Exhibit 10(ee)
August 11, 1997
Xxxxxx X. Xxxxxxx, Director
FOX & Company Investments, Inc.
0000 X. 00xx. Street
Phoenix, Arizona 85018
Re: Engagement
Dear Xxx:
The purpose of this letter is to set forth the agreement between
Sandbox Entertainment Corporation (the "Company") and FOX & Company Investments,
Inc. ("FOX") with respect to the matters described herein. Subject to execution
and delivery of this letter where indicated below by each party, our agreement
is as follows:
1. The Company hereby engages FOX as a consultant to assist the Company
in identifying and introducing potential investors in connection with the
"Financing" described hereafter, and facilitating negotiations with such
potential investors as reasonably requested by the Company, on the terms and
conditions set forth in this engagement letter. The services described in this
paragraph are referred to herein as the "Services". The "Financing" is defined
as follows:
(a) Each investor must be an "Accredited Investor" as that term is
defined in Rule 501 of Regulation D as promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended.
(b) Each investor who is acceptable to the Company and who executes and
delivers definitive documentation acceptable to the Company shall receive a
fully subordinated (but not convertible) note (the "Notes") bearing interest at
10% payable in two years or out of the proceeds of a Qualifying IPO (as defined
in the Notes), and a three year warrant (the "Investor Warrants") to purchase
that number of shares of Common Stock determined by dividing the amount loaned
by $2.00 per share. The exercise price of the Investor Warrants will be $2.00
per share until 30 days after an IPO (as defined in the warrants) at which point
the exercise price will be the IPO price if greater than $2.00 per share. Forms
of the definitive documents will be provided to FOX by the Company for
disclosure to potential investors.
(c) The Company reserves the right in its sole and absolute discretion
to decide whether or not, and on what terms and conditions, it accepts any
investment in the Company.
(d) The amount of the Financing shall not exceed $225,000 in proceeds
to the Company, except as otherwise agreed by the Company.
(e) The Financing will end immediately prior to the filing of a
registration statement by the Company with the SEC, which filing could occur as
early as August 29, 1997. Accordingly, all definitive documentation must have
been executed and delivered by investors prior to such date and their
obligations to purchase the Notes and Investor Warrants shall be subject to no
conditions within the control of such investors.
2. FOX shall be entitled to compensation for the Services as and to the
extent provided in this paragraph 2, and not otherwise. If the Company closes a
Financing with one or more investors introduced to the Company by FOX during the
term of this engagement letter, then FOX shall be entitled to receive the
following compensation:
(a) A cash fee in the amount of ten percent (10%) of the gross
amount of the loans made to the Company in the Financing from investors
introduced to the Company by FOX, which shall be paid upon closing of
such loans;
(b) If permitted under all applicable Blue Sky Laws, Investor
Warrant(s) to purchase that number of shares of Common Stock that is
determined by dividing 10% of the aggregate loan amount brought to the
Company by FOX by $2.00 per share, provided FOX executes and delivers
such investment letters regarding securities laws as the Company
reasonably requests; and
(c) FOX shall also have the ability to agree with each
potential investor to allocate some of the Investor Warrants amongst
Investors, selling broker compensation or retained as additional
compensation for Fox, all as mutually agreed by such investors and FOX.
3. The Company's engagement of FOX to provide the Services is
nonexclusive. The Company reserves the right to have discussions with, and enter
into transactions for a Financing with, potential investors that have not been
identified and introduced by FOX, and if the Company does close a Financing with
investors not identified and introduced by FOX, FOX shall not be entitled to
compensation from the Company with respect to such transaction(s) or its
Services under this engagement letter. Nothing in this engagement letter
obligates the Company to enter into or complete a Financing.
4. The term of this engagement letter is four (4) weeks at the end of
which it shall automatically expire unless it is extended by mutual agreement,
provided however that if the Company completes, within one year after
termination of this engagement letter a Financing with a party introduced to the
Company by FOX pursuant to this letter FOX will be entitled to receive
compensation in accordance with paragraph 2 above.
5. The Company acknowledges that FOX may seek assistance from third
parties, with the prior approval of the Company, in identifying potential
investors. XXX agrees that the
FOX & Company Investments, Inc.
August 11, 1997
Page 3
Company shall have no obligation to any such third parties with respect to
compensation or otherwise, and that FOX shall be solely responsible for
compensating such third parties if at all. The Company agrees that FOX may
assign a portion of any options that become payable pursuant to paragraph 2
above to one or more of such approved third parties, provided that such third
parties execute and deliver to the Company such investment letters regarding
securities laws as the Company reasonably requests and provided that such
assignment does not jeopardize the Company's exemption of the Financing from
registration or qualification under applicable Blue Sky Laws.
6. XXX has executed and delivered to the Company a confidentiality
letter in the form attached hereto as Exhibit X. XXX shall not provide
Confidential Information (as defined in such confidentiality form) to any third
party without first obtaining from them an executed confidentiality letter in a
form approved by the Company.
