Exhibit 10.3
Securities Purchase Agreement between Company and third party buyers for
$250,000 of Convertible Debentures, dated August 16, 2001
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of August ___,
2001, by and among VERTICAL COMPUTER SYSTEMS, INC., a Delaware corporation, with
headquarters located at 0000 Xxxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000
(the "Company"), and the Buyers listed on Schedule I attached hereto
(individually, a "Buyer" or collectively "Buyers").
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");
WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Buyer(s), as provided
herein, and the Buyer(s) shall purchase Two Hundred and Fifty Thousand Dollars
($250,000) of convertible debentures (the "Convertible Debentures"), which shall
be convertible into shares of the Company's common stock, (the "Common Stock")
(as converted, the "Conversion Shares"), for a total purchase price of Two
Hundred and Fifty Thousand Dollars ($250,000) (the "Purchase Price") in the
respective amounts set forth opposite each Buyer(s) name on Schedule I ( the
"Subscription Amount"); and
WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit A (the "Investor
Registration Rights
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Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
there under, and applicable state securities laws; and
WHEREAS, the aggregate proceeds of the sale of the Convertible Debentures
contemplated hereby shall be held in escrow pursuant to the terms of an escrow
agreement substantially in the form of the Escrow Agreement attached hereto as
Exhibit B.
NOW, THEREFORE, in consideration of the mutual covenants and other agreements
contained in this Agreement the Company and the Buyer(s)hereby agree as follows:
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
Purchase of Convertible Debentures. Subject to the satisfaction (or waiver) of
the terms and conditions of this Agreement, each Buyer agrees, severally and not
jointly, to purchase at Closing (as defined herein below) and the Company agrees
to sell and issue to each Buyer, severally and not jointly, at Closing,
Convertible Debentures in amounts corresponding with the Subscription Amount set
forth opposite each Buyer's name on Schedule I hereto. Upon execution hereof by
a Buyer, the Buyer shall wire transfer the Subscription Amount set forth
opposite his name on Schedule I in same-day funds or a check payable to "First
Union National Bank, as Escrow Agent for Vertical Computer Systems, Inc. /
Cornell Capital Partners, LP", which Subscription Amount shall be held in escrow
pursuant to the terms of the Escrow Agreement (as hereinafter defined) and
disbursed in accordance therewith. Notwithstanding the foregoing, a Buyer may
withdraw his Subscription Amount and terminate this Agreement as to such Buyer
at any time after the execution hereof and prior to Closing (as hereinafter
defined).
Closing Date. The closing of the purchase and sale of the Convertible Debentures
(the "Closing") shall take place at 10:00 a.m. Eastern Standard Time on the
fifth business day ("Closing Date") following the date hereof, subject to
notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 below (or such later date as is mutually agreed to by
the Company and the Buyers). The Closing shall occur on the
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Closing Date at the offices of Xxxxxx Xxxxxxxx, LLP, 0000 Xxxxxxxxxx Xxxxxx,
Xxxxx 0, Xxxxx, XX 00000 (or such other place as is mutually agreed to by the
Company and the Buyers).
Escrow Arrangements; Form of Payment. Upon execution hereof by Buyer(s) and
pending Closing, the aggregate proceeds of the sale of the Convertible
Debentures to Buyer(s) pursuant hereto, plus the fees and expenses of the
Yorkville Advisors Management, LLC (the "Consultant"), shall be deposited in a
non-interest bearing escrow account with First Union National Bank, as escrow
agent ("Escrow Agent"), pursuant to the terms of an escrow agreement between the
Company, the Consultant and the Escrow Agent in the form attached hereto as
Exhibit B (the "Escrow Agreement"). Subject to the satisfaction of the terms and
conditions of this Agreement, on the Closing Date, (i) the Escrow Agent shall
deliver to the Company in accordance with the terms of the Escrow Agreement such
aggregate gross proceeds for the Convertible Debentures to be issued and sold to
such Buyer(s) at the Closing minus the fees and expenses of the Consultant, by
wire transfer of immediately available funds in accordance with the Company's
written wire instructions, and (ii) the Company shall deliver to each Buyer,
Convertible Debentures which such Buyer(s) is purchasing in amounts indicated
opposite such Buyer's name on Schedule I, duly executed on behalf of the
Company.
