Exhibit 10(b)
ADDENDUM NO. 1 TO
MASTER LEASE AGREEMENT NO. 000-00000-000
DATED AS OF MARCH 31,1997
BETWEEN
THIRD COAST VENTURE LEASE PARTNERS I, L.P.
AND
SANDBOX ENTERTAINMENT CORPORATION, AS LESSEE
This Addendum is attached to and forms part of that certain Master Lease
Agreement No. 000-00000-000 dated as of March 31,1997, between THIRD COAST
VENTURE LEASE PARTNERS I, L.P. ("Lessor") and SANDBOX ENTERTAINMENT CORPORATION
("Lessee"), ("Lease") agreeing as follows:
A. Terms defined in the Lease shall have the same meanings herein unless
otherwise expressly set forth herein or otherwise required by context hereof.
B. The following shall be added to the terms of the Lease and are hereby
incorporated therein by reference.
C. To the extent any terms or conditions contained in this Addendum may be
inconsistent or conflict with any terms or conditions contained in the Lease,
the terms and conditions contained in this Addendum shall govern and control.
25. Definitions.
"Base Implicit Rate" shall mean as set forth in Section 28(b) herein.
"Base Monthly Rent Factor" shall mean as set forth in Section 28(b)
herein.
"Base Treasury Rate" shall mean as set forth in Section 28(b) herein.
"Equipment Cost" shall mean the lowest of: (a) manufacturer's net
invoice price; (b) net book value (determined in accordance with
generally accepted accounting principles); and (c) fair market value.
Equipment Cost shall exclude sales tax, delivery costs, installation
costs, leasehold improvements and software in excess of five percent
(5%) of total findings hereunder.
"Funding Period" shall mean from the date hereof to April 1,1998.
"Implicit Rate" shall mean the annual implicit rate set forth in
Section 28(c) herein.
"Index Instrument" shall mean the U.S. Treasury Notes maturing closest
to the date thirty-six (36) months from the Commencement Date of each
Schedule.
"Lease Line" shall mean the equipment lease line of credit as set forth
in Section 26 herein.
"Lease Line Amount" shall be the amount of the Lease Line to be
provided hereunder as set forth in Section 26(b) herein.
"Monthly Rent Factor" shall mean as set forth in Section 28(c) herein.
"Treasury Rate" shall mean the yield of the Index Instrument as
reported, from time to time, in the Wall Street Journal, Midwest
Edition.
26. Lease Line.
(a) Subject to the terms and conditions of the Lease, this Addendum and
any applicable Schedules, and provided no Event of Default shall have occurred
and be then continuing, Lessor agrees to purchase and lease new Equipment to
Lessee.
(b) The aggregate Equipment Cost of such Equipment shall not exceed
$500,000.
(c) All Equipment to be purchased by Lessor and leased to Lessee under
this Lease Line shall be delivered, accepted, fully operational and funded by no
later than April 1,1998.
(d) The Equipment shall be located at Lessee's location at 0000 Xxxx
Xxxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx, 00000 or at such other locations as
Lessor may approve prior to funding all as set forth in the applicable
Schedules.
(e) No unit of Equipment with an aggregate Equipment Cost of less than
$1,000 shall be included in the Equipment.
(f) Each piece of Equipment, its Supplier and all purchase orders,
invoices & related documents will be subject to review and approval by Lessor.
27. Fundings.
(a) Lessor, upon Lessee's request, may make progress payments for any
unit of Equipment with a unit cost over $1,000 to the Supplier in accordance
with Lessor's standard procedures. Lessee shall pay Lessor interim rent from the
Acceptance Date to the Commencement Date as set forth in Section 2 of the Lease.
2
(b) In the event Lessee shall not deliver to Lessor its Equipment
Acceptance in respect of the Equipment on or before three (3) months from the
date of the first progress payment made hereunder, Lessee shall pay Lessor, upon
demand, an amount equal to the sum of all progress payments made by Lessor
together with all accrued and unpaid interim rent.
(c) Alternatively, Lessor may purchase Equipment from Lessee for which
Lessee may have purchased and paid the Supplier. In such event, Lessee shall
submit to Lessor evidence satisfactory to Lessor of payment to the Supplier
within 90 days of such payment by Lessee to Supplier.
(d) Lessor shall in its sole discretion accumulate Lessee's paid
invoices and progress payment made by Lessor into Schedules of no less than
$100,000 (except a final Schedule in a lesser amount as required to utilize the
remaining Lease Line) which Schedules shall commence on the Commencement Date.
