FORM OF DEBENTURE
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS
AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF SUCH LAWS. THE SECURITIES ARE
SUBJECT TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS
PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY OTHER REGULATORY
AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON
OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR
ADEQUACY OF THE OFFERING MATERIALS. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
ISSUANCE DATE May __,
1999
DUE DATE
May __, 2002
AMOUNT $500,000
NUMBER MAY-1999-
101
FOR VALUE RECEIVED, eConnect, a Nevada corporation (the
"Company"), hereby promises to pay to
_______________________________ or registered assigns (the
"Holder") on May __, 2002, (the "Maturity Date"), the principal
amount of Five Hundred Thousand Dollars ($500,000) U.S., and to
pay interest on the principal amount hereof, in such amounts, at
such times and on such terms and conditions as are specified
herein.
Article 1. Interest
The Company shall pay interest on the unpaid principal
amount of this Debenture (the "Debenture") at the rate of six
percent
(6.0%) per annum, payable at the time of each conversion, with
respect to the principal amount of the Debenture being converted,
until the principal amount hereof is paid in full or has been
converted. Interest shall be computed on the basis of a three
hundred sixty (360) day year of twelve (12), thirty (30) day
months.
Each payment shall be paid in cash or in freely trading Common
Stock of the Company, at the Company's option. If the interest is
to be paid in cash, the Company shall make such payment within
five (5) business days of the of "Conversion Date" as that term
is defined in Section 3.2(b). If the interest is to be paid in
Common Stock, said Common Stock shall be delivered to the Holder,
or per Holder's instructions, within five (5) business days of
the date of conversion. The Debentures are subject to automatic
conversion at the end of three years from the date of issuance at
which time all Debentures outstanding will be automatically
converted based upon the formula set forth in Section 3.2. The
closing shall be deemed to have occurred on the date the funds
are received by the Company or its Counsel (the "Closing Date").
Article 2. Method of Payment
This Debenture must be surrendered to the Company in
order for the Holder to receive payment of the principal amount
hereof. The Company shall have the option of paying the interest
on this
Debenture in United States dollars or in common stock upon
conversion pursuant to Article 1 hereof. The Company may draw a
check for the payment of interest to the order of the Holder of
this Debenture and mail it to the Holder's address as shown on
the Register (as defined in Section 7.2 below). Interest and
principal payments shall be subject to withholding under
applicable United States Federal Internal Revenue Service
Regulations.
Article 3. Conversion
Section 3.1. Conversion Privilege
(a) The Holder of this Debenture shall have the right,
at its option, to convert it into shares of common stock, par
value of one tenth of one cent ($0.001) per share, of the Company
("Common
Stock") at any time which is before the close of business on the
Maturity Date, except as set forth in Section 3.1(c) below. The
number of shares of Common Stock issuable upon the conversion of
this Debenture is determined pursuant to Section 3.2 and rounding
the result to the nearest whole share.
(b) Less than all of the principal amount of this
Debenture may be converted into Common Stock if the portion
converted is five thousand dollars ($5,000) or a whole multiple
of five thousand dollars ($5,000) and the provisions of this
Article 3 that apply to the conversion of all of the Debenture
shall also apply to the conversion of a portion of it. This
Debenture may not be converted, whether in whole or in part,
except in accordance with Article 3.
(c) In the event all or any portion of this Debenture
remains outstanding on the third anniversary of the date hereof,
the unconverted portion of such Debenture will automatically be
converted into shares of Common Stock on such date in the manner
set forth in Section 3.2.
Section 3.2. Conversion Procedure.
(a) Debentures. Upon the Company's receipt of a
facsimile or original of Holder's signed Notice of Conversion and
the original Debenture to be converted, the Company shall
instruct its transfer
agent to issue one or more Certificates representing that number
of shares of Common Stock into which the Debenture, or portion
thereof is convertible in accordance with the provisions
regarding conversion set forth in the conversion notice. The
Company or its counsel shall act as Registrar and shall maintain
an appropriate ledger containing the necessary information with
respect to each Debenture.
(b) Conversion Date. The face amount of the
Debentures, plus accrued interest, may be converted anytime after
the Closing Date. Such conversion shall be effectuated by
surrendering to the Company,
or its attorney, this Debenture to be converted together with a
facsimile or original of the signed Notice of Conversion which
evidences Holder's intention to convert the Debenture indicated.
