Maxim Group LLC Letterhead]
[Maxim
Group LLC Letterhead]
February
2, 2006
▇▇.
▇▇▇▇▇
▇▇▇▇▇▇
Chairman
and Chief Executive Officer
▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
Richland,
WA 99352
Dear
▇▇.
▇▇▇▇▇▇:
The
purpose of this letter agreement (“Agreement”) is to confirm the engagement of
Maxim Group LLC (“Maxim”) by IsoRay, Inc. (“Company”) to act as one of the two
exclusive co-placement agents in connection with the “best-efforts” proposed
offering (“Offering”) of equity or equity-linked securities (“Securities”) of
the Company. The gross proceeds from the Offering will be up to $20,000,000
and
the terms of the Securities and the gross proceeds of such Offering will be
set
forth in a purchase agreement (“Purchase Agreement”) with investors (as defined
below). It is understood that Maxim and Punk, ▇▇▇▇▇▇ & Company, L.P. will be
the exclusive co-placement agents (the “Placement Agents”) of the Offering.
1. Appointment.
(a) Subject
to the terms and conditions of this Agreement, the Company hereby retains Maxim,
and ▇▇▇▇▇ ▇▇▇▇▇▇ agrees to act, as one of the Company’s two exclusive
co-placement agents in connection with the Offering. As placement agent for
the
Offering, ▇▇▇▇▇ will advise and assist the Company in identifying, and assisting
the Company in issuing the Securities to, one or more Investors (“Investors”) in
the Offering. The Company acknowledges and agrees that ▇▇▇▇▇’s is only required
to use its “commercially reasonable efforts” in connection with the Offering and
that this Agreement does not constitute a commitment by Maxim to purchase the
Securities. The Company retains the right to determine all of the terms and
conditions of the Offering and to accept or reject and proposals submitted
to it
by ▇▇▇▇▇ in its sole and absolute discretion.
(b) During
the Term of this Agreement (as such term is hereinafter defined), neither the
Company nor any of its subsidiaries will, directly or indirectly, solicit or
otherwise encourage the submission of any proposal or offer (“Investment
Proposal”), from any person or entity relating to any issuance of the Company’s
or any of its subsidiaries’ equity securities (including debt securities with
any equity feature) or participate in any discussions regarding an Investment
Proposal. The term “Investment Proposal” shall not include (i) any investment in
the equity securities of any other entity, (ii) any commercial loans to the
Company, and (iii) any transaction or agreement with one or more persons, firms
or entities designated as a “strategic partner” of the Company, as determined in
good faith by the Board of Directors of the Company, provided that each such
person, firm or entity is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company and in which
the Company receives benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities. The Company will immediately cease all contracts,
discussions and negotiations with third parties regarding any Investment
Proposal.
2. Compensation
and Expenses.
(a) In
consideration of the services rendered by ▇▇▇▇▇ in connection with the Offering,
the Company agrees to pay Maxim a cash fee (the “Placement Fee”) payable upon
the closing of the transactions contemplated by this Agreement (“Closing”) equal
to three point fifteen percent (3.15%, or 45% of the 7.0% total cash fee payable
to the Placement Agents) of the gross proceeds received by the Company from
Investors at the Closing. Upon the execution of this engagement letter, the
Company shall deliver to Maxim $25,000 (by check or wire transfer of immediately
available funds) as a non-refundable cash retainer fee, which shall be
creditable against the payment of any Placement Fee. The Company will reimburse
Maxim in a timely manner for its out-of-pocket expenses relating to the
Offering, including but not limited to legal fees, printing expenses, travel
and
other related expenses, provided that Maxim shall obtain the Company’s prior
approval if and when such expenses should cumulatively reach
$35,000.
(b) The
Company shall deliver a warrant, or, if so requested, warrants, to Maxim and/or
its designees (the “Agent Warrant”), which Agent’s Warrant shall be exercisable
to purchase additional Securities equal to two and three quarters percent
(2.75%, or 55% of the 5% total warrants payable to the Placement Agents) of
the
total number of shares sold pursuant to the Offering. The Agent’s Warrant will
be exercisable at any time and from time to time, in whole or in part, during
the four-year period commencing one year from the Offering, at a price per
share
equal to 110% of the per share offering price of the Securities in the Offering.
The Agent’s Warrant will provide for registration rights (including a one time
demand registration right and unlimited piggyback rights), cashless exercise
and
customary anti-dilution provisions (for stock dividends and splits and
recapitalizations) consistent with the National Association of Securities
Dealers, Inc. (“NASD”) Rules of Fair Practice and satisfactory to Maxim and its
counsel.
