SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of March 16, 2000, is entered into
by and between Wasatch Interactive Learning Corporation, a Washington
corporation, with headquarters located at 0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxx Xxxx Xxxx, XX 00000 (the "Company"), and the undersigned (referred to
individually as the "Buyer" and collectively as the ("Buyers").
W I T N E S S E T H:
WHEREAS, the Company and the Buyers are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, by Rule 506 under Regulation
D ("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), and/or Section 4(2) of the Securities Act;
WHEREAS, in consideration of the foregoing, the Buyers desire
to purchase, upon the terms and subject to the conditions of this Agreement, a
7% Secured Convertible Debenture, in the principal amount of $4,000,000, issued
by the Company (which may be issued to each individual Buyer in series) (the
"Debentures"), the form of which is attached hereto as Annex I, which will be
convertible into shares of Common Stock, par value $0.0001 per share of the
Company (the "Common Stock"), together with the Common Stock Purchase Warrants
described herein (the "Warrants"), upon the terms and subject to the conditions
of such Debenture, and subject to acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase; Certain Definitions. (i) The undersigned hereby
agrees to purchase from the Company the Debentures in the amount set forth on
the signature page of this Agreement, out of a total offering of Debentures in
the principal amount of $4,000,000, and having the terms and conditions set
forth therein. The form of Debenture is attached hereto as Annex I (the
"Debenture"). The purchase price for the Debenture shall be as set forth on the
signature page hereto (the "Purchase Price") and shall be payable in United
States Dollars.
(ii) As used herein, the term "Securities" means the
Debentures, the Warrants and the Common Stock issuable upon conversion of the
Debentures and the exercise of the Warrants.
b. Form of Payment. The Buyer shall pay the Purchase Price for
the Debentures by delivering immediately available good funds in United States
Dollars to the escrow agent (the "Escrow Agent") identified in the Joint Escrow
Instructions attached hereto as Annex II (the "Joint Escrow Instructions"). No
later than the Closing Date (as defined below), the Company shall deliver the
original Debentures duly executed on behalf of the Company to the Escrow Agent.
By signing this Agreement, the Buyer and the Company, and subject to acceptance
by the Escrow Agent, each agrees to all of the terms and conditions of, and
becomes a party to, the Joint Escrow Instructions, all of the provisions of
which are incorporated herein by this reference as if set forth in full.
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c. Method of Payment. Payment into escrow of the Purchase
Price for the Debentures shall be made by wire transfer of funds to:
City National Bank
1950 Avenue of the Stars
Xxx Xxxxxxx, XX 00000
ABA# 000000000
For credit to the account of Law Office
of Xxxxxxx X. Xxxxxxxxx
Escrow for Xxxxx Street, LLC
Account No.: 009477772
Not later than 1:00 p.m., PST time, on the date which is one (1) New York Stock
Exchange trading day after the Company shall have accepted this Agreement and
returned a signed counterpart of this Agreement to the Escrow Agent by
facsimile, each Buyer shall deposit with the Escrow Agent the purchase price for
the Debenture being acquired by it, in immediately available funds. Time is of
the essence with respect to such payment, and failure by the Buyer to make such
payment shall allow the Company to cancel this Agreement.
d. Escrow Property. The Purchase Price and the Debentures
delivered to the Escrow Agent as contemplated by Sections 1(b) and (c) hereof
are referred to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
Each Buyer represents and warrants to, and covenants and
agrees with, the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock
pursuant to the Registration Statement (as that term is defined in the
Registration Rights Agreement defined below), the Buyer is purchasing the
Debenture and will be acquiring the shares of Common Stock issuable upon
conversion of the Debenture or the exercise of the Warrant (the "Converted
Shares") for its own account for investment, and not with a view towards the
public sale or distribution thereof and not with a view to or for sale in
connection with any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the Securities
Act by reason of Rule 501(a)(3), (ii) experienced in making investments of the
kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an entity)
and professional advisors (who are not affiliated with or compensated in any way
by the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities.
c. All subsequent offers and sales of the Debenture and the
shares of Common Stock representing the Converted Shares (such Common Stock
sometimes referred to as the "Shares") by the Buyer shall be made pursuant to
registration of the Shares under the Securities Act or pursuant to an exemption
from registration.
d. The Buyer understands that the Debenture is being offered
and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Debenture.
