Contract
THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “ACT”), OR ANY STATE SECURITIES LAWS. THE SALE TO THE HOLDER OF THIS
SECURITY OF THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS SECURITY
ARE NOT COVERED BY A REGISTRATION STATEMENT UNDER THE ACT OR REGISTRATION UNDER
STATE SECURITIES LAWS. THIS SECURITY HAS BEEN ACQUIRED, AND SUCH SHARES OF
COMMON STOCK MUST BE ACQUIRED, FOR INVESTMENT ONLY AND MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE THEREOF
OR
AN OPINION OF COUNSEL REASONABLY ACCEPTABLE IN FORM, SCOPE AND SUBSTANCE TO
THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No.
49
Right
to
Purchase 600,000 Shares
of
Common Stock of Vertical Computer Systems, Inc.
VERTICAL
COMPUTER SYSTEMS, INC.
Common
Stock Purchase Warrant (the “Warrant”)
VERTICAL
COMPUTER SYSTEMS, INC., a Delaware corporation (the “Company”), hereby certifies
that, for value received, Xxxxxxx
Xxxx,
or
registered assigns (the “Holder”), is entitled, subject to the terms set forth
below, to purchase from the Company at any time or from time to time up to
and
including Three
(3)
years
after the date hereof, and before 5:00 p.m., Los Angeles time, on December
19, 2004,
Six
Hundred Thousand
(600,000) fully
paid and nonassessable shares of Common Stock, $.00001 par value, of the Company
(hereinafter the “Warrants”) at an Exercise Price per share initially equal to
$0.10.
The
number of such shares of Common Stock and the Exercise Price are subject to
adjustment as provided in this Warrant.
1.
Conditions and Rights of Holder to Exercise Warrants.
(a) If,
from
time to time, the Holder acquires any shares of stock pursuant to this Common
Stock Purchase Warrant, the Holder accepts and agrees to the terms of the Lock
Up Agreement, attached hereto as Exhibit A, and incorporated herein by this
reference.
(b) The
Warrants shall vest in equal amounts on a monthly basis over a three (3) year
period so long as the Holder is employed by company or as otherwise set forth
in
the employment agreement between the Company and the Holder, dated December
1,
2001.
(c)
This
Warrant may be exercised by the Holder hereof in full or in part at any time
or
from time to time during the exercise period specified in the first paragraph
hereof, by surrender of this Warrant and the subscription form annexed hereto
(duly executed) by such Holder to the Company and by making payment, in cash
or
by certified or official bank check payable to the order of the Company or
wire
transfer to the Company’s account or, with the prior written consent of the
Company, through the surrender of previously acquired shares of Common Stock
at
their fair market value on the exercise date or through the execution of a
promissory note collateralized by the shares underlying the Warrant, in the
amount obtained by multiplying (a) the number of shares of Common Stock
designated by the Holder in the subscription form by (b) the Exercise Price
then
in effect. On any partial exercise the Company will forthwith issue and deliver
to or upon the order of the Holder hereof a new Warrant or Warrants of like
tenor, in the name of the Holder hereof or as such Holder (upon payment by
such
Holder of any applicable transfer taxes) may request, providing in the aggregate
on the face or faces thereof for the purchase of the number of shares of Common
Stock for which such Warrant or Warrants may still be exercised.
2.
Delivery
of Stock Certificates, etc., on Exercise.
As soon
as practicable after the exercise of this Warrant, and in any event within
five
business days thereafter, the Company at its expense (including the payment
by
it of any applicable issue or stamp taxes) will cause to be issued in the name
of and delivered to the Holder hereof, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock to which such Holder shall be entitled on such exercise, in such
denominations as may be requested by such Holder, plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash equal
to
such fraction multiplied by the then current fair market value of one full
share, together with any other stock or other securities any property (including
cash, where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
3.
Dilution.
a. Dividends,
Etc.
