Exhibit 4.9
FORM OF
COMMON STOCK PURCHASE AGREEMENT
BETWEEN
ALPHA VENTURE CAPITAL, INC.
AND
ECONNECT
________________________________________________________________
DATED AS OF JULY 18, 2001
This COMMON STOCK PURCHASE AGREEMENT is entered into as of the 18/th/ day
of July, 2001 (this "Agreement"), between Alpha Venture Capital, Inc., a
corporation organized under the laws of the Xxxx Islands (the "Investor"), and
eConnect, a corporation organized and existing under the laws of the State of
Nevada (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor
and the Investor shall purchase from time to time as provided herein, up to
twenty million dollars ($20,000,000) of the Common Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended and the regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Affiliate" shall have the meaning assigned to such term
in Section 3.4 hereof.
Section 1.2 "Average Daily Trading Volume" shall mean the dollar amount
of the average daily trading volume of shares of Common Stock, calculated based
upon the average Bid Price and average daily trading volume traded over the
twenty (20) Trading Days preceding the date of the Put Purchase notice.
Section 1.3 "Bid Price" shall mean the closing bid price (as reported
by Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.4 "Business Day" means a day on which the Nasdaq stock
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market is open for regular trading.
Section 1.5 "Capital Shares" shall mean the Common Stock and any shares
of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.6 "Closing Date" shall mean the date hereof.
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Section 1.7 "Commitment Amount" shall mean the twenty million dollars
($20,000,000) up to which the Investor has agreed to provide to the Company in
order to purchase Put Shares pursuant to the terms and conditions of this
Agreement.
Section 1.8 "Commitment Period" shall mean the period commencing on
the Effective Date and expiring on the earlier to occur of (x) the date on which
the Investor shall have purchased Put Shares pursuant to this Agreement for an
aggregate Purchase Price of twenty million dollars ($20,000,000), or (y) the
date occurring 12 (twelve) months from the Effective Date.
Section 1.9 "Common Stock" shall mean the Company's common stock,
$0.001 par value per share.
Section 1.10 "Common Stock Equivalents" shall mean any securities that
are convertible into or exchangeable for Common Stock or any warrants, options
or other rights to subscribe for or purchase Common Stock or any such
convertible or exchangeable securities.
Section 1.11 "Condition Satisfaction Date" shall have the meaning
assigned to such term in Section 6.2 hereof.
Section 1.12 "Control Person" shall have the meaning assigned to such
term in Section 11.2(a) hereof.
Section 1.13 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.14 "XXXXX" shall mean the SEC's electronic data gathering and
retrieval system.
Section 1.15 "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering resale of the
Registrable Securities.
Section 1.16 "Effectiveness Target Date" shall have the meaning assigned
to such Term in Section 5.1 hereof.
Section 1.17 "Escrow Agent" means the company appointed by the Company
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to act as escrow agent for the shares to be sold under this agreement.
Section 1.18 "Escrow Funds" means the funds held by the Escrow Agent
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under the Joint Escrow Instructions together with all interest and income earned
thereon.
Section 1.19 "Escrow Period" is defined in Section 2.4(c).
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Section 1.20 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and the regulations promulgated thereunder.
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Section 1.21 "Floor Price" shall mean the lowest Market Price specified
in the Put Purchase Notice for calculation of the Purchase Price, below which
the Company will not sell Put Shares to the Investor.
Section 1.22 "Investment Amount" shall mean the dollar amount (within
the range specified in Section 2.1) to be invested by the Investor to purchase
Put Shares with respect to any Put Purchase Notice delivered by the Company to
the Investor in accordance with Section 2.1 hereof.
Section 1.23 "Joint Escrow Instructions" means the joint escrow
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instructions in the form of Exhibit B hereto.
Section 1.24 "Legend" shall have the meaning assigned to such term in
Section 8.1 hereof.
Section 1.25 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects or financial condition of the
Company that is material and adverse to the Company or to the Company and such
other entities controlling or controlled by the Company, taken as a whole,
and/or any condition, circumstance or situation that would prohibit or otherwise
interfere with the ability of the Company to enter into and perform its
obligations under this Agreement.
Section 1.26 "Market Price" shall mean for the purpose of calculating
the Purchase Price of the Put Shares, the average of the Bid Prices for all the
Trading Days during the Valuation Period.
Section 1.27 "Maximum Put Amount" shall mean the lesser of (a) two
hundred thousand dollars ($200,000) and (b) fifteen percent (15%) of the Average
Daily Trading Volume.
Section 1.28 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.29 "Outstanding" when used with reference to Common Stock
or Capital Shares (collectively the "Shares"), shall mean, at any date as of
which the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.30 "Person" shall mean an individual, a corporation, a
partnership, an association, a limited liability company, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.31 "Principal Market" shall mean the NASD OTC Bulletin Board,
Nasdaq SmallCap Market, the Nasdaq National Market, the American Stock Exchange
or the New York Stock Exchange, whichever is at the time the principal trading
exchange or market for the Common Stock.
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Section 1.32 "Prospectus" as used in this Agreement means the prospectus
in the form included in the Registration Statement, as supplemented by any
prospectus supplement filed with the SEC pursuant to Rule 424(b).
Section 1.33 "Purchase Price" as used in this Agreement shall mean
eighty-five percent (85%) of the Market Price on the Put Date. The foregoing
percentage is the "Purchase Price Percentage."
Section 1.34 "Put" shall mean each occasion the Company elects to draw
down a portion from the equity line by exercising its right to tender a Put
Purchase Notice requiring the Investor to purchase a specified amount of the
Company's Common Stock, subject to the terms of this Agreement which tender must
be given to the Investor.
Section 1.35 "Put Closing" shall mean one of the closings of a purchase
and sale of the Put Shares pursuant to Section 2.3.
Section 1.36 "Put Closing Date" shall mean, subject to Section 3 of the
Escrow Agreement with respect to a Put Closing the twelth (12/th/) Trading Day
following the Put Date related to such Put Closing, provided all conditions to
such Put Closing have been satisfied on or before such Trading Day.
Section 1.37 "Put Date" shall mean the date on which a Put Purchase
Notice is delivered to the Investor.
Section 1.38 "Put Purchase Notice" shall mean a written notice to the
Investor setting forth the Investment Amount that the Company intends to sell to
the Investor, as such form is attached hereto as Exhibit A.
Section 1.39 "Put Shares" shall mean all shares of Common Stock issued or
issuable pursuant to a Put that has occurred or may occur in accordance with the
terms and conditions of this Agreement.
Section 1.40 "Registrable Securities" shall mean the Put Shares until
the Registration Statement has been declared effective by the SEC and all Put
Shares have been disposed of pursuant to the Registration Statement.
Section 1.41 "Registration Statement" shall mean the registration
statement on Form SB-2 filed with the SEC for the registration of the Put
Shares, as such Registration Statement may be amended from time to time.
Section 1.42 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.43 "SEC" shall mean the Securities and Exchange Commission.
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Section 1.44 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.45 "Securities Act" shall have the definition ascribed to it in
the recitals of this Agreement.
Section 1.46 "SEC Documents" shall mean, to the extent applicable, the
Company's latest Form 10-K as of the time in question, all Forms 10-Q and 8-K
filed thereafter and all exhibits and amendments thereto and the Proxy Statement
for its latest fiscal year as of the time in question until such time the
Company no longer has an obligation to maintain the effectiveness of a
Registration Statement.
Section 1.47 "Trading Cushion" shall mean the mandatory minimum fifteen
(15) Trading Days between Put Dates.
Section 1.48 "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.49 "Valuation Event" shall mean an event in which the Company
at any time during a Valuation Period takes any of the following actions but
shall not include such events as set forth on Schedule 1.49:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any other
distribution of its Capital Shares;
(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing Subsections (a) and
(b) above, at a price per share less, or for other consideration lower,
than the Bid Price in effect immediately prior to such issuance, or without
consideration;
(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant
to such warrants, options or other rights shall be less than the Bid Price
in effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable for
Capital Shares and the consideration per share for which Additional Capital
Shares may at any time thereafter be issuable pursuant to the terms of such
convertible or exchangeable securities shall be less than the Bid Price in
effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences of indebtedness
to the holders of its Capital Shares as a dividend in liquidation or by way
of return of capital or other than as a dividend payable out of earnings or
surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all
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or substantially all of the Company's assets (other than under the
circumstances provided for in the foregoing subsections (a) through (e));
or
(g) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing subsections
(a) through (f) hereof, inclusive, which in the opinion of the Company's
Board of Directors, determined in good faith, would have a materially
adverse effect upon the rights of the Investor at the time of a Put.
Section 1.50 "Valuation Period" shall mean the period of ten (10)
Trading Days commencing on the Put Date during which the Purchase Price of the
Common Stock is determined.
Section 1.51 "Warrant" shall mean the common stock purchase warrants of
the Company described in Section 2.5.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Investments/Puts. Upon the terms and conditions set
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forth herein (including, without limitation, the provisions of Article VII
hereof), the Company may exercise a Put by the delivery of a Put Purchase Notice
to the Investor. The number of Put Shares that the Investor shall receive
pursuant to such Put shall be determined by dividing the relevant portions of
the Investment Amount specified in the Put Purchase Notice by the Purchase Price
determined during the Valuation Period. The Investment for each Put as
designated by the Company in the applicable Put Purchase Notices shall be
neither less than the Minimum Put Amount and not more than the Maximum Put
Amount and shall be subject always to a limit of 200% of the Average Daily
Trading Volume or, in combination with all the other Puts exercised under this
Agreement, not more than the Commitment Amount, and any such Investment Amount
will be reduced so as to neither exceed the Maximum Put Amount nor the
Commitment Amount.
Section 2.2 Mechanics.
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(a) Put Purchase Notice. At any time during the Commitment Period,
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the Company may deliver a Put Purchase Notice, in substantially the form
and substance of Exhibit A, to the Investor, subject to the conditions set
forth in Section 6.2.
(b) Date of Delivery of Put Purchase Notice. A Put Purchase Notice
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shall be deemed delivered on (i) the Trading Day it is received by
facsimile or otherwise by the Investor if such notice is received prior to
the start of trading on the Principal Market, or (ii) the immediately
succeeding Trading Day if it is received by facsimile or otherwise after
the start of trading on the Principal Market on a Trading Day or at any
time on a day which is not a Trading Day. No Put Purchase Notice may be
deemed delivered on a day that is not a Trading Day.
(c) Determination of Put Shares Issuable. The Purchase Price shall
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be based on the Purchase Price Percentage of the Market Price during the
Valuation Period; provided, however, that the Market Price shall not be
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lower than the Floor Price indicated
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in the Put Purchase Notice. The minimum Floor Price shall be two cents
($0.02), not taking into account the Purchase Price Percentage, unless
otherwise agreed upon by both parties. Prior to issuing any Put Purchase
Notice, the Company shall have Put Shares representing at least the
Investment Amount registered under the Registration Statement. The number
of Put Shares to be purchased by the Investor shall be settled on the Put
Closing Date.
