conversion
agreement 


 


SUBORDINATED
CONVERTIBLE PROMISSORY NOTES


 


This Conversion Agreement (this “Agreement”)
is entered into as of May 4, 2012 by and between CNS Response, Inc., a Delaware corporation (the “Company”) and the
undersigned (“Holders”), as the holders of subordinated convertible promissory notes (collectively, the “Notes”
and each, a “Note”) in the aggregate principal amount set forth opposite each such holder's name below, and of the
related warrants (collectively, the “Warrants” and each, a “Warrant”) to purchase the number of shares
of common stock, par value $0.001 per share (the “Common Stock”), set forth opposite each such holder’s name.


 


WHEREAS, the Company entered into an Amended
and Restated Note and Warrant Purchase Agreement dated as of November 11, 2011 (the “Original Agreement”) with the
Holders in respect of the Notes and Warrants.


 


WHEREAS, the Notes contain certain provisions
permitting each Holders to choose to convert or redeem their Note(s) upon the consummation of a public offering in which the Company
planned to issue securities yielding gross proceeds of at least $10 million.


 


WHEREAS, the Company effected a reverse
stock split (“Reverse Split”) of the Common Stock on April 2, 2012 at 5:00 pm Pacific Time, as a result of which the
Conversion Price, as defined in the Notes, was adjusted to $3.00, the exercise price of the Warrants was adjusted to $3.00 per
share, and the number of shares issuable upon exercise of the Warrants was proportionately reduced.


 


WHEREAS, the Company wishes to issue securities,
which will include Common Stock and warrants to purchase Common Stock (the “Offered Warrants”), in a public offering
at a per share price to be determined by the Company (the “Per Share Offering Price”), with such offering to yield
gross proceeds to the Company of at least $5 million (the “Qualified Offering”).


 


WHEREAS, pursuant to Section 9 of the Notes,
the Company will not, (i) without the written consent of Holders of a majority in outstanding principal amount of Notes (the “Majority
Holders”), amend, waive or modify any provision of the Notes other than Sections 6(a)(ii), 6(c)(iii) and the proviso in the
definition of “Conversion Price” in Section 6(b) and (ii) without the written consent of the Holder, the Company will
not amend, waive or modify Sections 6(a)(ii) and 6(c)(iii) and the proviso in the definition of “Conversion Price”
in Section 6(b) in such Holder’s Note(s).


 


WHEREAS, pursuant to Section 5.2 of the
Original Agreement, any term of the Original Agreement may be amended (either retroactively or prospectively) with the written
consent of the Company and the Majority Holders.


 


WHEREAS, the Company and the Holders wish
to agree and to amend the Notes and Warrants in accordance with the terms set forth herein.


 



    	 



    	 



    

 


NOW, THEREFORE, the Company and the Holders,
in consideration for the mutual promises and covenants herein, agree as follows:


 


1.              Each
Holder hereby waives the provisions of Section 4.1 (“Registration Rights Agreement”) of the Original Agreement,
as they may apply to the Qualified Offering, and consents to the registration of the issuance of the securities in the Qualified
Offering.


 


2.            a.              Notwithstanding
anything to the contrary in the Original Agreement, each Holder hereby irrevocably:


 


(i)             agrees
and consents to the amendment of its Note(s) as specified in Exhibit A hereto (the “Amendment”), with such amendment
being self-actuating and effective immediately upon receipt by the Company of consent to the Amendment by the Holders (i.e., the
Amendment will be effective immediately following receipt by the Company of executed copies of the Conversion Agreement and the
Irrevocable Consent to Amend and Irrevocable Notice to Convert (the form of which is attached hereto as Exhibit A) from
the Holders, without any further action by the Company or any Holder irrespective of whether the Note(s) to be amended are delivered
to the Company); and


 