7. The Company will reimburse FOX for reasonably incurred out of pocket
expenses, subject to the following: FOX shall obtain prior approval from the
Company for any single miscellaneous expense item in excess of $150.
8. The Company agrees to the indemnification provisions set forth in
Exhibit B attached hereto.
9. The validity and interpretation of this engagement letter shall be
governed by the laws of the State of Arizona applicable to agreements made and
to be fully performed therein.
10. For convenience of the parties, any number of counterparts of this
letter agreement may be executed by the parties hereto, and each such
counterpart shall be and shall be deemed to be, an original instrument, but all
such counterparts taken together shall constitute one and the same agreement.
11. This letter and exhibits attached hereto contains the entire
agreement of the parties and supersedes all prior discussions, agreements,
understandings or representations between the parties relating to the subject
matter hereof, and may not be amended except by written agreement executed by
both parties hereto.
If the foregoing correctly sets forth our agreement, please so indicate
by signing the
FOX & Company Investments, Inc.
August 11, 1997
Page 4
enclosed copy in the space provided and return it to us, whereupon you and we
will be bound to the terms hereof.
Very truly yours,
SANDBOX ENTERTAINMENT CORPORATION
By: /s/ Xxxx Xxxxxxxx
-----------------------------
Its: Chief Financial Officer
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ACCEPTED AND AGREED:
FOX & COMPANY INVESTMENTS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Its: Executive Vice President
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EXHIBIT A
CONFIDENTIAL
Sandbox Entertainment Corporation
0000 X. Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
Re: Confidentiality Agreement
-------------------------
Gentlemen:
In connection with our possible interest in arranging or participating
in a business transaction with SANDBOX ENTERTAINMENT CORPORATION ("Company"), we
desire to receive from the Company information about the Company, including
without limitation its business, products, financial condition and prospects,
which is confidential, proprietary or otherwise not generally available to the
public. (All such information is hereafter referred to as "Confidential
Information"). As a condition to being furnished Confidential Information and
afforded access to the facilities and management of the Company, we agree as
follows:
1. We (which for purposes hereof shall include all of our affiliates)
will protect and hold in confidence all Confidential Information disclosed to
us. We will use such Confidential Information solely for the purpose of
evaluating the viability of a transaction with the Company and will not use the
same for any other purpose.
2. We will disclose Confidential Information only to those of our
directors, officers and/or employees, if any, who need access to such
Confidential Information to enable us to evaluate a proposed transaction and to
our outside professional advisors who assist us in such evaluation (such persons
are collectively referred to herein as "representatives"). We will disclose
Confidential Information only to those of our representatives who have been
informed of the confidentiality of Confidential Information and have been
instructed to keep the same confidential in accordance with the provisions of
this agreement unless the Company has given us prior written authorization to
deviate from this procedure.
3. Without the prior written consent of the Company, we will not, and
will direct our representatives not to, disclose to any person either the fact
that any investigations, discussions or negotiations are taking place concerning
a possible transaction involving the Company and us, or
that we have requested or received any Confidential Information from the
Company, or any of the terms, conditions or other facts with respect to any such
possible transaction, including the status thereof or any of the terms of this
Agreement or the fact of its existence.
4. We will, upon the Company's request, return to the Company or
destroy all Confidential Information and any copies or extracts thereof. Any
analyses, compilations, studies or other documents which may be prepared for use
by us or our representatives in connection with our evaluation of the Company's
information or a possible transaction with the Company, and which contain
Confidential Information, will be kept confidential in accordance with the terms
hereof and will be destroyed upon the Company's request.
5. Our obligations of non-use and non-disclosure hereunder will not be
deemed to apply to Confidential Information which (i) is in the public domain at
the time of delivery, (ii) subsequently is published or otherwise becomes part
of the public domain through no fault of ours or of our representatives, (iii)
we can demonstrate was in our possession at the time of disclosure and was not
acquired by us directly or indirectly from the Company or its representatives on
a confidential basis, or (iv) becomes available to us on a non-confidential
basis from a source that, to the best of our knowledge, is not under an
obligation to the Company.
6. We agree that all (i) communications regarding the proposed
transaction, (ii) requests for information, (iii) requests for facility tours or
management meetings, and (iv) discussions or questions regarding procedures will
be submitted or directed to you, unless specifically instructed otherwise by
you.
7. We understand and acknowledge that the Company is not making any
representation or warranty, express or implied, as to the accuracy or
completeness of the Confidential Information, and none of the Company or any of
its respective officers, directors, employees, stockholders, owners, affiliates
or agents will have any liability to us or any other person resulting from our
use of the Confidential Information. Only those representations or warranties,
if any, that are made in a definitive transaction agreement when, as, and if any
is executed.