Section 2.3 Share Escrow.
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(a) Simultaneous with the execution of this Agreement, the Company
agrees to deliver one hundred five million (105,000,000) shares of Common
Stock to the Escrow Agent to be held in Escrow, pursuant to the terms of
the Escrow Agreement.
(b) Simultaneous with the effectiveness of the Registration
Statement, the Company shall deliver to the Transfer Agent and the Escrow
Agent, the notice of effectiveness of the Registration Statement.
(c) The Common Stock shall be maintained with the Escrow Agent until
the termination of Investor's obligations under this Agreement ("Escrow
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Period"). At such time, the Escrow Agent, upon written notice from the
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Company, shall release the unissued share certificates back to the Transfer
Agent within five (5) Business Days thereafter.
Section 2.4 Share Issuance.
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(a) Not later than one (1) Business Day after the last Trading Day of
the Valuation Period, the Investor shall deliver a letter to the Escrow
Agent, advising the Escrow Agent of the maximum number of shares that may
be sold by the Investor free of restrictive legend pursuant to the relevant
Put Purchase Notice (the "Share Valuation Letter"). Investor shall make
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payment of the Put (less any applicable legal or other fees) within two (2)
Business Days after delivery of the Share Valuation Letter to the Escrow
Agent ("Share Payment Date").
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(b) In the event the Company does not deliver the requisite
instructions under Section 2.4(a) to the Escrow Agent within one (1)
Business Day after the last Trading Day of the
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Valuation Period, the Investor may at its option, elect to treat the Put
Purchase Notice as null and void.
Section 2.5 Purchase and Sale of Warrants. Under the terms of this
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Agreement on the date hereof, the Company shall issue to the Investor Warrant to
purchase 10,500,000 shares of Common Stock (the "Warrants"), as described in the
Common Stock Purchase Warrant.
Section 2.6 Valuation Event. If a Valuation Event occurs at any time
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during a Valuation Period, the Investor may in its sole discretion (i) purchase
the Investment Amount of shares of Common Stock granted during such Valuation
Period on the terms at which the Company issued shares of Common Stock pursuant
to the Valuation Event during such Valuation Period, net of any third party's
discount and fees, (ii) purchase the Investment Amount of shares of Common Stock
granted during such Valuation Period at the applicable Purchase Price for such
Valuation Period, or (iii) elect not to purchase any shares of Common Stock
during such Valuation Period. The Investor shall notify the Company of its
election on the last Trading Day of the Valuation Period.
Section 2.7 Termination of Investment Obligation. The obligation of the
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Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Put Closing Date that has not yet occurred) in the
event that (i) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement for a consecutive ten day calendar
period or for an aggregate of thirty (30) Trading Days during the Commitment
Period, for any reason, or (ii) the Company shall at any time fail to comply
with the requirements of Section 5.2, 5.3, 5.4, 5.5 or 5.6.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for
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its own account and not with a view to the distribution of the Common Stock, and
the Investor has no present arrangement (whether or not legally binding) at any
time to sell the Common Stock to or through any person or entity; provided,
however, that by making the representations herein, the Investor does not agree
to hold the Common Stock for any minimum or other specific term and reserves the
right to dispose of the Common Stock at any time in accordance with federal and
state securities laws applicable to such disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
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investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and the Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section 3.3 Authority. This Agreement has been duly authorized and
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validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency,
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or similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of general
application.
Section 3.4 Not an Affiliate. The Investor is not an officer, director
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or to Investor's good faith belief, an "affiliate" (as that term is defined in
Rule 405 of the Securities Act) of the Company.
Section 3.5 Absence of Conflicts. The execution and delivery of this
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Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated hereby, and compliance
with the requirements hereof, will not violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Investor, or, to the
Investor's knowledge, (a) violate any provision of any indenture, instrument or
agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, (b) conflict with or constitute a material default
thereunder, (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
Section 3.6 Disclosure; Access to Information. The Investor has
---------------------------------
received all documents, records, books and other information pertaining to
Investor's investment in the Company that have been requested by the Investor.
The Company is subject to the periodic reporting requirements of the Exchange
Act, and the Investor has had access to copies of any such reports that have
been requested by it.
Section 3.7 Manner of Sale. At no time was Investor presented with or
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solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor, except as may be set
forth in the Disclosure Schedule delivered in connection herewith, that:
Section 4.1 Organization of the Company. The Company is a corporation
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duly organized and existing in good standing under the laws of the State of
Nevada and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company 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 or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate
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power and authority to enter into and perform its obligations under this
Agreement to issue the Put Shares; (ii) the execution, issuance and delivery of
this Agreement, the issuance of the Put Shares and the
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consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required; and (iii) this Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application.
Section 4.3 Capitalization. As of July 16, 2001, the authorized
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capital stock of the Company consists of five hundred million (500,000,000)
shares of Common Stock, of which three hundred thirty-four million three hundred
forty-five thousand seven hundred seventy-five (334,345,775) shares are issued
and outstanding and zero (0) shares of preferred stock. Except as set forth in
Schedule 4.3, there are no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or giving
any right to subscribe for any shares of capital stock of the Company. All of
the outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable.
Section 4.4 Common Stock. As of the commencement of the Commitment
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Period, the Company will have registered its Common Stock pursuant to
Section 12(b) or 12(g) of the Exchange Act and be in full compliance with all
reporting requirements of the Exchange Act, if any, and the Company will have
maintained all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is then listed or quoted on the Principal Market.
As of the date hereof, the Common Stock is traded on the OTC Bulletin Board.
Section 4.5 Financial Statements. The Company has delivered or made
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available to the Investor true and complete copies of unaudited financial
statements (with footnotes if available) as of and for the period ending
March 31, 2001 (the "Financial Statements"). The Company has not provided to the
Investor any information that, according to applicable law, rule or regulation,
should have been disclosed publicly prior to the date hereof by the Company, but
which has not been so disclosed. The Financial Statements fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of operations for the periods then ended, subject to normal
year-end audit adjustments.
Section 4.6 Valid Issuances. Assuming the accuracy of the
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representations and warranties contained in Sections 3.1, 3.2, 3.4 and 3.7
hereof both at the date hereof and at the time of sale and issuance, the sale
and issuance of the Put Shares will be exempt from registration under the
Securities Act in reliance upon Section 4(2) thereof and/or Regulation D thereto
and when issued, the Put Shares shall be duly and validly issued, fully paid,
and nonassessable. Neither the sales of the Put Shares pursuant to, nor the
Company's performance of its obligations under this Agreement will (a) result in
the creation or imposition of any liens, charges, claims or other encumbrances
upon the Put Shares or any of the assets of the Company, or (b) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
to or acquire the Capital Shares or other securities of the Company. The Put
Shares shall not subject the Investor to personal liability by reason of the
possession thereof.
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Section 4.7 No General Solicitation or Advertising in Regard to this
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Transaction. Neither the Company nor any of its affiliates nor any distributor
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or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Put Shares, or (ii) made any
offers or sales of any security or solicited any offers to buy any security
under any circumstances that would require registration of the Common Stock
under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
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available to the Investor true and correct copies of the Company's Certificate
of Incorporation, as amended and in effect on the date hereof (the
"Certificate"), and the Company's By-Laws, as amended and in effect on the date
hereof (the "By-Laws").
Section 4.9 No Conflicts. The execution, delivery and performance of
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this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including, without limitation, the issuance of
Common Stock do not and will not (a) result in a violation of the Company's
Certificate or By-Laws or (b) conflict with, or constitute a default (or an
event that 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 material agreement, indenture, instrument or any "lock-up"
or similar provision of any underwriting or similar agreement to which the
Company is a party, or (c) result in a violation of any federal, state, local or
foreign law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or by which any
property or asset of the Company is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, conflict with or
in default under any of the foregoing; provided that, for purposes of the
Company's representations and warranties as to violations of foreign law, rule
or regulation referenced in clause (c), no such representations and warranties
are being made insofar as the execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby are or may be affected by the status of the Investor under
or pursuant to any such foreign law, rule or regulation. The business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental entity, except for possible violations that either
individually or in the aggregate do not and will not have a Material Adverse
Effect. The Company is not required under federal, state or local law, rule or
regulation 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 this Agreement or issue
and sell the Common Stock in accordance with the terms hereof (other than any
SEC, NASD or state securities filings that may be required to be made by the
Company subsequent to any Put Closing, any registration statement that may be
filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on any Principal Market);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
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Section 4.10 No Material Adverse Change. Since the date of the Financial
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Statements described in Section 4.5, no Material Adverse Effect has occurred or
exists with respect to the Company.
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities
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or obligations which are material, individually or in the aggregate, and are not
disclosed to the Investor in the Financial Statements or otherwise in writing,
other than those incurred in the ordinary course of the Company's businesses
since the date of the Financial Statements and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company.
Section 4.12 No Undisclosed Events or Circumstances. No event or
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circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires as of the date hereof, public
disclosure or announcement prior to the date hereof by the Company.
Section 4.13 No Integrated Offering. Neither the Company, nor any of its
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affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 Litigation and Other Proceedings. Except as set forth in
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the Financial Statements described in Section 4.5, there are no lawsuits or
proceedings pending or to the best knowledge of the Company threatened, against
the Company, nor has the Company received any written or oral notice of any such
action, suit, proceeding or investigation, which might have a Material Adverse
Effect. Except as set forth on Schedule 4.14, no judgment, order, writ,
injunction, decree or award has been issued by or, so far as is known by the
Company, requested by any court, arbitrator or governmental agency which might
result in a Material Adverse Effect.
Section 4.15 No Misleading or Untrue Communication. The Company and any
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Person representing the Company, in connection with the transactions
contemplated by this Agreement, have not made, at any time, any communication in
connection with same, which contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements, in
the light of the circumstances under which they were made, not misleading.
Section 4.16 Non-Public Information. Neither the Company nor any of its
----------------------
officers of agents has disclosed any material non-public information about the
Company to the Investor.
Section 4.17 Securities Act of 1933. The Company has complied and will
----------------------
comply in all material respects with all applicable federal and state securities
laws in connection with the offer, issuance and sale of the Put Shares
hereunder.
(a) Each Prospectus included as part of the Registration Statement as
originally filed or as part of any amendment or supplement thereto, or
filed pursuant to Rule 424 under the Securities Act, complied when so filed
in all material respects with
12
the provisions of the Securities Act. The SEC has not issued any order
preventing or suspending the use of any Prospectus.
