Exhibit 10(j)
WASATCH AND NEWTEK STOCK PURCHASE AGREEMENT
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THIS WASATCH AND NEWTEK STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of the 6th day of May, 1996 by and among SANDBOX ENTERTAINMENT
CORPORATION, a Delaware corporation (the "Company"), which was formerly TRACER
DESIGN, INC., an Arizona corporation (the "Predecessor"); WASATCH VENTURE
CORPORATION ("Wasatch") and NEWTEK VENTURES II, L.P. ("Newtek"); and XXXX X.
XXXXXX, XXXXXX X. XXXXXXXXXXX AND XXXXX X. XXXXX (collectively, the "Founders").
RECITALS
A. On February 13, 1996, the Predecessor entered into that certain
Series A Stock Purchase Agreement (the "Series A Stock Purchase Agreement") with
Wasatch and Newtek (collectively, the "Investors" as that term is defined under
the Series A Stock Purchase Agreement") pursuant to which the Investors agreed
to and did purchase Ninety Thousand (90,000) shares of Series A Preferred Stock
of the Predecessor, along with warrants for the purchase of Twenty-Two Thousand
Five Hundred (22,500) shares of Series A Preferred Stock of the Predecessor, for
a total purchase price of Four Hundred Fifty Thousand Dollars ($450,000).
B. On February 13, 1996, the Predecessor also entered into that certain
Investor Rights Agreement (the "Investor Rights Agreement") with the Investors
in connection with the transactions contemplated by the Series A Stock Purchase
Agreement.
C. On February 13, 1996, the Predecessor also entered into that certain
Co-Sale Agreement (the "Co-Sale Agreement") with the Founders and the Investors
(the Investors are denominated as the "Purchasers" in the Co-Sale Agreement) in
connection with the transactions contemplated by the Series A Stock Purchase
Agreement (the Series A Stock Purchase Agreement, the Co-Sale Agreement and the
Investor Rights Agreement are collectively referred to herein as the
"Agreements"). Capitalized terms used and not otherwise defined in this
Agreement shall have the meanings ascribed to them in the Agreements.
D. As of February 28, 1996, Xxxx X. Xxxxxxxx III ("Xxxxxxxx") purchased
Five Thousand (5,000) shares of Series A Preferred Stock of the Predecessor and
a Warrant for the purchase of One Thousand Two Hundred Fifty (1,250) shares of
Series A Preferred Stock of the Predecessor for a total purchase price of
Twenty-Five Thousand Dollars ($25,000) pursuant to the same terms and conditions
as the Investors under the Agreements.
E. Pursuant to an Agreement and Plan of Merger dated as of April 18,
1996 the Company and the Predecessor agreed to merge, with the Company as the
surviving corporation (the "Merger"). The Merger became effective on April 25,
1996, and pursuant thereto, the Company assumed all assets, obligations, and
liabilities of the Predecessor and each share of
Common and Preferred stock of the Predecessor was converted into five (5) shares
of Common or Preferred stock, $.001 par value, of the Company.
F. Wasatch wishes to purchase an additional Three Hundred Seventy Five
Thousand (375,000) shares of Series A Preferred Stock of the Company for a total
purchase price of Three Hundred Thousand Dollars ($300,000) pursuant to the same
terms and conditions as the Investors under the Agreements. Newtek wishes to
purchase Two Hundred Fifty Thousand (250,000) shares of Series A Preferred Stock
of the Company in exchange for a total purchase price of Two Hundred Thousand
Dollars ($200,000) pursuant to the same terms and conditions as the Investors
under the Agreements.
G. Pursuant to the Series A Preferred Stock Agreement, the Predecessor
issued a warrant dated as of February 13, 1996 to Wasatch to purchase Seventeen
Thousand Five Hundred (17,500) shares of the Predecessor's Series A Stock for a
total exercise price of One Hundred Seventy Five Dollars ($175) (the "Wasatch
Warrant"). After giving effect to the Merger, the Wasatch Warrant permits
Wasatch to purchase Eighty Seven Thousand Five Hundred (87,500) shares of the
Company's Series A Stock for a total exercise price of One Hundred Seventy Five
Dollars ($175).
