EXHIBIT 10.2
[LOGO]
Member of NASD, MSRB and SIPC
EMPIRE FINANCIAL GROUP, INC.
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June 5, 2006
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Chief Executive Officer
C.S.M.G. Technologies Inc.
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Dear ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇:
This letter (the "Agreement") constitutes the agreement between C.S.M.G.
Technologies, Inc.. (the "Company") and Empire Financial Group, Inc. ("Empire")
that Empire shall serve as the placement agent for the Company, on a "best
efforts" basis, in connection with the proposed offer and private placement (the
"Offering") by the Company of a bridge loan for its tissue welding operation. It
is currently contemplated that the Offering will raise $3.0 million and is
predicated on successful completion of the due diligence investigation by
Empire.
A. Fees and Expenses. In connection with the Services described above, the
Company shall pay to Empire the following:
1. Placement Agent's Fee. As compensation for its services in connection
with the Private Placement, the Company agrees to pay Empire a nonrefundable
retainer fee of $10,000 ("Ten Thousand Dollars") in cash upon execution of this
letter agreement. The Company shall pay to Empire a cash placement fee equal to
twelve percent (12%) of the aggregate purchase price paid by each purchaser of
Securities that were placed in the Offering (the "Placement Agent's Fee"). The
Placement Agent's Fee will be deducted from the gross proceeds of the Securities
sold at the Closing. The amount of the retainer fee previously paid to Empire
will be credited on a dollar for dollar basis toward the cash portion of the
placement fee.
2. Expenses. In addition to any fees payable to Empire hereunder and
regardless of whether an Offering is consummated, the Company hereby agrees to
reimburse Empire, within ten (10) days after written request therefor, all
reasonable travel and other out-of-pocket expenses incurred in connection with
Empire's engagement, including the reasonable fees and expenses of Empire's
counsel.
3. Warrants: In addition to the Placement Agent's Fee, upon the closing of
the sale of securities in connection with the Offering, the Company shall issue
to the Placement Agent warrants to purchase shares of common stock of the
Company (the "Warrants") in an amount equal to five percent (5.0%) of the amount
of Securities issued or issuable by the Company in the Offering. The Warrants
shall be exercisable at 100% of the Offering Price or at the 20-day average
prior to the closing of the offering, whichever is lower. The Warrants shall
expire seven years from the date of issuance. The Warrants shall be in the same
form, including, without limitation, the same registration rights and
anti-dilution provisions, as the securities sold in the Offering; provided,
however, the Warrants shall include a "net issuance" exercise feature.
B. No-Shop. Until the Offering contemplated hereby is completed, but no
later than 180 days from the date hereof (the "No-Shop Period"), the Company
agrees that it will not negotiate with any other person relating to a possible
public or private offering or placement of the Company's securities.
▇. ▇▇▇▇ and Termination of Engagement. Except as set forth below, the term
(the "Term") of Empire's engagement will begin on the date hereof and end on the
earlier of the consummation of the Offering or 20 days after receipt by either
Party hereto of written notice of termination; provided that no such notice may
be given by the Company during the No Shop Period. Notwithstanding any such
expiration or termination, Paragraphs D through N shall survive and remain in
full force and effect and be binding on the parties hereto, in accordance with
their terms.
D. Fee Tail. Empire shall be entitled to a Placement Agent's Fee,
calculated in the manner provided in Paragraph A, with respect to any securities
purchased in any subsequent offering ("Subsequent Offering") by investors whom
Empire had introduced to the Company during the Term if such Subsequent Offering
is consummated at any time within (i) the 24-month period following the
consummation of this Offering and (ii), if no Offering shall have been
consummated during the Term, the six month period following the expiration or
termination of this Agreement.
E. Future Transactions. If, at any time during the Term, or within the
24-month period following consummation of the Offering during the Term, the
Company or any of its subsidiaries (i) disposes of or acquires business units or
acquires any of its outstanding securities or makes any exchange or tender offer
or enters into a merger, consolidation or other business combination or any
recapitalization, reorganization, restructuring or other similar transaction,
including, without limitation, an extraordinary dividend or distribution or a
spin-off or split-off (each, a "Transaction"), and the Company decides to retain
a financial advisor for such Transaction, Empire shall have the right to act as
one of the Company's financial advisors for any such Transaction; or (ii)
decides to finance or refinance any indebtedness using a manager or agent,
Empire (or any affiliate designated by Empire) shall have the right to act as a
manager, placement agent or lead agent with respect to such financing or
refinancing; or (iii) determines to raise funds by means of a public offering or
a Offering of equity or debt securities using an underwriter or placement agent,
Empire shall have the right to act as an underwriter, initial purchaser or
placement agent for such financing. In each case where Empire so serves, Empire
shall be entitled to at least one third of the total fees paid in connection
with the foregoing transactions. If Empire or its affiliates decides to accept
any such engagement, the agreement governing such engagement will contain, among
other things, provisions for customary fees for Transactions of similar size and
nature and the provisions of this Agreement, including indemnification, which
are appropriate to such Transaction.
