EXHIBIT 10.50 INTERCREDITOR AND SUBORDINATION AGREEMENT

 

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                                                                       Execution

 

                                                                   EXHIBIT 10.50

 

                    INTERCREDITOR AND SUBORDINATION AGREEMENT

 

      THIS INTERCREDITOR AND SUBORDINATION AGREEMENT (this "Agreement"), dated

as of January __, 2005, by and among: the holders of Subordinated Notes (the

"Subordinated Noteholders") and the Senior Notes (the "Senior Noteholders"), all

as set forth on the attached Schedule 1; Warp Technology Holdings, Inc., a

Nevada corporation ("Borrower"), Warp Solutions, Inc., a Delaware corporation

("Solutions") and Gupta Technologies, LLC, a Delaware limited liability company

("Gupta", together with Solutions, the "Subsidiaries"; and the Subsidiaries,

together with the Borrower, the "Credit Parties"); and Crestview Capital Master,

LLC, a Delaware limited liability company ("Collateral Agent"), as collateral

agent for the Senior Noteholders and the Subordinated Noteholders (collectively,

the "Noteholders") pursuant to a Collateral Agency Agreement of this date (the

"Collateral Agency Agreement").

 

      WHEREAS, simultaneously herewith, the Borrower is executing and delivering

to each of the Noteholders a note (collectively, the "Notes") evidencing loans

in various original principal amounts severally made by each of the Noteholders

to the Borrower; and

 

      WHEREAS, as collateral security for the payment and performance of the

Borrower's obligations under the Senior Notes and certain related obligations

(i) the Borrower is granting to the Collateral Agent, for the benefit of the

Senior Noteholders, a security interest in the Collateral (as defined below)

pursuant to the terms and conditions of that certain Senior Security Agreement

of this date between the Borrower and the Collateral Agent (the "Senior Security

Agreement") and (ii) each Subsidiary is executing a guaranty of the Senior Notes

and granting to the Collateral Agent, for the benefit of the Senior Noteholders,

a security interest in the Collateral pursuant to the terms and conditions of

those certain Senior Subsidiary Security Agreements of this date between a

Subsidiary and the Collateral Agent (the "Senior Subsidiary Security Agreements"

and, collectively with the Senior Security Agreement, the "Senior Security

Agreements"); and

 

      WHEREAS, as collateral security for the payment and performance of the

Borrower's obligations under the Subordinated Notes and certain related

obligations (i) the Borrower is granting to the Collateral Agent, for the

benefit of the Subordinated Noteholders, a security interest in the Collateral

pursuant to the terms and conditions of that certain Subordinated Security

Agreement of this date between the Borrower and the Collateral Agent (the

"Subordinated Security Agreement") and (ii) each Subsidiary is executing a

guaranty of the Subordinated Notes and granting to the Collateral Agent, for the

benefit of the Subordinated Noteholders, a security interest in the Collateral

pursuant to the terms and conditions of those certain Subordinated Subsidiary

Security Agreements of this date between a Subsidiary and the Collateral Agent

(the "Subordinated Subsidiary Security Agreements" and, collectively with the

Subordinated Security Agreement, the "Subordinated Security Agreements");

 

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      NOW, THEREFORE, the parties hereto agree as follows:

 

      The parties hereto hereby agree as follows:

 

      1. Definitions. (a) Unless otherwise defined herein, terms defined in the

Senior Security Agreement and used herein shall have the meanings given to them

in the Senior Security Agreement.

 

            (b) The following terms shall have the following meanings:

 

            "Agreement": this Intercreditor and Subordination Agreement.

 

            "Collateral": any and all property from time to time subject to

security interests to secure payment or performance of the Senior Obligations or

the Subordinated Obligations including all "Collateral" as defined in the Senior

Security Agreements and the Subordinated Security Agreements.

