STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT (the "Agreement") is made and
entered into this 31st day of August, 1999 by and between La
Empresa Ranco Plasticos Limitada, a Costa Rica corporation (the
"Holder"), Michael Lanes ("Lanes"), Jamie Ligator ("Ligator"),
and eConnect, a Nevada corporation (the "Purchaser").
RECITALS:
A. Holder is the owner of record of 58.33% of the issued and
outstanding stock of Isla Escondida, S.A., a Costa Rica
Corporation ("EE") (the "Stock"). Nevertheless, pursuant to an
agreement between Holder, Ligator and Lanes, one-half (1/2) of
the Stock is actually being held in the name of Holder for the
benefit of Lanes and the other one-half (1/2) of the Stock is
actually being held in the name of Holder for the benefit of
Ligator.
B. Purchaser desires to purchase and Holder, Lanes and Ligator
are willing to sell all of their right, title and interest in
the Stock in exchange for the "Purchaser Stock" defined below,
pursuant to and subject to the terms and conditions set forth in
this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual
undertakings set forth herein, and for other good and valuable
consideration, the sufficiency of which is hereby acknowledged,
the parties hereby agree as follows:
ARTICLE I
Purchase and Sale of Stock
1.1 Purchase and Sale. Subject to the terms and conditions of
this Agreement, Purchaser shall purchase from Holder, Lanes and
Ligator; and Holder, Lanes and Ligator shall sell to Purchaser
all of their right, title and interest in the Stock.
1.2 Closing. Subject to the terms and conditions of this
Agreement, the purchase and sale shall take place upon execution
of this Agreement by all parties listed above ("Closing").
ARTICLE II
Purchase Price
2.1 Purchase Price. The purchase price for the Stock shall be
in the form of the Purchaser Stock as set forth below (the
"Purchase Price"). Purchaser acknowledges that certain shares
of the Purchaser Stock are to be issued to Empresas Horizontas
Lejanos., S.A., a Costa Rica corporation for the benefit of Gary
Hayes and Richard Adams in exchange for their execution of that
certain Indemnification and Release Agreement on or about even
date herewith.
2.2 Payment of Purchase Price. Payment of the Purchase Price
will be made as follows:
2.2.1. At Closing, Purchaser shall deposit into an escrow
account with Bank One, N.A. or such other independent third
party FDIC insured institution as mutually agreed to by the
parties in writing (the "Escrow Agent"), Seven Million
(7,000,000) shares of common stock of Purchaser to be held
pursuant to the terms of this Section 2.2 (collectively the
"Purchaser Stock"), which Purchaser Stock shall be issued in the
names as set forth on the "Exhibit A" which is attached hereto
and incorporated herein by this reference.
2.2.2 One Million Eight Hundred Seventy Five Thousand
(1,875,000) shares of Purchaser Stock (the "Registered Purchaser
Stock") will be, at Closing, registered with the U.S. Securities
and Exchange Commission ("SEC") pursuant to Section 5 of the
Securities Act of 1933 (the "Act") and registered to trade on
the NASDAQ OTC (Bulletin Board) stock exchange (the "Exchange")
without any trading or resale restrictions and therefore, the
certificates for such shares will contain no restrictive
legends. The Escrow Agent shall deliver the Registered
Purchaser Stock to the respective parties on Exhibit A at
Closing without restriction of any kind. The balance of the
Purchaser Stock, when delivered to Escrow Agent at Closing, will
not be registered with the SEC pursuant to the Act nor
registered to trade on the Exchange but rather will be issued
pursuant to exemptions from such registration requirements and
therefore, the certificates evidencing such shares will contain
a restrictive legend that such shares must be re-sold in
compliance with Rule 144 of the Act (the "Escrowed Shares").
The certificates evidencing both the Escrowed Shares and the
Stock (as well as the Assignments) will be held by the Escrow
Agent pursuant to this Section 2.2 and a separate Escrow
Agreement between the parties hereto and the Escrow Agent in the
form attached hereto as Exhibit "B" (the "Escrow Agreement").
2.2.3 Purchaser represents and warrants that Purchaser has
filed with the SEC a SB-2 registration statement requesting the
registration under the Act and the Exchange of certain
additional shares of stock of Purchaser, including without
limitation the Escrowed Shares (the "Registration Statement").
Within two (2) business days of the approval by the SEC of the
Registration Statement, Purchaser shall deposit with Escrow
Agent, new certificates evidencing the Escrowed Shares as
registered under the Act and on the Exchange without any trading
or resale restrictions and therefore, the certificates for such
shares will contain no restrictive legends (such shares shall
hereinafter be referred to as the "Registered Escrowed Shares").
