Punk, Ziegel & Company, L.P. Letterhead]
[Punk,
▇▇▇▇▇▇ & Company, L.P. Letterhead]
March
14,
2007
CONFIDENTIAL
▇▇▇▇▇
▇▇▇▇▇▇
Chief
Executive Officer and Chairman
▇▇▇
▇▇▇▇▇
▇▇., ▇▇▇▇▇ ▇▇▇
Richland
, WA 99354
Dear
▇▇.
▇▇▇▇▇▇:
This
letter (the “Agreement”) confirms that Punk, ▇▇▇▇▇▇ & Company, L.P. (“Punk,
▇▇▇▇▇▇ & Company”) will, subject to the second paragraph of this Agreement,
act as exclusive financial advisor and lead placement agent to IsoRay, Inc.
(together with its subsidiaries and affiliates, “IsoRay” or the “Company”) in
connection with the offering and sale of up to twenty million dollars
($20,000,000) of equity or equitylike securities of IsoRay (the "Securities”) to
investors (the “Potential Transaction”), on the terms and conditions set forth
below.
Subject
to the terms and conditions of this Agreement, the Company hereby appoints
Punk,
▇▇▇▇▇▇ & Company to place the Securities in an amount and on terms and
conditions satisfactory to the Company. Punk, ▇▇▇▇▇▇ & Company hereby
accepts such agency and agrees on the terms of this Agreement to use its
best
efforts to privately place the Securities with potential investors. The Company
shall promptly refer to Punk, ▇▇▇▇▇▇ & Company all offers, inquiries and
proposals relating to any placement of the Securities made at any time.
Notwithstanding anything to the contrary contained in this Agreement, the
Company may retain Maxim Group LLC ("Maxim") as a co-placement agent in
connection with the placement of the Securities.
This
Agreement supersedes the Engagement Agreement dated January 26, 2006 between
the
parties hereto (the "Original Letter"), and upon execution and delivery by
the
parties of this Agreement, the Original Letter shall terminate.
1. Services
to be Rendered. Punk,
▇▇▇▇▇▇ & Company agrees, on the terms and conditions set forth herein, and
subject to the performance by the Company of all its obligations hereunder
and
the completeness and accuracy, in all material respects, of the representations
and warranties of the Company set forth herein, to act as exclusive financial
advisor to the Company (subject to the second paragraph of this Agreement),
and
in that regard to (i) assist the Company in the preparation of a summary
business description, (ii) at the Company’s request, be available to the Board
of Directors to discuss a Potential Transaction and its financial implications,
(iii) assist the Company in structuring the Securities, (iv) market the
Securities on a best efforts basis and assist in negotiating the terms of
the
Securities, (v) on behalf of the Company, coordinate the due diligence effort
of
potential Investors and (vi) assist the Company in negotiation of the final
terms of the Potential Transaction.
Punk,
▇▇▇▇▇▇ & Company agrees, on the terms and conditions set forth herein, and
subject to the performance by the Company of all its obligations hereunder
and
the completeness and accuracy, in all material respects, of the representations
and warranties of the Company set forth herein, to act as a Placement Agent,
with ▇▇▇▇▇, to assist the Company in identifying and contacting possible
parties
to a Potential Transaction (“Investors”).
2. Compensation.
For
Punk, ▇▇▇▇▇▇ & Company’s services hereunder, the Company agrees to pay Punk,
▇▇▇▇▇▇ & Company (a) a non-refundable cash retainer fee (the “Retainer Fee”)
of forty thousand dollars ($40,000) and (b) a placement fee (the “Placement
Fee”) equal to three point three percent (3.30% or 55% of the 6.0% cash fee
payable to the placement agents) of the aggregate gross proceeds of the
Securities placed, payable in full, in cash, upon the closing of the sale
of any
of the Securities. The Retainer Fee will be creditable against the payment
of a
Placement Fee.