(b) The Company meets the requirements for the use of Form SB-2 under
the Securities Act. The Registration Statement in the form in which it
became effective and also in such form as it may be when any post-effective
amendment thereto became effective and the Prospectus and any supplement or
amendment thereto when filed with the SEC under Rule 424(b) under the
Securities Act, complied in all material respects with the provisions of
the Securities Act and did not at any such times contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein (in the case
of the Prospectus, in the light of the circumstances under which they made)
not misleading, except that this representation and warranty does not apply
to statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
relating to the Investor furnished to the Company in writing by or on
behalf of the Investor expressly for use therein.
(c) The Company has not distributed and, prior to the completion of
the sale of the Put Shares to the Investor, will not distribute any
offering material in connection with the offering and sale of the Put
Shares other than the Registration Statement, the Prospectus or other
materials, if any, permitted by the Securities Act.
Section 4.18 Use of Proceeds. The proceeds from the sale of the Put
---------------
Shares will be used by the Company for general corporate purposes.
Section 4.19 Brokers, Finders. Except for payment of commitment fees
----------------
to Investor equal to six percent (6%) of the amount specified in each Put
Purchase Notice, payment of which shall be deducted by the Investor for the
Investment Amount of each Put, the Company has taken no action which would give
rise to any claim by any Person for brokerage commission, finder's fees or
similar payments by Investor relating to this Agreement or the transactions
contemplated hereby.
ARTICLE V
COVENANTS OF THE COMPANY
Section 5.1 Effective Registration Statement. The Company will use its
--------------------------------
best efforts to file the Registration Statement within 28 calendar days after
the Closing Date. The Company will cause the Registration Statement or such
post-effective amendment to become effective as soon as reasonably practicable,
and in any event no later than the date which is 120 calendar days after the
Closing Date (the "Effectiveness Target Date"). If the Registration Statement is
-------------------------
not declared effective by the SEC by the Effectiveness Target Date, (a) the
Company shall pay to the Investor ten thousand dollars ($10,000) in cash, as
liquidated damages and not as a penalty, [and (b) the Investor shall have the
right to terminate this Agreement]. The Company will advise the
13
Investor promptly and, if requested by the Investor, will confirm such advice in
writing, when it receives notice that the Registration Statement or such post-
effective amendment has become effective.
Section 5.2 Reservation of Common Stock. As of the date hereof, the
---------------------------
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the Put
Shares.
Section 5.3 Quoting or Listing of Common Stock. The Company shall
----------------------------------
maintain the quoting or listing of the Common Stock on a Principal Market, and
as soon as practicable (but in any event prior to the commencement of the
Commitment Period) to list the Put Shares on the Principal Market. The Company
further shall, if the Company applies to have the Common Stock traded on any
other Principal Market, include in such application the Put Shares, and shall
take such other action as is necessary or desirable to cause the Common Stock to
be listed on such other Principal Market as promptly as possible. The Company
shall take all action necessary to continue the quoting, listing and trading of
its Common Stock on the Principal Market and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the Principal Market.
Section 5.4 Exchange Act Registration. The Company shall cause its
-------------------------
Common Stock to become and continue to be registered under Section 12(g) or
12(b) of the Exchange Act, will comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act.
Section 5.5 Legends. The certificates evidencing the Common Stock to be
-------
sold to the Investor shall be free of legends.
Section 5.6 Corporate Existence. The Company will take all steps
-------------------
necessary to preserve and continue the corporate existence of the Company.
Section 5.7 Additional SEC Documents. In the event that the SEC
------------------------
Documents furnished or submitted to the SEC by the Company are not available or
accessible by the Investor on XXXXX, the Company will deliver to the Investor,
as and when the originals thereof are submitted to the SEC for filing, copies of
all such SEC Documents.
Section 5.8 Blackout Period. The Company will immediately notify the
---------------
Investor upon the occurrence of any of the following events in respect of the
Registration Statement or Prospectus: (i) receipt of any request for additional
information by the SEC or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to the Registration Statement or related Prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the
14
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the happening of any event that makes any
statement made in the Registration Statement or Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires the making of any changes in the Registration
Statement, Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to the Investor any such supplement or amendment to
the Prospectus. The Company shall not deliver to the Investor any Put Purchase
Notice during the continuation of any of the foregoing events or if the Company
has knowledge that any of the foregoing events will occur within ten (10) days
of such knowledge. If the Registration Statement shall cease to be effective for
any reason whatsoever (other than as a result of any actions or omissions of the
Investor), the Company shall immediately take all necessary action to cause the
Registration Statement to be amended or supplemented so as to cure the default.
Failure to cure such default within fifteen (15) business days shall result in
the Company paying a liquidated damage penalty of $1,000 per day for so long as
more than 10,000 shares of Common Stock are held by the Investor.
Section 5.9 Expectations Regarding Put Purchase Notices. Within ten
-------------------------------------------
(10) days after the commencement of each calendar quarter occurring subsequent
to the commencement of the Commitment Period, the Company undertakes to notify
the Investor as to its reasonable expectations as to the dollar amount it
intends to put during such calendar quarter, if any, through the issuance of Put
Purchase Notices. Such notification shall constitute only the Company's good
faith estimate and shall in no way obligate the Company to put such amount, or
any amount, or otherwise limit its ability to deliver Put Purchase Notices. The
failure by the Company to comply with this provision can be cured by the
Company's notifying the Investor at any time as to its reasonable expectations
with respect to the current calendar quarter.
Section 5.10 Disclosure of Material Information. In the event that any
----------------------------------
or all of the information set forth on Schedule 7.2(a) hereto becomes material,
the Company shall make full and complete public disclosure if required by and in
accordance with all applicable law.
Section 5.11 Other Financings. The Company covenants and agrees that it
-----------------
will not, without the prior written consent of Investor, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock with any third party until the later of (a) July 31, 2002 or
(b) the expiration of the Commitment Period (the "Restrictive Period"), other
------------------
than as agreed to in writing by the parties; provided, however, that during the
Restrictive Period, the Company shall be entitled to issue equity securities to
strategic partners and/or in connection with mergers or acquisitions in which
the Company is the surviving entity, so long as such securities are "restricted
securities" pursuant to Rule 144 of the Securities Act.
15
Section 5.12 Issuance of Put Shares. The sale and issuance of the Put
----------------------
Shares shall be made in accordance with the provisions and requirements of
applicable federal and state law.
Section 5.13 Amendments to the Registration Statement. The Company will
----------------------------------------
not (i) file any amendment to the Registration Statement or make any amendment
or supplement to the Prospectus relating to the Investor in any way whatsoever
of which the Investor shall not previously have been advised or to which the
Investor shall reasonably object after being so advised or (ii) so long as, in
the reasonable opinion of counsel for the Investor, a Prospectus is required to
be delivered in connection with sales by any Investor or dealer, file any
information, documents or reports pursuant to the Exchange Act without
delivering a copy of such information, documents or reports to the Investor,
promptly following such filing.
Section 5.14 Prospectus Delivery. The Company shall file a prospectus
-------------------
supplement to its Registration Statement on the first Trading Day immediately
following the end of each Valuation Period, and will deliver to the Investor,
without charge, in such quantities as reasonably requested by the Investor,
copies of each form of Prospectus and prospectus supplement on each Put Closing
Date. The Company consents to the use of the Prospectus (and of any amendment
or supplement thereto) in accordance with the provisions of the Securities Act
and with the securities or Blue Sky laws of the jurisdictions in which the Put
Shares may be sold by the Investor, in connection with the offering and sale of
the Put Shares and for such period of time thereafter as the Prospectus is
required by the Securities Act to be delivered in connection with sales of the
Put Shares. If during such period of time any event shall occur that in the
judgment of the Company or in the opinion of counsel for the Investor is
required to be set forth in the Prospectus (as then amended or supplemented) or
should be set forth therein in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or if it
is necessary to supplement or amend the Prospectus to comply with the Securities
Act or any other law, the Company will forthwith prepare and file with the SEC
an appropriate supplement or amendment thereto, and will expeditiously furnish
to the Investor a reasonable number of copies thereof.
Section 5.15 PR Firm. Prior to delivering a Put Purchase Notice to the
-------
Investor, the Company shall retain a public relations firm which is a member
of the National Investor Relations Institute, if the Company has not already
done so.
ARTICLE VI
CONDITIONS TO DELIVERY OF PUT
PURCHASE NOTICES AND CONDITIONS TO PUT CLOSING
6.1 Conditions Precedent to the Obligation of the Company to Issue and
------------------------------------------------------------------
Sell Common Stock. The obligation hereunder of the Company to issue and sell the
-----------------
Put Shares to the Investor incident to each Put Closing is subject to the
satisfaction, at or before each such Put Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
--------------------------------------------------------
representations and warranties of the Investor shall be true and correct in
all material
16
respects as of the date of this Agreement and as of the date of each such
Put Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have performed,
---------------------------
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by the Investor at or prior to such Put Closing.
Section 6.2 Conditions Precedent to the Right of the Company to Deliver
-----------------------------------------------------------
a Put Purchase Notice and the Obligation of the Investor to purchase Put
------------------------------------------------------------------------
Shares. The right of the Company to deliver a Put Purchase Notice and the
------
obligation of the Investor hereunder to acquire and pay for the Put Shares
incident to a Put Closing is subject to the satisfaction, (i) on the Put Date,
(ii) for each day during the Valuation Period, and (iii) on the applicable Put
Closing Date (each a "Condition Satisfaction Date"), of each of the following
conditions:
(a) Effective Registration Statement. The Company shall have
the Put Shares registered under the Registration Statement equal to or in
excess of the number of Put Shares issuable pursuant this Agreement. The
Registration Statement registering the offer and sale of the Put Shares
shall have been declared effective by the SEC and shall have been amended
or supplemented, as required, to disclose the sale of the Put Shares prior
to each Put Closing Date, as applicable, and there shall be no stop order
suspending the effectiveness of the Registration Statement.
(b) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in
all material respects as of the date when made and as of each Condition
Satisfaction Date as though made at each such time (except for
representations and warranties specifically made as of a particular date)
with respect to all periods, and as to all events and circumstances
occurring or existing to and including each Condition Satisfaction Date,
except for any conditions which have temporarily caused any representations
or warranties herein to be incorrect and which have been corrected with no
continuing impairment to the Company or the Investor.
(c) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to each Condition
Satisfaction Date, including but not limited to the requirements for the
Company and its transfer agent set forth in Sections 8.1 and 8.2 to deliver
Common Stock without legends pursuant to the terms set forth in Sections
8.1 and 8.2, and Exhibit B hereto.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction that prohibits or directly or materially adversely affects any
of the transactions contemplated by this Agreement, and no proceeding shall
have been commenced that may have the effect of prohibiting or materially
adversely affecting any of the transactions contemplated by this Agreement.