The date on which the Notice of Conversion is effective
("Conversion Date") shall be deemed to be the date on which the
Holder has delivered to the Company a facsimile or original of
the signed Notice of Conversion, as long as the original
Debentures to be converted are received by the Company or its
designated attorney within five (5) business days thereafter. As
long as the Debentures to be converted are received by the
Company or its designated attorney within five (5) business days
after it receives a facsimile or original of the signed Notice of
Conversion, the Company shall deliver to the Holder, or per the
Holder's instructions, the shares of Common Stock, without
restrictive legend or stop transfer instructions, within four (4)
business days of receipt of the facsimile Conversion Notice.
(c) Issuance of Common Stock. Upon the conversion of
any Debentures and upon receipt by the Company or its attorney of
a facsimile or original of Holder's signed conversion notice
Company shall instruct Company's transfer agent to issue Stock
Certificates with restrictive legend or stop transfer
instructions, as may be required pursuant to the terms of the
Subscription Agreement entered into by the Company and Holder in
the name of Holder (or its nominee) and in such denominations to
be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion, as applicable.
Company warrants that no instructions, other than these
instructions, have been given or will be given to the transfer
agent and that the Common Stock shall otherwise be freely
transferable on the books and records of Company.
(d) Conversion Rate. Anytime after the Closing Date,
Holder is entitled to convert the face amount of this Debenture,
plus accrued interest, into Common Stock at the lesser of (a)
$0.72 or (b) seventy percent (70%) of the average of the lowest
three (3) day bid prices as reported by Bloomberg, LP for the
twenty day period prior to the Conversion Date (each being
referred to as the "Conversion Price"). No fractional shares or
scrip representing fractions of shares will be issued on
conversion, but the number of shares issuable shall be rounded up
or down, as the case may be, to the nearest whole share.
The Debentures are subject to a mandatory, thirty-six
(36) month conversion feature at the end of which all Debentures
outstanding will be automatically converted, upon the terms set
forth in this section ("Mandatory Conversion Date").
(e) Nothing contained in this Debenture shall be deemed
to establish or require the payment of interest to the Company at
a rate in excess of the maximum rate permitted by governing law.
In the event that the rate of interest required to be paid
exceeds the maximum rate permitted by governing law, the rate of
interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and
such excess shall be returned with reasonable promptness by the
Holder to the Company.
(f) It shall be the Company's responsibility to take all
necessary actions and to bear all such costs to issue the
Certificate of Common Stock as provided herein, including the
responsibility and cost for delivery of an opinion letter to the
transfer agent, if so required. The person in whose name the
certificate of Common Stock is to be registered shall be treated
as a shareholder of record on and after the conversion date. Upon
surrender of any Debentures that are to be converted in part, the
Company shall issue to the Holder a new Debenture equal to the
unconverted amount, if so requested in writing by Holder.
(g) In the event the Common Stock is not delivered per
the written instructions of the Holder, within four (4) business
days after the Conversion Date, then in such event the Company
shall pay to Holder one percent (1%) in cash, of the dollar value
of the Debentures being converted per each day after the fourth
(4th) business day following the Conversion Date that the Common
Stock is not delivered.
The Company acknowledges that its failure to deliver the
Common Stock within four (4) business days after the Conversion
Date will cause the Holder to suffer damages in an amount that
will be difficult to ascertain. Accordingly, the parties agree
that it is appropriate to include in this Agreement a provision
for liquidated damages. The parties acknowledge and agree that
the liquidated damages provision set forth in this section
represents the parties' good faith effort to qualify such damages
and, as such, agree that the form and amount of such liquidated
damages are reasonable and will not constitute a penalty. The
payment of liquidated damages shall not relieve the Company from
its obligations to deliver the Common Stock pursuant to the terms
of this Agreement.
To the extent that the failure of the Company to issue
the Common Stock pursuant to this Section 4 is due to the
unavailability of authorized but unissued shares of Common Stock,
the provisions of this Section 4(g) shall not apply but instead
the provisions of Section 4(h) shall apply.
The Company shall make any payments incurred under this
Section 4(g) in immediately available funds within three (3)
business days from the date of issuance of the applicable Common
Stock. Nothing herein shall limit a Holder's right to pursue
actual damages or cancel the conversion for the Company's failure
to issue and deliver Common Stock to the Holder within six (6)
business days after the Conversion Date.
