EXHIBIT 99.6
April 17, 2006
▇▇▇▇▇▇ Electronics, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇:
This letter will confirm our mutual agreement with respect to our engagement as
exclusive placement agent (the "Distributor") to act on behalf of ▇▇▇▇▇▇
Electronics, Inc. (the "Company") in obtaining financing for the Company to be
achieved on a best efforts basis in one or more tranches with the offer and sale
of up to Four Million Dollars ($4,000,000) worth of 8% Convertible Preferred
Securities (the "Securities"). Sales of the Securities will be in a private
placement exempt from registration under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to Section 4(2) thereof and Regulation D
promulgated thereunder by the Securities and Exchange Commission.
The engagement hereunder shall be for a term of six months commencing upon the
execution of this letter by the Company, unless extended by our mutual
agreement. Upon non-renewal or termination of this Agreement, the Distributor
shall provide Company with a written list of parties with whom it has had
discussions in connection with any proposed transaction and/or financing.
Notwithstanding any such non-renewal or termination, the Distributor shall be
entitled to the compensation provided below with respect to any transaction or
financing which shall be consummated with any party named on such list within
eighteen (18) months following such non-renewal or termination.
You represent that no other offering is presently in progress by the Company
which has not been disclosed to us.
In consideration for placing the Securities, the Distributor or its designees
shall be entitled to a Distributor's Fee of 10% of the Gross Proceeds received
by the Company. On the first Three Million Five Hundred Thousand Dollars
($3,500,000), this Distributor's Fee shall be "paid in kind" in exactly the form
of securities purchased by investors in the transaction, currently contemplated
as an 8% Convertible Preferred Security, but without any warrants that accompany
the Preferred Securities purchased by investors in the financing. For all
Securities placed by the Distributor in excess of Three Million Five Hundred
Thousand Dollars ($3,500,001 and above), the Company agrees to pay the
Distributor a cash fee of 10%, which fee shall be paid directly to a charitable
organization of the Distributor's choosing, currently contemplated to be The
Center for Outreach and Services to the Autistic Community. In addition to the
Distributor's Fee payable hereunder, the Distributor shall be entitled to the
Warrants, as defined in Section 9 hereof. Notwithstanding anything to the
contrary set forth herein, it is understood and agreed that
1) Each Purchaser will be an "accredited investor" as said term is defined in
Rule 501 under Regulation D promulgated under the Securities Act.
2) The Company shall have the right in its sole discretion to reject any
subscription and to disapprove any person or entity which is proposed by the
Distributor to be a purchaser of any Securities.
3) Each Purchaser will, within two (2) business days after acceptance by the
Company of a Conditional Subscription Agreement or Securities Purchase Agreement
(each, a "Securities Purchase Agreement") in a form acceptable to the Company
and the Distributor, pay the purchase price for the Securities in escrow to the
Escrow Agent. The Escrow Agent is authorized to release the funds of each
Purchaser after all of the following conditions have been met:
a) the Company approves such Purchaser and Securities Purchase Agreement, which
have been submitted and signed by the Purchaser,
b) the Company has caused to be delivered to the Escrow Agent or his designee,
certificates representing the securities comprising the Securities purchased by
such Purchaser and an opinion of counsel or bringdown letter with respect to a
previously delivered opinion in a form acceptable to the Distributor, and
c) the Escrow Agent has received good funds representing the Purchase Price for
the Securities, and disbursed same to the Company.
4) The Company will cause certificates for the Securities purchased pursuant to
such Securities Purchase Agreement to be delivered to escrow agent (the "Escrow
Agent") pursuant to the terms of an Escrow Agreement.
5) The Distributor represents, warrants and agrees that each Purchaser of the
Securities will be qualified to purchase the Securities under the laws of the
jurisdiction in which such person resides and that the offer and sale of the
Securities will not violate the securities or other laws of such jurisdiction.
The Company agrees that with respect to any offerees resident in the United
States the Company will file, at the request of Distributor, any necessary
applications with any applicable securities regulatory authority, provided, that
all U.S. offerees will be accredited investors, and provided, further, that no
such filing shall require the Company to be generally qualified to do business
in any such jurisdiction.
6) The Distributor is a member of NASD and a licensed broker-dealer.