 

            "Collection Action": shall mean (a) to demand, sue for, take or

receive from or on behalf of any Credit Party or any guarantor of the

Subordinated Obligations, by set-off or in any other manner, the whole or any

part of any moneys which may now or hereafter be owing by any Credit Party with

respect to the Subordinated Obligations, (b) to initiate or participate with

others in any suit, action or proceeding against any Credit Party to (i) enforce

payment of or to collect the whole or any part of the Subordinated Obligations

or (ii) commence judicial enforcement of any of the rights and remedies under

the Subordinated Documents or applicable law with respect to the Subordinated

Obligations or the Subordinated Documents, (c) to accelerate any Subordinated

Obligations, or (d) to exercise any put option or to cause any Credit Party to

honor any redemption or mandatory prepayment obligation under any Subordinated

Document; provided, that, notwithstanding the foregoing, in the case of any

Subordinated Noteholder, "Collection Action" shall not mean the exercise by a

Subordinated Noteholder of its right to exercise its warrants as provided under

the Subordinated Transaction Documents.

 

            "Collateral Enforcement Action": shall mean any action by any

Subordinated Noteholder to (a) exercise or seek to exercise any rights or

exercise any remedies with respect to any Collateral, (b) institute any action

or proceeding with respect to such rights or remedies, including, any action of

foreclosure or (c) contest, protest or object to any foreclosure proceeding,

postpetition financing, use of cash collateral or action brought by the

Collateral Agent or any Senior Noteholder or to any other exercise by the

Collateral Agent or any Senior Noteholder of any rights and remedies under any

Senior Transaction Documents.

 

            "Gupta Note" shall mean the Amended and Restated Subordinated Note

of this date in the original principal amount of $1,500,000 from the Company to

Gupta Holdings, LLC.

 

             "Insolvency Event": (a) any Credit Party commences any case,

proceeding or other action (1) under any existing or future law of any

jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,

reorganization, conservatorship or relief of debtors, seeking to have an order

for relief entered with respect to it, or seeking to adjudicate it a bankrupt or

insolvent, or seeking reorganization, arrangement, adjustment, winding-up,

liquidation, dissolution,

 

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composition or other relief with respect to it or its debts, or (2) seeking

appointment of a receiver, trustee, custodian, conservator or other similar

official for it or for all or any substantial part of its assets, or any Credit

Party making a general assignment for the benefit of its creditors; or (b) there

being commenced against any Credit Party any case, proceeding or other action of

a nature referred to in clause (a) above which (1) results in the entry of an

order for relief or any such adjudication or appointment or (2) remains

undismissed, undischarged or unbonded for a period of 60 days; or (c) there

being commenced against any Credit Party or any of its subsidiaries any case,

proceeding or other action seeking issuance of a warrant of attachment,

execution, distraint or similar process against all or any substantial part of

its assets which results in the entry of an order for any such relief which

shall not have been vacated, discharged, or stayed or bonded pending appeal

within 60 days from the entry thereof; or (d) any Credit Party taking any action

in furtherance of, or indicating its consent to, approval of, or acquiescence

in, any of the acts set forth in clause (a), (b) or (c) above; or (e) any Credit

Party generally not paying, or being unable to pay, or admitting in writing its

inability to pay, its debts as they become due.

 

            "Senior Event of Default": any "Event of Default" under any Senior

Note or Senior Security Document (beyond any applicable grace period with

respect thereto).

 

            "Senior Notes": the promissory notes of any Borrower outstanding

from time to time under the Senior Purchase Agreement.

 

            "Senior Obligations": the unpaid principal of and interest on the

Senior Notes and all other obligations and liabilities of any Credit Party to

the Senior Noteholders or the Collateral Agent of whatever kind or nature

pursuant to, under or in connection with the Senior Transaction Documents

(including interest accruing at the then applicable rate provided in the Senior

Purchase Agreement after the maturity of the Senior Notes and interest accruing

at the then applicable rate provided in the Senior Purchase Agreement after the

filing of any petition in bankruptcy, or the commencement of any insolvency,

reorganization or like proceeding, relating to any Credit Party, whether or not

a claim for post-filing or post-petition interest is allowed in such

proceeding), whether direct or indirect, absolute or contingent, due or to

become due, or now existing or hereafter incurred, arising under, out of, or in

connection with, the Senior Purchase Agreement, the Senior Notes, this

Agreement, the other Senior Transaction Documents or any other document made,

delivered or given by any Credit Party, in each case whether on account of

principal, interest, reimbursement obligations, fees, indemnities, costs,

expenses or otherwise (including all fees and disbursements of counsel to the

Collateral Agent that are required to be paid by any Credit Party pursuant to

the terms of this Agreement or any other Senior Transaction Document).