(h) The Company shall at all times reserve and have
available all Common Stock necessary to meet conversion of the
Debentures by
all Holders of the entire amount of Debentures then outstanding.
If, at any time Holder submits a Notice of Conversion and the
Company does not have sufficient authorized but unissued shares
of Common Stock available to effect, in full, a conversion of the
Debentures (a "Conversion Default", the date of such default
being referred to herein as the "Conversion Default Date"), the
Company shall issue to the Holder all of the shares of Common
Stock which are available, and the Notice of Conversion as to any
Debentures requested to be converted but not converted (the
"Unconverted
Debentures"), upon Holder's sole option, may be deemed null and
void. The Company shall provide notice of such Conversion
Default ("Notice of Conversion Default") to all existing Holders
of outstanding Debentures, by facsimile, within three (3)
business day of such default (with the original delivered by
overnight or two day courier), and the Holder shall give notice
to the Company by facsimile within five (5) business days of
receipt of the original Notice of Conversion Default (with the
original delivered by overnight or two day courier) of its
election to either nullify or confirm the Notice of Conversion.
The Company agrees to pay to all Holders of outstanding
Debentures payments for a Conversion Default ("Conversion Default
Payments") in the amount of (N/365) x (.24) x the initial
issuance price of the outstanding and/or tendered but not
converted Debentures held by each Holder where N = the number of
days from the Conversion Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient
number of shares of Common Stock to effect conversion of all
remaining Debentures. The Company shall send notice
("Authorization Notice") to each Holder of outstanding Debentures
that additional shares of Common Stock have been authorized, the
Authorization Date and the amount of Holder's accrued Conversion
Default Payments. The accrued Conversion Default shall be paid
in cash or shall be convertible into Common Stock at the
Conversion Rate, at the Holder's option, payable as follows: (i)
in the event Holder elects to take such payment in cash, cash
payments shall be made to such Holder of outstanding Debentures
by the fifth (5th) day of the following calendar month, or (ii)
in the event Holder elects to take such payment in stock, the
Holder may convert such payment amount into Common Stock at the
conversion rate set forth in Section 3.2(d) at anytime after the
fifth (5th) day of the calendar month following the month in
which the Authorization Notice was received, until the expiration
of the mandatory twenty-four (24) month conversion period. The
Company acknowledges that its failure to maintain a sufficient
number of authorized but unissued shares of Common Stock to
effect in full a conversion of the Debentures will cause the
Holder to suffer damages in an amount that will be difficult to
ascertain. Accordingly, the parties agree that it is appropriate
to include in this Debenture a provision for liquidated damages.
The parties acknowledge and agree that the liquidated damages
provision set forth in this section represents the parties' good
faith effort to quantify such damages and, as such, agree that
the form and amount of such liquidated damages are reasonable and
will not constitute a penalty. The payment of liquidated damages
shall not relieve the Company from its obligations to deliver the
Common Stock pursuant to the terms of this Debenture. Nothing
herein shall limit the Holder's right to pursue actual damages or
cancel the conversion for the Company's failure to maintain a
sufficient number of authorized shares of Common Stock.
(i) The Company shall furnish to Holder such number
of prospectuses and other documents incidental to the
registration of the shares of Common Stock underlying the
Debentures, including any amendment of or supplements thereto.
Holder shall acknowledge in writing the receipt, the careful
reading, and the understanding thereof, prior to any conversion
under Article 3 hereof.
(j) The Holder is limited in the amount of this
Debenture it may convert and own. Other than the Mandatory
Conversion provisions contained in this Debenture which are not
limited by the following,
in no other event shall the Holder be entitled to convert, and
the Company must not permit conversion of, any amount of
Debentures in excess of that amount upon conversion of which the
sum of (1) the number of shares of Common Stock beneficially
owned by the Holder and its affiliates (other than shares of
Common Stock which may be
deemed beneficially owned through the ownership of the
unconverted portion of the Debenture, and (2) the number of
shares of Common Stock issuable upon the conversion of the
Debentures with respect to which the determination of this
provision is being made, would result in beneficial ownership by
the Holder and its affiliates of more than four and 99/100
percent (4.99%) of the outstanding shares of Common Stock of the
Company. (after taking into account the shares to be issued to
the Holder upon such conversion). For purposes of this provision
to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13 D-G
thereunder, except as otherwise provided in clause (1) of such
provision.
