XXXX XXXXX & COMPANY, INC.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Tel (000) 000-0000
Fax (000) 000-0000
July 29, 1999
Xx. Xxxxx X. Xxxxxxxxx
President & CEO
Isonics Corporation
0000 XxXxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Re: INVESTMENT BANKING AGREEMENT
Gentlemen:
1. Isonics Corporation and/or related entities (the "Company") hereby
engages Xxxx Xxxxx & Company, Inc. ("Xxxx Xxxxx") to provide investment
banking services on a non-exclusive basis under the terms described herein.
Xxxx Xxxxx will provide investment banking services that the Company may
reasonably request including providing advice concerning relations with
securities analysts, the evaluation of potential public or private financing,
acquisitions, purchases or sales of major assets and mergers that have been
proposed to the Company and those which may be proposed to the Company in the
future. We shall not be responsible, of course, for your effectuating any
particular transaction. In the event we perform any functions other than
acting as your agent hereunder, such as obtaining funds for you or placing
your securities, acting as tender agent or arranging for acquisitions or
mergers, we shall be entitled to such compensation for such services as we
may hereafter agree upon, in addition to the compensation provided for in the
next paragraph; however, inability to reach agreement shall not be deemed a
breach hereof.
2. In consideration of the execution and delivery of this investment
banking agreement, the Company will irrevocably issue to Xxxx Xxxxx warrants
to purchase 500,000 (five hundred thousand) shares of the Company's common
stock ("Common Stock") at a price of U.S. $3.75 (three dollars and
seventy-five cents) per share. All warrants referred to herein will be
substantially in the form attached hereto as Exhibit A and will be
exercisable from the date of issuance and will expire three years from the
date of issuance. The rights granted pursuant to the warrant shall not be
affected by the performance of services hereunder or payment of other
compensation for such services.
XXXX XXXXX & COMPANY, INC.
3. In the event the Company consummates a transaction(s) (such as a merger
or sale of the Company a sale by the Company of all or substantially all of
its assets, an acquisition of another company, a public or private financing
of the Company, a joint venture or licensing arrangement or similar
transaction) during the period set forth in Section 6 below and Xxxx Xxxxx
initiated the transaction, identified or had conversations with the other
party (at the request of the Company) to the transaction or otherwise
rendered any services in connection with the transaction (each a "Consummated
Transaction"), Xxxx Xxxxx shall be entitled to receive, and the Company
agrees to pay Xxxx Xxxxx, the following compensation:
The Company shall pay to Xxxx Xxxxx an investment banking fee equal to five
percent (5%) of the value of the first five million dollars ($5,000,000) of
the Consummated Transaction and two percent (2%) of the value thereof in
excess of five million dollars ($5,000,000). The fee due to Xxxx Xxxxx
shall be paid by the Company in cash at the closing of the Consummated
Transaction, without regard to whether the Consummated Transaction involves
payment in cash, in stock, or a combination of cash and stock, or is made
on an installment basis. In the case of a leveraged buyout or leveraged
transaction, the value of the Consummated Transaction shall include all
funds borrowed or debt incurred or assumed by the acquiring or acquired
entity. In the event a Consummated Transaction is consummated in one or
more steps, including, without limitation, by way of a two step merger or
royalty arrangement, the value of any additional consideration paid or to
be paid in any subsequent step in the Consummated Transaction whether in
the form of (i) property, (ii) capital stock (and any securities
convertible into, or options, warrants or other rights to acquire, such
capital stock) or (iii) the assumption, directly or indirectly (by
operation of law, or otherwise), or repayment of indebtedness and other
liabilities, shall be included in the value of the Consummated Transaction
for purposes of calculating Xxxx Xxxxx'x fee pursuant to this paragraph.
If all or a portion of the consideration paid in the Consummated
Transaction is other than cash or securities, then the value of such non-
cash consideration shall be the fair market value thereof on the date the
Consummated Transaction is consummated as mutually agreed upon in good
faith by the Company's Board of Directors and Xxxx Xxxxx. If such non-cash
consideration consists of common stock, options, warrants or rights for
which a public trading market existed prior to the consummation of the
Consummated Transaction, then the value of such securities shall be
determined by the closing or last sales price thereof on the date of the
consummation of the Consummated Transaction; provided, however, that if
such non-cash consideration consists of newly-issued, publicly-traded
common stock, options, warrants or rights for which no public trading
market existed prior to the consummation of the Consummated Transaction,
then the value thereof shall be the average of the closing prices for the
twenty (20) trading days subsequent to the fifth trading day after the
consummation of the Consummated Transaction. In such event, the fee
payable to Xxxx Xxxxx pursuant to this paragraph shall be paid on the 30th
trading day subsequent to consummation of the Consummated Transaction. If
no public market exists for the common stock, options, warrants or other
rights issued in the Consummated Transaction, then the value thereof shall
be as mutually agreed upon in good faith by the Company's Board of
Directors and Xxxx Xxxxx. If the non-cash consideration paid in the
Consummated Transaction consists of preferred stock or debt securities
(regardless of whether a public trading market existed for such preferred
stock or debt securities prior to the consumma-
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XXXX XXXXX & COMPANY, INC.