 

            "Senior Purchase Agreement": the Senior Note and Warrant Purchase

Agreement dated as of the date hereof, between the Borrower and Senior

Noteholders.

 

            "Senior Security Documents": all documents and instruments, now

existing or hereafter arising, which create or purport to create a security

interest in property to secure payment or performance of the Senior Obligations

including the Senior Security Agreements.

 

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            "Subordinated Notes": the promissory notes (including, for the

avoidance of doubt, the Gupta Note)of any Credit Party outstanding from time to

time under the Subordinated Purchase Agreement with respect to the Subordinated

Obligations.

 

            "Subordinated Obligations": the unpaid principal and interest on the

Subordinated Notes and all other obligations and liabilities of the Credit

Parties to the Subordinated Noteholders (including interest accruing at the then

applicable rate provided in the Subordinated Notes after the maturity thereof

and interest accruing at the then applicable rate provided in the Subordinated

Notes after the filing of any petition in bankruptcy, or the commencement of any

insolvency, reorganization or like proceeding, relating to any Credit Party,

whether or not a claim for post-filing or post-petition interest is allowed in

such proceeding), whether direct or indirect, absolute or contingent, due or to

become due, or now existing or hereafter incurred, which may arise under, out

of, or in connection with, the Subordinated Notes, any other Subordinated

Transaction Document, or this Agreement, in each case whether on account of

principal, interest, reimbursement obligations, fees, indemnities, costs,

expenses or otherwise.

 

            "Subordinated Purchase Agreement": the Subordinated Note and Warrant

Purchase Agreement of this same date between Borrower and the Subordinated

Noteholders.

 

            "Subordinated Security Documents": all documents and instruments,

now existing or hereafter arising, which create or purport to create a security

interest in property to secure payment or performance of the Subordinated

Obligations including the Subordinated Security Agreements.

 

            "Subordinated Transaction Documents": the Subordinated Purchase

Agreement, the Subordinated Notes, the Subordinated Security Documents, the

Collateral Agency Agreement, all "Transaction Documents" as defined in the

Subordinated Purchase Agreement and all other documents that from time to time

evidence the Subordinated Obligations or secure payment or performance thereof.

 

            (c) The words "hereof," "herein" and "hereunder" and words of

similar import when used in this Agreement shall refer to this Agreement as a

whole and not to any particular provision of this Agreement, and section and

paragraph references are to this Agreement unless otherwise specified.

 

            (d) The meanings given to terms defined herein shall be equally

applicable to both the singular and plural forms of such terms.

 

            (e) The words (i)"includes" and "including" are not limiting; (ii)

"or" is not exclusive; (iii) "all" includes "any" and "any" includes "all" and

means "any one or more"; (iv) references to any instrument, document, mortgage,

assignment or agreement of any kind includes any amendments, restatements or

modifications; (v) headings are for convenience only, and do not affect the

meaning of any provision; and (vi) references to the consent, satisfaction,

acceptance, discretion, judgment, option, requirement or approval (or variations

of those terms) of Collateral Agent or any Senior Noteholder are, unless

otherwise specifically indicated, to be

 

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interpreted as if followed by the phrase "in its absolute discretion".

 

      2. Subordination. (a) Each Credit Party and each of the Subordinated

Noteholders agrees, for itself and each future holder of the Subordinated

Obligations, that the Subordinated Obligations are expressly "subordinate and

junior in right of payment" (as that phrase is defined in paragraph 2(b)) to all

Senior Obligations.

