Exhibit 4(t)
TWO YEAR NOTE AND WARRANT PURCHASE AGREEMENT
THIS TWO YEAR NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement") is
made effective as of _________, 1997 by and between Sandbox Entertainment
Corporation, a Delaware corporation ("Sandbox"), and ___________________________
______________________________ ("Purchaser").
PREMISES: Sandbox desires to borrow $_______ (the "Loan") from
Purchaser, and Purchaser is willing to make such Loan to Sandbox in
consideration of Sandbox issuing to Purchaser a Subordinated Promissory Note
evidencing the Loan in the form attached hereto as Exhibit I (the "Note") and a
warrant to purchase ______ shares of the Common Stock, $.001 par value, of
Sandbox (the "Warrant Shares"), a form of which is attached to this Agreement as
Exhibit II (the "Warrant"), on the terms and subject to the conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement, Sandbox and Purchaser agree as follows:
1. Issuance, Sale and Delivery of the Note and the Warrant. At the
Closing (defined in Section 2) Sandbox agrees to issue and deliver to Purchaser
and Purchaser agrees to receive from Sandbox the Note and the Warrant in
consideration of Purchaser making the Loan to Sandbox .
2. Closing. The issuance and delivery of the Note and the Warrant shall
take place at the offices of Sandbox on ________, 1997 at 10 a.m. local time, or
at such other location, date and time as may be agreed upon between Purchaser
and Sandbox (such transaction being the "Closing" and such date and time being
the "Closing Date"). At the Closing Sandbox shall issue and deliver to Purchaser
the Note and the Warrant registered in the name of Purchaser. In exchange for
such delivery, Purchaser shall deliver its check payable to the order of
"Sandbox Entertainment Corporation" in the amount of the Loan, or a wire
transfer of such amount, as agreed by the parties.
3. Representations and Warranties of Sandbox . Sandbox represents and
warrants to Purchaser as follows:
(a) Organization and Standing; Charter and Bylaws. Sandbox has
requisite corporate power and authority to own its property and to carry on its
business as presently conducted or as proposed to be conducted. Sandbox has all
requisite legal and corporate power to sell and issue the Note, Warrant and the
Warrant Shares to Purchaser and in all other respects to carry out and perform
its obligations under this Agreement.
(b) Capitalization. The authorized capital stock of Sandbox is
set forth on Exhibit III attached hereto. All issued and outstanding shares of
Sandbox listed therein have been duly authorized and validly issued and are
fully paid and nonassessable.
(c) Authorization. All corporate action on the part of Sandbox
necessary for the authorization, execution, and delivery of this Agreement, and
performance of all of Sandbox's obligations hereunder, including issuance and
delivery of the Note, the Warrant and the Warrant Shares, shall have been taken
prior to the Closing.
(d) Corporate Law Status. When the Note, Warrant, and the
Warrant Shares have been issued, delivered and paid for in accordance with this
Agreement, the Note, and the Warrant, they will be validly issued, fully paid
and non-assessable and will be free and clear of all liens, charges,
restrictions, claims and encumbrances imposed by or through any act or omission
on the part of Sandbox. With the exception of the rights of first offer held by
the holders of the Series A Preferred Stock of Sandbox pursuant to Section 2.1
of that certain Investor Rights Agreement (the "Investor Rights Agreement")
dated as of February 13, 1996 among Sandbox and certain Investors (as defined
therein), for which appropriate consents and waivers have been obtained, the
issuance, sale or delivery of the Note, the Warrant and the Warrant Shares are
not subject to any preemptive right of stockholders of Sandbox or to any right
of first refusal or other right in favor of any person that has not been waived
in writing.
(e) Validity. This Agreement has been duly executed and
delivered by Sandbox and constitutes the legal, valid and binding obligation of
Sandbox, enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditor's rights generally, and
except as enforceability may be subject to general principles of equity, whether
applied in a court of equity or at law or by an arbitration panel.
4. Representations and Warranties of Purchaser. Purchaser represents
and warrants to Sandbox, and where so stated, promises as follows:
(a) Unregistered Securities. Purchaser understands that the
Note, the Warrant and the Warrant Shares (the "Securities") have not been
registered under the Securities Act of 1933 or any state securities laws
(collectively, "Securities Laws") in reliance upon an exemption from
registration accorded for nonpublic offerings. Purchaser further recognizes that
the Securities may not be sold unless they and the transaction in which they are
to be sold has been registered under the Securities Laws or an exemption from
registration is available for such sale. Purchaser accepts that the Securities
will each bear a legend to that effect. Further, Purchaser recognizes that
Sandbox has made no representations as to registration of the Securities under
the Securities Laws.