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F. Use of Information. The Company will furnish Empire such written
information as Empire reasonably requests in connection with the performance of
its services hereunder. The Company understands, acknowledges and agrees that,
in performing its services hereunder, Empire will use and rely entirely upon
such information as well as publicly available information regarding the Company
and other potential parties to an Offering and that Empire does not assume
responsibility for independent verification of the accuracy or completeness of
any information, whether publicly available or otherwise furnished to it,
concerning the Company or otherwise relevant to an Offering, including, without
limitation, any financial information, forecasts or projections considered by
Empire in connection with the provision of its services.
G. Confidentiality. In the event of the consummation or public
announcement of any Offering, Empire shall have the right to disclose its
participation in such Offering, including, without limitation, the placement at
its cost of "tombstone" advertisements in financial and other newspapers and
journals. Empire agrees to keep confidential during the Term, and for five years
after the expiration or any termination, of this Agreement, all material
nonpublic information provided to it by the Company, except as required by law,
pursuant to an order of a court of competent jurisdiction or the request of a
regulatory authority having jurisdiction over Empire or its affiliates (a
"Regulatory Request"), or as contemplated by the terms of this Agreement,
provided Empire shall, if permitted by law, give notice to the Company of the
request or order (other than a Regulatory Request) to furnish the nonpublic
information. Notwithstanding any provision herein to the contrary, Empire may
disclose nonpublic information to its affiliates, agents and advisors whenever
Empire determines that such disclosure is necessary to provide the services
contemplated hereunder, provided that Empire advises such persons of the
obligation to maintain the confidentiality of such information and remains
liable under this Agreement for any breach of confidentiality by such
affiliates, agents and advisors. Notwithstanding any provision herein to the
contrary, this Section G shall not bar disclosure of, and Empire and the Company
and their respective representatives or agents may disclose, without limitation
of any kind, any information with respect to the "tax treatment" and "tax
structure" (in each case, within the meaning of Treasury Regulation Section
1.6011-4) of the Offering and related transactions and all materials of any kind
(including opinions or other tax analyses) that are provided to Empire or the
Company or such representatives or agents relating to such tax treatment and tax
structure, provided that with respect to any document or similar item, this
sentence shall only apply to such portions of the document or similar item that
relate to the tax treatment or tax structure of the Transactions.
H. Securities Matters. The Company shall be responsible for any and all
compliance with the securities laws applicable to it, including Regulation D and
the Securities Act of 1933, and Rule 506 promulgated thereunder, and unless
otherwise agreed in writing, all state securities ("blue sky") laws. ▇▇▇▇▇▇
agrees to cooperate with counsel to the Company in that regard.
I. Indemnity. Empire and the Company agree to the indemnification
provisions as set forth in Annex A attached hereto.
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J. Limitation of Engagement to the Company. The Company acknowledges that
Empire has been retained only by the Company, that Empire is providing services
hereunder as an independent contractor (and not in any fiduciary or agency
capacity) and that the Company's engagement of Empire is not deemed to be on
behalf of, and is not intended to confer rights upon, any shareholder, owner or
partner of the Company or any other person not a party hereto as against Empire
or any of its affiliates, or any of its or their respective officers, directors,
controlling persons (within the meaning of Section 15 of the Act or Section 20
of the Securities Exchange Act of 1934), employees or agents. Unless otherwise
expressly agreed in writing by Empire, no one other than the Company is
authorized to rely upon this Agreement or any other statements or conduct of
Empire, and no one other than the Company is intended to be a beneficiary of
this Agreement. The Company acknowledges that any recommendation or advice,
written or oral, given by Empire to the Company in connection with Empire's
engagement is intended solely for the benefit and use of the Company's
management and directors in considering a possible Offering, and any such
recommendation or advice is not on behalf of, and shall not confer any rights or
remedies upon, any other person or be used or relied upon for any other purpose.