 

            (b) "Subordinate and junior in right of payment" means, for purposes

of paragraph 2(a), that (1) no part of the Subordinated Obligations shall have

any claim to the assets of any Credit Party on a parity with or prior to the

claim of the Senior Obligations; and (2) unless and until the Senior Obligations

have been paid in full, then, without the express prior written consent of the

Collateral Agent, no Subordinated Noteholder will take, demand or receive from

any Credit Party, and no Credit Party will make, give or permit, directly or

indirectly, by setoff, redemption, purchase or in any other manner, any payment

of (of whatever kind or nature, whether in cash, property, securities or

otherwise) the Subordinated Obligations provided, however, that so long as an

Event of Default has not occurred and is continuing, the Borrower may make, and

the Subordinated Noteholders may receive, regularly scheduled payments (not

prepayments) of interest on the Subordinated Notes in accordance with the terms

thereof determined on a non-accelerated basis (without giving effect to any

default rate of interest thereunder) and the Borrower may make, and the holder

of the Gupta Note may receive, regularly scheduled payments (not prepayments) of

principal on the Gupta Note in accordance with the terms thereof determined on a

non-accelerated basis (without giving effect to any default rate of interest

thereunder).

 

            (c) The expressions "prior payment in full," "payment in full,"

"paid in full" and any other similar terms or phrases when used in this

Agreement shall mean the indefeasible payment in full, in immediately available

funds, of all of the Senior Obligations.

 

      3. Additional Provisions Concerning Subordination. (a) The Subordinated

Noteholders and each Credit Party agree that upon the occurrence of any

Insolvency Event:

 

                  (i) all Senior Obligations shall be paid in full before any

payment or distribution of whatever kind or nature is made with respect to the

Subordinated Obligations; and

 

                  (ii) any payment or distribution of assets of any Credit

Party, whether in cash, property or securities (other than as permitted under

clause (a)(1) of this Section 3), to which any Subordinated Noteholder would be

entitled except for the provisions hereof, shall be paid or delivered by such

Credit Party, or any receiver, trustee in bankruptcy, liquidating trustee,

disbursing agent or other Person making such payment or distribution, directly

to the Collateral Agent, to the extent necessary to pay in full all Senior

Obligations, before any payment or distribution of any kind or nature shall be

made to any Subordinated Noteholder.

 

            (b) Upon the occurrence of any Insolvency Event:

 

                  (i) each Subordinated Noteholder irrevocably authorizes and

 

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empowers the Collateral Agent (A) to demand, sue for, collect and receive every

payment or distribution on account of the Subordinated Obligations payable or

deliverable in connection with such event or proceeding and give acquittance

therefor, (B) to file claims and proofs of claim in any statutory or

non-statutory proceeding if such Subordinated Noteholder has not demonstrated to

the satisfaction of the Collateral Agent, no later than 30 days prior to the

applicable bar date, that such Subordinated Noteholder has filed an appropriate

claim or proof of claim, and (C) to take such other actions, in its own name as

Collateral Agent, or in the name of the Subordinated Noteholders or otherwise,

as the Collateral Agent may deem necessary or advisable for the enforcement of

the provisions of this Agreement; provided, however, that the foregoing

authorization and empowerment imposes no obligation on the Collateral Agent to

take any such action;

 

                  (ii) each Subordinated Noteholder shall take such action, duly

and promptly, as the Collateral Agent may request from time to time (A) to

collect the Subordinated Obligations for the account of the Collateral Agent and

(B) to file appropriate proofs of claim in respect of the Subordinated

Obligations; and

 

                  (iii) each Subordinated Noteholder shall execute and deliver

such powers of attorney, assignments or proofs of claim or other instruments as

the Collateral Agent may request to enable the Collateral Agent to enforce any

and all claims in respect of the Subordinated Obligations and to collect and

receive any and all payments and distributions which may be payable or

deliverable at any time upon or in respect of the Subordinated Obligations.

 

            (c) If any payment or distribution, whether consisting of money,

property or securities, shall be collected or received by any Subordinated

Noteholder in respect of the Subordinated Obligations, except payments permitted

to be made at the time of payment as provided in paragraph 2(b), such

Subordinated Noteholder shall forthwith deliver the same to the Collateral

Agent, in the form received, duly indorsed to the Collateral Agent, if required,

to be applied to the payment or prepayment of the Senior Obligations until the

Senior Obligations are paid in full (provided that no securities of the Borrower

that are delivered to the Collateral Agent shall be applied against any Senior

Obligations). Until so delivered, such payment or distribution shall be held in

trust by such Subordinated Noteholder as the property of the Collateral Agent,

segregated from other funds and property held by such Subordinated Noteholder.

