Unassociated Document


    
      Exhibit
10.1

       

    

    BRIDGE
NOTE AND WARRANT PURCHASE AGREEMENT

     

    THIS BRIDGE NOTE AND WARRANT PURCHASE
AGREEMENT (this “Agreement”) is made
as of May 14, 2009 by and between CNS Response, Inc., a Delaware corporation
(the “Company”), and
SAIL Venture Partners, LP (the “Investor”.)

     

    Agreement

     

    In consideration for the mutual
promises and covenants herein, the parties agree as follows:

     

    Section
1 – Purchase and Sale of Notes and Warrants

    


    1.1           Agreement to Purchase and
Sell Notes and Warrants.

    


    a)           First
Closing.  Subject to the terms and conditions of this
Agreement, the Investor agrees to purchase, and the Company agrees to sell and
issue to the Investor, a Secured Convertible Promissory Note in the principal
amount of $200,000, substantially in the form attached hereto as Exhibit
A (a “Note”), at the
first closing (the “First
Closing”).  In
addition, in order to induce the Investor to purchase this Note, the Company
shall issue to the Investor at the First Closing a warrant in the form attached
hereto as Exhibit
B (a “Warrant”)
that will permit the Investor to purchase up to 100,000 shares of common stock
at a purchase price equal to $0.25 per share.

    


    b)           Second
Closing.  Subject to the terms and conditions of this
Agreement, the Investor agrees to purchase, and the Company agrees to sell and
issue to the Investor, a Note in the principal amount of $200,000 at the second
closing (the “Second
Closing”).  In
addition, in order to induce the Investor to purchase this Note, the Company
shall issue to the Investor at the Second Closing a Warrant that will permit the
Investor to purchase up to 100,000 shares of common stock at a purchase price
equal to $0.25 per share.

    


    c)           Securities.  The
Notes and Warrants issued pursuant to this Agreement, and any securities
issuable upon conversion or exercise of such Notes and Warrants or upon
conversion of the shares of stock to be issued upon conversion or exercise of
such Notes and Warrants, are referred to herein as the “Securities.”

    


    1.2           Closings.

     

    a)           The
First Closing shall take place at the offices of the Company at 10:00 a.m.,
California time, on the date hereof, or at such other location, date and time as
may be agreed upon by the Investor and the Company (the “First
Closing Date”).  At
the First Closing, the Company shall issue and deliver to the Investor the Note
and Warrant described in Section 1.1(a), both of which shall be acknowledged and
agreed to by the Investor.  As payment in full for such Note, the
Investor shall deliver to the Company a check payable to the order of the
Company in the amount of $200,000, or transfer such sum to the account of the
Company by wire transfer.  As payment in full for such Warrant, the
Investor shall deliver to the Company a check payable to the order of the
Company in the amount of $20, or transfer such sum to the account of the Company
by wire transfer, which the parties agree is the fair market value of the
Warrant being so issued.  The obligation of the Investor to purchase
and pay for the Note and Warrant at the First Closing is, unless waived by the
Investor, subject to the condition that the Company’s representations and
warranties contained in Section 2 are true, complete and correct on and as of
the First Closing Date.  The obligation of the Company to sell and
issue the Note and Warrant at the First Closing is, unless waived by the
Company, subject to the condition that the Investor’s representations and
warranties contained in Section 3 are true, complete and correct on and as of
the First Closing Date.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    b)           The
Second Closing shall take place at the offices of the Company at 10:00 a.m.,
California time, at such location, date and time as may be agreed upon by the
Investor and the Company, but which shall in no event be earlier than June 3,
2009 (the “Second
Closing Date”).  At
the Second Closing, the Company shall issue and deliver to the Investor the Note
and Warrant described in Section 1.1(b), both of which shall be acknowledged and
agreed to by the Investor.  As payment in full for such Note, the
Investor shall deliver to the Company a check payable to the order of the
Company in the amount of $200,000, or transfer such sum to the account of the
Company by wire transfer.  As payment in full for such Warrant, the
Investor shall deliver to the Company a check payable to the order of the
Company in the amount of $20, or transfer such sum to the account of the Company
by wire transfer, which the parties agree is the fair market value of the
Warrant being so issued.  The obligation of the Investor to purchase
and pay for the Note and Warrant at the Second Closing is, unless waived by the
Investor, subject to the conditions that (i) the Company’s representations and
warranties contained in Section 2 are true, complete and correct on and as of
the Second Closing Date, (ii) the Company has not breached any of its covenants
in Section 4 as of the Second Closing Date, (iii) the Company has entered into a
signed term sheet acceptable to Investor in which one or more investors have
committed to participate in an equity financing of not less than $2,000,000,
excluding any and all notes and other liabilities or indebtedness which are
converted, and with the principal purpose of raising capital, (iv) the Company
has not encountered any material adverse changes since the date of this
Agreement and (v) the Company, including the TRD study, has performed in a
satisfactory manner since the date of this Agreement.  The
determination of whether the conditions in the previous sentence have been met
shall be determined by the Investor, in its sole discretion.  The
obligation of the Company to sell and issue the Note and Warrant at the Second
Closing is, unless waived by the Company, subject to the condition that the
Investor’s representations and warranties contained in Section 3 are true,
complete and correct on and as of the Second Closing Date.