Empire shall not have the authority to make any commitment binding on the
Company. The Company, in its sole discretion, shall have the right to reject any
investor introduced to it by Empire.
K. Limitation of Empire's Liability to the Company. Empire and the Company
further agree that neither Empire nor any of its affiliates or any of its their
respective officers, directors, controlling persons (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act of 1934), employees or
agents shall have any liability to the Company, its security holders or
creditors, or any person asserting claims on behalf of or in the right of the
Company (whether direct or indirect, in contract, tort, for an act of negligence
or otherwise) for any losses, fees, damages, liabilities, costs, expenses or
equitable relief arising out of or relating to this Agreement or the Services
rendered hereunder, except for losses, fees, damages, liabilities, costs or
expenses that arise out of or are based on any action of or failure to act by
Empire and that are finally determined (by a court of competent jurisdiction and
after exhausting all appeals) to have resulted solely from the gross negligence
or willful misconduct of Empire. With respect to alleged breaches of the
Confidentiality provisions herein by Empire, the Company shall have the right to
pursue equitable relief in addition to any other remedy in equity or law.
L. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any disputes which arise
under this Agreement, even after the termination of this Agreement, will be
heard only in the state or federal courts located in the City of New York, State
of New York. The parties hereto expressly agree to submit themselves to the
jurisdiction of the foregoing courts in the City of New York, State of New York.
The parties hereto expressly waive any rights they may have to contest the
jurisdiction, venue or authority of any court sitting in the City and State of
New York. In the event of the bringing of any action, or suit by a party hereto
against the other party hereto, arising out of or relating to this Agreement,
the party in whose favor the final judgment or award shall be entered shall be
entitled to have and recover from the other party the costs and expenses
incurred in connection therewith, including its reasonable attorneys' fees.
M. Notices. All notices hereunder will be in writing and sent by certified
mail, hand delivery, overnight delivery or telefax, if sent to Empire, to Empire
Financial Group, Inc., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ #▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention Messrs. ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇., with a copy to ▇▇▇▇▇, ▇▇▇▇▇▇▇, Rose &
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Esq. and if sent to the Company, will be mailed, delivered or telefaxed and
confirmed to C.S.M.G. Technologies, Inc. ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Notices sent by certified mail shall be deemed
received five days thereafter, notices sent by hand delivery or overnight
delivery shall be deemed received on the date of the relevant written record of
receipt, and notices delivered by telefax shall be deemed received as of the
date and time printed thereon by the telefax machine.
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N. Miscellaneous. This Agreement shall not be modified or amended except
in writing signed by Empire and the Company. This Agreement shall not be
assigned without the prior written consent of Empire and the Company; provided,
however, that in the event of a Offering in which the Company is not the
surviving corporation or entity, the Company's remaining obligations (except
with respect to the Fee Tail and Future Offerings), if any, under this Agreement
shall remain in full force and effect and become obligations of the surviving
corporation or entity. This Agreement constitutes the entire agreement of Empire
and the Company with respect to the subject matter hereof and supersedes any
prior agreements. If any provision of this Agreement is determined to be invalid
or unenforceable in any respect, such determination will not affect such
provision in any other respect, and the remainder of the Agreement shall remain
in full force and effect. This Agreement may be executed in counterparts
(including facsimile counterparts), each of which shall be deemed an original
but all of which together shall constitute one and the same instrument.
In acknowledgment that the foregoing correctly sets forth the
understanding reached by Empire and the Company, please sign in the space
provided below, whereupon this letter shall constitute a binding Agreement as of
the date indicated above.
Very truly yours,
EMPIRE FINANCIAL GROUP, INC.
By:
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Chief Executive Officer
Confirmed and accepted as of
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C.S.M.G. Technologies, Inc.
By:
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Executive Officer
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Annex A
June 5, 2006
Empire Financial Group, Inc.
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Gentlemen:
In connection with our engagement of Empire Financial Group, Inc.
