EXHIBIT 1(a)
_______________ Shares
SANDBOX ENTERTAINMENT CORPORATION
Series B Convertible Preferred Stock
Form of
UNDERWRITING AGREEMENT
__________ __, 1997
Wit Capital Corporation
[Other lead Underwriters]
As Representatives of the Several Underwriters
c/o Wit Capital Corporation
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Dear Sirs:
Sandbox Entertainment Corporation, a Delaware corporation (the
"Company"), proposes to sell __________ shares of the Company's Series B
Convertible Preferred Stock, par value $0.001 per share (the "Series B Preferred
Stock"). This is to confirm the agreement (the "Agreement") concerning the
purchase of the Series B Preferred Stock from the Company by the several
Underwriters named in Schedule 1 hereto (the "Underwriters") for whom Wit
Capital Corporation, _____ and _____ are acting as representatives (the
"Representatives").
1. Representations, Warranties and Agreements of the Company.
The Company represents, warrants and agrees that:
(a) A registration statement on Form SB-2
(Registration No. 333-36787), and one or more amendments
thereto, with respect to the Series B Preferred Stock have (i)
been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission
(the "Commission") thereunder, (ii) been filed with the
Commission under the Securities Act and (iii) become effective
under the Securities Act. Copies of the registration statement
and the amendments to such registration statement have been
delivered by the Company to the Representatives As used in
this Agreement "Effective Time" means the date and the time as
of which such registration statement, or the most recent
post-effective amendment thereto, if any, was declared
effective by the Commission; "Effective Date" means the date
of the Effective Time of such registration statement;
"Preliminary Prospectus" means each prospectus included in
such registration statement, or amendments thereof,
before it became effective under the Securities Act and any
prospectus filed with the Commission by the Company with the
consent of the Underwriter pursuant to Rule 424(a) of the
Rules and Regulations; "Registration Statement" means the
registration statement referred to in this Section l(a), as
amended at its Effective Time, including all information
contained in the final prospectus filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations in
accordance with Section 5(a) hereof and deemed to be a part of
the Registration Statement as of the Effective Time of the
Registration Statement pursuant to paragraph (b) of Rule 430A
of the Rules and Regulations; and "Prospectus" means such
final Prospectus, as first filed with the Commission pursuant
to paragraphs (1) or (4) of Rule 424(b) of the Rules and
Regulations. The Commission has not issued any order
preventing or suspending the use of any Preliminary
Prospectus;
(b) The Registration Statement conforms (and any
further amendments or supplements thereto, when they become
effective, will conform) in all material respects to the
requirements of the Securities Act and the Rules and
Regulations and do not and will not, as of the applicable
Effective Date contain any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and the Prospectus conforms (and any further
amendments or supplements thereto, when they are filed with
the Commission, will conform) in all material respects to the
requirements of the Securities Act and the Rules and
Regulations and do not and will not, as of the applicable
filing date with the Commission, contain any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading; provided that no representation or
warranty is made as to information contained in or omitted
from the Registration Statement or the Prospectus in reliance
upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriters specifically
for inclusion therein;
(c) The Prospectus delivered to the Underwriters for
use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the
Commission pursuant to ▇▇▇▇▇, except to the extent permitted
by Regulation S-T;
(d) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, is duly qualified
to do business and is in good standing as a foreign
corporation in each jurisdiction in which ownership or lease
of property or the conduct of its business requires such
qualification, except where the failure to be so qualified and
in good standing would not have a material adverse effect on
the business, management, financial condition, results of
operations, or prospects of the Company, is in compliance in
all material respects with the laws, orders, rules,
regulations and directives issued or administered by such
jurisdiction and has all
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corporate power and authority necessary to own or hold its
properties and to conduct the business in which it is engaged;
(e) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued and
outstanding shares of capital stock of the Company have been
duly and validly authorized and issued, are fully-paid and
non-assessable and conform to the description thereof
contained in the Prospectus;
(f) The Certificate of Designation for the Series B
Preferred Stock has been duly authorized by all necessary
corporate and shareholder action and duly filed with the
Secretary of State of the State of Delaware. The shares of the
Series B Preferred Stock to be issued and sold by the Company
to the Underwriters hereunder have been duly and validly
authorized and, when issued and delivered against payment
therefor as provided herein, will be duly and validly issued,
fully paid and nonassessable, free of preemptive rights to
subscribe for or to purchase any shares of the Series B
Preferred Stock of the Company pursuant to the Company's
charter or by-laws or any agreement or other instrument and
the Series B Preferred Stock will conform to the description
thereof contained in the Prospectus. Shares of the common
stock, par value $0.001 per share (the "Common Stock"), of the
Company issuable upon conversion of the Series B Preferred
Stock (the "Conversion Shares") have been duly and validly
authorized and reserved for issuance upon conversion of the
Series B Preferred Stock, and upon such conversion, will be
duly issued, fully paid and nonassessable, free of preemptive
rights to subscribe for or to purchase any shares of the
Common Stock of the Company pursuant to the Company's charter
or by-laws or any agreement or other instrument;
(g) The execution, delivery and performance of this
Agreement by the Company and the consummation of the
transactions contemplated hereby will not conflict with or
result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company is a party or by which the
Company is bound or to which any of the properties or assets
of the Company are subject, except for such breaches,
violations or defaults as would not individually or in the
aggregate have a material adverse effect on the business,
management, financial condition, results of operations, or
prospects of the Company, nor will such actions result in any
violation of the provisions of the charter or by-laws of the
Company or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over
the Company or any of its properties or assets; and except for
the registration of the Series B Preferred Stock under the
Securities Act and such filings or registrations as may be
required under applicable state securities laws in connection
with the purchase and distribution of the Series B Preferred
Stock by the Underwriters, no consent, approval, authorization
or order of, or filing or registration with, any such court or