BUYER'S REPRESENTATIONS AND WARRANTEES.
Each Buyer represents and warrants, severally and not jointly, that:
Investment Purpose. Each Buyer is acquiring the Convertible Debentures and, upon
conversion of Convertible Debentures, the Buyer will acquire the Conversion
Shares then issuable, for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that by making the representations herein, such Buyer
reserves the right to dispose of the Conversion Shares
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at any time in accordance with or pursuant to an effective registration
statement covering such Conversion Shares or an available exemption under the
1933 Act.
Accredited Investor Status. Each Buyer is an "Accredited Investor" as that term
is defined in Rule 501(a)(3) of Regulation D.
Reliance on Exemptions. Each Buyer understands that the Convertible Debentures
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
Information. Each Buyer and its advisors (and his or, its counsel), if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and information he deemed material to making an
informed investment decision regarding his purchase of the Convertible
Debentures and the Conversion Shares, which have been requested by such Buyer.
Each Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer's right to
rely on the Company's representations and warranties contained in Section 3
below. Each Buyer understands that its investment in the Convertible Debentures
and the Conversion Shares involves a high degree of risk. Each Buyer is in a
position regarding the Company, which, based upon employment, family
relationship or economic bargaining power, enabled and enables such Buyer to
obtain information from the Company in order to evaluate the merits and risks of
this investment. Each Buyer has sought such accounting, legal and tax advice, as
it has considered necessary to make an informed investment
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decision with respect to its acquisition of the Convertible Debentures and the
Conversion Shares. No
Governmental Review. Each Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Convertible Debentures or the
Conversion Shares, or the fairness or suitability of the investment in the
Convertible Debentures or the Conversion Shares, nor have such authorities
passed upon or endorsed the merits of the offering of the Convertible Debentures
or the Conversion Shares.
Transfer or Resale. Each Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Convertible Debentures have not been and
are not being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, or (B) such Buyer shall have delivered to
the Company an opinion of counsel, in a generally acceptable form, to the effect
that such securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration requirements;
(ii) any sale of such securities made in reliance on Rule 144 under the 1933 Act
(or a successor rule thereto) ("Rule 144") may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
such securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 0000 Xxx) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC there under; and (iii)
neither the Company nor any other person is under any obligation to register
such securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption there under. The Company reserves
the right to place stop transfer instructions against the shares and
certificates for the Conversion Shares.
Legends. Each Buyer understands that the certificates or other instruments
representing the Convertible Debentures and or the Conversion Shares shall bear
a restrictive legend in
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substantially the following form (and a stop transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED
SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Conversion Shares upon
which it is stamped, if, unless otherwise required by state securities laws, (i)
in connection with a sale transaction, provided the Conversion Shares are
registered under the 1933 Act or (ii) in connection with a sale transaction,
such holder provides the Company with an opinion of counsel, in form acceptable
to the Company and its counsel, to the effect that a public sale, assignment or
transfer of the Conversion Shares may be made without registration under the
1933 Act.
Authorization, Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of such Buyer and is a valid and binding
agreement of such Buyer enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
Receipt of Documents. Each Buyer and his or its counsel has received and read in
their entirety: (i) this Agreement and each representation, warranty and
covenant set forth herein, the Investor Registration Rights Agreement, and the
Escrow Agreement; (ii) all due diligence and other information necessary to
verify the accuracy and completeness of such representations, warranties and
covenants; (iii) the Company's Form 10-KSB for the fiscal year ended December
31, 2000; (iv) the Company's Form 10-QSB for the fiscal quarter
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ended March 2001 and June 2001; and (v) answers to all questions the Buyer
submitted to the Company regarding an investment in the Company; and the Buyer
has relied on the information contained therein and has not been furnished any
other documents, literature, memorandum or prospectus.
Due Formation of Corporate and Other Buyers. If the Buyer(s) is a corporation,
trust, partnership or other entity that is not an individual person, it has been
formed and validly exists and has not been organized for the specific purpose of
purchasing the Convertible Debentures and is not prohibited from doing so.