tion of the Consummated Transaction or exists thereafter), the value
thereof shall be the face or principal amount, as the case may be. Any
amounts payable by a party to the Consummated Transaction, any
shareholder of such party or any affiliate of either such party or any
shareholder of such party in connection with a non-competition,
employment, consulting, joint venture, licensing, supply or other
agreement shall be deemed to be part of the value of the Consummated
Transaction. If all or a portion of the consideration payable in
connection with the Consummated Transaction includes contingent future
payments, then the Company shall pay to Xxxx Xxxxx upon consummation of
such Consummated Transaction, an additional cash fee, determined in
accordance with this paragraph based upon the present value of the
reasonably expected maximum amount of such contingent future payments
(as such amount is determined in good faith between the Company and Xxxx
Xxxxx) using a discount rate of ten percent (10%). However, in the
event of an installment purchase at a fixed price and a fixed time
schedule, the Company agrees to pay Xxxx Xxxxx, upon consummation of the
Consummated Transaction, a cash fee determined in accordance with this
paragraph based upon the present value of such installment payments
using a discount rate of ten percent (10%). Any disputes concerning
value of a Consummated Transaction or any component thereof shall be
resolved by an investment banking firm or other professional valuation
firm mutually agreed upon by the parties (or if the parties fail to
agree on such firm, then such a firm chosen by the investment banking
firm chosen by each party), whose determination of value shall be final
and binding on the parties.
4. In order to coordinate efforts to effect a Consummated Transaction, in
the event that either Xxxx Xxxxx initiates a transaction or the Company
requests investment banking services for a particular transaction pursuant to
this Agreement, neither the Company nor any other person acting on the
Company's behalf shall, directly or indirectly (except through Xxxx Xxxxx),
solicit any offer from any party to enter into such a transaction. In the
event that, during the period of the engagement of Xxxx Xxxxx hereunder, the
Company or any of its officers, directors, employees or representatives are
contacted by or on behalf of any party concerning the possibility of a
transaction, the Company will promptly so inform Xxxx Xxxxx in order that
Xxxx Xxxxx can evaluate such party and its interest and assist the Company,
including assisting the Company in any subsequent discussions.
5. In the event that for any reason the Company shall fail to pay to Xxxx
Xxxxx all or any portion of any fees payable hereunder when due, interest
shall accrue and be payable on the unpaid cash balance hereunder from the
date then first due through and including the date when actually collected by
Xxxx Xxxxx, at a rate equal to fourteen percent (14%) per year.
6. This Agreement shall be effective on the date hereof and shall be in
effect for a minimum of one year following the date hereof. After this one
year anniversary, this Agreement shall remain in effect until thirty (30)
days after written notice is given by either party to terminate this
Agreement. Notwithstanding anything herein to the contrary, if the Company
shall, within one year immediately following the termination of the
Agreement, conclude a Consummated Transaction based on any transaction that
was initiated prior to the termination of the Agreement, the Company shall
also pay Xxxx Xxxxx the fee determined above.
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XXXX XXXXX & COMPANY, INC.
7. (a) The Company agrees to indemnify and hold harmless Xxxx Xxxxx, its
directors, officers, employees, legal counsel, agents and stockholders, (all
of such persons being hereinafter collectively referred to as the
"Indemnified Parties") against any and all losses, claims, damages,
obligations, penalties, judgments, awards, liabilities, costs, expenses and
disbursements (and any and all actions, suits, proceedings and investigations
in respect thereof and any and all legal and other costs, expenses and
disbursements reasonably incurred in giving testimony or furnishing documents
in response to a subpoena or otherwise), including, without limitation, the
reasonable costs, expenses and disbursements, as and when incurred, of
investigating, preparing or defending any such action, suit, proceeding or
investigation (whether or not in connection with litigation in which an
Indemnified Party is a party), directly or indirectly caused by, relating to,
based upon, arising out of or in connection with (a) Xxxx Xxxxx'x acting for
the Company, including, without limitation, any act or omission by an
Indemnified Party in connection with its acceptance of or the performance or
nonperformance of its obligations under the Agreement, as it may be amended
from time to time; (b) any untrue statement or alleged untrue statement of
material fact contained in, or omissions or alleged omissions from, any
information furnished to an Indemnified Party, an investor, lender, provider
of funding or any party to the transaction; or (c) any Consummated
Transaction, PROVIDED, HOWEVER, such indemnity agreement shall not apply to
any portion of any such loss, claim, damage, obligation, penalty, judgment,
award, liability, cost, expense or disbursement to the extent it is found in
a final judgment by a court of competent jurisdiction (not subject to further
appeal) to have resulted primarily and directly from the gross negligence or
willful misconduct of the particular Indemnified Party. The Company also
agrees that an Indemnified Party shall not have any liability (whether direct
or indirect, in contract or tort or otherwise) to the Company or to any
person claiming through the Company for or in connection with the engagement
of Xxxx Xxxxx, except to the extent that any such liability is found in a
final judgment by a court of competent jurisdiction (not subject to further
appeal) to have resulted primarily and directly from Xxxx Xxxxx'x gross
negligence or willful misconduct.