28. Lease Economics.
(a) The Initial Lease Term shall be thirty-six (36) months.
(b) The Base Monthly Rent Factor shall be 3.29% of Equipment Cost,
payable monthly in advance, and reflects a Base Implicit Rate of 12.00%, which
corresponds to a Base Treasury Rate of 5.94%.
(c) For each Schedule, the Monthly Rent Factor shall be calculated
based on the Implicit Rate in effect on the Commencement Date of such Schedule.
Such Implicit Rate shall be equal to the Base Implicit Rate plus or minus (as
appropriate) the number of basis points by which the Treasury Rate on such
Commencement Date differs from the Base Treasury Rate. Notwithstanding anything
to the contrary contained herein _______ minimum Implicit Rate shall be 10.00%
at the maximum Implicit Rate shall be 14.00%. Upon the commencement of each
Schedule, the Monthly Rent Factor for such Schedule shall be fixed for the
Initial Lease Term of such Schedule.
(d) ("X" if applicable) [_____] See casualty loss schedule attached
hereto to establish value pursuant to Section 10 of the Lease in the event of an
Equipment Loss.
29. Fees.
(a) Lessor acknowledges the receipt of an application fee of $5,000.
The application fee shall be applied to defray Lessor's due diligence costs and
legal costs which shall not exceed $5,000. Any remaining balance will be
returned to Lessee.
(b) A commitment fee equal to 0.25% of the unused Lease Line Amount
shall be paid by Lessee to Lessor on July 1,1997, October 1, 1997, January 1,
1998, and April 1,1998.
3
(c) Subject to Paragraph 29 (a) above, Lessee shall reimburse Lessor
for all reasonable costs related to this transaction including due diligence
costs, legal costs and on-site document preparation costs (if such service is
requested by Lessee).
30. End of Term Options. Provided that this Lease has not been canceled and that
no Event of Default or event which, with notice or lapse of time or both, would
become an Event of Default shall have occurred and be continuing, Lessee shall
elect one of the following options in clauses (a), (b), or (c) below:
(a) Lessee's Option to Renew: At the expiration of the Initial Lease
Term of the first Schedule hereto, Lessee may elect to renew the Lease with
respect to all, and not less than all, of the Equipment under all Schedules at
their respective expiration dates for not less than twelve (12) months nor more
than twenty four (24) months at the Equipment's Fair Rental Value, but not less
than 1.65% of Equipment Cost per month, which rent shall be paid monthly in
advance plus any applicable taxes. Upon the expiration of such extended lease
term, Lessee shall purchase the Equipment as provided in Section 30(b) unless
Lessee shall have returned the Equipment as provided in Section 30(c).
(b) Lessee's Option to Purchase: At the expiration of the Initial Lease
Term of the first Schedule hereto, Lessee may elect to purchase all, but not
less than all, of the Equipment under all Schedules at their respective
expiration dates for a purchase price equal to the then Fair Market Value, but
not less than 10% of Equipment Cost thereof as of the end of the Initial Lease
Term applicable to each Schedule, plus any applicable sales or other transfer
taxes payable as a result of such sale plus any amounts that remain unpaid to
Lessor under the Lease.
(c) Lessee's Option to Return At the expiration date of Initial Lease
Term of the first Schedule hereto, Lessee may elect to return all, but not less
than all, of the Equipment under all Schedules at their respective expiration
dates in accordance with the return provisions of Section 4 of the Lease.
The foregoing options in clauses (a), (b), or (c) shall be exercised by written
notice delivered to Lessor not more than 180 days and not less than 90 days
prior to the expiration of the Initial Lease Term of the first Schedule hereto.
If none of the foregoing options in clauses (a), (b), or (c) of this section is
duly exercised by Lessee, this Lease shall be automatically extended at the
Monthly Rent Factor in effect immediately prior to the expiration date of the
Initial Lease Term applicable to the first Schedule hereunder with respect to
all Equipment covered by any Schedule from the expiration date of the Initial
Lease Term of each Schedule on a month-to-month basis.
Lessee may terminate any _____ extended term on ninety (90) days' prior written
notice to Lessor and so long as with such notice Lessee elect one of the options
described in clauses (a), (b), or (c) above.
4
The purchase of the Equipment by Lessee pursuant to any options herein granted
shall be "AS IS, WHERE IS," without recourse to or any warranty by Lessor, other
than a warranty that the Equipment is free and clear of liens and encumbrances
resulting by or through acts of Lessor.
