control" (including the terms "controlling", "controlled by" or
"under common control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor statute, and the rules and regulations promulgated
thereunder.
"Gupta Purchase Agreement" means that certain Membership Interest
Purchase Agreement, described in the SEC Filings, as assigned to and assumed by
the Company, and as amended, which provides for the acquisition of the
membership interests of Gupta.
"Intellectual Property" means all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).
"Intercreditor Agreement" means the Intercreditor and Subordination
Agreement of this date among the Company, Collateral Agent, the Purchasers and
the purchasers of certain subordinated notes issued by the Company
simultaneously with the issuance of the Notes.
"Material Adverse Effect" means a material adverse effect on (i) the
assets, liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries taken as a whole, or
(ii) the ability of the Company to perform its obligations under the Transaction
Documents.
"Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"SEC Filings" has the meaning set forth in Section 4.6.
"Securities" means the Notes, the Warrants and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended, or
any successor statute, and the rules and regulations promulgated thereunder.
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"Security Agreement" means the Senior Security Agreement, dated as
of the date of the closing, between the Company and Collateral Agent.
"Subsidiary" of any Person means another Person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
Person. For the avoidance of doubt, Gupta is not included in any reference to
"Subsidiaries" of the Company.
"Transaction Documents" means this Agreement, the Notes, the
Warrants, the Security Agreement, the Collateral Agency Agreement, the
Intercreditor Agreement, the Subsidiary Guaranty, the Senior Subsidiary Security
Agreement and the Intellectual Property Security Agreement.
"Warrants" shall mean the Initial Warrants and, if issued, the
Additional Warrants.
"Warrant Shares" means the shares of capital stock of the Company
issuable upon the exercise of the Warrants.
ARTICLE II
PURCHASE, SALE AND TERMS OF SENIOR
SECURED NOTES AND WARRANTS
2.1 Senior Secured Notes and Warrants. The Company has authorized the
issuance, sale and delivery at the Closings (as defined below) to the Purchasers
of (A) senior secured notes in the aggregate principal amount of up to
$6,850,000 (the "Notes"), the form of which is attached as Exhibit 1.B hereto,
and (B) warrants (the "Initial Warrants"), the form of which is attached hereto
as Exhibit 1.1C, to purchase such number of shares of common stock, $0.00001 par
value per share ("Common Stock"), of the Company in the respective amounts set
forth in Exhibit 1.1A hereto. In addition, the Company has authorized the
issuance, sale and delivery of additional warrants (the "Additional Warrants"),
in the respective amounts set forth in Exhibit 1.1A hereto, to be issued and
delivered to each Purchaser in the event that the Company elects to extend the
maturity date of the Notes as set forth therein. Notwithstanding payment by the
Company to the holders of the Notes of any principal and accrued interest
thereon, the Warrants shall remain valid and exercisable for shares of Common
Stock as provided for therein.
2.2 Reservation of Stock. Upon the effectiveness of the filing of the
Amendment, which the Company undertakes to file on the Closing Date, 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
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capital stock to satisfy the rights of exercise of the holders of the Warrants
to acquire Warrant Shares.
2.3 Purchase Price and Closing. The Company agrees to issue, sell and
deliver 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 (a) to purchase the
principal amount of the Notes (together with the attendant Warrants) set forth
opposite their respective names in Exhibit 1.1A for the Closing. The closing of
the purchase, sale and delivery of the Notes and Warrants to be acquired by the
Purchasers from the Company under this Agreement (the "Closing") shall take
place at the offices of the Company at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇
or such other place as the parties may agree. At the Closing, the Company will
deliver to each Purchaser the Notes and certificates for the attendant Warrants
that are purchased by such Purchaser at the Closing in exchange for a transfer
of funds to the account of the Company by wire transfer. The date and time of
the Closing shall be at 12:00 p.m. on January ___, 2005. The date of the Closing
is referred to herein as the "Closing Date."
2.4 Representations by the Purchasers. Each of the Purchasers represents
severally, but not jointly, to the Company as follows:
(a) Investment Representations. It is its present intention to
acquire the Notes and Warrants to be acquired by it for its own account (and it
will be the sole beneficial owner thereof) and that the Notes and Warrants and
the Warrant Shares into which the Warrants may be exercised, respectively, 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 an exemption therefrom. The acquisition by each Purchaser of
the Notes and Warrants 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 Securities and Exchange Commission (the "SEC"), all
certificates evidencing any of the Notes, the Warrants or Warrant Shares,
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 hereby have not been registered under the
Securities Act of 1933, as amended (the "Act"), and may not be transferred
except pursuant to an effective registration under the Act or in a
transaction which qualifies as an exempt transaction under the Act and the
rules and regulations promulgated thereunder.
(b) Access to Information. Each Purchaser or its representative
during the course of this transaction, and prior to the purchase of any Notes
and Warrants, 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 Notes and Warrants, 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.
