Exhibit 4(o)
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1993, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
STOCK SUBSCRIPTION WARRANT
to Purchase _______ Shares of the
Series A Preferred Stock, $.001 Par Value, of
SANDBOX ENTERTAINMENT CORPORATION,
a Delaware corporation (the "Company")
DATE OF INITIAL ISSUANCE: May 9, 1997
THIS CERTIFIES THAT for value received, __________________, whose
address is _________________________________, or its permitted assigns
(hereinafter called the "Holder") is entitled to purchase from the Company, at
any time during the Term of this Warrant, __________ shares of Series A
Preferred Stock, $.001 par value, of the Company (subject to adjustment and to
conversion into a New Series Conversion Stock as provided herein), at the
Warrant Price, payable as provided herein upon the exercise of this Warrant. The
exercise of this Warrant shall be subject to the provisions, limitations and
restrictions herein contained and may be exercised in whole or in part.
1. Definitions. For all purposes of this Warrant, the following terms
shall have the meanings indicated:
Aggregate Loan Amount shall mean the aggregate principal face amount of all of
the series of Convertible Subordinated Promissory Notes of the Company issued in
connection with the Purchase Agreement having terms and conditions (but not
principal amounts) identical to the Convertible Subordinated Promissory Note
issued to Holder in connection with the Purchase Agreement.
Common Stock shall mean and include the Company's authorized Common Stock, $.001
par value, as constituted at the date of this Warrant, and shall also include
any capital stock of any class or series of the Company now or hereafter
authorized that is not limited to, or measured by, a fixed sum or percentage of
par value or of the purchase price of such stock in respect of the rights of the
holders thereof to participate in dividends and/or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Company, or that is not otherwise designated as "preferred stock" in the
Certificate of Incorporation of the Corporation.
Equity Financing shall mean the issuance of any equity securities of the Company
in an equity financing or series of related equity financings for which the
aggregate gross proceeds total at least One Million Five Hundred Thousand
Dollars ($1,500,000) (excluding the Aggregate Loan Amount and any additional
amounts raised from any of the Initial Noteholders as part of such Equity
Financing).
New Series Conversion Price shall mean an amount equal to the price per share at
which the Company issues shares of such capital stock in the Equity Financing.
Initial Noteholders shall mean each of the initial holders of the series of
Convertible Subordinated Promissory Notes of the Company issued in connection
with the Purchase Agreement having terms and conditions (but not principal
amounts) identical to the Convertible Subordinated Promissory Note issued to
Holder in connection with the Purchase Agreement.
Purchase Agreement shall mean that certain Note and Warrant Purchase Agreement
of even date herewith between the Company and Holder pursuant to which Company
shall issue to Holder this Warrant and a Convertible Subordinated Promissory
Note.
Series A Preferred Stock shall mean and include the series of preferred stock of
the Company so denominated in the Certificate of Incorporation of the Company.
Term of this Warrant shall mean the period beginning on the date of initial
issuance hereof and ending on the seventh (7th) anniversary of the date of
initial issuance hereof.
Warrant Price shall mean Eighty Cents ($.80) per share, subject to adjustment in
accordance with Section 5, or, if the provisions of Section 9 hereof apply, the
New Series Conversion Price.
Warrant Shares shall mean the shares of Series A Preferred Stock purchased or
purchasable by the Holder of this Warrant upon exercise hereof, and/or the
shares of Common Stock purchased or purchasable upon exercise hereof.
2. Exercise of Warrant. The Warrant shall be exercised, if at all, only
as follows:
(a) To exercise this Warrant in whole or in part, the Holder
shall deliver to the Company at its principal office, at any time and from time
to time during the Term of this Warrant: (i) the notice of exercise in the form
attached hereto as Exhibit A, (ii) cash, certified or official bank check
payable to the order of the Company, wire transfer of funds to the Company's
account, or the surrender of evidence of any indebtedness of the Company to the
Holder (or any combination of the foregoing) in the amount of the Warrant Price
for each share being purchased, and (iii) this Warrant.
(b) Notwithstanding any contrary provisions in this Warrant,
if the Current Market Price (as defined in Section 2(c) below) exceeds the
Warrant Price at the date of calculation, instead of exercising this Warrant as
described in Section 2(a) above, the Holder may
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elect to receive Warrant Shares equal to the value of this Warrant (or the
portion thereof being exercised), by delivering to the Company at its principal
office, at any time and from time to time during the Term of this Warrant: (i)
the notice of exercise in the form attached hereto as Exhibit A, and (ii) this
Warrant, in which event the Company shall issue to the Holder a number of
Warrant Shares calculated using the following formula:
WS = WCS x (CMP-WP)
-------------------
CMP,
where WS = the number of Warrant Shares to be issued to the
Holder,
WCS = the number of Warrant Shares purchasable under the
Warrant, or if only a portion of the Warrant is
being exercised, the portion of the Warrant being
exercised at the date of such calculation,
CMP = the Current Market Price (as defined in Section
5(c) below) at the date of such calculation, and
WP = the Warrant Price, as adjusted to the date of such
calculation.