(ii)            agrees
to convert such amended Note(s) into shares of Common Stock in accordance with the terms set forth herein and on Exhibit A
hereto (the “Conversion”). Such conversion shall be self-actuating in connection with the consummation of the Qualified
Offering, i.e., the Conversion shall be effective concurrently with the consummation of the Qualified Offering without any further
action by the Company or such Holder irrespective of whether the amended Note(s) being converted are delivered to the Company.
Upon the effectiveness of the Conversion, the Note(s) being converted pursuant hereto, and the related security interest pursuant
to the Amended and Restated Security Agreement dated as of September 30, 2011 between the Company and Paul Buck, as administrative
agent, shall be deemed canceled and each Holder shall be entitled to receive as the Conversion Amount shares of Common Stock at
the Conversion Price in accordance with the terms of the Note(s) as amended pursuant hereto and Exhibit A hereto. For the sake
of clarity, the parties agree that such Conversion Price will be the lesser of $3.00 (reflecting the Reverse Split), subject to
adjustment as provided in the Note(s), or the Per Share Offering Price. Upon the effective date of such conversion, any and all
obligations of the Company relating to the Notes, including those contained in the Original Agreement, shall cease to be of any
further force or effect.


 


b.             The
Company hereby agrees to the amendments and conversions of the Notes described in (i) and (ii) above.


 


c.             Each
Holder represents to the Company as follows:


 


i.            Accredited
Investor. The Holder is an “accredited investor” within the meaning of SEC Rule 501 of Regulation D promulgated
under the Securities Act of 1933, as amended (the “Securities Act”).


 



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ii.         Investment
for Own Account. The shares of Common Stock to be issued upon conversion of the Note(s) in accordance herewith are being, and
will be, acquired for his, her or its own account, for investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act.


 


iii.         Knowledge
and Experience. The Holder has such knowledge and experience in financial and business matters that (s)he is capable of evaluating
the merits and risks of an investment in the shares of Common Stock and of making an informed investment decision with respect
thereto, has the ability and capacity to protect his/her interests and can bear the economic risk of the acceptance of the shares
of Common Stock, including a total loss of his/her investment.


 


iv.         Opportunity
to Ask Questions. The Holder has had the opportunity to ask questions and receive answers from the Company or any authorized
person acting on its behalf concerning the Company and its business and to obtain any additional information, to the extent possessed
by the Company (or to the extent it could have been acquired by the Company without unreasonable effort or expense) necessary to
verify the accuracy of the information received by the Holder. In connection therewith, the Holder acknowledges that (s)he has
had the opportunity to discuss the Company’s business, management and financial affairs with the Company’s management
or any authorized person acting on its behalf.


 


v.           Receipt
of Information. The Holder has received and reviewed all the information concerning the Company, the Note(s) and the shares
of Common Stock underlying such Note(s), both written and oral, that the Holder desires. Without limiting the generality of the
foregoing, the Holder has been furnished with or has had the opportunity to acquire, and to review: all information, both written
and oral, that the Holder desires with respect to the Company’s business, management, financial affairs and prospects. In
determining whether to make this investment, the Holder has relied solely on his/her own knowledge and understanding of the Company
and its business based upon the Holder’s own due diligence investigations and the Company’s filings with the SEC.


 


d. Simultaneously with the execution of this
Agreement, each Holder is delivering a duly completed and executed Irrevocable Consent to Amend and Irrevocable Notice to Convert,
the form of which is attached hereto as Exhibit A, to the Company, which shall be irrevocable and which, (i) with respect
to the Amendment, shall be effective immediately upon the receipt by the Company of consent to the Amendment by the Holders, and
(ii) with respect to the Conversion, shall be effective concurrently with the consummation of the Qualified Offering, both as specified
in Section 2.a. hereof and Exhibit A hereto.


 


e. It is understood and agreed that the Company
is making available to all Holders the same opportunity to receive the consideration set forth in Section 4 hereof.