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e. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Debenture and the
offer of the Shares which have been requested by the Buyer. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received complete and satisfactory answers to any such
inquiries. Without limiting the generality of the foregoing, the Buyer has also
had the opportunity to obtain and to review (i) the Company's annual report on
Form 10-KSB for the year ending April 30, 1999, (ii) the Company's reports on
Form 10-QSB for the periods ending July 31, 1999, and October 30, 1999 (the "SEC
Reports");
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
h. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
i. Notwithstanding the provisions hereof or of the Debenture,
in no event (except with respect to an automatic conversion of the Debenture as
provided therein) shall each Buyer be entitled to convert any Debenture to the
extent that, after such conversion, the sum of (1) the number of shares of
Common Stock beneficially owned by such Buyer 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 Debenture with
respect to which the determination of this proviso is being made, would result
in beneficial ownership by such Buyer and its affiliates of more than 4.99% of
the outstanding shares of Common Stock. For purposes of the proviso 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
(the "1934 Act"). Any issuance by the Company to the Buyer in excess of the
limit contained in this Paragraph 2.i. shall be null and void, ab initio, and
upon notice of such invalid issuance, the Company shall correct its books and
cause its transfer agent's books to be corrected forthwith to reflect that the
Buyer's ownership of Common Stock is within the limit set forth herein. Buyer
shall immediately deliver any certificates for invalidly issued Common Stock to
the Company's transfer agent. The Company further agrees to (i) immediately
reissue certificates for Common Stock to the extent that a portion of the Common
Stock represented by said certificates have been validly issued and (ii)
immediately reissue all or a portion of those shares which were deemed invalidly
issued (at a price set forth in the original conversion notices applicable to
such shares) upon notice from the Buyer that the reissuance of such shares would
not cause such Buyer to have a beneficial ownership interest in excess of 4.99%.
The Company hereby indemnifies and holds Holder free and harmless in connection
with any and all liabilities, losses, costs and expenses, including, without
limitation, attorneys' fees and costs arising from or relating to claims made by
any third parties alleging that any Holder has violated Sections 13(d) and/or
16, to the extent such violation is premised on the fact that, notwithstanding
this Section 4.E., the Holder is the beneficial owner of all of the shares of
Common Stock which would be issuable, from time to time, if Holder converted the
entire principal and interest balance of the Debenture.
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j. Buyer represents that it neither is nor will be obligated
for any finders' fee or commission nor is it aware of any such fee or commission
payable in connection with this transaction other than as set forth on the Joint
Escrow Instructions (attached hereto as Annex II). Buyer agrees to indemnify and
to hold harmless the Company from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which such Buyer or
any of its officers, partners, employees, or representatives is responsible.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants and hereby covenants and
agrees with each Buyer that:
a. Concerning the Debenture and the Shares. The Debentures
have been duly authorized and, when issued, will be duly and validly issued,
fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder. There are no preemptive
rights of any stockholder of the Company, as such, to acquire the Securities.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or prospects or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act, and the Common Stock is listed and
traded on the "NASD OTC Bulletin Board." The Company has received no notice,
either oral or written, with respect to the continued eligibility of the Common
Stock for such listing, and the Company has maintained all requirements for the
continuation of such listing.
c. Authorized Shares. The Company has at February 29, 2000,
7,500,000 shares of Common Stock issued and outstanding, and has sufficient
authorized and unissued Shares as may be reasonably necessary to effect the
conversion of the Debentures (assuming all future conversions occurred are based
upon an average 5-day closing bid of the Common Stock, as reported by Bloomberg,
LP which was one-half (1/2) of the closing bid price of the Common Stock on the
Closing Date [the "Closing Date Bid"]) and exercise of the Warrants (as defined
in Section 4.k.) at the Closing Date Bid. The Common Stock has been duly
authorized and, when issued upon conversion of the Debentures in accordance with
their terms, will be duly and validly issued, fully paid and non-assessable and
will not subject the holder thereof to personal liability by reason of being
such holder.
