COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement ("Agreement") by
and between eConnect, a Nevada corporation (the
"Company"), and Alpha Venture Capital, Inc., a Xxxx
Islands corporation ("Purchaser"), is dated as of
September 28, 1999.
Recitals
A. Purchaser desires to purchase, and the Company
desires to sell, shares of the Company's common
stock, on the terms and conditions as are set forth
below.
B. The parties intend that the issuance of the
shares as anticipated by this Agreement shall be
accomplished without registration under the
Securities Act of 1933, as amended (the "Securities
Act"), and without registration or qualification
under the securities laws of any state or other
jurisdiction in reliance on exemptions from the
registration requirements of the Securities Act,
including without limitation Regulation D under the
Securities Act and Section 4(2) of the Securities
Act, provided, however, that except as expressly
otherwise provided in this Agreement, nothing in this
Agreement shall act or be construed as a limitation
on Purchaser's right to sell any of the securities to
be acquired pursuant to this Agreement pursuant to
the registration statement contemplated by the
Registration Rights Agreement (as defined below), or
other provisions of the Registration Rights Agreement
or in accordance with applicable laws.
THEREFORE, in consideration of the mutual promises
and covenants set forth below and for other good and
valuable consideration, the receipt and sufficiency
of which the parties acknowledge by their signatures
below, the parties agree as follows (capitalized
terms shall have the meanings ascribed to such terms
in Exhibit A hereto, unless otherwise indicated):
1. Purchase of Common Stock.
1.1 Shares. Subject to the terms and conditions of
this Agreement, the Company agrees to issue and sell
to Purchaser, and Purchaser agrees to acquire from
the Company, at each Closing, a number of shares of
Common Stock determined in accordance with the
following formula (the "Shares"):
Put Amount: Eighty percent (80%) of the Lowest Market
Price on the Five (5) Business Days immediately
following the Put Notice Date.
1.2 Closings. Each Closing shall take
place at 2:00 p.m. on the eighth (8th) Business Day
after the issuance of a Put Notice as defined below,
at the offices of the Escrow Agent or at such other
place, time or date as the parties may mutually agree
to in writing. At each Closing, Purchaser shall
deliver written instructions to the Escrow Agent to
deliver to the Company (against receipt by the Share
Escrow Agent of a certificate or certificates
evidencing the Additional Shares), the Escrow Funds
in U.S. dollars by wire transfer of immediately
available funds to an account designated by the
Company.
2. Closings and Escrow.
2.1 Closing. Each closing shall occur on the Share
Payment Date at the offices of Xxxxxxx & Prager,
Esqs. ("Escrow Agent") or at such other place, time
or date as the parties may mutually agree to in
writing. At the Initial Closing,
(a) the Company shall deliver to Purchaser (i) a
certificate or certificates evidencing the Initial
Shares, (ii) the Registration Rights Agreement, duly
executed on behalf of the Company, and (iii) the
Initial Warrant, duly executed on behalf of the
Company; and
(b) Purchaser shall deliver to the Company (i) the
Initial Purchase Price times the number of Initial
Shares, in U.S. dollars by wire transfer of
immediately available funds to an account designated
by the Company, and (ii) the Registration Rights
Agreement, duly executed on behalf of Purchaser.
2.2 Purchases.
(a) The Purchaser hereby unconditionally and
irrevocably agrees to purchase from the Company up to
$5,000,000 of Common Stock ("Common Stock") in one or
more Tranches on and subject to the terms and
conditions provided this Section 2.2.
(b) Commencing on or before the Effective Date, the
Company may give a notice (a "Put Notice") to the
Purchaser, with a copy to the Escrow Agent. The date
the Put Notice is given to the Purchaser is referred
to as the "Put Notice Date" The Put Notice shall
specify the dollar amount (the "Put Amount") of the
Common Stock to be purchased by the Purchaser (which
amount shall be not be less than one hundred thousand
dollars ($100,000) and not more than five hundred
thousand dollars ($500,000) in any given Put Notice).
(c) Except as specifically provided in this Section
2.3, the purchase and sale of Additional Common Stock
effected on each Additional Closing Date shall be
conducted as if it were the transactions referred to
in the Transaction Agreements (other than this
Section 2.3). By way of illustration, and not in
limitation, of the foregoing, each of the Company and
the Purchaser shall be deemed to have made all of the
representation, warranties and covenants set forth in
the Transaction Agreements as of the Additional
Common Stock, and the terms of the Registration
Rights Agreement will apply to the Additional Common
Stock and the related Warrants. Specifically, the
Company acknowledges its obligation to register the
Registrable Securities applicable to each Additional
Put independent of any other effective registration
applicable to Registrable Securities relating to
prior Common Stock and related Warrants purchased on
any prior Closing Date.
(d) It shall be a condition to the Company's right
to issue a Put Notice that, as of the Put Notice Date
and the relevant Additional Closing Date, (A) the
Registration Statement or Statements required to be
filed under the Registration Rights Agreement for all
Registrable Securities relating to Common Stock and
related Warrants purchased prior to the Additional
Closing Date contemplated by the current Put Notice
shall have been declared effective and shall continue
to be effective, (B) the Registration Rights
Agreement shall continue to be in full force and
effect and be applicable to the filing of and
effectiveness of the registration of the sale of
shares of Common Stock issuable upon conversion of
the Additional Common Stock and upon the exercise of
the Warrants issued in connection with the closing of
the Additional Common Stock (and the Company's
issuance of the Additional Common Stock shall
constitute the Company's confirmation thereof as of
such date) , and (C) the representations and
warranties of the Company contained in Article 4
hereof shall be true and correct in all material
respects (and the Company's issuance of the
Additional Common Stock shall constitute the
Company's making each such representation and
warranty as of such date) and there shall have been
no material adverse changes (financial or otherwise)
in the business or conditions of the Company from the
Initial Closing Date through and including the
Additional Closing Date (and the Company's issuance
of the Additional Common Stock shall constitute the
Company's making such representation and warranty as
of such date).
(e) It shall be a condition to the Company's right
to issue a Put Notice that, as of each Closing Date,
the Put Amount shall not exceed two hundred percent
(200%) of the average Trading Volume for the twenty
(20) consecutive trading days ending the day before
the relevant Closing Date.
(f) Except to the extent specifically contemplated
by the provisions of this Section, the closing of
each Additional Tranche shall be conducted upon the
same terms and conditions as those applicable to the
closing held on the Initial Closing Date.
(g) The Purchaser's obligations under this Section
2.2 shall terminate eighteen (18) months after the
Initial Closing Date.
(h) The Company is only required to issue Put
Notices totaling a minimum of one million dollars
($1,000,000) of Common Stock during the term of this
Agreement. Should the Company not desire to issue any
further Put Notices under this Agreement, then it
shall give notice of such to the Purchaser, with a
copy to the Escrow Agent and the Share Escrow Agent
under this Agreement.
2.3 Escrow. Within three (3) Business Days after
the Company has delivered a written notice to
Purchaser that the SEC has approved the Post
Effective Amendment to the Registration Statement,
(a) the Company shall deliver to the Escrow Agent
the Joint Escrow Instructions and the Initial Put
Notice, duly executed on behalf of the Company; and
(b) Purchaser shall deliver to the Escrow Agent, (i)
the Joint Escrow Instructions in the form annexed
hereto as Exhibit 2, duly executed on behalf of
Purchaser, and (ii) the amount of the Initial Put
Notice, in U.S. dollars by wire transfer of
immediately available funds to such account as may be
designated by the Escrow Agent.
2.4 Share Escrow.
(a) Simultaneous with the execution of this
Agreement, the Company agrees to deliver twenty
million (20,000,000) shares of Common Stock to the
Share Escrow Agent for Escrow, pursuant to the terms
of the Securities Escrow Agreement annexed hereto as
Exhibit 2.4 (a)..
(b) Simultaneous with the effectiveness of the
Registration, the Company shall deliver to the
transfer agent and the Share Escrow Agent, the
Irrevocable Instructions in the form annexed hereto
as Exhibit 1.
(c) The Common Stock shall be maintained with the
Share Escrow Agent until the earlier of: (a) notice
is given by the Company under Section 2.2(h), or (b)
the termination of Purchaser's obligations under this
Agreement ("Escrow Period"). At such time, the Share
Escrow Agent, upon written notice from the Company,
shall release the unissued share certificates back to
Corporate Stock Transfer, Inc., the transfer agent
for the Company within five (5) business days
thereafter.
2.5 Share Issuance.
(a) Not later than two (2) business days after the
Share Valuation Date, the Company shall deliver a
letter [in the form annexed hereto as Exhibit 2.5],
to the Share Escrow Agent, advising the Share Escrow
Agent of the maximum number of shares that may be
sold by the Purchaser free of restrictive legend
pursuant to a Put Notice. Purchaser shall make
payment of the Put Notice Amount (less any applicable
legal or other fees) within three (3) business days
after delivery of such share letter to the Escrow
Agent ("Share Payment Date").