     

    Section
2 - Representations and Warranties

    of
the Company

     

    The Company represents and warrants to
the Investor as follows:

     

    2.1           Existence of
Company.  The Company is a duly organized Delaware
corporation.  The Company is validly existing and in good standing in
all jurisdictions where it conducts its business.

     

    2.2           Authority to
Execute.  The execution, delivery and performance by the
Company of (i) this Agreement, (ii) the  Notes and the Warrants
pursuant to the terms of this Agreement, including the Notes issuable pursuant
to Section 4.1, and (iii) any financing statements thereunder (collectively, the
“Loan
Documents”) are
within the Company’s corporate powers, have been duly authorized by all
necessary corporate action, do not and will not conflict with any provision of
law or organizational document of the Company (including its Articles of
Incorporation or Bylaws) or of any agreement or contractual restrictions binding
upon or affecting the Company or any of its property and need no further
stockholder or creditor consent.

     

    
      
         

      

      
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    2.3           No Stockholder Approval
Required.  No approval of the Company’s stockholders is
required for (i) the entry by the Company into this Agreement, (ii) the issuance
of the Notes and Warrants contemplated by this Agreement, (iii) the granting of
the security interest under the terms of such Notes or (iv) the issuance of any
shares of stock upon conversion or exercise of such Notes and Warrants or upon
conversion of the shares of stock to be issued upon conversion or exercise of
such Notes and Warrants.

     

    2.4           Valid
Issuance.  The shares of stock to be issued upon conversion or
exercise of the Notes and Warrants contemplated by this Agreement or upon
conversion of the shares of stock to be issued upon conversion or exercise of
such Notes and Warrants will be, upon issuance, validly issued, fully paid and
nonassessable and free of restrictions on transfer other than restrictions on
transfer under the Loan Documents, applicable state and federal securities laws
and liens or encumbrances created by or imposed by the
Investor.  Assuming the accuracy of the representations of the
Investor in Section 3 of this Agreement, such Notes and Warrants and the shares
of stock to be issued upon conversion or exercise of such Notes and Warrants or
upon conversion of the shares of stock to be issued upon conversion or exercise
of such Notes and Warrants will be issued in compliance with all applicable
federal and state securities laws.  The issuance of such Notes,
Warrants and shares will not trigger any anti-dilution protections.

     

    2.5           Binding
Obligation.  This Agreement is, and the other Loan Documents
when delivered hereunder will be, legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, moratorium, reorganization and similar laws affecting creditors’
rights generally and to general equitable principles.

     

    2.6           Litigation.  No
litigation or governmental proceeding is pending or threatened against the
Company which may have a materially adverse effect on the financial
condition,  operations or prospects of the Company, and to the
knowledge of the Company, no basis therefore exists.

     

    2.7           Intellectual
Property.  To the best of its knowledge, the Company owns or
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes necessary for its business as now conducted and
as presently proposed to be conducted, without any known infringement of the
rights of others.  There are no outstanding options, licenses or
agreements of any kind relating to the foregoing proprietary rights, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
of any other person or entity other than such licenses or agreements arising
from the purchase of “off the shelf” or standard products.

     

    
      
         

      

      
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    Section
3 - Representations and Warranties

    of
the Investor

     

    The Investor represents and warrants to
the Company:

     

    3.1           Authorization; Binding
Obligations.  The Investor has full power and authority to
enter into this Agreement and each of the other Loan Documents to which it is a
party, and this Agreement and each other Loan Document constitutes a valid and
legally binding obligation of the Investor, enforceable in accordance with its
terms, subject, as to enforcement of remedies, to applicable bankruptcy,
insolvency, moratorium, reorganization and similar laws affecting creditors’
rights generally and to general equitable principles.