(k) Nothing contained in the Debenture shall be deemed
to establish or require the payment of interest to the Purchaser
at a
rate in excess of the maximum rate permitted by governing law.
In the event that the rate of interest required to be paid under
the Debenture exceeds the maximum rate permitted by governing
law, the rate of interest required to be paid thereunder shall be
automatically reduced to the maximum rate permitted under the
governing and any amounts collected in excess of the permissible
amount shall be deemed a payment of principal. To the extent
that such excess amount exceeds the aggregate principal amount of
the Debenture, such excess shall be returned with reasonable
promptness by the Holder to the Company.
(l) Redemption: The Company reserves the right, at
its sole option, to call a mandatory redemption of any percentage
of the
balance on the Debentures as follows: In the event the Company
exercises such right of redemption anytime following the Closing
Date, it shall pay the Holder, in U.S. currency the benefit of
the bargain (intrinsic value), that is, the principal amount of
the Debenture being redeemed, plus accrued interest and the
profit the Holder would have received upon conversion of that
portion of the Debenture being redeemed and sale of the Common
Stock. The date by which the Debentures must be delivered to the
Escrow Agent shall not be later than five (5) business days
following the date the Company notifies the Holder by facsimile
of the redemption. The Company shall give the Holder at least
twenty (20) business days advance written notice of its intent to
redeem.
(m) Investment Intent. The Holder of this Debenture by
acceptance hereof, agrees that this Debenture is being acquired
for investment and that such Holder will not offer, sell or
otherwise dispose of this Debenture or the shares of Common Stock
issuable upon
conversion thereof except under circumstances which will not
result in violation of the 1933 Act or any applicable state Blue
Sky law or similar laws relating to the sale of securities.
(n) Adjustment. In case any provision of this Debenture
is held by a court of competent jurisdiction to be excessive in
scope or otherwise invalid or unenforceable, such provision shall
be adjusted rather than voided, if possible, and the validity and
enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
Section 3.3. Fractional Shares. The Company shall not
issue fractional shares of Common Stock, or scrip representing
fractions
of such shares, upon the conversion of this Debenture. Instead,
the Company shall round up or down, as the case may be, to the
nearest whole share.
Section 3.4. Taxes on Conversion. The Company shall pay
any documentary, stamp or similar issue or transfer tax due on
the issue of shares of Common Stock upon the conversion of this
Debenture. However, the Holder shall pay any such tax which is
due because the
shares are issued in a name other than its name.
Section 3.5. Company to Reserve Stock. The Company
shall reserve the number of shares of Common Stock required
pursuant to and upon the terms set forth in Section 3(a) of the
Subscription Agreement entered into by the Company and Holder, to
permit the conversion of this Debenture. All shares of Common
Stock which may be issued upon the conversion hereof shall upon
issuance be validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the
issuance thereof.
Section 3.6. Restrictions on Transfer. This Debenture
has not been registered under the Securities Act of 1933, as
amended, (the "Act") and is being issued under Section 4(2) of
the Act and Rule 506 of Regulation D promulgated under the Act.
This Debenture and the Common Stock issuable upon the conversion
thereof may only be offered or sold pursuant to registration
under or an exemption from the Act.
Section 3.7. Mergers, Etc. If the Company merges or
consolidates with another corporation or sells or transfers all
or substantially all of its assets to another person and the
holders of the Common Stock are entitled to receive stock,
securities or property in respect of or in exchange for Common
Stock, then as a condition of such merger, consolidation, sale or
transfer, the Company and any such successor, purchaser or
transferee shall amend this Debenture to provide that it may
thereafter be converted on the terms and subject to the
conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger,
consolidation, sale or transfer by a holder of the number of
shares of Common Stock into which this Debenture might have been
converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable to adjustments provided for in
this Article 3. Article 4. Mergers and Adjustments
Section 4.1 Mergers. The Company shall not consolidate
or merge into, or transfer all or substantially all of its assets
to, any person, unless such person assume in writing the
obligations of the Company under this Debenture and immediately
after such transaction no Event of Default exists. Any reference
herein to the Company shall refer to such surviving or transferee
corporation and the obligations of the Company shall terminate
upon such written assumption.