(b) In the event the Company does not deliver the
requisite instructions under Section 2.5(a) to the
Escrow Agent within two (2) business days after the
Share Valuation Date, the Purchaser may at its
option, elect to treat the Put Notice as null and
void.
(c) If the effectiveness of the Registration
Statement shall be suspended for any reason,
Purchaser shall be under no obligation to accept or
honor any Put Notice for a minimum period of fifteen
(15) days after the lifting of such terms or
suspension of such Registration Statement.
3. Representations and Warranties of Purchaser. To
induce the Company's acceptance of this Agreement,
Purchaser hereby certifies, represents and warrants
to the Company and its agents and attorneys as
follows, which representations and warranties are
solely for the benefit of the Company and may be
waived in whole or in part at any time prior to
Closing by the Company:
3.1 Intent. Purchaser will be acquiring the
Securities for its own account, and Purchaser has no
present arrangement (whether or not legally binding)
to sell any of the Securities to or through any
Person; provided, however, that by making the
representations herein, Purchaser does not agree to
hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of
the Securities at any time in accordance with U.S.
federal and state securities laws applicable to such
disposition and any restrictions imposed on such
transfer by this Agreement or the instruments and
documents executed in connection with this Agreement.
Purchaser understands that the Securities must be
held indefinitely unless the Securities are
subsequently registered under the Securities Act or
an exemption from registration is available.
Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the
Securities Act.
3.2 Sophisticated Investor; Domicile. Purchaser and
each of its members is a "sophisticated investor" (as
described in Rule 506(b)(2)(ii) of Regulation D) and
an "accredited investor" (as defined in Rule 501(a)
of Regulation D), and Purchaser has such knowledge
and experience in business and financial matters that
it is capable of evaluating the merits and risks of
an investment in the Company's securities. Purchaser
was not formed exclusively for the purpose of
entering into the transactions contemplated hereby.
3.3 Ability of Purchaser to Bear Risk of Investment.
Purchaser acknowledges that the Securities are
speculative investments and involve a high degree of
risk and Purchaser is able to bear the economic risk
of an investment in the Securities, and, at the
present time, is able to afford a complete loss of
such investment.
3.4 Authority. This Agreement has been duly
authorized and validly executed and delivered by
Purchaser and (assuming due authorization and valid
execution by the Company) is a legal, valid and
binding agreement of Purchaser enforceable against
Purchaser in accordance with its terms, subject to
general principles of equity and to 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. The person or persons executing this
Agreement and all exhibits to this Agreement and
documents or instruments executed in connection with
this Agreement on behalf of Purchaser have all
requisite authority to do so on behalf of Purchaser.
3.5 Brokers, Finders. Purchaser has taken no action
which would give rise to any claim by any Person for
brokerage commission, finder's fees or similar
payments by the Company relating to this Agreement or
the transactions contemplated hereby. The Company
shall have no obligation with respect to such fees or
with respect to any claims made by or on behalf of
other Persons for fees of a type contemplated in this
Section 3.5 that may be due in connection with the
transactions contemplated hereby, except as expressly
provided in Section 4.14.
3.6 Organization; Authority. Purchaser is an entity
organized, validly existing and in good standing
under the laws of the jurisdiction of its
organization with the requisite power and authority
to enter into and to consummate the transactions
contemplated by this Agreement and to carry out its
obligations thereunder. The acquisition of the
Securities and the payment of the purchase price
therefor by Purchaser have been duly authorized by
all necessary action on the part of Purchaser.
3.7 Absence of Conflicts. The execution and
delivery of this Agreement and any other document or
instrument executed in connection herewith
(collectively with this Agreement, the "Transaction
Documents"), and the consummation of the transactions
contemplated by the Transaction Documents, and
compliance with the requirements thereof, will not
violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on
Purchaser, or the provision of any indenture,
instrument or agreement to which Purchaser is a party
or is subject, or by which Purchaser or any of its
assets is bound, or conflict with or constitute a
material default thereunder, or require the approval
of any third-party pursuant to any material contract,
agreement, instrument, relationship or legal
obligation to which Purchaser is subject or to which
any of its assets, operations or management may be
subject.
3.8 Disclosure; Access to Information. Purchaser
has received copies of or has had access to all
documents, records, books and other information
pertaining to Purchaser's investment in the Company
and the Securities that have been requested by
Purchaser. Purchaser has been afforded the
opportunity to ask questions of and receive answers
from the Company and its management concerning all
aspects of the Company and of this transaction.
Purchaser further acknowledges that it understands
that the Company is subject to the periodic reporting
requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Purchaser has
reviewed or received copies of any such reports that
have been requested by it. Purchaser further
acknowledges that it has been provided with copies of
the Company's certificate of incorporation, as
amended (the "Certificate"), and the Company's by-
laws (the "By-Laws").
3.9 Manner of Sale. At no time was Purchaser
presented with or solicited by or through any
leaflet, public promotional meeting, television
advertisement or any other form of general
solicitation or advertising with respect to the
Securities.
3.10 Accuracy of Other Materials. To the extent
Purchaser has received from the Company documents or
other materials which constitute summaries,
projections, forecasts or estimates, Purchaser
acknowledges the following with respect to such
documents or other materials: Such documents or other
materials are intended to illustrate projected
financial and other results based upon a set of
assumptions (in some cases based on information
obtained by the Company from outside sources) the
Company views as reasonable and obtainable; all such
summaries, projections, forecasts or estimates
pertaining to revenue growth, profitability and other
similar financial or market data are forward-looking
statements; such statements are subject to certain
risks and uncertainties that could cause actual
results to differ materially from those projected;
and no representations or warranties of future
performance by or market trends for the Company are
intended, and such are expressly disclaimed.
3.11 Accuracy of Representations and Information.
All representations made by Purchaser in this
Agreement and all documents and instruments related
to this Agreement, and all information provided by
Purchaser to the Company concerning Purchaser are
correct and complete in all material respects as of
the date hereof.
4. Representations and Warranties of the Company.
Except as otherwise set forth in the schedules
hereto, the Company hereby represents and warrants to
Purchaser as follows, which representations and
warranties are solely for the benefit of Purchaser
and may be waived in whole or in part by Purchaser at
any time prior to Closing:
4.1 Company Status. The Company has registered the
Common Stock pursuant to Section 12(g) of the
Exchange Act, is in full compliance with all
reporting requirements of the Exchange Act, and the
Company has maintained all requirements for the
continued listing of the Common Stock, and such
Common Stock is currently listed on the Over the
Counter Bulletin Board.
4.2 Current Public Information. The Company has
furnished or made available to Purchaser true and
correct copies of all registration statements,
reports and documents, including proxy statements
(other than preliminary proxy statements), filed with
SEC by or with respect to the Company since December
31, 1997 and prior to the date of this Agreement,
pursuant to the Securities Act or the Exchange Act
(collectively, the "SEC Documents"). The SEC
Documents are the only filings made by or with
respect to the Company since December 31, 1997
pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act or pursuant to the Securities Act.
The Company has filed all reports, schedules, forms,
statements and other documents required to be filed
under Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act since January 1, 1996 and prior to the
date of this Agreement. [The Company meets the
"Registrant Requirement" for eligibility to use Form
S-3 under the Securities Act in order to register the
Company's Common Stock for resales.]
4.3 No General Solicitation. Neither the Company,
nor any of its affiliates, nor any person acting on
its or their behalf, has engaged in any form of
general solicitation or general advertising (within
the meaning of Regulation D under the Securities Act)
in connection with the offer or sale of the
Securities.
4.4 Valid Issuance of Common Stock. The Company has
an authorized capitalization consisting of two
hundred million (200,000,000) shares of Common Stock,
and no shares of preferred stock. As of August 31,
1999, the Company has issued and outstanding sixty-
six million seven hundred eight-three thousand seven
hundred seventy-five (66,783,775) shares of Common
Stock. The number of shares of Common Stock are
subject to issuance upon the conversion or exercise
of presently issued and outstanding warrants and
options of the Company are as set forth in Schedule
4.4. Schedule 4.4 sets forth the number of shares of
Common Stock which are reserved for issuance under
the Company's existing stock option plans. No shares
of the Company's preferred stock are issued and
outstanding. All of the shares of Common Stock
outstanding have been duly and validly authorized and
issued and are fully paid and non-assessable. Except
as set forth above or as disclosed in Schedule 4.4,
as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the
Company or any of the Subsidiaries, or contracts,
commitments, understandings or arrangements by which
the Company or any of it Subsidiaries is or may
become bound to redeem or issue additional shares of
capital stock of the Company or any of the
Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the
Company or any of the Subsidiaries, (ii) there are no
outstanding debt securities, other than indebtedness
to banks and other institutional lenders set forth on
Schedule 4.4, and (iii) there are no agreements or
arrangements under which the Company or any of the
Subsidiaries is obligated to register the sale of any
of their securities under the Securities Act. Except
as disclosed in Schedule 4.4, there are no securities
or instruments containing any anti-dilution, right of
first refusal, preemptive rights or similar
provisions that will be triggered by the issuance of
the Securities as described in this Agreement. Upon
issuance of the Securities, such securities will be
duly and validly issued, fully paid and
non-assessable.