7) Distributor is an independent contractor, and is not the agent of the
Company. It is not authorized to bind the Company, or to make any
representations or warranties on behalf of the Company.
8) As more fully described in Exhibit A hereto, which is incorporated herein by
reference, each party hereto will indemnify and hold the other (including its
partners, agents, employees, and controlling persons within the meaning of
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended ( the "Exchange Act")) harmless from and against certain
claims, liabilities, losses, damages and expenses incurred, including fees and
disbursements of counsel, related to or arising out of this engagement. Exhibit
A will be executed and delivered simultaneously with this agreement.
9) The Company agrees to issue to Distributor or its designees at each Closing,
transferable divisible warrants (the "Warrants") to purchase Five Hundred
Thousand (500,000) shares of the Company's common stock. Such Warrants shall
bear an exercise price per share of common stock equal to $1.40 and shall be
exercisable immediately upon issuance, and for a period of seven (7) years
thereafter, with piggy-back registration rights for the underlying shares in the
Registration Statement.
10) The Company represents, warrants, and agrees that, in addition to the
warranties to be made by the Company to the Purchasers:
a) the Company hereby warrants that no other offerings are currently in
progress or contemplated;
b) the Company will use its best efforts to cause the common stock to be
issued as part of the Securities to be registered pursuant to the
Securities Act of 1933, and the Company will, following the
effectiveness of such registration statement, file all material
required to be filed pursuant to the Exchange Act on a timely basis;
c) the Securities will be offered and sold in compliance with all U.S.
securities laws and regulations; it being understood that this
representation, warranty and agreement is made relying exclusively on
the representations, warranties and agreements made by the Distributor
and/or Purchasers herein or in the applicable subscription documents.
The Company will, at its expense, make all filings required under the
Securities Act, the Exchange Act, applicable state securities laws and
the rules of any applicable domestic securities exchange or trading
market, if any;
d) all information furnished by the Company to Purchasers will not
contain any untrue statement of material fact or omit to state a
material fact required to be stated or necessary to make the
statements therein not misleading; provided however, that this
representation and warranty does not extend to written material
furnished to the Company by Distributor relating to Distributor or the
distribution process;
e) the Company has all requisite corporate power and authority to execute
and perform this agreement. All corporate action necessary for the
authorization, execution, delivery and performance of this agreement
and the transactions contemplated hereby have been taken. This
agreement constitutes a valid and binding obligation of the Company;
f) the execution and performance of this agreement by the Company and the
offer and sale of the Securities will not violate any provision of the
Certificate of Incorporation or By-laws of the Company or any material
agreement or other instrument to which the Company is party or by
which it is bound, and which violation(s) would have a material
adverse effect on the business or financial condition of the Company.
Any material necessary approvals, U.S. governmental and private, will
be obtained by the Company prior to the issuance of the Securities;
and
g) the Company makes no other representation or warranty with respect to
the Company, its finances, assets, business or prospects or otherwise,
except as expressly set forth herein or in the Securities Purchase
Agreements or as set forth in the Confidential Private Placement
Memorandum related to the offering. Distributor will advise each
Purchaser and potential Purchaser of the foregoing, and that such
Purchaser is relying on its own investigation with respect to all such
matters, and that it will be given reasonable access to any and all
material publicly available documents and Company personnel it may
require for such investigation.
11) This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof. Any notices required or permitted to be
given under the terms of this Agreement shall be sent by mail or delivered
personally or by courier and shall be effective five days after being placed in
the mail, if mailed, or upon receipt, if delivered personally or by courier, in
each case addressed to a party at such party's address as such party shall have
provided by notice to the other party. Each party hereto shall cooperate and
shall take such further action and shall execute and deliver such further
documents as may be reasonably requested by any other party in order to carry
out the provisions and purposes of this Agreement.
Dated: April 17, 2006
VFINANCE INVESTMENTS, INC.