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(c) General Access. Each 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
Notes and Warrants, and confirms that all documents, records and books
pertaining to such Purchaser's investment in the Company and requested by such
Purchaser or its representative have been made available or delivered to him.
(d) Sophistication and Knowledge. Each 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 Notes and Warrants. Each Purchaser can bear the economic risks of this
investment and can afford a complete loss of its investment.
(e) Transfer Restrictions Imposed by Securities Laws. Each Purchaser
understands that the Notes, the Warrants and the Warrant Shares 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 Purchaser is and must be purchasing the
Notes, the Warrants and the Warrant Shares for investment for the account of
such Purchaser and not for the account or benefit of others, and not with any
present view toward resale or other distribution thereof. Each Purchaser agrees
not to resell or otherwise dispose of all or any part of the Notes, the Warrants
and the Warrant Shares purchased by such Purchaser except as permitted by law,
including, without limitation, any regulations under the Securities Act and
applicable state securities laws. Purchasers are aware that Rule 144 or Rule
144A under the Securities Act may not be available as a basis for exemption from
registration of the shares of Common Stock issuable upon conversion or exercise
of the Warrants and Warrant Shares.
(f) Lack of Liquidity. Each Purchaser has no present need for
liquidity in connection with its purchase of the Notes and Warrants.
(g) Suitability and Investment Objectives. The purchase of the Notes
and Warrants by each Purchaser is consistent with the general investment
objectives of the Purchaser. The Purchaser understands that the purchase of the
Notes and Warrants involves a high degree of risk in view of the fact that,
among other things, the Company has not been operated profitably in the past,
and intends to complete a significant acquisition. The Company hereby
incorporates all risk factors set forth in the Company's filings under the
Exchange Act.
(h) Accredited Investor Status. Each Purchaser is an "Accredited
Investor" as that term is defined in Rule 501 of Regulation D promulgated under
the Securities Act.
2.5 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 as described in Schedule 4.20.
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ARTICLE III
CONDITIONS TO PURCHASERS' OBLIGATIONS
3.1 Conditions to the Purchaser's Obligations. The obligation of each
Purchaser to purchase the Notes and the Warrants at the Closing is subject to
the fulfillment to such Purchaser's satisfaction, on or prior to the Closing
Date, of the following conditions, any of which may be waived by such Purchaser
(as to itself only):
(a) The representations and warranties made by the Company in
Section 4 hereof qualified as to materiality shall be true and correct at all
times prior to and on the Closing Date, except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and correct as of such earlier
date, and, the representations and warranties made by the Company in Section 4
hereof not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date. The Company shall have performed in all
material respects all obligations and conditions herein required to be performed
or observed by it on or prior to the Closing Date.
(b) Other than the Amendment, the Company shall have obtained any
and all consents, permits, approvals, registrations and waivers necessary for
consummation of the purchase and sale of the Securities and the consummation of
the other transactions contemplated by the Transaction Documents, all of which
shall be in full force and effect.
(c) Each signatory to a Transaction Document shall have executed and
delivered the Transaction Documents to which it is a party.
(d) The Company shall have received gross proceeds from the sale of
the Notes and Warrants as contemplated hereby of at least $6,000,000.
(e) No judgment, writ, order, injunction, award or decree of or by
any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding shall have been instituted by any governmental
authority, enjoining or preventing the consummation of the transactions
contemplated hereby or in the other Transaction Documents.
(f) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in subsections (a), (b), (d), and (e) of this Section 3.1.
(g) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Closing Date, setting forth in detail all of the
expenses incurred by the Company in connection with the issuance and sale of the
Notes and Warrants pursuant to the terms of this Agreement.
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(h) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary, dated as of the Closing Date, certifying
the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents
and the issuance of the Securities, certifying the current versions of the
Articles of Incorporation and Bylaws of the Company and certifying as to the
signatures and authority of persons signing the Transaction Documents and
related documents on behalf of the Company.
(i) The Purchasers shall have received an opinion from ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, the Company's in-house counsel, dated as of the Closing Date, in form
and substance reasonably acceptable to the Purchasers and addressing such legal
matters as the Purchasers may reasonably request.
(j) No stop order or suspension of trading shall have been imposed
by the SEC or any other governmental or regulatory body with respect to public
trading in the Common Stock.
(k) At the time of the Closing, no Event of Default (as such term is
defined in the Notes) shall have occurred and be continuing.
(l) to the extent required by the Security Agreement, all action
shall have been taken so that Collateral Agent has obtained, for the benefit of
the Purchasers, a duly perfected first priority security interest and pledge of
all Collateral (as defined in the Security Agreement and other collateral
documents) to Collateral Agent's satisfaction.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers that:
4.1 Organization, Good Standing and Qualification. As of the Closing, each
of the Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now conducted and to own its properties. Each of the Company and
its Subsidiaries is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property makes such qualification or leasing
necessary unless the failure to so qualify has not and could not reasonably be
expected to have a Material Adverse Effect.