governmental agency or body is required for
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the execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions
contemplated hereby;
(h) There are no contracts, agreements or
understandings between the Company and any person granting
such person the right to require the Company to file a
registration statement under the Securities Act with respect
to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in
the securities registered pursuant to the Registration
Statement, except for such rights as have been duly waived or
are inapplicable to the Registration Statement;
(i) Except as described in the Prospectus, the
Company has not sold or issued any shares of Common Stock
during the six-month period preceding the date of the
Prospectus, including any sales pursuant to Rule 144A under,
or Regulations D or S of, the Securities Act, other than
grants of options made under shareholder-approved stock option
plans, or shares issued pursuant to shareholder-approved stock
option plans or pursuant to outstanding options and warrants;
(j) The Company has not sustained, since the date of
the latest audited financial statements included in the
Prospectus, any material loss or interference with its
business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and,
since such date, there has not been any change in the capital
stock or long-term debt of the Company (other than as
contemplated in Section 1(i) above) or any material adverse
change, or any development involving a prospective material
adverse change, in or affecting the business, management,
financial condition, results of operations, or prospects of
the Company, other than as set forth or contemplated in the
Prospectus;
(k) The financial statements (including the related
notes and supporting schedules) filed as part of the
Registration Statement or included in the Prospectus present
fairly, in all material respects, the financial condition and
results of operations of the Company purported to be shown
thereby, at the dates and for the periods indicated, and have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the
periods involved;
(l) Ernst & Young LLP, who have certified certain
financial statements of the Company, whose report appears in
the Prospectus and who have delivered the initial letter
referred to in Section 7(e) hereof, are independent public
accountants as required by the Securities Act and the Rules
and Regulations;
(m) The Company owns or possesses adequate licenses
or other rights to use all material patents, patent
applications, technology, software, know-how, trade secrets,
trademarks, service marks, trade names, trademark
registrations,
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service ▇▇▇▇ registrations, copyrights and licenses necessary
for the conduct of its business as described in the Prospectus
and has no reason to believe that such conduct of its business
will conflict with, and, except as disclosed in the
Prospectus, has not received any notice of any claim of
conflict with, any such rights of others. Except as disclosed
in the Prospectus, the discoveries, inventions, products,
services or processes of the Company referred to in the
Prospectus do not infringe or conflict with any right or
patent of any third party, or any discovery, invention,
product or process which is the subject of a patent
application filed by any third party;
(n) Except as disclosed in the Prospectus, there are
no legal or governmental proceedings pending to which the
Company is a party or of which any property or asset of the
Company is the subject which might have a material adverse
effect on the business, management, financial condition,
results of operations, or prospects of the Company; and to the
best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
(o) There are no contracts or other documents which
are required to be described in the Prospectus or filed as
exhibits to the Registration Statement by the Securities Act
or by the Rules and Regulations which have not been described
in the Prospectus or filed as exhibits to the Registration
Statement;
(p) No relationship, direct or indirect, exists
between or among the Company on the one hand, and the
directors, officers, stockholders, customers or suppliers of
the Company on the other hand, which is required to be
described in the Prospectus which is not so described;
(q) Since the date as of which information is given
in the Prospectus through the date hereof, and except as may
otherwise be disclosed in the Prospectus, the Company has not
(i) issued or granted any securities, other than as
contemplated in Section 1(i) above, (ii) incurred any
liability or obligation, direct or contingent, other than
liabilities and obligations which were incurred in the
ordinary course of business, (iii) entered into any
transaction not in the ordinary course of business or (iv)
declared or paid any dividend on its capital stock;
(r) The Company is not (i) in violation of its
charter or by-laws, (ii) in default in any material respect,
and no event has occurred which, with notice or lapse of time
or both, would constitute such a material default, in the due
performance or observance of any term, covenant or condition
contained in any material indenture, mortgage, deed of trust,
loan agreement, investor purchase or servicing agreement or
other agreement or instrument to which it is a party or by
which it is bound or to which any of its properties or assets
is subject or (iii) in violation in any material respect of
any law, ordinance, governmental rule, regulation or court
decree to which it or its properties or assets may be subject
or has failed to obtain any material license, permit,
certificate, franchise or other
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governmental authorization or permit necessary to the
ownership of its properties or assets or to the conduct of its
business;
(s) The Company is not, nor upon the sale of the
Series B Preferred Stock as herein contemplated will be, an
"investment company" or an entity "controlled" by an
"investment company" within the meaning of such terms under
the Investment Company Act of 1940, as amended, and the rules
and regulations of the Commission thereunder (the "1940 Act");
(t) The Company has not taken nor will take, directly
or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or
result in the stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale
of the shares of the Series B Preferred Stock.
2. Purchase of the Series B Preferred Stock by the
Underwriters. On the basis of the representations and warranties contained in,
and subject to the terms and conditions of, this Agreement, the Company hereby
agrees to sell ____ shares of the Series B Preferred Stock to the Underwriters
(the "Stock"), and each of the Underwriters agrees to purchase the number of
shares of the stock set forth opposite that Underwriter's name in Schedule 1
hereto.
The price of the Stock shall be $_____ per share.
The Company shall not be obligated to deliver any of the Stock
to be delivered on the Delivery Date (as hereinafter defined), except upon
payment for all the Stock to be purchased on the Delivery Date (as hereinafter
defined) as provided herein.
As compensation for its commitments hereunder, the
Underwriters shall receive, on the Delivery Date, an amount equal to $____ per
share for all of the Stock to be delivered by the Company hereunder on the
Delivery Date, such amount to be paid on such date to the Representatives, for
the accounts of the several Underwriters.