Upon the occurrence of the condition set forth in the prior
sentence, the Escrow Agent shall release (a) to Purchaser the
certificates evidencing the Stock (the "Stock Certificates") and
the assignments separate from certificate transfer-ring the
Stock to Purchaser (the "Assignments"), and (b) the certificates
evidencing the Registered Escrowed Shares as follows:
2.2.3.1 One Hundred Twenty Five Thousand (125,000) shares of
the Registered Escrow Shares shall be immediately released to
those persons referenced on "Exhibit A".
2.2.3.2 In the event that the per share closing price of
eConnect stock on the Exchange, as reported in the Wall Street
Journal, does not equal or exceed $.75 per share for any period
consisting of ten (10) consecutive trading days at any time
during the period commencing the Closing and ending September
30, 1999, the Escrow Agent shall release Two Million (2,000,000)
of the Registered Escrowed Shares to those persons referenced on
"Exhibit A". If by September 30, 1999 the per share closing
price of eConnect stock for any consecutive ten day period does
exceed $.75 per share, then on September 30, 1999 the Escrow
Agent shall release such certificates to Purchaser, who shall
cancel them.
2.2.3.3 In the event that the per share closing price of
eConnect stock on the Exchange, as reported in the Wall Street
Journal, does not equal or exceed $ 1.00 per share for any
period consisting of ten (10) consecutive trading days at any
time during the period commencing the Closing and ending
December 31, 1999, the Escrow Agent shall release an additional
Three Million (3,000,000) of the Registered Escrowed Shares to
those persons referenced on "Exhibit A" (such shares not
inclusive of the Registered Escrow Shares described in Section
2.2.3.2 above). If by December 31, 1999 the per share closing
price of eConnect stock for any consecutive ten day period does
not exceed $1.00 per share, then on December 31, 1999 the Escrow
Agent shall release such certificates to Purchaser, who shall
cancel them.
2.2.3.4 In the event that Purchaser declares a stock split
during the period commencing the Closing and ending December 31,
1999, upon the occurrence of either events set forth in Section
2.2.3.2 or 2.2.3.3 entitling the persons described on Exhibit A
to distributions of the Registered Escrow Shares, each of the
persons referenced on Exhibit A shall be entitled to receive (in
addition to the shares of stock to set forth above) such
additional shares of stock that each person would have receive
pursuant to the stock split if they were a shareholder at the
time of the stock split. In the event of any such stock split
(or a reverse stock split) the respective $.75 per share and $
1.00 per share benchmarks shall be adjusted accordingly such
that if there was a 2 for I stock split, the references to $.75
per share and $1.00 per share would be $.37 and $.50 per share
respectively.
2.2.4 However, if (a) the Escrowed Shares are not registered
under the Act and on the Exchange without any restrictions
within thirty (30) days from Closing and/or (b) new certificates
have not been deposited with Escrow Agent within two (2)
business days of the approval by the SEC of the Registration
Statement, Holder, Lanes and Ligator may elect, in their sole
discretion to notify the Escrow Agent to release (a) the Stock
Certificates and the Assignments to Holder, Lanes and Ligator,
who shall destroy the Assignments, whereupon Purchaser shall
have no rights therein and (b) the certificates evidencing the
Registered Escrowed Shares to Purchaser, who shall cancel them.
Alternatively, if Holder, Lanes and Ligator do not make the
election in the prior sentence, they can elect to notify the
Holder to release the One Hundred Twenty Five Thousand (125,000)
shares of the Registered Escrow Shares to them and have the
right to receive the other Registered Escrowed shares as set
forth above subject to the restrictive legend. However, in
either event, the parties set forth on Exhibit A shall be
entitled to retain the Registered Purchaser Stock.
ARTICLE III
Representations and Warranties of Holder, Lanes and Ligator
Acknowledging that Purchaser is materially relying on each of
the following representations, warranties and covenants, Holder,
Lanes and Ligator hereby represent and warrant as follows. For
purpose of this Article III, if any representation or warranty
is qualified by someone's "knowledge", the term knowledge shall
mean the actual knowledge of such person without further
inquiry.
3.1 Formation of IE. To the best of their knowledge, IE is a
corporation duly organized and validly existing under the laws
of Costa Rica.