If the
Company shall pay to the holders of its Common Stock a dividend in shares of
Common Stock or in securities convertible into Common Stock, the Exercise Price
in effect immediately prior to the record date fixed for the determination
of
the holders of Common Stock entitled to such dividend shall be proportionately
decreased, effective at the opening of business on the next following full
business day.
b. Splits,
Combinations, Etc.
If the
Company shall split the outstanding shares of its Common Stock into a greater
number of shares or combine the outstanding shares into a smaller number, the
Exercise Price in effect immediately prior to such action shall be
proportionately decreased in the case of a split or increased in the case of
a
combination, effective at the opening of business on the full business day
next
following the day such action becomes effective. Notwithstanding the foregoing,
in the event that the Company shall approve a so-called reverse stock split,
the
number of Warrants shall not be decreased but the initial exercise price per
share shall be multiplied by the inverse of the stock split. By way of example
only, if the Company approves a 4 to 1 reverse stock split, the Holder would
retain the right to purchase 600,000
common
shares underlying the Warrants at a purchase price per share four times the
original purchase price per share.
4. Protection
in Case or Reclassification, Etc.
In case
of any reclassification or change of the terms of the outstanding shares of
the
class of Common Stock issuable upon the exercise of this Warrant, then upon
exercise of this Warrant (other than a change relating to par value, or as
a
result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into another company (other than a merger in
which
the Company is the continuing company or which does not result in any
reclassification or change of outstanding shares of Common Stock of the class
issuable upon exercise of this Warrant, other than a split or combination of
shares), or in case of any sale or conveyance to any other person or entity
of
all or substantially all of the assets of the Company, the Company shall use
its
best efforts to execute an agreement providing that the holder of this Warrant
shall have the right thereafter to exercise this Warrant for the kind and amount
of shares of stock and other securities and property receivable upon such
reclassification, change, dividend, distribution, consolidation, merger, sale
or
conveyance by a holder of the number of shares of Common Stock of the Company
for which this Warrant might have been exercised immediately prior to such
reclassification, change, dividend, distribution, consolidation, merger, sale
or
conveyance. This Section 4 shall apply to successive reclassifications and
changes of and dividends and distributions on shares of Common Stock and to
successive consolidations, mergers, sales or conveyances. Notice of the
execution of any agreement pertaining to such reclassification, change,
dividend, distribution, consolidation, merger, sale or conveyance shall be
given
to the holder of this Warrant as soon as practicable and in any event not less
than ten (10) business days before any such transaction is
consummated.
5.
Reservation
of Stock, etc., Issuable on Exercise of Warrants.
The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, all shares of Common Stock from time
to time issuable on the exercise of this Warrant.
6.
Register
of Warrants.
The
Company shall maintain, at the principal office of the Company (or such other
office as it may designate by notice to the Holder hereof), a register in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each successor
and
prior owner of such Warrant. The Company shall be entitled to treat the person
in whose name this Warrant is so registered as the sole and absolute owner
of
this Warrant for all purposes.
7.
Exchange
of Warrant.
This
Warrant is exchangeable, upon the surrender hereof by the Holder hereof at
the
office or agency of the Company referred to in Section 6, for one or more new
Warrants of like tenor representing in the aggregate the right to subscribe
for
and purchase the number of shares of Common Stock which may be subscribed for
purchase hereunder, each of such new Warrants to represent the right to
subscribe for and purchase such number of shares as shall be designated by
said
Holder hereof at the time of such surrender.
8.
Replacement
of Warrant.
On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss,
theft or destruction of this Warrant, on delivery of an indemnity agreement
or
security reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, on surrender and cancellation of this Warrant,
the
Company at its expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
9.
Warrant
Agent.
The
Company will act as the exercise agent for the purpose of issuing Common Stock
on the exercise of this Warrant pursuant to Section 1. The Company may, by
written notice to the Holder, appoint an agent having an office in the United
States of America, for the purpose of issuing Common Stock on the exercise
of
this Warrant pursuant to Section 1, redeeming this Warrant pursuant to Section
2, exchanging this Warrant pursuant to Section 7, and replacing this Warrant
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at such
office by such agent.