8. If we or our representatives are requested or required to disclose
any Confidential Information, we will promptly notify you of such request or
requirement so that you may seek an appropriate protective order or other
appropriate relief and/or waive our compliance with provisions of this
agreement. If, in the absence of such relief or waiver hereunder, we or our
representatives are, in the opinion of our counsel, compelled to disclose
Confidential Information, then we may disclose such of the Confidential
Information to the person compelling disclosure as is, according to such
opinion, required without liability hereunder.
Sandbox Entertainment Corporation
August 11, 1997
Page 3
9. It is further agreed that no failure or delay by the Company in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise of any right, power or privilege hereunder.
10. In addition to any and all remedies available at law, we agree that
the Company shall also be entitled to equitable relief, including injunction and
specific performance, in the event of any breach of this agreement. This
agreement and any issues arising hereunder or related hereto shall be governed
by the internal laws of Arizona (without regard to choice of laws).
This letter agreement is effective on and as of August 11, 1997.
Xxxxxx X. Xxxxxxx, for Xxx & Company Investments,
Inc.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Its Authorized Representative
[Corporate signatory]
--------------------------------------
Signature
--------------------------------------
Print name
[Individual signatory]
EXHIBIT B
INDEMNIFICATION PROVISIONS
The Company agrees to defend, indemnify and hold harmless FOX, its
officers, directors, and employees (hereafter jointly referred to as FOX)
against any and losses, claims, demands, suits, actions, judgments, awards,
damages, liabilities, costs, reasonable attorneys' fees (and all actions in
respect thereof and any reasonable real or other expenses in giving testimony or
furnishing documents in response to a subpoena or otherwise), including the
costs of investigating, preparing or defending any such action or claim, whether
or not in connection with litigation In which FOX is a party, directly or
indirectly caused by, relating to, or asserted by a third party, based upon or
arising out of (a) the Company's breach of or the incorrectness of any
representation, warranty, or covenant of Company contained in this agreement;
and/or (b) the conduct or operation of the business of the Company; or (c)
failure of Company to perform any term condition, or obligation required by this
Agreement to be performed by Company; or (d) any services rendered by FOX as
defined in or contemplated by the letter agreement to which these Provisions are
attached, as it may be amended from time to time (the "Agreement") or (e) FOX
acting for the Company, including without limitation, any act or omission by FOX
in connection with its performance of its obligations the Agreement.
Notwithstanding the foregoing, the Company shall not have any liability to FOX
for or in connection with the engagement of FOX or with any of the foregoing,
for any such liability for losses, claims, demand, suits, actions, judgments,
awards, damages, liabilities, costs or expenses that is found in a final
judgment by a court of competent jurisdiction or mutually acceptable arbitrator
to have resulted primarily and directly from FOX's gross negligence or willful
misconduct or XXX'x material breach of the Agreement.
As a condition to the foregoing indemnity, in the event of the
assertion of any claim or demand, or the institution of any suit or action with
respect to which Company is required by this paragraph to indemnify FOX, FOX
will give notice thereof to Company and will afford Company the opportunity to
defend, settle, or compromise the same. Unless Company agrees to duly, promptly
and diligently discharge or defend against such claim, demand, suit or action
such manner as will, in the Company's reasonable judgment, protect FOX from any
liability, loss, cost or damage as a result thereof, FOX may, at FOX's option,
for Company's account and risk, assume the defense of the same, may implead,
interplead or claim over against Company or may, compromise or settle the same
on such terms as FOX may reasonably determine and may thereafter hold Company
responsible for all sums paid and all costs, expenses and reasonable attorney's
fees incurred by XXX in so doing. FOX may, at FOX's option, participate in any
legal
proceedings being conducted by Company hereunder with counsel of FOX's choosing,
but such participation shall be at FOX's sole expense, so long as Company is
diligently conducting the same in the Company's reasonable judgments and FOX's
counsel shall to the fullest extent consistent with its professional
responsibilities cooperate with the Company and any counsel designated by the
Company.
In the event that a court of competent jurisdiction, or an arbitrator
mutually acceptable to the parties, determines that Company has no indemnity
obligations to FOX hereunder, but that both Company and FOX are liable to a
third party asserting a claim against Company and FOX, then as between Company
and FOX, they each agree to contribute such amounts as may be necessary to
satisfy such liability, in amounts proportionate to their respective comparative
negligence/responsibility as determined by a court of competent jurisdiction or
a mutually acceptable arbitrator. If either Company or FOX pays such third party
more than its proportionate share as determined above, then it shall be entitled
to seek contribution from the other party to the extent of such excess.
No person or affiliated entity found liable for a fraudulent
misrepresentation shall be entitled to contribution from any person or
affiliated entity who is not also found liable for such fraudulent
misrepresentation.
These Indemnification Provisions shall be in addition to any liability
which the Company may otherwise have to FOX or the controlling persons of FOX
within the meaning of the federal securities laws.
The foregoing Indemnification Provisions are in addition to any rights
or remedies available under applicable law and are not to the exclusion of any
such nights or remedies.