 



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3.             a.
Notwithstanding anything to the contrary in the Original Agreement or any Warrant, each of the Holders hereby irrevocably agrees
and consents to the amendment of their Warrant(s), as set forth in Exhibit B hereto, and the Company hereby agrees and consents
to such amendment. Such amendment shall be self-actuating and effective immediately upon receipt by the Company of consent to such
amendment by the Holders (i.e., the amendment will be effective immediately following receipt by the Company of executed copies
of the Conversion Agreement and the Irrevocable Consent to Amend Warrants to Purchase Shares (the form of which is attached hereto
as Exhibit B) from the Holders, without any further action by the Company or any Holder irrespective of whether the certificates
evidencing the Warrants are delivered to the Company).


 


b. Simultaneously with the execution of this
Agreement, each Holder is delivering to the Company a duly executed Irrevocable Consent to Amend Warrant to Purchase Shares, the
form of which is attached hereto as Exhibit B, which shall be irrevocable and which shall be effective immediately upon
the receipt by the Company of consent to such amendment by the Holders as specified herein and in Exhibit B hereto.


 


c. It is understood and agreed that the Company
is making available to all Holders the same opportunity to receive the consideration set forth in Section 4 hereof.


 


4.            As consideration for the Amendment
and Conversion, the Company shall issue to each Holder a warrant to purchase a number of shares of Common Stock equal to one share
for each two shares issuable upon conversion of the principal amount of and accrued and unpaid interest on the Note(s) amended
and converted by such Holder. The terms of such new warrant shall be identical to the terms of the Offered Warrants. Such new warrant,
which is referred to as the “Consideration Warrant,” will be issued by the Company and the certificate representing
the Consideration Warrant will be delivered to the Holder within ten (10) business days of the date of Conversion.


 


5.             THIS
AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, INTERPRETATION
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF CALIFORNIA OR ANY OTHER JURISDICTIONS) THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTIONS OTHER THAN THE STATE OF CALIFORNIA; PROVIDED, HOWEVER, THAT THE PERFECTION
OF THE SECURITY INTERESTS IN THE COLLATERAL SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE RELEVANT JURISDICTION OR JURISDICTIONS
UNDER THE UCC.


 


6.             Any
amendment effected in accordance with this Section 7 shall be binding upon each Investor, each future holder of Securities (as
defined in the Original Agreement) and the Company.


 


7.             A
Holder may only assign this Agreement with the written consent of the Company. The Company may freely assign this Agreement without
the consent of any other party. Any assignment of this Agreement in violation of this Section is null and void. This Agreement
shall be binding and inure to the benefit of the parties hereto and their respective successors and permitted assigns.


 



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8.             No
failure on the part of any party hereto to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by such party preclude any other
or further exercise thereof or the exercise of any other right, power or remedy. All rights, powers and remedies under this Agreement
are cumulative and are not exclusive of any other rights, powers and remedies provided by law.


 


9.             This
Agreement (including Exhibits A and B hereto) contains a final and complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof and shall constitute the entire agreement between the parties hereto with
respect to the subject matter thereof, superseding all prior oral or written understandings. There are no unwritten agreements
between the parties hereto. In the event of a conflict between the terms of this Agreement, on the one hand, and the terms of the
Notes, Warrants and/or Original Agreement on the other hand, the terms of this Agreement shall prevail and control.


 


10.            This
Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. This Agreement will be binding upon the Company and the Holders and their respective successors,
assigns, heirs and personal representatives.


 


[Signature page follows]


 



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IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first written above.


 


	 	CNS Response, Inc.
	 	 
	 	By:	 
	 	Name:
	 	Title:



 


	
        Holders of Subordinated Convertible
        Promissory Notes:

        
	 	Aggregate Principal Amount:	 	Number of Shares Underlying Warrants (Before and After Adding the Consideration Warrant):
	 	 	 	 	 


 


[Signature Page – Conversion Agreement]


 



    	 



    	 



    

 


Exhibit A


 


CNS RESPONSE, INC. 