As additional compensation for such commitments, Wit Capital
Corporation and any other managing underwriter shall receive a warrant (the
"Warrant") to purchase the number of shares of Series B Preferred Stock as set
forth opposite such Underwriter's name on Schedule 2 exercisable, in whole or in
part, at an initial exercise price of $____ or on a cashless basis, until the
fifth anniversary of the Effective Date, such warrant to be issued pursuant to
the Warrant Agreement attached as Exhibit A. The initial exercise price and
number of shares of Series B Preferred Stock issuable upon exercise of the
warrant shall be subject to adjustment pursuant to certain antidilution
provisions. Neither the Underwriters nor any permitted transferee of the
Underwriters shall exercise, sell, transfer, assign, hypothecate or otherwise
dispose of the Warrants, in whole or in part, for the later of a period of one
year from the Effective Date or the "Restricted Period," as defined in the
Certificate of Designation for the Series B Preferred Stock. Thereafter, the
Warrants may be sold, transferred, hypothecated or otherwise disposed of only
to: (i) to officers of the Underwriters who are also shareholders of the
Underwriters; (ii) by will and pursuant to the laws of descent and distribution;
or (iii) by operation of law. Pursuant to the Warrant Agreement, the
Underwriters shall be granted certain rights to include the Underwriters'
Warrants, shares issuable upon exercise of such Warrants ("Warrant Shares") and
shares issuable upon conversion of the Warrant Shares and other securities of
the Company held as of the date of the filing of the registration statement in
any registration statement covering the Common Stock of the Company filed by the
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Company during the period of seven years following the Effective Date; provided,
however, that such rights shall not include the right of demand registration.
3. Offering of the Stock by the Underwriters. Upon
authorization by the Representatives of the release of the Stock, the several
Underwriters propose to offer the Stock for sale upon the terms and conditions
set forth in the Prospectus.
4. Delivery of and Payment for the Stock. Delivery of and
payment for the Stock shall be made at the office of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP at
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 11:00 A.M., New York City time, on the
third full business day following the date of this Agreement or at such other
date or place as shall be determined by agreement between the Representatives
and the Company. This date and time are sometimes referred to as the "Delivery
Date." On the Delivery Date, the Company shall deliver or cause to be delivered
certificates representing the Stock to the Representatives for the account of
each of the Underwriters against payment to or upon the order of the Company of
the purchase price (net of the discount provided for in the fifth paragraph of
Section 2) by certified or official bank check, checks or wire transfer, payable
in next day New York Clearing House funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligation of each Underwriter hereunder. Upon delivery, the
Stock shall be registered in such names and in such denominations as the
Representatives shall request in writing not less than two full business days
prior to the Delivery Date. For the purpose of expediting the checking and
packaging of the certificates for the Stock, the Company shall make the
certificates representing the Stock available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the Delivery Date.
On the Delivery Date, the Company will pay the commission
payable and deliver a fully executed warrant to the Underwriters under the last
two paragraphs of Section 2. The Company hereby authorizes the Representatives,
in order to effect the payment of such commission, to deduct from the purchase
price payable to the Company in exchange for the Stock sold on such date an
amount equal to such commission, calculated in accordance with the fourth
paragraph of Section 2.
5. Further Agreements of the Company. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Securities Act not later than 10:00 A.M., New York City time,
on the day following the execution and delivery of this Agreement; to
make no further amendment or any supplement to the Registration
Statement or to the Prospectus except as permitted herein; to advise
the Representatives, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed or
becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representatives with
copies thereof; to advise the Representatives, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Series B Preferred Stock for offering or sale in
any jurisdiction, of
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the initiation or threatening of any proceeding for any such purpose,
or of any request by the Commission for the amending or supplementing
of the Registration Statement or the Prospectus or for additional
information; and, in the event of the issuance of any stop order or of
any order preventing or suspending the use of any Preliminary
Prospectus or the Prospectus or suspending any such qualification, to
use promptly its best efforts to obtain its withdrawal;
(b) To furnish promptly to the Representatives and to counsel
for the Underwriters a signed copy of the Registration Statement as
originally filed with the Commission, and each amendment thereto filed
with the Commission, including all consents and exhibits filed
therewith;
(c) To make prompt delivery to the Representatives in New York
City (which delivery if requested by the Representatives shall be in
electronic form in addition to hard copy) such number of the following
documents as the Underwriter shall request: (i) conformed copies of the
Registration Statement as originally filed with the Commission and each
amendment thereto (in each case excluding exhibits other than this
Agreement and the computation of per share earnings) and (ii) each
Preliminary Prospectus, the Prospectus (not later than 10:00 A.M., New
York City time, of the day following the execution and delivery of this
Agreement) and any amended or supplemented Prospectus (not later than
10:00 A.M., New York City time, on the day following the date of such
amendment or supplement); and, if the delivery of a prospectus is
required at any time after the Effective Time of the Registration
Statement in connection with the offering or sale of the Series B
Preferred Stock and if at such time any event shall have occurred as a
result of which the Prospectus as then amended or supplemented would
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such
Prospectus is delivered, not misleading, or, if for any other reason it
shall be necessary to amend or supplement the Prospectus in order to
comply with the Securities Act, to notify the Representatives and, upon
its request, to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many copies as the Representatives
may from time to time request of an amended or supplemented Prospectus
which will correct such statement or omission or effect such
compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the Underwriter,
be required by the Securities Act or requested by the Commission;