4.5 Organization and Qualification. The Company is
a corporation duly incorporated and existing in good
standing under the laws of the Nevada and has the
requisite corporate power to own its properties and
to carry on its business as now being conducted. The
Company does not have any Subsidiaries, except for
those listed on Schedule 4.5 attached to this
Agreement (the "Subsidiaries"). The Subsidiaries are
duly incorporated and existing in good standing under
the laws of the jurisdiction of their incorporation.
The Company and each of the Subsidiaries is duly
qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which
the nature of the business conducted 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. "Material
Adverse Effect" means any effect on the business,
operations, properties or financial condition of the
entity or entities with respect to which such term is
used and which is material and adverse to such entity
or to other entities controlling or controlled by
such entity, and/or any condition or situation which
would prohibit or otherwise interfere with the
ability of the entity or entities with respect to
which said term is used to enter into and perform its
obligations under the Transaction Documents.
4.6 Authorization: Enforcement. (i) The Company has
the requisite corporate power and authority to enter
into and perform under the Transaction Documents and
to issue the Securities in accordance with the terms
of the Transaction Documents, (ii) the execution,
issuance and delivery of the Transaction Documents by
the Company and the consummation by it of the
transactions contemplated by the Transaction
Documents 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, (iii) the
Transaction Documents have been duly executed and
delivered by the Company, and (iv) the Transaction
Documents (assuming due authorization and valid and
legal execution by Purchaser) constitute legal, valid
and binding obligations of the Company enforceable
against the Company in accordance with their 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.
4.7 Corporate Documents. The Company has furnished
or made available to Purchaser true and correct
copies of the Certificate and the Bylaws.
4.8 No Conflicts. The execution, delivery and
performance of the Transaction Documents by the
Company and the consummation by the Company of the
transactions contemplated hereby, including without
limitation the issuance of the Securities, do not and
will not (i) result in a violation of the Company's
Certificate or Bylaws, or (ii) conflict with, or
result in a breach of or forfeiture of any rights (or
result in an event which with notice or lapse of time
or both would become a breach of or forfeiture of any
rights) under, or give to others any rights of
termination, amendment, acceleration or cancellation
of, any material agreement, indenture or instrument
to which the Company or any of the Subsidiaries is a
party, or (iii) result in a violation of any federal
or state law, rule, regulation, order, judgment or
decree (including federal and state securities laws
and regulations) applicable to the Company or any of
the Subsidiaries or by which any property or asset of
the Company or any of the Subsidiaries 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). 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 which either singly 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 Securities in
accordance with the terms of this Agreement (other
than any SEC, NASD or state securities filings which
may be required to be made by the Company subsequent
to any closing hereunder, and any registration
statement which may be filed in furtherance of this
Agreement); 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 Purchaser
herein. Neither the Company nor any of the
Subsidiaries is in violation of any material term of
or in material default under its Certificate or By-
laws or their organizational charter or by-laws,
respectively, or any material contract, agreement,
mortgage, indebtedness, indenture, instrument,
judgment, decree of order or any statute, rule or
regulation applicable to the Company or the
Subsidiaries, which has not been duly waived as of
the date of this Agreement.
4.9 SEC Documents. As of their respective dates,
the SEC Documents complied, and all similar documents
filed with the SEC prior to each Closing Date will
comply, in all material respects with the
requirements of the Securities Act or the Exchange
Act, as the case may be, and rules and regulations of
the SEC promulgated thereunder and other federal,
state and local laws, rules and regulations
applicable to such SEC Documents, and none of the SEC
Documents contained, nor will any similar document
filed with the SEC prior to each Closing Date
contain, any untrue statement of a material fact or
omitted or omit to state a material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances
under which they were made, not misleading. The
financial statements of the Company included in the
SEC Documents, as of the dates thereof, complied,
and all similar documents filed with the SEC prior to
each Closing Date will comply, as to form in all
material respects with applicable accounting
requirements and the published rules and regulations
of the SEC and other applicable rules and regulations
with respect thereto. Such financial statements were
prepared in accordance with generally accepted
accounting principles applied on a consistent basis
during the periods involved (except (i) as may be
otherwise indicated in such financial statements or
the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not
include footnotes or may be condensed or summary
statements as permitted by Form 10-QSB of the SEC)
and fairly present in all material respects the
financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and
the consolidated results of operations and cash flows
for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit
adjustments).
4.10 No Undisclosed Liabilities. Except to the
extent described in Schedule 4.10, the Company and
the Subsidiaries have no liabilities or obligations
of a financial nature (whether accrued, absolute,
contingent or otherwise), which are material,
individually or in the aggregate, and are not
disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company's or
the Subsidiaries' respective businesses consistent
with past practice since December 31, 1996, and
which, individually or in the aggregate, do not or
would not have a Material Adverse Effect on the
Company.
4.11 Litigation and Other Proceedings. Except as may
be set forth in the SEC Documents or otherwise
disclosed in writing to Purchaser, 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 on the Company or which might materially
adversely affect the transactions contemplated by
this Agreement. Except as set forth in the SEC
Documents, no judgment, order, writ, injunction or
decree or award has been issued by or, to the best
knowledge of the Company, requested of any court,
arbitrator or governmental agency which might result
in a Material Adverse Effect or which might
materially adversely affect the transactions
contemplated by this Agreement.
4.12 Other Documents or Materials. With respect to
any document or other materials received by Purchaser
from the Company or its representatives other than
the Transaction Documents and the SEC Documents, (i)
the Company has no reason to believe any of such
documents and materials or any projections contained
therein, as of the date of such other documents or
materials, contained material errors or misstatements
or do not adequately describe the status of the
development of the Company's technologies or its
business as of such date, and (ii) such documents,
materials and projections were prepared by the
Company and its management in good faith.
4.13 Nature of Company. The Company is not an open
ended investment company or a unit investment trust,
registered or required to be registered, or a closed
end investment company required to be registered, but
not registered, under the Investment Company Act of
1940.
4.14 Brokers, Finders. Except for payment of
commitment fees to Purchaser, payment of which is the
sole responsibility of the Company, 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 Purchaser relating to this
Agreement or the transactions contemplated hereby.
Purchaser shall have no obligation with respect to
such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type
contemplated in this Section 4.14 that may be due in
connection with the transactions contemplated hereby.
4.15 Absence of Certain Changes. Since December
31, 1998, no Material Adverse Effect has been
suffered by, and no material adverse development has
occurred in the business, properties, operations,
financial condition or results of operations of the
Company or the Subsidiaries. The Company has not
taken any steps, and does not currently expect to
take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of the
Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary
bankruptcy proceedings.
4.16 Intellectual Property Rights. The Company and
the Subsidiaries own or possess adequate rights or
licenses to use all trademarks, trade names, service
marks, service xxxx registrations, service names,
patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations,
trade secrets and rights necessary to conduct their
respective businesses as now conducted. None of the
Company's trademarks, trade names, service marks,
service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets
or other intellectual property rights have expired or
terminated, or are expected to expire or terminate in
the near future. The Company and the Subsidiaries
do not have any knowledge of any infringement by the
Company or the Subsidiaries of trademarks, trade name
rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks,
service xxxx registrations, trade secrets or other
similar rights of others, or of any such development
of similar or identical trade secrets or technical
information by others and, there is no claim, action
or proceeding being made or brought against, or to
the best knowledge of the Company, being threatened
against, the Company or the Subsidiaries regarding
trademark, trade name, patent, patent rights,
invention, copyright, license, service name, service
xxxx, service xxxx registration, trade secret or
other infringement; and the Company and the
Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the
foregoing. The Company and the Subsidiaries have
taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their
intellectual properties.
4.17 Internal Accounting Controls. The Company is
aware of no respect in which its system of internal
accounting controls is not sufficient to provide
reasonable assurance that (i) transactions are
executed in accordance with management's general or
specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of
financial statements in conformity with generally
accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted
only in accordance with management's general or
specific authorization and (iv) the recorded
accountability for assets is compared with the
existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
4.18 Tax Status. The Company and the Subsidiaries
have made or filed all federal and state income and
all other tax returns, reports and declarations
required by any jurisdiction to which it is subject
and has paid all taxes and other governmental
assessments and charges that are material in amount,
shown or determined to be due on such returns,
reports, declarations, except those being contested
in good faith and has set aside on its books
provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which
such returns, reports, or declarations apply. There
are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for
any such claim.