d. Securities Purchase Agreement; Registration Rights
Agreement and Debenture. This Agreement, the Debenture, the Registration Rights
Agreement, the form of which is attached hereto as Annex IV (the "Registration
Rights Agreement") and the transactions contemplated hereby and thereby, have
been duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Debentures
and the Registration Rights Agreement, when executed and delivered by or on
behalf of the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject, as to
enforceability, to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
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e. Non-contravention. The execution and delivery of this
Agreement, the Debentures and the Registration Rights Agreement by the Company,
the issuance of the Securities, and the consummation by the Company of the other
transactions contemplated by this Agreement, the Debentures and the Registration
Rights Agreement do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) except as disclosed in Annex V, any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, including any
listing agreement for the Common Stock (except as herein set forth), (iii) to
its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, or (iv) any
listing agreement for its Common Stock, except such conflict, breach or default
which would not have a material adverse effect on the transactions contemplated
herein.
f. Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the Buyer
as contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. To the best of the Company's knowledge, none
of the Company's SEC Reports filed since January, 1998 contained, at the time
they were filed, any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
made therein in light of the circumstances under which they were made, not
misleading, except as corrected by an amended filing made prior to the date
hereof. The Company has since January 1998 filed all requisite forms, reports
and exhibits thereto with the SEC.,
h. Absence of Certain Changes. Since October 31, 1999, there
has been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise), or results
of operations of the Company and its subsidiaries, taken as a whole, except as
disclosed in Annex V or in the Company's SEC Reports. Since October 31, 1999,
the Company has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. Full Disclosure. There is no fact known to the Company
(other than general economic conditions known to the public generally or as
disclosed in the Company's SEC Reports), that has not been disclosed in writing
to the Buyer that (i) would reasonably be expected to have a material adverse
effect on the business or financial condition of the Company or (ii) would
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement or any of the
agreements contemplated hereby (collectively, including this Agreement, the
"Transaction Agreements").
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j. Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company, wherein an unfavorable decision, ruling or finding would
have a material adverse effect on the properties, business or financial
condition. results of operation or prospects of the Company and its subsidiaries
taken as a whole or the transactions contemplated by any of the Transaction
Agreements or which would adversely affect the validity or enforceability of, or
the authority or ability of the Company to perform its obligations under, any of
the Transaction Agreements.
k. Absence of Events of Default. Except as set forth in Annex
V hereto, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a material adverse effect on the Company's
financial condition or results of operations.
l. Prior Issues. Except as set forth in Annex V hereto,
during the twelve (12) months preceding the date hereof, the Company has not
issued any Common Stock or convertible securities in capital transactions which
have not been fully disclosed in the Company's filings with the SEC. Except as
set forth in Annex V hereto, all such issuances (except for issuances to Buyer)
have been fully converted into shares of common stock and there are no
outstanding unconverted debt or convertible securities from those transactions.
m. No Undisclosed Liabilities or Events. Except as set forth
in Annex V, the Company has no liabilities or obligations other than those
disclosed in the Company's SEC Reports or those incurred in the ordinary course
of the Company's business since December 31, 1998, and which, individually or in
the aggregate, do not or would not have a material adverse effect on the
properties, business, condition (financial or otherwise), results of operations
or prospects of the Company and its subsidiaries, taken as a whole. No event or
circumstances has occurred or exists with respect to the Company or its
properties, business, condition (financial or otherwise), results of operations
or prospects, which, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed.
n. No Default. Except as disclosed in Annex V, hereto, the
Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust or other material instrument or agreement to which it is
a party or by which it or its property is bound.
o. No Integrated Offering. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, made any 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.
p. Dilution. The number of Shares issuable upon conversion of
the Debentures may increase substantially in certain circumstances, including,
but not necessarily limited to, the circumstance wherein the trading price of
the Common Stock declines prior to the conversion of the Debentures. The
Company's executive officers and directors have studied and fully understand the
nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded
that, in its good faith business judgment, such issuance is in the best
interests of the Company. The Company specifically acknowledges that its
obligation to issue the Shares upon conversion of the Debentures 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.