(b) Investment Intent. Purchaser is acquiring the Securities
for its own account for investment and not with a view to resale or
distribution. The Purchaser promises that it will not sell, hypothecate,
transfer or otherwise dispose of the Securities, or attempt so to do, unless
they have been registered, to the extent applicable, under the Securities Laws
or, in the opinion of counsel reasonably acceptable to Sandbox and its counsel,
an exemption from registration is available.
2
(c) Negotiation; Access to Information. The terms of
Purchaser's purchase of the Securities were established by negotiations between
Purchaser and Sandbox 's representative, and in connection therewith, Purchaser
was given access to the relevant information it requested concerning Sandbox 's
condition and operations, and the opportunity to ask questions of and receive
answers from Sandbox 's representatives. Specifically, Purchaser has received
and reviewed Sandbox's Business Plan dated June, 1997, financial statement and
that Supplement to Business Plan dated August 1, 1997, including the Risk
Factors described therein. Purchaser is knowledgeable and experienced in
financial and business matters and, on the basis of the information it received
concerning Sandbox 's condition and operations, Purchaser is in a position to
make an informed investment decision concerning its investment in the Securities
and the risks attending such investment. Further, in light of its financial
position, Purchaser is able to bear the economic risks of investment in the
Securities.
(d) Accredited Investor. Purchaser acknowledges that he/she/it
is an "accredited investor" as defined in Rule 501 of Regulation D as
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Securities Act"), and shall submit to Sandbox such
further assurances of such status as may be reasonably requested by Sandbox.
(e) Legends; Stop Transfer Orders. Purchaser hereby consents
and agrees that Sandbox may imprint on any certificate evidencing the Securities
an appropriate legend or notification to the effect that such shares are not
freely transferable and may be transferred only in compliance with applicable
securities laws. Purchaser further consents and agrees that Sandbox may give
appropriate "stop order" instructions in this regard to any transfer agent for
the Securities.
(f) Compliance; Indemnity. Purchaser hereby expressly promises
not to offer for sale or sell any of the Securities, or any interest therein,
except in compliance with the Securities Act and other applicable securities
laws and regulations, including those of the State of Arizona. Purchaser hereby
promises to indemnify Sandbox , together with its officers and directors,
against any and all liabilities, losses, damages and expenses (including
reasonable attorney fees) arising (directly or indirectly) from or in connection
with Purchaser's disposition of any of the Securities, or any interest therein,
in violation of (or allegedly in violation of) applicable securities laws or
regulations, including all such expenses incurred in connection with the defense
against any such claim.
(g) Delivery of Investment Letter upon Exercise of Warrant. At
the request of Sandbox, Purchaser shall deliver upon exercise of the Warrant an
investment letter in form and substance substantially to the effect of Sections
4(a)-(f) above.
5. Conditions to the Obligations of Purchaser. The obligation of
Purchaser to make the Loan and receive the Note and the Warrant on the Closing
Date is, at Purchaser's sole option, subject to satisfaction on or before the
Closing Date of the following conditions:
3
(a) Representations and Warranties to Be True. The
representations and warranties contained in Section 3 shall be true, complete
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date.
(b) Performance. Sandbox shall have performed and complied
with all agreements contained herein and required to be performed or complied
with by it prior to or at the Closing Date.
(c) Proceedings. All corporate and other proceedings to be
taken by Sandbox in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in form and substance to
Purchaser and its counsel.
6. Conditions to the Obligations of Sandbox. The obligation of Sandbox
to issue the Note and the Warrant on the Closing Date is subject to satisfaction
on or before the Closing Date of the following condition:
(a) Consents and Waivers Received. Sandbox shall have obtained
all necessary consents and waivers from the Investors (as that term is defined
in the Investor Rights Agreement) pursuant to Section 2.1 of the Investor Rights
Agreement in connection with the issuance of the Note and the Warrant, including
but not limited to a consent to the treatment of the Warrant Shares and any
shares issuable to Purchaser upon conversion of the Note as "Shares" under the
Investor Rights Agreement and a waiver of the rights of first offer under the
Investor Rights Agreement by the Investors in connection with the issuance of
the Note and Warrant.
7. Miscellaneous.
(a) Survival. All covenants, representations and warranties
made herein shall survive the Closing.