(c) For the purpose of any calculation made pursuant to this
Section 2, the "Current Market Price" at any date of one share of Common Stock
shall be deemed to be the average of the daily closing prices for the 20
consecutive business days ending 2 business days before such date (as adjusted
for any stock dividend, split, combination or reclassification that took effect
during such 20 business day period). The closing price for each day shall be the
last reported sales price regular way or, if no such reported sales took place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading (or if the Common Stock is not at the
time listed or admitted for trading on any such exchange, then such price as
shall be equal to the average of the last reported bid and asked prices, as
reported by the National Association of Securities Dealers Automated Quotations
System ("NASDAQ") on such day, or if, on any such date, the security shall not
be quoted on the NASDAQ, then such price shall be equal to the average of the
last reported bid and asked prices on such day as reported by The National
Quotations Bureau Incorporated or any similar reputable quotation and reporting
service, if such quotation is not reported by The National Quotation Bureau
Incorporated); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this Section 2(c) are available for
the period required hereunder, the Current Market Price shall be determined by
the Board of Directors of the Company in its reasonable, good faith judgment.
(d) Each certificate for Warrant Shares shall bear the
following legend (and any additional legend required by (i) any applicable state
securities laws, and (ii) any securities exchange upon which such Warrant Shares
may, at the time of such exercise be listed) on the face thereof:
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"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER SAID
ACT AND APPLICABLE STATE SECURITIES LAWS."
3. Covenants As to Common Stock. The Company covenants and agrees that:
(i) all Warrant Shares that may be issued upon the exercise of this Warrant
will, upon issuance, be validly issued, fully paid and nonassessable, and free
from all taxes, liens and charges with respect to the issue thereof; (ii) it
will pay when due and payable any and all federal and state taxes (other than
federal or state income taxes, if any, which shall remain Holder's
responsibility) that may be payable in respect of the issue of this Warrant or
the Warrant Shares; (iii) it will at all times have authorized and reserved,
free from preemptive rights, a sufficient number shares of Series A Preferred
Stock and underlying Common Stock to provide for the exercise of the rights
represented by this Warrant; (iv) if any shares of capital stock to be reserved
for the purpose of the issuance of shares upon the exercise of this Warrant
require registration with or approval of any governmental authority under any
federal or state law before such shares may be validly issued or delivered upon
exercise, then the Company shall in good faith and as expeditiously as possible
endeavor to secure such registration or approval, as the case may be; and (v) if
the Series A Preferred Stock or, if applicable, the New Series Conversion Stock,
issuable under this Warrant has been converted to Common Stock and if and so
long as any Common Stock issuable upon the exercise of this Warrant is listed on
any national securities exchange, the Company, will, if permitted by the rules
of such exchange, list and keep listed on such exchange, upon official notice of
issuance, all shares of such Common Stock issuable upon exercise of this
Warrant.
4. Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price as provided in Section 5 below, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest 1/10th of a share) obtained by multiplying the
Warrant Price in effect immediately before such adjustment by the number of
shares purchasable pursuant hereto immediately before such adjustment, and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
5. Adjustment of Warrant Price. The Warrant Price shall be subject to
adjustment from time to time as follows:
(a) If, at any time during the term of this Warrant, the
number of shares of Series A Preferred Stock outstanding is increased by a stock
dividend payable in shares of Series A Preferred Stock or by a subdivision or
split-up of shares of Series A Preferred Stock, then, following the record date
fixed for the determination of Holders of Series A Preferred Stock entitled to
receive such stock dividend, subdivision or split-up, the Warrant Price shall be
appropriately decreased so that the number of shares of Series A Preferred Stock
issuable upon the exercise of this Warrant shall be increased in proportion to
such increase in outstanding shares.
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(b) If, at any time during the term of this Warrant, the
number of shares of Series A Preferred Stock outstanding is decreased by a
combination of the outstanding shares of Series A Preferred Stock, then,
following the record date for such combination, the Warrant Price shall
appropriately increase so that the number of shares of Series A Preferred Stock
issuable upon the exercise hereof shall be decreased in proportion to such
decrease in outstanding shares.
(c) If all of the outstanding shares of Series A Preferred
Stock of the Company have been converted to Common Stock pursuant to Article
IV(4)(b) of the Certificate of Incorporation of Company (or any successor
section thereof) or if any action of the type described in Section 5(a) or (b)
occurs with respect to the Common Stock, then this Section 5 shall apply in the
same manner to such Common Stock in order to effect the appropriate adjustments
in the Warrant Price and number of shares of Common Stock to be issued
hereunder.
(d) All calculations under this Section 5 shall be made to the
nearest cent or to the nearest 1/10th of a share, as the case may be.
(e) If the Company proposes to take any action of the types
described in Section 5(a), (b) or (c), the Company shall forward at the same
time and in the same manner, to the Holder of this Warrant, such notice, if any,
that the Company shall give to the Holders of capital stock of the Company.