H. Pursuant to the Series A Preferred Stock Agreement, the Predecessor
issued a warrant dated as of February 13, 1996 to Newtek to purchase Five
Thousand (5,000) shares of the Predecessor's Series A Stock for a total exercise
price of Fifty Dollars ($50) (the "Newtek Warrant"). After giving effect to the
Merger, the Newtek Warrant permits Newtek to purchase Twenty Five Thousand
(25,000) shares of the Company's Series A Stock for a total exercise price of
Fifty Dollars ($50).
ACCORDINGLY, for good and valuable consideration, the receipt of which
are acknowledged by the parties, the parties agree as follows:
1. The Company agrees to issue to Wasatch Three Hundred Seventy Five
Thousand (375,000) shares of Series A Preferred Stock of the Company in exchange
for a payment by Wasatch to the Company of Three Hundred Thousand Dollars
($300,000) pursuant to the same terms and conditions as the Investors under the
Agreements. Further, Wasatch agrees to exercise, at the closing of the stock
purchase hereunder, the Wasatch Warrant to purchase Eighty Seven Thousand Five
Hundred (87,500) shares of the Company's Series A Stock for a total exercise
price of One Hundred Seventy Five Dollars ($175).
2. The Company agrees to issue to Newtek Two Hundred Fifty Thousand
(250,000) shares of Series A Preferred Stock of the Company in exchange for a
payment by Newtek to the Company of Two Hundred Thousand Dollars ($200,000)
pursuant to the same terms and conditions as the Investors under the Agreements.
Further, Newtek agrees to exercise, at the closing of the stock purchase
hereunder, the Newtek Warrant to purchase Twenty Five Thousand (25,000) shares
of the Company's Series A Stock for a total exercise price of Fifty Dollars
($50).
2
3. With respect to the securities issued under this Agreement (the "New
Securities"), the Company, the Founders, Wasatch and Newtek agree that Wasatch
and Newtek are parties to each of the Agreements, that Wasatch and Newtek are
entitled to all of the rights and benefits as an Investor or Purchaser under
each of the Agreements, and that Wasatch and Newtek assume all of the
obligations and responsibilities of an Investor or Purchaser under each of the
Agreements.
4. The Company represents and warrants that, except as set forth in the
Schedule of Exceptions and on the amendments thereto, which amendments are
attached to this Agreement as Exhibit A, as of the date of this Agreement each
of the representations and warranties contained in Section 2 of the Series A
Stock Purchase Agreement are not materially inaccurate or incomplete.
5. Wasatch and Newtek represent warrant, and agree that, as of the date
of this Agreement and the closing described below, each of the representations,
warranties, and agreements contained in Section 3 of the Series A Stock Purchase
Agreement are accurate and complete as to each of them and shall apply to the
purchase by them of the New Securities.
6. This Agreement may be executed in counterparts, each of which shall
be enforceable against the party actually executing the counterpart, and all of
which shall constitute one instrument.
7. The closing for the transactions contemplated by this Agreement
shall take place at such time and place as is mutually agreeable to the Company,
Wasatch and Newtek. The Company's obligation to close is also conditioned upon
its receipt of a consent and waiver from Xxxxxxxx to the transactions
contemplated hereby in form and substance acceptable to such Xxxxxxxx and the
Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
SANDBOX ENTERTAINMENT CORPORATION
By: /s/ Xxxx X. Xxxxxx
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Title: President
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3
WASATCH:
WASATCH VENTURE CORPORATION
By: /s/ Xxxx X. Xxxxxxx
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Title: Secretary and Treasurer
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NEWTEK:
NEWTEK VENTURES II, L.P.
By: /s/ Xxxx Xxxx
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Title: General Partner
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THE FOUNDERS:
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxxxxxxx
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Xxxxxx X. Xxxxxxxxxxx
/s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
EXHIBIT A
AMENDMENT TO THE SCHEDULE OF EXCEPTIONS
2.1 The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as currently conducted.
True and accurate copies of the Company's Certificate of Incorporation and
Bylaws, each as amended and in effect at the Closing, have been delivered to
Wasatch and Newtek.