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q. Acknowledgment by Company. Company represents and warrants
that neither the Buyer, nor any persons or entities representing or purporting
to represent the Buyer have made any representation or warranty which is not
contained expressly in this Agreement or any other agreements referred to
herein. Without limiting the foregoing, Company specifically acknowledges that
the Buyer has made no representations that it is a "long term" investor in the
Company, or that it intends to hold the Debentures or shares of stock in the
Company (obtained by conversions of the Debentures) for any period beyond that
which is required under the Securities Act. Company further acknowledges that
the Buyer may hedge the shares of stock in the Company prior to or after the
conversions of any of the Debentures, provided that such hedging is done in
compliance with the Securities Act, the 1934 Act, any rules applicable to
securities traded on the NASD OTC Bulletin Board and the express terms of this
Agreement, the Debentures, the Warrants and the Registration Rights Agreement.
r. Brokers Fee. The Company represents that it neither is nor
will be obligated for any finders' fee or commission nor is it aware of any such
fee or commission payable in connection with this transaction other than as set
forth on the Joint Escrow Instructions (attached hereto as Annex II). The
Company agrees to indemnify and to hold harmless the Buyer from any liability
for any commission or compensation in the nature of a finders' fee (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, partners, employees, or
representatives is responsible.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. Each Buyer acknowledges that (1) the
Debentures have not been and is not being registered under the provisions of the
Securities Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the Securities Act, and
may not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the Securities Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the Securities Act, may require compliance
with some other exemption under the Securities Act or the rules and regulations
of the SEC thereunder; and (3) neither the Company nor any other person is under
any obligation to register the Securities (other than pursuant to the
Registration Rights Agreement) under the Securities Act or to comply with the
terms and conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that
the Debentures and, until such time as the Common Stock has been registered
under the Securities Act as contemplated by the Registration Rights Agreement
and sold pursuant to an effective Registration Statement, certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
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c. Registration Rights Agreement. The parties hereto agree to
enter into the Registration Rights Agreement on or before the Closing Date.
d. Filings. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Debentures to the Buyer
under any United States laws and regulations, or by any domestic securities
exchange or trading market, and to provide a copy thereof to the Buyer promptly
after such filing.
e. Reporting Status. So long as any Buyer beneficially holds
the Debentures, the Company shall file all reports required to be filed with the
SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
f. Use of Proceeds. The Company will use the proceeds from the
sale of the Debentures (excluding amounts paid by the Company for legal fees,
finder's fees and escrow agent fees in connection with the sale of the
Debentures) for general capital purposes and, without limiting the foregoing,
shall not, directly or indirectly, use any of such proceeds for investment in
any other affiliate.
g. Certain Agreements. (i) The Company covenants and agrees
that it will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock with any third party until one hundred eighty (180) days after
the Effective Date (as defined below).
(ii) The provisions of subparagraph 4.i.(i) will not apply to
(A) Common Stock issued as "restricted stock" as defined in SEC Rule 144,
provided the holder thereof holds such Common Stock for at least one year from
the date of issuance; (B) a secondary public offering of shares of Common Stock
at market; (C) an offering of convertible securities at market or above; (D) 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; (E) the grant or exercise of
employee stock options and other employment compensation; and (F) the conversion
of securities or the exercise of warrants referenced in Schedule 5(b) of the
Registration Rights Agreement; provided with regard to (A) through (D) above,
such securities would not be included in the Registration Statement relating to
the Shares and a registration statement in respect of such stock shall not be
filed prior to sixty (60) days after the Effective Date.
(iii) The term "Effective Date" means the effective date of
the Registration Statement covering the Registrable Securities (as defined in
the Registration Rights Agreement).
(iv) In the event the Company breaches the provisions of this
Paragraph 4.G.i., the Conversion Price shall be amended to equal the conversion
formula set forth in Section 4.A. of the Debenture and each Buyer may, within
thirty (30) days after it receives written notice of such breach from the
Company, require the Company to immediately redeem the Debenture held by it in
accordance with Section 6(y) of the Debenture.
h. Available Shares. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock equal to two hundred percent (200%) of the number of shares of
Common Stock issuable upon conversion of all of the outstanding Debentures, and
the exercise of the Warrants.