4.2 Authorization. Subject to the effectiveness of the filing of the
Amendment, the Company has full power and authority and has taken all requisite
action on the part of the Company, its officers, directors and stockholders
necessary for (i) the authorization, execution and delivery of the Transaction
Documents, (ii) the authorization of the performance of all obligations of the
Company hereunder or thereunder, and (iii) the authorization, issuance (or
reservation for issuance) and delivery of the Securities. The Transaction
Documents constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in
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accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.
4.3 Capitalization. All of the issued and outstanding shares of the
Company's capital stock have been duly authorized and validly issued and are
fully paid, nonassessable and free of pre-emptive rights and were issued in full
compliance with applicable state and federal securities law and any rights of
third parties. All of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully paid,
nonassessable and free of pre-emptive rights, were issued in full compliance
with applicable state and federal securities law and any rights of third parties
and are owned by the Company, beneficially and of record, subject to no lien,
encumbrance or other adverse claim. Other than pursuant to the Investors' Rights
Agreement (the "Investors' Agreement"), dated January __, 2005, among the
Company and certain Investors (as defined therein) when such is executed and
delivered, or pursuant to the Certificate of Designations, Preferences and
Rights pertaining to the Company's Series C Preferred Stock (the "Series C
Certificate of Designations") when such is filed and becomes effective, no
Person is entitled to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. Other than pursuant to the
Investors' Agreement, or any agreements which have been filed as exhibits to the
SEC Filings (collectively, the "Material Contracts"), there are no voting
agreements, buy-sell agreements, options or rights of first purchase agreements
or other agreements of any kind among the Company and any of the securityholders
of the Company relating to the securities of the Company held by them. Other
than pursuant to the Investors' Agreement, or any of the Material Contracts, no
Person has the right to require the Company to register any securities of the
Company under the Securities Act, whether on a demand basis or in connection
with the registration of securities of the Company for its own account or for
the account of any other Person, other than pursuant to the Investors'
Agreement.
The issuance and sale of the Securities hereunder will not obligate
the Company to issue shares of Common Stock or other securities to any other
Person (other than the Purchasers) and will not result in the adjustment of the
exercise, conversion, exchange or reset price of any outstanding security.
The Company does not have outstanding stockholder purchase rights or
"poison pill" or any similar arrangement in effect giving any Person the right
to purchase any equity interest in the Company upon the occurrence of certain
events.
4.4 Valid Issuance. The Notes have been duly and validly authorized. The
Warrants have been duly and validly authorized. Subject to the effectiveness of
the filing of the Amendment, upon the due exercise of the Warrants, the Warrant
Shares will be validly issued, fully paid and non-assessable, free and clear of
all encumbrances and restrictions, except for restrictions on transfer set forth
in the Transaction Documents or imposed by applicable securities laws and except
for those created by the Purchasers. Subject to the effectiveness of the filing
of the Amendment, the Company has reserved a sufficient number of shares of
capital stock for issuance upon the exercise of the Warrants, free and clear of
all encumbrances and
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restrictions, except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws and except for those created
by the Purchasers.
4.5 Consents. The execution, delivery and performance by the Company of
the Transaction Documents and the offer, issuance and sale of the Securities
require no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than the Amendment, filings that
have been made pursuant to applicable state securities laws and post-sale
filings pursuant to applicable state and federal securities laws which the
Company undertakes to file within the applicable time periods. Subject to the
accuracy of the representations and warranties of each Purchaser set forth in
Section 2 hereof, the Company has taken all action necessary to exempt (i) the
issuance and sale of the Securities, (ii) the issuance of the Warrant Shares
upon due exercise of the Warrants, and (iii) the other transactions contemplated
by the Transaction Documents from the provisions of any stockholder rights plan
or other "poison pill" arrangement, any anti-takeover, business combination or
control share law or statute binding on the Company or to which the Company or
any of its assets and properties may be subject and any provision of the
Company's Articles of Incorporation or By-laws that is or could reasonably be
expected to become applicable to the Purchasers as a result of the transactions
contemplated hereby, including without limitation, the issuance of the
Securities and the ownership, disposition or voting of the Securities by the
Purchasers or the exercise of any right granted to the Purchasers pursuant to
this Agreement or the other Transaction Documents.
4.6 Delivery of SEC Filings; Business. The Company has made available to
the Purchasers through the ▇▇▇▇▇ system, true and complete copies of the
Company's most recent Annual Report on Form 10-K for the fiscal year ended June
30, 2004 (the "10-K"), and all other reports filed by the Company pursuant to
the Exchange Act since the filing of the 10-K and prior to the date hereof
(collectively, the "SEC Filings"). The SEC Filings are the only filings required
of the Company pursuant to the Exchange Act for such period. The Company and its
Subsidiaries are engaged in all material respects only in the business described
in the SEC Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company and its
Subsidiaries, taken as a whole.
4.7 Use of Proceeds. The net proceeds of the sale of the Notes and the
Warrants hereunder shall be used for the acquisition of Gupta Technologies, LLC,
and for working capital purposes.