Section 4.2 Adjustments. The number of shares of Common
Stock purchasable upon the conversion of this Debenture shall be
subject to adjustments as follows:
(a) In case the Company shall (i) pay a dividend on
Common Stock in Common Stock or securities convertible into,
exchangeable
for or otherwise entitling a holder thereof to receive Common
Stock, (ii) declare a dividend payable in cash on its Common
Stock and at substantially the same time offer its shareholders a
right to purchase new Common Stock (or securities convertible
into, exchangeable for or other entitling a holder thereof to
receive Common Stock) from the proceeds of such dividend (all
Common Stock so issued shall be deemed to have been issued as a
stock dividend), (iii) subdivide its outstanding shares of Common
Stock into a greater number of shares of Common Stock, (iv)
combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock, or (v) issue by
reclassification, reorganization or recapitalization of its
Common Stock any shares of Common Stock or other securities of
the Company, the number of shares of Common Stock issuable upon
conversion of this Debenture immediately prior thereto shall be
adjusted so that the Holder of this Debenture shall
be entitled to receive after the happening of any of the events
described above that number and kind of shares as the Holder
would have received had this Debenture been converted immediately
prior to the happening of such event or any record date with
respect thereto.
Any adjustment made pursuant to this subdivision shall become
effective immediately after the close of business on the record
date in the case of a stock dividend and shall become effective
immediately after the close of business on the effective date in
the case of a stock split, subdivision, combination or
reclassification.
(b) In case the Company shall distribute, without
receiving consideration therefor, to all holders of its Common
Stock evidences
of its indebtedness or assets (excluding cash dividends other
than as described in Section 4.2(a)), or rights, options or
warrants or convertible or exchangeable securities containing the
right to subscribe for or purchase shares of Common Stock, then
in such case, the number of shares of Common Stock thereafter
issuable upon conversion of this Debenture shall be determined by
multiplying the number of shares of Common Stock theretofore
issuable upon conversion of this Debenture, by a fraction, of
which the numerator shall be the closing bid price per share of
Common Stock on the record date for such distribution, and of
which the denominator shall be the closing bid price of the
Common Stock less the then fair value (as determined by the Board
of Directors of the Company, whose determination shall be
conclusive) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights,
options or warrants, or of such convertible or exchangeable
securities applicable to one share of Common Stock. Such
adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date for
the determination of stockholders entitled to receive such
distribution.
(c) Any adjustment in the number of shares of Common
Stock issuable hereunder otherwise required to be made by this
Section 4.2 will not have to be adjusted if such adjustment would
not require an increase or decrease in one percent (1%) or more
in the number of shares of Common Stock issuable upon conversion
of this Debenture.
No adjustment in the number of shares of Common Stock issuable
upon
conversion of this Debenture will be made for the issuance of
shares of capital stock to directors, employees or independent
contractors pursuant to the Company's or any of its subsidiaries'
stock option, for the purpose of the Company's Common Stock
warrants issued, issuable or to be issued for services rendered
by others to the Company, stock ownership or other benefit plans
or arrangements or trusts related thereto or for issuance of any
shares of Common Stock pursuant to any plan providing for the
reinvestment of dividends or interest payable on securities of
the Company and the investment of additional optional amounts in
shares of Common Stock under such plan.
Article 5. Reports
The Company will mail to the Holder hereof at its address
as shown on the Register a copy of any annual, quarterly or
current report that it files with the Securities and Exchange
Commission promptly after the filing thereof and a copy of any
annual, quarterly or other report or proxy statement that it
gives to its shareholders generally at the time such report or
statement is sent to shareholders.
Article 6. Defaults and Remedies
Section 6.1. Events of Default. An "Event of Default"
occurs if (a) the Company does not make the payment of the
principal of
this Debenture when the same becomes due and payable at maturity,
upon redemption or otherwise, (b) the Company does not make a
payment, other than a payment of principal, for a period of five
(5) business days thereafter, (c) the Company fails to comply
with any of its other agreements in this Debenture and such
failure continues for the period and after the notice specified
below, (d) the Company pursuant to or within the meaning of any
Bankruptcy Law (as hereinafter defined): (i) commences a
voluntary case; (ii) consents to the entry of an order for relief
against it in an involuntary case; (iii) consents to the
appointment of a Custodian (as hereinafter defined) of it or for
all or substantially all of its property or (iv) makes a general
assignment for the benefit of its creditors or (v) a court of
competent jurisdiction enters an order or decree under any
Bankruptcy Law that: (A) is for relief against the Company in an
involuntary case; (B) appoints a Custodian of the Company or for
all or substantially all of its property or (C) orders the
liquidation of the Company, and the order or decree remains
unstayed and in effect for sixty (60) days, (e) the Company's
Common Stock is no longer listed on any recognized exchange
including electronic over-the-counter bulletin board. As used in
this Section 6.1, the term "Bankruptcy Law" means Title 11 of the
United States Code or any similar federal or state law for the
relief of debtors. The term "Custodian" means any receiver,
trustee, assignee, liquidator or similar official under any
Bankruptcy Law. A default under clause (c) above is not an Event
of Default until the holders of at least twenty-five percent
(25%) of the aggregate principal amount of the Debentures
outstanding notify the Company of such default and the Company
does not cure it within five (5) business days after the receipt
of such notice, which must specify the default, demand that it be
remedied and state that it is a "Notice of Default".