(e) Prior to filing with the Commission (i) any amendment to
either of the Registration Statement or supplement to the Prospectus or
(ii) any Prospectus pursuant to Rule 424 of the Rules and Regulations,
to furnish a copy thereof to the Representatives and counsel for the
Underwriters and obtain the consent of the Representatives to any such
filing;
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(f) As soon as practicable after the Effective Date of the
Registration Statement, to make generally available to the Company's
security holders and to deliver to the Representatives an earnings
statement of the Company (which need not be audited) complying with
Section 11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Company, Rule 158);
(g) For a period of three years following the Effective Date
of the Registration Statement, to furnish to the Representatives (i)
copies of all materials furnished by the Company to its shareholders
and all public reports and all reports and financial statements
furnished by the Company to the Commission pursuant to the Exchange Act
or any rule or regulation of the Commission thereunder, and (ii) such
other information as the Underwriters may reasonably request regarding
the Company;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Series B
Preferred Stock for offering and sale under the securities laws of such
jurisdictions as the Representatives may request and to comply with
such laws so as to permit the continuance of sales and dealings therein
in such jurisdictions for as long as may be necessary to complete the
distribution of the Series B Preferred Stock; provided that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or file a general consent to service of process in
any jurisdiction;
(i) for a period of 180 days from the date of the Prospectus,
not to offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock, Series
A Convertible Preferred Stock, par value $0.001 per share ("Series A
Preferred Stock"), or Series B Preferred Stock or any securities
convertible into or exercisable or exchangeable for Series B Preferred
Stock, Series A Preferred Stock or Common Stock (other than shares
issued pursuant to stock option plans and warrants existing on the date
hereof, as described in the Prospectus) without the prior written
consent of the Representative; and to cause each officer and director
and five percent (5 %) stockholder of the Company to furnish to the
Representatives, prior to the Delivery Date, a letter or letters, in
form and substance satisfactory to counsel for the Underwriters,
pursuant to which each such person shall agree not to (x) offer,
pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Series B Preferred Stock, Series
A Convertible Preferred Stock, or Common Stock or any securities
convertible into or exercisable or exchangeable for Series B Preferred
Stock, Series A Preferred Stock or Common Stock (other than shares
issued pursuant to stock option plans and warrants existing on the date
hereof, as described in the Prospectus) which may be deemed to be
beneficially owned by such persons in accordance with the rules and
regulations of the Securities and Exchange Commission) or (y) enter
into any swap or other arrangement that transfers all or a portion of
the economic consequences associated with the ownership of any Series B
Preferred Stock, Series A Preferred Stock or Common Stock (regardless
of whether any of the transactions described in clause (x) or (y) is to
be settled by the delivery of Common Stock, Series A Preferred Stock or
Series B Preferred
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Stock, or such other securities, in cash or otherwise), for a period of
30 days following the expiration or early termination of the Restricted
Period (as defined in the Certificate of Designation for the Stock),
without the prior written consent of the Representatives, provided that
this Section 5(i) shall not apply to recipients of: (i) gifts, (ii)
transfers or dispositions to a spouse, direct lineal relative
(including adopted descendants) or the spouse of a direct lineal
relative, and (iii) transfers or dispositions by will or by the laws of
decent and distribution (collectively, the "Permitted Transferees") of
shares of Series B Preferred Stock, Series A Convertible Preferred
Stock, or Common Stock or any securities convertible into or
exercisable or exchangeable for Series B Preferred Stock, Series A
Preferred Stock or Common Stock, if the Permitted Transferees each
shall have furnished to the Underwriter a letter, in form and substance
satisfactory to counsel for the Underwriters, whereby the Permitted
Transferee agrees to comply with the terms and provisions of (x) and
(y) above;
(j) To apply the net proceeds from the sale of the Stock being
sold by the Company as set forth in the Prospectus;
(k) To take such steps as shall be necessary to ensure that
the Company thereof shall not become an "investment company" or an
entity "controlled" by an "investment company" within the meaning of
such terms under the 1940 Act; and
(l) Not to waive its right to terminate the Restricted Period
pursuant to clause (iv) of the definition thereof in the Certificate of
Designation for the Series B Preferred Stock without the consent of the
Underwriter.
6. Expenses. The Company agrees to pay, in addition to the
commissions specified in the fourth paragraph of Section 2, (a) the costs
incident to the authorization, issuance, sale and delivery of the Series B
Preferred Stock to the Underwriters and any taxes payable in that connection;
(b) the costs incident to the preparation, printing and filing under the
Securities Act of the Registration Statement and any amendments and exhibits
thereto provided, however, that Wit Capital Corporation agrees to pay one half
of the costs incident to the printing of any Preliminary Prospectus and any
amendment or supplement thereto; (c) the costs of distributing the Registration
Statement as originally filed and each amendment thereto and any post-effective
amendments thereto (including, in each case, exhibits), any Preliminary
Prospectus and the Prospectus and any amendment or supplement to the Prospectus,
and costs and expenses of any transfer agent; (d) the costs of reproducing and
distributing this Agreement, the Master Agreement Among Underwriters and the
Selected Dealers Agreement; (e) the costs of distributing the terms of agreement
relating to the organization of the underwriting syndicate and selling group to
the members thereof by mail, telex or other means of communication and (f) all
reasonable costs up to $10,000 incident to any roadshow in connection with the
offering of the Stock; (g) legal fees and expenses of underwriters' counsel in
connection with state securities and blue sky law clearances; (h) filing fees
with the National Association of Securities Dealers, Inc.; and (i) other costs
and expenses incident to the performance of the obligations of the Company under
this Agreement; provided that, except as provided in this Section 6 and in
Section 11, the Underwriters shall pay their own costs and expenses, including
the costs and expenses of their counsel, any transfer taxes on the Series B
Preferred Stock which it may sell and the expenses of advertising any offering
of the Series B Preferred Stock made by the Underwriters.