4.8 No Material Adverse Change. Since June 30, 2004, except as identified
and described in the SEC Filings, there has not been:
(a) any change in the consolidated assets, liabilities, financial
condition or operating results of the Company from that reflected in the
financial statements included in the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2004, except for changes in the ordinary course
of business which have not had and could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate;
(b) any declaration or payment of any dividend (other than the
payment in shares of Common Stock of accrued dividends on the shares of the
Company's Series B 10%
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Cumulative Convertible Preferred Stock or on the shares of the Company's Series
B-2 Preferred Stock), or any authorization or payment of any distribution, on
any of the capital stock of the Company, or any redemption or repurchase of any
securities of the Company;
(c) any material damage, destruction or loss, whether or not covered
by insurance to any assets or properties of the Company or its Subsidiaries;
(d) any waiver, not in the ordinary course of business, by the
Company or any Subsidiary of a material right or of a material debt owed to it;
(e) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company or a Subsidiary, except in the
ordinary course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company and its
Subsidiaries taken as a whole (as such business is presently conducted and as it
is proposed to be conducted) other than pursuant to the conversion of the
existing notes (the "Existing Bridge Notes") issued by the Company the proceeds
of which were used to pay purchase price deposits to the seller for the
acquisition of Gupta;
(f) any change or amendment to the Company's Articles of
Incorporation (other than the Amendment and the Series C Certificate of
Designations) or Bylaws, or material change to any material contract or
arrangement by which the Company or any Subsidiary is bound or to which any of
their respective assets or properties is subject;
(g) any material labor difficulties or labor union organizing
activities with respect to employees of the Company or any Subsidiary;
(h) any material transaction entered into by the Company or a
Subsidiary other than in the ordinary course of business, other than this
Agreement, the Transaction Documents, the issuance of the Other Notes (as
defined in the Security Agreement);
(i) the loss of the services of any key employee, or material change
in the composition or duties of the senior management of the Company or any
Subsidiary;
(j) the loss or threatened loss of any customer which has had or
could reasonably be expected to have a Material Adverse Effect; or
(k) any other event or condition of any character that has had or
could reasonably be expected to have a Material Adverse Effect.
4.9 SEC Filings.
(a) At the time of filing thereof, the SEC Filings complied as to
form in all material respects with the requirements of the Exchange Act and did
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
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(b) Each registration statement and any amendment thereto filed by
the Company since June 30, 2002 pursuant to the Securities Act and the rules and
regulations thereunder, as of the date such statement or amendment became
effective, complied as to form in all material respects with the Securities Act
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein not misleading; and each prospectus filed pursuant to
Rule 424(b) under the Securities Act, as of its issue date and as of the closing
of any sale of securities pursuant thereto did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading.
4.10 No Conflict, Breach, Violation or Default. The execution, delivery
and performance of the Transaction Documents by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or violation
of any of the terms and provisions of, or constitute a default under (i) the
Company's Articles of Incorporation (subject to the filing of the Amendment) or
the Company's Bylaws, both as in effect on the date hereof, or (ii)(a) any
statute, rule, regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Company, any Subsidiary
or any of their respective assets or properties, or (b) any agreement or
instrument to which the Company or any Subsidiary is a party or by which the
Company or a Subsidiary is bound or to which any of their respective assets or
properties is subject.
4.11 Tax Matters. The Company and each Subsidiary has timely prepared and
filed all tax returns required to have been filed by the Company or such
Subsidiary with all appropriate governmental agencies and timely paid all taxes
shown thereon or otherwise owed by it. The charges, accruals and reserves on the
books of the Company in respect of taxes for all fiscal periods are adequate in
all material respects, and there are no material unpaid assessments against the
Company or any Subsidiary nor, to the Company's Knowledge, any basis for the
assessment of any additional taxes, penalties or interest for any fiscal period
or audits by any federal, state or local taxing authority except for any
assessment which is not material to the Company and its Subsidiaries, taken as a
whole. All taxes and other assessments and levies that the Company or any
Subsidiary is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third party
when due. There are no tax liens or claims pending or, to the Company's
Knowledge, threatened against the Company or any Subsidiary or any of their
respective assets or property. There are no outstanding tax sharing agreements
or other such arrangements between the Company and any Subsidiary or other
corporation or entity.
4.12 Title to Properties. Except as disclosed in the SEC Filings,
including, without limitation, the Material Contracts, and except pursuant to
this Agreement and the Transaction Documents, and the Other Notes, the Company
and each Subsidiary has good and marketable title to all real properties and all
other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each
Subsidiary holds any leased real or personal
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property under valid and enforceable leases with no exceptions that would
materially interfere with the use made or currently planned to be made thereof
by them.