Due Authorization of Fiduciary Buyers. If the Buyer(s) is purchasing the
Convertible Debentures in a fiduciary capacity for another person or entity,
including, without limitation, a corporation, partnership, trust or any other
entity, the Buyer(s) has been duly authorized and empowered to execute this
Agreement and such other person fulfills all the requirements for purchase of
the Convertible Debentures and agrees to be bound by the obligations,
representations, warranties, and covenants contained herein. Upon request of the
Company, the Buyer(s) will provide true, complete and current copies of all
relevant documents creating the Buyers, authorizing its investment in the
Company and/or evidencing the satisfaction of the foregoing.
Further Representations by Foreign Buyers. If the Buyer(s) is not a U.S. Person
(as defined below), such Buyer hereby represents that such Buyer(s) is satisfied
as to full observance of the laws of such Buyer's jurisdiction in connection
with any invitation to subscribe for the securities or any use of this
Agreement, including: (i) the legal requirements of such Buyer's jurisdiction
for the purchase of the securities, (ii) any foreign exchange restrictions
applicable to such purchase, (iii) any governmental or other consents that may
need to be obtained, and (iv) the income tax and other tax consequences, if any,
which may be relevant to the purchase, holding, redemption, sale, or transfer of
the securities. Such Buyer's subscription and payment for, and such Buyer's
continued beneficial ownership of, the securities will not violate any
applicable securities or other
8
laws of such Buyer's jurisdiction. The term "U.S. Person" as used herein shall
mean any person who is a citizen or resident of the United States or Canada, or
any state, territory or possession thereof, including, but not limited to, any
estate of any such person, or any corporation, partnership, trust or other
entity created or existing under the laws thereof, or any entity controlled or
owned by any of the foregoing.
No Legal Advice From the Company. Each Buyer acknowledges, that it had the
opportunity to review this Agreement and the transactions contemplated by this
Agreement with his or its own legal counsel and investment and tax advisors.
Each Buyer is relying solely on such counsel and advisors and not on any
statements or representations of the Company or any of its representatives or
agents for legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
Organization and Qualification. The Company and its subsidiaries are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. Each of the Company and its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole.
Authorization, Enforcement, Compliance with Other Instruments. (i) The Company
has the requisite corporate power and authority to enter into and perform this
Agreement, the Investor Registration Rights Agreement and any related
agreements, and to issue the Convertible Debentures and the Conversion Shares in
accordance with the terms hereof
9
and thereof, (ii) the execution and delivery of this Agreement, the Registration
Rights Agreement and any related agreements by the Company and the consummation
by it of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Convertible Debentures the Conversion Shares and
the reservation for issuance and the issuance of the Conversion Shares issuable
upon conversion or exercise thereof, have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders, (iii) this Agreement and
the Investor Registration Rights Agreement and any related agreements have been
duly executed and delivered by the Company, (iv) this Agreement, the Investor
Registration Rights Agreement and any related agreements constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
Capitalization. The authorized capital stock of the Company consists of
1,000,000,000 shares of Common Stock, $0.00001 par value, and 2,050,000 shares
of Preferred Stock, $0.001 par value. As of August 1, 2001, the Company had
579,723,956 shares of Common Stock and 82,200 shares of Preferred Stock issued
and outstanding. All of such outstanding shares have been validly issued and are
fully paid and nonassessable. Except as disclosed in the SEC Documents (as
defined in Section 3(f)) as amended, no shares of Common Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as disclosed in the SEC Documents,
as of the date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the
10
Company or any of its subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, (ii) there are no
outstanding debt securities and (iii) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except pursuant to the
Registration Rights Agreement). There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Convertible Debentures as described in this Agreement. The
Company has furnished to the Buyer true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "Certificate of Incorporation"), and the Company's By-laws, as in effect on
the date hereof (the "By-laws"), and the terms of all securities convertible
into or exercisable for Common Stock and the material rights of the holders
thereof in respect thereto other than stock options issued to employees and
consultants.
Issuance of Securities. The Convertible Debentures are duly authorized and, upon
issuance in accordance with the terms hereof, shall be duly issued, fully paid
and nonassessable, are free from all taxes, liens and charges with respect to
the issue thereof. The Conversion Shares issuable upon conversion of the
Convertible Debentures have been duly authorized and reserved for issuance. Upon
conversion or exercise in accordance with the Convertible Debentures the
Conversion Shares will be duly issued, fully paid and nonassessable.