4.19 Certain Transactions. Except as set forth in
Schedule 4.19 or in the SEC Documents and except for
arm's length transactions pursuant to which the
Company makes payments in the ordinary course of
business upon terms no less favorable than the
Company could obtain from third parties and other
than the grant of stock options, none of the
officers, directors, or employees of the Company (or
any spouse or relative of any such person) is
presently a party to any transaction with the Company
(other than for services as employees, officers,
consultants and directors), including any contract,
agreement or other arrangement providing for the
furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise
requiring payments to or from any officer, director
or such employee or, to the knowledge of the Company,
any corporation, partnership, trust or other entity
in which any officer, director, or any such employee
has a substantial interest or is an officer,
director, trustee or partner.
4.20 Dilution. The Repricing Shares may increase
substantially in certain circumstances, including,
but not necessarily limited to, the circumstance
wherein the trading price of the Common Stock
declines during the one hundred eighty (180) day
period following the Initial Closing Date or the
Effective Date, as may be applicable. The Company's
executive officers and directors have studied and
fully understand the nature of the transactions
contemplated by this Agreement and recognize that
they have a potential dilutive effect. The board of
directors of the Company has concluded, in its good
faith business judgment, that such issuance is in the
best interests of the Company. The Company
specifically acknowledges that its obligation to
issue the Repricing Shares is binding upon the
Company and enforceable regardless of the dilution
such issuance may have on the ownership interests of
other shareholders of the Company.
4.21 OTC BB Listing. The Company's Common Stock is
presently quoted on the Over the Counter Bulletin
Board under the symbol "ECNC." The Company is not in
receipt of any written notice from any stock
exchange, market or trading facility on which the
Common Stock is or has been listed (or on which it is
or has been quoted) to the effect that the Company is
not in compliance with the listing or maintenance
requirements of such stock exchange, market or
trading facility or that the Common Stock will be
delisted from such stock exchange, market or trading
facility.
4.22 No Integrated Offering. Neither the
Company nor any of its affiliates nor any person
acting on its or their behalf has, directly or
indirectly, at any time since December 31, 1998, made
any offer or sales of any security or solicited any
offers to buy any security under circumstances that
would eliminate the availability of the exemption
from registration under Regulation D in connection
with the offer and sale of the Securities as
contemplated hereby.
5. Use and Disposition of Proceeds. The Company
will use the proceeds from the sale of the Common
Stock (excluding amounts paid by the Company for
legal fees and finder's fees in connection with the
sale to Purchaser) but shall not, directly or
indirectly, use such proceeds for investment in any
other affiliate or to repay debt to affiliates.
6. Company Reliance on Purchaser's Representations.
Purchaser understands that the Company is relying on
the truth and accuracy of the representations and
warranties made herein by Purchaser in offering the
Securities for sale and in relying upon applicable
exemptions available under the Securities Act and
applicable state securities laws.
7. Restricted Shares. Purchaser understands and
acknowledges that if the Securities have not been,
and will not as of the time issued be, registered
under the Securities Act, they will be issued in
reliance upon exemptions from the registration
requirements of the Securities Act, and thus cannot
be resold unless they are included in an effective
registration statement filed under the Securities Act
or unless an exemption from registration is available
for such resale. With regard to the restrictions on
resales of the Securities, Purchaser is aware (a)
that the Company will issue stop transfer orders to
its stock transfer agent in the event of attempts to
improperly transfer any Securities; and (b) that a
restrictive legend will be placed on certificates
representing the Securities, which legend will read
substantially as follows:
THESE SECURITIES ARE NOT REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
ACT AND REGULATIONS PROMULGATED UNDER THE ACT,
INCLUDING EXEMPTIONS UNDER SECTIONS 3(b) AND 4(2) OF
THE ACT AND THE PROVISIONS OF REGULATION D UNDER SUCH
ACT, AND SIMILAR EXEMPTIONS UNDER STATE LAW.
ACCORDINGLY, THESE SECURITIES MAY NOT BE RESOLD,
TRANSFERRED, PLEDGED, ASSIGNED OR HYPOTHECATED UNLESS
SUCH SECURITIES ARE COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER THE ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT IS
AVAILABLE AND THE COMPANY HAS RECEIVED AN OPINION OF
SECURITIES COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH EXEMPTION IS AVAILABLE.
The legend set forth above shall be promptly removed
without additional cost or delay, and the Company
shall issue a certificate without such legend to the
holder of any of the Securities upon which such
legend is stamped (or to the holder's assignee), if,
unless otherwise required by state securities laws,
(i) such securities are registered for resale, or
have been sold, under an effective registration
statement under the Securities Act, (ii) in
connection with a sale transaction, such holder
provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a
public sale, assignment or transfer of the Securities
may be made without registration under the Securities
Act, or (iii) such holder provides the Company with
reasonable assurances that the Securities can be sold
pursuant to Rule 144 promulgated under the Securities
Act without any restriction as to the number of
securities acquired as of a particular date that can
then be immediately sold. Notwithstanding the
removal of the legend set forth above, in the event
the Securities are registered for resale on an
effective registration statement, the Company
reserves the right to affix a legend on certificates
representing the Securities that any selling
shareholder named in the registration statement must
comply with the prospectus delivery requirements of
the Securities Act in connection with any resale.
The Company shall bear the cost of the removal of any
legend as anticipated by this Section 7.
8. Other Covenants of the Company.
8.1 Furnishing of Information. As long as Purchaser
owns Securities, the Company covenants to timely file
(or obtain extensions in respect thereof and file
within the applicable grace period) all reports
required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act. If at any time prior to the date on
which Purchaser may resell all of the Securities
without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act (as determined
by counsel to the Company pursuant to a written
opinion letter to such effect, addressed and
acceptable to the Company's transfer agent for the
benefit of and enforceable by Purchaser) the Company
is not required to file reports pursuant to such
sections, it will prepare and furnish to Purchaser
and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual
and quarterly financial statements, together with a
discussion and analysis of such financial statements
in form and substance substantially similar to those
that would otherwise be required to be included in
reports required by Section 13(a) or 15(d) of the
Exchange Act in the time period that such filings
would have been required to have been made under the
Exchange Act. The Company further covenants that it
will take such further action as any holder of
Securities may reasonably request, all to the extent
required from time to time to enable such Person to
sell Securities without registration under the
Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the
Securities Act.
8.2 Certain Agreements. The Company covenants and
agrees that it will not, without the prior written
consent of Purchaser enter into any subsequent or
further offer or sale of Common Stock or securities
convertible into Common Stock with any third party
until the date which is one hundred eighty (180)
days after the later of any Closing Date or September
15, 2000 (the "Restrictive Period").
(a) The provisions of this subparagraph will not
apply to (x) Common Stock issued pursuant to Rule
144, provided the holder thereof holds such Common
Stock for at least one year from the date of
issuance; or (y) the issuance of securities (other
than for cash) in connection with a merger,
consolidation, sale of assets, disposition or the
exchange of the capital stock for assets, stock or
other joint venture interests; or (z) Upon conversion
or exercise of any convertible or derivative
securities outstanding on the date hereof, as set
forth on Schedule 8.3.
(b) The term "Effective Date" means the effective
date of the Registration Statement covering the
Registrable Securities (as defined in the
Registration Rights Agreement);
8.4 Limitation on Issuance of Shares. The parties
acknowledge that the Company may be limited in the
number of shares of Common Stock it may issue by
applicable OTC BB rules without obtaining shareholder
approval ("Cap Regulations"). To the extent the
Company cannot issue Repricing Shares and shares
issuable upon exercise of the Warrants without
violating the Cap Regulations, the Company shall
provide notice thereof to the Purchaser specifying
the number of shares that may not be repriced or
issued pursuant to the Warrants because of the Cap
Regulations and the Company shall be relieved of the
obligation to issue such shares if it is unable to
obtain the required shareholder vote as provided
below. On receipt of such notice, Purchaser's
request with respect to the issuance of Repricing
Shares or shares upon exercise of the Warrants shall
be deemed reduced by the number permitted under the
Cap Regulations and Purchaser shall have the option,
exercisable in its sole and absolute discretion, to
require the Company to redeem Initial Shares or
Additional Shares for an amount in cash equal to one
hundred twenty percent (120%) of the Initial Purchase
Price or the Additional Purchase Price, as
applicable. Company's obligation to redeem such
shares shall be suspended during any period in which
such redemption would be prohibited by law.
Notwithstanding the foregoing, the Company agrees
that the Company shall, in connection with its next
annual meeting, solicit the consent of its
shareholders for the issuance of shares that would
otherwise violate the Cap Regulations but for such
consent.
8.5 Available Shares. The Company shall have at all
times authorized and reserved for issuance, free from
preemptive rights, twenty million (20,000,000) shares
of Common Stock.