4.13 Certificates, Authorities and Permits. The Company and each
Subsidiary possess adequate certificates, authorities or permits issued by
appropriate governmental agencies or bodies necessary to conduct the business
now operated by it, and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the Company or
such Subsidiary, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
4.14 Labor Matters.
(a) The Company is not a party to or bound by any collective
bargaining agreements or other agreements with labor organizations. The Company
has not violated in any material respect any laws, regulations, orders or
contract terms, affecting the collective bargaining rights of employees, labor
organizations or any laws, regulations or orders affecting employment
discrimination, equal opportunity employment, or employees' health, safety,
welfare, wages and hours.
(b) (i) There are no labor disputes existing, or to the Company's
Knowledge, threatened, involving strikes, slow-downs, work stoppages, job
actions, disputes, lockouts or any other disruptions of or by the Company's
employees, (ii) there are no unfair labor practices or petitions for election
pending or, to the Company's Knowledge, threatened before the National Labor
Relations Board or any other federal, state or local labor commission relating
to the Company's employees, (iii) no demand for recognition or certification
heretofore made by any labor organization or group of employees is pending with
respect to the Company and (iv) to the Company's Knowledge, the Company enjoys
good labor and employee relations with its employees and labor organizations.
(c) The Company is, and at all times has been, in full compliance in
all material respects with all applicable laws respecting employment (including
laws relating to classification of employees and independent contractors) and
employment practices, terms and conditions of employment, wages and hours, and
immigration and naturalization. There no claims are pending against the Company
before the Equal Employment Opportunity Commission or any other administrative
body or in any court asserting any violation of Title VII of the Civil Rights
Act of 1964, the Age Discrimination Act of 1967, 42 U.S.C. Sections 1981 or 1983
or any other federal, state or local Law, statute or ordinance barring
discrimination in employment.
(d) Other than the Material Contracts, the Company is not a party
to, or bound by, any employment or other contract or agreement that contains any
severance, termination pay or change of control liability or obligation,
including, without limitation, any "excess parachute payment," as defined in
Section 2806(b) of the Internal Revenue Code.
(e) Each of the Company's employees is a Person who is either a
United States citizen or a permanent resident entitled to work in the United
States. To the Company's
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Knowledge, the Company has no liability for the improper classification by the
Company of such employees as independent contractors or leased employees prior
to the Closing.
4.15 Intellectual Property.
(a) All Intellectual Property of the Company and its Subsidiaries is
currently in compliance with all legal requirements (including timely filings,
proofs and payments of fees) and is valid and enforceable. No Intellectual
Property of the Company or its Subsidiaries which is necessary for the conduct
of Company's and each of its Subsidiaries' respective businesses as currently
conducted or as currently proposed to be conducted has been or is now involved
in any cancellation, dispute or litigation, and, to the Company's Knowledge, no
such action is threatened. No patent of the Company or its Subsidiaries
necessary for the conduct of Company's and each of its Subsidiaries' respective
businesses as currently conducted or as currently proposed to be conducted has
been or is now involved in any interference, reissue, re-examination or
opposition proceeding.
(b) All of the licenses and sublicenses and consent, royalty or
other agreements concerning Intellectual Property which are necessary for the
conduct of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted to which the
Company or any Subsidiary is a party or by which any of their assets are bound
(other than generally commercially available, non-custom, off-the-shelf software
application programs having a retail acquisition price of less than $10,000 per
license) (collectively, "License Agreements") are valid and binding obligations
of the Company or its Subsidiaries that are parties thereto and, to the
Company's Knowledge, the other parties thereto, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally, and
there exists no event or condition which will result in a material violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default by the Company or any of its Subsidiaries under any such License
Agreement.
(c) The Company and its Subsidiaries own or have the valid right to
use all of the Intellectual Property that is necessary for the conduct of the
Company's and each of its Subsidiaries' respective businesses as currently
conducted or as currently proposed to be conducted and for the ownership,
maintenance and operation of the Company's and its Subsidiaries' properties and
assets, free and clear of all liens, encumbrances, adverse claims or obligations
to license all such owned Intellectual Property and Confidential Information,
other than licenses entered into in the ordinary course of the Company's and its
Subsidiaries' businesses, and other than under the Material Contracts, under
this Agreement, the Transaction Documents, or the Other Notes. The Company and
its Subsidiaries have a valid and enforceable right to use all third party
Intellectual Property and Confidential Information used or held for use in the
respective businesses of the Company and its Subsidiaries.
(d) The conduct of the Company's and its Subsidiaries' businesses as
currently conducted does not infringe or otherwise impair or conflict with
(collectively, "Infringe") any Intellectual Property rights of any third party
or any confidentiality obligation
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owed to a third party, and, to the Company's Knowledge, the Intellectual
Property and Confidential Information of the Company and its Subsidiaries which
are necessary for the conduct of Company's and each of its Subsidiaries'
respective businesses as currently conducted or as currently proposed to be
conducted are not being Infringed by any third party. There is no litigation or
order pending or outstanding or, to the Company's Knowledge, threatened or
imminent, that seeks to limit or challenge or that concerns the ownership, use,
validity or enforceability of any Intellectual Property or Confidential
Information of the Company and its Subsidiaries and the Company's and its
Subsidiaries' use of any Intellectual Property or Confidential Information owned
by a third party, and, to the Company's Knowledge, there is no valid basis for
the same.