3.2 Power and Authorization of Holder and MA. The sale of
Stock contemplated by this Agreement is not in violation of any
provision of EE's articles or bylaws, or any agreement or
instrument to which Holder, Lanes or Ligator is a party or to
which the Stock is subject, will not result in any such
violation or be in conflict with or constitute a default under
any such provision or agreement, and will not accelerate the
performance provided by the terms of any agreement or instrument
to which Holder, Lanes or Ligator is a party, or constitute a
default thereunder, or an event which, with the lapse of time or
action by a third party, could result in a default thereof, or
result in the creation of any lien, charge or encumbrance upon
the Stock. Such sale of Stock will not violate any provision of
any judgment, writ, decree, order, statute, rule or governmental
regulation applicable to Holder, Lanes or Ligator.
3.3 Title. Lanes and Ligator are the owners of the Stock,
which constitutes 58.33% of the total issued and outstanding
shares of IE. The Stock transferred pursuant to the terms of
this Agreement is free and clear of all restrictions, liens,
encumbrances and security interests and is validly issued.
Other than by this Agreement, there are no outstanding options,
warrants, preemption rights, rights of first refusal or other
rights to subscribe for or purchase or contracts, agreements or
other arrangements with respect to the Stock or any other
investment exercisable or convertible into the Stock.
3.4 Indemnification. Holder, Lanes and Ligator, and their
respective successors and assigns agree to indemnify and hold
Purchaser harmless from and against any and all claims, losses,
liabilities or obligations, including reasonable attorneys'
fees, for any claim arising out of or resulting from any breach
of warranty or a misrepresentation by Holder or the
nonperformance of any covenant hereunder. Should any claims
occur for any period prior to Closing, the Purchaser shall
advise Holder, Lanes and Ligator within ten (10) days of
becoming aware of any asserted claim and Holder, Lanes and
Ligator will pay for all costs incurred, including but not
limited to, audit accounting, legal, penalties and interests.
If Holder is not advised by Purchaser within the ten (10) day
period, Holder, Lanes and Ligator shall have no liability for
the payment of any costs incurred in defending any asserted
claim or cause of action which is the subject of this Section
3.4.
ARTICLE IV
Representations and Warranties of Purchaser
Acknowledging that Holder, Lanes and Ligator are materially
relying on each of the following representations, warranties and
covenants, Purchaser hereby represents and warrants as follows:
4.1 Formation of Purchaser. Purchaser is a corporation duly
organized and validly existing under the laws of Nevada.
4.2 Capital Stock of Purchaser. The authorized capital stock
of Purchaser consists solely of (a) 200,000,000 shares of common
stock, par value $.001 per share, of which 60,523,775 shares
were issued and outstanding as of August 13, 1999 and (b) no
shares of preferred stock. Such common and preferred stock of
constitute all of the issued and outstanding shares of stock of
Purchaser. All of such stock of Purchaser have been duly
authorized and validly issued and were offered, issued, sold and
delivered by Purchaser in compliance with all applicable state
and federal laws concerning the issuance of securities. None of
the shareholders of Purchaser have any preemptive or similar
rights with respect to the shares of Purchaser.
4.3 Power and Authorization. Purchaser has the power to enter
into this Agreement. This Agreement has been duly authorized by
and validly executed on behalf of Purchaser and when delivered
will constitute the valid and binding obligation of Purchaser.
The sale and issuance of the Purchaser Stock contemplated by
this Agreement is not in violation of any provision of
Purchaser's articles or bylaws, or any agreement or instrument
to which Purchaser is a party or to which the Purchaser Stock is
subject, will not result in any such violation or be in conflict
with or constitute a default under any such provision or
agreement, and will not accelerate the performance provided by
the terms of any agreement or instrument to which Purchaser is a
party, or constitute a default thereunder, or an event which,
with the lapse of time or action by a third party, could result
in a default thereof, or result in the creation of any lien,
charge or encumbrance upon the Purchaser Stock. Such sale of
Purchaser Stock will not violate any provision of any judgment,
writ, decree, order, statute, rule or governmental regulation
applicable to Purchaser.
4.4 Business of Purchaser. Purchaser has the corporate power
to own property and to carry on its business as now being
conducted. Purchaser is duly qualified to do business and is in
good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes
such qualification necessary. Purchaser holds all licenses,
permits and other governmental authorizations required in
connection with the conduct of Purchaser's business and
Purchaser has conducted and is conducting its business in
compliance with the requirements, standards, criteria and
conditions of any such licenses, pen-nits and other governmental
authorizations.
4.5 No Violations. Purchaser has complied with and is in
compliance with all foreign, federal, state, local, city, county
or other (civil and criminal) laws or order with respect to its
operations.
