EXHIBIT 10.3
[MAXIM GROUP LOGO]
November 2, 2004
Xx. Xxxxxxx Xxxxxxxx
President
Interactive Systems Worldwide, Inc.
0 Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxx Xxxxxxxx, XX 00000
Dear Xx. Xxxxxxxx:
The purpose of this letter agreement ("Agreement") is to confirm the
engagement of Maxim Group, LLC ("Maxim") by Interactive Systems Worldwide, Inc.
("Company") to act as the exclusive placement agent in connection with the
proposed offering ("Offering") of convertible preferred stock and warrants (the
"Securities") of the Company. The gross proceeds from the Offering will be U.S.
$3,000,000, and the terms of such Offering and the Securities will be
substantially as set forth in Exhibit B hereto.
1. Appointment.
(a) Subject to the terms and conditions of this Agreement, the Company
hereby retains Maxim, and Xxxxx xxxxxx agrees to act, as the Company's exclusive
placement agent in connection with the Offering. As placement agent Xxxxx will
advise and assist the Company in identifying, and assisting the Company in
issuing the Securities to, one or more potential investors ("Investors") in the
Offering. The Company acknowledges and agrees that Xxxxx's obligations hereunder
are on a "commercially reasonable efforts" basis only and 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 any proposals submitted to it by Xxxxx 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 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 contacts,
discussions and negotiations with third parties regarding any Investment
Proposal.
Members NASD & SIPC
000 Xxxxxxxxx Xxx. * New York, NY 10174 * tel (000) 000-0000 * (000) 000-0000
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[MAXIM GROUP LOGO]
2. Compensation and Expenses.
(a) In consideration of the services rendered by Xxxxx in connection
with the Offering, the Company agrees to pay Xxxxx the following compensation:
(i) A cash fee payable upon the closing of the transactions
contemplated by this Agreement ("Closing") equal to 6% of the gross
proceeds received by the Company at the Closing. A 5% cash fee payable
upon receipt by the Company of the gross proceeds resulting from the
exercise by any Investor of a warrant issued to such Investor in
connection with the Offering for cash, if any, provided that an
Investor Warrant exercise occurs on or before the expiration of the 30
month period commencing on the date of the Closing.
(ii) On the date of the Closing, the Company will issue to Maxim or
its designees warrants to purchase a number of shares of the common
stock of the Company ("Common Stock") as is determined by the following
formula: The number of warrants issued to Maxim shall be equal to 10%
of the quotient obtained by dividing the amount of the gross proceeds
that the Investors have delivered to the Company at the Closing by the
"Closing Price" (as hereinafter defined). These warrants will entitle
the holders thereof to purchase Common Stock, at an initial exercise
price equal to 120% of the Closing Price, during the five-year period
commencing on the date of the Closing. These warrants shall be callable
by the Company in the event of a merger or similar transaction where
the Company is not the surviving entity and the successor entity
demands that the warrants are extinguished at or prior to the
applicable closing. The "Closing Price" shall be equal to the average
of the 5 VWAPs of the Common Stock immediately prior to the date of the
Closing, as listed on the NASDAQ Small Cap market. These warrants will
be evidenced by a customary form of instrument received by placement
agents for private placements of this type; will not be exercisable
until at least 6 months and 1 day after the Closing Date; will provide
for unlimited piggyback registration rights; will contain a cashless
exercise provision; and will contain customary weighted average
anti-dilution protection; provided that the exercise price of the
warrants may not be less than the Closing Price until after the
Company's shareholders approve this transaction, which approval the
Company will seek at its next annual meeting of shareholders to be held
no later than March 31, 2005.
(iii) All amounts payable hereunder will be paid to Xxxxx out of an
escrow account established for the Closing or by such other means
acceptable to Maxim.
(b) In order to reimburse Maxim for its expenses, the Company has paid
to Maxim $10,000 toward its legal fees and expenses for the Offering. Such
$10,000 amount is in addition to the amount set forth in Exhibit B to be paid by
the Company to the Investors for their fees and expenses.