31. Warrants. Lessee shall issue and deliver to Lessor a warrant to purchase
75,000 shares of Series A Preferred Stock at an exercise price of $0.80 per
share. The warrants shall be issued and delivered to Lessor upon the execution
of the Lease, but in no event later than the execution of this Addendum. The
warrant expiration dates shall be (a) with respect to 12,500 shares, May 31,
1997, and (b) with respect to the remaining 62,500 shares seven (7) years from
the Commencement Date of the last Schedule. The terms of the warrant shall
include piggyback registration rights on a pro rata basis with the shares of
other shareholders, acceptable anti-dilution rights and shall provide for a
"cashless" exercise provision in the event of exercise by Lessor.
32. Conditions Precedent. Lessee shall cause the following documents to be
delivered to Lessor in form and substance acceptable to Lessor:
(a) Condition to closing and Lessor's performance:
1. Master Lease Agreement;
2. Addendum;
3. Warrant and related documents;
4. Certified copy of Lessee's Articles of Incorporation
and By-Laws;
5. Certificate of Good Standing from Lessee's State of
Incorporation;
6. Certified Copy of Corporate Resolution;
7. Certificate of Incumbency and Authority;
8. Legal Opinion;
9. UCC Search, Tax Lien Search, and Judgement Lien
Search results satisfactory to Lessor;
10. Release or subordination of any prior security
interests in the Equipment including "after acquired"
clauses;
11. Current financial statements prepared by Lessee;
5
12. Most recent audited financial statements of Lessee
prepared by Independent Auditor;
13. Lessee's most current operating plan (including five
year financial and operating projections);
14. Insurance Letter, Loss Payable Clause Endorsement,
Additional Insured Endorsement and related
Certificates of Insurance;
15. Release, Disclaimer or Subordination Agreements by
each Owner and Mortgagee of the Premises of the
Equipment;
16. Such other items or documents as Lessor may request.
(b) Condition to any purchase of or payment on account of the purchase
of Equipment:
1. UCC-1 financing statements and protective fixture
filings signed by Lessee (to be filed prior to the
earlier of funding or, for Equipment delivered after
the date of the Lease, delivery of Equipment to
Lessee) together with any UCC amendments relating
thereto for any prior, present or subsequent
Schedule;
2. Equipment Acceptance Certificate;
3. Schedule;
4. Software License Assignment Agreement (if
applicable);
5. User Agreement (if applicable);
6. For new Equipment, Copies of Purchase Order(s),
Purchase Agreement Assignment(s), Progress Payment
Authorization (if applicable) and Original Invoices
issued to Lessor;
7. For used Equipment, Certified Copies of Original
Invoices, Copies of Cancelled Checks (front and
back), Xxxx of Sale and UCC-3 Release(s);
8. Such other items or documents as Lessor may request.
33. Reports. The following shall supersede and replace paragraph 21 of the
Master Lease in its entirety: "So long as this Lease is in effect or Lessor
holds shares and unexpired and unexercised warrants with an aggregate fair
market value in excess of $50,000, Lessee shall
6
provide Lessor with the following: (a) annual financial statements of Lessee
(and of any Obligers), prepared in accordance with generally accepted accounting
principles and certified by independent certified public accountants within
ninety (90) days after Lessee's (and any Obligor's) fiscal year end, (b) monthly
financial and operating performance data as and when provided to members of
Lessee's Board of Directors, investors and, if applicable, the S.E.C.; and (3)
prompt written notice of any material adverse change in Lessee's financial
condition, operating plan or business prospects."
34. Additional Event of Default. In addition to the events set forth in
paragraph 13 of the Master Lease Agreement, an Event of Default shall occur if
Xxxx X. Xxxxxx'x full-time employment with Lessee is terminated for any reason.
IN WITNESS WHEREOF, this Addendum has been executed by a duly authorized officer
of Lessee as of the 6th day of May, 1997.
SANDBOX ENTERTAINMENT CORPORATION
0000 Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
By: /s/ Xxxx Xxxxxxxx
----------------------------
Name: Xxxx Xxxxxxxx
----------------------------
Title: Chief Financial Officer
----------------------------
THIRD COAST VENTURE LEASE PARTNERS I, L.P., Lessor
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
By its General Partner, Third Coast GP-I,
L.L.C.
By: /s/ Miroslav Anic
----------------------------
Name: Miroslav Anic
Title: Manager
7