Irrevocable Consent to Amend and Irrevocable Notice to Convert


 


Subordinated Convertible
Promissory Note


 


issued pursuant to


 


Amended and Restated Note and Warrant
Purchase Agreement, dated as of November 11, 2011, between the Company and the investors signatory thereto


 


CNS Response, Inc., a Delaware corporation (the “Company”)
issued to the undersigned holder (the “Holder”) a convertible promissory note in the aggregate principal amount of
___________ (the “Note”), pursuant to the agreement specified above.


 


In accordance with and pursuant to the
Conversion Agreement (as defined below), the Holder hereby irrevocably (i) agrees and consents to the amendment of the Note as
specified below and (ii) agrees to convert such amended Note (including accrued but unpaid interest thereon through the Conversion
Date, as defined below) into shares of the Company’s common stock, $0.001 par value (the “Common Stock”) as further
specified below, with (i) such amendment being self-actuating and effective immediately upon receipt by the Company of consent
to the amendment by the Holders, i.e., such amendment will be effective immediately following receipt by the Company of executed
copies of the Conversion Agreement and this Irrevocable Consent to Amend and Irrevocable Consent to Convert from the Holders, without
any further action by the Company or any Holder irrespective of whether the Note(s) to be amended are delivered to the Company
and (ii) such conversion being self-actuating in connection with the consummation of a public offering in which the Company issues
shares of its Common Stock and/or other securities at a per share price to be determined by the Company (the “Per Share Offering
Price”) and yielding gross proceeds to the Company of at least $5 million (the “Qualified Offering”).


 


Upon the effective date of such conversion,
the Holder shall be entitled to receive as the Conversion Amount shares of Common Stock at the Conversion Price in accordance with
the terms of Section 6 of the Note, as amended as specified below.


 


1.            Amendment of Note. The Note
is amended as follows:


 


a.            Section
1 (“Definitions”) is amended by amending and restating the following provision:


 


“(o) ‘Qualified Offering’
means the issuance by the Company of shares of Common Stock and/or other securities in a public offering at a per share price to
be determined by the Company (the “Per Share Offering Price”), with such offering to yield gross proceeds to the Company
of at least $5 million.”


 



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Section 1 (“Definitions”) is
furthermore amended by adding the following provision:


 


“(p) ‘Conversion Agreement’
means the agreement, executed as of May 4, 2012 by the Company and the Holders in connection with a proposed Qualified Offering.”


 


b.             Section
6(a)(ii) shall be replaced in its entirety with the following:


 


“At the time specified in Section
6(c)(iii) hereof, the outstanding and unpaid Conversion Amount (as defined below) shall be automatically converted into fully paid
and nonassessable shares of Common Stock in accordance with Section 6(c)(iii), at the Conversion Rate (as defined below). The Company
shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a
fraction of a share of Common Stock equal to or in excess of one half of one share, the Company shall round such fraction of a
share of Common Stock up to the nearest whole share. The Company shall pay any and all stock transfer, stamp, documentary and similar
taxes (excluding any taxes on the income or gain of the Holder) that may be payable with respect to the issuance and delivery of
shares of Common Stock to the Holder upon conversion of any Conversion Amount.”


 


c.            The
definition of “Conversion Price” in Section 6(b) shall be replaced in its entirety with the following:


 


“’Conversion Price’
means, as of any Conversion Date following the date of the Conversion Agreement, subject to adjustment following the date of the
Conversion Agreement as provided herein; provided that, in the case of mandatory conversion described in Section 6(c)(iii) hereof,
‘Conversion Price’ shall mean the lesser of $3.00, subject to adjustment as provided herein, or the Per Share Offering
Price.”