2
Members NASD & SIPC
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[MAXIM GROUP LOGO]
(c) The terms of Exhibit A attached hereto are incorporated by
reference for the benefit of Maxim and the Company.
3. Term of Engagement.
(a) This Agreement will remain in effect until the date that is 30 days
after the date hereof, after which either party shall have the right to
terminate it on two 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 by Xxxxx and disclosed
to the Company in writing within ten days after the Termination Date of this
Agreement (but not including any persons or entities who had invested in the
Company as part of the financing concluded on November 24, 2003), the Company
will pay to Maxim upon the closing of such financing the compensation set forth
in Section 2(a) as a "Source Fee".
(b) Notwithstanding anything herein to the contrary, the obligation to
pay the compensation and expenses described in Section 2 if any, and the Source
Fees described in Section 3(a), if any, and the provisions of Sections 4(b), and
9-15 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. Information.
(a) The Company recognizes that, in completing its engagement
hereunder, Xxxxx 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 promptly provide Maxim with
all relevant information about the Company (to the extent available to the
Company in the case of parties other than the Company) that is reasonably
requested by Xxxxx, which information will be accurate in all material respects
as of the time it is furnished. It is understood and agreed that in performing
under this engagement, Xxxxx 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.
Notwithstanding the foregoing, it is understood that Xxxxx will conduct a due
diligence investigation of the Company and the Company will reasonably cooperate
with such investigation as a condition of Xxxxx's obligations hereunder.
3
Members NASD & SIPC
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[MAXIM GROUP LOGO]
(b) Until the date that is one year from the date hereof, Xxxxx 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, Xxxxx independently of the Company and without breach of any of
Maxim's agreements with the Company; (ii) Maxim may disclose such information to
its employees and attorneys, and to its other advisors and financial sources on
a need to know basis only and will ensure that all such employees, attorneys,
advisors and financial sources will keep such information strictly confidential;
and (iii) pursuant to any order of a court of competent jurisdiction or other
governmental body or as may otherwise be required by law.
(c) 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 Xxxxx to participate in meetings and
discussions between the Company and any third party relating to the matters
covered by the terms of Xxxxx's engagement.
5. Securities Law Compliance. The Company, at its own expense, will obtain any
registration or qualification required to sell any Securities under the Blue Sky
laws of any applicable jurisdictions.
6. 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.
7. Confidentiality. The Company will not provide or release any information with
respect to this Agreement or the Offering except as required by law.
8. Representations and Warranties. The Company represents and warrants 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
the Company 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) the Company's
certificate of incorporation or by-laws or (ii) any agreement to which the
Company is a party or by which any of its property or assets is bound.
9. 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. Xxxxx 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
Xxxxx and the Company or their respective Boards of Directors. Xxxxx shall not
be considered to be the agent of the Company for any purpose whatsoever and
Xxxxx 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.
4
Members NASD & SIPC
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* fax (000) 000-0000 * xxx.xxxxxxxx.xxx
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[MAXIM GROUP LOGO]
10. 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.
11. 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.
12. 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.
13. Governing Law; Jurisdiction Law. This Agreement will be governed as to
validity, interpretation, construction, effect and in all other respects 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 Xxxxx 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 or proceeding.
14. Entire Agreement; Modification. This Agreement together with the attached
Exhibits A and B, supercedes, amends and restates in its entirety the letter
agreement entered into by the parties on October 22, 2004 and this agreement
constitutes the entire understanding and agreement between the parties with
respect to its subject matter and there are no agreements or understandings with
respect to the subject matter hereof which are not contained in this Agreement.
This Agreement may be modified only in writing signed by the party to be charged
hereunder.
5
Members NASD & SIPC
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[MAXIM GROUP LOGO]
15. 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 addresses or such other address as such party may
advise the other in writing:
To the Company: Xx. Xxxxx Xxxxxx
Interactive Systems Worldwide, Inc.