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7. Conditions of the Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company
contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with
the Commission in accordance with Section 5; no stop order
suspending the effectiveness of either of the Registration
Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or
threatened by the Commission; and any request of the
Commission for inclusion of additional information in either
of the Registration Statement or the Prospectus or otherwise
shall have been complied with.
(b) No Underwriter shall have discovered and
disclosed to the Company on or prior to such Delivery Date
that the Registration Statement or the Prospectus or any
amendment or supplement thereto contains any untrue statement
of a fact which, in the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP,
counsel for the Underwriters, is material or omits to state
any fact which, in the opinion of such counsel, is material
and is required to be stated therein or is necessary to make
the statements therein not misleading.
(c) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this
Agreement, the Series B Preferred Stock, the Conversion
Shares, the Registration Statement and the Prospectus, and all
other legal matters relating to this Agreement and the
transactions contemplated hereby and thereby shall be
satisfactory in all respects to counsel for the Underwriters,
and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to
enable them to pass upon such matters.
(d) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.A., shall have furnished to the
Representatives its written opinion, as counsel to the
Company, addressed to the Underwriters and dated such Delivery
Date, in form and substance satisfactory to the
Representatives, to the effect that:
(i) The Company has been duly incorporated
and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation is duly
qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its respective
ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to be so
qualified and in good standing would not have a material
adverse effect on the business, management, financial
condition, results of operations, or prospects of the Company,
and has all corporate power and authority necessary to own or
hold its properties and to conduct the business in which it is
engaged;
11
(ii) This Agreement has been duly
authorized, executed and delivered by the Company;
(iii) The Company has an authorized
capitalization as set forth in the Prospectus, and all of the
issued shares of capital stock of the Company (including the
shares of Series B Preferred Stock being delivered on such
Delivery Date) have been duly and validly authorized and
issued, are fully paid and non-assessable and conform to the
description thereof contained in the Prospectus;
(iv) The Registration Statement was declared
effective under the Securities Act as of the date and time
specified in such opinion, the Prospectus was filed with the
Commission pursuant to the subparagraph of Rule 424(b) of the
Rules and Regulations specified in such opinion on the date
specified therein and no stop order suspending the
effectiveness of the Registration Statement has been issued
and, to the knowledge of such counsel, no proceeding for that
purpose is pending or threatened by the Commission;
(v) The Registration Statement, as of its
Effective Date, and the Prospectus, as of its date, and any
further amendments or supplements thereto, as of their
respective dates, made by the Company prior to such Delivery
Date (other than the financial statements (including the notes
thereto) and other financial, statistical and accounting data
contained therein, as to which such counsel need express no
opinion) complied as to form in all material respects with the
requirements of the Securities Act and the Rules and
Regulations, it being understood that counsel expresses no
view with respect to the financial statements, schedules, pro
forma financial statements, projections and other financial
and statistical data included in the Registration Statement or
Prospectus;
(vi) The issue and sale of the shares of
Series B Preferred Stock being delivered on such Delivery Date
by the Company and the compliance by the Company with all of
the provisions of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with or
result in a material breach or violation of any of the terms
or provisions of, or constitute a material default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the
Company is a party or by which the Company is bound or to
which any of the properties or assets of the Company are
subject, nor will such actions result in any material
violation of the provisions of the charter or by-laws of the
Company or any statute or any order, rule or regulation known
to such counsel of any court or governmental agency or body
having jurisdiction over the Company or any of its properties
or assets; and, except for the registration of the Series B
Preferred Stock under the Securities Act and such filings and
registrations as may be required under applicable state
securities laws in connection with the purchase and
distribution of the Series B Preferred Stock by the
Underwriters, no consent, approval, authorization or order of,
or filing or registration with, any such court or governmental
agency or body is required for the execution, delivery and
12
performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby;
(vii) Except as described in the Prospectus,
there are no preemptive or other rights to subscribe for or to
purchase, nor any restriction upon the voting or transfer or
conversion of any shares of the Series B Preferred Stock
pursuant to the Company's charter or by-laws or any agreement
or other instrument known to such counsel;
(viii) To the best of such counsel's
knowledge, there are no legal or governmental proceedings
pending to which the Company is a party or of which any
property or asset of the Company is the subject which might
have a material adverse effect on the business, management,
financial condition, results of operations, or prospects of
the Company; except as disclosed in the Prospectus, to the
best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others; except as disclosed in the Prospectus,
to the best of such counsel's knowledge, the Company is in
material compliance with the laws, orders, rules and
regulations generally applicable to its business;
(ix) To the best of such counsel's
knowledge, there are no contracts or other documents which are
required to be described in the Prospectus or filed as
exhibits to the Registration Statement by the Securities Act
or by the Rules and Regulations which have not been described
or filed as exhibits to the Registration Statement or
incorporated therein by reference as permitted by the Rules
and Regulations;
(x) The form of certificate used to evidence
the Series B Preferred Stock complies in all material respects
with all applicable statutory requirements, with any
applicable requirements of the certificate of incorporation
and by-laws of the Company;
(xi) To the best of such counsel's
knowledge, except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company
and any person granting such person the right to require the
Company to file a registration statement under the Securities
Act with respect to any securities of the Company owned or to
be owned by such person or to require the Company to include
such securities in the securities registered pursuant to the
Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the
Company under the Securities Act;
(xii) The Company is not, nor upon the sale
of the Series B Preferred Stock as herein contemplated will be
an "investment company" or an entity "controlled" by an
"investment company" within the meaning of such terms under
the 1940 Act; and
13
In rendering such opinion, such counsel may (i) state that its
opinion is limited to matters governed by the Federal laws of
the United States of America and the laws of the State of
Arizona and the General Corporation Law of Delaware; (ii) rely
on an opinion or opinions of other counsel retained by them or
the Company as to the laws and jurisdiction other than the
State of Arizona and the general corporation law of the State
of Delaware, provided that each such opinion is satisfactory
in scope and form to the Representatives and, in its opinion,
such counsel is and the Underwriters are justified in relying
thereon, and (iii) as to matters of fact, such counsel may
rely on certificates of officers of the Company and of
government officials and the representations and warranties of
the Company set forth in this Agreement. Such counsel shall
also have furnished to the Representatives a written
statement, addressed to each Underwriter and dated such
Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that (x) such counsel has acted
as counsel to the Company on a regular basis and has acted as
counsel to the Company in connection with the preparation of
the Registration Statement, (y) such counsel has participated
in conferences with representatives of the Company, the
Representatives, counsel to the Underwriters and the
independent accountants of the Company at which the contents
of the Registration Statement, Prospectus and related matters
were discussed, and (z) based on the foregoing, no facts have
come to the attention of such counsel which lead it to believe
that the Registration Statement (excluding the financial
statements and notes thereto, schedules, pro forma financial
statements, projections and other financial and statistical
data included therein), as of its Effective Date, contained
any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary
in order to make the statements therein not misleading, or
that the Prospectus (excluding the financial statements and
notes thereto, schedules, pro forma financial statements,
projections and other financial and statistical data included
therein) contains as of its filing date and the Delivery Date
any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
foregoing opinion and statement may be qualified by a
statement to the effect that such counsel is not passing on,
and does not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for the
statements made in the Prospectus under the caption
"Description of Capital Stock", insofar as such statements
relate to the Series B Preferred Stock and concern legal
matters.