Section 6.2. Acceleration. If an Event of Default
occurs and is continuing, the Holder hereof by notice to the
Company, may
declare the remaining principal amount of this Debenture to be
due
and payable. Upon such declaration, the remaining principal
amount shall be due and payable immediately
Article 7. Registered Debentures
Section 7.1. Series. This Debenture is one of a
numbered series of Debentures which are identical except as to
the principal amount and date of issuance thereof and as to any
restriction on the transfer thereof in order to comply with the
Securities Act of 1933 and the regulations of the Securities and
Exchange Commission promulgated thereunder. Such Debentures are
referred to herein collectively as the "Debentures". The
Debentures shall be issued in whole multiples of five thousand
dollars ($5,000).
Section 7.2. Record Ownership. The Company, or its
attorney, shall maintain a register of the holders of the
Debentures (the "Register") showing their names and addresses and
the serial numbers and principal amounts of Debentures issued to
or transferred of
record by them from time to time. The Register may be maintained
in electronic, magnetic or other computerized form. The Company
may treat the person named as the Holder of this Debenture in the
Register as the sole owner of this Debenture. The Holder of
this Debenture is the person exclusively entitled to receive
payments of interest on this Debenture, receive notifications
with respect to this Debenture, convert it into Common Stock and
otherwise exercise all of the rights and powers as the absolute
owner hereof.
Section 7.3. Registration of Transfer. Transfers of
this Debenture may be registered on the books of the Company
maintained for such purpose pursuant to Section 7.2 above (i.e.,
the Register).
Transfers shall be registered when this Debenture is presented
to the Company with a request to register the transfer hereof and
the Debenture is duly endorsed by the appropriate person,
reasonable
assurances are given that the endorsements are genuine and
effective, and the Company has received evidence satisfactory to
it that such transfer is rightful and in compliance with all
applicable laws, including tax laws and state and federal
securities laws. When this Debenture is presented for transfer
and duly transferred hereunder, it shall be canceled and a new
Debenture showing the name of the transferee as the record holder
thereof shall be issued in lieu hereof. When this Debenture is
presented to the Company with
a reasonable request to exchange it for an equal principal amount
of Debentures of other denominations, the Company shall make such
exchange and shall cancel this Debenture and issue in lieu
thereof Debentures having a total principal amount equal to this
Debenture in such denominations as agreed to by the Company and
Holder.
Section 7.4. Worn or Lost Debentures. If this Debenture
becomes worn, defaced or mutilated but is still substantially
intact and recognizable, the Company or its agent may issue a new
Debenture in lieu hereof upon its surrender. Where the Holder of
this Debenture claims that the Debenture has been lost, destroyed
or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by
written notice to the Company actually received by the Company
before it is notified that the Debenture has been acquired by a
bona fide purchaser and the Holder has delivered to the Company
an indemnity bond in such amount and issued by such surety as the
Company deems satisfactory together with an affidavit of the
Holder setting forth the facts concerning such loss, destruction
or wrongful taking and such other information in such form with
such proof or verification as the Company may request.
Article 8. Notices
Any notice which is required or convenient under the
terms of this Debenture shall be duly given if it is in writing
and delivered in person or mailed by first class mail, postage
prepaid and
directed to the Holder of the Debenture at its address as it
appears on the Register or if to the Company to its principal
executive offices. The time when such notice is sent shall be
the time of the giving of the notice.