The
Company shall deliver a warrant, or, if so requested, warrants, to Punk,
▇▇▇▇▇▇
& Company and/or its designees (the “Agent Warrant”), which Agent’s Warrant
shall be exercisable to purchase additional Securities equal to two point
two
five percent (2.25% or 45% of the 5% total warrants payable to the placement
agents rounded to the nearest higher whole number) of the total number of
shares
sold to the Investors. Any fractional shares shall be rounded to the nearest
whole number. 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 closing of 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 Punk, ▇▇▇▇▇▇ & Company and its
counsel.
For
a
period of twelve months following the closing of the sale of any of the
Securities, Punk, ▇▇▇▇▇▇ & Company will have a right of first refusal (i) to
act as the Company’s exclusive financial advisor with regard to any privately
negotiated sales of the Company’s equity securities in excess of five million
dollars ($5,000,000) or financing required to consummate any merger,
acquisition, change of control transaction or sale of all or substantially
all
of the assets of the Company and (ii) to act as a managing underwriter of
any
public offering of the Company’s equity securities.
3. Expenses.
In
addition to any fees that may be payable hereunder and regardless of whether
or
not any Potential Transaction is consummated, the Company shall reimburse
Punk,
▇▇▇▇▇▇ & Company from time to time, upon request (but not less frequently
than monthly), for (i) travel and other out-of-pocket expenses, up to a maximum
of $35,000, incurred in connection with Punk, ▇▇▇▇▇▇ & Company’s engagement
hereunder and under the Original Letter, plus (ii) including the reasonable
fees, expenses and other charges of its legal counsel. Any individual expenses
under clause (i) above that are greater than $5,000 and any aggregate expenses
under such clause in excess of $35,000, shall require prior authorization
by the
Company.
4. Information.
The
Company will furnish Punk, ▇▇▇▇▇▇ & Company such information with respect to
the Company and access to such Company personnel and representatives, including
the Company’s auditors and counsel, as Punk, ▇▇▇▇▇▇ & Company may request in
order to permit Punk, ▇▇▇▇▇▇ & Company to advise the Company and to assist
the Company in preparing any informational materials it may deem necessary
for
use in connection with the Potential Transaction ("Offering Materials").
The
Company will be solely responsible for the contents of the Offering Materials
and any other information provided to potential Investors with the approval
of
the Company. The Company represents and warrants to Punk, ▇▇▇▇▇▇ & Company
that such information will not contain any untrue statement of a material
fact
or omit to state a material fact necessary to make the statements therein,
in
light of the circumstances under which they were made, not misleading. The
Company agrees to advise Punk, ▇▇▇▇▇▇ & Company promptly upon the Company
becoming aware of the occurrence of any event or change in circumstance that
results or might reasonably be expected to result in such information containing
any untrue statement of a material fact or omitting to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company authorizes Punk, ▇▇▇▇▇▇
&
Company to provide such information to potential Investors in a Potential
Transaction. The Company and Punk, ▇▇▇▇▇▇ & Company shall jointly approve
every form of letter, circular, notice, memorandum or other written
communication from the Company or any person acting on its behalf in connection
with a Potential Transaction.
5. Termination and
Survival.
This
Agreement shall terminate on the first anniversary of the execution thereof,
subject to the extension thereafter as may be agreed in writing by the parties,
but either party hereto may terminate this Agreement at any time upon 30
days’
prior written notice. Notwithstanding the foregoing, it is understood that
the
provisions of paragraphs 2 (to the extent fees are payable irrespective of
whether a transaction is consummated), 3 (to the extent expenses have been
incurred prior to termination), 4 (the second and third sentences only),
5, 6,
7, 8, 9, 10 and 11 of this Agreement shall remain operative and in full force
and effect regardless of (i) any investigation made by or on behalf of Punk,
▇▇▇▇▇▇ & Company or any Indemnified Person (as defined in the
Indemnification Agreement (which is hereafter defined)), (ii) the consummation
of any Potential Transaction or (iii) any termination of this Agreement.