By: s/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President/
Director of Investment Banking
Agreed and Accepted:
▇▇▇▇▇▇ ELECTRONICS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Chairman
EXHIBIT A
Indemnification Provisions to Distribution Agreement (the "Agreement") dated
April 17, 2006 between vFinance Investments, Inc. ("VFIN") and ▇▇▇▇▇▇
Electronics, Inc. (the "Company"). Company agrees to (a) reimburse VFIN, its
affiliates and their respective directors, officers, employees, agents and
controlling persons (each, an "Indemnified Party") promptly, upon demand, for
actual and reasonable out-of-pocket expenses (including reasonable fees and
expenses for legal counsel) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatened claim,
or any litigation, proceeding or other action in connection with or arising out
of or relating to the engagement of VFIN under the Agreement, or any actions
taken or omitted, services performed or matters contemplated by or in connection
with the Agreement, (collectively, a "Claim"); and (b) to indemnify and hold
harmless each Indemnified Party from and against any and all out-of-pocket
losses, claims, damages and liabilities, joint or several, to which any
Indemnified Party may become subject, including any amount paid in settlement of
any litigation or other action (commenced or threatened) to which Company shall
have consented in writing (such consent not to be unreasonably withheld),
whether or not any Indemnified Party is a party and whether or not liability
resulted; provided, however, that Company shall not be liable in respect of any
loss, claim, damage or liability to the extent that a court or other agency
having competent jurisdiction shall have determined by final judgment (not
subject to further appeal) that such loss, claim, damage or liability shall have
been incurred solely as a direct result of the willful misconduct or gross
negligence of such Indemnified Party.
Company shall have the right to represent any Indemnified Party in any action as
to which indemnification is sought hereunder, provided, however, that in the
event that counsel to an Indemnified Party advises such party that there is a
conflict or potential conflict of interests as between Company and an
Indemnified Party in the reasonable judgment of such counsel, then such
Indemnified Party shall have the right to retain separate legal counsel of its
own choice to conduct the defense and all related matters in connection with any
Claim. Company shall pay the reasonable fees and expenses of such legal counsel,
and such counsel shall to the fullest extent, consistent with its professional
responsibilities, cooperate with Company and any legal counsel designated by
Company, provided, however, that the Company shall not be obligated to pay the
fees of more than one legal counsel for all Indemnified Parties with respect to
any single Claim or group of related Claims.
Company will not, without the prior written consent of each Indemnified Party
settle, compromise or consent to the entry of any judgment in any pending or
threatened Claim in respect of which indemnification may be reasonably sought
hereunder (whether or not any Indemnified Party is an actual or potential party
to such Claim), unless such settlement, compromise or consent includes an
unconditional, irrevocable release of each Indemnified Party against whom such
Claim may be brought from any and all liability arising out of such Claim.
In the event the indemnity provided for hereunder is unavailable or insufficient
to hold any Indemnified Party harmless, then Company shall contribute to amounts
paid or payable by an Indemnified Party in respect of such Indemnified Party's
losses, claims, damages and liabilities as to which the indemnity provided for
hereunder is unavailable or insufficient (i) in such portion as appropriately
reflects the relative benefits received by Company, on the one hand, and the
Indemnified Party, on the other hand, in connection with the matters as to which
losses, claims, damages or liabilities relate, or (ii) if the allocation
provided by
(i) above is not permitted by applicable law, in such proportion as
appropriately reflects not only the relative benefits referred to in clause (i)
but also the relative fault of Company, on the one hand, and the Indemnified
Party, on the other hand, as well as any other equitable considerations. The
amounts paid or payable by a party in respect of losses, claims, damages and
liabilities referred to above shall be deemed to include any reasonable legal or
other out-of-pocket fees and expenses incurred in defending any litigation,
proceeding or other action or claim. Notwithstanding the provisions hereof,
VFIN's share of the liability hereunder shall not be in excess of the amount of
fees actually received by VFIN under the Agreement (excluding any amounts
received as reimbursement of expenses by VFIN).
These Indemnification Provisions shall remain in full force and effect and
survive the expiration of the term of the Agreement, and shall be in addition to
any liability that Company might otherwise have to any Indemnified Party under
the Agreement or otherwise.
Each party hereto consents to personal jurisdiction and service of process and
venue in any court in the State of New York in which any claim for indemnity is
brought by any Indemnified Person, except as provided in Section 11 of the
Agreement.
VFINANCE INVESTMENTS, INC.
By: /s/▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President/Director
of Investment Banking
▇▇▇▇▇▇ ELECTRONICS, INC.
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇▇▇▇▇
Chairman