("Empire") as our placement agent, we hereby agree to indemnify and hold
harmless Empire and its affiliates, and the respective controlling persons,
directors, officers, shareholders, agents and employees of any of the foregoing
(collectively the "Indemnified Persons"), from and against any and all claims,
actions, suits, proceedings (including those of shareholders), damages,
liabilities and expenses incurred by any of them (including the reasonable fees
and expenses of counsel), (collectively a "Claim"), which are (A) related to or
arise out of (i) any actions taken or omitted to be taken (including any untrue
statements made or any statements omitted to be made) by the Company, or (ii)
any actions taken or omitted to be taken by any Indemnified Person in connection
with our engagement of Empire, or (B) otherwise relate to or arise out of
Empire's activities on our behalf under Empire's engagement, and we shall
reimburse any Indemnified Person for all out-of-pocket expenses (including the
reasonable fees and expenses of counsel) incurred by such Indemnified Person in
connection with investigating, preparing or defending any such Claim to which
the Indemnified Person is, or is threatened to be made, a party. Notwithstanding
anything to the contrary set forth above, we will not be responsible for any
Claim, or for any reimbursement of any Indemnified Person's expenses in
connection with such Claim, which is finally judicially determined to have
resulted from the gross negligence or willful misconduct of any person seeking
indemnification for such Claim. We further agree that no Indemnified Person
shall have any liability to us for or in connection with our engagement of
Empire except for any Claim incurred by us as a result of such Indemnified
Person's gross negligence or willful misconduct.
We further agree that we will not, without the prior written consent of
Empire, 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.
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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,
except and only to the extent such failure results in the forfeiture by us of
substantial rights and defenses. 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 determines 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 such Indemnified Person 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. Notwithstanding anything herein to
the contrary, if we fail timely or diligently to defend, contest, or otherwise
protect against any Claim, the relevant 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, in accordance with the terms of this
Agreement, 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 addition, with respect to 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 therefor at its own expense.
Empire agrees that it will indemnify and hold harmless the Company
and each of its directors and officers, employees, agents, stockholders and
affiliates against any Loss whatsoever (including, but not limited to, any and
all legal fees and other expenses) to which the Company or any such person or
entity may be subject solely as a result of statements made in the Private
Placement Memorandum based solely upon information supplied by Empire to the
Company in writing or based upon the gross negligence or willful misconduct of
Empire or any of its employees or agents in acting as Placement Agent for the
offering and sale hereunder.
We agree that if any indemnity sought by an Indemnified Person
hereunder is held by a court to be unavailable for any reason then (whether or
not Empire is the Indemnified Person), we and Empire 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 Empire
on the other, in connection with Empire's engagement referred to above, subject
to the limitation that in no event shall the amount of Empire's contribution to
such Claim exceed the amount of fees actually received by Empire from us
pursuant to Empire's engagement. We hereby agree that the relative benefits to
us, on the one hand, and Empire on the other, with respect to Empire'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 or our stockholders as the case
may be, pursuant to the Offering (whether or not consummated) for which you are
engaged to render services bears to (b) the fee paid or proposed to be paid to
Empire 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.
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The validity and interpretation of this agreement shall be governed
by and construed and enforced in accordance with the laws of the State of New
York applicable to agreements made and to be fully performed therein (excluding
the conflicts of laws rules). Each of Empire and the Company hereby irrevocably
submits to the jurisdiction of any court of the State of New York, County of New
York or the United States District Court for the Southern District of New York
for the purpose of any suit, action or other proceeding arising out of this
agreement or the Offerings contemplated hereby, which is brought by or against
Empire or the Company and in connection therewith, each of Empire and the
Company (i) hereby irrevocably agrees that all claims in respect of any such
suit, action or proceeding may be heard and determined in any such court, (ii)
to the extent that it has acquired, or hereafter may acquire, any immunity from
jurisdiction of any such court or from any legal process therein, it hereby
waives, to the fullest extent permitted by law, such immunity and (iii) agrees
not to commence any action, suit or proceeding relating to this agreement other
than in any such court. Each of Empire and the Company hereby waives and agrees
not to assert in any such action, suit or proceeding, to the fullest extent
permitted by applicable law, any claim that (a) it is not personally subject to
the jurisdiction of any such court, (b) it is immune from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to its property of (c)
any suit, action or proceeding is brought in an inconvenient forum.
The provisions of this Agreement shall remain in full force and
effect following the completion or termination of Empire's engagement.
Very truly yours,
C.S.M.G. TECHNOLOGIES, INC.
By:
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Executive Officer
Confirmed and agreed to:
EMPIRE FINANCIAL GROUP, INC.
By:
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▇▇▇ ▇▇▇▇▇▇▇▇▇
Chief Executive Officer
Date:
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