(e) With respect to the letter of Ernst & Young
delivered to the Representatives concurrently with the
execution of this Agreement (the "initial letter"), the
Company shall have furnished to the Representatives a letter
(the "bring-down letter") of such accountants, addressed to
the Underwriters and dated such Delivery Date (i) confirming
that they are independent public accountants within the
meaning of the Securities Act and are in compliance with the
applicable requirements relating to the qualification of
accountants under Rule 2-01 of
14
Regulation S-X of the Commission, (ii) stating, as of the date
of the bring-down letter (or, with respect to matters
involving changes or developments since the respective dates
as of which specified financial information is given in the
Prospectus, as of a date not more than five days prior to the
date of the bring-down letter), the conclusions and findings
of such firm with respect to the financial information and
other matters covered by the initial letter and (iii)
confirming in all material respects the conclusions and
findings set forth in the initial letter.
(f) The Company shall have furnished to the
Representatives a certificate, dated such Delivery Date, of
its Chief Executive Officer and its Chief Financial Officer
stating that:
(i) The representations, warranties and
agreements of the Company in Section 1 are true and correct as
of such Delivery Date; the Company has complied with all its
agreements contained herein; and the conditions set forth in
Section 7(a) have been fulfilled;
(ii) The Company has not sustained, since
the date of the latest audited financial statements included
in the Prospectus, any material loss or interference with its
business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and,
since such date, there has not been any change in the capital
stock or long-term debt of the Company or any material adverse
change, or any development involving a prospective material
adverse change, in or affecting the business, management,
financial condition, results of operations, or prospects of
the Company, other than as set forth or contemplated in the
Prospectus.
(iii) They have carefully examined the
Registration Statements and the Prospectus and, in their
opinion, (A) the Registration Statement, as of its Effective
Date, and the Prospectus, as of the Effective Date, did not
include any untrue statement of a material fact and did not
omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading,
and (B) since the Effective Date of the Registration
Statement, no event has occurred which should have been set
forth in a supplement or amendment to the Registration
Statement or the Prospectus.
(g) (i) The Company shall not have sustained
since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus or (ii)
since such date there shall not have been any change in the
capital stock or long-term debt of the Company or any change,
or any development involving a prospective change, in or
affecting the business, management, financial condition,
results of operations, or prospects of the
Company, other than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in
clause (i) or (ii), is, in the judgment of the
Representatives, so material and adverse as to make it
impracticable or inadvisable to proceed with the public
offering or the delivery of the Series B Stock being delivered
on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
(h) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following:
(i) trading in securities generally on the New York Stock
Exchange or the American Stock Exchange or in the
over-the-counter market, shall have been suspended or minimum
prices shall have been established on any such exchange or
such market by the Commission, by such exchange or by any
other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been
declared by Federal authorities or authorities in the State of
New York or Arizona, (iii) the United States shall have become
engaged in hostilities, there shall have been an escalation in
hostilities involving the United States or there shall have
been a declaration of a national emergency or war by the
United States or (iv) there shall have occurred such a
material adverse change in general economic, political or
financial conditions (or the effect of international
conditions on the financial markets in the United States shall
be such) as to make it, in the judgment of a majority interest
of the several Underwriters, impracticable or inadvisable to
proceed with the offering or delivery of the Series B
Preferred Stock being delivered on such Delivery Date on the
terms and in the manner contemplated in the Prospectus.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance satisfactory to
counsel for the Representatives.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each
Underwriter, its officers and employees and each person, if any, who
controls any Underwriter within the meaning of the Securities Act, from
and against any loss, claim, damage or liability, joint or several, or
any action in respect thereof (including, but not limited to, any loss,
claim, damage, liability or action relating to purchases and sales of
Series B Preferred Stock), to which that Underwriter, officer, employee
or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, (ii) the omission or alleged omission
to state in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or in any amendment or supplement thereto, any material
fact required to be stated therein or necessary to make the statements
therein not misleading or (iii) any act or failure to act, or any
alleged act or failure to act, by any Underwriter in connection with,
or relating in any manner to, the Series B Preferred Stock or the
offering contemplated
16
hereby, and which is included as part of or referred to in any loss,
claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Company shall
not be liable in the case of any matter covered by this clause (iii) to
the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, claim, damage, liability or
action resulted directly from any such act or failure to act undertaken
or omitted to be taken by such Underwriter through its gross negligence
or willful misconduct), and shall reimburse each Underwriter and each
such officer, employee and controlling person promptly upon demand for
any legal or other expenses reasonably incurred by that Underwriter,
officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such
loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged
untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement or the Prospectus,
or in any such amendment or supplement, in reliance upon and in
conformity with the written information furnished to the Company
through the Representative by or on behalf of the Underwriter
specifically for inclusion therein and described in Section 8; and
provided further that as to any Preliminary Prospectus this indemnity
agreement shall not inure to the benefit of any Underwriter, its
officers or employees or any person controlling any Underwriter on
account of any loss, claim, damage, liability or action arising from
the sale of Series B Preferred Stock to any person by that Underwriter
if that Underwriter failed to send or deliver a copy of the Prospectus,
as the same may be amended or supplemented, to that person within the
time required by the Securities Act, and the untrue statement or
alleged untrue statement of any material fact or omission or alleged
omission to state a material fact in such Preliminary Prospectus was
corrected in the Prospectus, unless such failure resulted from
non-compliance by the Company with Section 5. The foregoing indemnity
agreement is in addition to any liability which the Company may
otherwise have to any Underwriter or to any officer, employee or
controlling person of that Underwriter.