17
(e) Adverse Changes. Since the date of filing of the Company's most
recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(f) No Suspension of Trading In or Delisting of Common Stock. The
trading of the Common Stock (including without limitation the Put Shares)
shall not have been suspended by the SEC, the Principal Market or the NASD
and the Common Stock (including without limitation the Put Shares) shall
have been approved for listing or quotation and shall have actually been
listed or quoted on, and shall not have been delisted from the Principal
Market, nor shall the Company have received any letter or notice of any
suspension or delisting or warning of such suspension or delisting. The
issuance of shares of Common Stock with respect to the applicable Put
Closing, if any, shall not violate the shareholder approval requirements of
the Principal Market.
(g) Legal Opinion. The Company's counsel shall deliver to the
Investor upon execution of this Agreement an opinion in the form of Exhibit
C hereto, addressing, among other things, corporate matters and the
exemption from registration under the Securities Act of the issuance of the
Registrable Securities by the Company to the Investor under this Agreement.
(h) SEC Filings. The Company shall provide evidence that the Company
is current on all SEC filing requirements, including, but not limited to,
SEC Documents and Forms 3, 4, 5, and 13D.
(i) Blue Sky. The Company shall have complied with all blue sky laws
to enable the Put Shares to be issued and resold in the States of New York,
New Jersey, Florida, Connecticut and California.
(j) Ten Percent Limitation. The number of Put Shares to be purchased
on each Put Closing Date by the Investor shall not exceed the number of
such shares that, when aggregated with all other shares of Common Stock
then owned by the Investor beneficially or deemed beneficially owned by the
Investor, would result in the Investor owning more than nine and nine
tenths percent (9.99%) of all of such Common Stock as would be outstanding
on such Put Closing Date, as determined in accordance with Section 16 of
the Exchange Act and the regulations promulgated thereunder. For purposes
of this Section 6.2(j), in the event that the amount of Common Stock
outstanding as determined in accordance with Section 16 of the Exchange Act
and the regulations promulgated thereunder is greater on a Put Closing Date
than on the date upon which the Put Purchase Notice associated with such
Put Closing Date is given, the amount of Common Stock outstanding on such
Put Closing Date shall govern for purposes of determining whether the
Investor, when aggregating all purchases of Common Stock made pursuant to
this Agreement and, if any, Shares, would own more than nine and nine
tenths percent (9.99%) of the Common Stock following such Put Closing Date.
18
(k) Cross Default. The Company shall not be in default of a term,
covenant, warranty or undertaking of any other agreement to which the
Company and Investor are parties, nor shall there have occurred an event of
default under any such other agreement, in each case which default would
have a material adverse effect on the financial condition of the Company or
the Company's ability to comply with its obligations to the Investor.
(l) No Knowledge. The Company shall have no knowledge of any event
more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective (which event is more
likely than not to occur within the Valuation Period during which the Put
Purchase Notice is deemed delivered).
(m) Trading Cushion. The Trading Cushion shall have elapsed since
the immediately preceding Put Date.
(n) Shareholder Vote. The issuance of shares of Common Stock with
respect to the applicable Put Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(o) Secretary's Certificate. The Investor shall have received a
Secretary's Certificate in substantially the form and substance of Exhibit
D hereto, executed by the Secretary of the Company.
(p) Other. On each Condition Satisfaction Date, the Investor shall
have received such certificates and documents as are required by this
Agreement in order for the Investor to confirm the Company's satisfaction
of the conditions set forth in this Section 6.2 including, without
limitation, a Compliance Certificate in substantially the form and
substance of Exhibit E hereto, executed by an executive officer of the
Company and to the effect that all the conditions to such Put Closing shall
have been satisfied as at the date of each such certificate.
ARTICLE VII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 7.1 Due Diligence Review. The Company shall make available for
--------------------
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all other
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the
19
filing and effectiveness of the Registration Statement for the sole purpose of
enabling the Investor and such representatives, advisors and underwriters and
their respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section 7.2 Non-Disclosure of Non-Public Information.
----------------------------------------
(a) Except as set forth on Schedule 7.2(a) hereof, the Company
represents and warrants that the Company and its officers, directors,
employees and agents have not disclosed any non-public information to the
Investor or advisors to or representatives of the Investor. The Company
covenants and agrees that it shall refrain from disclosing, and shall cause
its officers, directors, employees and agents to refrain from disclosing,
unless prior to disclosure of such information the Company identifies such
information as being non-public information and provides the Investor, such
advisors and representatives with the opportunity to accept or refuse to
accept such non-public information for review. The Company may, as a
condition to disclosing any non-public information hereunder, require the
Investor's advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and the Investor.
(b) The Company acknowledges and understands that the Investor is
entering into this Agreement at the request of the Company and in good
faith reliance on (i) the Company's representation set forth in Section
4.16 that neither it nor its agents have disclosed to the Investor any
material non-public information; and (ii) the Company's covenant set forth
in Section 5.10 that if all or any portion of the information set forth on
Schedule 7.2(a) becomes material, the Company shall timely make full and
complete public disclosure of all or such portion of such information that
shall have become material as required by and in accordance with applicable
law.
(c) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the
Company represents that it does not disseminate non-public information to
any investors who purchase stock in the Company in a public offering, to
money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives
of the Investor and, if any, underwriters, of any event or the existence of
any circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material misstatement or
to omit a material fact required to be stated therein in order to make the
statements, therein, in light of the circumstances in which they were made,
not misleading. Nothing contained in this Section 7.2 shall be construed
to mean that such persons or entities other than the Investor (without the
written consent of the Investor prior to disclosure of such information)
may not obtain non-public information in the course of conducting due
diligence in accordance with the terms of this Agreement and nothing herein
shall prevent any such persons or entities from notifying the Company of
their opinion that
20
based on such due diligence by such persons or entities, that the
Registration Statement contains an untrue statement of a material fact or
omits a material fact required to be stated in the Registration Statement
or necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE VIII
LEGENDS
Section 8.1 Legend. Unless otherwise provided below, each certificate
------
representing the Put Shares shall be stamped or otherwise imprinted with a
legend substantially in the following form (the "Legend"):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS OR ECONNECT, INC. (THE "COMPANY") SHALL HAVE
RECEIVED AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH
SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
As soon as practicable after the execution and delivery hereof, the Company
shall issue to the transfer agent instructions in substantially the form of
Exhibit B hereto. Such instructions shall be irrevocable by the Company from
and after the date thereof or from and after the issuance thereof. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent to issue to the Investor, at the Investor's option, via the
Deposit Withdrawal Agent Commission system ("DWAC") or in the form of
----
certificates evidencing the Put Shares incident to a Put and issued on a Put
Closing Date, free of the Legend, without consultation by the transfer agent
with the Company or its counsel and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Company or its
counsel or the Investor; provided, that (a) the Registration Statement shall
then be effective, (b) the Investor confirms to the transfer agent and the
Company that it has or intends to sell such Put Shares to a third party that is
not an affiliate of the Investor or the Company and the Investor agrees to
redeliver the certificate representing such Put Shares to the transfer agent to
add the Legend in the event the Put Shares are not sold, and (c) if reasonably
requested by the transfer agent or the Company, the Investor confirms to the
transfer agent and the Company that the Investor has complied with the
prospectus delivery requirement under the Securities Act. At any time after the
Effective Date, upon surrender of one or more certificates evidencing Common
Stock that bear the Legend, to the extent accompanied by a notice requesting the
issuance of new certificates free of the Legend to replace those surrendered,
the transfer agent shall reissue such shares of Common Stock via DWAC or free of
the Legend.
21
Section 8.2 No Other Legend or Stock Transfer Restrictions. No legend
----------------------------------------------
other than the one specified in Section 8.1 has been or shall be placed on the
share certificates representing the Put Shares and no instructions or "stop
transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article VIII.
Section 8.3 Investor's Compliance. Nothing in this Article VIII shall
---------------------
affect in any way the Investor's obligations to comply with all applicable
securities laws upon resale of the Put Shares.
ARTICLE IX
CHOICE OF LAW/VENUE
Section 9.1 Choice of Law/Venue. This Agreement shall be governed by
-------------------
and construed in accordance with the laws of the State of California without
regard to principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this Agreement
shall be brought only in the state courts of New York or in the federal courts
located in the city and/or state of California. Both parties and the individuals
executing this Agreement and other agreements on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury. The
prevailing party shall be entitled to recover from the other party its actual
reasonable attorneys' fees and costs. In the event that any provision of this
Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
ARTICLE X
ASSIGNMENT; AMENDMENT; TERMINATION
Section 10.1 Assignment. Neither this Agreement nor any rights or
----------
obligations of the Investor or the Company hereunder may be assigned by either
party to any other person. Notwithstanding the foregoing, (a) the provisions of
this Agreement shall inure to the benefit of, and be enforceable by, and be
binding upon, any transferee of any of the Common Stock purchased or acquired by
the Investor hereunder with respect to the Common Stock held by such person
unless such Common Stock is free from restrictions on further transfer of such
Common Stock, and (b) the Investor's interest in this Agreement may be assigned
at any time, in whole or in part, to any other person or entity (including any
affiliate of the Investor) effective upon written notice to the Company. The
assignee shall assume the obligations of the Investor under this Agreement. The
Company shall have the right to require any assignee to execute a counterpart of
this Agreement.
22
Section 10.2 Termination of Agreement and Survival of Terms. This
----------------------------------------------
Agreement shall terminate twelve (12) months after the commencement of the
Commitment Period; provided, however, that the Investor may terminate this
-------- -------
Agreement upon one (1) day's written notice (v) if an event resulting in a
Material Adverse Effect has occurred, (w) the Registration Statement is not
declared effective by the SEC within one hundred twenty (120) days following the
Effectiveness Target Date, (x) there shall occur any stop order or suspension of
the effectiveness of the Registration Statement for an aggregate of five (5)
trading days during the Commitment Period, for any reason other than deferrals
or suspension during a blackout period as a result of corporate developments
subsequent to the Closing Date that would require such Registration Statement to
be amended to reflect such event in order to maintain its compliance with the
disclosure requirements of the Securities Act, or (y) the Company shall at any
time fail to comply with the requirements of Section 5.1, 5.3, 5.4, 5.5, 5.6 or
5.14 hereof. This Agreement shall terminate immediately if the Company breaches
Section 5.11 hereof or the Investor breaches Section (a "Terminating Event");
provided, however, that if a Terminating Event occurs during a Valuation Period,
-------- -------
this Agreement shall terminate on the Put Closing Date for such Valuation
Period. Notwithstanding any of the foregoing, the provisions of Articles V, VII,
VIII, IX, X, XI and XII shall survive the termination of this Agreement, and the
Company shall be obligated to pay all of the applicable fees pursuant to
Sections 12.1 and 12.2 hereof. The Company may terminate this Agreement upon one
(1) day's written notice if the Investor fails to fund any Put Purchase Note of
the Company.
Section 10.3 Amendment. Except as expressly provided in this Agreement,
---------
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by both parties hereto.