Article 9. Time
Where this Debenture authorizes or requires the payment
of money or the performance of a condition or obligation on a
Saturday or Sunday or a public holiday, or authorizes or requires
the payment of money or the performance of a condition or
obligation within, before or after a period of time computed from
a certain date, and such period of time ends on a Saturday or a
Sunday or a public holiday, such payment may be made or condition
or obligation performed on the next succeeding business day, and
if the period ends at a specified hour, such payment may be made
or condition performed, at or before the same hour of such next
succeeding business day, with the same force and effect as if
made or performed in accordance with the terms of this Debenture.
A "business day" shall mean a day on which the banks in New York
are not required or allowed to be closed.
Article 10. Waivers
The holders of a majority in principal amount of the
Debentures may waive a default or rescind the declaration of an
Event of Default and its consequences except for a default in the
payment of principal or conversion into Common Stock.
Article 11. Rules of Construction
In this Debenture, unless the context otherwise requires,
words in the singular number include the plural, and in the
plural include the singular, and words of the masculine gender
include the feminine and the neuter, and when the sense so
indicates, words of the neuter gender may refer to any gender.
The numbers and titles of sections contained in the Debenture are
inserted for convenience of reference only, and they neither form
a part of this Debenture nor are they to be used in the
construction or interpretation hereof. Wherever, in this
Debenture, a determination of the Company is required or allowed,
such determination shall be made by a majority of the Board of
Directors of the Company and if it is made in good faith, it
shall be conclusive and binding upon the Company and the Holder
of this Debenture.
Article 12. Governing Law
The validity, terms, performance and enforcement of this
Debenture shall be governed and construed by the provisions
hereof and in accordance with the laws of the State of California
applicable to agreements that are negotiated, executed, delivered
and performed solely in the State of California.
Article 13. Litigation
(a) Forum Selection and Consent to Jurisdiction.
Any litigation based thereon, or arising out of, under, or in
connection with, this agreement or any course of conduct, course
of dealing, statements (whether oral or written) or actions of
the Company or Holder shall be brought and maintained exclusively
in the federal courts of the State of California without
reference to its conflicts of laws rules or principles. The
Company hereby expressly and irrevocably submits to jurisdiction
exclusively with the federal Courts of the State of California
for the purpose of any such litigation as set forth above and
irrevocably agrees to be bound by any final judgment rendered
thereby in connection with such litigation. The Company further
irrevocably consents to the service of process by registered
mail, postage prepaid, or by personal service within or without
the State of California. The Company hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any
objection which it may have or hereafter may have to the laying
of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been
brought in any inconvenient forum. To the extent that the
Company has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment,
attachment in aid of execution or otherwise) with respect to
itself or its property. The Company hereby irrevocably waives
such immunity in respect of its obligations under this agreement
and the other loan documents.
(b) Waiver of Jury Trial. The Holder and the
Company hereby knowingly, voluntarily and intentionally waive any
rights they may have to a trial by jury in respect of any
litigation based hereon, or arising out of, under, or in
connection with, this agreement, or any course of conduct, course
of dealing, statements (whether oral or written) or actions of
the Holder or the Company.
The Company acknowledges and agrees that it has received full
and sufficient consideration for this provision and that this
provision is a material inducement for the Holder entering into
this agreement.
(c) Submission To Jurisdiction . Any legal
action or proceeding in connection with this Agreement or the
performance
hereof shall be brought exclusively in the federal courts located
in the California and the parties hereby irrevocably submit to
the
exclusive jurisdiction of such courts for the purpose of any such
action or proceeding.
IN WITNESS WHEREOF, the Company has duly executed this
Debenture as of the date first written above.
eConnect
By
Name:____________________
_______
Title:___________________
_________
Exhibit A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
Debentures.)
The undersigned hereby irrevocably elects, as of
______________, 199_ to convert $_________________ of the
Debentures into Shares of Common Stock (the "Shares") of eConnect
(the "Company") according to the conditions set forth in the
Subscription Agreement dated May ____, 1999.
Date of Conversion_________________________________________
Applicable Conversion Price_________________________________
Number of Shares Issuable upon this conversion______________
Signature___________________________________________________
[Name]
Address_____________________________________________________
____________________________________________________________
Phone______________________ Fax___________________________
Assignment of Debenture
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
(name, address and SSN or EIN of assignee)
Dollars ($
) (principal amount of Debenture, $10,000 or integral
multiples of
$10,000) of principal amount of this Debenture together with all
accrued and unpaid interest hereon.
Date: Signed:
(Signature must conform
in all
respects to name
of Holder shown
of face of
Debenture)
Signature Guaranteed: