Unassociated Document


    


    [Monarch
Capital Letterhead]

    


    
      	 
      	
              September
      30, 2010

            


    

    


    


    CNS Response, Inc.

    Attn: George Carpenter,
CEO

    85
Enterprise, Suite 410

    Aliso
Vejo, CA  92656

    


    


    Dear Mr.
Carpenter:

    


               This
letter agreement (the “Agreement”) confirms the engagement of Monarch Capital
Group LLC (“MONARCH”) by CNS Response, Inc. a Delaware company (“CNS” or the
“Company”), to act as a non-exclusive placement agent to the Company in
connection with a proposed Private Placement (as defined herein) of the
Company’s convertible notes and/or other securities or rights to purchase
securities of the Company (the “Securities”).  The term “Private
Placement” means the proposed offering and sale by private placement of up to
$1.5 million of Securities to be made in accordance with the exemption from the
registration requirements of the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder (collectively, the “Act”) provided
by Regulation D under the Act (“Regulation D”) and the qualification and
registration requirements of applicable state and foreign securities or blue sky
laws and regulations pursuant to a private placement memorandum and/or other
disclosure materials consisting of transaction documentation (as amended and
supplemented, the “Disclosure Materials”).  Investors in the Private
Placement will be persons who qualify as “accredited investors” under Regulation
D.  The exact price, type and amount of Securities will be determined
through negotiations between the Company and MONARCH, on the one hand, and the
investors, on the other hand.

    


                          1.  Engagement.   CNS
hereby engages MONARCH during the Term (as hereinafter defined) as its
non-exclusive placement agent with respect to the Private
Placement.  In its capacity as placement agent, MONARCH will provide
the Company with assistance in connection with the Private Placement, which may
include working with the Company in identifying potential investors and using
MONARCH’s reasonable efforts to assist in arranging sales of the Securities to
investors.  CNS reserves the right to retain other properly licensed
and registered broker-dealers to act as agents on its behalf.  The
Company will be responsible for updating, amending and supplementing the
Disclosure Materials prior to the closing of the Private Placement as required
by applicable laws.    MONARCH shall have no authority to
bind CNS to any specific terms of a Private Placement or any other obligation
and CNS shall have the right to reject any proposed terms for a Private
Placement or refuse to consummate the Private Placement without incurring any
obligation to MONARCH except as provided in this Agreement.   The
purchase price payable by investors will be deposited in an escrow account with
a bank mutually agreeable to the Company and MONARCH.

    


                          2.  Success
Fee.   The Company agrees to pay MONARCH as compensation
for its services under this engagement, the following fees on all sales of
Securities made in the Private Placement upon each closing:

    


     

    (a)   A
cash fee equal to 10% of the gross proceeds raised from the sale of Securities
in the Private Placement to purchasers introduced to CNS by
MONARCH.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ______________

    
      Page
2

       

    

    (b)  5-
year warrants (the “Placement Agent Warrants”) to purchase Securities equal to
10% of the gross amount of Securities sold to purchasers introduced to CNS by
MONARCH at the applicable closing of the Private Placement. The Placement Agent
Warrants related to shares of common stock issued in the Private Placement shall
have an exercise price equal to 110% of the per share price of the common stock
sold in the Private Placement or (110%) of conversion or exercise price if the
Private Placement is for convertible notes or other rights to purchase common
stock.  To the extent warrant coverage is included with the
Securities, the Placement Agent warrants issued to the Placement Agent shall
contain the same provisions (including anti-dilution protections and
registration rights) afforded to the investors in the Private
Placement.  MONARCH may designate any of its employees, officers or
agents to receive any part of its Placement Agent Warrants.

    
 

                          3.  Expenses.  CNS
shall bear all of its expenses in connection with the Private
Placement.  In addition, if the Private Placement is consummated, the
Company will pay to MONARCH a non-accountable expense allowance equal to two
percent (2%) percent of the gross proceeds from each closing received from
purchasers introduced to CNS by MONARCH.  The provisions of this
paragraph shall survive the closing and any termination of the Private
Placement.

    


                          4.  Term.   The
term of this Agreement (“Term”) shall commence on the date hereof and shall
continue for a six (6) month period thereafter;
provided, however that either party shall have the right to terminate this
Agreement at any time prior to the expiration of the Term, with or without
cause, upon ten (10) days’ prior written notice thereof to the other party.
Notwithstanding anything to the contrary herein, if, during the term of the
Private Placement hereunder, an investor is informed of the Private Placement by
the MONARCH and if (i) the
Private Placement hereunder does not close and such
investor purchases from the Company any
privately placed securities of the Company within 12 months
after the termination of the Private Placement or
(ii) the Private Placement hereunder closes and such investor makes an
investment in the Private Placement and subsequently purchases from the
Company within 12 months after the closing of the Private Placement any
privately placed securities of the Company, MONARCH shall be entitled to Cash
Compensation and Warrant Compensation as set forth in Section 2 and 3 of this
Agreement with respect to purchases by such investor.  The provisions of
this paragraph shall survive the Closing, expiration and any termination of the
Private Placement or this Agreement

     

                          5.  Further Representations and
Covenants of CNS.

    


    (a)  The
Company represents and agrees that (i) it has the corporate power and authority
to enter into and perform this Agreement and all corporate action necessary for
the authorization, execution, delivery and performance of this Agreement has
been taken, (ii) this Agreement constitutes a legal, valid and binding
obligation of CNS enforceable in accordance with its terms, (iii) the execution
and performance of this Agreement by the Company and the offer and sale of the
Securities in the Private Placement will not violate any provision of the
Company’s charter or bylaws or conflict with any agreement or other instrument
to which the Company is a party or by which it is bound and (iv) any necessary
approvals, governmental and private, will be obtained by the Company before the
closing of the Private Placement.

    


    (b)  The
Company represents and warrants that the Disclosure Materials will not as of the
date of the offer or sale of the Securities or the closing date of any such
sale, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein or previously made, in light of the circumstances under which they were
made not misleading.  The Company will advise MONARCH immediately of
the occurrence of any event or any other change known to the Company which
results in the Disclosure Materials containing an untrue statement of a material
fact or omitting to state a material fact required to be stated therein or
necessary to make the statements therein or previously made, in light of the
circumstance under which they were made, not misleading. MONARCH agrees to cease
providing the Disclosure Materials to prospective purchasers of the Securities
promptly upon receiving any notice of an inaccuracy or omission in the
Disclosure Materials, until such time as the Company provides it with the
supplement or amendment correcting such.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ______________

    
      Page
3

       

    

           (c)  The
Company acknowledges and agrees that MONARCH’s obligations to commence the
Private Placement may be subject to execution of a Placement Agency Agreement on
customary terms and incorporating the principal terms hereof.  In the
absence of such Placement Agency Agreement, the Company agrees that MONARCH may
rely upon, and will be named as a third party beneficiary of, the
representations and warranties, and applicable covenants, set forth in any stock
purchase agreement or subscription agreement that the Company executes with
investors in the Private Placement.  The Company will, at the closing
of the Private Placement, furnish MONARCH with a favorable opinion of its
outside counsel.  Such opinion will be in customary form and will
include customary items contained in legal opinions rendered in connection with
private financing transactions, including, among other things, opinions on
matters relating to organization and good standing, capitalization, corporate
power and authority, non-contravention and exemption of the
Financing.  In addition, at the closing of the Private Placement, the
Company will provide MONARCH with such other certification, opinions and
documents as MONARCH or its counsel are customarily provided in connection with
private financing transactions, all in customary form and
substance.

     

    (d)  The
Company agrees to provide MONARCH with due diligence materials upon request and
will provide copies of due diligence materials which may be provided to
investors in the Private Placement.

     

    (e)  The
Company will file appropriate notices on Form D with the SEC, as well as all
filings required to be made with respect to state and foreign securities or blue
sky laws and regulations.

    


                          6. 
 Indemnification.  CNS
agrees to indemnify and hold harmless MONARCH in accordance with the agreement
set forth on Exhibit A attached hereto, the terms of which are specifically
incorporated herein by reference.

    


                          7.    Miscellaneous.

    


                         
  (a)  Governing Law; Jurisdiction.  This
Agreement shall be governed by and construed under the laws of the State of New
York, without giving effect to principles of conflict of laws.

    


                           
    (b)  Notices.  Whenever notice is
required to be given pursuant to this Agreement, such notice shall be in writing
and shall either be mailed by certified first class mail, postage prepaid,
delivered personally, delivered by fax (with answerback confirmed), or sent by
recognized overnight courier, addressed to the parties at the respective
addresses set forth above.  Notice shall be deemed given, if sent by
mail, on the third day after deposit in a United States post office receptacle,
or if delivered personally, by fax or by courier, upon
receipt.   Any party may change such address by like
notice.

    


           
    (c)  Entire Agreement; Binding
Effect.  This Agreement constitutes the entire agreement between CNS
and MONARCH with respect to the subject matter hereof and supersedes and cancels
any other agreements, oral or written, with respect
thereto.   This Agreement may not be assigned by either party
without the prior written consent of the other party.  This Agreement
shall be binding on the parties and their respective successors and permitted
assigns.

    


           
    (d)  No
Commitment.  The execution of this Agreement does not constitute a
commitment by MONARCH or the Company to consummate any transaction contemplated
hereunder and does not ensure the successful placement of securities of the
Company or the success of MONARCH with respect to securing any financing on
behalf of the Company.  No promises or representations have been made
except as expressly set forth in this Agreement and the parties have not relied
on any promises or representations except as expressly set forth in this
Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      ______________

      Page
4

       

    

    (e)  Confidentiality.  All material non-public information
identified as such and that has been or is given to MONARCH concerning the Company will be used by
MONARCH solely in the course of the performance
of its services hereunder and will be treated as strictly confidential by
MONARCH except (a) for disclosure of such
information to its officers, employees and retained professionals as necessary
in order to perform its services hereunder, (b) as such information becomes
publicly available through no fault of MONARCH in violation of the terms hereof or (c)
as otherwise required by law or judicial or regulatory process
(provided that MONARCH will give the Company prior written
notice of any such required disclosure).  Except for any Private Placement documents (including all schedules and
exhibits thereto), any document the Company authorizes MONARCH to deliver to potential investors, and any other information the Company
deems necessary for MONARCH’s use in introducing the Company to
potential investors, MONARCH shall not distribute or use non-public
information without the Company’s written consent or such third party’s
agreement to maintain the confidentiality of the non-public
information.  MONARCH’s confidentiality and non-use
obligations under this Agreement shall survive the termination of this Agreement
for a period of two (2) years.

    


    (f)  Other
Services.  In the event that other services are required and/or
transactions which are the result of MONARCH’s efforts that are not as
contemplated herein, the parties hereto shall negotiate in good faith to
determine a mutually acceptable level of compensation in such an
eventuality.

    


                   
(g)  Severability.  If any provision of this Agreement is
determined to be invalid or unenforceable in any respect, then such
determination will not affect such provision in any other respect or any other
provision of this Agreement, which will remain in full force and effect. No
material provision of this Agreement shall be deemed waived and no breach
excused, unless such waiver or consent excusing the breach shall be in writing
and signed by the party to be charged with such waiver or consent.

    


    (h) 
Independent Contractor.  In carrying out its responsibilities under
this letter, the parties agree that MONARCH shall be an independent contractor
with complete supervision and control over its own activities, and shall have no
right or authority to assume or create any obligation on behalf of the Company
and MONARCH’s engagement by the Company shall not create any partnership, joint
venture or similar business relationship between the Company and
MONARCH.  MONARCH shall have no restrictions on its ability to provide
services to companies other than the Company, except as stated
herein.  MONARCH shall be under no obligation hereunder
to make an independent appraisal of assets or investigation or inquiry as to any
information regarding, or any representations of, the Company and shall have no liability
hereunder in regard thereto.

    


    (i)  Advice
Given; Public Announcements.  The Company agrees that all advice given
by MONARCH in connection with its engagement hereunder is for the benefit and
use of the Company in considering the Private Placement to which such advice
relates, and the Company agrees that no such advice shall be used for any other
purpose or be disclosed, reproduced, disseminated, quoted or referred to at any
time, in any manner or for any purpose, nor shall any public references to
MONARCH be made by or on behalf of the Company, in each case without MONARCH’s
prior written consent, which consent shall not be unreasonably
withheld.

    


            (j)  Counterparts.  This
Agreement may be executed in one or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile
or “.pdf” signature page were an original
thereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      ______________

      Page
5

       

    

    (k)  Investor Contact.  Before
MONARCH contacts potential investors, the Company must first determine that the
potential investor has not been contacted by any other party to which the
Company has an agreement similar to this Agreement.

    


                          Please
confirm your agreement to the foregoing below whereupon this letter shall
constitute a binding agreement between us.

     

    
      
        	 	Very
      truly yours,	 
	 	 	 
	 	
                Monarch
      Capital

              	 
	 	 	 	 
	
              	
                By:
      

              	/s/ Michael
      Potter	 
	 	 	

                Name:
      Michael Potter

              	 
	 	 	

                Title:
      Chairman/CEO

              	 
	 	 	 	 


      

    

    


    


    
      
        	
                

                  Confirmed
      and agreed to

                  as
      of the date set forth above:

                

              	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
                CNS
      Response, Inc.

              	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	
                By:

              	
                /s/
      George Carpenter

              	 
      	 
      	 
      	 
      
	 
      	
                Name:
      George Carpenter

              	 
      	 
      	 
      	 
      
	 
      	
                Title:
      CEO

              	 
      	 
      	 
      	 
      


      

    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      
        ______________

        Page
6

         

      

    

    EXHIBIT
A

    


    


    
      	 
      	
              September
      30, 2010

            


    

    


    


    Monarch
Capital

    500
5th
Avenue, Suite 2240

    New York,
NY 10110

    


    Gentlemen:

    


    In
connection with our engagement of Monarch Capital. ("MONARCH") as our
non-exclusive placement agent, we hereby agree to indemnify and hold harmless
MONARCH and its affiliates, and the respective controlling persons, directors,
officers, shareholders, agents (including sub-agents) and employees of any of
the foregoing (collectively the "Indemnified Persons"), from and against any and
all claims, actions, suits, proceedings, damages, liabilities and expenses
(including the reasonable fees and expenses of counsel) incurred by any of them
(collectively a "Claim"), which
relate to or arise in any manner out of any transaction, financing, or any other
matter (collectively, the "Matters") contemplated by the engagement letter of
which this Exhibit A forms a part and the performance by MONARCH of the services
contemplated thereby,  and will promptly reimburse each Indemnified
Person for all reasonable expenses (including reasonable fees and expenses of
legal counsel) as incurred in connection with the investigation of, preparation
for or defense of any pending or threatened claim or any action or proceeding
arising therefrom, whether or not such Indemnified Party is a
party.  We will not, however, be responsible to any Indemnified
Person for any Claim which is finally judicially determined to have resulted
primarily from the gross negligence or willful misconduct of any Indemnified
Person.

    


    We also agree that no Indemnified Person
shall have any liability (whether direct or indirect, in contract or tort or
otherwise) to us related to, arising out of, or in connection with, any Matters,
the engagement of MONARCH pursuant to, or the performance by MONARCH of the
services contemplated by, our engagement letter, except to the extent any loss,
claim, damage or liability if found in a final judgment by a court of competent
jurisdiction to have resulted primarily from MONARCH’s gross negligence or willful
misconduct.

    


    We
further agree that we will not, without the prior written consent of MONARCH,
settle, compromise or consent to the entry of any judgment in any pending or
threatened Claim in respect of which indemnification may be sought hereunder
(whether or not any Indemnified Person is an actual or potential party to such
Claim), unless such settlement, compromise or consent includes an unconditional,
irrevocable release of each Indemnified Person hereunder from any and all
liability arising out of such Claim.