(b) The provisions shall be in addition to any liability the Company
may otherwise have to any of the Indemnified Parties.
(c) If any action, suit, proceeding or investigation is commenced, as
to which an Indemnified Party proposes to demand indemnification, it shall
notify the Company with reasonable promptness; PROVIDED, HOWEVER, that any
failure by an Indemnified Party to notify the Company shall not relieve the
Company from its obligations hereunder. Each Indemnified Party shall have
the right to retain counsel of its own choice to represent it, and the
Company shall pay the fees, expenses and disbursements of such counsel; and
such counsel shall to the extent consistent with its professional
responsibilities cooperate with the Company and any counsel designated by the
Company. The Company shall be liable for any settlement of any claim against
an Indemnified Party made with the Company's written consent, which consent
shall not be unreasonably withheld. The Company shall not, without the prior
written consent of an Indemnified Party, settle or compromise any claim, or
permit a default or consent to the entry of any judgment in respect thereof,
unless such settlement, compromise or consent includes, as an unconditional
term thereof, the giving by the claimant to the respective Indemnified Party
of an unconditional release from all liability in respect of such claim.
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XXXX XXXXX & COMPANY, INC.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Indemnification Provisions is made but it
is found in a final judgment by a court of competent jurisdiction (not
subject to further appeal) that such indemnification may not be enforced in
such case, even though the express provisions hereof provide for
indemnification in such case, then the Company, on the one hand, and the
respective Indemnified Party or Indemnified Parties, as applicable on the
other hand, shall contribute to the losses, claims, damages, obligations,
penalties, judgments, awards, liabilities, costs, expenses and disbursements
to which the indemnified persons may be subject in accordance with the
relative benefits received by the Company, on the one hand, and the
respective Indemnified Party or Indemnified Parties, as applicable on the
other hand, and also the relative fault of the Company, on the one hand, and
the respective Indemnified Party or Indemnified Parties, as applicable on the
other hand, in connection with the statements, acts or omissions which
resulted in such losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses and disbursements and the relative
equitable considerations shall also be considered. No person found liable
for a fraudulent misrepresentation shall be entitled to contribution from any
person who is not also found liable for such fraudulent misrepresentation.
Notwithstanding the foregoing, the respective Indemnified Party or
Indemnified Parties, as applicable, shall not be obligated to contribute any
amount hereunder that exceeds the amount of fees previously received by the
respective Indemnified Party or Indemnified Parties, as applicable, in
connection with the foregoing.
Neither termination nor completion of the engagement of Xxxx Xxxxx
pursuant to the Agreement shall affect the provisions of this Section 7 which
then shall remain operative and in full force and effect.
8. The Company shall bear Xxxx Xxxxx'x reasonable expenses incurred in
connection with performance of its duties hereunder, including without
limitation the reasonable fees and expenses of its outside counsel and travel
expenses; provided that Xxxx Xxxxx will obtain the Company's prior approval
before incurring travel expenses or retaining experts (other than counsel).
9. Neither the Company nor Xxxx Xxxxx shall make any public statement about
this agreement or any transactions or services described herein mentioning
the other party without the prior written consent of the other party, unless
that party determines in good faith, on the advice of legal counsel, that
public disclosure is required by law, in which case that party shall consult
with the other party prior to making a statement.
10. The Company represents and warrants to Xxxx Xxxxx that Xxxx Xxxxx'x
engagement and compensation hereunder has been duly authorized and approved
by the Board of Directors of the Company and this Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company.
11. This Agreement has been executed and delivered in the State of New York
and shall be governed by the laws of such state, without giving effect to the
conflict of laws rules thereunder.
12. This Agreement shall be binding upon, and enforceable against, the
successors and assigns of each of the undersigned.
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XXXX XXXXX & COMPANY, INC.
13. This Agreement may be executed in counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the
same instrument.
Please sign this letter at the place indicated below and return it to the
undersigned.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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XXXX XXXXX & COMPANY, INC.
Very truly yours,
XXXX XXXXX & COMPANY, INC.
By:
--------------------------
Managing Director
AGREED:
ISONICS CORPORATION
By:
--------------------------
Xxxxx X. Xxxxxxxxx
President & CEO
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