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i. Warrants. The Company agrees to issue to Buyer at the
Closing, transferable divisible warrants with cashless exercise provisions (the
"Warrants") for 196,078 shares of Common Stock. Such Warrants shall bear an
exercise price equal to $5.31, and shall be exercisable immediately upon
issuance, and for a period of five (5) years thereafter, in the form annexed
hereto as Annex VI, together with piggy-back registration rights, and demand
registration rights set forth under the Registration Rights Agreement.
j. Limitation on Issuance of Shares. The Debenture shall
provide that the Company shall take all steps reasonably necessary to be in a
position to issue shares of Common Stock on conversion of the Debentures without
violating the "Cap Regulations". If despite taking such steps, the Company is
limited in the number of shares of Common Stock it may issue by the "Cap
Regulations," to the extent that the Company cannot issue such shares of Common
Stock, due upon a Notice of Conversion, without violating the Cap Regulations,
the Company shall immediately notify each Buyer the principal amount of its
Debenture which is not convertible as a result of said Cap Regulations (the
"Debenture Balance") and the Buyer, shall have the option, exercisable in its
sole and absolute discretion, to elect any of the remedies in Section 6 of the
Debenture.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the
aggregate purchase price for the Debentures in accordance with Section 1(c)
hereof, the Company will irrevocably instruct its transfer agent to issue Common
Stock from time to time upon conversion of the Debentures in such amounts as
specified from time to time by the Company to the transfer agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the Securities Act, registered in the name of
the Buyer or its nominee and in such denominations to be specified by each Buyer
in connection with each conversion of its Debenture. The Company warrants that
no instruction other than such instructions referred to in this Section 5 and
stop transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Shares under the Securities Act will be given by
the Company to the transfer agent and that the Shares 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 shall affect in any way the Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities. If the Buyer provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a)
of this Agreement is not required under the Securities Act, the Company shall
(except as provided in clause (2) of Section 4(a) of this Agreement) permit the
transfer of the Securities and, in the case of the Shares, promptly instruct the
Company's transfer agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the Buyer.
b. (i) The Company will permit each Buyer to exercise its
right to convert its Debenture by telecopying an executed and completed Notice
of Conversion (as defined in the Debenture) to the Company and delivering within
three (3) business days thereafter, the original Notice of Conversion, together
with the original Debenture, by express courier.
(ii) The term "Conversion Date" means, with respect to any
conversion elected by the holder of the Debentures after the Effective Date, the
date specified in the Notice of Conversion, provided the copy of the Notice of
Conversion is telecopied to or otherwise delivered to the Company in accordance
with the provisions hereof so that is received by the Company on or before such
specified date. The Conversion Date for any mandatory conversion at maturity
shall be the Maturity Date of the Debentures.
9
(iii) The Company shall, at its expense, take all actions and
use all means necessary and diligent to cause its transfer agent to transmit the
certificates representing the Shares issuable upon conversion of any Debentures
to the Buyer via express courier, by electronic transfer or otherwise, within
three (3) business days after receipt by the Company of the later of (i) receipt
by the Company of the copy of the original Notice of Conversion (and the
original Debenture upon the final conversion) and (ii) the Conversion Date (the
"Delivery Date").
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer in the event that due entirely to the Company's
failure to issue and deliver the Shares upon Conversion in accordance with the
following schedule (where "No. Business Days Late" is defined as the number of
business days beyond five (5) business days from Delivery Date):
Late Payment For Each $10,000
of principal and interest of
No. Business Days Late Debenture Being Converted
---------------------- -----------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
>5 $500 +$200 for each Business
Day Late beyond 5 days from
The Delivery Date
The Company shall pay any payments incurred under this Section
in immediately available funds upon demand. Nothing herein shall limit each
Buyer's right to pursue actual damages or to cause the Company to redeem its
Debentures as provided below for the Company's actions or inactions resulting in
the transfer agent's failure to issue and deliver the Common Stock to the Buyer.