8.6 Reimbursement. If (i) Purchaser, other than by
reason of its gross negligence or willful misconduct,
becomes involved in any capacity in any action,
proceeding or investigation brought by any
stockholder of the Company, in connection with or as
a result of the consummation of the transactions
contemplated by the Transaction Documents, or if
Purchaser is impleaded in any such action, proceeding
or investigation by any Person, or (ii) Purchaser,
other than by reason of its gross negligence or
willful misconduct or by reason of its trading of the
Common Stock in a manner that is illegal under
applicable securities laws, becomes involved in any
capacity in any action, proceeding or investigation
brought by the SEC against or involving the Company
or in connection with or as a result of the
consummation of the transactions contemplated by the
Transaction Documents, or if Purchaser is impleaded
in any such action, proceeding or investigation by
any Person, then in any such case, the Company will
reimburse Purchaser for its reasonable legal and
other expenses (including the cost of any
investigation and preparation) incurred in connection
therewith, as such expenses are incurred. In
addition, other than with respect to any matter in
which Purchaser is a named party, the Company will
pay Purchaser the charges, as reasonably determined
by Purchaser, for the time of any officers or
employees of Purchaser devoted to appearing and
preparing to appear as witnesses, assisting in
preparation for hearings, trials or pretrial matters,
or otherwise with respect to inquiries, hearing,
trials, and other proceedings relating to the subject
matter of this Agreement. The reimbursement
obligations of the Company under this paragraph shall
be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and
conditions to any Affiliates of Purchaser who are
actually named in such action, proceeding or
investigation, and partners, directors, agents,
employees and controlling persons (if any), as the
case may be, of Purchaser and any such Affiliate, and
shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal
representatives of the Company, Purchaser and any
such Affiliate and any such Person. The Company also
agrees that neither any Purchaser nor any such
Affiliate, partners, directors, agents, employees or
controlling persons shall have any liability to the
Company or any person asserting claims on behalf of
or in right of the Company in connection with or as a
result of the consummation of the Transaction
Documents except to the extent that any losses,
claims, damages, liabilities or expenses incurred by
the Company result from the gross negligence or
willful misconduct of Purchaser or any inaccuracy in
any representation or warranty of Purchaser contained
in herein or any breach by Purchaser of any of the
provisions hereof.
9. Transfer Agent Instructions.
9.1 Irrevocable Instructions. Subject to the
provisions of Section 2.5, the Company will
irrevocably instruct its transfer agent to issue
securities from time to time in such amounts as shall
be required hereunder and as specified from time to
time by the Company to the transfer agent, bearing
the restrictive legend specified in Section 7 of this
Agreement prior to registration of the Securities
under the Securities Act, registered in the name of
Purchaser or its nominee and in such denominations to
be specified by Purchaser in connection with each
closing hereunder. The Company warrants that no
instruction other than such instructions referred to
in this Section 9 and stop transfer instructions to
give effect to Section 7 hereof prior to registration
and sale of the Securities under the Securities Act
will be given by the Company to the transfer agent
and that the securities shall otherwise be freely
transferable on the books and records of the Company
as and to the extent provided in this Agreement, the
Registration Rights Agreement, and applicable law.
Nothing in this Section 9 shall affect in any way
Purchaser's obligations and agreement to comply with
all applicable securities laws upon resale of the
Securities.
9.2 Transmission of Certificates. Subject to
Section 7, the Company will transmit the certificates
representing any unlegended securities to be issued
to Purchaser via express courier, by electronic
transfer or otherwise, within three (3) business days
after receipt by the Company of the certificate
representing the legended Common Stock or the date
unlegended Common Stock is required to be issued
pursuant to Section 7, as applicable (the "Delivery
Date").
9.3 Delay. The Company understands that a delay in
the issuance of the securities beyond the Delivery
Date could result in economic loss to Purchaser. As
compensation to Purchaser for such loss, the Company
agrees to pay late payments to Purchaser for late
issuance of unlegended securities, including
Repricing Shares, valued at Relevant Repricing Price,
in accordance with the following schedule (where "No.
Days Late" is defined as the number of days beyond
five (5) business days from Delivery Date):
Late Payment For Each
No. Days Late $10,000 of Common Stock
1 $ 50
2 $100
3 $150
4 $200
5 $250
6 $300
7 $350
8 $400
9 $450
10 $500
>10 $500 +$100 for each
Business
Day Late
beyond 10
days
The Company shall pay any payments incurred under
this Section 9.3 in immediately available funds upon
demand. Nothing herein shall limit Purchaser's right
to pursue actual damages for the Company's failure to
issue and deliver the unlegended securities to
Purchaser.
9.4 Cover. If, by the relevant Delivery Date, the
Company fails for any reason to deliver the
unlegended Shares to be issued pursuant to Section
9.2 and after such Delivery Date, Purchaser
purchases, in an open market transaction or
otherwise, shares of Common Stock (the "Covering
Shares") in order to make delivery in satisfaction of
a sale of Common Stock by Purchaser (the "Sold
Shares"), which delivery Purchaser anticipated to
make using the shares to be issued upon such
conversion (a "Buy-In"), the Company shall pay to
Purchaser, in addition to all other amounts
contemplated in other provisions of the Transaction
Documents, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy-In
Adjustment Amount" is the amount equal to the excess,
if any, of (x) Purchaser's total purchase price
(including brokerage commissions, if any) for the
Covering Shares over (y) the net proceeds (after
brokerage commissions, if any) received by Purchaser
from the sale of the Sold Shares. The Company shall
pay the Buy-In Adjustment Amount to the Company in
immediately available funds immediately upon demand
by Purchaser. By way of illustration and not in
limitation of the foregoing, if Purchaser purchases
shares of Common Stock having a total purchase price
(including brokerage commissions) of eleven thousand
dollars ($11,000) to cover a Buy-In with respect to
shares of Common Stock it sold for net proceeds of
ten thousand dollars ($10,000), the Buy-In Adjustment
Amount which Company will be required to pay to
Purchaser will be one thousand dollars ($1,000).
9.5 Electronic Transfer. In lieu of delivering
physical certificates representing the unlegended
securities issuable after the Effective Date as
provided in Section 7, provided the Company's
transfer agent is participating in the Depository
Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of Purchaser and its
compliance with the provisions contained in this
paragraph, so long as the certificates therefor do
not bear a legend and Purchaser thereof is not
obligated to return such certificate for the
placement of a legend thereon, the Company shall use
its reasonable best efforts to cause its transfer
agent to electronically transmit the Common Stock
issuable upon conversion to Purchaser by crediting
the account of Purchaser's Prime Broker with DTC
through its Deposit Withdrawal Agent Commission
system.
9.6 Bankruptcy. Purchaser shall be entitled to
exercise its right under Section 2.3 notwithstanding
the commencement of any case under 11 U.S.C. Section
101 et seq. (the "Bankruptcy Code"). In the event
the Company is a debtor under the Bankruptcy Code,
the Company hereby waives to the fullest extent
permitted any rights to relief it may have under 11
U.S.C. Section 362 in respect of the holder's
repricing right. The Company agrees, without cost
or expense to the holder, to take or consent to any
and all action necessary to effectuate relief under
11 U.S.C. Section 362.
10. Closing Conditions
10.1 Conditions to the Company's Obligation to Sell.
The Purchaser understands that the Company's
obligation to sell the Initial Shares and the
Additional Shares on the Initial Closing Date and the
Additional Closing Date, respectively, pursuant to
this Agreement is conditioned upon:
(a) the accuracy on each such date of the
representations and warranties of Purchaser contained
in this Agreement as if made thereon, and the
performance by Purchaser on or before such date of
all covenants and agreements of Purchaser required to
be performed on or before such date;
(b) there not being in effect any law, rule or
regulation prohibiting or restricting the
transactions contemplated hereby, or requiring any
consent or approval which shall not have been
obtained, nor there being any pending or threatened
proceeding or investigation which may have the effect
of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement.
10.2. Conditions to Purchaser's Obligation To
Purchase. The Company understands that Purchaser's
obligation to purchase the Initial Shares and the
Additional Shares on the Initial Closing Date and the
Additional Closing Date, respectively, pursuant to
this Agreement is conditioned upon:
(a) the accuracy in all material respects on each
such date of the representations and warranties of
the Company contained in this Agreement as if made on
such date and the performance by the Company on or
before each such date of all covenants and agreements
of the Company required to be performed on or before
such date;
(b) on or before each such date, Purchaser having
received an opinion of counsel for the Company, dated
on each such date, in the form of Exhibit E hereto;
(c) there not being in effect any law, rule or
regulation prohibiting or restricting the
transactions contemplated hereby, or requiring any
consent or approval which shall not have been
obtained, nor there being any pending or threatened
proceeding or investigation which may have the effect
of prohibiting or adversely affecting any of the
transactions contemplated by this Agreement; and
(d) from and after the date hereof to and including
the Initial Closing Date and the Additional Closing
Date, the trading of the Common Stock shall not have
been suspended by the SEC or the NASD.