In
addition, if within twelve (12) months following the termination of this
Agreement any Potential Transaction is consummated with any Investor contacted
by Punk, ▇▇▇▇▇▇ & Company during the term of this Agreement or the Company
or any of its affiliates enter into an agreement regarding a Potential
Transaction which at any time thereafter results in a Potential Transaction
being consummated with any Investor contacted by Punk, ▇▇▇▇▇▇ & Company
during the term of this Agreement, the Company shall pay, in full, the
Transaction Fee as provided for in paragraph 2. In the event that any similar
financing transaction or 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 Punk, ▇▇▇▇▇▇ & Company during the
term of this Agreement, the Company shall pay to Punk, ▇▇▇▇▇▇ & Company a
mutually agreed upon fee reflecting industry standards for such transactions
of
such type. Punk, ▇▇▇▇▇▇ & Company shall provide a complete list of those
parties contacted regarding an investment in IsoRay 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
6. Confidentiality
of Advice; Publicity.
Except
as otherwise provided in this paragraph, any written or other advice rendered
by
Punk, ▇▇▇▇▇▇ & Company pursuant to its engagement hereunder is solely for
the use and benefit of the Company and shall not be publicly disclosed in
whole
or in part, in any manner or summarized, excerpted from or otherwise publicly
referred to or made available to third parties, other than representatives
and
agents of the Company who also shall not disclose such information, in each
case, without Punk, ▇▇▇▇▇▇ & Company’s prior approval, unless in the opinion
of counsel and after consultation with ▇▇▇▇, ▇▇▇▇▇▇ & Company, such
disclosure is required by law. In addition, Punk, ▇▇▇▇▇▇ & Company may not
be otherwise publicly referred to without its prior written
consent.
Upon
consummation of the Potential Transaction, Punk, ▇▇▇▇▇▇ & Company may, at
its own expense, place announcements or advertisements in financial newspapers
and journals describing its services hereunder; provided, however, that Punk,
▇▇▇▇▇▇ & Company receives prior approval by the Company (which approval
shall not be unreasonably withheld) for any such announcement or advertisements.
The
Company acknowledges that Punk, ▇▇▇▇▇▇ & Company and its affiliates are in
the business of providing financial services and consulting advice to others.
Nothing herein contained shall be construed to limit or restrict Punk, ▇▇▇▇▇▇
& Company in conducting such business with respect to others, or in
rendering such advice to others, except as such advice may relate to matters
relating to the Company’s business and properties and that might compromise
confidential information delivered by the Company to Punk, ▇▇▇▇▇▇ &
Company.
7. Obligations
Limited.
Punk,
▇▇▇▇▇▇ & Company shall have no obligation to make any independent appraisals
of assets or liabilities or any independent verification of the accuracy
or
completeness of any information provided it in the course of this engagement
and
shall have no liability in regard thereto.
8. Third
Party Beneficiaries.
This
Agreement and the Indemnification Agreement are made solely for the benefit
of
the Company, Punk, ▇▇▇▇▇▇ & Company and other Indemnified Persons and their
respective successors, assigns, heirs and personal representatives, and no
other
person shall acquire or have any right under or by virtue of this Agreement
or
the Indemnification Agreement.
9. Representations
and Warranties.
The
Company represents and warrants that this Agreement has been duly authorized,
executed and delivered by the Company and constitutes a legal, valid and
binding
obligation of the Company.
10. Indemnification.
In
connection with and as part of the engagement contemplated herein, the parties
have entered in to a separate indemnification agreement (the "Indemnification
Agreement"), which sets forth certain other agreements between the parties
hereto. In the event of any conflict between this Agreement and the
Indemnification Agreement, the terms and provisions of the Indemnification
Agreement shall control and this Agreement shall be deemed to be amended
and
modified accordingly.
11. Miscellaneous.
The
Agreement shall be governed by and construed in accordance with the laws
of the
State of New York, without regard to its principles of conflicts of laws.