ARTICLE XI
NOTICES; INDEMNIFICATION
Section 11.1 Notices. All notices, demands, requests, consents,
-------
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company:
23
eConnect
2500 Xxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Fax No.: (000) 000-0000
With a copy to:
Xxxxxxx Xxxxxxxxx
000 X. Xxxxxxxxxx Xx
Xxxxxxxxx XX 00000
Fax No.: (000) 000 0000
If to Investor:
Alpha Venture Capital, Inc.
X.X. Xxx 00
Xxxxxx Xxxxxxxxx
Xxxx Xxxxxxx
Attention: Xx. Xxxxx Xxxxxx, Director
Fax No.: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 11.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 11.2 Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the Investor,
its partners, Affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act or is controlled by the Investor (the "Control
Person") from and against any Damages, joint or several, and any action in
respect thereof to which the Investor, its partners, Affiliates, officers,
directors, employees, and duly authorized agents, and any such Control
Person becomes subject to, resulting from, arising out of or relating to
any misrepresentation, breach of warranty or nonfulfillment of or failure
to perform any covenant or agreement on the part of Company contained in
this Agreement in any event as such Damages are incurred.
(b) The Investor agrees to indemnify and hold harmless the Company,
its partners, Affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act, together with the Control Persons from and against
any Damages, joint or several, and any action in respect thereof to which
the Company, its partners, Affiliates, officers, directors, employees, and
duly
24
authorized agents, and any such Control Person becomes subject to,
resulting from, arising out of or relating to any misrepresentation, breach
of warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of Investor contained in this Agreement in an
aggregate amount not to exceed one-quarter of the Commitment Amount.
Section 11.3 Method of Asserting Indemnification Claims. All claims
------------------------------------------
for indemnification by any Indemnified Party (as defined below) under Section
11.2 will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any person
claiming indemnification under any provision of Section 11.2 (an
"Indemnified Party") might seek indemnity under Section 11.2 is asserted
against or sought to be collected from such Indemnified Party by a person
other than the Company, the Investor or any affiliate of the Company or (a
"Third Party Claim"), the Indemnified Party shall deliver a written
notification, enclosing a copy of all papers served, if any, and specifying
the nature of and basis for such Third Party Claim and for the Indemnified
Party's claim for indemnification that is being asserted under any
provision of Section 11.2 against any person (the "Indemnifying Party"),
together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such Third Party Claim (a
"Claim Notice") with reasonable promptness to the Indemnifying Party. If
the Indemnified Party fails to provide the Claim Notice with reasonable
promptness after the Indemnified Party receives notice of such Third Party
Claim, the Indemnifying Party will not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that
the Indemnifying Party's ability to defend has been irreparably prejudiced
by such failure of the Indemnified Party. The Indemnifying Party will
notify the Indemnified Party as soon as practicable within the period
ending thirty (30) calendar days following receipt by the Indemnifying
Party of either a Claim Notice or an Indemnity Notice (as defined below)
(the "Dispute Period") whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party under
Section 11.2 and whether the Indemnifying Party desires, at its sole cost
and expense, to defend the Indemnified Party against such Third Party
Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to
defend the Indemnified Party with respect to the Third Party Claim
pursuant to this Section 11.3(a), then the Indemnifying Party will
have the right to defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate proceedings, which
proceedings will be vigorously and diligently defended by the
Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any
relief which affects the Indemnified Party, other than the payment of
monetary damages or that provides for the payment of monetary damages
as to which the Indemnified Party will not be indemnified in full
pursuant to Section 11.2). The Indemnifying Party will have full
control of such
25
defense and proceedings, including any compromise or settlement
thereof; provided, however, that the Indemnified Party may, at the
sole cost and expense of the Indemnified Party, at any time prior to
the Indemnifying Party's delivery of the notice referred to in the
first sentence of this clause (i), file any motion, answer or other
pleadings or take any other action that the Indemnified Party
reasonably believes to be necessary or appropriate to protect its
interests; and provided further, that if requested by the Indemnifying
Party, the Indemnified Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the Indemnifying Party
elects to contest. The Indemnified Party may participate in, but not
control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this clause (i), and except as
provided in the preceding sentence, the Indemnified Party will bear
its own costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Indemnified Party may take over the
control of the defense or settlement of a Third Party Claim at any
time if it irrevocably waives its right to indemnity under Section
11.2 with respect to one hundred percent (100%) of such Third Party
Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to
defend the Third Party Claim pursuant to Section 11.3(a), or if the
Indemnifying Party gives such notice but fails to defend vigorously
and diligently or settle the Third Party Claim, or if the Indemnifying
Party fails to give any notice whatsoever within the Dispute Period,
then the Indemnified Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party Claim by
all appropriate proceedings, which proceedings will be prosecuted by
the Indemnified Party in a reasonable manner and in good faith or will
be settled at the discretion of the Indemnified Party (with the
consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control
of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that if requested by the
Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party
Claim which the Indemnified Party is contesting. Notwithstanding the
foregoing provisions of this clause (ii), if the Indemnifying Party
has notified the Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability or the amount of its
liability hereunder to the Indemnified Party with respect to such
Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause (iii) below, the
Indemnifying Party will not be required to bear the costs and expenses
of the Indemnified Party's defense pursuant to this clause (ii) or of
the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party will reimburse the
Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but
26
not control, any defense or settlement controlled by the Indemnified
Party pursuant to this clause (ii), and the Indemnifying Party will
bear its own costs and expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability or the amount of its liability
to the Indemnified Party with respect to the Third Party Claim under
Section 11.2 or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability
or the amount of its liability to the Indemnified Party with respect
to such Third Party Claim, the Loss in the amount specified in the
Claim Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 11.2 and the Indemnifying Party shall
pay the amount of such Loss to the Indemnified Party on demand. If
the Indemnifying Party has timely disputed its liability or the amount
of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party will proceed in good faith to negotiate a
resolution of such dispute (the "Resolution Period"), and if not
resolved through negotiations within the Resolution Period, such
dispute shall be resolved by arbitration in accordance with paragraph
(c) of this Section 11.3.
(b) In the event any Indemnified Party should have a claim under
Section 11.2 against the Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver a written notification of
a claim for indemnity under Section 11.2 specifying the nature of and basis
for such claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such
claim (an "Indemnity Notice") with reasonable promptness to the
Indemnifying Party. The failure by any Indemnified Party to give the
Indemnity Notice shall not impair such party's rights hereunder except to
the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the
claim described in such Indemnity Notice or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
claim or the amount of the claim described in such Indemnity Notice, the
Loss in the amount specified in the Indemnity Notice will be conclusively
deemed a liability of the Indemnifying Party under Section 11.2 and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its
liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved
by arbitration in accordance with paragraph (c) of this Section 11.3.
(c) If the parties are unable to resolve a dispute as contemplated by
Sections 11.3(a) and (b) hereof, the parties agree that such dispute shall
be settled by arbitration as their sole and exclusive remedy with respect
to such dispute, such arbitration to be held in the State of New York,
under the rules promulgated by the American Arbitration Association, as
amended from time to time. Any decision rendered in such arbitration
proceeding shall be non-appealable, final and binding upon the parties.
All expenses incurred in any arbitration proceeding shall be borne equally
by the parties.
27
ARTICLE XII
MISCELLANEOUS
Section 12.1 Fees and Expenses. Each of the Company and the Investor
-----------------
agrees to pay its own expenses incident to the performance of its obligations
hereunder provided, however, that the Company shall pay (a) the Investor's legal
fees and other fees and expenses, in an amount not to exceed $25,000 and (b) the
fees of the Escrow Agent in an amount not to exceed $2,000 per Put Closing.
Section 12.2 Brokerage. Each of the parties hereto represents that it
---------
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party
except as described on Schedule 12.2. The Company shall also pay to the Investor
a commitment fee in cash equal to 6% of the Investment Amount for each Put
exercised by the Company.
Section 12.3 Publicity. Except as required by applicable law, the
---------
Company shall not issue any press release or otherwise make any public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement without the prior consent of the
Investor.
Section 12.4 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 12.5 Entire Agreement. This Agreement with the Exhibits hereto
----------------
and the Registration Rights Agreement set forth the entire agreement and
understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as if fully set forth herein.
Section 12.6 Survival; Severability. The representations, warranties,
----------------------
covenants and agreements of the parties hereto shall survive each Put Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 12.7 Title and Subtitles. The titles and subtitles used in this
-------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 12.8 Reporting Entity for the Common Stock. The reporting entity
-------------------------------------
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
28
IN WITNESS WHEREOF, the parties hereto have caused this Common Stock
Purchase Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
eConnect
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Xxxxxx X. Xxxxxx, President
Alpha Venture Capital, Inc.
By: /s/ Xxxxx Xxxxxx
-----------------------------------
Xxxxx Xxxxxx, Director
29
EXHIBIT A
FORM OF
PUT PURCHASE NOTICE
Reference is made to the Common Stock Purchase Agreement dated as of
July 18, 2001 (the "Agreement ") between eConnect, a Nevada corporation (the
"Company") and Alpha Venture Capital, Inc., a corporation organized under the
laws of Cooks Islands. Capitalized terms used and not otherwise defined herein
shall have the meanings given such terms in the Agreement.
In accordance with and pursuant to Section 2.2 of the Agreement, the
Company hereby issues this Put Purchase Notice to exercise a Put request for the
Put Amount indicated below.
Put Amount:
-----------------------------------------------
Valuation Period start date:
------------------------------
Valuation Period end date:
--------------------------------
Put Closing Date:
-----------------------------------------
Floor Price: $0.02
----------------------------------------------
Minimum Floor Price: $
--------------------------------------
Dated:
-------------------
eConnect
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address:
------------------------------
Facsimile No.:
------------------------
Wire Instructions:
--------------------
Contact Name:
-------------------------
EXHIBIT B
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Escrow Agreement") dated as of the 18/th/ day of
----------------
July, 2001, by and among eConnect, a Nevada corporation (the "Company"), Alpha
-------
Venture Capital, Inc., a Xxxx Islands corporation (the "Investor") and Jenkens &
--------
Xxxxxxxxx Xxxxxx Xxxxxx LLP, as escrow agent (the "Escrow Agent").
------------
W I T N E S S E T H:
--------------------
WHEREAS, the Company desires to raise capital in order to finance the
growth of its business operations and for other general corporate purposes;
WHEREAS, pursuant to a Common Stock Purchase Agreement dated July 18, 2001
between the Company and the Investor (the "Purchase Agreement"), the Company and
------------------
the Investor desire to have shares (the "Escrow Shares") of common stock, $.001
-------------
par value per share, of the Company (the "Common Stock") delivered to the Escrow
------------
Agent to hold, along with immediately available funds for the purchase of the
Common Stock (the "Escrow Funds"), and the Escrow Agent has agreed to receive,
------------
hold and redeliver the Escrow Shares and the Escrow Funds, all upon the terms
and subject to the conditions hereinafter set forth;
WHEREAS, the Purchase Agreement contemplates that the Escrow Funds shall be
paid into escrow and the Escrow Shares purchased by the Investor shall be held
in escrow and the Escrow Agent has agreed to receive, hold and pay such Escrow
Funds and to receive and deliver the Escrow Shares, upon the terms and subject
to the conditions hereinafter set forth; and
WHEREAS, the Company acknowledges and agrees that this Escrow Agreement
shall serve as irrevocable authorization and direction by the Company to the
Escrow Agent to receive, hold, and ultimately deliver the Escrow Funds and the
Escrow Shares placed in escrow in accordance with the terms and conditions of
this Escrow Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties to this Escrow Agreement hereby agree
as follows:
1. Defined Terms. Capitalized terms used and not otherwise defined
-------------
herein shall have the meanings respectively assigned to them in the Purchase
Agreement.