(e) The consummation of the transactions contemplated hereby and by
the other Transaction Documents will not result in the alteration, loss,
impairment of or restriction on the Company's or any of its Subsidiaries'
ownership or right to use any of the Intellectual Property or Confidential
Information which is necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted.
(f) The Company and its Subsidiaries have taken reasonable steps to
protect the Company's and its Subsidiaries' rights in their Intellectual
Property and Confidential Information. Each employee, consultant and contractor
who has had access to Confidential Information which is necessary for the
conduct of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Confidential Information and
has executed appropriate agreements that are substantially consistent with the
Company's standard forms thereof. Except under confidentiality obligations,
there has been no material disclosure of any of the Company's or its
Subsidiaries' Confidential Information to any third party.
4.16 Environmental Matters. Neither the Company nor any Subsidiary is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "Environmental Laws"), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company's Knowledge, threatened
investigation that might lead to such a claim.
4.17 Litigation. Except as disclosed in the SEC Filings, there are no
pending actions, suits or proceedings against or affecting the Company, its
Subsidiaries or any of its or their properties; and to the Company's Knowledge,
no such actions, suits or proceedings are threatened or contemplated.
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4.18 Financial Statements. The financial statements included in each SEC
Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis ("GAAP") (except as may be
disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act). Except
as set forth in the financial statements of the Company included in the SEC
Filings filed prior to the date hereof, neither the Company nor any of its
Subsidiaries has incurred any liabilities, contingent or otherwise, except those
incurred in the ordinary course of business, consistent (as to amount and
nature) with past practices since the date of such financial statements, none of
which, individually or in the aggregate, have had or could reasonably be
expected to have a Material Adverse Effect.
4.19 Insurance Coverage. The Company and each Subsidiary maintains in full
force and effect insurance coverage that is customary for comparably situated
companies for the business being conducted and properties owned or leased by the
Company and each Subsidiary, and the Company reasonably believes such insurance
coverage to be adequate against all liabilities, claims and risks against which
it is customary for comparably situated companies to insure.
4.20 Brokers and Finders. No Person will have, as a result of the
transactions contemplated by the Transaction Documents, any valid right,
interest or claim against or upon the Company, any Subsidiary or a Purchaser for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Company, other than as
described in Schedule 4.20. No two Persons listed in Schedule 4.20 shall be
entitled to any commission, fee or other compensation with respect to the
purchase of Securities by the same Purchaser.
4.21 No Directed Selling Efforts or General Solicitation. Neither the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Securities.
4.22 No Integrated Offering. Neither the Company nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration for
the transactions contemplated hereby or would require registration of the
Securities under the Securities Act.
4.23 Private Placement. The offer and sale of the Securities to the
Purchasers as contemplated hereby is exempt from the registration requirements
of the Securities Act, subject to the accuracy of the Purchasers'
representations set forth herein.
4.24 Questionable Payments. Neither the Company nor any of its
Subsidiaries nor, to the Company's Knowledge, any of their respective current or
former stockholders, directors,
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officers, employees, agents or other Persons acting on behalf of the Company or
any Subsidiary, has on behalf of the Company or any Subsidiary or in connection
with their respective businesses: (a) used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payments to any
governmental officials or employees from corporate funds; (c) established or
maintained any unlawful or unrecorded fund of corporate monies or other assets;
(d) made any false or fictitious entries on the books and records of the Company
or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence
payment, kickback or other unlawful payment of any nature.
4.25 Transactions with Affiliates. Except as disclosed in the SEC Filings,
none of the officers or directors of the Company and, to the Company's
Knowledge, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than as holders of stock
options and/or warrants, and for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the Company's Knowledge, any entity in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
4.26 Internal Controls. The Company is in material compliance with the
provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 currently applicable to the
Company. The Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company, including the Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company's most recently filed period report under the Exchange Act, as
the case may be, is being prepared. The Company's certifying officers have
evaluated the effectiveness of the Company's controls and procedures as of the
end of the period covered by the most recently filed periodic report under the
Exchange Act (such date, the "Evaluation Date"). The Company presented in its
most recently filed periodic report under the Exchange Act the conclusions of
the certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in the Company's
internal controls (as such term is defined in Item 307(b) of Regulation S-K) or,
to the Company's Knowledge, in other factors that could significantly affect the
Company's internal controls. The Company maintains and will continue to maintain
a standard system of accounting established and administered in accordance with
GAAP and the applicable requirements of the Exchange Act.