0 Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxx Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxxxx, Esq.
c/o Friedman Xxxxxx Xxxxxx & Xxxxxxx LLP
0000 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To Maxim: Maxim Group, LLC
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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Members NASD & SIPC
000 Xxxxxxxxx Xxx. * New York, NY 10174 * tel (000) 000-0000 * (000) 000-0000
* fax (000) 000-0000 * xxx.xxxxxxxx.xxx
New York, NY * Long Island, NY * Chicago, IL
[MAXIM GROUP LOGO]
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.
Very truly yours,
MAXIM GROUP, LLC
By: /s/ Xxxxxxx X. Xxxxxx
Name: XX. XXXXXXX X. XXXXXX
Title: HEAD OF INVESTMENT BANKING
INTERACTIVE SYSTEMS WORLDWIDE, INC.
By: /s/ Xxxxxxx Xxxxxxxx
Name: XX. XXXXXXX XXXXXXXX
Title: PRESIDENT
7
Members NASD & SIPC
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[MAXIM GROUP LOGO]
EXHIBIT A
INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless Maxim, any person
who controls Maxim within the meaning of the Securities Act, Section 20(a) of
the Exchange Act or any applicable statute, and each partner, director, officer,
employee, agent and representative of Maxim from and against any loss, damage,
expense, liability or claim, or actions or proceedings in respect thereof
(including, without limitation, reasonable attorneys' fees and expenses incurred
in investigating, preparing or defending against any litigation commenced) which
any such person may incur or which may be made or brought against any such
person, but only to the extent the same arises out of or is based upon: (i) any
breach of any of the agreements, representations or warranties of the Company
contained in or contemplated by this Agreement or the Offering Documents,
including, without limitation, those arising out of or based on any alleged
untrue statement of a material fact contained in the Offering Documents or
omission to state a material fact required to be stated in the Offering
Documents or necessary in order to make the statements appearing therein not
misleading in the light of the circumstances in which they were made, (ii) any
violation of any federal or state securities laws attributable to the Offering,
(iii) any violation of law by the Company or any affiliate of the Company, or
any director, officer, employee, agent or representative of any of them, related
to or arising out of the Offering or (iv) Maxim's entering into or performing
services under this Agreement, or arising out of any other matter referred to in
this Agreement. This indemnity agreement by, and the agreements, warranties and
representations of, the Company shall survive the offer, sale and delivery of
the Securities and the termination of this Agreement and shall remain in full
force and effect regardless of any investigation made by or on behalf of any
person indemnified hereunder, and termination of this Agreement and acceptance
of any payment for the Securities hereunder.
(b) Xxxxx agrees to indemnify and hold harmless the Company and its
affiliates, any person who controls any of them within the meaning of the
Securities Act, Section 20(a) of the Exchange Act or any applicable statute, and
each officer, director, employee, agent and representative of the Company or any
of its affiliates from and against any loss, damage, expense, liability or claim
or actions or proceedings in respect thereof (including, without limitation,
reasonable attorneys' fees and expenses incurred in investigating, preparing or
defending against any litigation commenced) which any such person may incur or
which may be made or brought against any such person, but only to the extent the
same arises out of or is based upon: (i) any breach of any of the agreements,
representations or warranties of Maxim contained in this Agreement or (ii) any
alleged untrue statement of a material fact in any information provided to the
Company in writing by Xxxxx, expressly for use in and used in the Offering
Documents. This indemnity agreement by, and the agreements, warranties and
representations of, Xxxxx shall survive the offer, sale and delivery of the
Securities and the termination of this Agreement and shall remain in full force
and effect regardless of any investigation made by or on behalf of any person
indemnified hereunder, and termination of this Agreement and acceptance of any
payment for the Securities hereunder.