 


d.            Section
6(c)(iii) shall be replaced in its entirety with the following:


 


“(iii)
Mandatory Conversion. Notwithstanding Sections 6(c)(i) and 6(c)(ii) hereof, the Conversion Amount shall be automatically
converted into shares of Common Stock concurrently with the consummation of the Qualified Offering (the date on which such conversion
occurs, the ‘Conversion Date’). On or before 4:00 p.m., New York Time, on the tenth (10th) Business
Day following such Conversion Date (the ‘Share Delivery Date’), the Company shall issue and deliver to the address
as specified in the executed Irrevocable Consent to Amend and Irrevocable Notice to Convert, a form of which was attached to the
Conversion Agreement, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock
to which the Holder shall be entitled. If the Company complies with the terms of this Section 6(c)(iii), then, on the date on which
it so complies, the Outstanding Debt shall be deemed satisfied and paid in full and the Company shall have no other obligation
with respect to the Outstanding Debt, whether or not this Subordinated Secured Note is delivered for cancellation. 
The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Subordinated Secured Note
shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.”



 



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2.          Delivery
of Conversion Amount (Qualified Offering).


 


Aggregate Principal Amount (plus
accrued and unpaid interest) to be converted:


 





	Title of Note:	 	 	 




 


Please issue the Common Stock into which
the Note is being converted in the following name and to the following address:


 


	
        Issue to:

         
	 
	
         

         
	 
	
         

         
	 


 



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IN WITNESS WHEREOF, the undersigned has
duly executed and delivered to the Company this Irrevocable Consent to Amend and Irrevocable Notice to Convert on the date written
below.


 


		CONVERTING NOTEHOLDER: 
	 	 
	 	Name:	 
	 	 	 
	 	By:	 
	 	 	 
	 	 	Name:
	 	 	Title:
	 	 	 
	 	Date:	__________________


 



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	Agreed and Accepted:
	 
	CNS RESPONSE, INC.
	 
	By:	 
	Name:
	Title:


 



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Exhibit B


 


CNS RESPONSE, INC. (the “Company”)


 


Irrevocable Consent to Amend Warrant
to Purchase Shares


issued pursuant to


 


Amended and Restated Note and Warrant
Purchase Agreement, dated as of November 11, 2011, between the Company and the investors signatory thereto


 


CNS Response, Inc., a Delaware corporation (the “Company”)
issued to the undersigned holder (the “Holder”) a warrant to purchase ________________ fully paid and nonassessable
shares of common stock, par value $0.001 per share (the “Common Stock”), of the Company (the “Warrant”),
pursuant to the agreement specified above.


 


In accordance with and pursuant to the Conversion
Agreement executed as of May 4, 2012 by the Company and the Holders in connection with a proposed public offering of the Company’s
Common Stock and/or other securities and yielding gross proceeds to the Company of at least $5 million, the Holder hereby agrees
and consents to amend the Warrant as specified below, with such amendment to be self-actuating and effective immediately upon receipt
by the Company of consent to such amendment by the Holders (i.e., the amendment will be effective immediately following receipt
by the Company of executed copies of the Conversion Agreement and this Irrevocable Consent to Amend Warrant to Purchase Shares
from the Holders, without any further action by the Company or any Holder irrespective of whether the certificates evidencing
the Warrants are delivered to the Company).


 


1.            Amendment
of Warrant. The Warrant shall be amended as follows:


 


a.             Section
7(d) is to be replaced in its entirety with the following:


 


“(d) One-Time Ratchet. If and
when the Company issues shares of its Common Stock and/or other securities in a public offering at a per share price to be determined
by the Company (the “Per Share Offering Price”) and yielding gross proceeds to the Company of at least $5 million (the
“Qualified Offering”), the Exercise Price, to the extent it exceeds the Per Share Offering Price, shall be adjusted
so that it shall equal such Per Share Offering Price and the number of shares issuable upon exercise of this Warrant shall be proportionately
increased. Such adjustment shall only be made once, after which this Section 7(d) shall cease to be of further effect.”


 



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IN WITNESS WHEREOF, the undersigned has
duly executed and delivered to the Company this Irrevocable Consent to Amend on the date written below.


 


	 	WARRANTHOLDER:
	 	 
	 	Name:	 
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 	 
	 	Date:	 


 



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        Agreed and Accepted: 

	 
	
        CNS RESPONSE, INC. 

	 
	By:	 
	Name:
	Title:


 



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