     

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

     

    3.3           Investment for Own
Account.  The Notes and Warrants issued pursuant to this
Agreement and the shares of stock to be issued upon conversion or exercise of
such Notes and Warrants or upon conversion of the shares of stock to be issued
upon conversion or exercise of such Notes and Warrants are being acquired for
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 Act.

     

    Section
4 - Covenants of the Company

     

    4.1           Brandt
Note.  At the election of the Investor at its sole discretion,
the Company agrees that it shall take all necessary actions to allow and cause
Brandt Ventures, GP (“Brandt”) to
cancel the promissory note issued by the Company to Brandt on March 30, 2009 in
return for all amounts due and payable under such note and, in the event such
note is so cancelled, accept from Investor, and promptly pay to Brandt, all
amounts due and payable under such note.  Upon payment to Brandt of
the amounts due under the terms of the note issued to Brandt on March 30, 2009
and cancellation of such note, a Note shall promptly be issued to Investor in
the principal amount equal to the payment made by Investor under the terms of
this Section 4.1.  The Company agrees that the Investor may compel the
Company to take the actions set forth in this Section 4.1 so long as the note
issued to Brandt on March 30, 2009 is outstanding.

     

    4.2           Future
Financings.  The Company covenants to allow Investor, at
Investor’s election, to participate in all future financings of the Company up
to an aggregate participation by Investor of $10,000,000 in addition to the
amounts invested by the Investor in the Company after the transactions
contemplated by this Agreement are consummated.  The Company shall
provide adequate notice to the Investor of all such future
financings.  Notwitstanding the foregoing, Investor is not obligated
to participate in any future financings.

     

    4.3           Registration Rights
Agreement.  Notwithstanding any provision in the Loan
Documents, the Company agrees that all securities issued upon conversion or
exercise of the Notes and Warrants contemplated by this Agreement or upon
conversion of the shares of stock to be issued upon conversion or exercise of
such Notes and Warrants will be subject to a Registration Rights Agreement
between the Company and Investor.  In the event that the terms of such
Notes and Warrants do not provide for such a Registration Rights Agreement, the
Company agrees to work with Investor in good faith to prepare and execute such a
Registration Rights Agreement on terms reasonably satisfactory to Investor at
the time such Notes and Warrants are converted or exercised.

     

    
      
         

      

      
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    4.4           Restrictive
Covenants.  Without the consent of Investor, the Company shall
not:

     

    a)           effect
a merger, reorganization, or sell, exclusively license or lease, or otherwise
dispose of any assets of the Company with a value in excess of $20,000, other
than in the ordinary course of business;

     

    b)           borrow,
guaranty or otherwise incur indebtedness in excess of $100,000;

     

    c)           acquire
all or substantially all of the properties, assets or stock of any other
corporation or entity or assets with a value greater than $50,000;
or

     

    d)           form,
contribute capital or assets to, or make a loan or advance in excess of $50,000
to (i) any partially-owned or wholly-owned subsidiary, (ii) a joint venture or
(iii) a similar business entity.

     

    Section
5 - Miscellaneous

     

    5.1           No Waiver; Cumulative
Remedies.  No failure or delay on the part of any party to any
Loan Document in exercising any right or remedy under, or pursuant to, any Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, remedy or power preclude other or further exercise
thereof, or the exercise of any other right, remedy or power.  The
remedies in the Loan Documents are cumulative and are not exclusive of any
remedies provided by law.

     

    5.2           Amendments and
Waivers.  No amendment or waiver of any provisions of this
Agreement or the Notes and Warrants that may be issued pursuant to this
Agreement shall be effective unless such amendment or waiver is in writing
signed by the Company and the Investor.  Any such amendment, waiver or
modification effected in accordance with this paragraph shall be binding upon
both the Company and the Investor.

     

    5.3           Notices,
Etc.   All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person, sent by facsimile
transmission to the number set forth on the signature page hereof only if a hard
copy is sent by U.S. mail to the recipient within 24 hours of facsimile
transmission, or such other number as may hereinafter be designated in writing
by the recipient to the sender, or duly sent by first class registered or
certified mail, return receipt requested, postage prepaid, or overnight delivery
service (e.g., Federal
Express) addressed to such party at the address set forth on the signature page
hereof or such other address as may hereafter be designated in writing by the
addressee to the sender.  All such notices, advises and communications
shall be deemed to have been received: (a) in the case of personal delivery, on
the date of such delivery; (b) in the case of facsimile transmission, on the
date of transmission; and (c) in the case of mailing or delivery by service, on
the date of delivery as shown on the return receipt or delivery service
statement.