2. Escrow of Shares / Escrow Agent Fees. On the date hereof, the
------------------------------------
Company shall deliver or cause to be delivered to the Escrow Agent, common stock
share certificates ("Share Certificates"), registered in the name of the
------------------
Investor (or any nominee designated by Investor), free and clear of all liens,
claims, charges and encumbrances, of one hundred five million (105,000,000)
shares of Common Stock. The fees of the Escrow Agent shall not exceed $2,000 per
each Put Closing and shall be deducted from the proceeds of each Put exercised
throughout the term of the Purchase Agreement.
3. Escrow at Put Closings. Not later than one (1) Business Day
----------------------
after the last Trading Day of the Valuation Period, the Investor shall deliver a
letter to the Escrow Agent advising the Escrow Agent of the maximum number of
shares that may be sold by the Investor free of restrictive legend pursuant to a
Put Purchase Notice. Investor shall make payment of the Investment Amount (less
any applicable legal or other fees) within two (2) Business Days after delivery
of such share letter to the Escrow Agent ("Share Payment Date"). The Escrow
------------------
Agent shall promptly, upon receipt of such notice, deliver one or more Share
Certificates to Corporate Stock Transfer, Inc., the transfer agent for the
Company (the "Transfer Agent"), for removal of legend pursuant to the
--------------
Irrevocable Transfer Agent Instructions, and upon receipt of such Share
Certificates, shall cause same to be delivered to or for the benefit of the
Investor pursuant to written instructions of the Investor.
4. Escrow Period. The certificates for any Escrow Shares delivered
-------------
to the Escrow Agent pursuant hereto shall be deposited for safekeeping with the
Escrow Agent (the "Escrow Account"). During the period beginning on the date the
--------------
Purchase Agreement is executed and continuing until the termination of the
Purchase Agreement (the "Escrow Period"), none of such Escrow Shares deposited
-------------
in the Escrow Account shall become the property of the Investor or any other
entity or be subject to the debts of the Investor or any other entity except as
expressly provided herein, and the Escrow Agent shall neither make nor permit
any disbursements or deliveries from the Escrow Account except as expressly
provided herein. Notwithstanding the foregoing, if any Escrow Shares remain in
the Escrow Account, all such Escrow Shares then remaining in the Escrow Account
shall be forwarded to the Transfer Agent within five (5) Business Days
thereafter upon written request given to Escrow Agent by the Company.
5. Holding of Shares. The Escrow Agent shall hold the Escrow Shares
-----------------
in a segregated escrow account where it normally holds such Escrow Shares.
6. Further Assurances. The Company and the Investor agree to do
------------------
such further acts and to execute and deliver such statements, assignments,
agreements, instruments and other documents as the Escrow Agent, from time to
time, may reasonably request in connection with the administration, maintenance,
enforcement or adjudication of this Escrow Agreement in order (a) to give the
Escrow Agent confirmation and assurance of the Escrow Agent's rights, powers,
privileges, remedies and interests under this Escrow Agreement and applicable
law, (b) to better enable the Escrow Agent to exercise any such right, power,
privilege, remedy or interest, or (c) to otherwise effectuate the purpose and
the terms and provisions of this Escrow Agreement, each in such form and
substance as may be reasonably acceptable to the Escrow Agent.
7. Conflicting Demands. If conflicting or adverse claims or demands
-------------------
are made or notices served upon the Escrow Agent with respect to the escrow
provided for herein, the Company and the Investor agree that the Escrow Agent
shall refuse to comply with any such claim or demand and withhold and stop all
further performance of this escrow so long as such disagreement shall continue.
In so doing, the Escrow Agent shall not be or become liable for damages, losses,
costs, expenses or interest to any or any other person for its failure to comply
with such conflicting or adverse demands. The Escrow Agent shall be entitled to
continue to so
-2-
refrain and refuse to so act until such conflicting claims or demands shall have
been finally determined by a court or arbitrator of competent jurisdiction or
shall have been settled by agreement of the parties to such controversy, in
which case the Escrow Agent shall be notified thereof in a notice signed by such
parties. The Escrow Agent may also elect to commence an interpleader or other
action for declaratory judgment for the purpose of having the respective rights
of the claimants adjudicated, and may deposit with the court all Shares held
hereunder pursuant to this Escrow Agreement; and if it so commences and
deposits, the Escrow Agent shall be relieved and discharged from any further
duties and obligations under this Escrow Agreement.
8. Disputes. Each of the parties hereto hereby covenants and agrees
--------
that the Federal or state courts located in the County of New York, State of New
York shall have jurisdiction over any dispute with the Escrow Agent or relating
to this Escrow Agreement.
9. Expenses of the Escrow Agent. The Company agrees to pay any and
----------------------------
all out-of-pocket costs and expenses incurred by the Escrow Agent in connection
with all waivers, releases, discharges, satisfactions, modifications and
amendments of this Escrow Agreement, the administration and holding of the
Escrow Shares and the investment of the Escrow Funds, and the enforcement,
protection and adjudication of the Escrow Agent's rights hereunder by the Escrow
Agent, including, without limitation, the out-of-pocket disbursements of the
Escrow Agent itself and expenses and costs of other attorneys it may retain, if
any. The Company shall be liable to the Escrow Agent for any expenses payable by
the Escrow Agent.
10. Reliance on Documents and Experts. The Escrow Agent shall be
---------------------------------
entitled to rely upon any notice, consent, certificate, affidavit, statement,
paper, document, writing or communication (which to the extent permitted
hereunder may be by telegram, cable, telex, telecopier, or telephone) reasonably
believed by it to be genuine and to have been signed, sent or made by the proper
person or persons, and upon opinions and advice of legal counsel (including
itself or counsel for any party hereto), independent public accountants and
other experts selected by the Escrow Agent and mutually acceptable to each of
the Company and the Investor.
11. Status of the Escrow Agent, Etc. The Escrow Agent is acting
-------------------------------
under this Escrow Agreement as a stakeholder only. No term or provision of this
Escrow Agreement is intended to create, nor shall any such term or provision be
deemed to have created, any joint venture, partnership or attorney-client
relationship between or among the Escrow Agent and the Company or the Investor.
This Escrow Agreement shall not be deemed to prohibit or in any way restrict the
Escrow Agent's representation of the Investor, who may be advised by the Escrow
Agent on any and all matters pertaining to this Escrow Agreement. To the extent
the Investor has been represented by the Escrow Agent, the Investor hereby
waives any conflict of interest and irrevocably authorizes and directs the
Escrow Agent to carry out the terms and provisions of this Escrow Agreement
fairly as to all parties, without regard to any such representation and
irrespective of the impact upon the Investor. The Escrow Agent's only duties are
those expressly set forth in this Escrow Agreement, and each of the Company and
the Investor authorizes the Escrow Agent to perform those duties in accordance
with its usual practices in holding funds of its own or those of other escrows.
The Escrow Agent may exercise or otherwise enforce any of its rights, powers,
privileges, remedies and interests under this Escrow Agreement and applicable
-3-
law or perform any of its duties under this Escrow Agreement by or through its
partners, employees, attorneys, agents or designees.
12. Exculpation. The Escrow Agent and its designees, and their
-----------
respective partners, employees, attorneys and agents, shall not incur any
liability whatsoever for the investment or disposition of the Escrow Funds or
the Escrow Shares or the taking of any other action in accordance with the terms
and provisions of this Escrow Agreement, for any mistake or error in judgment,
for compliance with any applicable law or any attachment, order or other
directive of any court or other authority (irrespective of any conflicting term
or provision of this Escrow Agreement), or for any act or omission of any other
person selected with reasonable care and engaged by the Escrow Agent in
connection with this Escrow Agreement (other than for such Escrow Agent's or
such person's own acts or omissions breaching a duty owed to the claimant under
this Escrow Agreement and amounting to gross negligence or willful misconduct as
finally determined pursuant to applicable law by a governmental authority having
jurisdiction); and each of the Company and the Investor hereby waives any and
all claims and actions whatsoever against the Escrow Agent and its designees,
and their respective partners, employees, attorneys and agents, arising out of
or related directly or indirectly to any and all of the foregoing acts,
omissions and circumstances. Furthermore, the Escrow Agent and its designees,
and their respective partners, employees, attorneys and agents, shall not incur
any liability (other than for a person's own acts or omissions breaching a duty
owed to the claimant under this Escrow Agreement and amounting to gross
negligence or willful misconduct as finally determined pursuant to applicable
law by a governmental authority having jurisdiction) for other acts and
omissions arising out of or related directly or indirectly to this Escrow
Agreement; and each of the Company and the Investor hereby expressly waives any
and all claims and actions (other than the Escrow Agent's or such person's own
acts or omissions breaching a duty owed to the claimant and amounting to gross
negligence or willful misconduct as finally determined pursuant to applicable
law by a governmental authority having jurisdiction) against the Escrow Agent
and its designees, and their respective partners, employees, attorneys and
agents, arising out of or related directly or indirectly to any and all of the
foregoing acts, omissions and circumstances.
13. Indemnification. The Escrow Agent and its designees, and their
---------------
respective partners, employees, attorneys and agents, shall be indemnified,
reimbursed, held harmless and, at the request of the Escrow Agent, defended, by
the Company from and against any and all claims, liabilities, losses and
expenses (including, without limitation, the reasonable disbursements, expenses
and fees of their respective attorneys) that may be imposed upon, incurred by,
or asserted against any of them, arising out of or related directly or
indirectly to this Escrow Agreement or the Escrow Shares, except such as are
occasioned by the indemnified person's own acts and omissions breaching a duty
owed to the claimant under this Escrow Agreement and amounting to willful
misconduct or gross negligence as finally determined pursuant to applicable law
by a governmental authority having jurisdiction.
14. Notices. Any notice, request, demand or other communication
-------
permitted or required to be given hereunder shall be in writing, shall be sent
by one of the following means to the addressee at the address set forth below
(or at such other address as shall be designated hereunder by notice to the
other parties and persons receiving copies, effective upon actual
-4-
receipt) and shall be deemed conclusively to have been given: (a) upon hand
delivery by telecopy or facsimile at the address or number designated below (if
delivered on a Business Day during normal business hours where such notice is to
be received), or the first Business Day following such delivery (if delivered
other than on a Business Day during normal business hours where such notice is
to be received) or (b) on the second Business Day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or (c)
upon actual receipt of such mailing, whichever shall first occur.