Following payment in full of the Senior Obligations, Collateral Agent will remit

to each Subordinated Noteholder as promptly as practicable, to the extent of

such Subordinated Noteholder's interest therein, all payments or distributions

paid (respectively by any such Subordinated Noteholder) to and held by

Collateral Agent in excess of the Senior Obligations as provided in Section

4(e)of this Agreement.

 

             (d) Until the Senior Obligations are paid in full, the Subordinated

Noteholders shall not take any Collection Action or Collateral Enforcement

Action with respect to the Subordinated Obligations.

 

      4. Rights in Collateral. (a) Notwithstanding anything to the contrary

contained in any Senior Transaction Document or any Subordinated Transaction

Document and irrespective of:

 

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                  (i) the time, order or method of attachment or perfection of

the security interests created by any Senior Security Document or any

Subordinated Security Document;

 

                  (ii) the time or order of filing or recording of financing

statements or other documents filed or recorded to perfect security interests in

any Collateral;

 

                  (iii) anything contained in any filing or agreement to which

the Collateral Agent or any Subordinated Noteholder now or hereafter may be a

party; and

 

                  (iv) the rules for determining perfection or priority under

the Uniform Commercial Code or any other law governing the relative priorities

of secured creditors, any security interest in any Collateral pursuant to any

Senior Security Document has and shall have priority, to the extent of any

unpaid Senior Obligations, over any security interest in such Collateral

pursuant to any Subordinated Transaction Document.

 

            (b) So long as the Senior Obligations have not been paid in full and

any Senior Security Document remains in effect, whether or not any Insolvency

Event has occurred,

 

                  (i) no Subordinated Noteholder will take any Collateral

Enforcement Action; and

 

                  (ii) the Collateral Agent and, subject to the Collateral

Agency Agreement, any Senior Noteholder shall have the exclusive right to

enforce rights and exercise remedies with respect to the Collateral and

Collateral Agent shall not be required to marshal any Collateral.

 

            (c) In exercising rights and remedies with respect to the

Collateral, the Collateral Agent and, subject to the Collateral Agency

Agreement, Senior Noteholders may enforce the provisions of the Senior Security

Documents and exercise remedies thereunder and under any other Senior

Transaction Documents, all in such order and in such manner as it or they may

determine in the exercise of its or their sole business judgment. Such exercise

and enforcement shall include the rights to sell or otherwise dispose of

Collateral, to incur expenses in connection with such sale or disposition and to

exercise all the rights and remedies of a secured lender under the Uniform

Commercial Code of any applicable jurisdiction. In conducting any public or

private sale under the Uniform Commercial Code, the Collateral Agent shall give

the Subordinated Noteholders such notice of such sale as may be required by the

applicable Uniform Commercial Code; provided, however, that 10 days' notice

shall be deemed to be commercially reasonable notice.

 

            (d) When all Senior Obligations have been paid in full and the

Senior Security Documents no longer are in effect, subject to the requirements

of the Collateral Agency Agreement, the Subordinated Noteholders shall have the

right to enforce the provisions of the Subordinated Security Documents and

exercise remedies thereunder.

 

            (e) Any money, property or securities realized upon the sale,

disposition or other realization by the Collateral Agent upon all or any part of

the Collateral, or otherwise

 

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received by Collateral Agent under any provision of this Agreement shall be

applied by the Collateral Agent in the following order:

 

                  (i) first, to the payment of any and all expenses incurred by

the Collateral Agent on and after the date of this Agreement in connection with

the performance of its duties under this Agreement for which reimbursement has

not been made by the Company;

 

                  (ii) second, to the Senior Secured Noteholders in an amount

equal to each such Noteholder's pro-rata share of accrued but unpaid interest on

the Senior Secured Notes.

 

                  (iii) third, to the Senior Secured Noteholders in an amount

equal to each such Noteholder's pro-rata share of the unpaid principal balance

of the Senior Secured Notes and any other unpaid Senior Obligation;

 

                  (iv) fourth, to the Subordinated Noteholders in an amount

equal to each such Noteholder's pro-rata share of accrued but unpaid interest on

the Subordinated Notes;

 

                  (v) fifth, to the Subordinated Noteholders in an amount equal

to each such Noteholder's pr