11. General Provisions.
11.1 Assignment. Neither this Agreement nor any
rights of Purchaser hereunder may be assigned by
either party to any other person without the prior
written consent of the Company.
11.2 Attorneys' Fees. In the event any dispute
arises under this Agreement or the documents or
instruments executed and delivered in connection with
this Agreement, and the parties hereto resort to
litigation to resolve such dispute, the prevailing
party in any such litigation, in addition to all
other remedies at law or in equity, shall be entitled
to an award of costs and fees from the other party,
which costs and fees shall include, without
limitation, reasonable attorneys' fees and legal
costs.
11.3 Choice of Law; Venue. This Agreement shall be
governed by and interpreted in accordance with the
laws of the State of Delaware for contracts to be
wholly performed in such state and without giving
effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to
the jurisdiction of the federal courts whose
districts encompass any part of the City of
Wilmington or the state courts of the State of
Delaware sitting in the City of Wilmington in
connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any
objection based on forum non coveniens, to the
bringing of any such proceeding in such
jurisdictions.
11.4 Costs and Expenses. The parties shall be
responsible for and shall pay their own costs and
expenses, including without limitation attorneys'
fees and accountants' fees and expenses, in
connection with the conduct of the due diligence
inquiry, negotiation, execution and delivery of this
Agreement and the instruments, documents and
agreements executed in connection with this
Agreement.
11.5 Counterparts/Facsimile Signatures. This
Agreement may be executed in one or more
counterparts, each of which when so signed shall be
deemed to be an original, and such counterparts
together shall constitute one and the same
instrument. In lieu of the original, a facsimile
transmission or copy of the original shall be as
effective and enforceable as the original.
11.6 Entire Agreement: Amendment. This Agreement,
together with the exhibits to this Agreement and the
other instruments and documents delivered in
connection with this Agreement constitute the full
and entire understanding and agreement between the
parties with regard to the subjects hereof and
thereof, and no party shall be liable or bound to any
other party in any manner by any warranties,
representations or covenants except as specifically
set forth in this Agreement or therein. 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 the party against whom
enforcement of any such amendment, waiver, discharge
or termination is sought.
11.7 Headings. The headings of the sections and
paragraphs of this Agreement have been inserted for
convenience of reference only and do not constitute a
part of this Agreement.
11.8 Notices. All notices or other communications
provided for under this Agreement shall be in
writing, and mailed, telecopied or delivered by hand
delivery or by overnight courier service, as follows:
If to the Company:
eConnect
2500 Xxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Fax No.: (000) 000-0000
With a copy to:
Xxxxx X. Xxxxxxxx, Esq.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
If to Purchaser:
Alpha Venture Capital, Inc.
X.X. Xxx 00
Xxxxxx Xxxxxxxx
Xxxx Xxxxxx
Attention: Xx. Xxxxx Xxxxxxx, Director
Fax No.: (682) 20667)
With a copy to:
Xxxxxxx & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
All notices and communications shall be effective as
follows: When mailed, upon three (3) business days
after deposit in the mail (postage prepaid); when
telecopied, upon confirmed transmission of the
telecopied notice; when hand delivered, upon
delivery; and when sent by overnight courier, the
next business day after deposit of the notice with
the overnight courier.
11.9 Publicity. Purchaser acknowledges that this
Agreement and all or part of the Transaction
Documents may be deemed to be "material contracts" as
that term is defined by Item 601(b)(10) of Regulation
S-B, and that the Company may therefore be required
to file such documents as exhibits to reports or
registration statements filed under the Securities
Act or the Exchange Act. Purchaser further agrees
that the status of such documents and materials as
material contracts shall be determined solely by the
Company, in consultation with its counsel. Purchaser
consents to the Company's public disclosure of this
Agreement in accordance with the Securities Act and
the Exchange Act.
11.10 Severability. Should any one or more of
the provisions of this Agreement be determined to be
illegal or unenforceable, all other provisions of
this Agreement shall be given effect separately from
the provision or provisions determined to be illegal
or unenforceable and shall not be affected thereby.
11.11 Survival Of Representations And Warranties.
The Company's representations and warranties herein
shall survive the execution and delivery of this
Agreement and the delivery of the Securities, and
shall inure to the benefit of Purchaser and its
successors and permitted assigns.
11.12 Schedules and Exhibits. The schedules and
exhibits attached to this Agreement are a part
hereof, as if fully set forth herein.
11.13 The Purchaser's obligation hereunder to
purchase Common Stock of the Company shall expire one
(1) year from the Effective Date; provided, however,
in the event that during the initial six (6) months
after the Effective Date of the Registration
Statement, Purchaser purchases at least one million
dollars ($1,000,000) in Common Stock pursuant to this
Agreement, the terms of this Agreement shall be
extended for an additional period of six (6) months.
IN WITNESS WHEREOF, the parties named below have
caused this Agreement to be executed and delivered as
of the date first above written.
COMPANY:
eConnect
By :______________________________
Xxxxxx X. Xxxxxx, President
PURCHASER:
Alpha Venture
Capital, Inc.
By:______________________________
Name:____________________________
Title:_____________________________
Exhibit A
DEFINITIONS
"Additional Closing" means the closing of the
transactions described in Section 1.2.
"Additional Closing Date" means the date on which
each Additional Closing takes place.
"Additional Shares" is defined in Section 1.2.
"Additional Warrant" means a warrant in the form of
Exhibit B hereto to purchase a number of shares of
Common Stock equal to ten percent (10%) of the number
of Additional Shares.
"Affiliate" has the meaning set forth in the Exchange
Act and the rules and regulations thereunder.
"Business Day" means a day on which the Nasdaq stock
market is open for regular trading.
"Closing Date" means either the Initial Closing Date
or the Additional Closing Date.
"Common Stock" means common stock, $0.001 par value
per share, of the Company.
"Effective Date" means the effective date of the
registration statement filed pursuant to the
Registration Rights Agreement.
"Escrow Agent" means the Person appointed as Escrow
Agent under the Joint Escrow Instructions.
"Escrow Funds" means the funds held by the Escrow
Agent under the Joint Escrow Instructions together
with all interest and income earned thereon.
"Exchange Act" is defined in Section 3.8.
"Initial Closing" means the closing of the
transactions described in Section 1.1.
"Initial Closing Date" means the date on which the
Initial Closing takes place.
"Initial Purchase Price" is defined in Section 1.1.
"Initial Shares" is defined in Section 1.1.
"Initial Warrant" means a warrant in the form of
Exhibit B hereto.
"Joint Escrow Instructions" means the joint escrow
instructions in the form of Exhibit C hereto.
"Market Price" means the closing bid price of the
Common Stock as reported, at the option of the Buyer,
by Bloomberg, LP or the National Association of
Securities Dealers.
"Material Adverse Effect" is defined in Section 4.5.
"Person" means an individual, corporation,
partnership, association, trust, estate or other
entity or organization, including a governmental
entity or agency.
"Put Notice" shall mean the notice delivered by the
Company to the Purchaser in compliance with the
notice provisions of Section 2.2 hereof.
"Registration Rights Agreement" means the
registration rights agreement in the form of Exhibit
D hereto.
"Relevant Purchase Price" means, (i) with respect to
the Initial Shares, the Initial Purchase Price and
(ii) with respect to the Additional Shares, the
Additional Purchase Price.
"SEC" means the U.S. Securities and Exchange
Commission.
"SEC Documents' is defined in Section 4.2.
"Securities" means the Initial Shares, the Additional
Shares, the Repricing Shares, the Warrants and the
shares issuable under the Warrants.
"Securities Act" is defined in Recital B.
"Share Escrow Agent" shall mean Union Securities
Limited of White Rock, B.C.
"Share Valuation Date" shall mean the fifth (5th)
business day after delivery of the Put Notice.
"Share Payment Date" shall mean the tenth (10th)
business day after the Put Notice.
"Subsidiaries" is defined in Section 4.5
"Trading Volume" shall mean the product of the Market
Price and the daily trading volume as reported by
Bloomberg, LP.
"Transaction Documents" is defined in Section 3.7.
"Warrants" means the Initial Warrant and the
Additional Warrant.
EXHIBIT 1 TO COMMON STOCK PURCHASE AGREEMENT
JOINT ESCROW INSTRUCTIONS
September 28, 1999
Union Securities Limited
0000 000xx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, X.X. X0X0X0 Xxxxxx
Attention: Xxxxx Xxxxx
RE: Alpha Venture Capital, Inc.