3. Term
of Engagement.
(a) This
Agreement will remain in effect until one year after the date hereof, after
which either party shall have the right to terminate it on thirty (30) days
prior written notice to the other. The date of termination of this Agreement
is
referred to herein from time to time as the “Termination
Date”.
The
period of time during which this Agreement remains in effect is referred to
herein from time to time as the “Term”.
If,
within one year after the Termination Date, the Company completes any private
financing of equity or debt or other capital raising activity of the Company
(other than the exercise by any person or entity of any options, warrants or
other convertible securities other than the warrants issued pursuant to this
Agreement) with any of the Investors who were first introduced to the Company
in
connection with the financing contemplated hereby by Maxim (i.e., an “Introduced
Party”), the Company will pay to Maxim upon the closing of such financing the
compensation set forth in Section 2 as a “Source
Fee”.
In the
event that any merger, acquisition, change of control transaction or sale of
all
or substantially all of the assets of the Company shall be consummated with
any
Investor contacted by Maxim during the term of this Agreement, the Company
shall
pay to Maxim a mutually agreed upon fee reflecting industry standards for such
transactions of such type. For purposes of this Section 3(a), “Introduced Party”
shall mean a person with whom ▇▇▇▇▇ has had at least one face-to-face or
telephone conversation in connection with ▇▇▇▇▇’s provision of services to the
Company hereunder and who is included in a list of Introduced Parties, which
shall be maintained by ▇▇▇▇▇ and a true and correct copy of which shall be
furnished to the Company upon closing and/or termination of the engagement
contract. Such a list is deemed confidential and is not to be disseminated
to
anyone other than IsoRay employees and members of the Board of Directors of
IsoRay.
(b) Notwithstanding
anything herein to the contrary, subject to the one year limitation described
in
Section 3(a) above, the obligation to pay the compensation and expenses
described in Section 2, and the provisions of Sections 6, 7, 9-18 and all of
Exhibit A attached hereto (the terms of which are incorporated by reference
hereto), will survive any termination or expiration of this
Agreement.
4. Right
of First Refusal.
If
the
Company executes definitive transaction documents with an Investor relating
to
the Offering, ▇▇▇▇▇ will have the right of first refusal to act as a managing
underwriter of any public offering of the Company’s equity or debt securities,
and will have the right of first refusal to act as a co-placement agent on
any
private placement of any of the Company’s equity or debt securities (excluding
(i) sales to employees under any compensation or stock option plan approved
by
the stockholders of the Company, (ii) shares issued in payment of the
consideration for an acquisition and (iii) conventional banking arrangements
and
commercial debt financing) of the Company or any subsidiary or successor of
the
Company during the one-year period following the completion of the Offering.
If
▇▇▇▇▇ fails to accept in writing any such proposal for such public or private
sale within 30 days after receipt of a written notice from the Company
containing such proposal, then Maxim will have no claim or right with respect
to
any such sale contained in any such notice. If, thereafter, such proposal is
modified in any material respect, the Company will adopt the same procedure
as
with respect to the original proposed public or private sale.
5. Information.
(a) The
Company recognizes that, in completing its engagement hereunder, ▇▇▇▇▇ will
be
using and relying on publicly available information and on data, material and
other information furnished to Maxim by the Company or the Company’s affiliates
and agents. The Company will cooperate with Maxim and furnish, and cause to
be
furnished, to Maxim, any and all information and data concerning the Company,
its subsidiaries and the Offering that Maxim deems appropriate, including,
without limitation, the Company’s acquisition plans and plans for raising
capital or additional financing (to the extent available to the Company in
the
case of parties other than the Company) that is reasonably requested by ▇▇▇▇▇.
The Company represents and warrants to Maxim that all such information: (1)
made
available by the Company to Maxim or its agents, representatives and any
potential participant in the Offering, (2) contained in any preliminary or
final
Private Placement Materials prepared by the Company in connection with the
Offering, and (3) contained in any filing by the Company with any court or
governmental regulatory agency, commission or instrumentality, will be complete
and correct in all material respects and will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein not misleading in the light of the circumstances under which
statements are made. The Company further represents and warrants to Maxim that
all such Information will have been prepared by the Company in good faith and
will be based upon assumptions which, in light of the circumstances under which
they were made, are reasonable. It is understood and agreed that in performing
under this engagement, ▇▇▇▇▇ will be relying upon the accuracy and completeness
of, and is not assuming any responsibility for independent verification of,
such
publicly available information and the other information so
furnished.