4.6 Litigation. There are no suits, actions, proceedings and
investigations or claims of any nature pending or threatened
against or affecting Purchaser or which may result, either
individually or in the aggregate, in any change in the assets,
conditions, affairs and prospects of the Purchaser's business.
Purchaser is not in violation of any order of any court or
foreign, federal, state, local, city, county or other
governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over them.
4.7 Approvals. No order, authorization, approval or consent
from or filing with any federal or state governmental body or
other authority having jurisdiction over Purchaser is required
for the execution, delivery and performance of this Agreement by
Purchaser or is necessary in order to ensure the legality,
validity, binding effect or enforceability of this Agreement.
The purchase of Stock contemplated by this Agreement is not in
violation of any provision of Purchaser's articles or bylaws or
any agreement or instrument to which Purchaser is a party or to
which it is subject, will not result in any such violation or be
in conflict with or constitute a default under any such
provision or agreement, and will not accelerate the performance
provided by the terms of any agreement or instrument to which
Purchaser is a party, or constitute a default thereunder, or an
event which, with the lapse of time or action by a third party,
could result in a default thereof Such purchase of Stock will
not violate any provision of any judgment, writ, decree, order,
statute, rule or governmental regulation applicable to
Purchaser.
4.8 Title. The Purchaser Stock transferred pursuant to the
terms of this Agreement is free and clear of all restrictions,
liens, encumbrances and security interests and is validly issued
and authorized.
4.9 Securities Regulations Relating to the Stock of Purchaser.
The Registered Purchaser Stock and the Registered Escrow Shares
will be, when issued, registered with the SEC pursuant to
Section 5 of the Act and will be, when issued, registered to
trade on the Exchange. Moreover, the Purchaser Stock will be
issued in compliance with the Act, the 34 Act, the Exchange
rules and any other applicable state, federal or foreign
securities laws. Purchaser has made all necessary filings with
the SEC, the Act and the Securities and Exchange Act of 1934
(the "34 Act") and no such filings, including without limitation
the Registration Statement, contain any material
misrepresentations of fact or omitted any material information.
Purchaser agrees to make all necessary filings with the SEC, the
Act and the 34 Act necessary with respect to the issuance of the
Purchaser Stock. In addition, neither the Registered Purchaser
Stock nor the Registered Escrow Shares contain any restrictive
legends nor is it otherwise subject to any restrictions relating
to its resale. Other than by this Agreement, Purchaser is not a
party to or bound by any contact, agreement or arrangement to
issue or sell any the Purchaser Stock and there are no
outstanding options, warrants, preemption rights, rights of
first refusal or other rights to subscribe for or purchase or
contracts, agreements or other arrangements with respect to the
Purchaser or other investment exercisable or convertible into
the Purchaser Stock.
4.10 Disclosure. Purchaser has provided Holder, Lanes and
Ligator with all material information relating to this Agreement
relating to Purchaser and Purchaser Stock. None of the
information so provided nor any representation or warranty of
Purchaser contained in this Agreement contains any untrue
statement or omits to state a material fact necessary in order
to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
4.11 Securities Regulations Relating to the Stock. Purchaser
understand that the Stock is not registered under the Act, the
34 Act or any state or other countries securities regulations,
to the extent applicable to this Agreement, and that the
purchase and sale of the Stock pursuant to this Agreement is
being made pursuant to exemptions from such registration
requirements, and Purchaser warrants that the Stock being
purchased hereby is for investment and not with a view to resale
of the Stock.
4.12 Indemnification. Purchaser, its officers and directors,
and their successors and assigns agree to indemnify and hold
Holder, Lanes and Ligator harmless from and against any and all
claims, losses, liabilities or obligations, including reasonable
attorneys' fees, for any claim arising out of or resulting from
any breach of warranty or a misrepresentation by Purchaser or
the nonperformance of any covenant hereunder which relates to
any matter hereunder.
ARTICLE V
Closing Documents
5.1 Holder, Lanes and Ligator's Obligations. At Closing,
Holder, Lanes and Ligator shall execute, if applicable, and
deliver to the Escrow Agent the following:
5.1.1 Documentation evidencing the Stock as originally issued
to Holder (the "Stock Certificates");
5.1.2 Documentation evidencing the transfer of the Stock to
Purchaser (the "Assignments"); and
5.1.3 The Escrow Agreement.
5.2 Purchaser's Obligations. At Closing, Purchaser shall
execute and deliver (or cause to be executed and delivered) to
MA (or the Escrow Agent, as applicable) the following:
5.2.1 Stock certificates evidencing the Purchaser Stock, issued
as set forth on
Exhibit A to the Escrow Agent;
5.2.2 The Escrow Agreement; and
5.2.3 A copy of the Registration Statement to Holder, Lanes and
Ligator.