    


               Promptly
upon receipt by an Indemnified Person of notice of any complaint or the
assertion or institution of any Claim with respect to which indemnification is
being sought hereunder, such Indemnified Person shall notify us in writing of
such complaint or of such assertion or institution but failure to so notify us
shall not relieve us from any obligation we may have hereunder, unless and only
to the extent such failure results in the actual material harm to us or
materially prejudices our ability to defend such Claim on behalf of such
Indemnified Person.  If we so elect or are requested by such
Indemnified Person, we will assume the defense of such Claim, including the
employment of counsel reasonably satisfactory to such Indemnified Person and the
payment of the fees and expenses of such counsel. In the event, however, that
legal counsel to such Indemnified Person reasonably concludes (based upon advice
of counsel to the Indemnified Person) and provides written correspondence to us,
that having common counsel would present such counsel with a conflict of
interest or if the defendant in, or target of, any such Claim, includes an
Indemnified Person and us, and legal counsel to such Indemnified Person
reasonably concludes that there may be legal defenses available to it or other
Indemnified Persons different from or in addition to those available to us, then
such Indemnified Person may employ its own separate counsel to represent or
defend it in any such Claim and we shall pay the reasonable fees and expenses of
such counsel; provided, however, that in no event shall we be required to pay
fees, disbursements and other charges of separate counsel for more than one firm
of attorneys representing all Indemnified Persons unless the defense of one
Indemnified Person is unique or separate from that of another Indemnified Person
subject to the same claim or action and such Indemnified Person provides written
notice to us of such circumstance (based upon advice of the counsel to the
Indemnified Person).  Notwithstanding anything herein to the contrary,
if we fail timely or diligently to defend, contest, or otherwise protect against
any Claim, the Indemnified Party shall have the right, but not the obligation,
to defend, contest, compromise, settle, assert crossclaims or counterclaims or
otherwise protect against the same, and shall be fully indemnified by us
therefor, including without limitation, for the reasonable fees and expenses of
its counsel and all amounts paid as a result of such Claim or the compromise or
settlement thereof.  In any Claim in which we assume the defense, the
Indemnified Person shall have the right to participate in such Claim and to
retain its own counsel at its own expense.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      ______________

      Page
7

       

    

               We
agree that if any indemnity sought by an Indemnified Person hereunder is
unavailable for any reason then (whether or not MONARCH is the Indemnified
Person), we and MONARCH shall contribute to the Claim for which such indemnity
is held unavailable in such proportion as is appropriate to reflect the relative
benefits to us, on the one hand, and MONARCH on the other, in connection with
MONARCH's engagement referred to above, subject to the limitation that in no
event shall the amount of MONARCH's contribution to such Claim exceed the amount
of fees actually received by MONARCH from us pursuant to MONARCH's
engagement.  We hereby agree that the relative benefits to us, on the
one hand, and MONARCH on the other, with respect to MONARCH's engagement shall
be deemed to be in the same proportion as (a) the total value paid or proposed
to be paid or received by us pursuant to the Private Placement for which MONARCH
is engaged to render services bears to (b) the fee paid or proposed to be paid
to MONARCH in connection with such engagement.

    


               Our
indemnity, reimbursement and contribution obligations under this Agreement shall
be in addition to, and shall in no way limit or otherwise adversely affect any
rights that any Indemnified Party may have at law or at equity.

    
 

               The
provisions of this Agreement shall remain in full force and effect following the
completion or termination of MONARCH's engagement.

     

    
      
        	Very
      truly yours,	 	 	 	 
	 	 	 	 	 	 
	CNS
      Response, Inc.	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	

                By:

              	
                /s/
      George
      Carpenter

              	 	 	
                 

              	 
	 	
                

                  Name:
      George Carpenter

                

              	 	 	
                 

              	 
	 	
                

                  Title:
      CEO

                

              	 	 	
                 

              	 


      

    

     

    
      
        	
                

                  Monarch
      Capital Group LLC

                

              	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      
	 	 	 	 	 	 
	
                By:

              	
                /s/
      Michael
      Potter

              	 
      	 
      	 
      	 
      
	 
      	
                

                  Name:
      Michael Potter

                

              	 
      	 
      	 
      	 
      
	 
      	
                

                  Title:
      Chairman/CEO