(b) Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Arizona as applied to agreements entered
into and performed entirely in the State of Arizona by residents thereof.
(c) Notices. Any notice or other document required or
permitted to be given or delivered to Purchaser shall be delivered at, or sent
by certified or registered mail to, Purchaser at the address written on the
first page of this Agreement, or to such other address as shall have been
furnished to Sandbox in writing by Purchaser. Any notice or other document
required or permitted to be given or delivered to Sandbox shall be delivered at
or sent by registered or certified mail to, Sandbox at 0000 Xxxx Xxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxx, XX 00000, or to such other address as shall have been
furnished in writing to Purchaser by Sandbox. Any notice so addressed and mailed
by registered or certified mail shall be deemed to be given when so mailed. Any
notice so addressed and otherwise delivered shall be deemed to be given when
actually received by the addressee.
4
(d) Counterparts. This Agreement may be executed in
counterparts, each of which shall be enforceable against the party actually
executing the counterpart, and both of which together shall constitute one
instrument.
(e) Entire Agreement; Amendment. This Agreement constitutes
the sole and entire agreement of the parties with respect to the subject matter
hereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
IN WITNESS WHEREOF, Sandbox and the Purchaser have executed this
Agreement as of the day and year first above written.
[SIGNATURES APPEAR ON THE FOLLOWING PAGES]
5
[SIGNATURE PAGE FOR NOTE AND WARRANT PURCHASE AGREEMENT]
SANDBOX:
SANDBOX ENTERTAINMENT CORPORATION
By: _______________________
Title: _______________________
PURCHASER:
_______________________________
By:___________________________
Its:__________________________
______________________________
6
EXHIBIT I
WARRANT
EXHIBIT II
SUBORDINATED PROMISSORY NOTE
EXHIBIT III
SANDBOX ENTERTAINMENT CORPORATION
Capitalization Schedule
As of August 1, 1997
I. AUTHORIZED CAPITALIZATION
Total Common Stock, $.001 par value: 10,000,000
Total Series A Convertible Preferred Stock, $.001 par value: 3,500,000
----------
Total 13,500,000
II. OUTSTANDING
Total Common Outstanding 3,136,429
Total Preferred Outstanding 1,981,250
Total Outstanding 5,117,679
Total Warrants/Options Outstanding 2,042,916
Total Series A Preferred conversion stock upon conversion of the Series A
Preferred Stock Convertible Subordinated Promissory Notes(1) 675,000
-------
Total Common Outstanding - Fully Diluted(2) 7,835,595
------------------
(1) The "Conversion Price" of this Note will increase from $.80 per
share to the price per share at which the Company issues shares of capital stock
in a subsequent Equity Financing that provides gross proceeds to the Company of
at least $1,500,000 and occurs within 180 days of the issue date of the Note. If
the Company does not raise an additional $225,000 (net of any commissions or
finders' fees) by certain deadlines, the last of which is September 26, 1997,
the "Series A Conversion Price" definition will change from $.80 per share to
$.20 per share, which will have the effect of quadrupling the number of
conversion shares.
(2) Assumes exercise of all outstanding warrants, options and
convertible notes and conversion of all outstanding preferred.
Schedule to Exhibit 4(t) - Form of Two Year Note and Warrant Purchase Agreement.
List of Purchasers and Number of Shares of Common Stock:
Purchaser Date Agreement Number of Shares
--------- -------------- ----------------
The Little Family Trust August 5, 1997 25,000
Xxxxx Xxxxx August 12, 1997 20,000
Xxxxxx X. Xxxxx, M.D., FAAP, PC Defined September 25, 1997 5,500
Benefits Pension
Xxxxx and Xxxxx Xxxxx, CPWROS September 25, 1997 2,750
Xxxxxx X. and Xxxxxxxxx X. Xxxxxxx, September 25, 1997 5,500
JTWROS
Xxxx X. Xxxxxxx, D.D.S., P.C. September 25, 1997 2,750
Xxxx X. Xxxxxxxxx September 25, 1997 5,500
Xxxx & Xxxxx Xxxxxxx Crandchildren's Trust September 25, 1997 5,500
UAD 1/15/90
Xxxxxxxx Xxxxxxxxx September 25, 1997 11,000
Xxxxxxx Xxxxxxx September 25, 1997 2,750
Xxxxx and Xxxxx Xxxxxxxx, JTWROS September 25, 1997 5,500
Maxim Corporation, Ltd. September 25, 1997 20,625
Art Beroff September 25, 1997 8,250