(b) It
is
further agreed that ▇▇▇▇▇ will conduct a due diligence investigation of the
Company and the Company will reasonably cooperate with such investigation as
a
condition of ▇▇▇▇▇’s obligations hereunder. The Company further recognizes,
understands and confirms that Maxim: (i) will use and rely primarily on data,
material and other information furnished to Maxim by the Company or the
Company’s affiliates and agents, including the Private Placement Materials, and
on information available from generally recognized public sources in performing
the services contemplated by this engagement without having independently
verified the same; (ii) is authorized as the Company’s placement agent to
transmit to any prospective investor a copy or copies of the Private Placement
Materials, forms of purchase agreements and any other legal documentation
supplied to Maxim for transmission to any prospective investor by or on behalf
of the Company or by any of the Company’s officers, representatives or agents,
in connection with the performance of ▇▇▇▇▇’s services hereunder or any
transaction contemplated hereby; (iii) does not assume responsibility for the
accuracy or completeness of any data, material and other information furnished
to Maxim by the Company or the Company’s affiliates and agents, including the
Private Placement Materials, or any other information; and (iv) will not make
an
appraisal of any assets of the Company. If at any time during the course of
▇▇▇▇▇’s engagement, the Company becomes aware of any material change in any of
the information previously furnished to Maxim, it will promptly advise Maxim
of
the change.
(c) Until
the
date that is two years from the date hereof, ▇▇▇▇▇ will keep all information
obtained from the Company strictly confidential except: (i) information which
is
otherwise publicly available, or previously known to or obtained by, ▇▇▇▇▇
independently of the Company and without breach of any of Maxim’s agreements
with the Company; (ii) Maxim may disclose such information to its officers,
directors, employees and agents, and to its other advisors and financial sources
on a need to know basis only and will ensure that all such persons will keep
such information strictly confidential. No such obligation of confidentiality
shall apply to information that: (i) is in the public domain as of the date
hereof or hereafter enters the public domain without a breach by ▇▇▇▇▇, (ii)
was
known or became known by Maxim prior to the Company’s disclosure thereof to
Maxim, (iii) becomes known to Maxim from a source other than the Company, and
other than by the breach of an obligation of confidentiality owed to the
Company, (iv) is disclosed by the Company to a third party without restrictions
on its disclosure, (v) is independently developed by ▇▇▇▇▇ or (vi) is required
to be disclosed by ▇▇▇▇▇ or its officers, directors, employees, agents,
attorneys and to its other advisors and financial sources, to any order of
a
court of competent jurisdiction or other governmental body or as may otherwise
be required by law.
(d) The
Company recognizes that in order for Maxim to perform properly its obligations
in a professional manner, the Company will keep Maxim informed of and, to the
extent practicable, permit Maxim to participate in meetings and discussions
between the Company and any third party relating to the matters covered by
the
terms of ▇▇▇▇▇’s engagement.
6. Indemnification.
The
Company agrees to indemnify Maxim in accordance with the indemnification and
other provisions attached to this Agreement as Exhibit A (the “Indemnification
Provisions”), which provisions are incorporated herein by reference and shall
survive the termination or expiration of this Agreement.
7. Securities
Law Compliance.
The
Company, at its own expense, will obtain any registration or qualifications
required to sell any Securities under the Blue Sky laws of any applicable
jurisdictions.
8. No
General Solicitation.
The
Securities will be offered only by approaching prospective purchasers on an
individual basis. No general solicitation or general advertising in any form
will be used by the Company or Maxim in connection with the offering of the
Securities.
9. Confidentiality.
The
Company will not provide or release any information with respect to this
Agreement or the Offering except as required by law or otherwise disclosed
in
any offering memorandum.
10. Representations
and Warranties.
The
Company and Maxim each respectively represent and warrant that: (a) it has
full
right, power and authority to enter into this Agreement and to perform all
of
its obligations hereunder; (b) this Agreement has been duly authorized and
executed and constitutes a legal, valid and binding agreement of such party
enforceable in accordance with its terms; and (c) the execution and delivery
of
this Agreement and the consummation of the transactions contemplated hereby
does
not conflict with or result in a breach of (i) such party’s certificate of
incorporation or by-laws or (ii) any agreement to which such party is a party
or
by which any of its property or assets is bound.
11. Parties;
Assignment; Independent Contractor.