Dear Xx. Xxxxx:
As escrow agent for both eConnect, Inc., a Nevada
corporation (the "Company"), and Alpha Venture
Capital, Inc., a Xxxx Islands corporation (the
"Purchaser") of Shares of the Company, who is named
in the Common Stock Purchase Agreement (the
"Agreement") between the Company and the Purchaser to
which a copy of these Joint Escrow Instructions is
attached as Exhibit 1 (the "Agreement"), you
(hereafter, the "Share Escrow Agent") are hereby
authorized and directed to hold the documents
delivered to the Share Escrow Agent pursuant to the
terms of the Agreement in accordance with the
following instructions:
1. Upon its acceptance of the Common Stock Purchase
Agreement, the Company shall deliver or cause to be
delivered to Share Escrow Agent, common stock share
certificates ("Share Certificate") of twenty million
(20,000,000) shares in ten (10) certificates of two
million (2,000,000) each.
2. The Share Certificates delivered to the Share
Escrow Agent pursuant hereto shall be deposited for
safekeeping with the Share Escrow Agent (the "Escrow
Account"). During the Escrow Period (hereinafter
defined), none of the Share Certificates deposited in
the Escrow Account shall become the property of
Purchaser or any other entity or be subject to the
debts of Purchaser or any other entity except as
expressly provided herein, and the Share Escrow Agent
shall neither make nor permit any disbursements or
deliveries from the Escrow Account except as
expressly provided herein.
3. The Escrow Period shall begin on the effective
date of the Agreement and, except as provided in
Section 4 below, shall continue until terminated
under Section 2.4(c) of the Agreement.
Notwithstanding the foregoing, if there remain Share
Certificates in the Escrow Account, all such Share
Certificates then remaining in the Escrow Account
shall forthwith be forwarded to Corporate Stock
Transfer, Inc., the transfer agent for the Company,
within five (5) business thereafter upon written
request given to Share Escrow Agent by the Company.
4. Not later than two (2) business days after the
Share Valuation Date, the Company shall deliver a
letter to the Share Escrow Agent advising the Share
Escrow Agent of the maximum number of shares that may
be sold by the Purchaser free of restrictive legend
pursuant to a Put Notice. Purchaser shall make
payment of the Put Notice Amount (less any applicable
legal or other fees) within three (3) business days
after delivery of such share letter to the Share
Escrow Agent ("Share Payment Date").
5. The Share Escrow Agent shall promptly, upon
receipt of such notice, deliver one or more share
certificates to the transfer agent for removal of
legend pursuant to the Irrevocable Instructions
annexed hereto, and upon receipt of such
certificates, shall cause same to be delivered to or
for the benefit of the Purchaser pursuant to written
instructions of the Purchaser.
6. The Company shall deliver to the Share Escrow
Agent appropriate written notice of any extension or
amendment to the Agreement.
7. The Share Escrow Agent's duties hereunder may be
altered, amended, modified or revoked only by a
writing signed by the Company, the Purchaser and the
Share Escrow Agent.
8. The Share Escrow Agent shall be obligated only
for the performance of such duties as are
specifically set forth herein and may rely and shall
be protected in relying or refraining from acting on
any instrument reasonably believed by the Share
Escrow Agent to be genuine and to have been signed or
presented by the proper party or parties. The Share
Escrow Agent shall not be personally liable for any
act the Share Escrow Agent may do or omit to do
hereunder as Share Escrow Agent while acting in good
faith, and any act done or omitted by the Share
Escrow Agent pursuant to the advice of the Share
Escrow Agent's attorneys-at-law shall be conclusive
evidence of such good faith.
9. The Share Escrow Agent is hereby expressly
authorized to disregard any and all warnings given by
any of the parties hereto or by any other person or
corporation, excepting only orders or process of
courts of law and is hereby expressly authorized to
comply with and obey orders, judgments or decrees of
any court. In case the Share Escrow Agent obeys or
complies with any such order, judgment or decree, the
Share Escrow Agent shall not be liable to any of the
parties hereto or to any other person, firm or
corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without
jurisdiction.
10. The Share Escrow Agent shall not be liable in
any respect on account of the identity, authorities
or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any
documents or papers deposited or called for
hereunder.
11. The Share Escrow Agent shall be entitled, at its
own expense, to employ such legal counsel and other
experts as the Share Escrow Agent may deem necessary
properly to advise the Share Escrow Agent in
connection with the Share Escrow Agent's duties
hereunder, may rely upon the advice of such counsel,
and may pay such counsel reasonable compensation
therefor.
12. The Share Escrow Agent's responsibilities as
Share Escrow Agent hereunder shall terminate if the
Share Escrow Agent shall resign by written notice to
the Company and the Purchaser. In the event of any
such resignation, the Purchaser and the Company shall
appoint a successor Share Escrow Agent.
13. If the Share Escrow Agent reasonably requires
other or further instruments in connection with these
Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in
furnishing such instruments.
14. It is understood and agreed that should any
dispute arise with respect to the delivery and/or
ownership or right of possession of the documents
held by the Share Escrow Agent hereunder, the Share
Escrow Agent is authorized and directed in the Share
Escrow Agent's sole discretion (1) to retain in the
Share Escrow Agent's possession without liability to
anyone all or any part of said documents or Share
Escrow Funds until such disputes shall have been
settled either by mutual written agreement of the
parties concerned or by a final order, decree or
judgment of a court of competent jurisdiction after
the time for appeal has expired and no appeal has
been perfected, but the Escrow Agent shall be under
no duty whatsoever to institute or defend any such
proceedings or (2) to deliver the Share Escrow Funds
and any other property and documents held by the
Share Escrow Agent hereunder to a state or federal
court having competent subject matter jurisdiction
and located in the State and City of New York in
accordance with the applicable procedure therefor.
15. The Company and the Purchaser agree jointly and
severally to indemnify and hold harmless the Share
Escrow Agent from any and all claims, liabilities,
costs or expenses in any way arising from or relating
to the duties or performance of the Share Escrow
Agent hereunder other than any such claim, liability,
cost or expense to the extent the same shall have
been determined by final, unappealable judgment of a
court of competent jurisdiction to have resulted from
the gross negligence or willful misconduct of the
Share Escrow Agent.
16. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified
herein) and shall be deemed effectively given upon
personal delivery or three business days after
deposit in the United States Postal Service, by
registered or certified mail with postage and fees
prepaid, addressed to each of the other parties
thereunto entitled at the following addresses, or at
such other addresses as a party may designate by ten
days advance written notice to each of the other
parties hereto.
If to Company:
eConnect
2500 Xxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Fax No.: (000) 000-0000
With a copy to:
Xxxxx X. Xxxxxxxx, Esq.
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
If to Purchaser:
Alpha Venture Capital, Inc.
X.X. Xxx 00
Xxxxxx Xxxxxxxx
Xxxx Xxxxxx
Attention: Xx. Xxxxx Xxxxxxx, Director
Fax No.: (682) 20667)
With a copy to:
Xxxxxxx & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
If to Share Escrow Agent:
Union Securities Limited
0000 000xx Xxxxxx, Xxxxx 000
Xxxxx Xxxx, X.X. X0X0X0 Xxxxxx
Attention: Mr. Xxxxx Xxxxx
Fax No.: (000) 000-0000
16. By signing these Joint Escrow Instructions, the
Escrow Agent becomes a party hereto only for the
purpose of these Joint Escrow Instructions; the
Escrow Agent does not become a party to the
Agreement. The Company and the Purchaser have become
parties hereto by their execution and delivery of the
Agreement, as provided therein.
17. This instrument shall be binding upon and inure
to the benefit of the parties hereto, and their
respective successors and permitted assigns and shall
be governed by the laws of the State of New York
without giving effect to principles governing the
conflicts of laws. A facsimile transmission of these
instructions signed by the Escrow Agent shall be
legal and binding on all parties hereto.
18. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings
provided in the Agreement.
19. The rights and obligations of any party hereto
are not assignable without the written consent of the
other parties hereto.
eConnect
By:______________________________
Xxxxxx X. Xxxxxx, President
Alpha Venture Capital, Inc.
By: _____________________________
Name: ___________________________
Title: ____________________________
Union Securities Ltd.