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4.27 Indebtedness and Other Contracts. Except as disclosed in the SEC
Filings, under the Material Contracts, this Agreement, any of the Transaction
Agreements, or the Other Notes, neither the Company nor any of its Subsidiaries
(i) has any outstanding Indebtedness (as defined below), (ii) is a party to any
contract, agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument would
result in a Material Adverse Effect, (iii) is in violation of any term of or in
default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect. For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; and (y) "Contingent Obligation" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto.
4.28 Solvency. Assuming that no event or condition shall have occurred
after the date hereof and prior to the Closing that would have a Material
Adverse Effect and subject to the Closing, the closings of the Other Notes, and
the closing of the acquisition of Gupta, the Company will not be Insolvent (as
defined below) after giving effect to the issuance of the Securities. For
purposes of this Section 4.28, "Insolvent" means (i) the present fair saleable
value of the Company's assets is less than the amount required to pay the
Company's total indebtedness, (ii) the Company is unable to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, or (iii) the Company intends to incur
or believes that it will incur debts that would be beyond its ability to pay as
such
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debts mature. Neither the Company nor any of its Subsidiaries has taken any
steps to seek protection pursuant to any bankruptcy law nor does the Company
have any knowledge or reason to believe that its or any of its Subsidiaries'
creditors intend to initiate involuntary bankruptcy proceedings or any actual
knowledge of any fact which would reasonably lead a creditor to do so.
4.29 Gupta. Upon the Closing, the closings of the Other Notes, and the
closing of the acquisition of Gupta under the Gupta Purchase Agreement, the
Company represents and warrants that the representations and warranties made by
Gupta Holdings, LLC (the "Seller") under the Gupta Purchase Agreement qualified
as to materiality shall be true and correct on the Closing Date, except to the
extent any such representation or warranty expressly speaks as of an earlier
date, in which case such representation or warranty shall be true and correct as
of such earlier date, and, the representations and warranties made by the Seller
under the Gupta Purchase Agreement not qualified as to materiality shall be true
and correct in all material respects on the Closing Date, except to the extent
any such representation or warranty expressly speaks as of an earlier date, in
which case such representation or warranty shall be true and correct in all
material respects as of such earlier date, and that the Gupta Purchase Agreement
shall be in full force and effect, enforceable in accordance with its terms.
ARTICLE V
SURVIVAL AND INDEMNIFICATION
5.1 Survival. All representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to be representations, warranties,
covenants and agreements as of the date hereof (except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be deemed to be as of such earlier date)
and shall survive the execution and delivery of this Agreement
5.2 Indemnification. The Company agrees to indemnify and hold harmless, on
an after-tax and after insurance recovery basis, each Purchaser and its
Affiliates and their respective directors, officers, employees and agents from
and against any and all losses, claims, damages, liabilities and expenses
(including without limitation reasonable attorney fees and disbursements and
other expenses incurred in connection with investigating, preparing or defending
any action, claim or proceeding, pending or threatened and the costs of
enforcement thereof) (collectively, "Losses") to which such Person may become
subject as a result of any breach of representation, warranty, covenant or
agreement made by or to be performed on the part of the Company under the
Transaction Documents, and will reimburse any such Person for all such amounts
as they are incurred by such Person.
5.3 Conduct of Indemnification Proceedings. Promptly after receipt by any
Person (the "Indemnified Person") of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 5.2, such Indemnified Person shall promptly notify
the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and
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shall assume the payment of all reasonable fees and expenses; provided, however,
that the failure of any Indemnified Person so to notify the Company shall not
relieve the Company of its obligations hereunder except to the extent that the
Company is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. Without the prior written
consent of the Indemnified Person, which consent shall not be unreasonably
withheld, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.
ARTICLE VI
MISCELLANEOUS
6.1 Registration Rights. The Warrant Shares shall have the registration
rights described in the Investors' Rights Agreement, dated January __, 2005.
6.2 Publicity / Form 8-K. By 8:30 a.m. (New York City time) on the trading
day immediately following the Closing Date, the Company shall issue a press
release disclosing the consummation of the transactions contemplated by this
Agreement. No later than the fourth trading day following the Closing Date, the
Company will file a Current Report on Form 8-K attaching the press release
described in the foregoing sentence as well as copies of the Transaction
Documents. In addition, the Company will make such other filings and notices in
the manner and time required by the SEC. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the SEC (other than any exhibits to
filings made in respect of this transaction in accordance with periodic filing
requirements under the Exchange Act) or any regulatory agency or Nasdaq, without
the prior written consent of such Purchaser, except to the extent such
disclosure is required by law or trading market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure.
6.3 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.
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6.4 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 shall obtain consent thereto in writing from all of the
Purchasers. 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 unanimous consent required
above and (y) any amendment, consent or waiver shall apply to all the Purchasers
and shall not discriminate against any particular Purchaser or Purchasers.
6.5 Addresses for Notices. All notices, requests, demands and other
communications provided for hereunder or under any Transaction Document 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 Exhibit 1.1A 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 capital stock of the Company: 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 Exhibit 1.1A 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 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.