10.
No
Rights or Liabilities as a Stockholder.
This
Warrant shall not entitle the Holder hereof to any voting rights or other rights
as a stockholder of the Company, until properly exercised.
11.
Notices, etc. All notices and other communications from the Company to the
registered Holder of this Warrant shall be mailed by first class certified
mail,
postage prepaid, at such address as may have been furnished to the Company
in
writing by such Holder or at the address shown for such Holder on the register
of Warrants referred to in Section 7.
12.
Miscellaneous. This Warrant and any terms hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement or such change, waiver, discharge or termination
is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the internal laws of the State of Delaware. The headings in this
Warrant are for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
13.
“Piggy-Back” Registration.
x. Xxxxx
of
Right. The Holder of this Warrant shall have the right for a period of five
years from the date of grant of this Warrant to include all or any part of
this
Warrant and the shares of Common Stock underlying this Warrant (collectively,
the “Registrable Securities”) as part of any registration of securities filed by
the Company (other than in connection with a transaction contemplated by Rule
145(a) promulgated under the Act); provided, however, that if, in the written
opinion of the Company’s managing underwriter or underwriters, if any, for such
offering determines that marketing factors require a limitation of the number
of
shares to be underwritten, the managing underwriter in its sole discretion
may
limit the number of Registrable Securities to be included in the registration,
or may exclude Registrable Securities entirely from such registration. In such
case, the Company shall so advise Holder whose Registrable Securities otherwise
would be included in such registration and underwritten offering shall be
allocated among other selling shareholders requesting registration in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by Holder and registrable shares each of such other selling
shareholders at the date of filing of the Registration Statement. If Xxxxxx
disapproves of the terms and conditions of the underwritten offering, Xxxxxx
may
withdraw therefrom by written notice to the Company and the managing
underwriter(s). Any Registrable Securities excluded or withdrawn from such
underwritten offering shall be withdrawn from such registration.
b.
Lock
Up.
Holder hereby agrees that, if requested by the Company and the managing
underwriter(s), it will enter into a customary form of “lock-up” agreement with
the Company and the managing underwriter(s) with respect to any Registrable
Securities then held by Holder, which agreement shall contain such Registrable
Securities than those contained in any other such agreements then entered into
by the Company and the managing underwriter(s) with other comparable holders
of
the Company’s Common Stock.
c.
Terms.
The Company shall bear all fees and expenses attendant to registering the
Reigstrable Securities, including any filing fees payable to the National
Association of Securities Dealers, Inc. (NASD), but the Holder shall pay any
and
all underwriting commissions and the expenses of any legal counsel selected
by
the Holder to represent it in connection with the sale of the Registrable
Securities. In the event of such a proposed registration, the Company shall
furnish the then Holder of outstanding Registrable Securities with prompt
written notice prior to the proposed date of filing of such registration
statement. Such notice to the Holder shall continue to be given for each
registration statement filed by the Company until such time as all of the
Registrable Securities have been sold by the Holder. The Holder of the
Registrable Securities shall exercise the “piggy-back” rights provided for
herein by giving written notice, within twenty days of the receipt of the
Company’s notice of its intention to file a registration statement. Nothing
contained in this Warrant shall be construed as requiring any Holder to exercise
this Warrant or any part thereof prior to the initial filing of any registration
statement or the effectiveness thereof. The Company shall have the right to
terminate or withdraw any registration initiated by the Company under this
Section 5 prior to the effectiveness of such registration whether or not Holder
has elected to include Registrable Securities in such registration.
IN
WITNESS WHEREOF, Vertical Computer Systems, Inc. has caused this Warrant to
be
executed on its behalf by one of its officers thereunto duly
authorized.
| Dated: December 19, 2001 | VERTICAL COMPUTER SYSTEMS, INC. | |
| |
|
|
| By: | ||
|
Xxxxxxx Xxxxx, Secretary |
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