No Conflicts. Except as disclosed in SEC Documents, the execution, delivery and
performance of this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby will not (i) result in a violation of
the Certificate of Incorporation, any certificate of designations of any
outstanding series of preferred stock of the Company or the By-laws or (ii)
conflict with or constitute a default (or an event
11
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the Nasdaq Stock Market
Inc.'s OTC Bulletin Board on which the Common Stock is quoted) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected. Except as disclosed in
the SEC Documents, neither the Company nor its subsidiaries is in violation of
any term of or in default under its Certificate of Incorporation or By-laws or
their organizational charter or by-laws, respectively, or any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or
order or any statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any material law,
ordinance, or regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. Except as
disclosed in the SEC Documents, all consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its subsidiaries are unaware of any facts or
circumstance, which might give rise to any of the foregoing.
SEC Documents: Financial Statements. Since January 1, 2001, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with
12
the SEC under of the Securities Exchange Act of 1934, as amended (the "1934
Act") (all of the foregoing filed prior to the date hereof or amended after the
date hereof and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, being
hereinafter referred to as the "SEC Documents"). The Company has delivered to
the Buyers or their representatives, or made available through the SEC's website
at xxxx://xxx.xxx.xxx., true and complete copies of the SEC Documents. As of
their respective dates, the financial statements of the Company disclosed in the
SEC Documents (the "Financial Statements") complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such Financial Statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyer which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) and (i) of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
10(b)-5. The SEC Documents do not include any untrue statements of material
fact, nor do they omit to state any material fact required to be stated therein
necessary to make the statements made, in light of the circumstances under which
they were made, not misleading.
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Absence of Litigation. Except as disclosed in the SEC Documents, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the Company's
subsidiaries, wherein an unfavorable decision, ruling or finding would (i) have
a material adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.
Acknowledgment Regarding Buyer's Purchase of the Convertible Debentures. The
Company acknowledges and agrees that the Buyer(s) is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that the
Buyer(s) is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Buyer(s) or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer's purchase
of the Convertible Debentures or the Conversion Shares. The Company further
represents to the Buyer that the Company's decision to enter into this Agreement
has been based solely on the independent evaluation by the Company and its
representatives.
No General Solicitation. Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the 0000 Xxx) in connection with the offer or sale of the Convertible Debentures
or the Conversion Shares.
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
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security or solicited any offers to buy any security, under circumstances that
would require registration of the Convertible Debentures or the Conversion
Shares under the 1933 Act or cause this offering of the Convertible Debentures
or the Conversion Shares to be integrated with prior offerings by the Company
for purposes of the 1933 Act.
Employee Relations. Neither the Company nor any of its subsidiaries is involved
in any labor dispute nor, to the knowledge of the Company or any of its
subsidiaries, is any such dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees are good.
Intellectual Property Rights. The Company and its subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now conducted. The
Company and its subsidiaries do not have any knowledge of any infringement by
the Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
xxxx registrations, trade secret or other similar rights of others, and, to the
knowledge of the Company there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing.
Environmental Laws. The Company and its subsidiaries are (i) in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all
15
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval.
Title. Any real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
Insurance. The Company and each of its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company believes to be prudent and customary in the
businesses in which the Company and its subsidiaries are engaged. Neither the
Company nor any such subsidiary has been refused any insurance coverage sought
or applied for and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not materially
and adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a whole.
Regulatory Permits. The Company and its subsidiaries possess all material
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
Internal Accounting Controls. The Company and each of its 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 generally
accepted accounting principles and to
16
maintain asset accountability, and (iii) the recorded amounts for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
No Material Adverse Breaches, etc. Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or is expected in
the future to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries. Neither the Company nor any of its subsidiaries is
in breach of any contract or agreement which breach, in the judgment of the
Company's officers, has or is expected to have a material adverse effect on the
business, properties, operations, financial condition, results of operations or
prospects of the Company or its subsidiaries.
Tax Status. The Company and each of its subsidiaries has made or filed all
federal and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (unless and only to the
extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) has paid all taxes and other governmental assessments and charges that
are material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set aside
on its books provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
Certain Transactions. Except as set forth in the SEC Documents and except for
arm's length transactions pursuant to which the Company makes payments in the
ordinary
17
course of business upon terms no less favorable than the Company could obtain
from third parties and other than the grant of stock options disclosed in the
SEC Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than 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 knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
Fees and Rights of First Refusal. The Company is not obligated to offer the
securities offered hereunder on a right of first refusal basis or otherwise to
any third parties including, but not limited to, current or former shareholders
of the Company, underwriters, brokers, agents or other third parties.