8
Members NASD & SIPC
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[MAXIM GROUP LOGO]
(c) If any action is brought against a party (the "INDEMNIFIED PARTY")
in respect of which indemnity may be sought against one or more other parties
(the "INDEMNIFYING PARTY" or "INDEMNIFYING PARTIES"), the Indemnified Party
shall promptly notify the Indemnifying Party or Parties in writing of the
institution of such action; provided, however, the failure to give such notice
shall not release the Indemnifying Party or Parties from its or their obligation
to indemnify the Indemnified Party hereunder except to the extent the
Indemnifying Party actually incurs substantial damage by reason of such failure
and shall not release the Indemnifying Party or Parties from any other
obligations or liabilities to the Indemnified Party in any event. The
Indemnifying Party or Parties may at its or their own expense elect to assume
the defense of such action, including the employment of counsel reasonably
acceptable to the Indemnified Party; provided, however, that no Indemnifying or
Indemnified Party shall consent to the entry of any judgment or enter into any
settlement by which the other party is to be bound without the prior written
consent of such other party, which consent shall not be unreasonably withheld.
In the event the Indemnifying Party or Parties assume a defense hereunder, the
Indemnified Party shall be entitled to retain its own counsel in connection
therewith and, except as provided below, shall bear the fees and expenses of any
such counsel, and counsel to the Indemnified Party or Parties shall cooperate
with such counsel to the Indemnifying Party in connection with such proceeding.
If an Indemnified Party reasonably determines that there are or may be differing
or additional defenses available to the Indemnified Party which are not
available to the Indemnifying Party, or that there is or may be a conflict
between the respective positions of the Indemnifying Party and of the
Indemnified Party in conducting the defense of any action, then the Indemnifying
Party shall bear the reasonable fees and expenses of any counsel retained by the
Indemnified Party in connection with such proceeding. All references to the
Indemnified Party contained in this paragraph (c) include, and extend to and
protect with equal effect, any persons who may control the Indemnified Party
within the meaning of the Securities Act, Section 20(a) of the Exchange Act or
any applicable statute, any successor to the Indemnified Party and each of its
partners, officers, directors, employees, agents and representatives. The
indemnity agreements set forth in this Exhibit A shall be in addition to any
other obligations or liabilities of the Indemnifying Party or Parties hereunder
or at common law or otherwise. Notwithstanding anything herein to the contrary,
in no event shall Maxim be obligated to indemnify any person or entity in an
amount in excess of the gross consideration received by Xxxxx for services
rendered hereunder.
(d) If recovery is not available under the foregoing indemnification
provisions of Exhibit A, for any reason other than as specified therein, the
party entitled to indemnification by the terms thereof shall be entitled to
contribution to losses, damages, liabilities and expenses of the nature
contemplated by such indemnification provisions. In determining the amount of
such contribution, there shall be considered the relative benefits received by
the Company, on the one hand, and the Maxim, on the other hand, from the
Offering (which shall be deemed to be the portion of the proceeds of the
Offering realized by each party), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any statement or omission, the relative
culpability of the parties, the relative benefits received by the parties and
any other equitable considerations appropriate under the circumstances. No party
shall be liable for contribution with respect to any action or claim settled
without its consent. Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Exhibit A, notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Exhibit A or otherwise. For
purposes of this Exhibit A, each person, if any, who controls a party to this
Agreement within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act shall have the same rights to contribution as that
party to this Agreement. Notwithstanding the foregoing, in no event will the
aggregate contribution by Xxxxx xxxxxxxxx exceed the amount of fees actually
received by Xxxxx pursuant to this Agreement. The reimbursement, indemnity and
contribution obligations of the Company hereinabove set forth shall be in
addition to any liability which the Company may otherwise have and these
obligations and the other provisions hereinabove set forth shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, Xxxxx and any other Indemnified Person.
9
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[MAXIM GROUP LOGO]
(e) In any claim for indemnification for United States Federal or state
securities law violations, the party seeking indemnification shall place before
the court the position of: (i) the SEC and (ii) if applicable, any state
securities commissioner or agency having jurisdiction with respect to the issue
of indemnification for securities law violations.
10
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