The
Company hereby irrevocably submits to the exclusive jurisdiction of the federal
and state courts located in the Borough of Manhattan in connection with any
action, suit or proceeding under, arising out of or otherwise relating to
this
Agreement, and waives any objection or defense that it may have to the laying
of
such venue. Punk, ▇▇▇▇▇▇ & Company hereby agrees, and the Company hereby
agrees on its own behalf and, to the extent permitted by applicable law,
on
behalf of its security holders, to waive any right to trial by jury with
respect
to any claim, counterclaim or action arising out of the engagement, Punk,
▇▇▇▇▇▇
& Company’s performance thereof or this Agreement.
We
are
delighted to work with you on this assignment. Please confirm that the foregoing
correctly sets forth our agreement and your intent to be bound by and to
perform
the terms hereof by signing and returning to us the enclosed duplicate of
this
Agreement. In addition, please sign and return to us a copy of the
Indemnification Agreement.
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Very
truly yours,
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Punk,
▇▇▇▇▇▇ & Company, L.P.
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By:
/s/ ▇▇▇▇▇ ▇.
▇▇▇▇▇▇
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Accepted
and Agreed to
as
of the
date hereof:
By: /s/
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
CEO/Chairman
INDEMNIFICATION
AGREEMENT
In
connection with the engagement of Punk, ▇▇▇▇▇▇ & Company, L.P ("Punk, ▇▇▇▇▇▇
& Company") by IsoRay, Inc. pursuant to a letter agreement, dated March 14,
2007, between IsoRay (the “Company”) and Punk, ▇▇▇▇▇▇ & Company (the
"Engagement Agreement"), Punk ▇▇▇▇▇▇ & Company and the Company hereby agree
as set forth herein. For purposes of the remainder of this Indemnification
Agreement, unless the context otherwise requires, "Punk, ▇▇▇▇▇▇ & Company"
shall include Punk, ▇▇▇▇▇▇ & Company, any affiliated entity, and each of
their respective officers, directors, employees, partners and controlling
persons within the meaning of the federal securities laws and the successors,
assigns, heirs and personal representatives of the foregoing persons
(collectively, the “Indemnified Persons”).
The
Company will indemnify Punk, ▇▇▇▇▇▇ & Company against any losses, claims,
damages, liabilities, costs and expenses (including, without limitation,
any
legal or other expenses incurred in connection with investigating, preparing
to
defend or defending against any action, claim, suit or proceeding, whether
commenced or threatened and whether or not Punk, ▇▇▇▇▇▇ & Company is a party
thereto, or in appearing or preparing for appearance as a witness), based
upon,
relating to or arising out of or in connection with advice or services rendered
or to be rendered pursuant to the Engagement Agreement or the Original Letter,
the transaction contemplated thereby or Punk, ▇▇▇▇▇▇ & Company’s actions or
inactions in connection with any such advice, services or transaction
(including, but not limited to, any liability arising out of (i) any
misstatement or alleged misstatement of a material fact in any offering
materials (including any "Offering Materials" (as defined in the Engagement
Agreement)) and (ii) any omission or alleged omission from any offering
materials (including any "Offering Materials" (as defined in the Engagement
Agreement")), including, without limitation of a material fact necessary
to make
the statements therein, in light of the circumstances under which they were
made, not misleading), except to the extent that any such loss, claim, damage,
liability, cost or expense results solely from the gross negligence or bad
faith
of Punk, ▇▇▇▇▇▇ & Company in performing the services which are the subject
of the Engagement Agreement. If for any reason the foregoing indemnification
is
unavailable to Punk, ▇▇▇▇▇▇ & Company or insufficient to hold it harmless,
then the Company shall contribute to the amount paid or payable by Punk,
▇▇▇▇▇▇
& Company as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative benefits received by
the
Company and its stockholders on the one hand and Punk, ▇▇▇▇▇▇ & Company on
the other hand, or, if such allocation is not permitted by applicable law,
not
only such relative benefits but also the relative fault of the Company and
Punk,