(b) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless the Company, its officers and employees,
each of its directors and each person, if any, who controls the Company
within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect
thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or
otherwise, to the extent that it is determined in a final judgment by a
court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly from any act or failure to act
undertaken or omitted to be taken by the Underwriter through its gross
negligence or willful misconduct, or insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or in any amendment or supplement thereto, or (ii) the
omission or alleged omission to state in any Preliminary Prospectus,
the Registration Statement or the Prospectus, or in any amendment or
supplement thereto, any material fact required to be stated therein or
necessary to make the statements therein
17
not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with the written
information furnished to the Company through the Representative by or
on behalf of that Underwriter specifically for inclusion therein and
described in Section 8, and shall reimburse the Company and any such
director, officer or controlling person for any legal or other expenses
reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or
action as such expenses are incurred. The foregoing indemnity agreement
is in addition to any liability which any Underwriter may otherwise
have to the Company or any such director, officer or controlling
person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 8 except to the extent it has been materially prejudiced
by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may
have to an indemnified party otherwise than under this Section 8. If
any such claim or action shall be brought against an indemnified party,
and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that
it wishes, jointly with any other indemnifying party, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified
party; provided, however, that the Representatives shall have the right
to employ counsel to represent jointly the Representatives and those
other Underwriters and their respective officers, employees and
controlling persons who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the Underwriters
against the Company under this Section 8 if, in the reasonable judgment
of the Representatives, it is advisable for the Representatives, those
Underwriters, officers, employees and controlling persons to be
represented by separate counsel, and in that event the fees and
expenses of such separate counsel shall be paid by the Company to the
extent provided in this Section 8. After notice from the indemnifying
party to the indemnified party of its election to assume the defense of
such claim or action, the indemnifying party shall not be liable to the
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation. Each
indemnified party, as a condition of the indemnity agreements contained
in Section 8(a) and (b) shall use its reasonable best efforts to
cooperate with the indemnifying party in the defense of any such action
or claim. No indemnifying party shall (i) without the prior written
consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of
any judgment with respect to any pending or threatened claim, action,
suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or
18
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be
liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld), but
if settled with its written consent or if there be a final judgment of
the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any
loss of liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold harmless
an indemnified party under Section 8(a) or 8(b) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred
to therein, then each indemnifying party shall, in lieu of indemnifying
such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, (i) in such proportion as
shall be appropriate to reflect the relative benefits received by the
Company, on the one hand, and the Underwriters, on the other hand, from
the offering of the Series B Preferred Stock or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters on the other hand with
respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits
received by the Company, on the one hand, and the Underwriters, on the
other hand, with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the offering of the
Series B Preferred Stock purchased under this Agreement (before
deducting expenses) received by the Company, on the one hand, and the
total underwriting discounts received by the Underwriters with respect
to the shares of the Series B Preferred Stock purchased under this
Agreement, on the other hand, bear to the total gross proceeds from the
offering of the shares of the Series B Preferred Stock under this
Agreement, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters, the intent of
the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8 were to be
determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or liability,
or action in respect thereof, referred to above in this Section 8 shall
be deemed to include, for purposes of this Section 8, any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 8, no Underwriter shall
be required to contribute any amount in excess of the amount by which
the total price at which the Series B Preferred Stock underwritten by
it and distributed to
19
the public was offered to the public exceeds the amount of any damages
which such Underwriter has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute as
provided in this Section 8 are several in proportion to their
respective underwriting obligations and not joint.
(e) The Underwriters severally confirm that the statements
with respect to the public offering of the Series B Preferred Stock set
forth on the cover page of, and under the caption "Underwriting" in,
the Prospectus are correct and constitute the only information
furnished in writing to the Company by or on behalf of the Underwriters
specifically for inclusion in the Registration Statement and the
Prospectus.