6.6 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 the Company shall not have the right
to delegate its obligations hereunder or to assign its rights hereunder or any
interest herein without the prior written consent of the holders of at all of
the Notes.
6.7 Prior Agreements. This Agreement, the Transaction Documents or 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.
6.8 Severability. The provisions of this Agreement and the terms of the
Notes and the Warrants are severable and, in the event that any court of
competent jurisdiction shall determine
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that any one or more of the provisions or part of a provision contained in this
Agreement or the terms of the Notes or the Warrants 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 or the terms of the Notes and the Warrants, but this
Agreement and the terms of the Notes and the Warrants 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.
6.9 Confidentiality. Each Purchaser agrees that it will keep confidential
and will not disclose or divulge 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 previously granted to any Purchaser, unless such information
is known, or until such information becomes known, to the public; provided,
however, that a Purchaser may disclose such information (i) 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, (ii) to any prospective purchaser of any of the Notes and the
Warrants from such Purchaser as long as such prospective purchaser agrees in
writing to be bound by the provisions of this Section 6.9, (iii) to any
affiliate or partner of such Purchaser and (iv) as required by applicable law.
6.10 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served on
each party hereto anywhere in the world by the same methods as are specified for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A
TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS
THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
6.11 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.
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6.12 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.
6.13 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 Transaction Agreements.
6.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Securities pursuant to the Transaction Documents has been made by such
Purchaser independently of any other Purchaser. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no
Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment in the Securities or enforcing its rights under the
Transaction Documents. The Company acknowledges that each of the Purchasers has
been provided with the same Transaction Documents for the purpose of closing a
transaction with multiple Purchasers and not because it was required or
requested to do so by any Purchaser.
6.15 Expenses. The parties hereto shall pay their own costs and expenses
in connection herewith, except that the Company shall pay Crestview Capital
Master, LLC $25,000 at Closing for legal fees and due diligence costs. The
Company shall reimburse the Purchasers upon demand for all reasonable
out-of-pocket expenses incurred by the Purchasers, including without limitation
reimbursement of attorneys' fees and disbursements, in connection with any
amendment, modification or waiver of this Agreement or the other Transaction
Documents. In the event that legal proceedings are commenced by any party to
this Agreement against another party to this Agreement in connection with this
Agreement or the other Transaction Documents, the party or parties which do not
prevail in such proceedings shall severally, but not jointly, pay their pro rata
share of the reasonable attorneys' fees and other reasonable out-of-pocket costs
and expenses incurred by the prevailing party in such proceedings.
6.16 Refinancing. The Company will be required to obtain the consent of a
majority in interest of the Purchasers prior to refinancing the Notes if the
interest rate on such refinancing will exceed 10% or if warrants issued to new
lenders will exceed 5% of the common stock of the Company, determined on a fully
diluted basis.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-22-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
WARP TECHNOLOGY HOLDINGS, INC.
By:_________________________________________
Its:
Purchaser
By:_________________________________________
Its:
-23-
EXHIBIT 1.1A
Schedule of Purchasers
NUMBER OF ADDITIONAL
AMOUNT TO BE NUMBER OF INITIAL WARRANTS TO BE ISSUED
PURCHASED IN THE WARRANTS TO BE ISSUED AT UPON EXTENSION OF
NAME AND ADDRESS OF PURCHASER CLOSING THE CLOSING MATURITY DATE OF NOTES.
----------------------------- ---------------- ------------------------ -----------------------
Crestview Capital Master, LLC $2,000,000 779,562 779,562
DCOFI Master LDC $2,000,000 779,562 779,562
Asset Managers International Ltd. $1,000,000 389,781 389,781
Gupta Holdings, LLC $ 750,000* 292,336 292,336
B/T Investors, a General Partnership $ 975,000 380,036 380,036
▇▇▇▇▇▇▇ Crossover Fund $ 125,000 48,723 48,723
* $750,000 in consideration paid pursuant to Section I A(2) of the Amendment No.
1 to the Membership Interest Purchase Agreement made and entered into as of
January 31, 2005, by and between the Company and Gupta Holdings, LLC.
EXHIBIT 1.1B
FORM OF NOTE
-2-
EXHIBIT 1.1C
FORM OF WARRANT
-3-
SCHEDULE 4.20
BROKERS OR FINDERS
AMOUNT INVESTED AMOUNT OF FEE (CASH,
NAME OF PURCHASER BROKER OR FINDER HEREUNDER WARRANTS)
----------------- ---------------- --------------- ------------------------
Crestview Capital Master, LLC ▇▇▇▇▇▇▇ Securities, Inc. $2,000,000 $200,000 and Warrants to
acquire 200,000 shares
of Common Stock
DCOFI Master LDC ▇▇▇▇▇▇ Capital, LLC $2,000,000 $120,000 and Warrants to
acquire 160,000 shares
of Common Stock
Asset Managers International Ltd. ▇▇▇▇▇▇ Capital, LLC $1,000,000 $60,000 and Warrants to
acquire 80,000 shares of
Common Stock