Furthermore, in addition to any other remedies which may be available to the
Buyer, in the event that the Company fails to deliver such shares of Common
Stock within five (5) business days after the Delivery Date, the Buyer will be
entitled to revoke the relevant Notice of Conversion by delivering a notice to
such effect to the Company whereupon the Company and the Buyer shall each be
restored to their respective positions immediately prior to delivery of such
Notice of Conversion. In the event the Company's actions or inactions result in
the transfer agent's failure to issue and deliver the Common Stock to the Buyer
within ten (10) days after the Delivery Date, each Buyer may, at its option,
require the Company (without limiting its other remedies hereunder) to
immediately redeem the remaining interest and principal balance of its Debenture
in accordance with Section 6(y) of the Debenture.
d. If, by the relevant Delivery Date, the Company fails for
any reason to deliver the Shares to be issued upon conversion of the Debentures
and after such Delivery Date, the holder of the Debentures being converted (a
"Converting Holder") 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 the Converting Holder made after a
Conversion Date (the "Sold Shares"), which delivery such Converting Holder
anticipated to make using the Shares to be issued upon such conversion (a
"Buy-In"), the Company shall pay to the Converting Holder, in addition to all
other amounts contemplated in other provisions of the Transaction Agreements,
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) the
Converting Holder'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 the Converting Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Buyer in
10
immediately available funds immediately upon demand by the Converting Holder. By
way of illustration and not in limitation of the foregoing, if the Converting
Holder purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of
Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
which Company will be required to pay to the Converting Holder will be $1,000.
The remedies set forth in paragraphs 5(c) and (d) shall be cumulative.
e. In lieu of delivering physical certificates representing
the unlegended securities issuable upon conversion, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the Buyer and its
compliance with the provisions contained in this paragraph, so long as the
certificates therefor do not bear a legend and the Buyer thereof is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion to the Buyer by crediting the
account of Buyer's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission system.
f. The original Debenture shall be delivered by the Buyer to
the Company simultaneous with the final Notice of Conversion.
6. DELIVERY INSTRUCTIONS.
The Debentures shall be delivered by the Company to the Escrow
Agent pursuant to Section 1(b) hereof, on a delivery against payment basis, no
later than on the Closing Date.
7. CLOSING DATE.
(i) The closing of the issuance and sale of the Debentures
shall occur on the date (the "Closing Date") which is the first NYSE trading day
after the fulfillment or waiver of all closing conditions pursuant to Sections 8
and 9 hereof or such other date and time as is mutually agreed upon by the
Company and the Buyer.
(ii) The closing of the purchase and issuance of Debentures
shall occur on the Closing Date, at the offices of the Escrow Agent and shall
take place no later than 12:00 Noon, PST, on such day or such other time as is
mutually agreed upon by the Company and the Buyer.
(iii) Notwithstanding anything to the contrary contained
herein, the Escrow Agent will be authorized to release the Escrow Property (as
defined in the Escrow Agreement) only upon satisfaction of the conditions set
forth in Sections 8 and 9 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Debentures on the Closing Date and to the Buyer pursuant to this Agreement
is conditioned upon:
a. The receipt and acceptance by the Buyer of this Agreement
as evidenced by execution of this Agreement by the Buyer for Four Million
Dollars ($4,000,000) in aggregate principal amount of the Debentures (or such
lesser amount as the Company, in its sole discretion, shall determine on the
Closing Date);
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Debentures in
accordance with Section 1(c) hereof;
11
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date, and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date;
d. There shall not be 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.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Debentures on the Closing Date is conditioned upon:
a. Acceptance by the Company of this Agreement for the sale of
Debentures, as indicated by execution of this Agreement;
b. Delivery by the Company to the Escrow Agent of the
Debentures, in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this Agreement
as if made on the Closing Date and the performance by the Company on or before
the Closing Date of all covenants and agreements of the Company required to be
performed on or before the Closing Date and as to Debentures, the conditions set
forth in Paragraph 4g; and
d. On the Closing Date, Buyer having received (i) an opinion
of counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in Annex III
attached hereto, (ii) the Registration Rights Agreement, and (iii) the Warrants.