▇▇▇▇▇▇ & Company, as well as any relevant equitable considerations;
provided, however, that, to the extent permitted by applicable law, Punk,
▇▇▇▇▇▇
& Company shall not be responsible for amounts which in the aggregate are in
excess of the amount of all fees actually received from the Company in
connection with the engagement. No person guilty of fraudulent misrepresentation
(as such term has been interpreted under Section 11(f) of the Securities
Act of
1933) shall be entitled to contribution from any person who was not guilty
of
such fraudulent misrepresentation. Relative benefits to Punk, ▇▇▇▇▇▇ &
Company, on the one hand, and the Company and its stockholders, on the other
hand, with respect to the engagement shall be deemed to be in the same
proportion as (i) the total value paid or proposed to be paid or received
or
proposed to be received by the Company or its stockholders, as the case may
be,
pursuant to the Potential Transaction, whether or not consummated, contemplated
by the engagement bears to (ii) all fees paid to Punk, ▇▇▇▇▇▇ & Company by
the Company in connection with the engagement. Punk, ▇▇▇▇▇▇ & Company shall
not have any liability to the Company in connection with the engagement,
except
to the extent of its gross negligence or willful misconduct.
The
Company also agrees to promptly upon demand reimburse Punk, ▇▇▇▇▇▇ & Company
for its legal and other expenses reasonably incurred by it in connection
with
investigating, preparing to defend, or defending any lawsuits, investigations,
claims or other proceedings in connection with any matter referred to in
or
otherwise contemplated by the Engagement Agreement or the Original Letter;
provided, however, that in the event a final judicial determination is made
to
the effect that Punk, ▇▇▇▇▇▇ & Company is not entitled to indemnification
hereunder, Punk, ▇▇▇▇▇▇ & Company will remit to the Company any amounts that
have been so reimbursed.
The
Company shall not be liable for any settlement of any action, claim, suit
or
proceeding (or for any related losses, damages, liabilities, costs or expenses)
if such settlement is effectuated without its written consent, which shall
not
be unreasonably withheld. The Company further agrees that it will not settle
or
compromise or consent to the entry of any judgment in any pending or threatened
action, claim, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not Punk, ▇▇▇▇▇▇ & Company
is a party therein) unless the Company has obtained an unconditional release
of
Punk, ▇▇▇▇▇▇ & Company, from all liability arising therefrom. The
reimbursement, indemnity and contribution obligations of the Company set
forth
in this Indemnification Agreement shall be in addition to any liability which
the Company may otherwise have to Punk, ▇▇▇▇▇▇ & Company.
The
Company represents and warrants that this Indemnification Agreement has been
duly authorized, executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company.
Any
Indemnified Persons that are not signatories to this Indemnification Agreement
shall be deemed to be third party beneficiaries of this Agreement.
This
Indemnification Agreement shall be governed by and construed in accordance
with
the laws of the State of New York, without regard to its principles of conflicts
of laws. The Company hereby irrevocably submits to the exclusive jurisdiction
of
the federal and state courts located in the Borough of Manhattan in connection
with any action, suit or proceeding under, arising out of or otherwise relating
to this Indemnification Agreement, and waives any objection or defense that
it
may have to the laying of such venue. Punk, ▇▇▇▇▇▇ & Company and the Company
each hereby agrees to waive any right to trial by jury with respect to any
claim, counterclaim or action arising out of this Indemnification
Agreement.
This
Indemnification Agreement shall survive any termination of the Engagement
Letter.
Entered
in to on the 14th day of March, 2007.
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Punk,
▇▇▇▇▇▇ & Company, L.P.
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By:
/s/ ▇▇▇▇▇ ▇.
▇▇▇▇▇▇
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IsoRay,
Inc.
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By: /s/
▇▇▇▇▇ ▇.
▇▇▇▇▇▇
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CEO/Chairman
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