COVENANTS.
Best Efforts. Each party shall use its best efforts timely to satisfy each of
the conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.
Form D. The Company agrees to file a Form D with respect to the Conversion
Shares as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing. The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine is necessary to
qualify the Conversion Shares, or obtain an exemption for the Conversion Shares
for sale to the Buyers at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date.
Reporting Status. Until the earlier of (i) the date as of which the Investor(s)
(as that term is defined in the Registration Rights Agreement) may sell all of
the Conversion Shares without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto), or (ii) the date on which (A) the
Buyer(s) shall have sold all the Conversion Shares
18
and (B) none of the Convertible Debentures are outstanding (the "Registration
Period"), the Company shall use its commercially reasonable efforts to file in a
timely manner all reports required to be filed with the SEC pursuant to the 1934
Act and the regulations of the SEC there under, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations there under would otherwise
permit such termination.
Use of Proceeds. The Company will use the proceeds from the sale of the
Convertible Debentures for general corporate purposes.
Reservation of Shares. The Company shall take all action reasonably necessary to
at all times have authorized, and reserved for the purpose of issuance, such
number of shares of Common Stock as shall be necessary to effect the issuance of
the Conversion Shares. If at any time the Company does not have available such
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Conversion Shares of the Company shall call and hold a
special meeting of the shareholders within sixty (60) days of such occurrence,
for the sole purpose of increasing the number of shares authorized. The
Company's management shall recommend to the shareholders to vote in favor of
increasing the number of shares of Common Stock authorized. Management shall
also vote all of its shares in favor of increasing the number of authorized
shares of Common Stock.
Listings or Quotation. The Company shall promptly secure the listing or
quotation of the Conversion Shares upon each national securities exchange,
automated quotation system or Over-The-Counter Bulletin Board or other market,
if any, upon which shares of Common Stock are then listed or quoted (subject to
official notice of issuance) and shall use its best efforts to maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable under the terms of this Agreement.
The Company shall maintain the Common Stock's authorization for quotation in the
over-the counter market.
19
Expenses. Each of the Company and the Buyer(s) shall pay all costs and expenses
incurred by such party in connection with the negotiation, investigation,
preparation, execution and delivery of this Agreement and the Registration
Rights Agreement. The costs and expenses of the Consultant, its counsel, and
Xxxxxxxxxxx & Xxxxxxxx LLP shall be paid for by the Company at Closing in
accordance with the terms of the Consulting Agreement between the Company and
the Consultant, of even date herewith.
Corporate Existence. So long as any of the Convertible Debentures remain
outstanding, the Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, consolidation, sale of all or substantially all
of the Company's assets or any similar transaction or related transactions (each
such transaction, a "Sale of the Company") unless, prior to the consummation of
a Sale of the Company, the Company makes appropriate provision to insure that,
upon the consummation of such Sale of the Company, each of the holders of the
Convertible Debentures will thereafter have the right to acquire and receive
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Convertible Debentures had such Sale of the Company not taken place. In any such
case, the Company will make appropriate provision with respect to such holders'
rights and interests to insure that the provisions of this Section 4(h) will
thereafter be applicable to the Convertible Debentures.
Transactions With Affiliates. So long as any Convertible Debentures are
outstanding, the Company shall not, and shall cause each of its subsidiaries not
to, enter into, amend, modify or supplement, or permit any subsidiary to enter
into, amend, modify or supplement any agreement, transaction, commitment, or
arrangement with any of its or any subsidiary's officers, directors, person who
were officers or directors at any time during the previous two (2) years,
stockholders who beneficially own five percent (5%) or more of the Common Stock,
or Affiliates (as defined below) or with any individual related
20
by blood, marriage, or adoption to any such individual or with any entity in
which any such entity or individual owns a five percent (5%) or more beneficial
interest (each a "Related Party"), except for (a) customary employment
arrangements and benefit programs on reasonable terms, (b) any investment in an
Affiliate of the Company, (c) any agreement, transaction, commitment, or
arrangement on an arms-length basis on terms no less favorable than terms which
would have been obtainable from a person other than such Related Party, (d) any
agreement transaction, commitment, or arrangement which is approved by a
majority of the disinterested directors of the Company, for purposes hereof, any
director who is also an officer of the Company or any subsidiary of the Company
shall not be a disinterested director with respect to any such agreement,
transaction, commitment, or arrangement. "Affiliate" for purposes hereof means,
with respect to any person or entity, another person or entity that, directly or
indirectly, (i) has a ten percent (10%) or more equity interest in that person
or entity, (ii) has ten percent (10%) or more common ownership with that person
or entity, (iii) controls that person or entity, or (iv) shares common control
with that person or entity. "Control" or "controls" for purposes hereof means
that a person or entity has the power, direct or indirect, to conduct or govern
the policies of another person or entity.