e. No statute, rule, regulation, executive order, decree,
ruling or injunction shall be enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits or
adversely effects any of the transactions contemplated by this Agreement or the
Transaction Documents, and no proceeding or investigation shall have been
commenced or threatened which may have the effect of prohibiting or adversely
effecting any of the transactions contemplated by this Agreement or the
Transaction Documents.
f. From and after the date hereof to and including the Closing
Date, the trading of the Common Stock shall not have been suspended by the SEC,
or the NASD and trading in securities generally on the New York Stock Exchange,
NASDAQ/Small Cap, or NASD OTC Bulletin Board, as applicable, shall not have been
suspended or limited, nor shall minimum prices been established for securities
traded on NASDAQ/Small Cap or the NASD OTC Bulletin Board, as applicable, nor
shall there be any outbreak or escalation of hostilities involving the United
States or any material adverse change in any financial market that in either
case in the reasonable judgment of the Buyer makes it impracticable or
inadvisable to purchase the Debentures.
10. GOVERNING LAW; MISCELLANEOUS.
a. This Agreement and all agreements entered into in
connection herewith shall be governed by and interpreted in accordance with the
laws of the State of California for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. 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 Buyer shall be
brought and maintained exclusively in the state or Federal courts of the State
of California, sitting in the City of Los Angeles. The Company hereby expressly
and irrevocably submits to the jurisdiction of the state and federal Courts of
the State of California for the purpose of any such litigation as set forth
12
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 related agreements
entered into in connection herewith.
b. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
c. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
d. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
e. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
f. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
g. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
h. Except as otherwise set forth herein, all costs and
expenses, including reasonable attorneys' fees, incurred by the Buyer in the
enforcement of this Agreement or any agreements related thereto, shall be paid
by the Company upon demand.
11. NOTICES. Any notice or communication required or permitted
by this Agreement shall be given in writing addressed as follows:
COMPANY: Wasatch Interactive Learning Corporation
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000
ATTN: CEO
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Snow, Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
BUYER: At the address set forth on the signature page of
this Agreement.
ESCROW AGENT: Law Offices of Xxxxxxx X. Xxxxxxxxx
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier No. (000) 000-0000
13
All notices shall be served personally by telecopy, by telex, by overnight
express mail service or other overnight courier, or by first class registered or
certified mail, postage prepaid, return receipt requested. If served personally,
or by telecopy, notice shall be deemed delivered upon receipt (provided that if
served by telecopy, sender has written confirmation of delivery); if served by
overnight express mail or overnight courier, notice shall be deemed delivered
forty-eight (48) hours after deposit; and if served by first class mail, notice
shall be deemed delivered seventy-two (72) hours after mailing. Any party may
give written notification to the other parties of any change of address for the
sending of notices, pursuant to any method provided for herein.
12. 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 Debentures and the Purchase Price, and
shall inure to the benefit of the Buyer and its successors and assigns.
13. SHORTING THE COMMON STOCK.The Buyer hereby represents that
as of the date of this Agreement it is not "short" (as that term is defined in
the Securities Act and the 0000 Xxx) the Common Stock. On the condition that the
Company is not in default of any of its obligations set forth in any of the
Transaction Agreements, including this Agreement, the Debenture and the
Registration Rights Agreement and on the further condition that the Registration
Statement for the Common Stock is declared effective within 120 days of this
Agreement, Buyer hereby agrees that it will not "short" the Common Stock until
after it has converted all amounts due under the Debenture into Common Stock.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
AGGREGATE PURCHASE PRICE OF THE DEBENTURES: $4,000,000*
*As detailed below
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf as of this 16th day of March, 2000.
Printed Names of Buyers:
Xxxxx Road, LLC, a Cayman Islands
Limited Liability Company
By:/s/
-----------------------------------
Navigator Management, LTD, Director
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
Wasatch Interactive Learning Corporation, a Washington corporation
By:/s/
------------------
Xxxxxxx Xxxxxx
Title: President
Date: March 16, 2000
15