If to the Company: eConnect
2500 Xxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Fax No.: (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxxxxxx
000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Fax No.: (000) 000-0000
If to the Investor: at the address of such Investor set forth on
Schedule A to this Escrow Agreement, with copies
to such Investor's counsel as set forth on
Schedule A or as specified in writing by such
Investor
If to the Escrow Agent: Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
15. Section and Other Headings. The section and other headings
--------------------------
contained in this Escrow Agreement are for convenience only, shall not be deemed
a part of this Escrow Agreement and shall not affect the meaning or
interpretation of this Escrow Agreement.
16. Governing Law. This Escrow Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of New York,
without regard to principles of conflicts of law. Each of the Company and the
Investor (i) hereby irrevocably submits to the jurisdiction of the United States
District Court sitting in the Southern District of New York for the purposes of
any suit, action or proceeding arising out of or relating to this Agreement or
the Purchase Agreement and (ii) hereby waives, and agrees not to assert in any
such suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of such court, that the suit, action or proceeding is brought
in an inconvenient forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Investor consents to process being served
in any such suit, action or proceeding by mailing a copy thereof
-5-
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing in this Section 16 shall affect or limit any
right to serve process in any other manner permitted by law.
17. Counterparts. This Escrow Agreement may be executed by the
------------
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts shall together
constitute one and the same agreement.
18. Resignation of Escrow Agent. The Escrow Agent may, at any time,
---------------------------
at its option, elect to resign its duties as Escrow Agent under this Escrow
Agreement by providing notice thereof to each of the Company and the Investor.
In such event, the Escrow Agent shall deposit the Escrow Funds and the Escrow
Shares to a successor independent escrow agent to be appointed by (a) the
Company and the Investor within thirty (30) days following the receipt of notice
of resignation from the Escrow Agent, or (b) the Escrow Agent if the Company and
the Investor shall have not agreed on a successor escrow agent within the
aforesaid 30-day period, upon which appointment and delivery of the Escrow Funds
and the Escrow Shares, the Escrow Agent shall be released of and from all
liability under this Escrow Agreement.
19. Successors and Assigns; Assignment. Whenever in this Escrow
----------------------------------
Agreement reference is made to any party, such reference shall be deemed to
include the successors, assigns and legal representatives of such party, and,
without limiting the generality of the foregoing, all representations,
warranties, covenants and other agreements made by or on behalf of each of the
Company and the Investor in this Escrow Agreement shall inure to the benefit of
any successor escrow agent hereunder; provided, however, that nothing herein
-------- -------
shall be deemed to authorize or permit the Company or the Investor to assign any
of its rights or obligations hereunder to any other person (whether or not an
affiliate of the Company or the Investor) without the written consent of each of
the other parties nor to authorize or permit the Escrow Agent to assign any of
its duties or obligations hereunder except as provided in Section 19 hereof.
20. No Third Party Rights. The representations, warranties and
---------------------
other terms and provisions of this Escrow Agreement are for the exclusive
benefit of the parties hereto, and no other person, including the creditors of
the Company or the Investor, shall have any right or claim against any party by
reason of any of those terms and provisions or be entitled to enforce any of
those terms and provisions against any party.
21. No Waiver by Action, Etc. Any waiver or consent respecting any
------------------------
representation, warranty, covenant or other term or provision of this Escrow
Agreement shall be effective only in the specific instance and for the specific
purpose for which given and shall not be deemed, regardless of frequency given,
to be a further or continuing waiver or consent. The failure or delay of a
party at any time or times to require performance of, or to exercise its rights
with respect to, any representation, warranty, covenant or other term or
provision of this Escrow Agreement in no manner (except as otherwise expressly
provided herein) shall affect its right at a later time to enforce any such term
or provision. No notice to or demand on either the Company or the Investor in
any case shall entitle such party to any other or further notice or demand in
the same, similar or other circumstances. All rights, powers, privileges,
remedies and interests of the
-6-
parties under this Escrow Agreement are cumulative and not alternatives, and
they are in addition to and shall not limit (except as otherwise expressly
provided herein) any other right, power, privilege, remedy or interest of the
parties under this Escrow Agreement or applicable law.
22. Modification, Amendment, Etc. Each and every modification and
----------------------------
amendment of this Escrow Agreement shall be in writing and signed by all of the
parties hereto, and each and every waiver of, or consent to any departure from,
any covenant, representation, warranty or other provision of this Escrow
Agreement shall be in writing and signed by the party granting such waiver or
consent.
23. Entire Agreement. This Escrow Agreement contains the entire
----------------
agreement of the parties with respect to the matters contained herein and
supersedes all prior representations, agreements and understandings, oral or
otherwise, among the parties with respect to the matters contained herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-7-
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
on the date first written above.
ECONNECT
By:_____________________________________
Name:
Title:
ALPHA VENTURE CAPITAL, INC.
By:_____________________________________
Name: Xxxxx Xxxxxx
Title: Director
JENKENS & XXXXXXXXX XXXXXX XXXXXX
LLP
By:_____________________________________
Name:
Title:
-8-
Schedule A
----------
Name and Address of Investor
----------------------------
Alpha Venture Capital, Inc.
Avarua Rarotonga
Xxxx Islands
Telephone No.: (000) 000-0000
Facsimile No: (000) 000-0000
Attention: Xx. Xxxxx Xxxxxx, Director
with a copy to:
Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No: (000) 000-0000
Attention: Xxxxxxxxxxx X. Xxxxxxx, Esq.
-9-
EXHIBIT C
OPINION OF COUNSEL
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Nevada. The Company has the
requisite corporate power to own and operate its properties and assets, and
to carry on its business as presently conducted. The Company is duly
qualified to do business as a foreign corporation and is in good standing
in every jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary.
2. The Company has the requisite corporate power and authority to enter into
and perform its obligations under the Common Stock Purchase Agreement and
the Registration Rights Agreement and to issue and sell the Common Stock.
The execution, delivery and performance of the Common Stock Purchase
Agreement by the Company and the consummation by it of the transactions
contemplated thereby have been duly and validly authorized by all necessary
corporate action and no further consent or authorization of the Company or
its Board of Directors or stockholders is required. The Common Stock
Purchase Agreement and the Registration Rights Agreement have been duly
executed and delivered by the Company, and each constitutes a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its respective terms. The Common Stock is not subject to
preemptive rights under the Company's certificate of incorporation or
bylaws.
3. The Common Stock have been duly authorized and the Common Stock, when
delivered against payment in full as provided in the Common Stock Purchase
Agreement, will be validly issued, fully paid and nonassessable.
4. The execution, delivery and performance of and compliance with the terms of
the Common Stock Purchase Agreement and the consummation by the Company of
the transactions contemplated thereby (i) do not violate any provision of
the Company's certificate of incorporation or bylaws, (ii) do not conflict
with, or constitute a default (or an event 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 material
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company is a party, (iii)
does not create or impose a lien, charge or encumbrance on any property of
the Company under any agreement or any commitment to which the Company is a
party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (iv) does not result in a violation of
any federal, state, local or foreign statute, rule, regulation, order,
judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries are
bound or affected, except, in all cases other than violations pursuant to
clause (i) above, for such conflicts, defaults, terminations, amendments,
acceleration, cancellations and violations as would not, individually or in
the aggregate, have a Material Adverse Effect.
5. There is no action, suit, claim, investigation or proceeding pending or
threatened against the Company or any subsidiary which questions the
validity of the Common Stock Purchase
Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. There is no action, suit, claim,
investigation or proceeding pending or, to our knowledge, threatened,
against or involving the Company, any subsidiary or any of their respective
properties or assets and which, if adversely determined, is reasonably
likely to result in a Material Adverse Effect.
6. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is
required in connection with the valid execution and delivery of the Common
Stock Purchase Agreement, or the offer, sale or issuance of the Common
Stock or the consummation of any other transaction contemplated by the
Common Stock Purchase Agreement (other than any filings which may be
required to be made by the Company with the Commission, or the OTC Bulletin
Board or an Alternate Market subsequent to the Closing, and, any
registration statement which may be filed pursuant to the Common Stock
Purchase Agreement).
7. The offer, issuance and sale of the Common Stock pursuant to the Common
Stock Purchase Agreement will be exempt from registration under the
Securities Act of 1933, as amended, pursuant to Rule 4(2) thereunder.
8. The Company is not a "holding company" or a "public utility company" as
such terms are defined in the Public Utility Holding Company Act of 1935,
as amended. The Company is not, and as a result of and immediately upon
Closing will not be, an "investment company" or a company "controlled" by
an "investment company," within the meaning of the Investment Company Act
of 1940, as amended.
EXHIBIT D
SECRETARY'S CERTIFICATE
ECONNECT
___________, 2001
The undersigned, ___________, Secretary of eConnect, a Nevada corporation (the
"Company"), delivers this certificate in connection with the issuance and sale
of shares of common stock of the Company in an aggregate amount of up to
$20,000,000 to Alpha Venture Capital, Inc. (the "Investor") pursuant to the
Common Stock Purchase Agreement, dated as of July 16, 2001 (the "Agreement"), by
and between the Company and the Investor, and hereby certifies on the date
hereof, that (capitalized terms used herein without definition have the meanings
assigned to them in the Agreement):
1. Attached hereto as Exhibit A is a true, complete and correct copy
of the Certificate of Incorporation of the Company and all amendments
thereto as filed with the Secretary of State of the State of Nevada. The
Certificate of Incorporation of the Company has not been further amended or
restated, and no document with respect to any amendment to the Certificate
of Incorporation of the Company has been filed in the office of the
Secretary of State of the State of ________ since _________ __, 2000, the
date shown on the Company's latest amendment to its Certificate of
Incorporation, which is in full force and effect on the date hereof, and no
action has been taken by the Company in contemplation of any such amendment
or the dissolution, merger or consolidation of the Company.
2. Attached hereto as Exhibit B is a true and complete copy of the
By-laws of the Company, as amended and restated through, and as in full
force and effect on, the date hereof, and no proposal for any amendment,
repeal or other modification to the By-laws of the Company has taken or is
currently pending before the Board of Directors or stockholders of the
Company.
3. Attached hereto as Exhibit C is a true and correct copy of all
written actions and resolutions of the Board of Directors (including any
committees thereof) of the Company relating to the transactions
contemplated by the Agreement; said actions and resolutions have not been
amended, rescinded or modified since their adoption and remain in full
force and effect as of the date hereof; said actions and resolutions are
the only resolutions adopted by the Board of Directors of the Company, or
any committee thereof, pertaining to (A) the offering of the Common Stock
to be sold by the Company pursuant to the Agreement, (B) the execution and
delivery of the Agreement and (C) all other transactions in connection with
the foregoing.