By: _____________________________
Name: ___________________________
Title: ____________________________
EXHIBIT 2 TO COMMON STOCK PURCHASE AGREEMENT
JOINT ESCROW INSTRUCTIONS
September 28, 1999
Xxxxxxx & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Dear Xx. Xxxxxxx:
As escrow agent for both eConnect, a Nevada
corporation (the "Company"), and Alpha Venture
Capital, Inc., a Xxxx Islands corporation ("Buyer")
of Common Stock (the "Common Stock") of the Company,
who is named in the Common Stock Purchase Agreement
between the Company and the Buyer to which a copy of
these Joint Escrow Instructions is attached as
Exhibit 2 (the "Agreement"; capitalized terms used
herein and not otherwise defined herein shall have
the respective meanings provided in the Agreement),
you (hereafter, the "Escrow Agent") are hereby
authorized and directed to hold the documents and
funds (together with any interest thereon, the
"Escrow Funds") delivered to the Escrow Agent
pursuant to the terms of the Agreement in accordance
with the following instructions:
1. The Escrow Agent shall, as promptly as feasible,
notify the Company of receipt of the Purchase Price
for the relevant Common Stock from or on behalf of
the Buyer, and notify the Buyer (or such agent as the
Buyer may designate in writing) of receipt of the
relevant Common Stock . As promptly as feasible upon
receipt of notice (whether oral or in written form)
from the Company and the Buyer that the respective
conditions precedent to the purchase and sale have
been satisfied (which notice shall not be
unreasonably withheld), the Escrow Agent shall, after
reduction by the amounts referred to in the next
succeeding sentences of this paragraph, release the
relevant Escrow Funds to or upon the order of the
Company, and shall release the relevant Common Stock
to the Buyer. After receipt of such notice, the
amount of eight percent (8%) of the Purchase Price of
the relevant Common Stock as the aggregate cash fees
to the Buyer shall be released. If the Company or
the Buyer notifies the Escrow Agent that on the
relevant Closing Date the conditions precedent to
the obligations of the Company or the Buyer, as the
case may be, under the Agreement with respect to the
purchase and sale of Common Stock to be effected
that date were not satisfied or waived, then the
Escrow Agent shall return the relevant Escrow Funds
to the Buyer. Prior to return of any Escrow Funds to
the Buyer, the Buyer shall furnish such tax reporting
or other information as shall be appropriate for the
Escrow Agent to comply with applicable United States
laws. The Escrow Agent shall deposit all funds
received hereunder in the Escrow Agent's attorney
escrow account at The Bank of New York.
2. The Escrow Agent's duties hereunder may be
altered, amended, modified or revoked only by a
writing signed by the Company, the Buyer and the
Escrow Agent.
3. The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set
forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument
reasonably believed by the Escrow Agent to be genuine
and to have been signed or presented by the proper
party or parties. The Escrow Agent shall not be
personally liable for any act the Escrow Agent may do
or omit to do hereunder as the Escrow Agent while
acting in good faith, and any act done or omitted by
the Escrow Agent pursuant to the advice of the Escrow
Agent's attorneys-at-law shall be conclusive evidence
of such good faith.
4. The Escrow Agent is hereby expressly authorized
to disregard any and all warnings given by any of the
parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and
is hereby expressly authorized to comply with and
obey orders, judgments or decrees of any court. In
case the Escrow Agent obeys or complies with any such
order, judgment or decree, the Escrow Agent shall not
be liable to any of the parties hereto or to any
other person, firm or corporation by reason of such
decree being subsequently reversed, modified,
annulled, set aside, vacated or found to have been
entered without jurisdiction.
5. The Escrow Agent shall not be liable in any
respect on account of the identity, authorities or
rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any
documents or papers deposited or called for
hereunder.
6. The Escrow Agent shall be entitled to employ
such legal counsel and other experts as the Escrow
Agent may deem necessary properly to advise the
Escrow Agent in connection with the Escrow Agent's
duties hereunder, may rely upon the advice of such
counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as
legal counsel for each Buyer and may continue to act
as legal counsel for such parties, from time to time,
notwithstanding its duties as the Escrow Agent
hereunder. The Company consents to the Escrow Agent
acting in such capacity as legal counsel for the
Buyer and waives any claim that such representation
represents a conflict of interest on the part of the
Escrow Agent. The Company understands that the Buyer
and the Escrow Agent are relying explicitly on the
foregoing provision in entering into these Joint
Escrow Instructions.
7. The Escrow Agent's responsibilities as escrow
agent hereunder shall terminate if the Escrow Agent
shall resign by written notice to the Company and the
Buyer. In the event of any such resignation, the
Buyer and the Company shall appoint a successor
Escrow Agent.
8. If the Escrow Agent reasonably requires other or
further instruments in connection with these Joint
Escrow Instructions or obligations in respect hereto,
the necessary parties hereto shall join in furnishing
such instruments.
9. It is understood and agreed that should any
dispute arise with respect to the delivery and/or
ownership or right of possession of the documents or
the Escrow Funds held by the Escrow Agent hereunder,
the Escrow Agent is authorized and directed in the
Escrow Agent's sole discretion (1) to retain in the
Escrow Agent's possession without liability to anyone
all or any part of said documents or the Escrow Funds
until such disputes shall have been settled either by
mutual written agreement of the parties concerned or
by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but the
Escrow Agent shall be under no duty whatsoever to
institute or defend any such proceedings or (2) to
deliver the Escrow Funds and any other property and
documents held by the Escrow Agent hereunder to a
state or federal court having competent subject
matter jurisdiction and located in the State and City
of New York in accordance with the applicable
procedure therefor.
10. The Company and the Buyer agree jointly and
severally to indemnify and hold harmless the Escrow
Agent from any and all claims, liabilities, costs or
expenses in any way arising from or relating to the
duties or performance of the Escrow Agent hereunder
other than any such claim, liability, cost or expense
to the extent the same shall (a) have been tax
obligations in connection with Escrow Agent's fee
hereunder, or (b) have been determined by final,
unappealable judgment of a court of competent
jurisdiction to have resulted from the gross
negligence or willful misconduct of the Escrow Agent,
or (c) be a liability, or arise from liability, to
either the Company or the Buyer.
11. Any notice required or permitted hereunder shall
be given in manner provided in the Section headed
"NOTICES" in the Agreement, the terms of which are
incorporated herein by reference.
12. By signing these Joint Escrow Instructions, the
Escrow Agent becomes a party hereto only for the
purpose of these Joint Escrow Instructions; the
Escrow Agent does not become a party to the
Agreement. The Company and the Buyer have become
parties hereto by their execution and delivery of the
Agreement, as provided therein.
13. This instrument shall be binding upon and inure
to the benefit of the parties hereto, and their
respective successors and permitted assigns and shall
be governed by the laws of the State of New York
without giving effect to principles governing the
conflicts of laws. A facsimile transmission of these
instructions signed by the Escrow Agent shall be
legal and binding on all parties hereto.
14. The rights and obligations of any party hereto
are not assignable without the written consent of the
other parties hereto. These Joint Escrow
Instructions constitute the entire agreement amongst
the parties with respect to the subject matter
hereof.
15. The Company agrees that the Placement Agent is a
third party beneficiary of the provisions of clause
(i) in Section 1 hereof and that such clause can not
be amended or revoked without the prior written
consent of the Placement Agent.
ACCEPTED BY ESCROW AGENT:
Xxxxxxx & Xxxxxx
By: _______________________________________
Date: _____________________________________
EXHIBIT 3 TO COMMON STOCK PURCHASE AGREEMENT
September 28, 1999
Corporate Stock Transfer, Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Reference is made to that certain Common Stock
Purchase Agreement (the "Purchase Agreement") between
eConnect, a Nevada corporation (the "Company"), and
Alpha Venture Capital, Inc., a Xxxx Islands
corporation (the "Holder") pursuant to which the
Company is issuing to the Holder certain shares (the
"Common Shares") of the Company's Common Stock,
$0.001 par value per share (the "Common Stock"), and
certain common stock purchase warrants exercisable
into shares of Common Stock. The Common Shares and
the shares of Common Stock issuable upon exercise of
the Warrants are referred to herein as the "Shares".
This letter shall serve as our irrevocable
authorization and direction to you (provided that you
are the transfer agent for the Company with respect
to its Common Stock at such time) to issue Shares,
from time to time, upon notice from the Company to
issue such Shares.
So long as you have previously received (1) an
opinion of the Company's outside counsel
substantially in the form attached hereto (which the
Company shall direct be delivered to you by such
outside counsel upon the effectiveness of the
registration statement covering resale of the Common
Shares) stating that a registration statement
covering resales of the Common Shares has been
declared effective by the U.S. Securities and
Exchange Commission under the Securities Act of 1933,
as amended, and that Common Shares may be issued (or
reissued if they have been issued at a time when t
here was not such an effective registration
statement) or resold without any restrictive legend
(the "Opinion"), and (2) a copy of such registration
statement, certificates representing Common Shares
shall not bear any legend restricting transfer of
Common Shares thereby and should not be subject to
any stop transfer restriction. Provided, however,
that if you have not previously received (1) a copy
of the Opinion, and (2) a copy of such registration
statement, then the certificates for Common Shares
shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE 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 AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
Please be advised that the Holder has relied upon
this letter as an inducement to enter into the
Purchase Agreement and, accordingly, the Holder is a
third party beneficiary to these instructions.
Please execute this letter in the space indicated to
acknowledge your agreement to act in accordance with
these instructions. Should you have any questions
concerning this matter, please contact me.
Sincerely,
eConnect
By: _______________________________
Xxxxxx X. Xxxxxx, President
ACKNOWLEDGED & AGREED:
Corporate Stock Transfer, Inc.
By: ________________________________
Name: _____________________________
Title: ______________________________
