Exhibit 4(q)
JULY 1997 BRIDGE NOTE AND WARRANT PURCHASE AGREEMENT
THIS JULY 1997 BRIDGE NOTE AND WARRANT PURCHASE AGREEMENT (this
"Agreement") is made effective as of July 25, 1997 by and between Sandbox
Entertainment Corporation, a Delaware corporation ("Sandbox"), and
___________________________, whose address is __________________________________
("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 Convertible Promissory Note
evidencing the Loan in the form attached hereto as Exhibit I (the "Note") and a
warrant to purchase _______ shares of the Series A Preferred 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 July 25, 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. Sandbox
has reserved sufficient shares of Series A Preferred Stock and/or of Common
Stock for the exercise and/or conversion of the Series A Preferred Stock, stock
options and warrants set forth in Exhibit III.
(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,
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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.
(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. 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)-(e) above.
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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:
(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. Reissuance of the Note and the Warrant. Sandbox agrees to reissue a
new Note and a new Warrant pursuant to the terms set forth on Exhibit IV if the
conditions set forth on Exhibit IV are not achieved.
8. 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
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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 ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, 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.
(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.
SANDBOX:
SANDBOX ENTERTAINMENT CORPORATION
By: __________________________
Title: __________________________
PURCHASER:
___________________________
By: __________________________
Title: __________________________
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EXHIBIT I
WARRANT
EXHIBIT II
CONVERTIBLE PROMISSORY NOTE
EXHIBIT III
SANDBOX ENTERTAINMENT CORPORATION
Capitalization Schedule
As of July 21, 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
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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 1,705,416
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Total Common Outstanding - Fully Diluted(1) 6,823,095
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(1) Assumes exercise of all outstanding warrants and options and
conversion of all outstanding preferred.
EXHIBIT IV
Reissuance of Note and Warrant
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A. Upon the failure of any of the conditions set forth in Paragraph B
below, Sandbox shall within thirty (30) days of such failure reissue the Note
and the Warrant to Purchaser with the following changes:
1. The Definition of "Series A Conversion Price" in the Note
shall be deleted and replaced with the following:
"'Series A Conversion Price' shall mean $0.20 per share."
2. The definition of "Warrant Price" in the Warrant shall be
deleted and replaced with the following:
"'Warrant Price' shall mean Twenty Cents ($.20) per share,
subject to adjustment in accordance with Section 5, or, if the
provisions of Section 9 hereof apply, the New Series
Conversion Price.
B. The following events shall occur by close of business on the
following dates:
1. Sandbox shall have received funds (by check or wire) from
individuals or entities in an additional amount of at least $125,000
(net of commissions or finders' fees) on August 8, 1997;
2. Sandbox shall have a written commitment from individuals or
entities to loan Sandbox an additional $100,000 (net of commissions or
finders' fees) by close of business on August 15, 1997; and
3. Sandbox shall have received funds (by check or wire) from
individuals or entities in an additional amount of at least $100,000
(net of commissions or finders' fees) on September 26, 1997.
Schedule to Exhibit 4(q) - Form of July 1997 Bridge Note and Warrant Purchase
Agreement.
List of Purchasers:
Wasatch Venture Corporation
Newtek Ventures II, L.P.
Sundance Venture Partners, L.P.
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