4. Each person who, as an officer of the Company, or as attorney-in-
fact of an officer of the Company, signed (A) the Agreement, (B) the
Registration Statement and (C) any other document delivered prior hereto or
on the date hereof in connection with the transactions contemplated by the
Agreement, was duly elected, qualified and acting as such officer or duly
appointed and acting as such attorney-in-fact, and the signature of each
such person appearing on any such document is his genuine signature.
5. The Agreement as executed and delivered on behalf of the Company
has been approved by the Board of Directors of the Company.
6. The actions, resolutions and other records of the Company
relating to all of the proceedings of the Stockholders of the Company, the
Board of Directors of the Company and any committees thereof made available
to the Investor and its counsel are the true, correct and complete copies
thereof, with respect to all proceedings of said Stockholders, Board of
Directors and committees thereof. Such records and other documents of the
Company made available to the Investor and its counsel were true and
complete in all respects. There have been no material changes, additions or
alterations in said records and other documents that have not been
disclosed to the Investor.
IN WITNESS WHEREOF, I have signed my name as of the date first above
written.
By: ___________________________
Name: _________________________
Title: Secretary
I, ______________, Chief Executive Officer of _____________, do hereby
certify that ___________ is the duly elected, qualified and acting Secretary of
the above mentioned company, and that the signature set forth above is her true
and genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name as of the date first
above written.
By: ___________________________
Name: _________________________
Title: Chief Executive Officer
EXHIBIT E
COMPLIANCE CERTIFICATE
ECONNECT
The undersigned, ______________, hereby certifies, with respect to shares
of common stock of eConnect (the "Company") issuable in connection with the Put
Purchase Notice, dated ________ (the "Notice"), delivered pursuant to Article II
of the Common Stock Purchase Agreement, dated _________________________, by and
among the Company and _____________________ (the "Agreement"), as follows:
1. The undersigned is the duly elected Chief Executive Officer of the
Company.
2. The representations and warranties of the Company set forth in
Article IV of the Agreement are true and correct in all material respects as
though made on and as of the date hereof.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Put Closing Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in Article VI and Article VII of the
Agreement.
The undersigned has executed this Certificate this ____ day of ______,
2001.
[COMPANY]
By:____________________________________
Name: _________________________________
Title: Chief Executive Officer
EXHIBIT F
FORM OF NOTICE OF EFFECTIVENESS
[Addressee]
[Address]
TO WHOM IT MAY CONCERN:
I am counsel to eConnect, a Nevada corporation (the "Company"), and I have
represented the Company in connection with that certain Common Stock Purchase
Agreement dated _________________ (the "Agreement") between the Company and
_____________________, pursuant to which the Company agreed to issue shares (the
"Shares") of its common stock (the "Common Stock") from time to time during the
term of the Agreement. Pursuant to the Agreement, the Company agreed to register
the Shares.
In connection with the foregoing, I have been advised that the Registration
Statement on Form SB-2 (File No. 333-______________) of the Company (the
"Registration Statement"), a copy of which is enclosed, was declared effective
at ____________M., eastern time, on ____________, 2001. Upon issuance of the
Shares referred to in the Company's instruction letter attached, and provided
that you have received a copy of the representation pursuant to item (y) in the
second paragraph of such instruction letter, you are authorized to issue
certificates for the Company's Common Stock without restrictive legends. I have
no knowledge as of the date hereof, after telephonic inquiry of a member of the
Securities and Exchange Commission's staff that any stop order suspending the
effectiveness of the Registration Statement has been issued or that any
proceedings for that purpose are pending before, or threatened by, the
Securities and Exchange Commission and, accordingly, the Shares are available
for resale under the Securities Act of 1933, as amended in the manner specified
in, and pursuant to the terms of the Registration Statement.
Very truly yours,
EXHIBIT G
ECONNECT WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
eConnect
COMMON STOCK PURCHASE WARRANT
1. Issuance. In consideration of good and valuable consideration,
--------
the receipt of which is hereby acknowledged by eConnect, a Nevada corporation
(the "Company"), ALPHA VENTURE CAPITAL, INC., or permitted registered assigns
(the "Holder") is hereby granted the right to purchase at any time commencing
July 18, 2001 until 5:00 P.M., New York City time, on July 18, 2006 (the
"Expiration Date"), 10,500,000 fully paid and nonassessable shares of the
Company's Common Stock, no par value per share (the "Common Stock"), at an
initial exercise price per share of an amount equal to the lesser of (a) $0.07
or (b) eighty-five percent (85%) of the average of the five (5) closing bid
prices following the effective date of the Registration Statement (the "Exercise
Price"), subject to further adjustment as set forth in Section 6 hereof.
2. Exercise of Warrants.
--------------------
(a) This Warrant is exercisable in whole or in part at the
Exercise Price per share of Common Stock payable hereunder, payable in cash or
by certified or official bank check, or by "cashless exercise," by means of
tendering this Warrant to the Company to receive a number of shares of Common
Stock equal to the difference between the Market Value of the shares of Common
Stock issuable upon exercise of this Warrant and the product of the number of
shares issuable upon exercise and the Exercise Price, divided by the Market
Value Per Share. For example, if Holder receives a warrant to purchase 1,500,000
shares of Common Stock at an Exercise Price of $1.00 and decides to use the
"cashless exercise" method to exercise its option to purchase all 1,500,000
shares at a time when the Company's Common Stock has a Market Value Per Share of
$10.00, Holder would receive 1,350,000 shares of Common Stock upon exercise.
Upon surrender of this Warrant with the annexed Notice of Exercise Form duly
executed, together with payment of the Exercise Price for the shares of Common
Stock purchased, the Holder shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. For the purposes of
this Section 2, "Market Value" shall be an amount equal to the average closing
bid price of a share of Common Stock for the ten (10) days preceding the
Company's receipt of the Notice of Exercise Form duly executed multiplied by the
number of shares of Common Stock to be issued upon surrender of this Warrant,
and "Market Value Per Share" shall be an amount equal to the average closing bid
price of a share of Common Stock for the ten (10) days preceding the Company's
receipt of the duly executed Notice of Exercise Form.
(b) For purposes of Rule 144 promulgated under the Securities Act
of 1933, as amended, it is intended, understood and acknowledged that the
Warrant Shares issued in a cashless exercise transaction shall be deemed to have
been acquired by the Holder and the holding period for the Warrant Shares shall
be deemed to have been commenced on the issue date of this Warrant (provided
such interpretation remains the position of the Securities and Exchange
Commission).
3. Reservation of Shares. The Company hereby agrees that at all
---------------------
times during the term of this Warrant there shall be reserved for issuance upon
exercise of this Warrant such number of shares of its Common Stock as shall be
required for issuance upon exercise of this Warrant (the "Warrant Shares").
4. Mutilation or Loss of Warrant. Upon receipt by the Company of
-----------------------------
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
--------------------
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. Protection Against Dilution.
---------------------------
6.1 Capital Adjustments. In case of any stock split or reverse
-------------------
stock split, stock dividend, reclassification of the Common Stock,
recapitalization, merger or consolidation, or like capital adjustment affecting
the Common Stock of the Company, the provisions of this Section 6 shall be
applied as if such capital adjustment event had occurred immediately prior to
the date of this Warrant and the original purchase price had been fairly
allocated to the stock resulting from such capital adjustment; and in other
respects the provisions of this Section shall be applied in a fair, equitable
and reasonable manner so as to give effect, as nearly as may be, to the purposes
hereof.
6.2 Adjustment for Spin Off. If, for any reason, prior to the
-----------------------
exercise of this Warrant in full, the Company spins off or otherwise divests
itself of a part of its business or operations or disposes all or of a part of
its assets in a transaction (the "Spin Off") in which the Company does not
receive compensation for such business, operations or assets, but causes
securities of another entity (the "Spin Off Securities") to be issued to
security holders of the Company, then the Company shall cause (i) to be reserved
Spin Off Securities equal to the number thereof which would have been issued if
Holder had exercised its right to purchase all of the remaining Common Stock
available to Holder under this Warrant as of the close of business on the
trading day immediately before the record date (the "Outstanding Warrants") for
determining the amount of the number of Spin Off Securities to be issued to
security holders of
2
the Company (the "Reserved Spin Off Shares"), and (ii) to be issued to the
Holder upon exercise of all or any of the Outstanding Warrants, such amount of
the Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares
multiplied by (y) a fraction, of which (I) the numerator is the amount of the
Outstanding Warrants then being exercised, and (II) the denominator is the
Outstanding Warrants.
7. Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage pre-paid, return receipt requested. Any such notice shall
be deemed given when so delivered personally, telegraphed, telexed or sent by
facsimile transmission, or, if mailed, two days after the date of deposit in the
United States mails, as follows:
If to the Company:
eConnect
2500 Xxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Fax No.: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxxxxx
000 Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Fax No.: (000) 000-0000
If to the Holder:
Alpha Venture Capital, Inc.
Avarua Rarotonga
Xxxx Islands
Fax No. (000) 000-0000
Attention: Xx. Xxxxx Xxxxxx, Director
Any party may designate another address or person for receipt of notices
hereunder by notice given to the other parties in accordance with this Section.
8. Liquidated Damages. If the Company fails to cause its transfer
------------------
agent to deliver to the Holder certificates representing the Warrant Shares
within ten (10) business days after the Date of Exercise, the Company shall pay
to such Holder, in cash, as liquidated damages and not as a penalty, $1,000 for
each day after such tenth (10/th/) business day until such certificates are
delivered. Nothing herein shall limit the Holder's right to pursue actual
damages for the Company's failure to deliver certificates representing shares of
Common Stock upon exercise within the period specified herein and the Holder
shall have the right to pursue all
3
remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief. The exercise of any
such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law.
9. Supplements and Amendments; Whole Agreement. This Warrant may be
-------------------------------------------
amended or supplemented only by an instrument in writing signed by the parties
hereto. This Warrant and the attached Notice of Exercise contains the full
understanding of the parties hereto with respect to the subject matter hereof
and thereof and there are no representations, warranties, agreements or
understandings other than expressly contained herein.
10. Governing Law. This Warrant shall be deemed to be a contract
-------------
made under the laws of the State of New York and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts to be made and performed entirely within such State.
11. Counterparts. This Warrant may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
12. Descriptive Headings. Descriptive headings of the several
--------------------
Sections of this Warrant are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
4
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
July 18, 2001.
eConnect
By: ______________________________
ATTEST:
_______________________________
5
NOTICE OF EXERCISE OF WARRANT
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate dated as of ______________, to purchase
__________shares of the Common Stock, no par value per share, of eConnect and
tenders herewith payment in accordance with Section 1 of said Common Stock
Purchase Warrant.
Please deliver the stock certificate to the Holder at:
Dated:______________________
By:__________________________________
CASH: $ __________________________
CASHLESS EXERCISE: ___________________
6