     

    5.4           Costs and
Expenses.  The Company agrees to be responsible for its costs
and expenses incurred in connection with the preparation of the Loan Documents
and to reimburse Investor for all of its costs and expenses incurred in
connection with the preparation of the Loan Documents, including legal fees of
the Investor’s outside counsel.  If any litigation, contest, dispute,
suit, proceeding or action is instituted between or among any of the parties
hereto regarding the enforcement or interpretation of this Agreement or any of
the Exhibits hereto, the prevailing party shall be entitled to reimbursement
from the other party or parties for all reasonable expenses, costs, charges and
other fees (including legal fees) incurred in connection with or related to such
dispute.

     

    
      
         

      

      
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    5.5           Governing
Law.  The Loan Documents shall be governed by and construed in
accordance with the laws of the State of California, without regard to the
conflicts of law provisions of the State of California or of any other state;
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 Uniform Commercial Code.  The
Company and

     

    Investor
consent to personal jurisdiction in Orange County, California.

     

    5.6           Severability.  If
any term in this Agreement is held to be illegal or unenforceable, the remaining
portions of this Agreement shall not be affected, and this Agreement shall be
construed and enforced as if this Agreement did not contain the term held to be
illegal or unenforceable.

     

    5.7           Binding Effect;
Assignment.  The Loan Documents shall be binding upon and inure
to the benefit of the Company and the Investor and their respective successors
and assigns.  The Company may not assign its rights or interest under
the Loan Documents without the prior written consent of the
Representative.

     

    5.8           Transfer of
Securities.  Notwithstanding the legend required to be placed
on the Securities by applicable law, no registration statement or opinion of
counsel shall be necessary: (a) for a transfer of Securities by an Investor that
is a partnership or a limited liability company (an “L.L.C.”) to a
partner or member of such partnership or L.L.C. or a retired partner or member
of such partnership or L.L.C. who retires after the date hereof; (b) for a
transfer of Securities to the estate of any such partner or member or retired
partner or member or for a transfer of Securities by gift, will or intestate
succession of any partner or member to his or her spouse or to the siblings,
lineal descendants or ancestors of such partner or member or his or her spouse,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if he or she were the original Investor hereunder; (c) for a
transfer of Securities by an Investor that is an entity to any affiliated
entity; or (d) for a transfer of Securities pursuant to SEC Rule 144 or any
successor rule, or for a transfer of Securities pursuant to a registration
statement declared effective by the SEC under the Act.

     

    5.9           Survival of Representations,
Warranties and Covenants.  The representations, warranties and
covenants of the parties contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement indefinitely, and shall in
no way be affected by any investigation of the subject matter thereof made by or
on behalf of the other parties.

     

    5.10           California Commissioner of
Corporations.  THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT
OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE SECURITIES OR PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO THE
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
QUALIFICATIONS BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE.  THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.

     

    
      
         

      

      
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    [Remainder
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    SIGNATURE
PAGE TO

    BRIDGE
NOTE AND WARRANT PURCHASE AGREEMENT

    


     

     

    
      
        	 	THE
      COMPANY:	 	 	THE
      INVESTOR:	 
	 	 	 	 	 	 
	 	CNS
      Response, Inc.	 	 	SAIL
      Venture Partners, LP	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:   	
                 

              	 	By:  	
                 

              	 
	 	 	 	 	 	 
	Name:	
                George
      Carpenter

              	 	Name: 	
                David
      B. Jones

              	 
	 	 	 	 	 	 
	Its: 	Chief
      Executive Officer	 	Its:  	Managing
      Partner	 
	 	 	 	 	 	 
	2755
      Bristol Street, Suite 285
      
                Costa
      Mesa, CA 92626

              	 	600
      Anton Boulevard, Suite 1010
      
                Costa
      Mesa, CA 92626

              	 
	 	
                 

              	 	 	
                 

              	 
	
                Phone:

                Fax: 

              	      
                (714)
      545-3288

                 (866)
      294-2611

              	 	
                Phone:

                Fax:

              	(714)
      241-7500
      
                 (815)
      642-0271

              	 


      



     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

    FORM
OF NOTE

     

     

     

     

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
B

    FORM
OF WARRANT