This
Agreement has been and is made solely for the benefit of Maxim and the Company
and each of the persons, agents, employees, officers, directors and controlling
persons referred to in Exhibit A and their respective heirs, executors, personal
representatives, successors and assigns, and nothing contained in this Agreement
will confer any rights upon, nor will this Agreement be construed to create
any
rights in, any person who is not party to such Agreement, other than as set
forth in this paragraph. The rights and obligations of either party under this
Agreement may not be assigned without the prior written consent of the other
party hereto and any other purported assignment will be null and void. ▇▇▇▇▇
has
been retained under this Agreement as an independent contractor, and it is
understood and agreed that this Agreement does not create a fiduciary
relationship between ▇▇▇▇▇ and the Company or their respective Board of
Directors. ▇▇▇▇▇ shall not be considered to be the agent of the Company for
any
purpose whatsoever and ▇▇▇▇▇ is not granted any right or authority to assume
or
create any obligation or liability, express or implied, on the Company’s behalf,
or to bind the Company in any manner whatsoever.
12. Validity.
In case
any term of this Agreement will be held invalid, illegal or unenforceable,
in
whole or in part, the validity of any of the other terms of this Agreement
will
not in any way be affected thereby.
13. Waiver
of Breach.
The
failure of any party hereto to insist upon strict performance of any of the
covenants and agreements herein contained, or to exercise any option or right
herein conferred in any one or more instances, will not be construed to be
a
waiver or relinquishment of any such option or right, or of any other covenants
or agreements, and the same will be and remain in full force and
effect.
14. Counterparts.
This
Agreement may be executed in counterparts and each of such counterparts will
for
all purposes be deemed to be an original, and such counterparts will together
constitute one and the same instrument.
15. Governing
Law; Jurisdiction Law.
This
Agreement will be governed as to validity, interpretation, construction, effect
and in all other aspects by the internal law of the State of New York. The
Company and Maxim each (i) agree that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted exclusively
in
the New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, (ii) waives any objection
to the venue of any such suit, action or proceeding, and the right to assert
that such forum is an inconvenient forum, and (iii) irrevocably consents to
the
jurisdiction of the New York State Supreme Court, County of New York, and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. Each of the Company and ▇▇▇▇▇ further agrees to
accept and acknowledge service of any and all process that may be served in
any
such suit, action or proceeding in the New York State Supreme Court, County
of
New York, or in the United States District Court for the Southern District
of
New York and agree that service of process upon it mailed by certified mail
to
its address shall be deemed in every respect effective service of process in
any
such suit, action of proceeding.
16. Successors
and Assigns.
The
benefits of the Agreement shall inure to the parties hereto, their respective
successors and assigns and to the indemnified parties hereunder and their
respective successors and assigns, and the obligations and liabilities assumed
in the Agreement shall be binding upon the parties hereto and their respective
successors and assigns. Notwithstanding anything contained herein to the
contrary, neither ▇▇▇▇▇ nor the company shall assign to an unaffiliated third
party of its obligations hereunder.
17. Press
Announcements.
The
company agrees that Maxim shall, upon a successful transaction, have the right
to place advertisement in financial and other newspapers and journals at its
own
expense describing its services to the Company hereunder, provided that ▇▇▇▇▇
shall submit a copy of any such advertisement to the Company for its approval,
such approval not be unreasonably withheld.
18. Notices.
All
notices will be in writing and will be effective when delivered in person or
sent via facsimile and confirmed by letter, to the party to whom it is addressed
at the following address or such other address as such party may advise the
other in writing:
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To
the Company:
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▇▇.
▇▇▇▇▇ ▇▇▇▇▇▇
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Chairman
and Chief Executive Officer
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▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
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Richland,
WA 99352
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Attention:
▇▇▇▇▇ ▇▇▇▇▇▇
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Phone:
▇▇▇-▇▇▇-▇▇▇▇
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Facsimile:
▇▇▇-▇▇▇-▇▇▇▇
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To
Maxim:
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▇▇.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Managing
Director
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Maxim
Group LLC
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▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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New
York, NY 10174
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Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
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Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
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[Signature
Page Follows]
If
the
foregoing correctly sets forth our agreement, please confirm this by signing
and
returning to us the duplicate copy of this letter.
We
appreciate this opportunity to be of service and are looking forward to working
with you on this matter.
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Very
truly yours,
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MAXIM
GROUP LLC
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By:
/s/ ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Managing Director
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By:
/s/ ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Director of Investment Banking
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By:
/s/
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
Chairman and Chief Executive Officer