9. Defaulting Underwriters. If, on the Delivery Date, any
Underwriter defaults in the performance of its obligations under this Agreement,
the remaining non-defaulting Underwriters shall be obligated to purchase the
Series B Preferred Stock which the defaulting Underwriter agreed but failed to
purchase on the Delivery Date in the respective proportions which the number of
shares of the Series B Preferred Stock set forth opposite the name of each
remaining non-defaulting Underwriter in Schedule 1 hereto bears to the total
number of shares of the Series B Preferred Stock set forth opposite the names of
all the remaining non-defaulting Underwriters in Schedule 1 hereto; provided,
however, that the remaining non-defaulting Underwriters shall not be obligated
to purchase any of the Series B Preferred Stock on such Delivery Date if the
total number of shares of the Series B Preferred Stock which the defaulting
Underwriter or Underwriters agreed but failed to purchase on such date exceeds
9.09% of the total number of shares of the Series B Preferred Stock to be
purchased on the Delivery Date, and any remaining non-defaulting Underwriter
shall not be obligated to purchase more than 110% of the number of shares of the
Series B Preferred Stock which it agreed to purchase on the Delivery Date
pursuant to the terms of Section 2. If the foregoing maximums are exceeded, the
remaining non-defaulting Underwriters, or those other underwriters satisfactory
to the Representative who so agree, shall have the right, but shall not be
obligated, to purchase, in such proportion as may be agreed upon among them, all
the Series B Preferred Stock to be purchased on such Delivery Date. If the
remaining Underwriters or other underwriters satisfactory to the Representative
do not elect to purchase the shares which the defaulting Underwriter or
Underwriters agreed but failed to purchase on the Delivery Date, this Agreement
shall terminate without liability on the part of any non-defaulting Underwriter
or the Company, except that the Company will continue to be liable for the
payment of expenses to the extent set forth in Sections 6 and 11. As used in
this Agreement, the term "Underwriter" includes, for all purposes of this
Agreement unless the context requires otherwise, any party not listed in
Schedule 1 hereto who, pursuant to this Section 9, purchases Series B Preferred
Stock which a defaulting Underwriter agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting
Underwriter of any liability it may have to the Company for damages caused by
its default. If other underwriters are obligated or agree to purchase the Series
B Preferred Stock of a defaulting or withdrawing Underwriter, either the
Representatives or the Company may postpone the Delivery Date for up to seven
full
20
business days in order to effect any changes that in the opinion of counsel for
the Company or counsel for the Underwriters may be necessary in the Registration
Statement, the Prospectus or in any other document or arrangement.
10. Termination. The obligations of the Underwriters hereunder
may be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Series B Preferred Stock if,
prior to that time, any of the events described in Sections 7(g) or 7(h) shall
have occurred or if the Underwriters shall decline to purchase the Series B
Preferred Stock for any reason permitted under this Agreement.
11. Reimbursement of Underwriters' Expenses. If (a) the
Company shall fail to tender the Series B Preferred Stock for delivery to the
Underwriters for any reason permitted under this Agreement, or (b) the offering
does not take place for a reason that cannot reasonably be described as
constituting a failure or unreasonable unwillingness on the part of the
Underwriters to proceed, the Company shall reimburse the Underwriters up to
$25,000 for the fees and expenses of their counsel and for such other
out-of-pocket expenses as shall have been incurred by them in connection with
this Agreement and the proposed purchase of the Series B Preferred Stock, and
upon demand the Company shall pay the full amount thereof to the Underwriters.
If this Agreement is terminated pursuant to Section 9 by reason of the default
of one or more Underwriters, the Company shall not be obligated to reimburse any
defaulting Underwriter on account of those expenses.
12. Notices, etc. All statements, requests, notices and
agreements hereunder shall be in writing, and:
(a) if to the Representative, shall be delivered or sent by
mail, e-mail or facsimile transmission to Wit Capital Corporation, ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (Fax:
▇▇▇-▇▇▇-▇▇▇▇) (E-mail Address: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇);
(b) if to the Company, shall be delivered or sent by mail,
e-mail or facsimile transmission to the address of the Company set
forth in the Registration Statement, Attention: __________ (Fax:
_____________) (E-mail Address: _____________); and
provided, however, that any notice to an Underwriter pursuant to Section 8 shall
be delivered or sent by mail, telex, facsimile or e-mail transmission to such
Underwriter at its address set forth in its acceptance to the Representative,
which address will be supplied to any other party hereto by the Representative
upon request. Any such statements, requests, notices or agreements shall take
effect at the time of receipt thereof. The Company shall be entitled to act and
rely upon any request, consent, notice or agreement given or made on behalf of
the Underwriters by the Representatives.
13. Persons Entitled to Benefit of Agreement. This Agreement
shall inure to the benefit of and be binding upon the Underwriters, the Company
and their respective personal representatives and successors. This Agreement and
the terms and provisions hereof are for the
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sole benefit of only those persons, except that (A) the representations,
warranties, indemnities and agreements of the Company contained in this
Agreement shall also be deemed to be for the benefit of the officers and
employees of each Underwriter and the person or persons, if any, who control
each Underwriter within the meaning of Section 15 of the Securities Act and (B)
the indemnity agreement of the Underwriters contained in Section 8 of this
Agreement shall be deemed to be for the benefit of directors, officers and
employees of the Company and any person controlling the Company within the
meaning of Section 15 of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 11, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
14. Survival. The respective indemnities, representations,
warranties and agreements of the Company and the Underwriters contained in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Series B Preferred
Stock and shall remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any of them.
15. Certain Definitions. For purposes of this Agreement,
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading.
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
17. Counterparts. This Agreement may be executed in one or
more counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement among the
Company and the Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
SANDBOX ENTERTAINMENT CORPORATION
By _________________________
{name}
Accepted and agreed:
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On behalf of themselves and the several other Underwriters named in Schedule 1
hereto.
WIT CAPITAL CORPORATION
By: _____________________
By: _____________________
By: _____________________
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SCHEDULE 1