ARTICLE VI
Miscellaneous Provisions
6.1 Tax-Free Exchange. The parties are entering into this
Agreement with the intention that the transaction contemplated
herein is intended to be a tax-free reorganization, within the
meaning of Section 2205 of the United States Internal Revenue
Code, for federal tax purposes, except to the extent of any
"boot" received and neither party will take any actions that
disqualify the transaction for such treatment.
6.2 Entire Agreement/Prior Agreements. This Agreement and the
other documents delivered pursuant hereto and specifically
referenced herein constitute the entire contract between the
parties hereto with respect to this transaction, and no party
shall be liable or bound to the other in any manner by any
warranties, representations or covenants except as specifically
set forth herein and therein. This Agreement supersedes all
prior agreements and understanding between the parties hereto
with respect to its subject matter. Any revision or
modification of this Agreement shall be effective only if in
writing and signed by the parties.
6.3 Waiver. Failure to enforce any provision of this Agreement
by a party shall not bar subsequent enforcement of such
provision or any other provision of this Agreement by such
party.
6.4 Governing Law. This Agreement and all other agreements
contemplated hereunder shall be governed by and construed under
the laws of the State of Arizona. The parties agree that
service of process may be made upon them by certified or
registered mail as provided in Section 6.6 below.
6.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same
instrument.
6.6 Notices. All notices provided for by this Agreement shall
be made in writing and shall be deemed received by the intended
recipient: (i) on the business day that such notice is sent by
telecopy or facsimile to the intended recipient provided that
such notice is also sent by United States Mail, by certified
mail, return receipt requested and postage paid thereon; (ii)
the third business day after the date placed in United States
Mail, certified mail, return receipt requested and postage paid
thereon; and (iii) the first business day after notice is sent
by express mail or other overnight mail service. All notices
shall be delivered to the address indicated below, unless the
party giving any such notice has been notified, in writing, of a
change of such address:
To Holder and Ligator: P.O. Box 025216
Dept 729
Miami, Florida 33102-5216
To Lanes: 6720 East Stallion Road
Paradise Valley, Arizona 89253
With a copy to: Gary R. Zwillinger, Esq.
Morrison & Hecker, L.L.P.
2800 North Central Avenue
Suite 1600
Phoenix, Arizona 85004-1047
To Purchaser: eConnect
2500 Via Cabrillo Marina
Suite 112
San Pedro, California 90731
Attn.: Thomas Hughes
With a copy to: Brian Faulkner, Esq.
Law Offices of Shawn F. Hackman
3360 West Sahara, Suite 200
Las Vegas, Nevada 89102
6.7 Headings. The headings in this Agreement are for
convenience only, are not part of the agreement of the parties
and shall not be deemed parts hereof or in any way affect the
meaning or interpretation of this Agreement.
6.8 Survival of Warranties. Unless otherwise expressly
provided, all indemnifications, covenants, warranties and
representations of Purchaser, Holder, Lanes and Ligator
contained herein or made pursuant to this Agreement shall
survive the delivery of this Agreement and Closing hereunder.
No investigation by the parties hereto in connection with this
Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate
or other document delivered in connection herewith and each such
representations and warranty shall survive such investigation.
6.9 Successors and Assigns. Holder's, Lanes' and Ligator's
rights and obligations hereunder shall not be assignable. The
terms and conditions of this Agreement shall inure to the
benefit of and be binding upon each party, its successors and
representatives.
6.10 Attorneys' Fees and Costs. If any party determines that
it is necessary to seek enforcement of any of the terms and
provisions hereunder by a court of law, the prevailing party, in
addition to any relief granted by the court of law, shall be
entitled to recover all costs and expenses thereof including
reasonable attorneys' fees and costs.
6.11 Expenses. Except as provided herein, each of the parties
shall be solely responsible for all of their own costs and
expenses, including but not limited to broker's agents or other
commission relating to the transactions contemplated herein as
well as accounting and legal expenses, incurred in connection
with this Agreement and the transactions contemplated herein.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement to be effective on the day and year first written
above.
PURCHASER:
eConnect
By: /s/ Thomas S. Hughes
Thomas S, Hughes, President
HOLDER:
La Empresa Ranco Plasticos Limitada
By: /s/ Jamie Ligator
Jamie Ligator, President
LANES:
/s/ Michael Lanes
Michael Lanes
LIGATOR:
/s/ Jamie Ligator
Jamie Ligator