2.2 Revised Capitalization Table of the Company:
I. AUTHORIZED CAPITALIZATION
Total Common Stock, $.001 par value: 10,000,000
Total Series A Convertible Preferred Stock, $.001 par value: 2,000,000
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Total 12,000,000
II. OUTSTANDING
A. Common Stockholders
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Name Shares
---- ------
Xxxx X. Xxxxxx(1) 1,275,000
Xxxxx X. Xxxxx(1) 612,500
Xxxxxx X. Xxxxxxxxxxx(1) 612,500
Xxxxx Xxxxx 229,590
R. Xxx and Xxxxxxx Xxxxxxxx Kailey 125,015
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Total Common: 2,854,605
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(1) Little, Layne and Xxxxxxxxxxx have certain agreements amongst
themselves pursuant to which the number of shares held by them relative to each
other may be adjusted. The agreements do not include receiving any new shares
from the Company.
B. Series A Preferred Stockholders
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Wasatch Venture Corporation 350,000
Newtek Ventures II, L.P. 100,000
Xxxx X. Xxxxxxxx III 25,000
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Total Series A Preferred: 475,000
Total Common/Preferred Outstanding: 3,329,605
C. Common Stock Options(2)
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Shares Price
------ -----
Name Optioned Per Share Vesting Schedule
---- -------- --------- ----------------
Xxxxxx Xxxxxxx 57,970 $.0002 11,590 shares on 8/1/96, 8/1/97 and 8/1/98;
11,600 shares on 8/1/99 and 8/1/00
Xxxx Xxxxxx 86,970 $.0002 17,390 shares on 8/1/96, 8/1/97 and 8/1/98;
17,400 shares on 8/1/99 and 8/1/00
Xxxxxx Xxxxxx 115,960 $.0002 23,190 shares on 8/1/96, 8/1/97, 8/1/98 and
8/1/99; 23,200 shares on 8/1/00
Xxxx Xxxx 86,970 $.0002 17,390 shares on 8/1/96, 8/1/97 and 8/1/98;
17,400 shares on 8/1/99 and 8/1/00
Xxxx Xxxx 131,535 $.10 65,767 shares as of 3/1/96, 10,962 on 9/1/96,
------- 3/1/97, 9/1/97, 3/1/98, 9/1/98 and 10,958 on
3/1/99
Total Common Options: 479,405
D. Common Warrants
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Shares Price Expiration
Name Under Warrant Per Share of Warrant
---- ------------- --------- ----------
Pickwick Group L.L.C. 229,500 $.80 9/15/05
Xxxxxx Xxxxxxxx 76,500 $.80 10/25/05
Xxxxxxxx Xxxxxx 38,250 $.80 10/25/05
Xxxxxxx and Xxxxx
Xxxxxxxxx 76,500 $.80 10/25/05
Pickwick Group L.L.C. 38,250 $.80 10/25/05
Xxxxxxxx Xxxxxx, M.D. 76,500 $.80 10/25/05
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(2) All of the options listed in this section are pursuant to the 1995
Equity Incentive Plan.
Xxxxx X. Xxxxxxx 131,535 $.002 2/13/06
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Total Common Warrants 667,035
TOTAL COMMON OPTIONS AND WARRANTS: 1,146,440
E. Series A Preferred Warrants
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Shares Price Term
Name Under Warrant Per Share of Warrant
---- ------------- --------- ----------
Wasatch Venture Corporation 87,500 $.002 2/13/96 - 2/13/06
Newtek Ventures II, L.P. 25,000 $.002 2/13/96 - 2/13/06
Xxxx Xxxxxxxx 6,250 $.002 2/28/96 - 2/28/06
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Total Series A Preferred Warrants: 118,750
III. RESERVED
Type Number of Shares For What Reserved
---- ---------------- -----------------
Common 668,945 1995 Equity Incentive Plan
Common 667,035 Common Warrants
Common 475,000 Series A Preferred Stock
Common 118,750 Series A Preferred Warrants
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Total Common Reserved: 1,929,730
Series A Preferred 118,750 Series A Preferred Warrants
Total Series A Preferred Reserved: 118,750
Total Common/Preferred Reserved: 2,048,480
IV. SUMMARY
Total Common Outstanding 2,854,605
Total Preferred Outstanding 475,000
Total Outstanding 3,329,605
Total Warrants/Options Outstanding 1,265,190
Total Common Outstanding - Fully Diluted(3) 4,594,795
2.25 The Company intends to use the proceeds from the sale of the New
Securities as follows:
Purpose Estimated Total
Working Capital (includes equipment,
additional rent, salaries, telecommunications,
payables, travel) $350,000
Advertising and Marketing $150,000
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(3) Assumes exercise of all outstanding warrants and options and
conversion of all outstanding preferred.