Transfer Agent. The Company covenants and agrees that, in the event that the
Company's agency relationship with the transfer agent should be terminated for
any reason prior to a date which is two (2) years after the Closing Date, the
Company shall immediately appoint a new transfer agent and shall require that
the transfer agent execute and agree to be bound by the terms of the Irrevocable
Instructions (as defined herein) to Transfer Agent.
TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions in the form attached hereto as
Exhibit C to its transfer agent to issue certificates, registered in the name of
the Buyer(s) or its respective nominee(s), for the Conversion Shares
representing such amounts of Convertible Debentures as specified from time to
time by the Buyer(s) to the Company upon conversion of the Convertible
Debentures (the "Irrevocable Transfer Agent
21
Instructions"). Prior to registration of the Conversion Shares under the 1933
Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5,
and stop transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares prior to registration of such shares under the
0000 Xxx) will be given by the Company to its transfer agent and that the
Conversion Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section 5 shall affect in any way
the Buyer's obligations and agreement to comply with all applicable securities
laws upon resale of Conversion Shares. If the Buyer(s) provides the Company with
an opinion of counsel, reasonably satisfactory in form, and substance to the
Company, that registration of a resale by the Buyer(s) of any of the Conversion
Shares is not required under the 1933 Act, the Company shall permit the transfer
and, promptly instruct its transfer agent to issue one or more certificates in
such name and in such denominations as specified by the Buyer. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyer by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyer(s) shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Convertible
Debentures to the Buyer(s) at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
Each Buyer shall have executed this Agreement and the Registration Rights
Agreement and delivered the same to the Company.
22
The Buyer(s) shall have delivered to the Escrow Agent the Purchase Price for
Convertible Debentures in respective amounts as set forth next to each Buyer as
outlined on Schedule I attached hereto and the Escrow Agent shall have delivered
such funds to the Company by wire transfer of immediately available U.S. funds
pursuant to the wire instructions provided by the Company.
The representations and warranties of the Buyer(s) shall be true and correct in
all material respects as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date), and the Buyer(s) shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer(s) at or prior to the Closing Date.
CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer(s) hereunder to purchase the Convertible Debentures
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Buyer's sole benefit and may be waived by the Buyer(s) at any time in its sole
discretion:
The Company shall have executed this Agreement and the Registration Rights
Agreement, and delivered the same to the Buyer(s).
The Common Stock shall be authorized for quotation on The National Association
of Securities Dealers, Inc. OTC Bulletin Board, trading in the Common Stock
shall not have been suspended for any reason and all of the Conversion Shares
issuable upon conversion of the Convertible Debentures shall be approved for
listing or quotation on The National Association of Securities Dealers, Inc. OTC
Bulletin Board.
The representations and warranties of the Company shall be true and correct in
all material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Date as
though made at that time (except for representations
23
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate, executed by the President of the Company, dated as
of the Closing Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, without limitation an update as
of the Closing Date regarding the representation contained in Section 3(c)
above.
The Company shall have executed and delivered to the Buyer(s) the Convertible
Debentures in the respective amounts set forth opposite each Buyer(s) name on
Schedule I attached hereto.
As of the Closing Date, the Company shall have reserved out of its authorized
and unissued Common Stock, solely for the purpose of effecting the conversion of
the Convertible Debentures, shares of Common Stock to effect the conversion of
all of the Conversion then outstanding.
The Irrevocable Transfer Agent Instructions, in form and substance satisfactory
to the Buyer, shall have been delivered to and acknowledged in writing by the
Company's transfer agent.
INDEMNIFICATION.