6. Transfers. The Company may deem and treat the person in whose name
this Warrant is registered as the Holder and owner hereof. Transferability of
the Warrant Shares is limited as set forth in this Warrant.
7. Mergers, Consolidations, Sales. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed sale
of all or substantially all of its assets to another person or entity, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of any such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made pursuant to which
the Holder of this Warrant shall thereafter have the right to receive upon the
basis and upon the terms and conditions specified herein, in lieu of the Warrant
Shares immediately purchasable hereunder, such shares of stock, securities or
assets as may, by virtue of such consolidation, merger, sale, reorganization or
reclassification, be issued or payable with respect to or in exchange for the
number of shares of such Warrant Shares purchasable hereunder immediately before
such consolidation, merger, sale reorganization or reclassification. The Company
shall forward at the same time and in the same manner, to the Holder of this
Warrant, such notice, if any, that the Company shall give to the Holders of
capital stock of the Company with respect to any proposed transaction described
above or any distribution of assets of the Company in dissolution or
liquidation, or any extraordinary dividend or other distribution on its Series A
Preferred Stock except out of earned surplus or by way of a stock dividend
payable in shares of its Series A Preferred Stock. This Warrant shall be binding
upon any corporation or other person or entity succeeding to the Company by
merger, consolidation or acquisition of all or substantially all of the
Company's assets.
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8. Registration Rights. The Company and Holder agree that the Warrant
Shares issuable pursuant this Warrant shall be deemed to be "Shares" under that
certain Investor Rights Agreement dated as of February 13, 1996 (the "Investor
Rights Agreement") among the Company and certain Investors (as defined therein)
and that the Warrant Shares shall be entitled to all the rights and subject to
all of the restrictions as Shares under the Investor Rights Agreement. Pursuant
to a Consent and Waiver, the Investors shall have agreed prior to the execution
of this Warrant to the inclusion of the Warrant Shares as "Shares" under the
Investor Rights Agreement.
9. Conversion if an Equity Financing Occurs within Six Months. If an
Equity Financing closes within one hundred eighty (180) days of the date hereof,
the following definitions shall automatically change as follows:
(a) Warrant Price shall mean the New Series Conversion Price.
10. Miscellaneous.
(a) Notices. Any notice or other document required or
permitted to be given or delivered to the Holder shall be delivered at, or sent
by certified or registered mail to, the Holder at the address set forth on the
first page of this Warrant, or to such other address as shall have been
furnished to the Company in writing by the Holder. Any notice or other document
required or permitted to be given or delivered to the Company shall be delivered
at or sent by registered or certified mail to, the Company at ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or to such other address as shall
have been furnished in writing to the Holder by the Company. 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.
(b) Governing Law. This Warrant 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) Entire Agreement; Amendment. This Warrant constitutes the
sole and entire agreement of the parties with respect to the subject matter
hereof. Neither this Warrant 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.
(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.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly and authorized officer as of this 9th day of May, 1997.
THE COMPANY:
ATTEST: SANDBOX ENTERTAINMENT CORPORATION
By: ________________________ By: ________________________________
Its Secretary Its President
ACCEPTED:
HOLDER:
_____________________________________
By: _______________________________
Title: ____________________________
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FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
1. The undersigned hereby exercises the right to purchase ________
shares of Series A Preferred Stock (or Common Stock, if applicable) that the
undersigned is entitled to purchase by the terms of the within Warrant according
to the conditions thereof, and herewith makes payment of the Warrant Price of
such shares in full. All shares to be issued pursuant hereto shall be issued in
the name of and the initial address of such person to be entered on the books of
the Company shall be:
_______________________________________________________________________________.
The shares are to be issued in certificates of the following denominations:
_______________________________________________________________________________.
2. The undersigned hereby represents that the shares of the Company's
Series A Preferred Stock (or Common Stock, if applicable) to be delivered to it
pursuant to the above-mentioned exercise of the Warrant are being acquired by
the undersigned as an investment and not with a view to, or for sale in
connection with, the distribution of any such shares. The undersigned agrees to
indemnify the Company and its subsidiaries, together with their officers and
directors, for any liabilities, losses, damages and expenses (including
reasonable attorney fees) arising from or in connection with any disposition of
the shares hereby being acquired, or any interest therein, in violation of
applicable securities laws or regulations. The undersigned further represents
that the undersigned has been given access to all information requested by the
undersigned to allow the undersigned to make a decision as to the advisability
of an investment in the Company's stock and the value of such stock, and that
undersigned has the skill and experience necessary to make such decision.
____________________________________
[Type Name of Holder]
By: _____________________________
Title: _____________________________
Date: _____________________________
Schedule to Exhibit 4(o) - Form Stock Subscription Warrant dated May 9, 1997.
List of Warrant Holders and Number of Series A Preferred Shares:
Wasatch Venture Corporation - 50,000 shares
Newtek Ventures II, L.P. - 25,000 shares
Sundance Venture Partners, L.P. - 50,000 shares
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ - 10,000 shares
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