In consideration of the Buyer's execution and delivery of this Agreement and
acquiring the Convertible Debentures and the Conversion Shares hereunder, and in
addition to all of the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and each
other holder of the Convertible Debentures and the Conversion Shares, and all of
their officers, directors, employees and agents (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Buyer Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Buyer
24
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Buyer Indemnitees or any of them as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement,
the Convertible Debentures or the Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement, or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out of
or resulting from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Indemnities, any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of
the Convertible Debentures or the status of the Buyer or holder of the
Convertible Debentures the Conversion Shares, as a Buyer of Convertible
Debentures in the Company. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
In consideration of the Company's execution and delivery of this Agreement, and
in addition to all of the Buyer's other obligations under this Agreement, the
Buyer shall defend, protect, indemnify and hold harmless the Company and all of
its officers, directors, employees and agents (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Company Indemnitees") from and against any and
all Indemnified Liabilities incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Buyer(s) in this Agreement, ,
instrument or
25
document contemplated hereby or thereby executed by the Buyer, (b) any breach of
any covenant, agreement or obligation of the Buyer(s) contained in this
Agreement, the Investor Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby executed by the Buyer, or
(c) any cause of action, suit or claim brought or made against such Company
Indemnitee based on material misrepresentations or due to a material breach and
arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement, the Investor Registration Rights Agreement or any
other instrument, document or agreement executed pursuant hereto by any of the
Company Indemnities. To the extent that the foregoing undertaking by each Buyer
may be unenforceable for any reason, each Buyer shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.
GOVERNING LAW: MISCELLANEOUS.
Governing Law. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York without regard to the principles of
conflict of laws. The parties further agree that any action between them shall
be heard in New York City, New York, and expressly consent to the jurisdiction
and venue of the Supreme Court of New York and the United States District Court
for the Southern District of New York for the adjudication of any civil action
asserted pursuant to this Paragraph.
Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
(4) additional original executed signature pages to be physically delivered to
the other party within five (5) days of the execution and delivery hereof.
Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
26
Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
Entire Agreement, Amendments. This Agreement supersedes all other prior oral or
written agreements between the Buyer(s), the Company, their affiliates and
persons acting on their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
Notices. Any notices, consents, waivers, or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon confirmation of receipt, when sent by facsimile; (iii)
three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company, to: Vertical Computer Systems, Inc.
0000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxx
President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
27
With a copy to: Xxxxxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx - Xxxxx 0000
Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Transfer Agent, to:
If to the Investor: At the address listed on Schedule A.
If to the Buyer(s), to its address and facsimile number on Schedule I, with
copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns. Neither the
Company nor any Buyer shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party hereto.
No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person.
Survival. Unless this Agreement is terminated under Section 9(l), the
representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall survive the
Closing for a period of one (1) year following the date on which the Convertible
Debentures are converted in full. The Buyer(s) shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.
Publicity. The Company and the Buyer(s) shall have the right to approve, before
issuance any press release or any other public statement with respect to the
transactions
28
contemplated hereby made by any party; provided, however, that the Company shall
be entitled, without the prior approval of the Buyer(s), to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations (the Company shall use
its best efforts to consult the Buyer(s) in connection with any such press
release or other public disclosure prior to its release and Buyer(s) shall be
provided with a copy thereof upon release thereof).
Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
Termination. In the event that the Closing shall not have occurred with respect
to the Buyers on or before five (5) business days from the date hereof due to
the Company's or the Buyer's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the non-breaching party's failure to waive such
unsatisfied condition(s)), the non-breaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on such date without liability of any party to any other party;
provided, however, that if this Agreement is terminated pursuant to this Section
9(l), the Company shall remain obligated to reimburse the Buyer(s) for the
expenses described in Section 4(g) above.
No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
29
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY:
VERTICAL COMPUTER SYSYTEMS INC.
By:____________________________
Name: Xxxxxxx Xxxx
Title: President
INVESTOR:
By:____________________________
Name:
30
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
31
EXHIBIT B
FORM OF ESCROW AGREEMENT
32
EXHIBIT C
TRANSFER AGENT INSTRUCTIONS
33
SCHEDULE I
SCHEDULE OF BUYERS
Amount of
Name Address/Facsimile Number of Buyer Subscription
---------------------- ----------------------------------------- -------------
34
